Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Mar. 27, 2020 | Jun. 30, 2019 | |
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, 2019 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well Known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business Flag | true | ||
Entity Emerging Growth Company | true | ||
Entity Ex transition period | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 8,092,239 | ||
Entity Common Stock, Shares Outstanding | 109,990,257 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2019 |
Balance Sheets
Balance Sheets - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Current Assets | ||
Cash | $ 25,063 | $ 5,459,884 |
Accounts receivable, net | 2,075,380 | 985,854 |
Factor receivables, net | 174,042 | 1,542,835 |
Inventory | 2,215,497 | 379,915 |
Prepaid assets | 254,070 | 222,000 |
Note receivable | 4,480,000 | |
Total Current Assets | 9,224,052 | 8,590,488 |
Other Assets | ||
Property and equipment, net | 1,029,885 | 224,196 |
Other assets | 215,688 | 36,014 |
Total Assets | 10,469,625 | 8,850,698 |
Current Liabilities | ||
Accounts payable | 2,536,871 | 1,962,901 |
Accrued expenses | 364,309 | 927,569 |
Deferred revenue | 107,776 | |
Factor loan payable | 125,645 | 1,304,512 |
Warrant derivative | 23,507,247 | |
Convertible notes payable - current | 4,216,307 | |
Total Current Liabilities | 7,243,132 | 27,810,005 |
Total Liabilities | 7,243,132 | 27,810,005 |
Commitments and Contingencies (Note 7) | ||
Shareholders' Equity (Deficit) | ||
Common stock, $0.0001 par value, 200,000,000 shares authorized, 33,000,151 and 9,870,873 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively | 3,300 | 987 |
Additional paid-in capital | 41,820,078 | 20,152,107 |
Accumulated deficit | (43,413,370) | (39,112,401) |
Total Shareholders' Equity (Deficit) | 3,226,493 | (18,959,307) |
Total Liabilities and Shareholders' Equity (Deficit) | 10,469,625 | 8,850,698 |
Series D Preferred Stock [Member] | ||
Shareholders' Equity (Deficit) | ||
Preferred Stock value | 4,816,485 | |
Total Shareholders' Equity (Deficit) | 5,775,000 | |
Series C Preferred Stock [Member] | ||
Shareholders' Equity (Deficit) | ||
Preferred Stock value | ||
Total Shareholders' Equity (Deficit) |
Balance Sheets (Parenthetical)
Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
Preferred Stock par value | $ 0.0001 | $ 0.0001 |
Preferred Stock, shares authorized | 5,000,000 | 5,000,000 |
Common stock par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 33,000,151 | 9,870,873 |
Common stock, shares outstanding | 33,000,151 | 9,870,873 |
Series D Preferred Stock [Member] | ||
Preferred Stock par value | $ 1,000 | $ 1,000 |
Preferred Stock, shares authorized | 5,775 | 0 |
Preferred Stock, shares issued | 5,775 | 0 |
Preferred Stock, shares outstanding | 5,775 | 0 |
Preferred Stock, liquidation preference | $ 5,775,000 | |
Series C Preferred Stock [Member] | ||
Preferred Stock par value | $ 0.0001 | $ 0.0001 |
Preferred Stock, shares authorized | 1,268 | 0 |
Preferred Stock, shares issued | 1,268 | 0 |
Preferred Stock, shares outstanding | 1,268 | 0 |
Preferred Stock, liquidation preference |
Statements of Operations
Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Revenues, net of allowances | ||
Total revenues, net of allowances | $ 19,090,071 | $ 15,289,400 |
Cost of Goods Sold | ||
Total cost of goods sold | 13,475,947 | 11,794,206 |
Gross profit | 5,614,124 | 3,495,194 |
Operating expenses: | ||
Selling, general and administrative expenses | 12,078,762 | 6,937,704 |
Litigation expense | 1,192,488 | |
Research and development | 2,116,018 | 1,816,389 |
Total operating expenses | 14,194,780 | 9,946,581 |
Loss from operations | (8,580,656) | (6,451,387) |
Other income (expense) | ||
Inducement cost for debt conversions | (3,542,161) | |
Interest expense | (972,165) | (3,321,439) |
Change in fair value of warrant derivative | 5,251,852 | (14,336,425) |
Total other income (expense) | 4,279,687 | (21,200,025) |
Loss before provision for income taxes | (4,300,969) | (27,651,412) |
Provision for income taxes | ||
Net loss | (4,300,969) | (27,651,412) |
Accretion of Redeemable Convertible Preferred Stock Dividend | (3,667,620) | |
Common Stock Deemed Dividend | (980,375) | |
Net loss attributable to common stockholders | $ (4,300,969) | $ (32,299,407) |
Basic and Diluted Net Loss Per Share | $ (0.14) | $ (7.22) |
Weighted Average Number of Shares Outstanding - Basic and Diluted | 31,007,384 | 4,476,403 |
Metal Goods [Member] | ||
Revenues, net of allowances | ||
Total revenues, net of allowances | $ 8,987,088 | $ 7,174,618 |
Cost of Goods Sold | ||
Total cost of goods sold | 6,285,750 | 5,897,354 |
Soft Goods [Member] | ||
Revenues, net of allowances | ||
Total revenues, net of allowances | 10,102,983 | 8,114,782 |
Cost of Goods Sold | ||
Total cost of goods sold | $ 7,190,197 | $ 5,896,852 |
Statements of Shareholders' Equ
Statements of Shareholders' Equity (Deficit) - USD ($) | Series C Preferred Stock [Member] | Series D Preferred Stock [Member] | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
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 | ||||
Stock issued in settlement of litigation, shares | ||||||
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) | ||||
Common stock deemed dividend, shares | ||||||
Accretion of redeemable convertible preferred stock dividend | (3,667,620) | (3,667,620) | ||||
