Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Mar. 27, 2019 | Jun. 30, 2018 | |
Document And Entity Information | |||
Entity Registrant Name | Toughbuilt Industries, Inc | ||
Entity Central Index Key | 0001668370 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business Flag | true | ||
Entity Emerging Growth Company | true | ||
Entity Ex transition period | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 0 | ||
Entity Common Stock, Shares Outstanding | 14,436,978 | ||
Trading Symbol | TBLT | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 |
Balance Sheets
Balance Sheets - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Current Assets | ||
Cash | $ 5,459,884 | $ 44,348 |
Accounts receivable | 985,854 | 153,407 |
Factor receivables, net of allowance for sales discounts of $13,000 at December 31, 2018 and 2017, respectively | 1,542,835 | 1,663,398 |
Inventory | 379,915 | 98,672 |
Prepaid assets | 222,000 | 52,500 |
Total Current Assets | 8,590,488 | 2,012,325 |
Property and equipment, net | 224,196 | 344,919 |
Security deposit | 36,014 | 44,567 |
Total Assets | 8,850,698 | 2,401,811 |
Current Liabilities | ||
Accounts payable | 1,962,901 | 2,331,224 |
Accrued liabilities | 717,453 | 731,191 |
Accrued payroll taxes | 150,559 | 469,271 |
Accrued interest | 699,576 | |
Other current liabilities | 167,333 | 86,873 |
Advance from officer | 400,000 | |
Loan payable - Factor | 1,304,512 | 1,078,941 |
Warrant derivative | 23,507,247 | |
Convertible debentures, net of debt discount and debt issuance cost of $0 and $835,854 at December 31, 2018 and 2017, respectively | 4,864,146 | |
Total Current Liabilities | 27,810,005 | 10,661,222 |
Total Liabilities | 27,810,005 | 10,661,222 |
Commitments and contingencies (Note 9) | ||
Convertible PreferredStock | ||
Class B Convertible Preferred Stock,$0.0001 par value, 5,000,000 shares authorized; 0 shares and 198,875 shares issued and outstanding, net of discount of $0and $196,758 at December 31, 2018 and 2017 respectively | 1,490,013 | |
Stockholders' Deficit | ||
Common stock, $0.0001 par value, 100,000,000shares authorized; 9,870,873 shares and 3,679,500 shares issued and outstanding at December 31, 2018 and 2017, respectively | 987 | 368 |
Additional paid in capital | 20,152,107 | 1,711,197 |
Accumulated deficit | (39,112,401) | (11,460,989) |
Total Stockholders' Deficit | (18,959,307) | (9,749,424) |
Total Liabilities, Convertible Preferred Stock and Stockholders' Deficit | $ 8,850,698 | $ 2,401,811 |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Allowances for sales discount | $ 13,000 | $ 13,000 |
Debt discount and issuance cost, current | $ 0 | $ 835,854 |
Class B convertible preferred stock par value | $ 0.0001 | $ 0.0001 |
Class B convertible preferred stock, shares authorized | 5,000,000 | 5,000,000 |
Class B convertible preferred stock, shares issued | 0 | 198,875 |
Class B convertible preferred stock, shares outstanding | 0 | 198,875 |
Class B convertible preferred stock, discount | $ 0 | $ 196,758 |
Common stock par value | $ 0.0001 | |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 9,870,873 | 3,679,500 |
Common stock, shares outstanding | 9,870,873 | 3,679,500 |
Statements of Operations
Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenues, Net of Allowances | ||
Total Revenues, Net of Allowances | $ 15,289,400 | $ 14,201,836 |
Cost of Goods Sold | ||
Total Cost of Goods Sold | 11,794,206 | 10,234,838 |
Gross Profit | 3,495,194 | 3,966,998 |
Operating Expenses | ||
Selling, general and administrative | 6,937,704 | 6,070,868 |
Litigation expense | 1,192,488 | |
Research and development | 1,816,389 | 1,675,093 |
Total Operating Expenses | 9,946,581 | 7,745,961 |
Operating Loss | (6,451,387) | (3,778,963) |
Other Income (Expense) | ||
Inducement cost for debt conversions | (3,542,161) | |
Amortization of debt issuances and debt discounts | (2,202,617) | (1,089,204) |
Change in the fair value of warrant derivative | (14,336,425) | |
Interest expense | (1,118,822) | (1,073,290) |
Total Other Income (Expense) | (21,200,025) | (2,162,494) |
Net Loss Before Income Taxes | (27,651,412) | (5,941,457) |
Income taxes | ||
Net Loss | (27,651,412) | (5,941,457) |
Accretion of Redeemable Convertible Preferred Stock Dividend | (3,667,620) | |
Common Stock Deemed Dividend | 980,375 | |
Net Loss Attributable to Common Stockholders | $ (32,299,407) | $ (5,941,457) |
Basic and Diluted Net Loss Per Share | $ (7.22) | $ (1.61) |
Weighted Average Number of Shares Outstanding - Basic and Diluted | 4,476,403 | 3,679,500 |
Metal Goods [Member] | ||
Revenues, Net of Allowances | ||
Total Revenues, Net of Allowances | $ 7,174,618 | $ 6,470,877 |
Cost of Goods Sold | ||
Total Cost of Goods Sold | 5,897,354 | 4,892,078 |
Soft Goods [Member] | ||
Revenues, Net of Allowances | ||
Total Revenues, Net of Allowances | 8,114,782 | 7,730,959 |
Cost of Goods Sold | ||
Total Cost of Goods Sold | $ 5,896,852 | $ 5,342,760 |
Statements of Changes in Stockh
Statements of Changes in Stockholders' Deficit - USD ($) | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2016 | $ 368 | $ 1,598,982 | $ (5,519,532) | $ (3,920,182) |
Balance, shares at Dec. 31, 2016 | 3,679,500 | |||
Stock-based compensation expense | 112,215 | 112,215 | ||
Stock-based compensation expense, shares | ||||
Net loss | (5,941,457) | (5,941,457) | ||
Balance at Dec. 31, 2017 | $ 368 | 1,711,197 | (11,460,989) | (9,749,424) |
Balance, shares at Dec. 31, 2017 | 3,679,500 | |||
Stock-based compensation expense | $ 1 | 557,041 | 557,042 | |
Stock-based compensation expense, shares | 8,334 | |||
Stock issued in settlement of litigation | 939,538 | 939,538 | ||
Conversion of Class B convertible preferred stock | $ 137 | 4,961,431 | 4,961,568 | |
Conversion of Class B convertible preferred stock, shares | 1,366,768 | |||
Issuance of warrants to third parties for capital raise | 594,293 | 594,293 | ||
Conversion of deferred salaries | $ 14 | 650,086 | 650,100 | |
Conversion of deferred salaries, shares | 136,863 | |||
Conversion of convertible debentures | $ 172 | 6,267,924 | 6,268,096 | |
Conversion of convertible debentures, shares | 1,726,678 | |||
Conversion of advance from officer | $ 4 | 199,996 | 200,000 | |
Conversion of advance from officer, shares | 42,105 | |||
Conversion of notes payable | $ 22 | 782,728 | 782,750 | |
Conversion of notes payable, shares | 215,625 | |||
Sale of common stock in public offering | $ 267 | 8,013,961 | 8,014,228 | |
Sale of common stock in public offering, shares | 2,670,000 | |||
Sale of common stock in over-allotment to underwriters | $ 2 | 121,907 | 121,909 | |
Sale of common stock in over-allotment to underwriters, shares | 25,000 | |||
Common stock deemed dividend | (980,375) | (980,375) | ||
Accretion of redeemable convertible preferred stock dividend | (3,667,620) | (3,667,620) | ||
Net loss | (27,651,412) | (27,651,412) | ||
Balance at Dec. 31, 2018 | $ 987 | $ 20,152,107 | $ (39,112,401) | $ (18,959,307) |
Balance, shares at Dec. 31, 2018 | 9,870,873 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash Flows from Operating Activities: | ||
Net loss | $ (27,651,412) | $ (5,941,457) |
Adjustment to reconcile net loss to net cash used in operating activities: | ||
Depreciation | 120,723 | 119,627 |
Amortization of original issue discount and debt issuance cost and non-cash inducement cost for debt conversion | 5,278,132 | 1,089,204 |
Stock issued in settlement of litigation | 939,538 | |
Change in the fair value of warrant derivative | 14,336,425 | |
Stock-based compensation expense | 557,042 | 112,215 |
Stock issued in lieu of deferred salaries | 650,100 | |
Changes in operating assets and liabilities: | ||
(Increase) decrease in accounts receivable | (832,446) | 19,639 |
Decrease (increase) in factor receivables | 120,563 | (424,486) |
(Increase) decrease in inventory | (281,243) | 77,006 |
(Increase) decrease in prepaid expenses | (169,500) | 32,500 |
Decrease (increase) in security deposits | 8,553 | (31,235) |
(Decrease) increase in accounts payable | (368,323) | 1,959,692 |
(Decrease) Increase in accrued payroll taxes | (318,713) | 352,105 |
(Decrease) increase in accrued interest | (699,576) | 607,109 |
Increase in other current liabilities | 80,461 | 86,873 |
(Decrease) increase in accrued liabilities | (13,739) | 511,740 |
Net cash used in operating activities | (8,243,415) | (1,429,468) |
Cash Flows from Investing Activities: | ||
Cash paid for purchase of property and equipment | (69,926) | |
Net cash used in investing activities | (69,926) | |
Cash Flows from Financing Activities: | ||
Proceeds from sale of common stock, net of costs | 11,671,735 | |
Proceeds from sale of common stock of overallotment, net of costs | 121,909 | |
Proceeds from sale of convertible preferred stock, net of costs | 1,201,157 | |
Proceeds from notes payable, net of costs | 752,579 | |
Cash repayments of notes payable | (114,000) | |
Proceeds from notes payable, related parties | 400,000 | |
Payments for debt issuance cost | (25,000) | |
Payment of advance from officer | (200,000) | |
Cash proceeds (payments) from loans payable | 225,571 | (165,188) |
Net cash provided by financing activities | 13,658,951 | 209,812 |
Net increase (decrease) in cash | 5,415,536 | (1,289,582) |
Cash, beginning of the period | 44,348 | 1,333,930 |
Cash, end of the period | 5,459,884 | 44,348 |
Supplemental disclosures of cash flow information: | ||
Cash paid for income taxes | ||
Cash paid for interest | 638,693 | 466,181 |
Supplemental disclosures of non-cash investing and financing activities: | ||
Conversion of deferred salaries into common stock | 650,100 | |
Conversion of notes payable of officer into common stock | 200,000 | |
Conversion of notes payable into Class A Units | 862,500 | |
Conversion of convertible debentures into Class A Units | 8,633,390 | |
Conversion of convertible preferred stock into Class A Units | 6,833,839 | |
Issuance of Class B Warrants for capital raise | 594,293 | |
Accretion of redeemable convertible preferred stock dividend | 3,667,620 | |
Common stock deemed dividend | $ 980,375 |
Nature of Operations
Nature of Operations | 12 Months Ended |
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | NOTE 1: NATURE OF OPERATIONS Nature of Operations In these notes, the terms “us”, “we”, “it”, “its”, “ToughBuilt”, the “Company” or “our” refer to ToughBuilt Industries, Inc. ToughBuilt Industries, Inc. was incorporated under the laws of the State of Nevada on April 9, 2012 under the name Phalanx, Inc. The Company designs and distributes innovative and superior quality tools and accessories to the home improvement community and the building industry. The Company aspires to augment brand loyalty in part from the enlightened creativity of its end users throughout the global tool market industry. The Company holds exclusive licenses to develop, manufacture, market, and distribute various home improvement and construction product lines for both Do-it-Yourself (“DIY”) and professional trade markets under the TOUGHBUILT® brand name. TOUGHBUILT® distributes products in the following categories, all designed and engineered in the United States and manufactured by third party vendors in China: ● tool belts, tool bags and other personal tool organizer products; ● complete line of knee pads for various construction applications; and ● job-site tools and material support products consisting of a full line of miter-saws and table saw stands, saw horses/job site tables and roller stands. On November 14, 2018, the Company completed its initial public offering (“IPO”), pursuant to which it sold 2,670,000 Class A Units (“Class A Unit”), each Unit consisting of one share of common stock, par value $0.0001 per share, one Series A Warrant to purchase one share of common stock (“Series A Warrant”) and one Series B Warrant to purchase one share of common stock (“Series B Warrant”) at a purchase price of $5.00 per Class A Unit. The Company received net proceeds from the IPO of $12,415,500 after deducting underwriting discounts and commission of $934,500. The Company incurred $743,765 in expenses related to the IPO. On December 17, 2018, pursuant to the Underwriting Agreement dated November 8, 2018, by and between the Company and the underwriters named therein (the “Representative”), the Representative on behalf of the underwriters agreed to partially exercise the over-allotment option to purchase an additional 25,000 shares of common stock, par value $0.0001, at a price of $4.98 per share, 400,500 Series A Warrants, at a price of $0.01 per warrant and 400,500 Series B Warrants, at a price of $0.01 per warrant. The Company received net proceeds from the exercise of over-allotment option of $121,909 after deducting commission and expenses of $10,601. Basis of Presentation and Preparation The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company. The financial statements and accompanying notes are the representations of the Company’s management, who is responsible for their integrity and objectivity. In the opinion of the Company’s management, the financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. Liquidity As of December 31, 2018, the Company’s principal sources of liquidity consisted of approximately $5.5 million of cash and future cash generated from operations. The Company believes its current cash balances coupled with anticipated cash flow from operating activities will be sufficient to meet its working capital requirements for at least one year from the date of the issuance of the accompanying financial statements. The Company continues to control its cash expenses as a percentage of expected revenue on an annual basis and thus may use its cash balances in the short-term to invest in revenue growth. Based on current internal projections, the Company believes it has and/or will generate sufficient cash for its operational needs, including any required debt payments, for at least one year from the date of issuance of the accompanying financial statements. Management is focused on growing the Company’s existing product offering, as well as its customer base, to increase its revenues. The Company cannot give assurance that it can increase its cash balances or limit its cash consumption and thus maintain sufficient cash balances for its planned operations or future acquisitions. Future business demands may lead to cash utilization at levels greater than recently experienced. The Company may need to raise additional capital in the future. However, the Company cannot assure that it will be able to raise additional capital on acceptable terms, or at all. Subject to the foregoing, management believes that the Company has sufficient capital and liquidity to fund its operations for at least one year from the date of issuance of the accompanying financial statements. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. The Company did not have any cash equivalents at December 31, 2018 and 2017, respectively. Accounts Receivable Accounts receivable represent income earned from the sale of tools and accessories for which the Company has not yet received payment. Accounts receivable are recorded at the invoiced amount and adjusted for amounts management expects to collect from balances outstanding at period-end. The Company estimates the allowance for doubtful accounts based on an analysis of specific accounts and an assessment of the customer’s ability to pay, among other factors. At December 31, 2018 and 2017, no allowance for doubtful accounts was recorded. The Company accounts for the transfer of accounts receivable to a third party under a factoring type arrangement in accordance with Accounting Standards Codification (“ASC”) 860, “ Transfers and Servicing Inventory Inventory is valued at the lower of cost or net realizable value using the first-in, first-out method. The reported net value of inventory includes finished saleable products that will be sold or used in future periods. The Company reserves for obsolete and slow-moving inventory. At December 31, 2018 and 2017, there were no reserves for obsolete and slow-moving inventory. Property and Equipment Property and equipment are recorded at cost, less accumulated depreciation. The Company provides for depreciation on a straight-line basis over the estimated useful lives of the assets which range from three to seven years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related assets when they are placed into service. The Company evaluates property and equipment for impairment periodically to determine if changes in circumstances or the occurrence of events suggest the carrying value of the asset or asset group may not be recoverable. Maintenance and repairs are charged to operations as incurred. Expenditures which substantially increase the useful lives of the related assets are capitalized. Long-lived Assets In accordance with ASC 360, “ Property, Plant, and Equipment Fair Value of Financial Instruments and Fair Value Measurements The Company adheres to ASC 820, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances. ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). ● Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. ● Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. ● Level 3 inputs are unobservable inputs for the asset or liability, which is typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The fair value of the Company’s warrant derivative recorded in the Company’s financial statements was determined using the Monte Carlo simulation valuation methodology and the quoted price of the Company’s common stock in an active market, a Level 3 measurement. Volatility was based on the actual market activity of the Company’s peer group. The expected life was based on the remaining contractual term of the warrants, and the risk free interest rate was based on the implied yield available on U.S. Treasury Securities with a maturity equivalent to the warrants’ expected life. The Company calculated the estimated fair value of warrants on the date of issuance and at each subsequent reporting date using the following assumptions: Year Ended December 31, 2018 Risk-free interest rate 2.54% – 2.71% Contractual term 0.95 - 1.0 year Expected volatility 35% - 40% Level 3 Fair Value Sensitivity Warrant derivative The fair value of the warrant derivative includes the estimated volatility and risk free rate. The higher/lower the estimated volatility, the higher/lower the value of the debt conversion feature liability. The higher/lower the risk free interest rate, the higher/lower the value of the debt conversion feature liability. From time to time, the Company sells common stock warrants that are derivative instruments. The Company does not enter into speculative derivative agreements and does not enter into derivative agreements for the purpose of hedging risks. The table below provides a reconciliation of the beginning and ending balances for the warrant derivative which is measured at fair value using significant unobservable inputs (Level 3): Balance, December 31, 2017 $ — Fair value of warrant derivative at Issuance date (Note 6, 7 and 10) (9,170,822 ) Total realized and unrealized gains (losses): Change in the fair value of warrant derivative (14,336,425 ) Balance, December 31, 2018 $ (23,507,247 ) Revenue Recognition The Company recognizes revenue when the product is delivered to the customer, and the ownership is transferred. The Company’s revenue recognition policy is based on the revenue recognition criteria established under the SEC’s Staff Accounting Bulletin No. 104. The criteria and how the Company satisfy each element are as follows: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred per the terms of the signed contract; (3) the price is fixed and determinable; and (4) collectability is reasonable assured. Revenue is recognized net of rebates and customer allowances, as appropriate. Income Taxes The Company accounts for income taxes following the asset and liability method in accordance with the ASC 740 “Income Taxes.” Under such method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company applies the accounting guidance issued to address the accounting for uncertain tax positions. This guidance clarifies the accounting for income taxes, by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements as well as provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company classifies interest and penalty expense related to uncertain tax positions as a component of income tax expense. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years that the asset is expected to be recovered or the liability settled. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the period in which related temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in its assessment of a valuation allowance. Stock Based Compensation The Company accounts for employee stock-based compensation in accordance with ASC 718-10, “ Share-Based Payment The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing formula. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The Company’s determination of fair value using an option-pricing model is affected by the stock price as well as assumptions regarding the number of highly subjective variables. The Company estimates volatility based upon the historical stock price of the comparable companies and estimates the expected term for employee stock options using the simplified method for employees and directors and the contractual term. The risk-free rate is determined based upon the prevailing rate of United States Treasury securities with similar maturities. The Company recognizes forfeitures as they occur rather than applying a prospective forfeiture rate in advance. Earnings (Loss) Per Share The Company computes net earnings (loss) per share in accordance with ASC 260, “ Earnings per Share” Potentially dilutive securities that are not included in the calculation of diluted net loss per share because their effect is anti-dilutive are as follows (in common equivalent shares): December 31, 2018 December 31, 2017 Common stock warrants 13,070,417 206,309 Stock options exercisable to common stock 1,125,000 125,000 Shares issuable upon conversion of debt - 579,247 Shares issuable upon conversion of preferred stock - 198,875 Total potentially dilutive securities 14,195,417 1,109,431 Segment Reporting The Company operates one reportable segment referred to as the tools segment. A single management team that reports to the Chief Executive Officer comprehensively manages the business. Accordingly, the Company does not have separately reportable segments. Recent Accounting Pronouncements As an emerging growth company, the Company has elected to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Securities and Exchange Act of 1934, as amended. In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting In February 2016, the FASB issued ASU 2016-02, “ Leases In January 2016, the FASB issued ASU 2016-01, “ Financial Instruments - Overall Recognition and Measurement of Financial Assets and Financial Liabilities. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) The Company plans to adopt on January 1, 2019 ASU 2014-09, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard. The Company is developing a plan for implementing the new standard, which includes, but is not limited to, identifying contract populations and “in scope” customer contracts, identifying performance obligations in those customer contracts, and evaluating any impact of variable consideration. The Company is currently evaluating the transition methods and will likely apply the modified retrospective transition method, which would result in an adjustment to retained earnings for the cumulative effect, if any, of applying the standard to contracts that are not completed at the date of initial application. Under this method, the Company would not restate the prior financial statements presented, therefore the new standard requires the Company to provide additional disclosures of the amount by which each financial statement line item is affected in the current reporting period during the fiscal year ending December 31, 2019, as compared to the guidance that was in effect before the change, and an explanation of the reasons for significant changes, if any. The impact that the new revenue recognition standard will have on the Company’s financial statements and disclosures has not yet been fully assessed. However, the Company does not expect the provisions of the new standard to have a material effect on the timing or amount of revenue it recognizes. The Company’s assessment also includes determining the impact the new standard may have on the revenue reporting processes, including disclosures, ensuring internal controls will operate effectively with the new standard and performing gap analyses on collected data and determining the relative accounting positions where applicable. |
Factor Receivables, Letters of
Factor Receivables, Letters of Credit Payable and Loan Payable | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Factor Receivables, Letters of Credit Payable and Loan Payable | NOTE 3: FACTOR RECEIVABLES, LETTERS OF CREDIT PAYABLE AND LOAN PAYABLE In April 2013, the Company entered into a financing arrangement with a third-party purchase order financing company (the “Factor”), whereby the Company assigned to the Factor selected sales orders from its customers in exchange for opening a letter of credit (“LC”) with its vendors to manufacture its products. The Company paid an initial fixed fee of 5% of the cost of products it purchased from the vendor upon opening the LC, and 1% each 30 days thereafter, after the LC is funded by the Factor until such time as the Factor receives the payment from the Company’s customers. The factoring agreement provides for full recourse against the Company for factored accounts receivable that are not collected by the Factor for any reason, and the collection of such accounts receivable is fully secured by substantially all of the receivables of the Company. The factoring advances for the LCs at December 31, 2018 and 2017 have been treated as a loan payable to third party in the accompanying balance sheets and were $1,304,512 and $1,078,941, respectively. The total sales factored, net of allowances for sales returns, discounts and rebates, for the years ended December 31, 2018 and 2017 were $7,458,497 and $8,136,556, respectively. The factor fees incurred for the years ended December 31, 2018 and 2017 were $395,615 and $461,624, respectively and included in interest expense. Total outstanding accounts receivable factored, net of allowance for sales returns, discounts and rebates of $13,000, as of December 31, 2018 and 2017 were $1,542,835 and $1,663,398, respectively. |
Inventory
Inventory | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Inventory | NOTE 4: INVENTORY Inventory consists of the following: Description December 31, 2018 December 31, 2017 Finished goods $ 379,915 $ 98,672 |
Property and Equipment, Net
Property and Equipment, Net | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | NOTE 5: PROPERTY AND EQUIPMENT, NET Property and equipment consists of the following: Description December 31, 2018 December 31, 2017 Computer equipment $ 88,615 $ 88,615 Furniture and office equipment 136,955 136,955 Leasehold improvements 37,899 37,899 Tooling and molds 249,690 249,690 Website design 9,850 9,850 523,009 523,009 Less: accumulated depreciation (298,813 ) (178,090 ) Property and Equipment, net $ 224,196 $ 344,919 Depreciation expense for the years ended December 31, 2018 and 2017, was $120,723 and $119,627, respectively. |
Convertible Debentures
Convertible Debentures | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Convertible Debentures | NOTE 6: CONVERTIBLE DEBENTURES Convertible debentures consist of the following: December 31, 2018 December 31, 2017 Convertible debenture - Hillair Capital $ - $ 3,784,230 Convertible debenture – HSPL Capital - 1,915,770 Less: Original issuance discount - (267,619 ) Less: Class B Convertible Preferred Stock discount - (207,125 ) Less: Debt issuance cost - (361,110 ) Convertible debentures, net $ - $ 4,864,146 Current portion $ - $ 4,864,146 On January 16, 2018, the Company and the holders of the Debentures mutually agreed to amend the terms of their Securities Purchase Agreement. The Company agreed to issue and deliver to (i) Hillair Capital an amended and restated Debenture in the principal amount of $4,182,709 and an additional 41,826 shares of Class B Preferred Stock, and to (ii) HSPL Capital Advisors, LLC (“HSPL Capital”), an amended and restated Debenture in the principal amount of $2,117,501 and an additional 21,174 shares of Class B Preferred Stock. The amended Debentures were comprised of the principal balance of the original debentures plus all accrued but unpaid interest as of the date of the amendment. The termination date of the debentures was extended to September 1, 2018, with the entire principal and accrued interest balances being due on that date. The additional 63,000 Class B Preferred Shares issued to the debenture holders were treated as debt discount and valued at $404,523. The Company accounted for such amendment as a modification to the Debentures. On August 28, 2018, the maturity date was extended to September 30, 2018, with the holders receiving, on a pro rata basis, 7,500 shares of the Company’s Class B Convertible Preferred Stock valued at $75,000. On October 2, 2018, the holders of the Debentures and the Company agreed to amend the terms of their Securities Purchase Agreement, accepting on a pro rata basis, and the holders were issued 15,000 shares of the Company’s Class B Convertible Preferred Stock valued at $75,000 in exchange for extension of the maturity date to October 15, 2018. This date was subsequently extended to the earlier of the closing of the Company’s IPO and November 15, 2018 for a payment of an additional 15,000 shares of Class B Convertible Preferred Stock valued at $75,000. On October 18, 2018, the holders of the Debentures and the Company agreed to amend the terms of their securities purchase agreements by the holders agreeing to accept, in exchange of converting their notes payable into common shares into the public offering: (i) a redemption amount equal to $685,148 and accrued but unpaid interest on debentures of $814,852 as of October 18, 2018, totaling $1,500,000 due in cash; (ii) an increase the principal amount of the debentures and the stated value of Class B Convertible Preferred Stock by 5% above of the current principal amount of the debentures and the stated value amounting to $315,011; and (iii) the balance of debentures not subject to redemption being automatically converted into unregistered Class A Units on a $1.00 principal amount of debenture for $1.20 basis which resulted into additional expense of $1,438,898 to the Company. On November 15, 2018, the Company paid $1,500,000 to the holders of convertible debentures pursuant to the amended terms of the securities purchase agreements. Concurrent with the closing of the IPO on November 14, 2018, the Company issued 1,726,678 unregistered Class A Units upon conversion of the Debentures (consisting of the principal amount and accrued and unpaid interest through the IPO date) at a conversion price of $5.00 per Unit (Note 10). Included in Class A Units were 1,726,678 Series A Warrants and 1,726,678 Series B Warrants. The Series A Warrants were classified within equity and the Series B Warrants were classified as a warrant derivative with a fair value determined to be $2,365,294 on the date of issuance. The Company has recorded interest expense relating to the Debentures of $2,384,923 and $456,000 for the years ended December 31, 2018 and 2017, respectively, including $1,753,908 and $0 as inducement payment for conversion of the Debentures to Class A Units. The Company has recorded interest expense due to the amortization of the debt discount related to the Debentures arising from the original issue discount (the “OID”) and Class B Convertible Preferred Stock, of $1,104,743 and $637,714 for the years ended December 31, 2018 and 2017, respectively. The unamortized portion of OID and Class B Convertible Preferred Stock was $0 and $474,744 at December 31, 2018 and 2017, respectively. The Company has recognized amortization of the debt issuance costs on the Debentures as interest expense in the amount of $2,200,453 and $451,491 for the years ended December 31, 2018 and 2017, respectively. The unamortized portion of debt issuance cost on Debenture was $0 and $361,110 at December 31, 2018 and December 31, 2017, respectively. |
Notes Payable
