Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Mar. 11, 2019 | Jun. 30, 2018 | |
Document And Entity Information | |||
Entity Registrant Name | Ondas Holdings Inc. | ||
Entity Central Index Key | 0001646188 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity a Well-known Seasoned Issuer | No | ||
Entity a Voluntary Filer | No | ||
Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | true | ||
Entity Small Business | true | ||
Entity Ex Transition Period | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 0 | ||
Entity Common Stock, Shares Outstanding | 50,463,732 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash and cash equivalents | $ 1,129,863 | $ 456,018 |
Accounts receivable, net of allowance for doubtful accounts of $0 and $7,914, respectively | 30,440 | 31,855 |
Inventory | 347,945 | 173,320 |
Other current assets | 533,481 | 43,578 |
Total current assets | 2,041,729 | 704,771 |
Property and equipment, net | 502,146 | 12,856 |
Other Assets: | ||
Intangible assets, net | 53,288 | |
Lease deposits | 49,376 | |
Deferred offering costs | 14,982 | |
Total other assets | 117,646 | |
Total assets | 2,661,521 | 717,627 |
Current Liabilities: | ||
Accounts payable | 1,111,929 | 795,755 |
Secured promissory note, net of debt discount $72,038 | 10,063,208 | |
Notes payable | 3,882,868 | 3,865,558 |
Derivative liability | 166,093 | |
Advance from related party | 155,645 | |
Accrued expenses and other current liabilities | 2,188,271 | 879,022 |
Total current liabilities | 17,246,276 | 5,862,073 |
Long-Term Liabilities: | ||
Notes payable, net of debt discount of $0 and $162,659, respectively | 300,000 | 2,777,341 |
Total long-term liabilities | 300,000 | 2,777,341 |
Total liabilities | 17,546,276 | 8,639,414 |
Stockholders' Deficit: | ||
Preferred stock - par value $0.0001: 10,000,000 shares authorized | ||
Common stock - par value $0.0001; 350,000,000 shares authorized; 50,463,732 and 16,797,744 issued and outstanding | 5,046 | 1,679 |
Additional paid in capital | 17,491,734 | 12,361,205 |
Accumulated deficit | (32,381,535) | (20,284,671) |
Total stockholders' Deficit | (14,884,755) | (7,921,787) |
Total liabilities and stockholders' deficit | $ 2,661,521 | $ 717,627 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 0 | $ 7,914 |
Secured promissory note, debt discount | 72,038 | |
Notes payable, net of debt discount | $ 0 | $ 162,659 |
Preferred stock, par value (in dollar pers share) | $ 0.0001 | $ 0.0001 |
Preferred stock, authorized | 10,000,000 | 10,000,000 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, authorized | 350,000,000 | 350,000,000 |
Common stock, issued | 50,463,732 | 16,797,744 |
Common stock, outstanding | 50,463,732 | 16,797,744 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | ||
Revenues, net | $ 190,029 | $ 274,403 |
Cost of goods sold | 39,365 | 79,768 |
Gross profit | 150,664 | 194,635 |
Operating expenses: | ||
General and administration | 2,611,992 | 1,083,557 |
Sales and marketing | 2,897,703 | 502,790 |
Research and Development | 3,076,502 | 1,002,625 |
Total operating expense | 8,586,197 | 2,588,972 |
Operating loss | (8,435,533) | (2,394,337) |
Other income (expense) | ||
Interest expense | (2,663,645) | (642,718) |
Change in fair value of derivative liability | (975,902) | 5,025 |
Loss on extinguishment of debt | (44,353) | |
Other income | 4,422 | 9,823 |
Interest income | 18,147 | |
Total other income (expense) | (3,661,331) | (627,870) |
Loss before provision for income taxes | (12,096,864) | (3,022,207) |
Provision for income taxes | ||
Net loss | $ (12,096,864) | $ (3,022,207) |
Net loss per share - basic and diluted (in dollars per share) | $ (0.42) | $ (0.19) |
Weighted average number of common shares outstanding, basic and diluted (in shares) | 28,528,060 | 16,191,240 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Balances at beginning at Dec. 31, 2016 | $ 1,612 | $ 12,353,363 | $ (17,262,464) | $ (4,907,489) |
Balances at beginning (in shares) at Dec. 31, 2016 | 16,120,860 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Shares issued for exercise of warrants | $ 67 | 6,676 | 6,743 | |
Shares issued for exercise of warrants (in shares) | 676,884 | |||
Purchase and retirement of common stock | ||||
Share based compensation | 1,166 | 1,166 | ||
Net loss | (3,022,207) | (3,022,207) | ||
Balances at ending at Dec. 31, 2017 | $ 1,679 | 12,361,205 | (20,284,671) | (7,921,787) |
Balances at ending (in shares) at Dec. 31, 2017 | 16,797,744 | |||
Balances at beginning at Dec. 31, 2017 | $ 1,679 | 12,361,205 | (20,284,671) | (7,921,787) |
Balances at beginning (in shares) at Dec. 31, 2017 | 16,797,744 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Issuance of shares in private placement | $ 665 | 4,031 | 4,696 | |
Issuance of shares in private placement (in shares) | 6,648,586 | |||
Issuance of shares in conversion of debt | $ 202 | 4,002,816 | 4,003,018 | |
Issuance of shares in conversion of debt (in shares) | 2,017,402 | |||
Reclassification of derivative liability | 1,141,995 | 1,141,995 | ||
Purchase and retirement of common stock | (3,260) | 3,260 | ||
Purchase and retirement of common stock (in shares) | (32,600,000) | |||
Effect of merger and recapitalization pursuant to execution of Agreement and Plan of Merger and Reorganization | $ 5,760 | (18,313) | (12,553) | |
Effect of merger and recapitalization pursuant to execution of Agreement and Plan of Merger and Reorganization (in shares) | 57,600,000 | |||
Net loss | (12,096,864) | (12,096,864) | ||
Balances at ending at Dec. 31, 2018 | $ 5,046 | $ 17,491,734 | $ (32,381,535) | $ (14,884,755) |
Balances at ending (in shares) at Dec. 31, 2018 | 50,463,732 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITES | ||
Net loss | $ (12,096,864) | $ (3,022,207) |
Adjustments to reconcile net loss to net cash flows used in operating activities: | ||
Depreciation | 54,946 | 13,439 |
Allowance for doubtful accounts | (7,914) | 7,914 |
Amortization of debt discount and deferred financing costs | 835,849 | 106,676 |
Amortization of intangible assets | 194 | |
Change in fair value of derivative liability | 975,902 | (5,025) |
Stock-based compensation | 1,166 | |
Loss on conversion of debt | 31,943 | |
Changes in operating assets and liabilities: | ||
Account receivable | 9,329 | (39,769) |
Inventory | (174,624) | (156,289) |
Other current assets | (477,937) | 113,808 |
Other assets | (44,359) | |
Account payable | 316,174 | (58,752) |
Accrued expenses and other current liabilities | 2,060,098 | 408,557 |
Net cash flows used in operating activities | (8,517,263) | (2,630,482) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of equipment | (544,236) | |
Patent costs | (53,482) | |
Deposits | (31,965) | |
Net cash flows used in investing activities | (629,683) | |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from secured promissory note, net of costs | 9,875,000 | |
Proceeds from convertible notes payable | 100,000 | 2,940,000 |
Proceeds from sale of common stock | 4,696 | |
Repayment of advances from related party | (155,645) | |
Purchase and retirement of common stock | (3,260) | |
Proceeds from loans payable | 50,000 | |
Proceeds from exercise of warrants | 6,744 | |
Advances from related parties | 119,508 | |
Repayment of short term loan | (75,000) | |
Net cash flows provided by financing activities | 9,820,791 | 3,041,252 |
Increase in cash and cash equivalents | 673,845 | 410,770 |
Cash and cash equivalent, beginning of period | 456,018 | 45,248 |
Cash and cash equivalents, end of period | 1,129,863 | 456,018 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||
Cash paid for interest | 979,167 | 502,638 |
Cash paid for income taxes | ||
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES: | ||
Reclassification of derivative liability to additional paid in capital | 1,141,995 | |
Increase in debt for non cash interest | 135,246 | |
Interest converted to debt | 17,310 | 880,558 |
Derivative liability | $ 171,118 |
DESCRIPTION OF BUSINESS AND BAS
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION | NOTE 1 – DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION The Company Ondas Holdings Inc. (the “Company”) was originally incorporated in Nevada on December 22, 2014 under the name of Zev Ventures Incorporated. On September 28, 2018, we closed the 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 Inc. and operational headquarters for Ondas Networks Inc. is located in Sunnyvale, California. Unless otherwise stated or unless the context otherwise requires, the description of our business set forth below is provided on a combined basis, taking into account our subsidiary, Ondas Networks. Ondas Networks was originally incorporated in Delaware on February 16, 2006 under the name of Full Spectrum Inc. On August 10, 2018, the name was changed to Ondas Networks Inc. On July 4, 2018, FS Partners (Cayman) Limited, a Cayman Islands limited liability company (“FS Partners”) was formed by Eric A. Brock, CEO of Ondas Holdings, and Stewart W. Kantor, President and L. Philip Chu, Vice President-Asia of Ondas Networks. On December 1, 2018, Messer Brock, Kantor and Chu transferred its ownership of FS Partners to Ondas Holdings, for a nominal amount, at which time FS Partners became a wholly owned subsidiary of Ondas Holdings. As of December 31, 2018, FS Partners had not begun formal operations and had not received any investment capital. On July 13, 2018, Full Spectrum Holding Limited, a Cayman Islands limited liability company (“Full Spectrum Holding”) was formed by FS Partners, Ondas Networks Inc., and Mr. Chu. On December 1, 2018, Ondas Networks transferred ownership of Full Spectrum Holding to Ondas Holdings, for a nominal amount, at which time Full Spectrum Holding became a majority owned subsidiary of Ondas Holdings. Mr. Chu maintained a minority interest in Full Spectrum Holding. As of December 31, 2018 Full Spectrum Holding had not begun formal operations and had not received any investment capital. On November 29, 2018, Ondas Network Limited, a company established in Chengdu, Sichuan Province, received a business license under the laws of Company Law of the People’s Republic of China and the Law of the People’s Republic of China on Wholly Foreign Invested Enterprises. Mr. Chu is legal representative of Ondas Network Limited. Ondas Network Limited is a wholly owned subsidiary of Full Spectrum Holding. As of December 31, 2018 Ondas Network Limited had not begun formal operations and had not received any investment capital. Ondas Networks’ wireless networking products are applicable to a wide range of mission critical functions that require secure communications over large geographic areas. We provide 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). We design, manufacture, sell and support FullMAX, our multi-patented wireless radio systems for secure, wide area mission-critical field area networks. This radio network provides point-to-multipoint, non-line of sight connectivity for industrial wireless networks. Since its inception on February 16, 2006, Ondas Networks has devoted its efforts principally to research and development and the commercialization of our FullMAX wireless technology platform. We began working with the IEEE in 2015 to help create the IEEE 802.16s wireless broadband standard which was published in the fourth quarter of 2017. In 2018, Ondas Networks initiated a business expansion plan designed to invest in our sales, and marketing and customer support capabilities in order to build our customer base. 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. 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 Share(s)”), 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 of directors, and our board of directors subsequently appointed executive officers; (ii) the former holders of the Ondas Networks Shares executed lock-up agreements (the “Lock-Up Agreements”), which provide for an initial 12-month lock-up period followed by a subsequent 12-month limited sale period, commencing with the date of the Closing; (iii) we entered into a Common Stock Repurchase Agreement with Energy Capital, a current stockholder of the Company (“Energy Capital”), pursuant to which the Energy Capital 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. The Repurchase Shares were canceled and returned to our authorized but unissued shares; (iv) our board of directors approved, and our stockholders adopted, the 2018 Incentive Stock Plan (the “2018 Plan”) pursuant to which 10 million Company Shares has 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. In accordance with ASC 805-40, Reverse Acquisitions Liquidity We have incurred losses since inception and have funded our operations primarily through debt and the sale of capital stock. As of December 31, 2018, we had an accumulated deficit of approximately $32,382,000 and net borrowings outstanding of approximately $14,246,000, of which approximately $3,883,000, is contractually due on March 30, 2019 and $10,063,000 is contractually due on September 19, 2019. As of December 31, 2018, we had cash and cash equivalents of approximately $1,130,000 and a working capital deficit of approximately $15,205,000. 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 depends on our completion of our second-generation products and commencing the manufacture, marketing and sales of those products. These activities, including our planned research and development efforts, will require significant uses of working capital through the end of 2019 and beyond. Based on our current operating plans, we believe that our existing cash and cash equivalents, as well as the $3,300,000 in borrowings we drew down thus far in 2019 from the $10 million loan and security agreement (see NOTE |
SUMMARY OF SIGNIFICANT ACCOUNT