Accretion of redeemable convertible preferred stock dividend, shares | ||||||
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 | |||||
Stock based compensation expense | 336,637 | 336,637 | ||||
Accretion of redeemable convertible preferred stock dividend | ||||||
Issuance of common stock upon exercise of Series A Warrants, net of cost | $ 42 | 2,172,638 | 2,172,680 | |||
Issuance of common stock upon exercise of Series A Warrants, net of cost, shares | 424,116 | |||||
Issuance of common stock as inducement to exercise Series A Warrants | $ 51 | (51) | ||||
Issuance of common stock as inducement to exercise Series A Warrants, shares | 508,940 | |||||
Issuance of common stock upon exercise of Placement Agent Warrants | 16,818 | 16,818 | ||||
Issuance of common stock upon exercise of Placement Agent Warrants, shares | 4,004 | |||||
Issuance of Series C preferred stock upon exchange of Series A and Series B warrants | 3,671,024 | 3,671,024 | ||||
Issuance of Series C preferred stock upon exchange of Series A and Series B warrants, shares | ||||||
Issuance of common stock upon exercise of Series B warrants | $ 1,620 | 14,582,751 | 14,584,371 | |||
Issuance of common stock upon exercise of Series B warrants, shares | 4,268 | 16,192,218 | ||||
Issuance of common stock upon Series C preferred (conversion) | $ 300 | (300) | ||||
Issuance of common stock upon Series C preferred (conversion), shares | (3,000) | 3,000,000 | ||||
Warrants issued in connection with convertible notes payable | 595,000 | 595,000 | ||||
Issuance of common stock upon conversion of convertible note payable | $ 300 | 293,454 | 293,754 | |||
Issuance of common stock upon conversion of convertible note payable, shares | 3,000,000 | |||||
Issuance of Series D preferred stock upon exchange of convertible note payable | $ 4,816,485 | 4,816,485 | ||||
Issuance of Series D preferred stock upon exchange of convertible note payable, shares | 5,775 | |||||
Net loss | (4,300,969) | (4,300,969) | ||||
Balance at Dec. 31, 2019 | $ 5,775,000 | $ 3,300 | $ 41,820,078 | $ (43,413,370) | $ 3,226,493 | |
Balance, shares at Dec. 31, 2019 | 1,268 | 5,775 | 33,000,151 |
Statements of Cash Flows
Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Cash flows from operating activities: | ||
Net loss | $ (4,300,969) | $ (27,651,412) |
Adjustments to reconcile from net loss to net cash used in operating activities: | ||
Depreciation | 225,426 | 120,723 |
Amortization of debt discount and debt issuance cost | 626,546 | 5,278,132 |
Change in fair value of warrant derivative | (5,251,852) | 14,336,425 |
Stock issued in settlement of litigation | 939,538 | |
Stock-based compensation expense | 336,637 | 557,042 |
Stock issued in lieu of deferred salaries | 650,100 | |
Changes in operating assets and liabilities | ||
Accounts receivable, net | (1,089,526) | (832,446) |
Factor receivables, net | 1,368,793 | 120,563 |
Inventory | (1,835,582) | (281,243) |
Prepaid assets | (32,070) | (169,500) |
Other assets | (179,674) | 8,553 |
Accounts payable | 573,970 | (368,323) |
Accrued expenses | (563,260) | (951,567) |
Deferred revenue | (107,776) | |
Net cash used in operating activities | (10,229,337) | (8,243,415) |
Cash flows from investing activities: | ||
Purchases of property and equipment | (1,031,115) | |
Net cash used in investing activities | (1,031,115) | |
Cash flows from financing activities: | ||
Proceeds from sales of common stock, net of costs | 11,671,735 | |
Proceeds from sale of common stock of overallotment, net of costs | 121,909 | |
Proceeds from exercise of Series A warrants | 2,172,680 | |
Proceeds from exercise of Placement Agent warrants | 16,818 | |
Proceeds from sale of convertible preferred stock, net of costs | 1,201,157 | |
Cash repayments of notes payable | (114,000) | |
Payment from advance from officer | (200,000) | |
Proceeds from notes payable, net of costs | 4,815,000 | 752,579 |
Proceeds (Repayments) of factor loan payable | (1,178,867) | 225,571 |
Net cash provided by financing activities | 5,825,631 | 13,658,951 |
Net increase (decrease) in cash | (5,434,821) | 5,415,536 |
Cash, beginning of period | 5,459,884 | 44,348 |
Cash, end of period | 25,063 | 5,459,884 |
Supplemental disclosure of cash flow information: | ||
Interest | 638,693 | |
Income taxes | 800 | |
Supplemental disclosure 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 | |
Issuance of warrants to investors | 575,000 | |
Issuance of warrants as compensation for capital raise | 20,000 | |
Issuance of common stock upon Series C preferred stock conversion | 3,671,024 | |
Issuance of common stock upon convertible note conversion | 293,754 | |
Issuance of Class D preferred stock upon convertible note conversion | 4,816,485 | |
Restricted promissory note in connection with convertible notes payable | 4,780,000 | |
Original issue discount | 1,720,000 | |
Conversion of Series B warrants into common stock | $ 14,584,371 |
Nature of Operations
Nature of Operations | 12 Months Ended |
Dec. 31, 2019 | |