Notes Payable | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 7 - NOTES PAYABLE On June 19, 2018, the Company executed a promissory note in the principal amount of $114,000 with a third party which was initially due and payable on September 30, 2018. The Company received cash proceeds of $100,000 from the promissory note. The promissory note is unsecured, bears an interest rate of 1.9% per month, and was issued with an original issue discount of 14%. On September 30, 2018, the Company and the third party mutually agreed to extend the maturity date of the promissory note until the earlier of three business days after the closing of the Company’s IPO and November 15, 2018. The holder of the promissory note was paid $7,500 as extension fee. The Company recorded $14,000 as debt discount and a $7,500 extension expense as interest expense for the year ended December 31, 2018. In addition, the Company recorded $10,686 as interest expense on the promissory note for the year ended December 31, 2018. On August 31, 2018, the Company executed six (6) unsecured promissory notes, with an original issuance debt discount of 15%, for a cumulative principal sum of $862,500 and gross proceeds of $750,000. The Company promised to pay the promissory note holders the aggregate principal sum of $862,500 on the earlier of (i) the third trading day after the closing of the Company’s IPO and (ii) November 30, 2018. At closing on September 4, 2018, the Company received cash proceeds of $652,579, which was the gross proceeds of $750,000, net of placement agent fees of $62,850, legal fees of $30,571, and escrow fees if $4,000. In addition, the Company issued to the six note holders an aggregate of 18,750 shares of Class B Convertible Preferred Stock, and 7,500 warrants to the placement agent (Note 10). On November 5, 2018, the holders of the six (6) promissory notes agreed to accept unregistered Class A Units at a per Unit conversion price equal to 80% of the per Unit purchase price in the Company’s IPO, and at the IPO closing, the Company issued 215,625 unregistered Class A Units upon the conversion of the aggregate amount of the notes at a Unit purchase price of $4.00 (see Note 10). Included in Class A Units were 215,625 Series A Warrants and 215,625 Series B Warrants. The Series A Warrants were classified within equity and the Series B Warrants were classified as a warrant derivative with a fair value determined to be $295,375 on the date of issuance. The Company recognized an expense of $215,625 as inducement payment for this conversion. In addition, the Company recorded a debt issuance cost of $187,500 and a debt discount of $209,921 as interest expense for the year ended December 31, 2018. |
Related Party Transactions and
Related Party Transactions and Balances | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions and Balances | NOTE 8 – RELATED PARTY TRANSACTIONS AND BALANCES In May 2017, the Company executed three unsecured promissory notes with an entity, whose beneficiary is an officer and director of the Company, for an aggregate principal balance of $400,000, bearing an interest at 10% per annum, due on or before September 30, 2018. On September 30, 2018, the Company extended the maturity date of the promissory notes to three (3) business days after the consummation of the sale of the Company’s equity securities in an IPO. On September 30, 2018, the Company and the officer and director mutually agreed to convert $200,000 of the principal of the promissory notes into 42,105 unregistered shares of common stock of the Company at a conversion price equal to $4.75 per share (Note 10), with the remaining $200,000 balance of the principal and accrued interest to be paid in cash. On October 1, 2018, the Company agreed to compensate the officer and director $72,628, as an inducement to convert a portion of the promissory note into shares of the Company’s common stock and to extend the maturity date of the promissory notes until the third business day after consummation of the IPO. The Company has recorded interest expense of $34,165 and $16,918 on these promissory notes for the years ended December 31, 2018 and 2017, respectively, and $72,628 as inducement payment for the year ended December 31, 2018. The Company has recorded $72,628 and $10,082 as accrued liability as of December 31, 2018 and 2017, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 9 – COMMITMENTS AND CONTINGENCIES Lease Commitments On January 3, 2017, the Company executed a non-cancellable operating lease for its principal office with the lease commencing February 1, 2017 for a five (5) year term. The Company paid a security deposit of $29,297. The lease required the Company to pay its proportionate share of direct costs estimated to be 22.54% of the total property, a fixed monthly direct cost of $6,201 for each month during the term of the lease, and monthly rental pursuant to the lease terms. Future minimum lease commitments of the Company are as follows: For the years ending December 31, Amount 2019 $ 174,872 2020 180,993 2021 187,327 2022 15,655 Total $ 558,847 The Company recorded rent expense of $164,626 and $277,252 for the years ended December 31, 2018 and 2017, respectively. Other Commitments On August 30, 2018, the Company entered into an agreement with a customer to pay a slotting allowance of $1,000,000 payable in three annual installments of $333,334 on March 1, 2019, $333,333 on March 1, 2020 and $333,333 on March 1, 2021. Employment Agreements with Officers On January 3, 2017, the Company entered into an employment agreement with its President and Chief Executive Officer for a five-year term. The officer received a sign-on-bonus of $50,000 and is entitled to an annual base salary of $350,000 to increase by 10% each year commencing on January 1, 2018. The officer was also granted a stock option to purchase 125,000 shares of the Company’s common stock at an exercise price of $10.00 per share. On January 3, 2017, the Company entered into an employment agreement with its Vice-President of Design and Development for a five-year term. Under the terms of this agreement, the officer received a sign-on-bonus of $35,000 and is entitled to an annual base salary of $250,000 beginning on December 1, 2016 to increase by 10% each year commencing on January 1, 2018. On January 3, 2017, the Company entered into an employment agreement with its Chief Operating Officer and Secretary for a three-year term. Under the terms of this agreement, the officer is entitled to an annual base salary of $180,000 beginning on January 1, 2017 to increase by 10% each year commencing on January 1, 2018. On January 3, 2017, the Company entered into an employment agreement with its Chief Financial Officer for a three-year term. Under the terms of this agreement, the officer is entitled to an annual base salary of $250,000 beginning on January 1, 2017 to increase by 10% each year commencing on January 1, 2018. The employment agreements also entitle the officers to receive, among other benefits, the following compensation: (i) eligibility to receive an annual cash bonus at the sole discretion of the Board and as determined by the Compensation Committee commensurate with the policies and practices applicable to other senior executive officers of the Company; (ii) an opportunity to participate in any stock option, performance share, performance unit or other equity based long-term incentive compensation plan commensurate with the terms and conditions applicable to other senior executive officers and (iii) participation in benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent available to the Company’s other senior executive officers. On September 30, 2017, the officers and an employee agreed to defer 30% of their salaries starting September 30, 2017 to September 30, 2018 for payment after the completion of the IPO. On September 30, 2018, the officers and employees agreed to convert their deferred compensation of $650,100, owed as of September 30, 2018, into shares of the Company’s common stock upon the consummation of an IPO. Concurrent with the closing of the IPO on November 14, 2018, the Company issued 136,863 unregistered shares of common stock upon conversion of $650,100 of accrued and unpaid compensation of officers and directors at a conversion price of $4.75 per share (see Note 10). On December 24, 2018, the Board approved $300,000 in cash bonuses for the two founders and an officer of the Company, payable by January 31, 2019. The Company has accrued the bonus expense as of December 31, 2018. Litigation Costs and Contingencies From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business. Other than as set forth below, management is currently not aware of any such legal proceedings or claims that could have, individually or in the aggregate, a material adverse effect on our business, financial condition, or operating results. On August 16, 2016, Edwin Minassian filed a complaint against the Company and Michael Panosian, our Chief Executive Officer, in the Superior Court of California, County of Los Angeles. The complaint alleges breach of oral contracts to pay Mr. Minassian for consulting and finder’s fees, and to hire him as an employee. The complaint further alleges, among other things, fraud and misrepresentation relating to the alleged tender of $100,000 to the Company in exchange for “a 2% stake in ToughBuilt” of which only $20,000 was delivered. The complaint seeks unspecified monetary damages, declaratory relief concerning the plaintiff’s contention that he has an unresolved 9% ownership stake in ToughBuilt and other relief according to proof. On April 12, 2018, the Court entered judgments against the Company and Mr. Panosian in the amounts of $7,080 and $235,542, plus awarding Mr. Minassian a 7% ownership interest in the Company (the “Judgments”). Mr. Minassian served notice of entry of the judgments on April 17, 2018 and the Company and Mr. Panosian received notice of the entry of the default judgments on April 19, 2018. On April 25, 2018, the Company and Mr. Panosian filed a motion to have the April 12, 2018 default judgment on Plaintiff’s Complaint, the February 13, 2018 defaults, and April 14, 2017 Order for terminating sanctions striking Defendants’ Answer set aside on the basis of their former attorney’s declaration that his negligence resulted in the default judgment, default, and terminating sanctions being entered against the Company and Mr. Panosian. The motion was denied. On September 13, 2018, the Company and Panosian satisfied the Judgments by the Company making a payment of $252,950 (which included $10,303 post judgment interest) to Minassian and by Mr. Panosian issuing him shares reflecting a 7% ownership stake in the Company. On October 18, 2018, the Company and Mr. Panosian filed a Notice of Appeal from the Order denying their motion for relief from the default judgment. The Company has recorded the litigation expense of $1,192,488 and $0 for the years ended December 31, 2018 and 2017, respectively. In the normal course of business, the Company incurs costs to hire and retain external legal counsel to advise it on regulatory, litigation and other matters. The Company expenses these costs as the related services are received. If a loss is considered probable and the amount can be reasonable estimated, the Company recognizes an expense for the estimated loss. Other Compliance Matters As of December 31, 2018, and 2017, the Company was delinquent in its federal and state payroll tax payments in the aggregate amount of $0 and $354,245, respectively. The Company has subsequently remitted all of its 2017 delinquent federal and state payroll tax payments, including interest and penalties, to the payroll tax authorities as of December 31, 2018. |
Stockholders' Deficit
Stockholders' Deficit | 12 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
Stockholders' Deficit | NOTE 10: STOCKHOLDERS’ DEFICIT At December 31, 2018, the Company had 100,000,000 shares of common stock and 5,000,000 shares of preferred stock authorized, both with a par value of $0.0001 per share. On September 13, 2018, the Company effectuated a reverse stock split (the “Reverse Split”) of its issued and outstanding common stock, preferred stock, warrants and options (collectively the “Equity Instruments”). As a result of the Reverse Split, each (2) units of Equity Instruments issued and outstanding prior to the Reverse Split were converted into one (1) unit of Equity Instrument. Common Stock and Class A Units On August 22, 2018, the Company issued 8,334 restricted shares of its common stock valued at $42,801 to a consultant for providing business advisory and consulting services, the expense was recorded as stock-based compensation expense. On November 14, 2018, the Company consummated its IPO pursuant to which it sold a total of 2,670,000 Class A Units, each Unit consisting of one share of common stock, par value $0.0001 per share, and a Series A Warrant to purchase one share of common stock and a Series B Warrant to purchase one share of common stock, on an offer price of $5.00 for each unit of a share of common stock, a Series A Warrant and a Series B Warrant (“Class A Unit”). The Company received net proceeds from the IPO of $12,415,500 after deducting underwriting discounts and commission of $934,500. The Company incurred $743,765 in expenses related to the IPO. Concurrent with the closing of the IPO on November 14, 2018, the following private transactions were consummated in accordance with the related agreements (Notes 6, 7, 8 and 9), all in transactions exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended: (a) 1,366,768 unregistered Class A Units were issued upon the conversion of outstanding shares of Class B Convertible Preferred Stock at a conversion price of $3.50 per Class A Unit. (b) 42,105 unregistered shares of common stock were issued upon conversion of the $200,000 principal amount of a promissory note due to an officer at a conversion price of $4.75 per share. (c) 1,726,678 unregistered Class A Units were issued upon conversion of outstanding convertible debt instruments (consisting of all principal amounts and accrued and unpaid interest through the date of the IPO) at a conversion price of $5.00 per Unit. (d) 136,863 unregistered shares of common stock were issued upon conversion of $650,100 of accrued and unpaid salaries to officers and directors at a conversion price of $4.75 per share. (e) 215,625 unregistered Class A Units issued upon the conversion of outstanding principal amount of unsecured promissory notes at a conversion price of $4.00 per Unit. On December 17, 2018, pursuant to the Underwriting Agreement dated November 8, 2018, by and between the Company and the underwriters named therein (the “Representative”), the Representative, on behalf of the underwriters, agreed to partially exercise the over-allotment option to purchase an additional 25,000 shares of common stock, at a price of $4.98 per share, 400,500 Series A Warrants, at a price of $0.01 per warrant and 400,500 Series B Warrants, at a price of $0.01 per warrant. The Company received net proceeds from the exercise of over-allotment option of $121,909 after deducting commission and expenses of $10,601. As of December 31, 2018, the Company had 9,870,873 shares of common stock issued and outstanding. At December 31, 2017, the Company had 3,679,500 shares of common stock issued and outstanding. Warrants Placement Agent Warrants The Company has issued warrants to the placement agents to purchase one share of its common stock at an exercise price of $12.00 per share. The warrants issued in its October 2016 Private Placement expire on October 17, 2021, and the warrants issued in its March 2018 Private Placement, May 2018 Private Placement and August 2018 Financing expire on September 4, 2023. The exercise price and number of shares of common stock or other securities issuable on exercise of such warrants are subject to customary adjustment in certain circumstances, including in the event of a stock dividend, recapitalization, reorganization, merger or consolidation of the Company. As of December 31, 2018, and 2017, 45,775 warrants and 30,725 warrants, respectively, have been issued to the placement agents and are outstanding and are currently exercisable. Class A Warrants On January 25, 2016, the Company issued Class A Warrants to purchase 61,083 shares of common stock at a price of $12.00 per share through and including December 31, 2018. No Class A Warrants were exercised during the year ended December 31, 2018 and 2017, respectively, and the Class A Warrants expired on December 31, 