SUMMARY OF SIGNIFICANT ACCOUNT POLICIES | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNT POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNT POLICIES Principles of Consolidation The consolidated financial statements include the accounts of the Company and our wholly owned subsidiaries Ondas Networks and FS Partners (FS Partners has not begun operations) and our majority owned subsidiaries, Full Spectrum Holding and Ondas Network Limited (both have not begun operations). All significant inter-company accounts and transactions between these entities have been eliminated in these historical consolidated financial statements. Segment Information We operate in one business segment, which is the development, marketing and sale of wireless radio systems for secure, wide area mission-critical business-to-business networks. 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 warrants, and valuation allowances against deferred tax assets. Actual results could differ from those estimates. Cash and Cash Equivalents We consider all highly liquid instruments with an original maturity of three months or less, as well as deposits in financial institutions, to be cash and cash equivalents. As of December 31, 2018 and 2017, we had no cash equivalents. Trade Accounts Receivable Accounts receivable are stated at a gross invoice amount less an allowance for doubtful accounts. We estimate allowance for doubtful accounts by evaluating specific accounts where information indicates our customers may have an inability to meet financial obligations, such as customer payment history, credit worthiness and receivable amounts outstanding for an extended period beyond contractual terms. We use assumptions and judgment, based on the best available facts and circumstances, to record an allowance to reduce the receivable to the amount expected to be collected. These allowances are evaluated and adjusted as additional information is received. We had no allowance for doubtful accounts as of December 31, 2018. We had an allowance for doubtful accounts of $7,914 as of December 31, 2017. 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 December 31, 2018 and 2017, we determined that no such reserves were necessary. Property and Equipment All additions, including improvements to existing facilities, are recorded at cost. Maintenance and repairs are charged to expense as incurred. Depreciation of property and equipment is principally recorded using the straight-line method over the estimated useful lives of the assets. The estimated useful lives typically are (i) three years for equipment and software, and (ii) five years for vehicles and furniture and fixtures. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful life of the asset. Upon the disposal of property, the asset and related accumulated depreciation accounts are relieved of the amounts recorded therein for such items, and any resulting gain or loss is recorded in operating expenses in the year of disposition. Software Costs incurred internally in researching and developing a software product are charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. We have determined that technological feasibility for our software products is reached after all high-risk development issues have been resolved through coding and testing. Generally, this occurs shortly before the products are released to production. The amortization of these costs is included in cost of revenue over the estimated life of the products. Impairment of Long-Lived Assets Long-lived assets are evaluated whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed. Such indicators include significant technological changes, adverse changes in market conditions and/or poor operating results. The carrying value of a long-lived asset group is considered impaired when the projected undiscounted future cash flows is less than its carrying value. The amount of impairment loss recognized is the difference between the estimated fair value and the carrying value of the asset or asset group. Fair market value is determined primarily using the projected future cash flows discounted at a rate commensurate with the risk involved. Based upon our evaluation, there were no impairments of long-lived assets required during the year ended December 31, 2018. Patents We amortize our intangible assets with a finite life on a straight-line basis, over 20 years for patents. We begin amortization of these costs on the date patents are awarded. Research and Development Costs for research and development are expensed as incurred. Research and development expense consists primarily of salaries, salary related expenses and costs of contractors and materials. Derivative Financial Instruments Derivatives are recorded on the balance sheet at fair value and changes in fair value are recorded in earnings at each reporting date in accordance with U.S. GAAP. 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 We have elected not to carry our debt instruments at fair value. The carrying amount of our debt approximates fair value. Interest rates that are currently available to us for issuance of short and long-term debt with similar terms and remaining maturities are used to estimate the fair value of our short and long-term debt. In accordance with accounting standards, we determined that at December 31, 2017, certain instruments qualified as derivative liabilities and should be recorded at their fair value on the date of issuance and re-measured at fair value each reporting period with the change reported in earnings). The fair value of these instruments were computed using the Binomial Lattice Monte Carlo model, incorporating transaction details such as the price of our common stock, contractual terms, maturity and risk-free rates, as well as assumptions about future financings, volatility, and holder behavior. The assumptions used in computing the fair value as of December 31, 2017 are as follows: Stock price $ 0.0027 Conversion price $ 8.1500 Expected volatility 63 % Term (years) 9.5 Risk-free interest 2.36 % Expected dividend yield 0 % At December 31, 2018, we had no instruments requiring a fair value determination. The following table provides the financial assets and liabilities reported at fair value and measured on a recurring basis at December 31, 2018 and 2017: Description Assets/ (Liabilities) Measured at Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Other Unobservable Inputs (Level 3) Fair value of derivative liability as of: December 31, 2018 $ — $ — $ — $ — December 31, 2017 $ (166,093 ) $ — $ — $ (166,093 ) The following table provides a summary of changes in fair value associated with the Level 3 liabilities for years ended December 31, 2018 and 2017: Fair Value Measurements Using Significant Unobservable Inputs (Level 3) December 31, 2018 2017 Balance, beginning of period $ (166,093 ) $ — Issuances of derivative liability — (171,118 ) Reclassification to additional paid in capital 1,141,995 — Change in fair value of derivative liability (975,902 ) 5,025 Balance, end of period $ — $ (166,093 ) 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. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized when the rate change is enacted. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. In accordance with GAAP, we recognize the effect of uncertain income tax positions only if the positions are more likely than not of being sustained in an audit, based on the technical merits of the position. Recognized uncertain income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which those changes in judgment occur. We recognize both interest and penalties related to uncertain tax positions as part of the income tax provision. Shipping and Handling We expense all shipping and handling costs as incurred. These costs are included in cost of goods sold on the accompanying consolidated financial statements. 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 the equity financing, 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 financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statement of operations. Off-Balance Sheet Arrangements The Company has no off-balance sheet risk such as foreign exchange contracts, option contracts, or other hedging arrangements. ASC 606, 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, value add, and other taxes collected on behalf of third parties are excluded from revenue. For the year ended December 31, 2018, 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 year ended December 31, 2018, 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 the FullMAX System and the delivery of related services. 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 sold by the Company 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, at our election, of the base station and remote radios, 2) software upgrades, bug fixes and new features of the radio software and NMS, 3) deployment and network architecture support, and 4) technical support by phone and email. Extended warranty, network support and maintenance, and remote monitoring revenues are recognized ratably over the term of the service contract. 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. 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 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. Disaggregation of Revenue The following tables present our disaggregated revenues by Type of Revenue and Timing of Revenue. Years Ended December 31, 2018 2017 Type of Revenue Product revenue $ 125,664 $ 185,261 Service revenue 64,365 89,142 Total revenue $ 190,029 $ 274,403 Years Ended December 31, 2018 2017 Timing of Revenue Revenue recognized point in time $ 147,863 $ 235,636 Revenue recognized over time 42,166 38,767 Total revenue $ 190,029 $ 274,403 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 good or services that we have transferred to a customer is conditional on something other than the passage of time. We did not have any contract assets recorded at December 31, 2018. 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 years ended December 31, 2018 and 2017, and the balance at the end of each year is reported as deferred revenue in the Company’s consolidated balance sheet. Years Ended December 31, 2018 2017 Balance, beginning of year $ 30,690 $ 36,299 Additions 32,106 39,895 Transfer to revenue (42,166 ) (45,504 ) Balance, end of year $ 20,631 $ 30,690 Warranty Reserve We provide a limited one-year assurance-type warranty on our software and hardware products. The assurance-type warranty covers defects in material and wordsmanship 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 December 31, 2018 is immaterial to the Company’s financial statements. Net Loss Per Common Share In a reverse merger transaction, net loss per share for all periods presented is based on the equity structure of the legal acquirer, which assumes common stock is outstanding and is reflected on a retrospective basis for all periods presented. Basic net loss per share is computed by dividing net loss by the weighted average shares of common stock outstanding for each period. Diluted net loss per share is the same as basic net loss per share since the Company has net losses for each period presented. The following common stock equivalents were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect: Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. Years Ended December 31, 2018 2017 Warrants to purchase common stock — 1,953,722 Options to purchase common stock — 3,606,052 Convertible debt 140,678 1,490,704 Total potentially dilutive securities 140,678 7,050,478 Debt Issuance Costs Debt issuance costs represent costs incurred for the issuance of debt. Once the associated debt instrument is issued, these costs would be recorded as a debt discount and amortized using the effective interest method over the term of the related debt instrument. Upon abandonment of a pending financing transaction, the related deferred financing costs are charged to interest expense. Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist of cash and accounts receivable. Cash is deposited with a limited number of financial institutions. The balances held at any one financial institution may be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits. Credit is extended to customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations of our customers and maintains an allowance for doubtful accounts and sales credits. 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. During the year ended December 31, 2018, two customers accounted for approximately $145,000 and $32,000 of our revenue or 76% and 17%, respectively. No other customers provided more than 10% of our revenue during 2018. During the year ended December 31, 2107, three customers accounted for approximately $156,000, $50,000 and $41,000 of our revenue or 51%, 18% and 15%, respectively. No other customers provided more than 10% of our revenue during 2017. Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”), 2018-13 that eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements. The FASB developed the amendments to Accounting Standards Codification (“ASC”) 820 as part of its broader disclosure framework project, which aims to improve the effectiveness of disclosures in the notes to financial statements by focusing on requirements that clearly communicate the most important information to users of the financial statements. The new guidance is effective for all entities for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. An entity is permitted to early adopt either the entire standard or only the provisions that eliminate or modify requirements. We are currently evaluating the effect of this guidance on our disclosures. In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). The amendments in ASU 2018-07 expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. In July 2017, the FASB issued ASU 2017-11 (“ASU 2017-11”), Earnings Per Share (“Topic 260”), Distinguishing Liabilities from Equity Derivatives and Hedging In August 2016, FASB issued ASU Statement of Cash Flows (Topic 230) In February 2016, the FASB issued ASU 2016-02, Leases Codification Improvements to Topic 842 Leases Leases (Topic 842), Targeted Improvements Leases Narrow-Scope Improvements for Lessors Restatement In connection with the year-end financial statement closing process, the Company determined that its previously issued financial statements included in its Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2018 (“Restated Period”) should be restated due to an error in recording the conversion of debt on September 28, 2018 and the omission of recognizing a modification of debt on July 11, 2018. With the modification on July 11, 2018, the Company should have recorded a loss on extinguishment of debt in the amount of $44,348 and reclassified the derivative liability at its fair value in the amount of $1,141,995 to additional paid in capital (see NOTE 7 for details). On September 28, 2018, the debt conversion was originally recorded as a gain of $3,976,992, however it should have been recorded in common stock and additional paid in capital as a result of the July 11, 2018 debt modification. See NOTE |