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. On January 24, 2019, the Company entered into exchange agreements with two institutional investors pursuant to which these investors exercised Series A Warrants to purchase 424,116 shares of its common stock, for total cash proceeds to the Company of $2,172,680, net of costs of $159,958. Those 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 $3.67, and the warrants became exercisable July 24, 2019 (see Note 6). On April 11, 2019, an investor exchanged its Series A Warrant to purchase up to 1,189,560 shares of common stock of the Company and a Series B Warrant to purchase up to 1,005,760 shares of common stock, which Series B Warrants are subject to certain anti-dilution provisions embedded in such Series B Warrants for 4,268 shares of Company’s Series C Convertible Preferred Stock having the rights, preferences and privileges set forth in the Certificate of Designation, filed by the Company with the Secretary of State of Nevada. The shares of Series C Convertible Preferred Stock are convertible into 4,268,000 shares of the Company’s common stock, and rights to convert into common stock are subject to limitations on ownership at any one time of Company common stock up to 9.9% of the issued and outstanding shares of common stock of the Company; otherwise, the Series C Convertible Preferred Stock has no rights not awarded to holders of common stock of the Company. On April 16, 2019, the Company formed a wholly-owned subsidiary named ToughBuilt Technologies, Inc. dedicated to the continued advancement, production and marketing of Company’s mobile solutions. On August 19, 2019, the Company entered into a Securities Purchase Agreement with an institutional investor pursuant to which it sold $11.5 million aggregate principal amount of promissory notes (at an aggregate original issue discount of 15%) to the investor in a transaction exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. The first note (the “Series A Note”) has a face amount of $6.72 million for which the investor paid $5 million in cash. The second note (the “Series B Note” and with the Series A Note, collectively referred to as the “Notes”) has a principal amount of $4.78 million for which the investor paid $4.78 million in the form of a full recourse promissory note issued by the investor to the Company (the “Investor Note”) secured by $4.78 million in cash or cash equivalents of the investor (i.e :an original issue discount of approximately 15% to the face amount of the Series B Note). No portion of the Series B Note may be converted into shares of our common stock (the “Common Stock”) until the corresponding portion of the Investor Note has been prepaid to the Company in cash, at which point in time such portion of the Series B Note shall be deemed “unrestricted”. The Investor Note is subject to optional prepayment at any time at the option of the investor and mandatory prepayment, at the Company’s option, subject to certain equity conditions, at any time 45 Trading Days after the effectiveness of a resale registration statement (or otherwise the applicability of Rule 144 promulgated under the Securities Act of 1933, as amended). Notwithstanding the foregoing, the Company may not effect a mandatory prepayment if the shares underlying the Series A Note and the portion of the Series B Note that has become unrestricted exceeds 35% of the market capitalization of the Company. On December 23, 2019, ToughBuilt Industries, Inc. (the “Company”) entered into an exchange agreement with an institutional investor pursuant to which the investor is exchanging $5.5 million principal amount of its August 19, 2019 Series A Senior Secured Note for 5,775 shares of its Series D Preferred Stock, which was authorized by the Company’s Board of Directors on December 21, 2019. On February 24, 2020, ToughBuilt Industries, Inc. (the “Company”) closed on the public offering of 4.45 million shares of its common stock, for gross proceeds of $934,500 based upon the overallotment option arising from the closing of its January 28, 2020 public offering. In the January 28, 2020 public offering, the Company sold 43 million shares of its common stock and 47.45 million warrants (each exercisable into ½ of a share of common stock for a total of 23.725 million shares of common stock) from which it received gross proceeds of $9,030,000. 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. Going Concern The Company has incurred substantial operating losses since its inception, and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As reflected in the financial statements, the Company had an accumulated deficit of approximately $43.4 million at December 31, 2019, a net loss of approximately $4.3 million, and approximately $10.2 million of net cash used in operating activities for the year ended December 31, 2019. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. The Company anticipates incurring additional losses until such time, if ever, that it can obtain marketing approval to sell, and then generate significant sales, of its technology that is currently in development. As such it is likely that additional financing will be needed by the Company to fund its operations and to develop and commercialize its technology. These factors raise substantial doubt about the Company’s ability to continue as a going concern. For the next twelve months from issuance of this Annual Report on Form 10-K. The Company will seek to obtain additional capital through the sale of debt or equity financings or other arrangements to fund operations; however, there can be no assurance that the Company will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity may dilute existing stockholders and newly issued shares may contain senior rights and preferences compared to currently outstanding shares of common stock. Issued debt securities may contain covenants and limit the Company's ability to pay dividends or make other distributions to stockholders. If the Company is unable to obtain such additional financing, future operations would need to be scaled back or discontinued. Due to the uncertainty in the Company's ability to raise capital, management believes that there is substantial doubt in the Company's ability to continue as a going concern for twelve months from the issuance of these condensed financial statements. |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2019 | |