2018. Class B Convertible Preferred Stock and Class B Warrants On January 8, 2018, the Company offered for sale a minimum of 160,000 units and a maximum of 300,000 units to certain accredited investors, with each such unit consisting of (i) one-half (1/2) share of Company’s Class B Convertible Preferred Stock Class B Preferred Stock, par value of $0.0001 per share, and (ii) one-half (1/2) of a Class B Warrant to purchase one-half (1/2) share of the Company’s common stock, par value $0.0001 per share. On March 14, 2018, the Company sold 162,000 units at a $5.00 per unit purchase price for gross proceeds of $810,000 and received cash proceeds of $613,200, net of commissions of $64,800 earned by the placement agent on the capital raise, $128,000 in legal fees, and $4,000 in escrow fees. Each Class B Warrant has an initial exercise price of $12.00 per share, subject to adjustment, and was exercisable for a period of five (5) years from the date of issuance. An aggregate of 81,000 shares of Class B Convertible Preferred Stock and 81,000 Class B Warrants were issued. As this transaction met certain accounting criteria, the Class B Warrants were recorded in stockholders’ equity and were not accounted for as derivatives. On May 2, 2018, the Company offered for sale 140,000 units with the same terms as the units sold in the earlier 2018 transaction, and on May 15, 2018, the Company sold all 140,000 for gross proceeds of $700,000, and received cash proceeds of $587,957, net of commissions and fees of $74,574 earned by the placement agent on capital raise, $33,469 in legal fees, and $4,000 in escrow fees. As this transaction met certain accounting criteria, the Class B Warrants are recorded in stockholders’ equity and were not accounted for as derivatives. On August 28, 2018, the holders of the Company’s convertible debentures and the Company agreed to extend the maturity date of those debentures to September 30, 2018, and the holders received on a pro rata basis, 7,500 shares of the Company’s Class B Convertible Preferred Stock valued at $75,000 (Note 6). On September 4, 2018, the Company issued to the six (6) promissory note holders an aggregate of 18,750 shares of Class B Convertible Preferred Stock valued at $187,500 pursuant to the August 31, 2018 financing agreement (Note 7). On October 15, 2018, the holders of the convertible debentures were issued 15,000 shares of Class B Convertible Preferred Stock valued at $150,000 in exchange for extension of the maturity date of those debentures to October 15, 2018. This date was subsequently extended to the earlier of the closing of the Company’s IPO and November 15, 2018 for payment of an additional 15,000 shares of Class B Convertible Preferred Stock valued at $150,000 (Note 6). The holders of the Class B Warrants did not exercise any of their warrants during the year ended December 31, 2018. Class B Warrants are exercisable at December 31, 2018 at the exercise price of $12.00 per share and such warrants expire between October 17, 2021 and May 15, 2023. Concurrent with the closing of the IPO on November 14, 2018, the Company issued 1,366,768 unregistered Class A Units upon the conversion of outstanding shares of Class B Convertible Preferred Stock at a conversion price of $3.50 per Class A Unit. Included in Class A Units were 1,366,768 Series A Warrants and 1,366,768 Series B Warrants. The Series A Warrants were classified within equity and the Series B Warrants were classified as a warrant derivative with a fair value determined to be $1,872,271 on the date of issuance. The Company had no shares of Class B Convertible Preferred Stock, 265,500 Class B Warrants, and 45,775 Placement Agent Warrants issued and outstanding as of December 31, 2018. The Company had 198,875 shares of Class B Convertible Preferred Stock, 114,500 Class B Warrants, and 30,725 Placement Agent Warrants issued and outstanding at December 31, 2017. The IPO and Series A Warrants and Series B Warrants issued thereunder On November 14, 2018, the Company consummated its IPO whereby it sold a total of 2,670,000 Class A Units, each Unit consisting of one share of common stock, par value $0.0001 per share, and a Series A Warrant to purchase one share of common stock and a Series B Warrant to purchase one share of common stock, on an offer price of $5.00 for each unit of a share and a Series A Warrant and a Series B Warrant. The Company issued 2,670,000 Series A Warrants and 2,670,000 Series B warrants upon consummation of its IPO. The Series A Warrants were classified within equity and the Series B Warrants were classified as a warrant derivative with a fair value determined to be $3,657,507 on the date of issuance. Concurrent with the closing of the IPO on November 14, 2018, the Company issued 1,366,768 Series A Warrants and 1,366,768 Series B Warrants upon the conversion of outstanding shares of Class B Convertible Preferred Stock. In addition, the Company issued 1,726,678 Series A Warrants and Series B Warrants upon the conversion of outstanding convertible debt instruments consisting of all principal amounts and accrued and unpaid interest through the date of the IPO (Note 6). The Company also issued 215,625 Series A Warrants and 215,625 Series B Warrants upon conversion of outstanding principal amount of the unsecured promissory notes (Note 7). On December 17, 2018, pursuant to the Underwriting Agreement dated November 8, 2018, by and between the Company and the underwriters named therein (the “Representative”), the Representative, on behalf of the underwriters, agreed to partially exercise the over-allotment option to purchase 400,500 Series A Warrants, at a price of $0.01 per warrant and 400,500 Series B Warrants, at a price of $0.01 per warrant. The Series A Warrants were classified within equity and the Series B Warrants were classified as a warrant derivative with a fair value determined to be $980,375 on the date of issuance. On December 31, 2018, the Company has 6,379,571 Series A Warrants and 6,379,571 Series B Warrants issued and outstanding. Derivative Financial Instruments As disclosed in Note 10 of the Company’s financial statements, the Company allocated part of the proceeds of its IPO of the Company’s units consisting of common stock and warrants to the Series B warrants issued in connection with the IPO. The valuations of the Series B warrants issued at the time of the initial closing of the IPO on November 14, 2018 and in the subsequent closing of the “greenshoe” on December 17, 2018 (collectively, the “Warrants”) were determined using Monte Carlo simulation models. These models use inputs such as the underlying price of the shares issued at the measurement date, volatility, risk free interest rate and expected life of the instrument. The Company has classified the Warrants as a current liability due to certain provisions relating to price adjustments with regard to alternate cashless exercises, as well as the holders’ ability to exercise the warrants within twelve months of the reporting date and has accounted for them as derivative instruments in accordance with ASC 815, adjusting the fair value at the end of each reporting period. Additionally, the Company has determined that the warrant derivative should be classified within Level 3 of the fair-value hierarchy by evaluating each input for the Monte Carlo simulation models against the fair-value hierarchy criteria and using the lowest level of input as the basis for the fair-value classification as called for in ASC 820. There are six inputs: closing price of the Company’s stock on the day of evaluation; the exercise price of the warrants; the remaining term of the warrants; the volatility of the Company’s stock over that term; number of warrants; and the risk-free rate of return. Of those inputs, the exercise price of the warrants and the remaining term are readily observable in the warrant agreements, and the number of warrants is publicly reported in the Company’s filings with the SEC. The closing price of the Company’s stock would fall under Level 1 of the fair-value hierarchy as it is a quoted price in an active market (ASC 820-10). The risk-free rate of return is a Level 2 input as defined in ASC 820-10, while the historical volatility is a Level 3 input as defined in ASC 820. Since the lowest level input is a Level 3, the Company determined the warrant derivative is most appropriately classified within Level 3 of the fair value hierarchy. For the year ended December 31, 2018, the Company recorded pre-tax derivative instrument loss of $14,336,425. The resulting derivative instrument liabilities totaled $23,507,247 at December 31, 2018. By their terms, Management of the Company expects that the Warrants will either be exercised (likely pursuant to the further cashless exercise provision) or expire worthless. The Company calculated the fair value of the Warrants at four different points: (i) the portion issued on November 14, 2018,on both November 14, 2018 and December 31, 2018, and (ii) the portion issued on December 17, 2018, on both December 17, 2018 and December 31, 2018. The expected volatility, risk free interest rates and expected life are all set forth on the table below. The table below presents the Company’s liabilities arising from the Warrants measured at fair value on a recurring basis as of the dates set forth above, with the level in the fair value hierarchy within which those measurements fall. Fair Value Measurements of Series B Warrants Using Significant Unobservable Inputs (Level 3) Dates Exercise Price Stock Price Term Volatility Risk Free Rate No. of Warrants FV of Warrant 11/14/2018 $5.00 $ 5.000 1.000 35 % 2.71 % 5,979,070 $ 8,190,447 12/17/2018 $3.77 $ 1.270 0.500 35 % 2.54 % 400,500 $ 980,375 12/31/2018 $5.00 $ 1.170 0.869 40 % 2.61 % 5,979,070 $ 22,505,397 12/31/2018 $3.77 $ 1.170 0.461 40 % 2.54 % 400,500 $ 1,001,850 The 2016 Equity Incentive Plan The 2016 Equity Incentive Plan (the “2016 Plan”) was adopted by the Board of Directors and approved by the shareholders on July 6, 2016. The awards per 2016 Plan may be granted through July 5, 2026 to the Company’s employees, consultants, directors and non-employee directors provided such consultants, directors and non-employee directors render good faith services not in connection with the offer and sale of securities in a capital-raising transaction. The maximum number of shares of our common stock that may be issued under the 2016 Plan is 2,000,000 shares, which amount will be (a) reduced by awards granted under the 2016 Plan, and (b) increased to the extent that awards granted under the 2016 Plan are forfeited, expire or are settled for cash (except as otherwise provided in the 2016 Plan). No employee will be eligible to receive more than 125,000 shares of common stock in any calendar year under the 2016 Plan pursuant to the grant of awards. On January 3, 2017, the Board of Directors of the Company approved and granted to the President/Chief Executive Officer of the Company, an option to purchase One Hundred and Twenty-Five Thousand (125,000) shares of the Company’s Common Stock (“Option”) under the Company’s 2016 Plan. The Option will have an exercise price that is no less than $10.00 per share and will vest over four (4) years, with 25% of the total number of shares subject to the Option vesting on the one (1) year anniversary of the date of grant and, the remainder vesting in equal installments on the last day of each of the thirty-six (36) full calendar months thereafter. Vesting will depend on the Officer’s continued service as an employee with the Company and will be subject to the terms and conditions of the 2016 Plan and the written Stock Option Agreement governing the Option. As of December 31, 2017, the Company estimated the fair value of the options using the Black-Scholes option pricing model was $448,861. The Company recorded compensation expense of $112,215 for each of the years ended December 31, 2018 and 2017, respectively. The key valuation assumptions used consist, in part, of the price of the Company’s common stock of $3.60 at the issuance date; a risk-free interest rate of 1.72% and the expected volatility of the Company’s common stock of 315.83% (estimated based on the common stock of comparable public entities). As of December 31, 2018, the unrecognized compensation expense was $224,431 which will be recognized as compensation expense over two (2) years. The 2018 Equity Incentive Plan Effective July 1, 2018, the Board of Directors adopted the 2018 Equity Incentive Plan (the “2018 Plan”). This 2018 Plan supplements, and does not replace, the existing 2016 Equity Incentive Plan. Awards may be granted under the 2018 Plan through June 30, 2023 to the Company’s employees, officers, consultants, and non-employee directors. The maximum number of shares of our common stock that may be issued under the 2018 Plan is 1,000,000 shares, which amount will be (a) reduced by awards granted under the 2018 Plan, and (b) increased to the extent that awards granted under the 2018 Plan are forfeited, expire or are settled for cash (except as otherwise provided in the 2018 Plan). No employee will be eligible to receive more than 200,000 shares of common stock in any calendar year under the 2018 Plan pursuant to the grant of awards. On September 12, 2018, the Board of Directors approved an increase in the number of shares of common stock reserved for future issuance under this Plan from 1,000,000 shares to 2,000,000 shares. On September 14, 2018, 1,000,000 shares of common stock underlying awards under the 2018 Plan were granted to the employees and officers, 25% vesting immediately on the date of grant and 25% vesting each year thereafter on the three subsequent anniversaries of the grant date. The Company estimated the fair value of the options using the Black-Scholes option pricing model was $1,241,417. The Company recorded compensation expense of $402,027 for the year ended December 31, 2018. The key valuation assumptions used consist, in part, of the price of the Company’s common stock ranging in price from $3.90 to $4.29 at the issuance date; a risk-free interest rate ranging from 2.86% to 2.92%, and the expected volatility of the Company’s common stock ranging from of 29.8% to 31.1% (estimated based on the common stock of comparable public entities). As of December 31, 2018, the unrecognized compensation expense was $839,390 which will be recognized as compensation expense over 3.71 years. |
Income Tax