OTHER CURRENT ASSETS
OTHER CURRENT ASSETS | 12 Months Ended |
Dec. 31, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
OTHER CURRENT ASSETS | NOTE 3 – OTHER CURRENT ASSETS Other current assets consist of the following: Years Ended December 31, 2018 2017 Prepaid financing costs $ 188,300 $ — Prepaid marketing cost 125,525 — Prepaid insurance 102,743 — Other prepaid expenses 40,654 13,755 Other receivables 44,294 9,823 Deposits 31,965 20,000 TOTAL OTHER CURRENT ASSETS $ 533,481 $ 43,578 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 4 – PROPERTY AND EQUIPMENT Property and equipment consist of the following: Years Ended December 31, 2018 2017 Leasehold improvements $ 256,920 $ 30,367 Vehicle 143,560 — Furniture and fixtures 132,088 41,685 Computer Equipment 87,087 39,382 Software 61,287 25,272 680,942 136,706 Less: accumulated depreciation (178,796 ) (123,850 ) TOTAL PROPERTY AND EQUIPMENT $ 502,146 $ 12,856 Depreciation expense for the years ended December 31, 2018 and 2017 was $54,946 and $13,439, respectively. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS | NOTE 5 – INTANGIBLE ASSETS Our intangible assets include patent costs totaling $53,482 less amortization of patent costs of $194 at December 31, 2018. We had no capitalized patent costs at December 31, 2017. |
OTHER CURRENT LIABILITIES
OTHER CURRENT LIABILITIES | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
OTHER CURRENT LIABILITIES | NOTE 6 – OTHER CURRENT LIABILITIES Accrued expenses and other current liabilities consist of the following: Years Ended December 31, 2018 2017 Accrued payroll and other benefits $ 1,659,577 $ 792,746 Accrued rent and facilities costs 160,544 — Accrued interest 138,605 42,824 Accrued professional fees 126,384 — D&O insurance financing payable 52,530 — Other accrued expenses 30,000 1,526 Deferred revenue 20,631 30,690 Other current liabilities — 11,236 TOTAL OTHER CURRENT LIABILITIES $ 2,188,271 $ 879,022 |
NOTES PAYABLE AND OTHER FINANCI
NOTES PAYABLE AND OTHER FINANCING AGREEMENTS | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
NOTES PAYABLE AND OTHER FINANCING AGREEMENTS | NOTE 7 – NOTES PAYABLE AND OTHER FINANCING AGREEMENTS Loan Agreements In October 2007, Ondas Networks Inc. (“Ondas Networks”), the wholly owned subsidiary of Ondas Holdings Inc. (“Ondas Holdings” or the “Company”), entered into a 6% per annum loan agreement with an entity in the amount of $550,000 in connection with the issuance of common stock of Ondas Networks (the “October 2007 Loan”); however, the October 2007 Loan was not memorialized. The original maturity date of the October 2007 Loan was September 30, 2011. On February 11, 2016, the entity and Ondas Networks entered into a Loan Amendment to amend the October 2007 Loan to (i) extend the maturity date to April 1, 2017 and (ii) clear and waive any existing defaults. On November 30, 2017, the entity and Ondas Networks entered into a Loan Modification Agreement to further amend the October 2007 Loan to (i) transfer all accrued and unpaid interest ($17,310) as of December 31, 2017 to principal in January 2018, (ii) extend the maturity date to December 31, 2018, (iii) clear and waive any existing defaults, and (iv) amend the interest rate to 10% per annum effective January 1, 2018. On October 1, 2018, the entity entered into an Assignment and Assumption Agreement to assign all of its rights and obligations including all principal and interest owing under the October 2007 Loan to an unaffiliated third-party. On December 31, 2018, the assignee and Ondas Networks entered into a Note Extension Agreement to further amend the October 2007 Loan to extend the maturity date to March 30, 2019. At December 31, 2018 and December 31, 2017, the outstanding balance of the October 2007 Loan was $567,310 and $550,000, respectively. On December 31, 2013, Ondas Networks entered into a 10% per annum Promissory Note with an entity in the amount of $250,000, of which $25,000 was repaid in February 2015 (the “December 2013 Note”). The original maturity of the December 2013 Note was December 31, 2014. On November 1, 2014, Ondas Networks entered into a Loan Agreement with the same entity in the amount of $210,000. (the “November 2014 Loan”). The original maturity of the November 2014 Loan was March 16, 2015. The interest through the original maturity date of the November 2014 Loan was a fixed amount of $16,800. Subsequent to the original maturity date, the November 2014 Loan accrued interest at a rate of 18% per annum. On September 15, 2015, Ondas Networks and the entity verbally agreed to amend the November 2014 Loan to decrease the interest rate to 10% per annum. On April 1, 2016, the entity and Ondas Networks entered into a Loan Amendment to amend the December 2013 Note and November 2014 Loan to (i) extend the maturity date to April 1, 2017, and (ii) clear and waive any existing defaults. On November 30, 2017, the entity and Ondas Networks entered into a Loan Modification Agreement to further amend the December 2013 Note and November 2014 Loan to (i) transfer all accrued and unpaid interest on the December 2013 Note and November 2014 Loan ($60,679 and $49,170, respectively, as of December 31, 2017) to principal, (ii) extend the maturity dates to December 31, 2018, and (iii) clear and waive any existing defaults. On December 31, 2018, the entity and Ondas Networks entered into a Note Extension Agreement to further amend the December 2013 Note and November 2014 Loan to extend the maturity date to March 30, 2019. At December 31, 2018 and December 31, 2017, the outstanding balances of the December 2013 Note and November 2014 Loan was $285,679 and $259,170, respectively. On April 1, 2015, Ondas Networks entered into a 10% per annum Loan Agreement with two individuals in the amount of $50,000 (the “April 2015 Note”). The original maturity of the April 2015 Note was July 1, 2015. The accrued interest on the April 2015 Note through the original maturity date was $4,000. Subsequent to the original maturity date, the April 2015 Note accrued interest at a rate of 10% per annum. On February 11, 2016, the individuals and Ondas Networks entered into a Loan Amendment to amend the April 2015 Note to (i) extend the maturity date to April 1, 2017 and (ii) clear and waive any existing defaults. On November 30, 2017, the individuals and Ondas Networks entered into a Loan Modification Agreement to further amend the April 2015 Note to (i) transfer all accrued and unpaid interest ($16,511) as of December 31, 2017 to principal, (ii) extend the maturity date to December 31, 2018 and (iii) clear and waive any existing defaults. On December 31, 2018, the entity and Ondas Networks entered into a Note Extension Agreement to further amend the April 2015 Note and to extend the maturity date to March 30, 2019. At December 31, 2018 and December 31, 2017, the outstanding balance of the April 2015 Note was $66,511. In March 2017, Ondas Networks entered into a loan agreement with an individuals in the amount of $50,000 (the “March 2017 Note”). Accrued interest on the March 2017 Note was $10,000. The March 2017 Note and accrued interest were paid in full during 2017. Financing Agreement On November 3, 2016, Ondas Networks entered into a Purchase Order Financing Agreement with an accompanying 20% per annum Promissory Note with an individual in the amount of $250,000 (the “November 2016 Note”). The original maturity of the November 2016 Note was the earlier of the payment of the purchase order for which the loan was advanced or 180 days after issuance. On December 20, 2016, Ondas Networks entered into a second Purchase Order Financing Agreement with an accompanying 10% per annum Promissory Note with the same individual in the amount of $100,000 (the “December 2016 Note”). The original maturity of the December 2016 Note was the earlier of the payment of the purchase order for which the loan was advanced or 180 days after issuance. On November 30, 2017, the individual and Ondas Networks entered into a Loan Modification Agreement to amend the November and December 2016 Notes to (i) transfer all accrued and unpaid interest on the November and December 2016 Notes ($47,000 and $5,591, respectively) as of December 31, 2017 to principal, (ii) extend the maturity dates to December 31, 2018, and (iii) clear and waive any existing defaults. On December 31, 2018, the individual and Ondas Networks entered into a Note Extension Agreement to further amend the November and December 2016 Notes and to extend the maturity date to March 30, 2019. At December 31, 2018 and December 31, 2017, the outstanding balance of the November and December 2016 Notes was $297,000 and $105,591, respectively, in both years. On February 28, 2014, Ondas Networks entered into a Purchase Order Financing Agreement (the “Financing Agreement”) with an entity. Interest on the Financing Agreement accrued at 30% per annum for the first 104 days and at 51% per annum thereafter. Between June 2014 and January 2015, Ondas Networks received an aggregate of $660,000 of which $285,000 was repaid. At December 31, 2015, the principal outstanding totaled $375,000 and accrued interest totaled $223,393. During 2016, and for the period from January 1, 2017 through November 17, 2017, additional interest was accrued totaling $191,250 and $168,282, respectively. On November 17, 2017, the entity and Ondas Networks entered into an Amendment to Purchase Order Financing Agreement and agreed to (i) transfer all accrued and unpaid interest to principal, (ii) reduce the per annum interest rate to 10%, (iii) set the maturity date at December 31, 2018, and (iv) combine the Purchase Order Financing Agreements into a single loan (“November 2017 Loan”). On December 31, 2018, the entity and Ondas Networks entered into a Note Extension Agreement to further amend the November 2017 Loan and to extend the maturity date to March 30, 2019. As of December 31, 2018 and December 31, 2017, the outstanding principal balance of the November 2017 Loan was $957,925. Promissory Notes On December 14, 2015, Ondas Networks approved a private placement offering (“Private Placement”) seeking to sell to investors certain 10% promissory notes in the aggregate face amount of $750,000, which amount was later increased to $1,250,000, with a term of 18 months (“Private Placement Notes”). In connection with the Private Placement Notes, each investor (the “Private Placement Noteholders”) received warrants to purchase shares of common stock of Ondas Networks (“Private Placement Warrants”), equal to 25% of the principal amount of the Private Placement Notes, exercisable at the lower of (i) $2.00 per share or (ii) 40% of the selling price of Ondas Networks’ shares in its proposed initial public offering. In December 2015, pursuant to the terms of Security Purchase Agreements, Ondas Networks completed the sale of an aggregate of $325,000 in Private Placement Notes to Private Placement Noteholders, of which $25,000 was repaid during 2017, and issued them Private Placement Warrants to purchase an aggregate of 81,250 shares of common stock of Ondas Networks, with a term of ten years, at exercise price of $2.00 and a fair value of $63,398. As of January 1, 2018, the Private Placement Warrants for the 81,250 shares were surrendered to Ondas Networks in exchange for participation in a private placement of Ondas Networks’ shares dated April 13, 2018. Between February and July 2016, pursuant to the terms of Security Purchase Agreements, Ondas Networks completed the sale of an aggregate of $925,000 in Private Placement Notes to Private Placement Noteholders and issued them Private Placement Warrants to purchase an aggregate of 231,250 shares of Ondas Networks common stock, with a term of ten years, an exercise price of $2.00 and a fair value of $168,678. As of January 1, 2018, the Private Placement Warrants for the 231,250 shares of Ondas Networks of common stock was surrendered to Ondas Networks in exchange for participation in a private placement of Ondas Networks’ shares dated April 13, 2018. On November 30, 2017, the Private Placement Noteholders and Ondas Networks entered into Loan Modification Agreements to amend the Private Placement Notes to (i) transfer all accrued and unpaid interest ($118,682) as of December 31, 2017 to principal, (ii) extend the maturity date to December 31, 2018 and (iii) clear and waive any existing defaults. On December 31, 2018, the Private Placement Noteholders and Ondas Networks entered into Note Extension Agreements to further amend the Private Placement Notes and to extend the maturity date to March 30, 2019. At December 31, 2018 and December 31, 2017, the total outstanding balance of the Private Placement Notes was $1,343,682. Convertible Promissory Notes During 2017, Ondas Networks and certain entities and individuals (the “Noteholder(s)”) entered into convertible promissory notes defined herein as (i) notes with mutual conversion preferences (“Group 1 Notes”) and (ii) notes with unilateral conversion preferences (“Group 2 Notes”). Group 1 Notes. Group 2 Notes. On July 11, 2018, the Ondas Networks board of directors, by written consent, approved certain changes to outstanding Convertible Promissory Notes. The action approved changes to the Group 2 Notes to match the Group 1 Notes and authorized the issuance of a Security Holder Consent Agreement wherein each Group 2 Note holder would agree to the change. The changes modified the conversion option for the Group 2 Notes which resulted in a loss on extinguishment of debt in the amount of $44,348 and caused the derivative liability related to the Group 2 Notes to cease to exist and be classified as additional paid in capital at its fair value on July 11, 2018 in the amount of $1,141,995. On September 28, 2018, in conjunction with the Merger Agreement discussed in NOTE 1, the Group 1 Note noteholders and all but one Group 2 Note noteholders converted their outstanding Convertible Promissory Notes into an aggregate of 2,017,416 Company Shares. At December 31, 2018 and December 31, 2017, the total outstanding balance of the Convertible Promissory Note(s) was $300,000 and $2,940,000, respectively. Notes payable and other financing consists of: As of December 31, 2018 2017 Short Term: Loan Agreements $ 1,178,670 $ 1,161,360 Financing Agreement 1,360,516 1,360,516 Promissory Notes 1,343,682 1,343,682 $ 3,882,868 $ 3,865,558 Long Term: Convertible Promissory Notes $ 300,000 $ 2,940,000 Debt Discount — (162,659 ) $ 300,000 $ 2,777,341 |