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, 2019 and 2018, 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, 2019 and 2018, 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, 2019 and 2018, 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 Debt Issuance Costs Costs incurred in connection with the issuance of debt are capitalized and amortized to interest expense over the term of the related debt using the straight-line method which approximates the effective interest method. The costs associated with the outstanding loans payable are amortized over the term of the respective loan. The unamortized amount is presented as a reduction of debt on the accompanying balance sheets. 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 Company had no derivative instruments as of December 31, 2019 requiring such valuation. Level 3 Fair Value Sensitivity Warrant derivative 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 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. 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, January 1, 2019 $ 23,507,247 Series B Warrants exercised or expired during the three months ended March 31, 2019 (14,584,371 ) Series B Warrants exchanged for Series C Preferred Stock (3,671,024 ) Change in the fair value of warrant derivative (5,251,852 ) Balance, December 31, 2019 $ - Balance, January 1, 2018 $ - Fair value of warrant derivative at Issuance date 9,170,822 Change in the fair value of warrant derivative 14,336,425 Balance, December 31, 2018 $ 23,507,247 Revenue Recognition In May of 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09 – Revenue from Contracts with Customers (Topic 606). The core principle of the new accounting guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new accounting guidance provides a five-step analysis of transactions to determine when and how revenue is recognized and requires enhanced disclosures about revenue. The Company adopted ASC 606, including all related amendments, with a date of initial application of January 1, 2019 using the modified retrospective approach. The Company applied the guidance to contracts with customers that were not substantially complete as of January 1, 2019. The results for reporting periods beginning after January 1, 2019 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported with the Company’s historic accounting under ASC 605 – Revenue Recognition. For contracts, which were modified before the adoption date, the Company has not restated the contract for those modifications. Instead, the Company reflected the aggregate effect of all modifications when identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction price, if necessary. The cumulative effect of initially applying ASC 606 is to be applied as an adjustment to the opening balance of retained earnings. The Company analyzed this effect and found the adoption of ASC 606 did not have a material impact on its financial statements and revenue recognition is consistent with the Company’s historical accounting policies. The Company recognizes revenues when 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 FASB – Accounting Standards Codification 606 “Revenue From Contracts With Customers 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): Year Ended December 31, 2019 December 31, 2018 Preferred shares 7,043,000 517,875 Warrants 11,449,884 364,859 Options 1,063,419 125,000 Series A and Series B Notes 5,602,750 Total anti-dilutive weighted average shares 25,159,053 1,007,734 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 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 June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (“Topic 326”)”. The ASU introduces a new accounting model, the Current Expected Credit Losses model (“CECL”), which requires earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses at the time the financial asset is originated or acquired. ASU 2016-13 is effective for annual period beginning after December 15, 2022, including interim reporting periods within those annual reporting periods. The Company is currently evaluating this guidance to determine its impact it may have on its financial statements. In December 2019, the FASB Issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting of Income Taxes”, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating this guidance to determine its impact it may have on its financial statements. In January 2016, the FASB issued ASU 2016-01, “ Financial Instruments - Overall Recognition and Measurement of Financial Assets and Financial Liabilities. |
Factor Receivables, Letters of
Factor Receivables, Letters of Credit Payable and Loan Payable | 12 Months Ended |