Income Tax | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Tax | NOTE 11: INCOME TAX Income tax expense for the years ended December 31, 2018 and 2017 is summarized as follows. December 31, 2018 December 31, 2017 Deferred: Federal $ (2,720,081 ) $ (700,557 ) State (904,569 ) (327,051 ) Change in valuation allowance 3,624,650 1,027,608 Income tax expense (benefit) $ - $ - The following is a reconciliation of the provision for income taxes at the U.S. federal income tax rate to the income taxes reflected in the Statement of Operations: December 31, 2018 December 31, 2017 Book income (loss) 21.00 % 34.00 % State taxes 6.98 % 5.83 % Change in the fair value of warrant derivative -14.51 % - Other permanent items -0.36 % -2.25 % Enactment of Tax Cuts and Jobs Act 0.00 % -20.29 % Valuation allowance -13.11 % -17.30 % Tax expense at actual rate - - The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at December 31, 2018 and 2017 are as follows: December 31, 2018 December 31, 2017 Deferred tax assets: Net operating loss carryforward $ 6,357,768 $ 2,874,380 Other 225,935 84,673 Total gross deferred tax assets 6,583,703 2,959,053 Less: valuation allowance (6,583,703 ) (2,959,053 ) Net deferred tax assets $ - $ - Deferred income taxes are provided for the tax effects of transactions reported in the financial statements and consist of deferred taxes related primarily to differences between the bases of certain assets and liabilities for financial and tax reporting. The deferred taxes represent the future tax return consequences of those differences, which will either be deductible or taxable when the assets and liabilities are recovered or settled. The Tax Cuts and Jobs Act (“TCJA”) was enacted on December 22, 2017 and reduced the U. S. federal corporate income tax rate to 21.00% effective January 1, 2018. As such the Company recorded a decrease in deferred tax assets and valuation allowance of $1,205,334 during the year ended December 31, 2017. The staff of the US Securities and Exchange Commission (SEC) has recognized the complexity of reflecting the impacts of the TCJA, and on December 22, 2017 issued guidance in Staff Accounting Bulletin 118 (“SAB 118”) which clarifies accounting for income taxes under ASC 740 if information is not yet available or complete and provides for up to a one year period in which to complete the required analyses and accounting (the measurement period). SAB 118 describes three scenarios (or “buckets”) associated with a company’s status of accounting for income tax reform: (1) a company is complete with its accounting for certain effects of tax reform, (2) a company is able to determine a reasonable estimate for certain effects of tax reform and records that estimate as a provisional amount, or (3) a company is not able to determine a reasonable estimate and therefore continues to apply ASC 740, based on the provisions of the tax laws that were in effect immediately prior to the TCJA being enacted. The Company has completed the required analysis and accounting for substantially all the effects of the TCJA’s enactment and have made a reasonable estimate as to the other effects and have reflected the measurement and accounting of the effects in the 2017 financial statements. In accordance with SAB 118, adjustments, if any, to any provisional amounts will be recorded in 2018. The Company did not identify any effects related to the TCJA for which they were not able to either complete the required analysis or make a reasonable estimate. The Company has completed the assessment of the income tax effect of the Tax Act and there were no adjustments recorded to the provisional amounts. Section 382 of the Internal Revenue Code (“Section 382”), imposes limitations on a corporation’s ability to utilize its Net Operating Losses ( “NOLs”), if it experiences an “ownership change.” In general terms, an ownership change may result from transactions increasing the ownership percentage of certain stockholders in the stock of the corporation by more than 50% over a three-year period. In the event of an ownership change, utilization of the NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate. The Company has not completed a Section 382 study at this time; however, should a study be completed certain NOLs may be subject to such limitations. Any future annual limitation may result in the expiration of NOLs before utilization. At December 31, 2018 and 2017, the Company had net operating losses of approximately $22,500,000 and $18,500,000, respectively, for U.S. federal and California income tax purposes available to offset future taxable income, expiring on various dates through 2037. Federal losses generated in 2018 and onward do not expire. The Company has recorded a 100% valuation allowance on the deferred tax assets due to the uncertainty of its realization. The net change in the valuation allowance for the years ended December 31, 2018 and 2017 was an increase of $3,624,650 and $1,027,608, respectively. In the ordinary course of business, the Company’s income tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessment by these taxing authorities. Accordingly, the Company believes that it is more likely than not that it will realize the benefits of tax positions it has taken in its tax returns or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with FASB ASC 740. Differences between the estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material adverse effect on the company’s financial position. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. The Company is no longer subject to the U.S. federal and state income tax examination to the extent they are carried forward and impact a year that is open to examination by the authorities. |
Concentrations
Concentrations | 12 Months Ended |
Dec. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
Concentrations | NOTE 12: CONCENTRATIONS Concentration of Purchase Order Financing The Company used a third-party financing company for the years ended December 31, 2018 and 2017, respectively, which provided letters of credit to vendors for a fee against the purchase orders received by the Company for sale of products to its customers. The letters of credit were issued to the vendors to manufacture Company’s products pursuant to the purchase orders received by the Company (Note 3). Concentration of Customers The Company sold its products to four customers that accounted for approximately 74% and 78% of the total revenues for the years ended December 31, 2018 and 2017, respectively. The same four customers accounted for 69% and 79% of the total accounts receivable balance due to the Company at December 31, 2018 and 2017, respectively. Concentration of Suppliers The Company purchased products from four vendors for the year ended December 31, 2018 that accounted for approximately 78% of its total cost of goods sold. The Company purchased products from three vendors for the years ended December 31, 2017 that accounted for approximately 86% of its total cost of goods sold. Concentration of Credit Risk The Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in such accounts through December 31, 2018. The Company’s bank balances exceeded FDIC insured amounts at times during the years ended December 31, 2018 and 2017, respectively. At December 31, 2018 and 2017, the Company’s bank balance exceeded the FDIC insured amounts by $5,209,884 and $0, respectively. Geographic Concentration Geographical distribution of net revenue consisted of the following for the years ended December 31, 2018 and 2017, respectively, as follows: Year Ended December 31, COUNTRIES 2018 2017 Australia $ 1,806,335 $ 2,337,393 Belgium 197,335 - Canada 688,920 574,719 Germany 19,002 - Japan - 2,970 New Zealand - 81,375 Russia 112,102 - South Korea 851,270 476,004 Sweden 2,311 - United Kingdom 719,301 829,432 United States of America 10,893,824 9,899,943 Total Net Revenue $ 15,289,400 $ 14,201,836 |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 13: SUBSEQUENT EVENTS The Company evaluated subsequent events through March 29, 2019, the date of the filing of this Annual Report on Form 10-K with the SEC, to ensure that this filing includes appropriate disclosure of events both recognized in the financial statements as of December 31, 2018, and events which occurred subsequent to December 31, 2018 but were not recognized in the financial statements. The Company has determined that there were no subsequent events which required recognition, adjustment to or disclosure in the financial statements, except for the following: On January 24, 2019, the Company entered into an exchange agreement with two institutional investors pursuant to which these investors exercised Series A Warrants to purchase 424,116 shares of its common stock for total gross proceeds of $2,332,638 to the Company. The two investors also exchanged Series A Warrants to purchase 508,940 shares of its common stock into 508,940 shares of its common stock and received new warrants to purchase an aggregate of 933,056 shares of its common stock. These new warrants have terms substantially similar to the terms of the Company’s Series A Warrants, except that the per share exercise price of the new warrants is $3.77, and the warrants are not exercisable until the six-month anniversary of the date of issuance thereof. On February 15, 2019, the Company received cash proceeds of $16,817 from three placement agent warrant holders upon their exercise of warrants to purchase 4,004 Class A Units. As of March 27, 2019, the holders of 1,708,751 Series B Warrants exercised their rights to convert them into 3,629,045 shares of common stock. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. The Company did not have any cash equivalents at December 31, 2018 and 2017, respectively. |
Accounts Receivable | Accounts Receivable Accounts receivable represent income earned from the sale of tools and accessories for which the Company has not yet received payment. Accounts receivable are recorded at the invoiced amount and adjusted for amounts management expects to collect from balances outstanding at period-end. The Company estimates the allowance for doubtful accounts based on an analysis of specific accounts and an assessment of the customer’s ability to pay, among other factors. At December 31, 2018 and 2017, no allowance for doubtful accounts was recorded. The Company accounts for the transfer of accounts receivable to a third party under a factoring type arrangement in accordance with Accounting Standards Codification (“ASC”) 860, “ Transfers and Servicing |
Inventory | Inventory Inventory is valued at the lower of cost or net realizable value using the first-in, first-out method. The reported net value of inventory includes finished saleable products that will be sold or used in future periods. The Company reserves for obsolete and slow-moving inventory. At December 31, 2018 and 2017, there were no reserves for obsolete and slow-moving inventory. |
Property and Equipment | Property and Equipment Property and equipment are recorded at cost, less accumulated depreciation. The Company provides for depreciation on a straight-line basis over the estimated useful lives of the assets which range from three to seven years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related assets when they are placed into service. The Company evaluates property and equipment for impairment periodically to determine if changes in circumstances or the occurrence of events suggest the carrying value of the asset or asset group may not be recoverable. Maintenance and repairs are charged to operations as incurred. Expenditures which substantially increase the useful lives of the related assets are capitalized. |
Long-lived Assets | Long-lived Assets In accordance with ASC 360, “ Property, Plant, and Equipment |
Fair Value of Financial Instruments and Fair Value Measurements | Fair Value of Financial Instruments and Fair Value Measurements The Company adheres to ASC 820, which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances. ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy). ● Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. ● Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. ● Level 3 inputs are unobservable inputs for the asset or liability, which is typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The fair value of the Company’s warrant derivative recorded in the Company’s financial statements was determined using the Monte Carlo simulation valuation methodology and the quoted price of the Company’s common stock in an active market, a Level 3 measurement. Volatility was based on the actual market activity of the Company’s peer group. The expected life was based on the remaining contractual term of the warrants, and the risk free interest rate was based on the implied yield available on U.S. Treasury Securities with a maturity equivalent to the warrants’ expected life. The Company calculated the estimated fair value of warrants on the date of issuance and at each subsequent reporting date using the following assumptions: Year Ended December 31, 2018 Risk-free interest rate 2.54% – 2.71% Contractual term 0.95 - 1.0 year Expected volatility 35% - 40% Level 3 Fair Value Sensitivity Warrant derivative The fair value of the warrant derivative includes the estimated volatility and risk free rate. The higher/lower the estimated volatility, the higher/lower the value of the debt conversion feature liability. The higher/lower the risk free interest rate, the higher/lower the value of the debt conversion feature liability. From time to time, the Company sells common stock warrants that are derivative instruments. The Company does not enter into speculative derivative agreements and does not enter into derivative agreements for the purpose of hedging risks. The table below provides a reconciliation of the beginning and ending balances for the warrant derivative which is measured at fair value using significant unobservable inputs (Level 3): Balance, December 31, 2017 $ — Fair value of warrant derivative at Issuance date (Note 6, 7 and 10) (9,170,822 ) Total realized and unrealized gains (losses): Change in the fair value of warrant derivative (14,336,425 ) Balance, December 31, 2018 $ (23,507,247 ) |
Revenue Recognition | Revenue Recognition The Company recognizes revenue when the product is delivered to the customer, and the ownership is transferred. The Company’s revenue recognition policy is based on the revenue recognition criteria established under the SEC’s Staff Accounting Bulletin No. 104. The criteria and how the Company satisfy each element are as follows: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred per the terms of the signed contract; (3) the price is fixed and determinable; and (4) collectability is reasonable assured. Revenue is recognized net of rebates and customer allowances, as appropriate. |
Income Taxes | Income Taxes The Company accounts for income taxes following the asset and liability method in accordance with the ASC 740 “Income Taxes.” Under such method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. The Company applies the accounting guidance issued to address the accounting for uncertain tax positions. This guidance clarifies the accounting for income taxes, by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements as well as provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company classifies interest and penalty expense related to uncertain tax positions as a component of income tax expense. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years that the asset is expected to be recovered or the liability settled. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the period in which related temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in its assessment of a valuation allowance. |
Stock Based Compensation | Stock Based Compensation The Company accounts for employee stock-based compensation in accordance with ASC 718-10, “ Share-Based Payment The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing formula. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The Company’s determination of fair value using an option-pricing model is affected by the stock price as well as assumptions regarding the number of highly subjective variables. The Company estimates volatility based upon the historical stock price of the comparable companies and estimates the expected term for employee stock options using the simplified method for employees and directors and the contractual term. The risk-free rate is determined based upon the prevailing rate of United States Treasury securities with similar maturities. The Company recognizes forfeitures as they occur rather than applying a prospective forfeiture rate in advance. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share The Company computes net earnings (loss) per share in accordance with ASC 260, “ Earnings per Share” Potentially dilutive securities that are not included in the calculation of diluted net loss per share because their effect is anti-dilutive are as follows (in common equivalent shares): December 31, 2018 December 31, 2017 Common stock warrants 13,070,417 206,309 Stock options exercisable to common stock 1,125,000 125,000 Shares issuable upon conversion of debt - 579,247 Shares issuable upon conversion of preferred stock - 198,875 Total potentially dilutive securities 14,195,417 1,109,431 |