SECURED PROMISSORY NOTE
SECURED PROMISSORY NOTE | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
SECURED PROMISSORY NOTE | NOTE 8 –SECURED PROMISSORY NOTE On March 9, 2018, we entered into a Loan and Security Agreement (the “Agreement”) with an entity (the “Lender”) wherein the Lender 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 the Lender 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 ratably over the life of the loan. There is also an end of term charge of $250,000. The end of term charge is 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 the Lender entered into a second Secured Term Promissory Note for $5,000,000 having a maturity date of September 9, 2019 or 10 days after a public offering (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, which is also recorded as a debt discount and amortized over the remaining term of the Second Note. The Agreement also contains covenants which include 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 contains 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 contains 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. We were not in default of any conditions under the Loan and Security Agreements as of December 31, 2018. As of December 31, 2018, the principal balance was $10,000,000, net of debt discount of $72,038 and accreted cost totaled $135,246. |
STOCKHOLDER'S DEFICIT
STOCKHOLDER'S DEFICIT | 12 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
STOCKHOLDER'S DEFICIT | NOTE 9 – STOCKHOLDERS’ EQUITY Equity Incentive Plan In connection with the Closing, our board of directors approved, and our stockholders adopted, the 2018 Equity Incentive Plan (the “2018 Plan”) pursuant to which 10 million Company Shares have been reserved for issuance to employees, including officers, directors and consultants. No equity incentive instruments were outstanding at December 31, 2018. |
INCOME TAXES
INCOME TAXES | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 10 – INCOME TAXES The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows: December 31, 2018 2017 Deferred Tax Assets: Tax benefit of net operating loss carry-forward $ 6,465,826 $ 4,006,517 Depreciation and amortization (5,102 ) (8,332 ) Accrued liabilities 261,876 220,681 Stock based compensation — 507,545 Interest Expense 740,285 — R&D Credit 393,165 — Total deferred tax assets 7,856,050 4,726,411 Valuation allowance for deferred tax assets (7,856,050 ) (4,726,411 ) Deferred tax assets, net of valuation allowance $ — $ — The change in the Company’s valuation allowance is as follows: Years Ended December 31, 2018 2017 Beginning of the year $ 4,726,411 $ 3,848,878 Change in valuation account 3,129,639 877,533 End of the year $ 7,856,050 $ 4,726,411 A reconciliation of the provision for income taxes with the amounts computed by applying the Federal income tax rate to income from operations before the provision for income taxes is as follows: Years Ended December 31, 2018 2017 U.S. federal statutory rate (21.0 )% (35.0 )% State taxes, net of federal benefit (6.9 )% (5.8 )% Share-based compensation — % 17.5 % Effect of U.S. tax law change — % (13.2 )% Change in valuation allowance 25.8 % 30.2 % Nondeductible expenses 2.0 % 6.3 % R&D credit (3.2 )% — % Stock Options 3.3 % — % Effective income tax rate — % — % In assessing the realizability of deferred tax assets, including the net operating loss carryforwards (NOLs), the Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize its existing deferred tax assets. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period when those temporary differences become deductible. Based on its assessment, the Company has provided a full valuation allowance against its net deferred tax assets as their future utilization remains uncertain at this time. As of December 31, 2018 and 2017, the Company had approximately $23 million and $15 million respectively of Federal and state NOLs available to offset future taxable income with $15 million expiring from 2030 through 2037 while the Federal NOL of $8 Million generated in 2018 has no expiration. As of December 31, 2018 and 2017, the Company had approximately $393,000 and $295,000, respectively of Federal research and development credits available to offset future tax liability expiring from 2030 through 2038. In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s Federal Carryforwards could be limited in the event of a change in ownership. As of December 31, 2018 the company has not completed an analysis as to whether or not an ownership change has occurred. The Company applies the FASB’s provisions for uncertain tax positions. The Company utilizes the two-step process to determine the amount of recognized tax benefit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties associated with uncertain tax positions as a component of income tax expense. As of December 31, 2018, management does not believe the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its financial statements. The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its financial statements is necessary. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year. Our U.S. federal and state tax returns since 2015 remain open to examination. On December 22, 2017, the U.S. Tax Cuts and Jobs Act (“Tax Cuts and Jobs Act”) was enacted which contained substantial changes to the Code, some of which could have an adverse effect on our business. Among other things, the Tax Cuts and Jobs Act (i) reduces the U.S. corporate income tax rate from 35% to 21% beginning in 2018, (ii) generally will limit annual deductions for net interest expense to no more than 30% of our “adjusted taxable income,” plus 100% of our business interest income for the year, and (iii) will permit a taxpayer to offset only 80% (rather than 100%) of its taxable income with any U.S. net operating losses (“NOLs”) generated for taxable years beginning after 2017. The U.S. Department of Treasury has broad authority to issue regulations and interpretative guidance that may significantly impact how we will apply the law and impact our results of operations in the period issued. While the U.S. Department of the Treasury has issued some proposed regulations since the enactment of the Tax Cuts and Jobs Act, additional guidance is likely forthcoming. The measurement period allowed by Staff Accounting Bulletin (“SAB”) No. 118 has closed during the fourth quarter of 2018. The prospects of supplemental legislation or regulatory processes to address uncertainties that arise because of the Act, or evolving technical interpretations of the tax law, may cause our financial statements to be impacted in the future. We will continue to analyze the effects of the Act as subsequent guidance continues to emerge. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 11 – COMMITMENTS AND CONTINGENCIES Legal Proceedings 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 December 31, 2018. Operating Leases On November 11, 2013, Ondas Networks entered into a three-year lease agreement for 5,858 square feet of office space at 687 North Pastoria Avenue, Sunnyvale, California expiring on December 31, 2017 with a base rent ranging from $2,929 to $9,079 per month plus certain various expenses incurred (the “North Pastoria Lease”). On October 16, 2017, Ondas Networks extended the lease agreement for an additional three years with an expiration date of December 31, 2020 (“2018 Extension”). Rent expense for the years ended December 31, 2018 and 2017 related to the North Pastoria Lease was $170,151 and $110,201, respectively. The base rent in the 2018 Extension is $13,473 and $15,231 for 2019 and 2020, respectively. We have completed our move to our new location described below and are attempting to sublet the property for the remainder of the lease agreement. On October 30, 2018, Ondas Networks entered into a Sublease with Texas Instruments Sunnyvale Incorporated, regarding the sublease of approximately 21,982 square feet of rentable space at 165 Gibraltar Court, Sunnyvale, CA 94089 (the “Gibraltar Sublease”), constituting the entire first floor of the premises (except the lobby and two stairwells), as defined under that certain Lease dated April 12, 2004, as amended by the First Lease Amendment dated March 15, 2005, a Second Amendment to Lease dated November 30, 2005, and a Third Amendment to Lease dated November 30, 2010 between Gibraltar Sunnyvale Holdings LLC and Texas Instruments Sunnyvale Incorporated. The Sublease began on November 1, 2018 and ends on February 28, 2021 at a base monthly rent of $28,577. A security deposit of $28,577 was paid upon execution of the Sublease. Rent expense for the November and December 31, 2018 related to the Gibraltar Sublease was $52,050. The future minimum lease payments related to the Gibraltar Sublease are as follows: Years Ending December 31, 2019 $ 328,631 2020 $ 342,924 2021 $ 57,154 On June 15, 2018, effective June 1, 2018, Ondas Networks entered into a five-year lease agreement for approximately 15,200 square feet of office space in Sichuan Province, China expiring on May 31, 2023 with a base rent ranging from, in U.S. dollars, approximately $9,200 to $9,700 (the “Sichuan Lease”). Under the terms of the Sichuan Lease, the first three months are rent free and, we paid $28,000 in advance for the second three months at the time of the execution. Ondas Networks also made a deposit payment of $15,000. The base rent is approximately $9,200 for the period from June 1, 2018 through April 30, 2020 and approximately $9,700 for the period from May 1, 2020 through May 31, 2023. In addition to the base rent, we will pay a management fee of approximately $1,800 per month. Rent expense for the June through December 31, 2018 related to the Sichuan Lease was $55,334. The future minimum lease payments (allowing for exchange rates) are approximately as follows: Years Ending December 31, 2019 $ 110,849 2020 $ 114,544 2021 $ 116,392 2022 $ 116,392 2023 $ 48,497 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 12 – RELATED PARTY TRANSACTIONS From time to time, the Ondas Networks’ Chief Executive Officer, Stewart Kantor, advanced funds to Ondas Networks to fund its operations. As of December 31, 2018 and December 31, 2017, advances due to Mr. Kantor were $0 and $155,645, respectively. These advances are reported on our balance sheet as advance from related party. At the Closing, we entered into a Loan and Security Agreement with Energy Capital, a greater than 10% stockholder the Company, pursuant to which Energy Capital agreed to lend an aggregate principal amount of up to $10 million, subject to specified conditions. See NOTE |
RESTATEMENT
RESTATEMENT | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
RESTATEMENT | NOTE 13 – RESTATEMENT In connection with the year-end financial statement closing process, the Company determined that its previously issued financial statements included in its Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2018 (“Restated Period”) should be restated due to an error in recording the conversion of debt on September 28, 2018 and the omission of recognizing a modification of debt on July 11, 2018. With the modification on July 11, 2018, the Company should have recorded a loss on extinguishment of debt in the amount of $44,348 and reclassified the derivative liability at its fair value in the amount of $1,141,995 to additional paid in capital (see NOTE 7 for details). On September 28, 2018, the debt conversion was originally recorded as a gain of $3,976,992, however it should have been recorded in common stock and additional paid in capital as a result of the July 11, 2018 debt modification. Impact of this Restatement Based on management’s review and discussions with our external auditors, the Company’s has concluded that the misclassification included on its financial statements filed in our Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2018 (“Q3 10-Q”) requires restatement, included herewith. Condensed Consolidated Balance Sheet (Unaudited) September 30, 2018 As Previously Reported As Restated Restatement Total assets $ 1,206,063 $ 1,206,063 $ — Total liabilities $ 11,101,777 $ 11,101,777 $ — Stockholders’ Deficit: Preferred stock — — — Common stock $ 5,046 5,046 — Additional paid in capital 14,334,570 17,616,073 (3,281,503 ) Subscriptions receivable (1,958 ) (1,958 ) — Accumulated deficit (24,233,372 ) (27,514,875 ) 3,281,503 Total stockholders’ deficit (9,895,714 ) (9,895,714 ) — Total liabilities and stockholders’ deficit $ 1,206,063 $ 1,206,063 $ — Condensed Consolidated Statement of Operations (Unaudited) Three Months Ended September 30, 2018 As Previously Reported As Restated Restatement Gross profit $ 28,749 $ 28,749 $ — Operating loss $ (2,072,459 ) $ (2,072,459 ) $ — Other income (expense) Interest expense (2,381,602 ) (1,618,834 ) (762,768 ) Change in fair value of derivative liability 22,931 — 22,931 Gain (loss) on conversion of debt 3,976,992 (44,348 ) 4,021,340 Interest income 6,606 6,606 — Total other income (expense) 1,624,927 (1,656,576 ) 3,281,503 Net loss $ (447,532 ) $ (3,729,035 ) $ 3,281,503 Net loss per share – basic and diluted $ (0.02 ) $ (0.16 ) $ (0.14 ) Condensed Consolidated Statement of Operations (Unaudited) Nine Months Ended September 30, 2018 As Previously