Dec. 31, 2019 | |
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. Financial information on factoring is set forth in the below table: For the Year Ended December 31, 2019 2018 Factor payables, beginning balance $ 1,304,512 $ 1,078,941 - - New factorings 2,891,727 5,532,225 Payments, net of returns and discounts (4,070,594 ) (5,306,654 ) Factor loan payable, net $ 125,645 $ 1,304,512 |
Inventory
Inventory | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Inventory | NOTE 4: INVENTORY Inventory consists of the following: Description December 31, 2019 December 31, 2018 Finished goods $ 2,215,497 $ 379,915 |
Property and Equipment, Net
Property and Equipment, Net | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | NOTE 5: PROPERTY AND EQUIPMENT, NET Property and equipment consists of the following: December 31, 2019 December 31, 2018 Furniture $ 111,490 $ 61,722 Computers 254,243 88,615 Production equipment 182,446 75,233 Tooling and molds 605,485 249,690 Website design 360,943 9,850 Leasehold Improvements 42,249 37,899 Less: accumulated depreciation (526,971 ) (298,813 ) Property and Equipment, net $ 1,029,885 $ 224,196 Depreciation expense for the years ended December 31, 2019 and 2018, was $225,426 and $120,723, respectively. |
Notes Payable
Notes Payable | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 6 - 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. SENIOR SECURED CONVERTIBLE NOTES On August 19, 2019, the Company entered into a Securities Purchase Agreement with an institutional investor pursuant to which it sold $11.5 million aggregate principal amount of promissory notes (at an aggregate original issue discount of 15%) to the investor in a transaction exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended. The first note (the “Series A Note”) has a face amount of $6.72 million for which the investor paid $5 million in cash. The second note (the “Series B Note” and with the Series A Note, collectively referred to as the “Notes”) has a principal amount of $4.78 million for which the investor paid $4.78 million in the form of a full recourse promissory note issued by the investor to the Company (the “Investor Note”) secured by $4.78 million in cash or cash equivalents of the investor (i.e :an original issue discount of approximately 15% to the face amount of the Series B Note). No portion of the Series B Note may be converted into shares of our common stock (the “Common Stock”) until the corresponding portion of the Investor Note has been prepaid to the Company in cash, at which point in time such portion of the Series B Note shall be deemed “unrestricted”. The Investor Note is subject to optional prepayment at any time at the option of the investor and mandatory prepayment, at the Company’s option, subject to certain equity conditions, at any time 45 Trading Days after the effectiveness of a resale registration statement (or otherwise the applicability of Rule 144 promulgated under the Securities Act of 1933, as amended). Notwithstanding the foregoing, the Company may not effect a mandatory prepayment if the shares underlying the Series A Note and the portion of the Series B Note that has become unrestricted exceeds 35% of the market capitalization of the Company. The Company incurred $485,000 in debt issuance costs on these notes which has been recorded as a debt discount. The Notes are senior secured obligations of the Company secured by a lien on all assets of the Company, bear no interest (unless an event default has occurred and is continuing) and mature on December 31, 2020. The Notes will be convertible at $1.00 into a fixed number of shares (the “Conversion Shares”). The Notes are convertible at the Holder’s option, in whole or in part, at any time after closing. The Conversion Price will be subject to adjustment for stock dividends, stock splits, anti-dilution and other customary adjustment events. The Company shall repay the Principal Amount of the Notes in 12 installments, with the first installment starting on February 1, 2020 (each, an “Installment Date”). Installments 1-3 shall be 1/36th of the Principal Amount, Installments 4-6 shall be 1/18th of the Principal Amount and Installments 7-12 shall be 1/8th of the Principal Amount. The repayment amount shall be payable in cash, or, subject to the satisfaction of equity conditions, at the option of the Company, in registered Common Stock or a combination of cash and registered Common Stock. However, if the 30-day volume weighted average price of the Common Stock (the “VWAP”) of the Company falls below 50% of the market price of a share of the Company’s common stock or the Company fails to satisfy certain other equity conditions, the repayment amount is payable in shares of Common Stock only unless the Investor(s) waive any applicable equity condition. If the Company elects to satisfy all or any portion of an installment in shares of Common Stock, the Company will predeliver such shares of Common Stock to the investor on the 23rd trading day prior to the applicable Installment Date, with a true-up of shares (if necessary) on the Installment Date. Any excess shares of Common Stock shall be applied to subsequent installments. The shares used to meet a Principal Repayment (“Installment Shares”) would be valued at a conversion price calculated as the lesser of (i) 85% of the