Segment Reporting | Segment Reporting The Company operates one reportable segment referred to as the tools segment. A single management team that reports to the Chief Executive Officer comprehensively manages the business. Accordingly, the Company does not have separately reportable segments. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements As an emerging growth company, the Company has elected to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Securities and Exchange Act of 1934, as amended. In June 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2018-07, Compensation – Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting In February 2016, the FASB issued ASU 2016-02, “ Leases In January 2016, the FASB issued ASU 2016-01, “ Financial Instruments - Overall Recognition and Measurement of Financial Assets and Financial Liabilities. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) The Company plans to adopt on January 1, 2019 ASU 2014-09, as well as other clarifications and technical guidance issued by the FASB related to this new revenue standard. The Company is developing a plan for implementing the new standard, which includes, but is not limited to, identifying contract populations and “in scope” customer contracts, identifying performance obligations in those customer contracts, and evaluating any impact of variable consideration. The Company is currently evaluating the transition methods and will likely apply the modified retrospective transition method, which would result in an adjustment to retained earnings for the cumulative effect, if any, of applying the standard to contracts that are not completed at the date of initial application. Under this method, the Company would not restate the prior financial statements presented, therefore the new standard requires the Company to provide additional disclosures of the amount by which each financial statement line item is affected in the current reporting period during the fiscal year ending December 31, 2019, as compared to the guidance that was in effect before the change, and an explanation of the reasons for significant changes, if any. The impact that the new revenue recognition standard will have on the Company’s financial statements and disclosures has not yet been fully assessed. However, the Company does not expect the provisions of the new standard to have a material effect on the timing or amount of revenue it recognizes. The Company’s assessment also includes determining the impact the new standard may have on the revenue reporting processes, including disclosures, ensuring internal controls will operate effectively with the new standard and performing gap analyses on collected data and determining the relative accounting positions where applicable. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Schedule of Fair Value Warrants Assumption | The Company calculated the estimated fair value of warrants on the date of issuance and at each subsequent reporting date using the following assumptions: Year Ended December 31, 2018 Risk-free interest rate 2.54% – 2.71% Contractual term 0.95 - 1.0 year Expected volatility 35% - 40% |
Schedule of Warrants Liabilities Measured at Fair Value Using Significant Unobservable Inputs | The table below provides a reconciliation of the beginning and ending balances for the warrant derivative which is measured at fair value using significant unobservable inputs (Level 3): Balance, December 31, 2017 $ — Fair value of warrant derivative at Issuance date (Note 6, 7 and 10) (9,170,822 ) Total realized and unrealized gains (losses): Change in the fair value of warrant derivative (14,336,425 ) Balance, December 31, 2018 $ (23,507,247 ) |
Schedule of Potential Dilutive Securities | Potentially dilutive securities that are not included in the calculation of diluted net loss per share because their effect is anti-dilutive are as follows (in common equivalent shares): December 31, 2018 December 31, 2017 Common stock warrants 13,070,417 206,309 Stock options exercisable to common stock 1,125,000 125,000 Shares issuable upon conversion of debt - 579,247 Shares issuable upon conversion of preferred stock - 198,875 Total potentially dilutive securities 14,195,417 1,109,431 |
Inventory (Tables)
Inventory (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | Inventory consists of the following: Description December 31, 2018 December 31, 2017 Finished goods $ 379,915 $ 98,672 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment consists of the following: Description December 31, 2018 December 31, 2017 Computer equipment $ 88,615 $ 88,615 Furniture and office equipment 136,955 136,955 Leasehold improvements 37,899 37,899 Tooling and molds 249,690 249,690 Website design 9,850 9,850 523,009 523,009 Less: accumulated depreciation (298,813 ) (178,090 ) Property and Equipment, net $ 224,196 $ 344,919 |
Convertible Debentures (Tables)
Convertible Debentures (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Convertible Debt | Convertible debentures consist of the following: December 31, 2018 December 31, 2017 Convertible debenture - Hillair Capital $ - $ 3,784,230 Convertible debenture – HSPL Capital - 1,915,770 Less: Original issuance discount - (267,619 ) Less: Class B Convertible Preferred Stock discount - (207,125 ) Less: Debt issuance cost - (361,110 ) Convertible debentures, net $ - $ 4,864,146 Current portion $ - $ 4,864,146 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Future Minimum Lease Commitments | Future minimum lease commitments of the Company are as follows: For the years ending December 31, Amount 2019 $ 174,872 2020 180,993 2021 187,327 2022 15,655 Total $ 558,847 |
Stockholders' Deficit (Tables)
Stockholders' Deficit (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
Schedule of Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | The table below presents the Company’s liabilities arising from the Warrants measured at fair value on a recurring basis as of the dates set forth above, with the level in the fair value hierarchy within which those measurements fall. Fair Value Measurements of Series B Warrants Using Significant Unobservable Inputs (Level 3) Dates Exercise Price Stock Price Term Volatility Risk Free Rate No. of Warrants FV of Warrant 11/14/2018 $5.00 $ 5.000 1.000 35 % 2.71 % 5,979,070 $ 8,190,447 12/17/2018 $3.77 $ 1.270 0.500 35 % 2.54 % 400,500 $ 980,375 12/31/2018 $5.00 $ 1.170 0.869 40 % 2.61 % 5,979,070 $ 22,505,397 12/31/2018 $3.77 $ 1.170 0.461 40 % 2.54 % 400,500 $ 1,001,850 |
Income Tax (Tables)
Income Tax (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income Tax Expense | Income tax expense for the years ended December 31, 2018 and 2017 is summarized as follows. December 31, 2018 December 31, 2017 Deferred: Federal $ (2,720,081 ) $ (700,557 ) State (904,569 ) (327,051 ) Change in valuation allowance 3,624,650 1,027,608 Income tax expense (benefit) $ - $ - |
Schedule of Reconciliation of the Provision for Income Taxes at the U.S. Federal Income Tax Rate | The following is a reconciliation of the provision for income taxes at the U.S. federal income tax rate to the income taxes reflected in the Statement of Operations: December 31, 2018 December 31, 2017 Book income (loss) 21.00 % 34.00 % State taxes 6.98 % 5.83 % Change in the fair value of warrant derivative -14.51 % - Other permanent items -0.36 % -2.25 % Enactment of Tax Cuts and Jobs Act 0.00 % -20.29 % Valuation allowance -13.11 % -17.30 % Tax expense at actual rate - - |
Schedule of Deferred Tax Assets and Liabilities | The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at December 31, 2018 and 2017 are as follows: December 31, 2018 December 31, 2017 Deferred tax assets: Net operating loss carryforward $ 6,357,768 $ 2,874,380 Other 225,935 84,673 Total gross deferred tax assets 6,583,703 2,959,053 Less: valuation allowance (6,583,703 ) (2,959,053 ) Net deferred tax assets $ - $ - |
Concentrations (Tables)
Concentrations (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
Schedule of Geographical Distribution of Revenue | Geographical distribution of net revenue consisted of the following for the years ended December 31, 2018 and 2017, respectively, as follows: Year Ended December 31, COUNTRIES 2018 2017 Australia $ 1,806,335 $ 2,337,393 Belgium 197,335 - Canada 688,920 574,719 Germany 19,002 - Japan - 2,970 New Zealand - 81,375 Russia 112,102 - South Korea 851,270 476,004 Sweden 2,311 - United Kingdom 719,301 829,432 United States of America 10,893,824 9,899,943 Total Net Revenue $ 15,289,400 $ 14,201,836 |
Nature of Operations (Details N
Nature of Operations (Details Narrative) - USD ($) | Dec. 17, 2018 | Nov. 14, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Common stock, par value | $ 0.0001 | ||||
Warrants to purchase common stock | 3,070,500 | ||||
Proceeds from initial public offering | $ 12,415,500 | ||||
Cash | $ 5,459,884 | $ 44,348 | $ 1,333,930 | ||
Over-Allotment Option [Member] | Underwriting Agreement [Member] | |||||
Common stock, par value | $ 0.0001 | ||||
Option to purchase shares of common stock | 25,000 | ||||
Exercise price per share | $ 4.98 | ||||
Proceeds from over allotment options | $ 121,909 | ||||
Commission and expenses | $ 10,601 | ||||
Class A Unit [Member] | IPO [Member] | |||||
Initial public offering, shares | 2,670,000 | ||||
Common stock, par value | $ 0.0001 | ||||
Warrants price per share | $ 5 | ||||
Proceeds from initial public offering | $ 12,415,500 | ||||
Underwriting discounts and commission | 934,500 | ||||
Stock issuance cost | $ 743,765 | ||||
Series A Warrant [Member] | |||||
Warrants to purchase common stock | 1 | ||||
Series B Warrants [Member] | |||||
Warrants to purchase common stock | 1 | ||||
Series A Warrants [Member] | Underwriting Agreement [Member] | |||||
Warrants to purchase common stock | 400,500 | ||||
Warrants price per share | $ 0.01 | ||||
Series A Warrants [Member] | IPO [Member] | |||||
Warrants price per share | $ 215,625 | ||||
Series B Warrants [Member] | Underwriting Agreement [Member] | |||||
Warrants to purchase common stock | 400,500 | ||||
Warrants price per share | $ 0.01 | ||||
Series B Warrants [Member] | IPO [Member] | |||||
Warrants price per share | $ 215,625 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | Sep. 13, 2018 | Dec. 31, 2018 | Dec. 31, 2017 |
Reverse stock split | Reverse Split, each (2) units of Equity Instruments issued and outstanding prior to the Reverse Split were converted into one (1 unit) of Equity Instrument. | ||
Cash equivalents | |||
Allowance for doubtful accounts | |||
Allowances for sales discount | 13,000 | 13,000 | |
Inventory reserves for obsolete | |||
Assets impairment loss | |||
Minimum [Member] | |||
Estimated useful life of property plant and equipment | 3 years | ||
Maximum [Member] | |||
Estimated useful life of property plant and equipment | 7 years |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Fair Value Warrants Assumption (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Risk-Free Interest Rate [Member] | Minimum [Member] | |
Fair value measurement rate | 2.54% |
Risk-Free Interest Rate [Member] | Maximum [Member] | |
Fair value measurement rate | 2.71% |
Contractual Term [Member] | Minimum [Member] | |
Fair value of contractual term | 11 months 12 days |
Contractual Term [Member] | Maximum [Member] | |
Fair value of contractual term | 1 year |
Expected Volatility [Member] | Minimum [Member] | |
Fair value measurement rate | 35.00% |
Expected Volatility [Member] | Maximum [Member] | |
Fair value measurement rate | 40.00% |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Schedule of Warrants Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Details) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Accounting Policies [Abstract] | |
Balance,December 31, 2017 | |
Fair value of warrant derivative at Issuance date (Note 6, 7 and 10) | (9,170,822) |
Total realized and unrealized gains (losses): | |
Change in the fair value of warrant derivative | (14,336,425) |
Balance,December 31, 2018 | $ (23,507,247) |
Summary of Significant Accoun_7
Summary of Significant Accounting Policies - Schedule of Potential Dilutive Securities (Details) - shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Total potentially dilutive securities | 14,195,417 | 1,109,431 |
Common Stock Warrants [Member] | ||
Total potentially dilutive securities | 13,070,417 | 206,309 |
Stock Options Exercisable to Common Stock [Member] | ||
Total potentially dilutive securities | 1,125,000 | 125,000 |
Shares Issuable Upon Conversion of Debt [Member] | ||
Total potentially dilutive securities | 579,247 | |
Shares Issuable Upon Conversion of Preferred Stock [Member] | ||
Total potentially dilutive securities | 198,875 |
Factor Receivables, Letters o_2
Factor Receivables, Letters of Credit Payable and Loan Payable (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Debt Disclosure [Abstract] | ||
Fixed fee description | The Company paid an initial fixed fee of 5% of the cost of products it purchased from the vendor upon opening the LC, and 1% each 30 days thereafter, after the LC is funded by the Factor until such time as the Factor receives the payment from the Company's customers. | |
Loan payable third party | $ 1,304,512 | $ 1,078,941 |
Total sales factored, net of allowances for sales returns, discounts and rebates | 7,458,497 | 8,136,556 |
Factor fees incurred | 395,615 | 461,624 |
Allowance for sales returns, discounts and rebates | 13,000 | 13,000 |
Outstanding accounts receivable factored | $ 1,542,835 | $ 1,663,398 |
Inventory - Schedule of Invento
Inventory - Schedule of Inventory (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 379,915 | $ 98,672 |
Property and Equipment, Net (De
Property and Equipment, Net (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 120,723 | $ 119,627 |
Property and Equipment, Net - S
Property and Equipment, Net - Schedule of Property and Equipment (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Property and Equipment, gross | $ 523,009 | $ 523,009 |
Less: accumulated depreciation | (298,813) | (178,090) |
Property and Equipment, net | 224,196 | 344,919 |
Computer Equipment [Member] | ||
Property and Equipment, gross | 88,615 | 88,615 |
Furniture and Office Equipment [Member] | ||
Property and Equipment, gross | 136,955 | 136,955 |
Leasehold Improvements [Member] | ||
Property and Equipment, gross | 37,899 | 37,899 |
Tooling and Molds [Member] | ||
Property and Equipment, gross | 249,690 | 249,690 |
Website Design [Member] | ||
Property and Equipment, gross | $ 9,850 | $ 9,850 |
Convertible Debentures (Details
Convertible Debentures (Details Narrative) - USD ($) | Dec. 17, 2018 | Nov. 15, 2018 | Nov. 14, 2018 | Oct. 18, 2018 | Oct. 15, 2018 | Oct. 02, 2018 | Aug. 28, 2018 | Mar. 14, 2018 | Jan. 16, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Jun. 19, 2018 |
Promissory note principal amount | $ 114,000 | |||||||||||
Stock issued during period, value, issues | $ 8,014,228 | |||||||||||
Class of warrants issued during period | 3,070,500 | |||||||||||
Fair value of warrant liability | $ (14,336,425) | |||||||||||
Interest expense | 7,500 | |||||||||||
Inducement payment for conversion of debentures | 215,625 | |||||||||||
OID unamortized portion, value | $ 207,125 | |||||||||||
Debentures [Member] | ||||||||||||
Interest expense | 2,384,923 | 456,000 | ||||||||||
OID unamortized portion, value | 0 | 361,110 | ||||||||||
Amortization of the debt issuance costs | 2,200,453 | 451,491 | ||||||||||
OID [Member] | ||||||||||||
OID unamortized portion, value | $ 0 | 474,744 | ||||||||||
Class B Preferred Shares [Member] | ||||||||||||
Number of shares issued to debenture holders as debt discount | 63,000 | |||||||||||
Number of shares issued to debenture holders as debt discount, value | $ 404,523 | |||||||||||
Class B Convertible Preferred Stock [Member] | ||||||||||||
Stock issued during period, shares | 81,000 | |||||||||||
OID unamortized portion, value | 0 | 474,744 | ||||||||||
Class B Convertible Preferred Stock [Member] | OID [Member] | ||||||||||||
Interest expense | 1,104,743 | 637,714 | ||||||||||
Class B Convertible Preferred Stock [Member] | ||||||||||||
Number of shares issued to debenture holders as debt discount | 15,000 | 15,000 | ||||||||||
Number of shares issued to debenture holders as debt discount, value | $ 150,000 | $ 150,000 | ||||||||||
Class A Units [Member] | ||||||||||||
Inducement payment for conversion of debentures | 1,753,908 | 0 | ||||||||||
Class A Units [Member] | IPO [Member] | Convertible Debentures [Member] | ||||||||||||
Conversion of stock, shares issued | 1,726,678 | |||||||||||
Debt instrument conversion price | $ 5 | |||||||||||
Series A Warrants [Member] | IPO [Member] | ||||||||||||
Number of shares issued to debenture holders as debt discount | 1,726,678 | |||||||||||
Conversion of stock, shares issued | 1,366,768 | |||||||||||
Series A Warrants [Member] | Class A Units [Member] | IPO [Member] | Convertible Debentures [Member] | ||||||||||||
Class of warrants issued during period | 1,726,678 | |||||||||||
Series B Warrants [Member] | IPO [Member] | ||||||||||||
Number of shares issued to debenture holders as debt discount | 1,726,678 | |||||||||||
Conversion of stock, shares issued | 1,366,768 | |||||||||||
Series B Warrants [Member] | Class A Units [Member] | IPO [Member] | Convertible Debentures [Member] | ||||||||||||
Class of warrants issued during period | 1,726,678 | |||||||||||