Reported As Restated Restatement Gross profit $ 83,180 $ 83,180 $ — Operating loss $ (3,953,657 ) $ (3,953,657 ) $ — Other income (expense) Interest expense (2,932,674 ) (2,169,906 ) (762,768 ) Change in fair value of derivative liability (952,971 ) (975,902 ) 22,931 Gain (loss) on conversion of debt 3,976,992 (44,348 ) 4,021,340 Interest income 13,416 13,416 — Total other income (expense) 104,763 (3,176,740 ) 3,281,503 Net loss $ (3,848,894 ) $ (7,130,397 ) $ 3,281,503 Net loss per share – basic and diluted $ (0.18 ) $ (0.34 ) $ (0.16 ) Condensed Consolidated Statement of Cash Flows (Unaudited) Nine Months Ended September 30, 2018 As Previously Reported As Restated Restatement CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (3,848,894 ) $ (7,130,397 ) $ 3,281,503 Adjustments to reconcile net lost to net cash flows used in operating activities: Depreciation 15,405 15,405 — Allowance for doubtful accounts (7,914 ) (7,914 ) — Amortization of debt discount and deferred financing costs 907,891 145,123 762,768 Amortization of intangible assets 77 77 — Change in fair value of derivative liability 952,971 975,902 (22,931 ) Loss (gain) on conversion (3,976,992 ) 44,348 (4,021,340 ) Changes in operating assets and liabilities: Accounts receivable 1,929 1,929 — Inventory (137,725 ) (137,725 ) — Other current assets (110,113 ) (110,113 ) — Accounts payable 45,355 45,355 — Accrued expenses and other current liabilities 1,515,384 1,515,384 — Net cash flows used in operating activities (4,642,626 ) (4,642,626 ) — CASH FLOWS FROM INVESTING ACTIVITIES Net cash flows used in investing activities (185,780 ) (185,780 ) — CASH FLOWS FROM FINANCING ACTIVITIES Net cash flows provided by financing activities 4,884,593 4,884,593 — Increase in cash and cash equivalents 56,187 56,187 — Cash and cash equivalents, beginning of period 460,064 460,064 — Cash and cash equivalents, end of period $ 516,251 $ 516,251 $ — |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 14 – SUBSEQUENT EVENTS On January 29, February 11, February 27, and March 14, 2019, we drew down advances of $1,000,000, $650,000, $750,000 and $900,000, respectively, available under a loan and security agreement (the “Loan and Security Agreement”) with Energy Capital entered into on October 1, 2018 (the “Loan Agreement”) by the Company and Energy Capital (the “Loan”). The advance proceeds will be utilized primarily for operating capital. The principal amount outstanding under the Loan bears interest at or the completion by the Company of a capital raise with minimum proceeds to the Company of $20 million. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
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 (FS Partners has not begun operations) and our majority owned subsidiaries, Full Spectrum Holding and Ondas Network Limited (both have not begun operations). All significant inter-company accounts and transactions between these entities have been eliminated in these historical consolidated financial statements. |
Segment Information | Segment Information We operate in one business segment, which is the development, marketing and sale of wireless radio systems for secure, wide area mission-critical business-to-business networks. |
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 warrants, and valuation allowances against deferred tax assets. Actual results could differ from those estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents We consider all highly liquid instruments with an original maturity of three months or less, as well as deposits in financial institutions, to be cash and cash equivalents. As of December 31, 2018 and 2017, we had no cash equivalents. |
Trade Accounts Receivable | Trade Accounts Receivable Accounts receivable are stated at a gross invoice amount less an allowance for doubtful accounts. We estimate allowance for doubtful accounts by evaluating specific accounts where information indicates our customers may have an inability to meet financial obligations, such as customer payment history, credit worthiness and receivable amounts outstanding for an extended period beyond contractual terms. We use assumptions and judgment, based on the best available facts and circumstances, to record an allowance to reduce the receivable to the amount expected to be collected. These allowances are evaluated and adjusted as additional information is received. We had no allowance for doubtful accounts as of December 31, 2018. We had an allowance for doubtful accounts of $7,914 as of December 31, 2017. |
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 December 31, 2018 and 2017, we determined that no such reserves were necessary. |
Property and Equipment | Property and Equipment All additions, including improvements to existing facilities, are recorded at cost. Maintenance and repairs are charged to expense as incurred. Depreciation of property and equipment is principally recorded using the straight-line method over the estimated useful lives of the assets. The estimated useful lives typically are (i) three years for equipment and software, and (ii) five years for vehicles and furniture and fixtures. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful life of the asset. Upon the disposal of property, the asset and related accumulated depreciation accounts are relieved of the amounts recorded therein for such items, and any resulting gain or loss is recorded in operating expenses in the year of disposition. |
Software | Software Costs incurred internally in researching and developing a software product are charged to expense until technological feasibility has been established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. We have determined that technological feasibility for our software products is reached after all high-risk development issues have been resolved through coding and testing. Generally, this occurs shortly before the products are released to production. The amortization of these costs is included in cost of revenue over the estimated life of the products. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets Long-lived assets are evaluated whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or the useful life has changed. Such indicators include significant technological changes, adverse changes in market conditions and/or poor operating results. The carrying value of a long-lived asset group is considered impaired when the projected undiscounted future cash flows is less than its carrying value. The amount of impairment loss recognized is the difference between the estimated fair value and the carrying value of the asset or asset group. Fair market value is determined primarily using the projected future cash flows discounted at a rate commensurate with the risk involved. Based upon our evaluation, there were no impairments of long-lived assets required during the year ended December 31, 2018. |
Patents | Patents We amortize our intangible assets with a finite life on a straight-line basis, over 20 years for patents. We begin amortization of these costs on the date patents are awarded. |
Research and Development | Research and Development Costs for research and development are expensed as incurred. Research and development expense consists primarily of salaries, salary related expenses and costs of contractors and materials. |
Derivative Financial Instruments | Derivative Financial Instruments Derivatives are recorded on the balance sheet at fair value and changes in fair value are recorded in earnings at each reporting date in accordance with U.S. GAAP. |
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 We have elected not to carry our debt instruments at fair value. The carrying amount of our debt approximates fair value. Interest rates that are currently available to us for issuance of short and long-term debt with similar terms and remaining maturities are used to estimate the fair value of our short and long-term debt. In accordance with accounting standards, we determined that at December 31, 2017, certain instruments qualified as derivative liabilities and should be recorded at their fair value on the date of issuance and re-measured at fair value each reporting period with the change reported in earnings). The fair value of these instruments were computed using the Binomial Lattice Monte Carlo model, incorporating transaction details such as the price of our common stock, contractual terms, maturity and risk-free rates, as well as assumptions about future financings, volatility, and holder behavior. The assumptions used in computing the fair value as of December 31, 2017 are as follows: Stock price $ 0.0027 Conversion price $ 8.1500 Expected volatility 63 % Term (years) 9.5 Risk-free interest 2.36 % Expected dividend yield 0 % At December 31, 2018, we had no instruments requiring a fair value determination. The following table provides the financial assets and liabilities reported at fair value and measured on a recurring basis at December 31, 2018 and 2017: Description Assets/ (Liabilities) Measured at Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Other Unobservable Inputs (Level 3) Fair value of derivative liability as of: December 31, 2018 $ — $ — $ — $ — December 31, 2017 $ (166,093 ) $ — $ — $ (166,093 ) The following table provides a summary of changes in fair value associated with the Level 3 liabilities for years ended December 31, 2018 and 2017: Fair Value Measurements Using Significant Unobservable Inputs (Level 3) December 31, 2018 2017 Balance, beginning of period $ (166,093 ) $ — Issuances of derivative liability — (171,118 ) Reclassification to additional paid in capital 1,141,995 — Change in fair value of derivative liability (975,902 ) 5,025 Balance, end of period $ — $ (166,093 ) 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. |
Income Taxes | Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized when the rate change is enacted. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. In accordance with GAAP, we recognize the effect of uncertain income tax positions only if the positions are more likely than not of being sustained in an audit, based on the technical merits of the position. Recognized uncertain income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which those changes in judgment occur. We recognize both interest and penalties related to uncertain tax positions as part of the income tax provision. |
Shipping and Handling | Shipping and Handling We expense all shipping and handling costs as incurred. These costs are included in cost of goods sold on the accompanying consolidated financial statements. |
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 the equity financing, 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 financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the consolidated statement of operations. |
Off-Balance Sheet Arrangements | Off-Balance Sheet Arrangements The Company has no off-balance sheet risk such as foreign exchange contracts, option contracts, or other hedging arrangements. |
ASC 606, Revenue from Contracts with Customers | ASC 606, 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, value add, and other taxes collected on behalf of third parties are excluded from revenue. For the year ended December 31, 2018, 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 year ended December 31, 2018, 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 the FullMAX System and the delivery of related services. 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 sold by the Company 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, at our election, of the base station and remote radios, 2) software upgrades, bug fixes and new features of the radio software and NMS, 3) deployment and network architecture support, and 4) technical support by phone and email. Extended warranty, network support and maintenance, and remote monitoring revenues are recognized ratably over the term of the service contract. 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. 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 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. |
Disaggregation of Revenue | Disaggregation of Revenue The following tables present our disaggregated revenues by Type of Revenue and Timing of Revenue. Years Ended December 31, 2018 2017 Type of Revenue Product revenue $ 125,664 $ 185,261 Service revenue 64,365 89,142 Total revenue $ 190,029 $ 274,403 Years Ended December 31, 2018 2017 Timing of Revenue Revenue recognized point in time $ 147,863 $ 235,636 Revenue recognized over time 42,166 38,767 Total revenue $ 190,029 $ 274,403 |
Contract Assets and Liabilities | 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 good or services that we have transferred to a customer is conditional on something other than the passage of time. We did not have any contract assets recorded at December 31, 2018. 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 years ended December 31, 2018 and 2017, and the balance at the end of each year is reported as deferred revenue in the Company’s consolidated balance sheet. Years Ended December 31, 2018 2017 Balance, beginning of year $ 30,690 $ 36,299 Additions 32,106 39,895 Transfer to revenue (42,166 ) (45,504 ) Balance, end of year $ 20,631 $ 30,690 |
Warranty Reserve | Warranty Reserve We provide a limited one-year assurance-type warranty on our software and hardware products. The assurance-type warranty covers defects in material and wordsmanship 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 December 31, 2018 is immaterial to the Company’s financial statements. |
Net Loss Per Common Share | Net Loss Per Common Share In a reverse merger transaction, net loss per share for all periods presented is based on the equity structure of the legal acquirer, which assumes common stock is outstanding and is reflected on a retrospective basis for all periods presented. Basic net loss per share is computed by dividing net loss by the weighted average shares of common stock outstanding for each period. Diluted net loss per share is the same as basic net loss per share since the Company has net losses for each period presented. The following common stock equivalents were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect: Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. Years Ended December 31, 2018 2017 Warrants to purchase common stock — 1,953,722 Options to purchase common stock — 3,606,052 Convertible debt 140,678 1,490,704 Total potentially dilutive securities 140,678 7,050,478 |