arithmetic average of the three lowest daily VWAPs of the 20 trading days prior to the payment date or (ii) 85% of the VWAP of the trading day prior to payment date (“Installment Price”) with a floor of $0.10. All amortization payments shall be subject to the Investors’ right to (a) defer some or all of any Installment Payment to a subsequent Installment Date; and (b) at any time during an installment period, convert up to four times the installment amount at the Installment Price; provided shares received pursuant to such accelerated conversions shall be subject to a leak-out provision that solely limits sales of such shares received by the investor in such accelerated conversion (and not any other sales) to the greater of (a) $500,000 per trading day or (b) 40% of the volume traded on a given day as reported by Bloomberg LP. Upon completion of a Change of Control, the Holders may require the Company to purchase any outstanding Notes in cash at 125% of par plus accrued but unpaid interest. The Company shall have the right to redeem any and all amounts of the outstanding Note at 125% of the greater of (a) Principal Amount plus accrued but unpaid interest (if any), or (b) Conversion Value plus accrued but unpaid interest (if any) provided the Company has satisfied certain equity conditions. The Company must give the Investor(s) ninety (90) business days’ prior notice of any such redemption. Prior to all outstanding amounts under the Note being repaid in full, the Company will not create any new encumbrances on any of its or its subsidiaries’ assets without the prior written consent of the Lender, with a carveout for a working capital facility of which the details are to be determined. The Notes shall also be subject to standard events of default and remedies therefor. The Company filed a registration statement (“Effectiveness Date”) on Form S-1 covering the resale of the shares underlying the Series A Note, the Series B Note and Warrants which was declared effective on October 15, 2019. In connection with the granting of the Notes, the Company shall issue detachable warrants to the Investor, exercisable in whole or in part at any time during the five years from the date of issuance, in amount equal to 50% of the conversion shares underlying the Notes and have an exercise price of $1.00 per share. To the extent the Company has a change of control or a spinoff, the warrants provide for a put for the warrants to the Company at their Black- Scholes Valuation. The value of the warrants amounted to $575,000 and was recoded as debt discount in the accompanying balance sheet. Until the 3 year anniversary of the maturity date, the investor shall have the right (but not the obligation) to participate in 50% of any subsequent equity or debt issuance. Consummation of the transaction has been subject to certain conditions precedent, including the Company agrees to procure an approval of this transaction at its annual shareholder meeting scheduled no later than 180 days after the Closing Date and agrees to procure voting agreements from principal shareholders prior to closing of the Company. On December 23, 2019, ToughBuilt Industries, Inc. (the “Company”) entered into an exchange agreement with an institutional investor pursuant to which the investor is exchanging $5.5 million principal amount of its August 19, 2019 Series A Senior Secured Note for 5,775 shares of its Series D Preferred Stock, which was authorized by the Company’s Board of Directors on December 21, 2019. As of December 31, 2019, the principal amount of notes payable - current was $5,602,750. Amortization of debt discount and debt issuance costs for the year ended December 31, 2019 amounted to $626,546. The unamortized amount of debt discount and debt issuance cost as of December 31, 2019 was $1,386,443. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 7 – 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, which is included in other assets on the accompanying balance sheets. 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. We entered into a lease for office space at 8669 Research Drive, in Irvine, CA, which is to replace the current corporate headquarters. The lease commenced on December 1, 2019 with no rent due until April 1, 2020. From April 1, 2020 through March 31, 2025, base rent will be due on the first of each month in the amount of $25,200 escalating annually on December 1 of each year to $29,480 beginning December 1, 2023. The Company paid an initial amount of $68,128 comprising the rent for April 2020, a security deposit and the amount due for property taxes, insurance and association fees. Future minimum lease commitments of the Company are as follows: For the years ending December 31, Amount 2020 $ 383,601 2021 502,872 2022 343,821 2023 341,293 2024 353,765 2025 88,411 Total $ 2,013,793 The Company recorded rent expense of $201,540 and $164,626 for the years ended December 31, 2019 and 2018, 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. 