Series A Warrants and Series B Warrants [Member] | ||||||||||||
Fair value of warrant liability | $ 980,375 | $ 3,657,507 | ||||||||||
Series A Warrants and Series B Warrants [Member] | Class A Units [Member] | IPO [Member] | ||||||||||||
Fair value of warrant liability | 1,298,429 | |||||||||||
Series A Warrants and Series B Warrants [Member] | Class A Units [Member] | IPO [Member] | Convertible Debentures [Member] | ||||||||||||
Fair value of warrant liability | $ 2,365,294 | |||||||||||
Hillair Capital [Member] | ||||||||||||
Promissory note principal amount | 3,784,230 | |||||||||||
HSPL Capital Advisors, LLC [Member] | ||||||||||||
Promissory note principal amount | $ 1,915,770 | |||||||||||
Securities Purchase Agreement [Member] | ||||||||||||
Extended maturity date | Sep. 30, 2018 | |||||||||||
Securities Purchase Agreement [Member] | Holders of Convertible Debentures [Member] | ||||||||||||
Repayments of convertible debentures | $ 1,500,000 | |||||||||||
Securities Purchase Agreement [Member] | Class B Convertible Preferred Stock [Member] | Holders of Convertible Debentures [Member] | ||||||||||||
Stock issued during period, shares | 15,000 | 15,000 | ||||||||||
Extended maturity date | Oct. 15, 2018 | |||||||||||
Stock issued during period, value, issues | $ 75,000 | $ 75,000 | ||||||||||
Redemption amount | $ 685,148 | |||||||||||
Unpaid interest accrued | 814,852 | |||||||||||
Notes payable | 1,500,000 | |||||||||||
Aggregate redemption amount including accrued interest | $ 1,500,000 | |||||||||||
Description on agreement | (i) a redemption amount equal to $685,148 and accrued but unpaid interest on debentures of $814,852 as of October 18, 2018, totaling $1,500,000 due in cash; (ii) an increase the principal amount of the debentures and the stated value of Class B Convertible Preferred Stock by 5% above of the current principal amount of the debentures and the stated value amounting to $315,011; and (iii) the balance of debentures not subject to redemption being automatically converted into unregistered Class A Units on a $1.00 principal amount of debenture for $1.20 basis which resulted into additional expense of $1,438,898 to the Company. | |||||||||||
Additional expense | $ 1,438,898 | |||||||||||
Securities Purchase Agreement [Member] | Class B Convertible Preferred Stock [Member] | ||||||||||||
Pro rata basis, shares | 7,500 | |||||||||||
Value of shares at pro rata basis | $ 75,000 | |||||||||||
Securities Purchase Agreement [Member] | Hillair Capital [Member] | ||||||||||||
Promissory note principal amount | $ 4,182,709 | |||||||||||
Securities Purchase Agreement [Member] | Hillair Capital [Member] | Class B Preferred Stock [Member] | ||||||||||||
Promissory note principal amount | $ 2,117,501 | |||||||||||
Stock issued during period, shares | 41,826 | |||||||||||
Securities Purchase Agreement [Member] | HSPL Capital Advisors, LLC [Member] | Class B Preferred Stock [Member] | ||||||||||||
Stock issued during period, shares | 21,174 |
Convertible Debentures - Schedu
Convertible Debentures - Schedule of Convertible Debt (Details) - USD ($) | Dec. 31, 2018 | Jun. 19, 2018 | Dec. 31, 2017 |
Convertible debentures | $ 114,000 | ||
Less: Original issuance discount | $ (267,619) | ||
Less: Class B Convertible Preferred Stock discount | (207,125) | ||
Less: Debt issuance cost | (361,110) | ||
Convertible debentures, net | 4,864,146 | ||
Current portion | 4,864,146 | ||
Hillair Capital [Member] | |||
Convertible debentures | 3,784,230 | ||
HSPL Capital Advisors, LLC [Member] | |||
Convertible debentures | $ 1,915,770 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | Dec. 17, 2018 | Nov. 14, 2018 | Nov. 05, 2018 | Sep. 04, 2018 | Aug. 31, 2018 | Jun. 19, 2018 | Mar. 14, 2018 | Dec. 31, 2018 | Dec. 31, 2017 |
Promissory note face amount | $ 114,000 | ||||||||
Promissory note payable date | Sep. 30, 2018 | Nov. 15, 2018 | |||||||
Cash proceeds on the promissory note | $ 652,579 | $ 100,000 | $ 752,579 | ||||||
Interest rate on unsecured promissory note | 1.90% | ||||||||
Original issue discount, percentage | 14.00% | ||||||||
Promissory note extension fee | 7,500 | ||||||||
Amortization of debt discount | 14,000 | ||||||||
Interest expense | $ 7,500 | ||||||||
Gross proceeds | 750,000 | ||||||||
Placement agent fees | 62,850 | ||||||||
Legal fees | 30,571 | ||||||||
Escrow fees | $ 4,000 | ||||||||
Number of warrants issued | 3,070,500 | ||||||||
Fair value of warrant liability | $ (14,336,425) | ||||||||
Inducement payment for conversion of debentures | 215,625 | ||||||||
Debt issuance cost | 361,110 | ||||||||
Debt discount | 207,125 | ||||||||
Series A Warrant [Member] | |||||||||
Number of warrants issued | 1 | ||||||||
Series B Warrants [Member] | |||||||||
Number of warrants issued | 1 | ||||||||
Series A Warrants and Series B Warrants [Member] | |||||||||
Fair value of warrant liability | $ 980,375 | $ 3,657,507 | |||||||
Class B Convertible Preferred Stock [Member] | |||||||||
Stock issued during period, shares | 81,000 | ||||||||
Debt discount | 0 | $ 474,744 | |||||||
Class A Units [Member] | IPO [Member] | Series A Warrant [Member] | |||||||||
Conversion of stock, shares issued | 1,366,768 | ||||||||
Class A Units [Member] | IPO [Member] | Series B Warrants [Member] | |||||||||
Conversion of stock, shares issued | 1,366,768 | ||||||||
Class A Units [Member] | IPO [Member] | Series A Warrants and Series B Warrants [Member] | |||||||||
Fair value of warrant liability | $ 1,298,429 | ||||||||
Class A Units [Member] | Holders of Six Promissory Notes [Member] | IPO [Member] | |||||||||
Debt instrument, convertible percentage | 80.00% | ||||||||
Conversion of stock, shares issued | 215,625 | ||||||||
Debt instrument conversion price | $ 4 | ||||||||
Class A Units [Member] | Holders of Six Promissory Notes [Member] | IPO [Member] | Series A Warrant [Member] | |||||||||
Conversion of stock, shares issued | 215,625 | ||||||||
Class A Units [Member] | Holders of Six Promissory Notes [Member] | IPO [Member] | Series B Warrants [Member] | |||||||||
Conversion of stock, shares issued | 215,625 | ||||||||
Class A Units [Member] | Holders of Six Promissory Notes [Member] | IPO [Member] | Series A Warrants and Series B Warrants [Member] | |||||||||
Fair value of warrant liability | $ 295,375 | ||||||||
Promissory Note [Member] | |||||||||
Interest expense | 10,686 | ||||||||
6 Unsecured Promissory Notes [Member] | |||||||||
Promissory note face amount | $ 862,500 | ||||||||
Original issue discount, percentage | 15.00% | ||||||||
Gross proceeds | $ 750,000 | ||||||||
Debt issuance cost | 187,500 | ||||||||
Debt discount | $ 209,921 | ||||||||
6 Note Holders [Member] | Placement Agent [Member] | |||||||||
Number of warrants issued | 7,500 | ||||||||
6 Note Holders [Member] | Class B Convertible Preferred Stock [Member] | |||||||||
Stock issued during period, shares | 18,750 |
Related Party Transactions an_2
Related Party Transactions and Balances (Details Narrative) - USD ($) | Oct. 02, 2018 | Sep. 30, 2018 | Jun. 19, 2018 | May 31, 2017 | Dec. 31, 2018 | Dec. 31, 2017 |
Promissory note principal amount | $ 114,000 | |||||
Debt instrument interest rate | 1.90% | |||||
Debt maturity date | Sep. 30, 2018 | Nov. 15, 2018 | ||||
Interest expense | $ 7,500 | |||||
Inducement payment | 215,625 | |||||
Three Unsecured Promissory Notes [Member] | ||||||
Interest expense | 34,165 | $ 16,918 | ||||
Inducement payment | 72,628 | |||||
Accrued liability | $ 72,628 | $ 10,082 | ||||
Officer and Director [Member] | Three Unsecured Promissory Notes [Member] | ||||||
Promissory note principal amount | $ 400,000 | |||||
Debt instrument interest rate | 10.00% | |||||
Officer and Director [Member] | Three Unsecured Promissory Notes [Member] | ||||||
Debt maturity date | Sep. 30, 2018 | |||||
Debt instrument periodic payment | $ 200,000 | |||||
Debt convesion of stock new issuance | 42,105 | |||||
Debt conversion price per shares | $ 4.75 | |||||
Debt conversion converted instrument amount | $ 72,628 |
Commitments and Contingencies_2
Commitments and Contingencies (Details Narrative) | Dec. 24, 2018USD ($)Founder | Nov. 14, 2018USD ($)shares | Sep. 13, 2018USD ($) | Aug. 30, 2018USD ($) | Apr. 12, 2018USD ($) | Jan. 03, 2017USD ($)$ / sharesshares | Aug. 16, 2016USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($)$ / shares | Dec. 31, 2017USD ($) |
Operating lease term | 5 years | |||||||||
Security deposit | $ 29,297 | $ 36,014 | $ 44,567 | |||||||
Direct costs estimated percentage | 22.54% | |||||||||
Direct cost lease per month | $ 6,201 | |||||||||
Operating lease monthly rental expense | 164,626 | 277,252 | ||||||||
Other commitments as slotting allowance | Slotting allowance of $1,000,000 payable in three annual installments of $333,334 on March 1, 2019, $333,333 on March 1, 2020 and $333,333 on March 1, 2021. | |||||||||
Slotting allowance, due | $ 1,000,000 | |||||||||
Slotting allowance, 2019 | 333,334 | |||||||||
Slotting allowance, 2020 | 333,333 | |||||||||
Slotting allowance, 2021 | $ 333,333 | |||||||||
Litigation expense | 1,192,488 | |||||||||
Payroll tax payments | $ 0 | $ 354,245 | ||||||||
Officers and Employees [Member] | ||||||||||
Percentage of salaries as deferred compensation | 30.00% | |||||||||
Deferred compensation | $ 650,100 | |||||||||
Conversion price of shares | $ / shares | $ 4.75 | |||||||||
Officers and Employees [Member] | Common Stock [Member] | ||||||||||
Stock issued as a conversion of compensation | shares | 136,863 | |||||||||
Stock issued value for conversion of compensation | $ 650,100 | |||||||||
Two Founders and Officer [Member] | ||||||||||
Cash bonuses for founders and officer | $ 300,000 | |||||||||
Number of founders | Founder | 2 | |||||||||
Edwin Minassian [Member] | ||||||||||
Loss contingency, damages sought, value | $ 7,080 | $ 100,000 | ||||||||
Further alleges exchange percentage | 2.00% | |||||||||
Loss contingency, damages awarded, value | $ 235,542 | $ 20,000 | ||||||||
Ownership percentage | 7.00% | 7.00% | 9.00% | |||||||
Litigation expense | $ 252,950 | |||||||||
Litigation interest | $ 10,303 | |||||||||
Employment Agreement [Member] | President/Chief Executive Officer [Member] | ||||||||||
Term of agreement | 5 years | |||||||||
Sign-on-bonus | $ 50,000 | |||||||||
Annual base salary | $ 350,000 | |||||||||
Increase percentage of base salary | 10.00% | |||||||||
Stock option to purchase shares of common stock | shares | 125,000 | |||||||||
Stock option exercise price per share | $ / shares | $ 10 | |||||||||
Employment Agreement [Member] | Vice-President of Design and Development [Member] | ||||||||||
Term of agreement | 5 years | |||||||||
Sign-on-bonus | $ 35,000 | |||||||||
Annual base salary | $ 250,000 | |||||||||
Increase percentage of base salary | 10.00% | |||||||||
Employment Agreement [Member] | Chief Operating Officer and Secretary [Member] | ||||||||||
Term of agreement | 3 years | |||||||||
Annual base salary | $ 180,000 | |||||||||
Increase percentage of base salary | 10.00% | |||||||||
Employment Agreement [Member] | Chief Financial Officer [Member] | ||||||||||
Term of agreement | 3 years | |||||||||
Annual base salary | $ 250,000 | |||||||||
Increase percentage of base salary | 10.00% |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Future Minimum Lease Commitments (Details) | Dec. 31, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2019 | $ 174,872 |
2020 | 180,993 |
2021 | 187,327 |
2022 | 15,655 |
Total | $ 558,847 |
Stockholders' Deficit (Details
Stockholders' Deficit (Details Narrative) - USD ($) | Dec. 17, 2018 | Nov. 15, 2018 | Nov. 14, 2018 | Oct. 15, 2018 | Sep. 14, 2018 | Sep. 13, 2018 | Sep. 04, 2018 | Aug. 28, 2018 | Aug. 22, 2018 | Jul. 02, 2018 | May 15, 2018 | May 02, 2018 | Mar. 14, 2018 | Jan. 08, 2018 | Jan. 03, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Sep. 12, 2018 | Jun. 19, 2018 | Jan. 25, 2016 |
Common stock, shares authorized | 100,000,000 | 100,000,000 | ||||||||||||||||||
Preferred stock, shares authorized | 5,000,000 | |||||||||||||||||||
Common stock par value | $ 0.0001 | |||||||||||||||||||
Preferred stock par value | $ 0.0001 | |||||||||||||||||||
Reverse stock split, description | Reverse Split, each (2) units of Equity Instruments issued and outstanding prior to the Reverse Split were converted into one (1 unit) of Equity Instrument. | |||||||||||||||||||
Proceeds from IPO | $ 12,415,500 | |||||||||||||||||||
Underwriting discounts and commission | $ 934,500 | |||||||||||||||||||
Promissory note principal amount | $ 114,000 | |||||||||||||||||||
Fair value of warrant liability | $ (14,336,425) | |||||||||||||||||||
Common stock, shares issued | 9,870,873 | 3,679,500 | ||||||||||||||||||
Common stock, shares outstanding | 9,870,873 | 3,679,500 | ||||||||||||||||||
Warrants to purchase common stock | 3,070,500 | |||||||||||||||||||
Legal fees | $ 30,571 | |||||||||||||||||||
Escrow fees | $ 4,000 | |||||||||||||||||||
Number of convertible debentures exchanged for preferred stock | $ 6,268,096 | |||||||||||||||||||
Gain loss on Derivative liabilities net pre tax | 14,336,425 | |||||||||||||||||||
Derivative liability | 23,507,247 | |||||||||||||||||||
Compensation expense | 557,042 | $ 112,215 | ||||||||||||||||||
2018 Equity Incentive Plan [Member] | ||||||||||||||||||||
Compensation expense | $ 402,027 | |||||||||||||||||||
Volatility rate | 58.00% | |||||||||||||||||||
Unrecognized compensation expense | $ 839,390 | |||||||||||||||||||
Compensation expense recognition period | 3 years 8 months 16 days | |||||||||||||||||||
Risk-free rate, minimum | 2.86% | |||||||||||||||||||
Risk-free rate, maximum | 2.92% | |||||||||||||||||||
Volatility rate, minimum | 29.80% | |||||||||||||||||||
Volatility rate, maximum | 31.10% | |||||||||||||||||||
Minimum [Member] | 2018 Equity Incentive Plan [Member] | ||||||||||||||||||||
Share price | $ 3.90 | |||||||||||||||||||
Maximum [Member] | 2018 Equity Incentive Plan [Member] | ||||||||||||||||||||
Share price | $ 4.29 | |||||||||||||||||||
Class A Unit [Member] | Convertible Debt Instruments [Member] | ||||||||||||||||||||
Debt conversion converted instrument shares issued | 1,726,678 | |||||||||||||||||||
Conversion price of debt instruments | $ 5 | |||||||||||||||||||
Debt instrument conversion price | $ 5 | |||||||||||||||||||
Class A Unit [Member] | Unsecured Promissory notes [Member] | ||||||||||||||||||||
Debt conversion converted instrument shares issued | 215,625 | |||||||||||||||||||
Conversion price of debt instruments | $ 4 | |||||||||||||||||||
Debt instrument conversion price | $ 4 | |||||||||||||||||||
Series A Warrant [Member] | ||||||||||||||||||||
Common stock, shares issued | 2,670,000 | |||||||||||||||||||
Warrants to purchase common stock | 1 | |||||||||||||||||||
Number of warrants outstanding | 2,670,000 | |||||||||||||||||||
Series B Warrants [Member] | ||||||||||||||||||||
Number of warrants issued | 2,670,000 | |||||||||||||||||||
Warrants to purchase common stock | 1 | |||||||||||||||||||
Number of warrants outstanding | 2,670,000 | |||||||||||||||||||
Series A Warrants and Series B Warrants [Member] | ||||||||||||||||||||
Fair value of warrant liability | $ 980,375 | $ 3,657,507 | ||||||||||||||||||
Common Stock [Member] | ||||||||||||||||||||
Stock issued during period, shares | 2,670,000 | |||||||||||||||||||
Number of convertible debentures exchanged for preferred stock, shares | 1,726,678 | |||||||||||||||||||
Number of convertible debentures exchanged for preferred stock | $ 172 | |||||||||||||||||||
Placement Agent Warrants [Member] | ||||||||||||||||||||
Warrants description | The warrants issued in its October 2016 Private Placement expire on October 17, 2021, and the warrants issued in its March 2018 Private Placement, May 2018 Private Placement and August 2018 Financing expire on September 4, 2023. | |||||||||||||||||||
Number of warrants issued | 45,775 | 30,725 | ||||||||||||||||||
Exercise price of warrants | $ 12 | |||||||||||||||||||
Warrants to purchase common stock | 45,775 | |||||||||||||||||||
Number of warrants outstanding | 45,775 | 30,725 | ||||||||||||||||||
Warrants expiration date | Oct. 17, 2021 | |||||||||||||||||||
Class A Warrant [Member] | ||||||||||||||||||||
Exercise price of warrants | ||||||||||||||||||||
Common stock, shares issued | 6,379,571 | 6,379,571 | ||||||||||||||||||
Common stock, shares outstanding | 6,379,571 | 6,379,571 | ||||||||||||||||||