Debt Issuance Costs | Debt Issuance Costs Debt issuance costs represent costs incurred for the issuance of debt. Once the associated debt instrument is issued, these costs would be recorded as a debt discount and amortized using the effective interest method over the term of the related debt instrument. Upon abandonment of a pending financing transaction, the related deferred financing costs are charged to interest expense. |
Concentrations of Credit Risk | Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist of cash and accounts receivable. Cash is deposited with a limited number of financial institutions. The balances held at any one financial institution may be in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits. Credit is extended to customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations of our customers and maintains an allowance for doubtful accounts and sales credits. |
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. During the year ended December 31, 2018, two customers accounted for approximately $145,000 and $32,000 of our revenue or 76% and 17%, respectively. No other customers provided more than 10% of our revenue during 2018. During the year ended December 31, 2107, three customers accounted for approximately $156,000, $50,000 and $41,000 of our revenue or 51%, 18% and 15%, respectively. No other customers provided more than 10% of our revenue during 2017. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2018, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”), 2018-13 that eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and modifies some disclosure requirements. The FASB developed the amendments to Accounting Standards Codification (“ASC”) 820 as part of its broader disclosure framework project, which aims to improve the effectiveness of disclosures in the notes to financial statements by focusing on requirements that clearly communicate the most important information to users of the financial statements. The new guidance is effective for all entities for fiscal years beginning after December 15, 2019 and for interim periods within those fiscal years. An entity is permitted to early adopt either the entire standard or only the provisions that eliminate or modify requirements. We are currently evaluating the effect of this guidance on our disclosures. In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). The amendments in ASU 2018-07 expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. In July 2017, the FASB issued ASU 2017-11 (“ASU 2017-11”), Earnings Per Share (“Topic 260”), Distinguishing Liabilities from Equity Derivatives and Hedging In August 2016, FASB issued ASU Statement of Cash Flows (Topic 230) In February 2016, the FASB issued ASU 2016-02, Leases Codification Improvements to Topic 842 Leases Leases (Topic 842), Targeted Improvements Leases Narrow-Scope Improvements for Lessors |
Restatement | Restatement In connection with the year-end financial statement closing process, the Company determined that its previously issued financial statements included in its Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2018 (“Restated Period”) should be restated due to an error in recording the conversion of debt on September 28, 2018 and the omission of recognizing a modification of debt on July 11, 2018. With the modification on July 11, 2018, the Company should have recorded a loss on extinguishment of debt in the amount of $44,348 and reclassified the derivative liability at its fair value in the amount of $1,141,995 to additional paid in capital (see NOTE 7 for details). On September 28, 2018, the debt conversion was originally recorded as a gain of $3,976,992, however it should have been recorded in common stock and additional paid in capital as a result of the July 11, 2018 debt modification. See NOTE |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Schedule of Assumptions Used | The assumptions used in computing the fair value as of December 31, 2017 are as follows: Stock price $ 0.0027 Conversion price $ 8.1500 Expected volatility 63 % Term (years) 9.5 Risk-free interest 2.36 % Expected dividend yield 0 % |
Fair Value Measurements, Recurring and Nonrecurring | The following table provides the financial assets and liabilities reported at fair value and measured on a recurring basis at December 31, 2018 and 2017: Description Assets/ (Liabilities) Measured at Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Other Unobservable Inputs (Level 3) Fair value of derivative liability as of: December 31, 2018 $ — $ — $ — $ — December 31, 2017 $ (166,093 ) $ — $ — $ (166,093 ) |
Changes in fair value associated with Level 3 liabilities | The following table provides a summary of changes in fair value associated with the Level 3 liabilities for years ended December 31, 2018 and 2017: Fair Value Measurements Using Significant Unobservable Inputs (Level 3) December 31, 2018 2017 Balance, beginning of period $ (166,093 ) $ — Issuances of derivative liability — (171,118 ) Reclassification to additional paid in capital 1,141,995 — Change in fair value of derivative liability (975,902 ) 5,025 Balance, end of period $ — $ (166,093 ) |
Disaggregation of Revenue | The following tables present our disaggregated revenues by Type of Revenue and Timing of Revenue. Years Ended December 31, 2018 2017 Type of Revenue Product revenue $ 125,664 $ 185,261 Service revenue 64,365 89,142 Total revenue $ 190,029 $ 274,403 Years Ended December 31, 2018 2017 Timing of Revenue Revenue recognized point in time $ 147,863 $ 235,636 Revenue recognized over time 42,166 38,767 Total revenue $ 190,029 $ 274,403 |
Deferred warranty activity | The table below details the activity in our contract liabilities during the years ended December 31, 2018 and 2017, and the balance at the end of each year is reported as deferred revenue in the Company’s consolidated balance sheet. Years Ended December 31, 2018 2017 Balance, beginning of year $ 30,690 $ 36,299 Additions 32,106 39,895 Transfer to revenue (42,166 ) (45,504 ) Balance, end of year $ 20,631 $ 30,690 |
Potentially dilutive securities | Potentially dilutive securities outlined in the table below have been excluded from the computation of diluted net loss per share because the effect of their inclusion would have been anti-dilutive. Years Ended December 31, 2018 2017 Warrants to purchase common stock — 1,953,722 Options to purchase common stock — 3,606,052 Convertible debt 140,678 1,490,704 Total potentially dilutive securities 140,678 7,050,478 |
OTHER CURRENT ASSETS (Tables)
OTHER CURRENT ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
OTHER CURRENT ASSETS | Other current assets consist of the following: Years Ended December 31, 2018 2017 Prepaid financing costs $ 188,300 $ — Prepaid marketing cost 125,525 — Prepaid insurance 102,743 — Other prepaid expenses 40,654 13,755 Other receivables 44,294 9,823 Deposits 31,965 20,000 TOTAL OTHER CURRENT ASSETS $ 533,481 $ 43,578 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | Property and equipment consist of the following: Years Ended December 31, 2018 2017 Leasehold improvements $ 256,920 $ 30,367 Vehicle 143,560 — Furniture and fixtures 132,088 41,685 Computer Equipment 87,087 39,382 Software 61,287 25,272 680,942 136,706 Less: accumulated depreciation (178,796 ) (123,850 ) TOTAL PROPERTY AND EQUIPMENT $ 502,146 $ 12,856 |
OTHER CURRENT LIABILITIES (Tabl
OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
OTHER CURRENT LIABILITIES | Accrued expenses and other current liabilities consist of the following: Years Ended December 31, 2018 2017 Accrued payroll and other benefits $ 1,659,577 $ 792,746 Accrued rent and facilities costs 160,544 — Accrued interest 138,605 42,824 Accrued professional fees 126,384 — D&O insurance financing payable 52,530 — Other accrued expenses 30,000 1,526 Deferred revenue 20,631 30,690 Other current liabilities — 11,236 TOTAL OTHER CURRENT LIABILITIES $ 2,188,271 $ 879,022 |
NOTES PAYABLE AND OTHER FINAN_2
NOTES PAYABLE AND OTHER FINANCING AGREEMENTS (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
Notes payable | Notes payable and other financing consists of: As of December 31, 2018 2017 Short Term: Loan Agreements $ 1,178,670 $ 1,161,360 Financing Agreement 1,360,516 1,360,516 Promissory Notes 1,343,682 1,343,682 $ 3,882,868 $ 3,865,558 Long Term: Convertible Promissory Notes $ 300,000 $ 2,940,000 Debt Discount — (162,659 ) $ 300,000 $ 2,777,341 |
INCOME TAXES (Tables)
INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of Deferred Tax Assets and Liabilities | The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows: December 31, 2018 2017 Deferred Tax Assets: Tax benefit of net operating loss carry-forward $ 6,465,826 $ 4,006,517 Depreciation and amortization (5,102 ) (8,332 ) Accrued liabilities 261,876 220,681 Stock based compensation — 507,545 Interest Expense 740,285 — R&D Credit 393,165 — Total deferred tax assets 7,856,050 4,726,411 Valuation allowance for deferred tax assets (7,856,050 ) (4,726,411 ) Deferred tax assets, net of valuation allowance $ — $ — |
Summary of Valuation Allowance | The change in the Company’s valuation allowance is as follows: Years Ended December 31, 2018 2017 Beginning of the year $ 4,726,411 $ 3,848,878 Change in valuation account 3,129,639 877,533 End of the year $ 7,856,050 $ 4,726,411 |
Schedule of Effective Income Tax Rate Reconciliation | A reconciliation of the provision for income taxes with the amounts computed by applying the Federal income tax rate to income from operations before the provision for income taxes is as follows: Years Ended December 31, 2018 2017 U.S. federal statutory rate (21.0 )% (35.0 )% State taxes, net of federal benefit (6.9 )% (5.8 )% Share-based compensation — % 17.5 % Effect of U.S. tax law change — % (13.2 )% Change in valuation allowance 25.8 % 30.2 % Nondeductible expenses 2.0 % 6.3 % R&D credit (3.2 )% — % Stock Options 3.3 % — % Effective income tax rate — % — % |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Sunnyvale, California [Member] | |
Future minimum lease payments | The future minimum lease payments related to the Gibraltar Sublease are as follows: Years Ending December 31, 2019 $ 328,631 2020 $ 342,924 2021 $ 57,154 |
Sichuan Province, China [Member] | |
Future minimum lease payments | The future minimum lease payments (allowing for exchange rates) are approximately as follows: Years Ending December 31, 2019 $ 110,849 2020 $ 114,544 2021 $ 116,392 2022 $ 116,392 2023 $ 48,497 |
RESTATEMENT (Tables)
RESTATEMENT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
RESTATEMENT | Based on management’s review and discussions with our external auditors, the Company’s has concluded that the misclassification included on its financial statements filed in our Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2018 (“Q3 10-Q”) requires restatement, included herewith. Condensed Consolidated Balance Sheet (Unaudited) September 30, 2018 As Previously Reported As Restated Restatement Total assets $ 1,206,063 $ 1,206,063 $ — Total liabilities $ 11,101,777 $ 11,101,777 $ — Stockholders’ Deficit: Preferred stock — — — Common stock $ 5,046 5,046 — Additional paid in capital 14,334,570 17,616,073 (3,281,503 ) Subscriptions receivable (1,958 ) (1,958 ) — Accumulated deficit (24,233,372 ) (27,514,875 ) 3,281,503 Total stockholders’ deficit (9,895,714 ) (9,895,714 ) — Total liabilities and stockholders’ deficit $ 1,206,063 $ 1,206,063 $ — Condensed Consolidated Statement of Operations (Unaudited) Three Months Ended September 30, 2018 As Previously Reported As Restated Restatement Gross profit $ 28,749 $ 28,749 $ — Operating loss $ (2,072,459 ) $ (2,072,459 ) $ — Other income (expense) Interest expense (2,381,602 ) (1,618,834 ) (762,768 ) Change in fair value of derivative liability 22,931 — 22,931 Gain (loss) on conversion of debt 3,976,992 (44,348 ) 4,021,340 Interest income 6,606 6,606 — Total other income (expense) 1,624,927 (1,656,576 ) 3,281,503 Net loss $ (447,532 ) $ (3,729,035 ) $ 3,281,503 Net loss per share – basic and diluted $ (0.02 ) $ (0.16 ) $ (0.14 ) Condensed Consolidated Statement of Operations (Unaudited) Nine Months Ended September 30, 2018 As Previously Reported As Restated Restatement Gross profit $ 83,180 $ 83,180 $ — Operating loss $ (3,953,657 ) $ (3,953,657 ) $ — Other income (expense) Interest expense (2,932,674 ) (2,169,906 ) (762,768 ) Change in fair value of derivative liability (952,971 ) (975,902 ) 22,931 Gain (loss) on conversion of debt 3,976,992 (44,348 ) 4,021,340 Interest income 13,416 13,416 — Total other income (expense) 104,763 (3,176,740 ) 3,281,503 Net loss $ (3,848,894 ) $ (7,130,397 ) $ 3,281,503 Net loss per share – basic and diluted $ (0.18 ) $ (0.34 ) $ (0.16 ) Condensed Consolidated Statement of Cash Flows (Unaudited) Nine Months Ended September 30, 2018 As Previously Reported As Restated Restatement CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (3,848,894 ) $ (7,130,397 ) $ 3,281,503 Adjustments to reconcile net lost to net cash flows used in operating activities: Depreciation 15,405 15,405 — Allowance for doubtful accounts (7,914 ) (7,914 ) — Amortization of debt discount and deferred financing costs 907,891 145,123 762,768 Amortization of intangible assets 77 77 — Change in fair value of derivative liability 952,971 975,902 (22,931 ) Loss (gain) on conversion (3,976,992 ) 44,348 (4,021,340 ) Changes in operating assets and liabilities: Accounts receivable 1,929 1,929 — Inventory (137,725 ) (137,725 ) — Other current assets (110,113 ) (110,113 ) — Accounts payable 45,355 45,355 — Accrued expenses and other current liabilities 1,515,384 1,515,384 — Net cash flows used in operating activities (4,642,626 ) (4,642,626 ) — CASH FLOWS FROM INVESTING ACTIVITIES Net cash flows used in investing activities (185,780 ) (185,780 ) — CASH FLOWS FROM FINANCING ACTIVITIES Net cash flows provided by financing activities 4,884,593 4,884,593 — Increase in cash and cash equivalents 56,187 56,187 — Cash and cash equivalents, beginning of period 460,064 460,064 — Cash and cash equivalents, end of period $ 516,251 $ 516,251 $ — |