1. Edwin Minassian v. Michael Panosian and ToughBuilt Industries, Inc., Los Angeles Superior Court Case No. EC065533. On August 16, 2016, Plaintiff Edwin Minassian filed a complaint against Defendants ToughBuilt Industries, Inc. (the “Company”) and Michael Panosian in the Superior Court of California, County of Los Angeles, Case No. EC065533. The complaint alleges breach of oral contracts to pay Plaintiff for consulting and finder’s fees, and to hire him as an employee. The complaint further alleged claims of fraud and misrepresentation relating to an alleged payment in exchange for stock in the Company. The complaint seeks unspecified monetary damages, declaratory relief, stock in the Company, and other relief according to proof. On April 12, 2018, the Court entered judgments of default 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. The Company and Panosian satisfied the judgments on September 14, 2018 by payment of $252,949 to Plaintiff Minassian and by issuing Plaintiff Minassian 376,367 shares of common stock of the Company. On October 18, 2018, the Company and Panosian filed a Notice of Appeal from the Order denying their motion for relief from the above-referenced default judgment. On October 1, 2019, the Second Appellate District of the California Court of Appeal issued its opinion reversing the trial court’s order denying ToughBuilt’s motion for relief from the default judgment and directing the trial court to grant ToughBuilt’s motion for relief, including allowing ToughBuilt to file an Answer and contest Minassian’s claims. The appellate court recently issued an remittitur officially transferring the matter from the appellate court back to the trial court for further proceedings consistent with its ruling, and the Company and Panosian have filed an Answer to the Complaint. The trial court has not yet set a trial date, and discovery in this case is just now beginning. The Company intends to vigorously defend the Complaint and seek to recover the compensation and stock previously paid to satisfy the now vacated default judgment. The Company believes it has a strong position, but cannot quantify the likelihood that it will prevail in the above litigation, or any likely liability or recoveries, because of the current status of the case and the unpredictability of litigation. 2. Design 1 st On November 26, 2019, Claimant Design 1 st The Company has recorded the litigation expense of $0 and $1,192,488 for the years ended December 31, 2019 and 2018, 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. |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
Stockholders' Equity | NOTE 8: STOCKHOLDERS’ EQUITY At December 31, 2019, the Company had 200,000,000 shares of common stock and 5,000,000 shares of Series C preferred stock authorized, both with a par value of $0.0001 per share. In addition, the Company had 5,775 shares of Series D preferred stock, authorized, with a par value of $1,000 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, 2019, the Company had 33,000,151 shares of common stock issued and outstanding. At December 31, 2018, the Company had 9,870,873 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, 2019, and 2018, 44,373 warrants and 45,775 warrants, respectively, have been issued to the placement agents and are outstanding and are currently exercisable. 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 no shares of Class B Convertible Preferred Stock, 265,500 Class B Warrants, and 44,373 Placement Agent Warrants issued and outstanding at December 31, 2019. 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. April 2019 Exchange On April 11, 2019, Hillair Capital Investment LP exchanged its ToughBuilt Industries, Inc. Series A Warrant to purchase up to 1,189,560 shares of common stock of the Company and a Series B Warrant to purchase up to 1,005,760 shares of Common Stock, which Series B Warrants are subject to certain anti-dilution provisions imbedded in such Series B Warrants for 4,268 shares of Company’s Series C Convertible Preferred Stock having the rights, preferences and privileges set forth in the Certificate of Designation, filed by the Company with the Secretary of State of Nevada The shares of Series C Convertible Preferred Stock are convertible into 4,268,000 shares of the Company’s common stock, and rights to convert into common stock are subject to limitations on ownership at any one time of Company common stock up to 9.9% of the issued and outstanding shares of common stock of the Company; otherwise, the Series C Convertible Preferred Stock has no rights not awarded to holders of common stock of the Company. Hillair Capital’s right to convert into shares of common stock is subject to daily volume limitations as follows: Up to 500,000 shares of daily volume, may trade 15% of the volume From 500,001 shares through 1,000,000 shares of daily volume, may trade 20% of the volume From 1,000,001 shares of daily volume, may trade 25% of the volume. All Series C Convertible Preferred Stock has been converted into common stock as of December 31, 2019. Series D Preferred Stock On December 23, 2019, we exchanged $5,500,000 principal amount of our Senior Secured Convertible Notes for 5,775 shares of our Series D Preferred Stock, all of which remained issued and outstanding on December 31, 2019. The terms of the Series D Preferred Stock are as follows: Stated Value $1,000 per share, subject to increase for (a) any capitalized dividends and (b) on June 30, 2020 (and each six month anniversary thereafter), the Stated Value shall increase by 5%. Dividends: The Series D Preferred Stock shall participate with any dividends paid to the holders of Common Stock. In addition, from now until June 30, 2020, shall accrue dividends at a rate of 8% per