Number of warrants outstanding | 61,083 | |||||||||||||||||||
Class B Warrants [Member] | ||||||||||||||||||||
Number of warrants issued | 265,500 | 114,500 | ||||||||||||||||||
Exercise price of warrants | $ 12 | |||||||||||||||||||
Warrant expiration start date | Oct. 17, 2021 | |||||||||||||||||||
Warrant expiration end date | May 15, 2023 | |||||||||||||||||||
Number of warrants outstanding | 265,500 | 114,500 | ||||||||||||||||||
Class B Convertible Preferred Stock [Member] | ||||||||||||||||||||
Debt conversion converted instrument shares issued | 15,000 | 15,000 | ||||||||||||||||||
Number of warrants issued | 198,875 | |||||||||||||||||||
Debt conversion converted instrument amount | $ 150,000 | $ 150,000 | ||||||||||||||||||
Number of warrants outstanding | 198,875 | |||||||||||||||||||
Class B Convertible Preferred Stock [Member] | 6 Promissory Note Holders [Member] | ||||||||||||||||||||
Debt conversion converted instrument shares issued | 18,750 | |||||||||||||||||||
Debt conversion converted instrument amount | $ 187,500 | |||||||||||||||||||
Class B Convertible Preferred Stock [Member] | ||||||||||||||||||||
Stock issued during period, shares | 81,000 | |||||||||||||||||||
IPO [Member] | Class A Unit [Member] | ||||||||||||||||||||
Common stock par value | $ 0.0001 | |||||||||||||||||||
Stock issued during period, shares | 2,670,000 | |||||||||||||||||||
Warrants description | Series A Warrant to purchase one share of common stock and a Series B Warrant to purchase one share of common stock, on an offer price of $5.00 for each unit of a share of common stock, a Series A Warrant and a Series B Warrant ("Class A Unit"). | |||||||||||||||||||
Offer price per unit | $ 5 | |||||||||||||||||||
Proceeds from IPO | $ 12,415,500 | |||||||||||||||||||
Stock issuance cost | $ 743,765 | |||||||||||||||||||
Exercise price of warrants | $ 5 | |||||||||||||||||||
IPO [Member] | Series A Warrants [Member] | ||||||||||||||||||||
Conversion of stock, shares issued | 1,366,768 | |||||||||||||||||||
Debt conversion converted instrument shares issued | 1,726,678 | |||||||||||||||||||
Exercise price of warrants | $ 215,625 | |||||||||||||||||||
IPO [Member] | Series B Warrants [Member] | ||||||||||||||||||||
Conversion of stock, shares issued | 1,366,768 | |||||||||||||||||||
Debt conversion converted instrument shares issued | 1,726,678 | |||||||||||||||||||
Exercise price of warrants | $ 215,625 | |||||||||||||||||||
IPO [Member] | Class B Convertible Preferred Stock [Member] | Class A Unit [Member] | ||||||||||||||||||||
Conversion of stock, shares issued | 1,366,768 | |||||||||||||||||||
Conversion price per share | $ 3.50 | |||||||||||||||||||
Fair value of warrant liability | $ 1,872,271 | |||||||||||||||||||
IPO [Member] | Class A Units [Member] | Series A Warrant [Member] | ||||||||||||||||||||
Conversion of stock, shares issued | 1,366,768 | |||||||||||||||||||
IPO [Member] | Class A Units [Member] | Series B Warrants [Member] | ||||||||||||||||||||
Conversion of stock, shares issued | 1,366,768 | |||||||||||||||||||
IPO [Member] | Class A Units [Member] | Series A Warrants and Series B Warrants [Member] | ||||||||||||||||||||
Fair value of warrant liability | $ 1,298,429 | |||||||||||||||||||
Placement Agent [Member] | ||||||||||||||||||||
Exercise price of warrants | $ 12 | |||||||||||||||||||
Number of shares sold during transaction | 140,000 | 140,000 | ||||||||||||||||||
Sale of stock, consideration received on transaction | $ 700,000 | |||||||||||||||||||
Proceeds from issuance of private placement | 587,957 | |||||||||||||||||||
Payments for commissions | 74,574 | |||||||||||||||||||
Legal fees | 33,469 | |||||||||||||||||||
Escrow fees | $ 4,000 | |||||||||||||||||||
Placement Agent [Member] | Class A Warrant [Member] | ||||||||||||||||||||
Exercise price of warrants | $ 12 | |||||||||||||||||||
Warrants to purchase common stock | 61,083 | |||||||||||||||||||
Warrants expiration date | Dec. 31, 2018 | |||||||||||||||||||
Certain Accredited Investors [Member] | ||||||||||||||||||||
Common stock par value | $ 0.0001 | |||||||||||||||||||
Preferred stock par value | $ 0.0001 | |||||||||||||||||||
Number of shares sold during transaction | 162,000 | |||||||||||||||||||
Sale of stock, price per share | $ 5 | |||||||||||||||||||
Sale of stock, consideration received on transaction | $ 810,000 | |||||||||||||||||||
Proceeds from issuance of private placement | 613,200 | |||||||||||||||||||
Legal fees | 128,000 | |||||||||||||||||||
Escrow fees | $ 4,000 | |||||||||||||||||||
Warrant exercisable term | 5 years | |||||||||||||||||||
Certain Accredited Investors [Member] | Minimum [Member] | ||||||||||||||||||||
Number of shares sold during transaction | 160,000 | |||||||||||||||||||
Certain Accredited Investors [Member] | Maximum [Member] | ||||||||||||||||||||
Number of shares sold during transaction | 300,000 | |||||||||||||||||||
Certain Accredited Investors [Member] | Class B Warrants [Member] | ||||||||||||||||||||
Number of warrants issued | 81,000 | |||||||||||||||||||
Exercise price of warrants | $ 12 | |||||||||||||||||||
Placement Agent [Member] | ||||||||||||||||||||
Payments for commissions | $ 64,800 | |||||||||||||||||||
Consultant [Member] | ||||||||||||||||||||
Number of restricted shares issued for common stock, shares | 8,334 | |||||||||||||||||||
Number of restricted shares issued for common stock | $ 42,801 | |||||||||||||||||||
Officer [Member] | IPO [Member] | Common Stock [Member] | ||||||||||||||||||||
Conversion of stock, shares issued | 42,105 | |||||||||||||||||||
Conversion price per share | $ 4.75 | |||||||||||||||||||
Promissory note principal amount | $ 200,000 | |||||||||||||||||||
Officers and Directors [Member] | Common Stock [Member] | ||||||||||||||||||||
Conversion price per share | $ 4.75 | |||||||||||||||||||
Accrued and unpaid salaries | $ 650,100 | |||||||||||||||||||
Representative [Member] | Partial Over-Allotment Option [Member] | Series B Warrants [Member] | ||||||||||||||||||||
Number of warrants issued | 400,500 | |||||||||||||||||||
Exercise price of warrants | $ 0.01 | |||||||||||||||||||
Representative [Member] | Partial Over-Allotment Option [Member] | Common Stock [Member] | ||||||||||||||||||||
Stock issued during period, shares | 25,000 | |||||||||||||||||||
Share price | $ 4.98 | |||||||||||||||||||
Representative [Member] | Partial Over-Allotment Option [Member] | Series A Warrants [Member] | ||||||||||||||||||||
Number of warrants issued | 400,500 | |||||||||||||||||||
Exercise price of warrants | $ 0.01 | |||||||||||||||||||
Representative [Member] | Over-Allotment Option [Member] | ||||||||||||||||||||
Proceeds from over allotment options | $ 121,909 | |||||||||||||||||||
Commission and expenses | $ 10,601 | |||||||||||||||||||
Holders [Member] | ||||||||||||||||||||
Number of convertible debentures exchanged for preferred stock, shares | 7,500 | |||||||||||||||||||
Number of convertible debentures exchanged for preferred stock | $ 75,000 | |||||||||||||||||||
Board of Directors [Member] | 2016 Equity Incentive Plan [Member] | ||||||||||||||||||||
Conversion price of debt instruments | $ 3.60 | |||||||||||||||||||
Share price | $ 3.60 | |||||||||||||||||||
Maximum number of shares eligible to receive by employees | 125,000 | |||||||||||||||||||
Number of options to purchase common stock | 125,000 | |||||||||||||||||||
Exercise price of options | $ 10 | |||||||||||||||||||
Options vesting term | 4 years | |||||||||||||||||||
Percentage of vesting of options | 25.00% | |||||||||||||||||||
Fair value of options | $ 448,861 | |||||||||||||||||||
Compensation expense | $ 112,215 | $ 112,215 | ||||||||||||||||||
Debt instrument conversion price | $ 3.60 | |||||||||||||||||||
Risk-free interest rate | 1.72% | |||||||||||||||||||
Volatility rate | 315.83% | |||||||||||||||||||
Unrecognized compensation expense | $ 224,431 | |||||||||||||||||||
Compensation expense recognition period | 2 years | |||||||||||||||||||
Board of Directors [Member] | 2018 Equity Incentive Plan [Member] | ||||||||||||||||||||
Maximum number of common stock shares issued | 1,000,000 | |||||||||||||||||||
Eligible to receive common stock shares description | No employee will be eligible to receive more than 200,000 shares of common stock in any calendar year under the 2018 Plan pursuant to the grant of awards. | |||||||||||||||||||
Board of Directors [Member] | Minimum [Member] | 2018 Equity Incentive Plan [Member] | ||||||||||||||||||||
Common stock reserved for future issuance | 1,000,000 | |||||||||||||||||||
Board of Directors [Member] | Maximum [Member] | 2016 Equity Incentive Plan [Member] | ||||||||||||||||||||
Stock issued during period, shares | 2,000,000 | |||||||||||||||||||
Board of Directors [Member] | Maximum [Member] | 2018 Equity Incentive Plan [Member] | ||||||||||||||||||||
Common stock reserved for future issuance | 2,000,000 | |||||||||||||||||||
Employees and Officers [Member] | 2018 Equity Incentive Plan [Member] | ||||||||||||||||||||
Number of options to purchase common stock | 1,000,000 | |||||||||||||||||||
Percentage of vesting of options | 25.00% | |||||||||||||||||||
Fair value of options | $ 1,241,417 | |||||||||||||||||||
Employees and Officers [Member] | 2018 Equity Incentive Plan [Member] | Anniversaries of the Grant Date [Member] | ||||||||||||||||||||
Percentage of vesting of options | 25.00% |
Stockholders' Deficit - Schedul
Stockholders' Deficit - Schedule of Fair Value Measurements Using Significant Unobservable Inputs (Level 3) (Details) | 12 Months Ended |
Dec. 31, 2018USD ($)$ / sharesshares | |
FV of Warrant | $ | $ (14,336,425) |
September 14, 2018 [Member] | |
Dates | Nov. 14, 2018 |
Stock Price | $ 5 |
Fair value assumptions term description | 1.000 |
No. of Warrants | shares | 5,979,070 |
FV of Warrant | $ | $ 8,190,447 |
September 14, 2018 [Member] | Exercise Price [Member] | |
Fair value assumptions, measurement input, per share | $ 5 |
September 14, 2018 [Member] | Expected Volatility [Member] | |
Fair value assumptions, measurement input, percentages | 35.00% |
September 14, 2018 [Member] | Risk-Free Interest Rate [Member] | |
Fair value assumptions, measurement input, percentages | 2.71% |
December 17, 2018 [Member] | |
Dates | Dec. 17, 2018 |
Stock Price | $ 1.270 |
Fair value assumptions term description | 0.500 |
No. of Warrants | shares | 400,500 |
FV of Warrant | $ | $ 980,375 |
December 17, 2018 [Member] | Exercise Price [Member] | |
Fair value assumptions, measurement input, per share | $ 3.77 |
December 17, 2018 [Member] | Expected Volatility [Member] | |
Fair value assumptions, measurement input, percentages | 35.00% |
December 17, 2018 [Member] | Risk-Free Interest Rate [Member] | |
Fair value assumptions, measurement input, percentages | 2.54% |
December 31, 2018 [Member] | |
Dates | Dec. 31, 2018 |
Stock Price | $ 1.170 |
Fair value assumptions term description | 0.869 |
No. of Warrants | shares | 5,979,070 |
FV of Warrant | $ | $ 22,505,397 |
December 31, 2018 [Member] | Exercise Price [Member] | |
Fair value assumptions, measurement input, per share | $ 5 |
December 31, 2018 [Member] | Expected Volatility [Member] | |
Fair value assumptions, measurement input, percentages | 40.00% |
December 31, 2018 [Member] | Risk-Free Interest Rate [Member] | |
Fair value assumptions, measurement input, percentages | 2.61% |
December 31, 2018 [Member] | |
Dates | Dec. 31, 2018 |
Stock Price | $ 1.170 |
Fair value assumptions term description | 0.461 |
No. of Warrants | shares | 400,500 |
FV of Warrant | $ | $ 1,001,850 |
December 31, 2018 [Member] | Exercise Price [Member] | |
Fair value assumptions, measurement input, per share | $ 3.77 |
December 31, 2018 [Member] | Expected Volatility [Member] | |
Fair value assumptions, measurement input, percentages | 40.00% |
December 31, 2018 [Member] | Risk-Free Interest Rate [Member] | |
Fair value assumptions, measurement input, percentages | 2.54% |
Income Tax (Details Narrative)
Income Tax (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Income tax reconciliation description | The Tax Cuts and Jobs Act ("TCJA") was enacted on December 22, 2017 and reduced the U. S. federal corporate income tax rate to 21.00% effective January 1, 2018. | |
Percentage on reduction rate | 21.00% | 34.00% |
Deferred tax asset valuation allowance decrease, amount | $ 1,205,334 | |
Net operating losses | $ 22,500,000 | $ 18,500,000 |
Operating loss carryforwards, expiration term | expiring on various dates through 2037 | |
Percentage of valuation allowance on deferred tax assets | 100.00% | 100.00% |
Net change in valuation allowance | $ 3,624,650 | $ 1,027,608 |
Income Tax - Schedule of Income
Income Tax - Schedule of Income Tax Expense (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Deferred: Federal | $ (2,720,081) | $ (700,557) |
Deferred: State | (904,569) | (327,051) |
Change in valuation allowance | $ 3,624,650 | $ 1,027,608 |
Income tax expense (benefit) |
Income Tax - Schedule of Reconc
Income Tax - Schedule of Reconciliation of the Provision for Income Taxes at the U.S. Federal Income Tax Rate (Details) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Book income (loss) | 21.00% | 34.00% |
State taxes | 6.98% | 5.83% |
Change in the fair value of warrant derivative | 14.51% | 0.00% |
Other permanent items | 0.36% | (2.25%) |
Enactment of Tax Cuts and Jobs Act | 0.00% | (20.29%) |
Valuation allowance | 13.11% | (17.30%) |
Tax expense at actual rate |
Income Tax - Schedule of Deferr
Income Tax - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforward | $ 6,357,768 | $ 2,874,380 |
Other | 225,935 | 84,673 |
Total gross deferred tax assets | 6,583,703 | 2,959,053 |
Less: valuation allowance | (6,583,703) | (2,959,053) |
Net deferred tax assets |
Concentrations (Details Narrati
Concentrations (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
FDIC insured amounts exceeded bank balance | $ 5,209,884 | $ 0 |
Four Vendors [Member] | ||
Concentration risk, percentage | 78.00% | |
Three Vendors [Member] | ||
Concentration risk, percentage | 86.00% | |
Sales Revenue [Member] | Four Customers [Member] | ||
Concentration risk, percentage | 74.00% | 78.00% |
Accounts Receivable [Member] | Four Customers [Member] | ||
Concentration risk, percentage | 69.00% | 79.00% |
Concentrations - Schedule of Ge
Concentrations - Schedule of Geographical Distribution of Revenue (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Total Net Revenue | $ 15,289,400 | $ 14,201,836 |
Australia [Member] | ||
Total Net Revenue | 1,806,335 | 2,337,393 |
Belgium [Member] | ||
Total Net Revenue | 197,335 | |
Canada [Member] | ||
Total Net Revenue | 688,920 | 574,719 |
Germany [Member] | ||
Total Net Revenue | 19,002 | |
Japan [Member] | ||
Total Net Revenue | 2,970 | |
New Zealand [Member] | ||
Total Net Revenue | 81,375 | |
Russia [Member] | ||
Total Net Revenue | 112,102 | |
South Korea [Member] | ||
Total Net Revenue | 851,270 | 476,004 |
Sweden [Member] | ||
Total Net Revenue | 2,311 | |
United Kingdom [Member] | ||
Total Net Revenue | 719,301 | 829,432 |
United States of America [Member] | ||
Total Net Revenue | $ 10,893,824 | $ 9,899,943 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Mar. 27, 2019 | Feb. 15, 2019 | Jan. 24, 2019 | Dec. 31, 2018 | Nov. 14, 2018 |
Warrants to purchase common stock | 3,070,500 | ||||
Series A Warrant [Member] | |||||
Warrants to purchase common stock | 1 | ||||
Series B Warrants [Member] | |||||
Warrants to purchase common stock | 1 | ||||
Subsequent Event [Member] | Class A Unit [Member] | Three Placement Agent Warrant Holders [Member] | |||||
Number of warrants exercised | 4,004 | ||||
Cash proceeds from exercise of warrants | $ 16,817 | ||||
Subsequent Event [Member] | Series B Warrants [Member] | |||||
Number of warrants exercised | 1,708,751 | ||||
Conversion of stock, shares issued | 3,629,045 | ||||
Subsequent Event [Member] | Two Institutional Investors [Member] | Series A Warrant [Member] | |||||
Number of warrants exchanged into shares of common stock | 508,940 | ||||
Subsequent Event [Member] | Two Institutional Investors [Member] | New Warrants [Member] | |||||
Warrants to purchase common stock | 933,056 | ||||
Warrants exercise price per share | $ 3.77 | ||||
Subsequent Event [Member] | Exchange Agreement [Member] | Two Institutional Investors [Member] | Series A Warrant [Member] | |||||
Number of warrants exercised | 424,116 | ||||
Cash proceeds from exercise of warrants | $ 2,332,638 |