DESCRIPTION OF BUSINESS AND B_2
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION (Details Narrative) - USD ($) | 12 Months Ended | |||||
Dec. 31, 2018 | Sep. 19, 2019 | Mar. 31, 2019 | Sep. 28, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||
Authorized Capital | 360,000,000 | |||||
Common stock, authorized | 350,000,000 | 350,000,000 | ||||
Common stock, issued | 50,463,732 | 16,797,744 | ||||
Common stock, outstanding | 50,463,732 | 16,797,744 | ||||
Preferred stock, par value (in dollar pers share) | $ 0.0001 | $ 0.0001 | ||||
Preferred stock, authorized | 10,000,000 | 10,000,000 | ||||
Accumulated deficit | $ (32,381,535) | $ (20,284,671) | ||||
Working capital deficit | 15,205,000 | |||||
Net borrowings outstanding | 14,246,000 | $ 10,063,000 | $ 3,883,000 | |||
Cash and cash equivalents | $ 1,129,863 | $ 456,018 | $ 45,248 | |||
Liquidity description | Based on our current operating plans, we believe that our existing cash and cash equivalents, as well as the $3,300,000 in borrowings we drew down thus far in 2019 from the $10 million loan and security agreement (see NOTE 14 for further details) will only be sufficient to meet our anticipated operating needs through March 2019. We currently do not have sufficient funds to repay the debt discussed above at maturity on March 30, 2019 and must secure additional equity or debt capital in order to repay those obligations (the balance of funds available under the $10 million loan and security agreement are contractually not available for this repayment). Aside from the balance available under $10 million loan and security agreement, at the present time we have no commitments for any such funding and no assurance can be provided that we will be able to raise the needed funds on commercially acceptable terms or at all. | |||||
Employee [Member] | 2018 Equity Incentive Plan [Member] | ||||||
Common stock issued to employeee | 10,000,000 | |||||
Common Stock Repurchase Agreement [Member] | ||||||
Number of shares repurchased | 32,600,000 | |||||
Consideration of shares repurchased | $ 3,260 | |||||
Ondas Networks Share [Member] | ||||||
Common stock, par value (in dollars per share) | $ 0.00001 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Details) | 12 Months Ended |
Dec. 31, 2017$ / shares | |
Accounting Policies [Abstract] | |
Stock price | $ 0.0027 |
Conversion price | $ 8.1500 |
Expected volatility | 63.00% |
Term (years) | 9 years 6 months |
Risk-free interest | 2.36% |
Expected dividend yield | 0.00% |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Details 1) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Fair value of warrant liability | $ (166,093) | |
Fair Value, Inputs, Level 1 [Member] | ||
Fair value of warrant liability | ||
Fair Value, Inputs, Level 2 [Member] | ||
Fair value of warrant liability | ||
Fair Value, Inputs, Level 3 [Member] | ||
Fair value of warrant liability | $ (166,093) |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | ||
Balance, beginning of period | $ (166,093) | |
Issuances of derivative liability | (171,118) | |
Reclassification to additional paid in capital | 1,141,995 | |
Change in fair value of derivative liability | (975,902) | 5,025 |
Balance, end of period | $ (166,093) |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Details 3) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenues | $ 190,029 | $ 274,403 |
Transferred at Point in Time [Member] | ||
Revenues | 147,863 | 235,636 |
Transferred over Time [Member] | ||
Revenues | 42,166 | 38,767 |
Product [Member] | ||
Revenues | 125,664 | 185,261 |
Service [Member] | ||
Revenues | $ 64,365 | $ 89,142 |
SUMMARY OF SIGNIFICANT ACCOUN_8
SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Details 4) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | ||
Balance, beginning of period | $ 30,690 | $ 36,299 |
Additions | 32,106 | 39,895 |
Transfer to revenue | (42,166) | (45,504) |
Balance, end of period | $ 20,631 | $ 30,690 |
SUMMARY OF SIGNIFICANT ACCOUN_9
SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Details 5) - shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Total potentially dilutive securities | 140,678 | 7,050,478 |
Warrants [Member] | ||
Total potentially dilutive securities | 1,953,722 | |
Options [Member] | ||
Total potentially dilutive securities | 3,606,052 | |
Convertible Debt [Member] | ||
Total potentially dilutive securities | 140,678 | 1,490,704 |
SUMMARY OF SIGNIFICANT ACCOU_10
SUMMARY OF SIGNIFICANT ACCOUNT POLICIES (Details Narrative) - USD ($) | Jul. 11, 2018 | Sep. 28, 2018 | Dec. 31, 2018 | Dec. 31, 2017 |
Cash equivalents | $ 0 | $ 0 | ||
Allowance for doubtful accounts | 0 | 7,914 | ||
Inventory reserve | 0 | 0 | ||
Impairments of long-lived assets | $ 0 | |||
Patent useful life | 20 years | |||
Revenue | $ 190,029 | 274,403 | ||
Loss on extinguishment of debt | $ 44,348 | (44,353) | ||
Reclassification of derivative liability to additional paid in capital | $ 1,141,995 | 1,141,995 | ||
Gain on conversion of debt | $ 3,976,992 | |||
Revenue [Member] | First customers [Member] | ||||
Revenue | $ 145,000 | $ 156,000 | ||
Concentration Percentage | 76.00% | 51.00% | ||
Revenue [Member] | Second customers [Member] | ||||
Revenue | $ 32,000 | $ 50,000 | ||
Concentration Percentage | 17.00% | 18.00% | ||
Revenue [Member] | Third customers [Member] | ||||
Revenue | $ 41,000 | |||
Concentration Percentage | 15.00% |
OTHER CURRENT ASSETS (Details)
OTHER CURRENT ASSETS (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
Prepaid financing costs | $ 188,300 | |
Prepaid marketing cost | 125,525 | |
Prepaid insurance | 102,743 | |
Other prepaid expenses | 40,654 | 13,755 |
Other receivables | 44,294 | 9,823 |
Deposits | 31,965 | 20,000 |
TOTAL OTHER CURRENT ASSETS | $ 533,481 | $ 43,578 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
PROPERTY AND EQUIPMENT GROSS | $ 680,942 | $ 136,706 |
Less: accumulated depreciation | (178,796) | (123,850) |
TOTAL PROPERTY AND EQUIPMENT | 502,146 | 12,856 |
Leasehold Improvements [Member] | ||
PROPERTY AND EQUIPMENT GROSS | 256,920 | 30,367 |
Vehicles [Member] | ||
PROPERTY AND EQUIPMENT GROSS | 143,560 | |
Furniture and Fixtures [Member] | ||
PROPERTY AND EQUIPMENT GROSS | 132,088 | 41,685 |
Computer Equipment [Member] | ||
PROPERTY AND EQUIPMENT GROSS | 87,087 | 39,382 |
Software [Member] | ||
PROPERTY AND EQUIPMENT GROSS | $ 61,287 | $ 25,272 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 54,946 | $ 13,439 |
INTANGIBLE ASSETS (Details Narr
INTANGIBLE ASSETS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Patent costs | $ 53,482 | |
Amortization of patent costs | 194 | |
Capitalized patent costs | $ 0 |
OTHER CURRENT LIABILITIES (Deta
OTHER CURRENT LIABILITIES (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Notes to Financial Statements | |||
Accrued payroll and other benefits | $ 1,659,577 | $ 792,746 | |
Accrued rent and facilities costs | 160,544 | ||
Accrued interest | 138,605 | 42,824 | |
Accrued professional fees | 126,384 | ||
D&O insurance financing payable | 52,530 | ||
Other accrued expenses | 30,000 | 1,526 | |
Deferred revenue | 20,631 | 30,690 | $ 36,299 |
Other current liabilities | 11,236 | ||
TOTAL OTHER CURRENT LIABILITIES | $ 2,188,271 | $ 879,022 |
NOTES PAYABLE AND OTHER FINAN_3
NOTES PAYABLE AND OTHER FINANCING AGREEMENTS (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Notes payable curent | $ 3,882,868 | $ 3,865,558 |
Debt Discount | 0 | (162,659) |
Notes payable noncurent | 300,000 | 2,777,341 |
Convertible Promissory Notes [Member] | ||
Notes payable noncurent | 300,000 | 2,940,000 |
Loan Agreements[Member] | ||
Notes payable curent | 1,178,670 | 1,161,360 |
Financing Agreement [Member] | ||
Notes payable curent | 1,360,516 | 1,360,516 |
Promissory Notes [Member] | ||
Notes payable curent | $ 1,343,682 | $ 1,343,682 |
NOTES PAYABLE AND OTHER FINAN_4
NOTES PAYABLE AND OTHER FINANCING AGREEMENTS (Details Narrative) - USD ($) | Jul. 11, 2018 | Apr. 13, 2018 | Dec. 14, 2015 | Sep. 28, 2018 | Nov. 30, 2017 | Nov. 17, 2017 | Oct. 31, 2017 | Dec. 31, 2016 | Nov. 30, 2016 | Dec. 31, 2015 | Sep. 15, 2015 | Apr. 30, 2015 | Feb. 28, 2015 | Nov. 30, 2014 | Dec. 31, 2013 | Jan. 08, 2018 | Aug. 01, 2017 | Jul. 31, 2016 | Jan. 31, 2015 | Dec. 31, 2018 | Dec. 31, 2017 | Mar. 31, 2017 |
Accrued interest | $ 138,605 | $ 42,824 | ||||||||||||||||||||
Notes payable noncurent | 300,000 | 2,777,341 | ||||||||||||||||||||
Loss on extinguishment of debt | $ 44,348 | (44,353) | ||||||||||||||||||||
Reclassification of derivative liability to additional paid in capital | $ 1,141,995 | 1,141,995 | ||||||||||||||||||||
Convertible Promissory Notes [Member] | ||||||||||||||||||||||
Notes payable noncurent | 300,000 | 2,940,000 | ||||||||||||||||||||
Loan Agreements[Member] | December 2013 Note [Member] | ||||||||||||||||||||||
Original principal amount | $ 250,000 | |||||||||||||||||||||
Repayment of note payable | $ 25,000 | |||||||||||||||||||||
Interest rate | 10.00% | |||||||||||||||||||||
Accrued and unpaid interest transfer to principal | 60,679 | |||||||||||||||||||||
Maturity date | Mar. 30, 2019 | |||||||||||||||||||||
Note payable | 285,679 | 285,679 | ||||||||||||||||||||
Loan Agreements[Member] | October 2007 Note [Member] | ||||||||||||||||||||||
Original principal amount | $ 550,000 | |||||||||||||||||||||
Interest rate | 10.00% | |||||||||||||||||||||
Accrued and unpaid interest transfer to principal | 17,310 | |||||||||||||||||||||
Maturity date | Mar. 30, 2019 | |||||||||||||||||||||
Note payable | 567,310 | 550,000 | ||||||||||||||||||||
Loan Agreements[Member] | November 2014 Note [Member] | ||||||||||||||||||||||
Original principal amount | $ 210,000 | |||||||||||||||||||||
Interest rate | 10.00% | 18.00% | ||||||||||||||||||||
Accrued and unpaid interest transfer to principal | 49,170 | |||||||||||||||||||||
Maturity date | Mar. 30, 2019 | |||||||||||||||||||||
Note payable | 259,170 | 259,170 | ||||||||||||||||||||
Accrued interest | $ 16,800 | |||||||||||||||||||||
Loan Agreements[Member] | April 2015 Note [Member] | ||||||||||||||||||||||
Original principal amount | $ 50,000 | |||||||||||||||||||||
Interest rate | 10.00% | |||||||||||||||||||||
Accrued and unpaid interest transfer to principal | 16,511 | |||||||||||||||||||||
Maturity date | Dec. 31, 2018 | |||||||||||||||||||||
Note payable | 66,511 | 66,511 | ||||||||||||||||||||
Accrued interest | $ 4,000 | |||||||||||||||||||||
Loan Agreements[Member] | November 2016 Note [Member] | ||||||||||||||||||||||
Original principal amount | $ 250,000 | |||||||||||||||||||||
Interest rate | 20.00% | |||||||||||||||||||||
Accrued and unpaid interest transfer to principal | 47,000 | |||||||||||||||||||||
Maturity date | Mar. 30, 2019 | |||||||||||||||||||||
Note payable | 297,000 | 297,000 | ||||||||||||||||||||
Loan Agreements[Member] | December 2016 Note [Member] | ||||||||||||||||||||||
Original principal amount | $ 100,000 | |||||||||||||||||||||
Interest rate | 20.00% | |||||||||||||||||||||
Accrued and unpaid interest transfer to principal | $ 5,591 | |||||||||||||||||||||
Note payable | 105,591 | 105,591 | ||||||||||||||||||||
Loan Agreements[Member] | March 2017 Note [Member] | ||||||||||||||||||||||
Original principal amount | $ 50,000 | |||||||||||||||||||||
Accrued interest | 10,000 | |||||||||||||||||||||
Accrued interest paid | 10,000 | |||||||||||||||||||||
Financing Agreement [Member] | ||||||||||||||||||||||
Original principal amount | $ 660,000 | |||||||||||||||||||||
Repayment of note payable | $ 285,000 | |||||||||||||||||||||
Note payable | $ 375,000 | |||||||||||||||||||||
Accrued interest | $ 168,282 | $ 191,250 | 223,393 | |||||||||||||||||||
Financing Agreement [Member] | November 2017 Note [Member] | ||||||||||||||||||||||
Interest rate | 10.00% | |||||||||||||||||||||
Maturity date | Mar. 30, 2019 | |||||||||||||||||||||
Note payable | 957,925 | 957,925 | ||||||||||||||||||||
Promissory Notes [Member] | Private Placement Notes [Member] | ||||||||||||||||||||||
Repayment of note payable | 25,000 | |||||||||||||||||||||
Sale of Private Placement Notes | $ 750,000 | $ 325,000 | $ 925,000 | |||||||||||||||||||
Warrants issued | 81,250 | 231,250 | ||||||||||||||||||||
Strike price of warrants | $ 2 | $ 2 | ||||||||||||||||||||
Fair value of warrants | $ 63,398 | $ 168,678 | ||||||||||||||||||||
Number of warrants surrenderd | 81,250 | |||||||||||||||||||||
Promissory Notes [Member] | Private Placement Notes [Member] | ||||||||||||||||||||||
Accrued and unpaid interest transfer to principal | 118,682 | |||||||||||||||||||||
Maturity date | Mar. 30, 2019 | |||||||||||||||||||||
Note payable | $ 1,343,682 | $ 1,343,682 | ||||||||||||||||||||
Number of warrants surrenderd | 231,250 | |||||||||||||||||||||
Convertible Promissory Notes [Member] | ||||||||||||||||||||||
Sale of Private Placement Notes | $ 1,175,000 | $ 1,865,000 | ||||||||||||||||||||
Exercise price | $ 0.01 | |||||||||||||||||||||
Warrant Term | 3 years | 3 years | ||||||||||||||||||||
Number of shares converted | 2,017,416 |
SECURED PROMISSORY NOTE (Detail
SECURED PROMISSORY NOTE (Details Narartive) - USD ($) | Oct. 09, 2018 | Mar. 09, 2018 | Dec. 31, 2018 |
Aggregate principal amount | $ 10,000,000 | ||
Debt discount | 72,038 | ||
Accreted costs | $ 135,246 | ||
Loan and Security Agreement | Secured Term Promissory Note [Member] | Lender [Member] | |||
Line of credit interest rate description | 11.25% plus the Prime Rate, less, 3.25% | ||
Aggregate principal amount | $ 10,000,000 | ||
Secured Term Promissory Note | 5,000,000 | ||
Payment of loan commitment fees | 25,000 | ||
Funding in loan facility charges | $ 100,000 | ||
Effective interest rate | 11.25% | ||
Debt discount | $ 50,000 | ||
Loan and Security Agreement | Secured Term Promissory Note [Member] | Lender [Member] | Share-based Compensation Award, Tranche One [Member] | |||
Maturity date | Sep. 9, 2019 | ||
Accreted costs | $ 250,000 | ||
Loan and Security Agreement | Second Secured Term Promissory Note [Member] | Lender [Member] | |||
Line of credit interest rate description | 11.25% plus the Prime Rate, less, 3.25% | ||
Aggregate principal amount | $ 10,000,000 | ||
Secured Term Promissory Note | 5,000,000 | ||
Funding in loan facility charges | $ 50,000 | ||
Effective interest rate | 11.25% | ||
Maturity date | Sep. 9, 2019 |
STOCKHOLDER'S DEFICIT (Details
STOCKHOLDER'S DEFICIT (Details Narrative) | 12 Months Ended |
Dec. 31, 2018shares | |
Employee [Member] | 2018 Equity Incentive Plan [Member] | |
Common stock issued to employeee | 10,000,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred Tax Assets: | ||
Tax benefit of net operating loss carry-forward | $ 6,465,826 | $ 4,006,517 |
Depreciation and amortization | (5,102) | (8,332) |
Accrued liabilities | 261,876 | 220,681 |
Stock based compensation | 507,545 | |
Interest Expense | 740,285 | |
R&D Credit | 393,165 | |
Total deferred tax assets | 7,856,050 | 4,726,411 |
Valuation allowance for deferred tax assets | (7,856,050) | (4,726,411) |
Deferred tax assets, net of valuation allowance |
INCOME TAXES (Details 1)
INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Beginning of the year | $ 4,726,411 | $ 3,848,878 |
Change in valuation account | 3,129,639 | 877,533 |
End of the year | $ 7,856,050 | $ 4,726,411 |
INCOME TAXES (Details 2)
INCOME TAXES (Details 2) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
U.S. federal statutory rate | (21.00%) | (35.00%) |
State taxes, net of federal benefit | (6.90%) | (5.80%) |
Share-based compensation | 17.50% | |
Effect of U.S. tax law change | (13.20%) | |
Change in valuation allowance | 25.80% | 30.20% |
Nondeductible expenses | 2.00% | 6.30% |
R&D credit | (3.20%) | |
Stock Options | 3.30% | |
Effective income tax rate |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Expiration Description | Company had approximately $23 million and $15 million respectively of Federal and state NOLs available to offset future taxable income with $15 million expiring from 2030 through 2037 while the Federal NOL of $8 Million generated in 2018 has no expiration. | |
Operating loss carryforwards | $ 23,000,000 | $ 15,000,000 |
Federal research and development credits | $ 393,000 | $ 295,000 |
Tax loss carryforwards, expire period | Dec. 31, 2038 | |
U.S. federal statutory rate | (21.00%) | (35.00%) |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details) | Dec. 31, 2018USD ($) |
Sunnyvale, California [Member] | |
2019 | $ 328,631 |
2020 | 342,924 |
2021 | 57,154 |
Sichuan Province, China [Member] | |
2019 | 110,849 |
2020 | 114,544 |
2021 | 116,392 |
2022 | 116,392 |
2023 | $ 48,497 |
COMMITMENTS AND CONTINGENCIES_3
COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | Oct. 30, 2018 | Nov. 11, 2013 | Jun. 15, 2018 | Dec. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Apr. 30, 2020 | May 31, 2023 |
Payment for deposit | $ 31,965 | |||||||
Security deposit | $ 49,376 | 49,376 | ||||||
687 North Pastoria Avenue, Sunnyvale, California [Member] | ||||||||
Expiration date | Dec. 31, 2020 | |||||||
Base rent for 2019 | $ 13,473 | |||||||
Base rent for 2020 | 15,231 | |||||||
Rent expenses | 170,151 | $ 110,201 | ||||||
687 North Pastoria Avenue, Sunnyvale, California [Member] | Minimum [Member] | ||||||||
Base rent | 2,929 | |||||||
687 North Pastoria Avenue, Sunnyvale, California [Member] | Maximum [Member] | ||||||||
Base rent | $ 9,079 | |||||||
Sichuan Province, China [Member] | ||||||||
Base rent | $ 9,200 | $ 9,700 | ||||||
Advance rent | $ 28,000 | |||||||
Payment for deposit | 15,000 | |||||||
Rent expenses | $ 55,334 | |||||||
Periodic management fee paid | 1,800 | |||||||
Sichuan Province, China [Member] | Minimum [Member] | ||||||||
Base rent | 9,200 | |||||||
Sichuan Province, China [Member] | Maximum [Member] | ||||||||
Base rent | $ 9,700 | |||||||
Sunnyvale, CA [Member] | ||||||||
Base rent | $ 28,577 | |||||||
Expiration date | Feb. 28, 2021 | |||||||
Rent expenses | $ 52,050 | |||||||
Security deposit | $ 28,577 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Aggregate principal amount | $ 10,000,000 | |
Chief Executive Officer [Member] | ||
Advance to related party | 0 | $ 155,645 |
Energy Capital [Member] | Loan and Security Agreement | ||
Aggregate principal amount | $ 10,000,000 |
RESTATEMENT (Details)
RESTATEMENT (Details) - USD ($) | Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Total assets | $ 2,661,521 | $ 717,627 | ||
Total liabilities | 17,546,276 | 8,639,414 | ||
Stockholders' Deficit: | ||||
Preferred stock | ||||
Common stock | 5,046 | 1,679 | ||
Additional paid in capital | 17,491,734 | 12,361,205 | ||
Accumulated deficit | (32,381,535) | (20,284,671) | ||
Total stockholders' deficit | (14,884,755) | (7,921,787) | $ (4,907,489) | |
Total liabilities and stockholders' deficit | $ 2,661,521 | $ 717,627 | ||
As Previously Reported [Member] | ||||
Total assets | $ 1,206,063 | |||
Total liabilities | 11,101,777 | |||
Stockholders' Deficit: | ||||
Preferred stock | ||||
Common stock | 5,046 | |||
Additional paid in capital | 14,334,570 | |||
Subscriptions receivable | (1,958) | |||
Accumulated deficit | (24,233,372) | |||
Total stockholders' deficit | (9,895,714) | |||
Total liabilities and stockholders' deficit | 1,206,063 | |||
As Restated [Member] | ||||
Total assets | 1,206,063 | |||
Total liabilities | 11,101,777 | |||
Stockholders' Deficit: | ||||
Preferred stock | ||||
Common stock | 5,046 | |||
Additional paid in capital | 17,616,073 | |||
Subscriptions receivable | (1,958) | |||
Accumulated deficit | (27,514,875) | |||
Total stockholders' deficit | (9,895,714) | |||
Total liabilities and stockholders' deficit | 1,206,063 | |||
Restatement [Member] | ||||
Total assets | ||||
Total liabilities | ||||
Stockholders' Deficit: | ||||
Preferred stock | ||||
Common stock | ||||
Additional paid in capital | (3,281,503) | |||
Subscriptions receivable | ||||
Accumulated deficit | 3,281,503 | |||
Total stockholders' deficit | ||||
Total liabilities and stockholders' deficit |
RESTATEMENT (Details 1)
RESTATEMENT (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Gross profit | $ 150,664 | $ 194,635 | ||
Operating loss | (8,435,533) | (2,394,337) | ||
Other income (expense) | ||||
Change in fair value of derivative liability | (975,902) | 5,025 | ||
Interest income | 18,147 | |||
Total other income (expense) | (3,661,331) | (627,870) | ||
Net loss | $ (12,096,864) | $ (3,022,207) | ||
Net loss per share - basic and diluted (in dollars per share) | $ (0.42) | $ (0.19) | ||
As Previously Reported [Member] | ||||
Gross profit | $ 28,749 | $ 83,180 | ||
Operating loss | (2,072,459) | (3,953,657) | ||
Other income (expense) | ||||
Interest expense | (2,381,602) | (2,932,674) | ||
Change in fair value of derivative liability | 22,931 | (952,971) | ||
Gain (loss) on conversion of debt | 3,976,992 | 3,976,992 | ||
Interest income | 6,606 | 13,416 | ||
Total other income (expense) | 1,624,927 | 104,763 | ||
Net loss | $ (447,532) | $ (3,848,894) | ||
Net loss per share - basic and diluted (in dollars per share) | $ (0.02) | $ (0.18) | ||
As Restated [Member] | ||||
Gross profit | $ 28,749 | $ 83,180 | ||
Operating loss | (2,072,459) | (3,953,657) | ||
Other income (expense) | ||||
Interest expense | (1,618,834) | (2,169,906) | ||
Change in fair value of derivative liability | (975,902) | |||
Gain (loss) on conversion of debt | (44,348) | (44,348) | ||
Interest income | 6,606 | 13,416 | ||
Total other income (expense) | (1,656,576) | (3,176,740) | ||
Net loss | $ (3,729,035) | $ (7,130,397) | ||
Net loss per share - basic and diluted (in dollars per share) | $ (0.16) | $ (0.34) | ||
Restatement [Member] | ||||
Gross profit | ||||
Operating loss | ||||
Other income (expense) | ||||
Interest expense | (762,768) | (762,768) | ||
Change in fair value of derivative liability | 22,931 | 22,931 | ||
Gain (loss) on conversion of debt | 4,021,340 | 4,021,340 | ||
Interest income | ||||
Total other income (expense) | 3,281,503 | 3,281,503 | ||
Net loss | $ 3,281,503 | $ 3,281,503 | ||
Net loss per share - basic and diluted (in dollars per share) | $ (0.14) | $ (0.16) |
RESTATEMENT (Details 2)
RESTATEMENT (Details 2) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Sep. 28, 2018 | Sep. 30, 2018 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITES | |||||
Net loss | $ (12,096,864) | $ (3,022,207) | |||
Adjustments to reconcile net loss to net cash flows used in operating activities: | |||||
Depreciation | 54,946 | 13,439 | |||
Allowance for doubtful accounts | (7,914) | 7,914 | |||
Amortization of debt discount and deferred financing costs | 835,849 | 106,676 | |||
Amortization of intangible assets | 194 | ||||
Change in fair value of derivative liability | 975,902 | (5,025) | |||
Loss (gain) on conversion | $ 3,976,992 | ||||
Changes in operating assets and liabilities: | |||||
Accounts receivable | 9,329 | (39,769) | |||
Inventory | (174,624) | (156,289) | |||
Other current assets | (477,937) | 113,808 | |||
Accounts payable | 316,174 | (58,752) | |||
Accrued expenses and other current liabilities | 2,060,098 | 408,557 | |||
Net cash flows used in operating activities | (8,517,263) | (2,630,482) | |||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Net cash from investing activities | (629,683) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Net cash flows provided by financing activities | 9,820,791 | 3,041,252 | |||
Increase in cash and cash equivalents | 673,845 | 410,770 | |||
Cash and cash equivalent, beginning of period | $ 456,018 | 456,018 | 45,248 | ||
Cash and cash equivalents, end of period | 1,129,863 | 456,018 | |||
As Previously Reported [Member] | |||||
CASH FLOWS FROM OPERATING ACTIVITES | |||||
Net loss | $ (447,532) | (3,848,894) | |||
Adjustments to reconcile net loss to net cash flows used in operating activities: | |||||
Depreciation | 15,405 | ||||
Allowance for doubtful accounts | (7,914) | ||||
Amortization of debt discount and deferred financing costs | 907,891 | ||||
Amortization of intangible assets | 77 | ||||
Change in fair value of derivative liability | 952,971 | ||||
Loss (gain) on conversion | 3,976,992 | ||||
Changes in operating assets and liabilities: | |||||
Accounts receivable | 1,929 | ||||
Inventory | (137,725) | ||||
Other current assets | (110,113) | ||||
Accounts payable | 45,355 | ||||
Accrued expenses and other current liabilities | 1,515,384 | ||||
Net cash flows used in operating activities | (4,642,626) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Net cash from investing activities | (185,780) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Net cash flows provided by financing activities | 4,884,593 | ||||
Increase in cash and cash equivalents | 56,187 | ||||
Cash and cash equivalent, beginning of period | 460,064 | 460,064 | |||
Cash and cash equivalents, end of period | 516,251 | 516,251 | 460,064 | ||
As Restated [Member] | |||||
CASH FLOWS FROM OPERATING ACTIVITES | |||||
Net loss | (3,729,035) | (7,130,397) | |||
Adjustments to reconcile net loss to net cash flows used in operating activities: | |||||
Depreciation | 15,405 | ||||
Allowance for doubtful accounts | (7,914) | ||||
Amortization of debt discount and deferred financing costs | 145,123 | ||||
Amortization of intangible assets | 77 | ||||
Change in fair value of derivative liability | 975,902 | ||||
Loss (gain) on conversion | 44,348 | ||||
Changes in operating assets and liabilities: | |||||
Accounts receivable | 1,929 | ||||
Inventory | (137,725) | ||||
Other current assets | (110,113) | ||||
Accounts payable | 45,355 | ||||
Accrued expenses and other current liabilities | 1,515,384 | ||||
Net cash flows used in operating activities | (4,642,626) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Net cash from investing activities | (185,780) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Net cash flows provided by financing activities | 4,884,593 | ||||
Increase in cash and cash equivalents | 56,187 | ||||
Cash and cash equivalent, beginning of period | 460,064 | 460,064 | |||
Cash and cash equivalents, end of period | 516,251 | 516,251 | 460,064 | ||
Restatement [Member] | |||||
CASH FLOWS FROM OPERATING ACTIVITES | |||||
Net loss | 3,281,503 | 3,281,503 | |||
Adjustments to reconcile net loss to net cash flows used in operating activities: | |||||
Depreciation | |||||
Allowance for doubtful accounts | |||||
Amortization of debt discount and deferred financing costs | 762,768 | ||||
Amortization of intangible assets | |||||
Change in fair value of derivative liability | (22,931) | ||||
Loss (gain) on conversion | (4,021,340) | ||||
Changes in operating assets and liabilities: | |||||
Accounts receivable | |||||
Inventory | |||||
Other current assets | |||||
Accounts payable | |||||
Accrued expenses and other current liabilities | |||||
Net cash flows used in operating activities | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||
Net cash from investing activities | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||
Net cash flows provided by financing activities | |||||
Increase in cash and cash equivalents | |||||
Cash and cash equivalent, beginning of period | |||||
Cash and cash equivalents, end of period |
RESTATEMENT (Details Narrative)
RESTATEMENT (Details Narrative) - USD ($) | Jul. 11, 2018 | Sep. 28, 2018 | Dec. 31, 2018 | Dec. 31, 2017 |
Notes to Financial Statements | ||||
Loss on extinguishment of debt | $ 44,348 | $ (44,353) | ||
Reclassification of derivative liability to additional paid in capital | $ 1,141,995 | $ 1,141,995 | ||
Gain on conversion of debt | $ 3,976,992 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member] - Loan and Security Agreement - Energy Capital [Member] - USD ($) | 1 Months Ended | ||||
Sep. 30, 2019 | Jan. 29, 2019 | Mar. 14, 2019 | Feb. 27, 2019 | Feb. 11, 2019 | |
Line of credit interest rate description | 11.25% plus the Prime Rate (as published by the Wall Street Journal (National Edition)), less 3.25% | ||||
Secured Term Promissory Note | $ 1,000,000 | $ 900,000 | $ 750,000 | $ 650,000 | |
Effective interest rate | 11.25% | ||||
Proceeds from capital raise | $ 20,000,000 |