annum and from June 30, 2020 and thereafter, at 12% per annum, which shall capitalize to the stated value of the Series D Preferred Stock on a monthly basis. Upon the occurrence of certain triggering events, the Series D Preferred Stock shall accrue additional dividends at a default rate set forth in the definitive documentation. Conversion Price: The Investor may elect to convert the Series D Preferred Stock into shares of Common Stock at a conversion price (the “ Conversion Price Voting Rights Series D Preferred Stock vote together on all matters as a class, with the approval of a majority of the Series D Preferred Stock required to amend or waive any term or condition of the Series D Preferred Stock. Series D Preferred Stock shall vote on an as-converted basis with the holders of Common Stock on all matters (subject to applicable ownership blockers, including not exceeding 19.9% in any event). Company Exchange Right The Company shall have the right to exchange the Series D Preferred Stock, at its option back into senior secured convertible notes in the form of the Existing Notes, at any time, with such New Exchange Notes having an initial outstanding amount equal to the stated value, accrued and unpaid dividends and any other amounts outstanding with respect to such Series D Preferred Stock subject to such exchange. Limitations on Beneficial Ownership: Notwithstanding anything herein to the contrary, no Preferred Stock of any Investor shall be issued or shall be convertible if after such conversion such Investor would beneficially own more than 4.99% of the shares of Common Stock then outstanding (as defined under Section 13(d) of the Securities Act of 1933, as amended). Exchange Cap The Series D Preferred Stock shall share the Exchange Cap of the August 19, 2019 Series A Note and Series B Note and, to the extent the Existing Notes have been converted into 19.9% of the Common Stock, shall not be convertible until such time as stockholder approval has been obtained and/or additional shares of Common Stock are eligible to be converted thereunder in compliance with the rules and regulations of the Principal Market. 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, 2019 and 2018, 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, 2019, there was no unrecognized compensation expense. 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. During the year ending December 31, 2019, 61,581 options granted under the 2018 Plan have been forfeited. The Company recorded compensation expense of $290,524 and $402,027 for the years ended December 31, 2019 and 2018, respectively. 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, 2019, the unrecognized compensation expense was $548,865 which will be recognized as compensation expense over 2.71 years. |
Income Tax
Income Tax | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Tax | NOTE 9: INCOME TAX Income tax expense for the years ended December 31, 2019 and 2018 is summarized as follows. December 31, 2019 December 31, 2018 Deferred: Federal $ (2,034,701 ) $ (2,720,081 ) State (693,481 ) (904,569 ) Change in valuation allowance 2,728,182 3,624,650 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, 2019 December 31, 2018 Book income (loss) 21.00 % 21.00 % State taxes 6.98 % 6.98 % Change in the fair value of warrant derivative 34.17 % -14.51 % Other permanent items 2.57 % -0.36 % Valuation allowance (64.72 )% -13.11 % 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, 2019 and 2018 are as follows: December 31, 2019 December 31, 2018 Deferred tax assets: Net operating loss carryforward $ 9,044,119 $ 6,357,768 Other 267,766 225,935 Total gross deferred tax assets 9,311,885 6,583,703 Less: valuation allowance (9,311,885 ) (6,583,703 ) 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. 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, 2019 and 2018, the Company had net operating losses of approximately $32,100,000 and $22,500,000, 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 aggregating $22,000,000 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, 2019 and 2018 was an increase of $2,728,182 and $3,624,650, 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 the net operating losses are carried forward and impact a year that is open to examination by the authorities. The Company’s income tax returns for the years 2016-2018 are subject to examination. |
Revenue Recognition and Reserve
Revenue Recognition and Reserve for Sales Returns and Allowances | 12 Months Ended |
Dec. 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition and Reserve for Sales Returns and Allowances | NOTE 10: REVENUE RECOGNITION AND RESERVE FOR SALES RETURNS AND ALLOWANCES The Company’s contracts with customers only include one performance obligation (i.e., sale of the Company’s products). Revenue is recognized in the gross amount at a point in time when delivery is completed and control of the promised goods is transferred to the customers. Revenue is measured as the amount of consideration the Company expects to be entitled to in exchange for those goods. The Company’s contracts do not involve financing elements as payment terms with customers are less than one year. Further, because revenue is recognized at the point in time goods are sold to customers, there are no contract asset or contract liability balances. The Company does not disclose remaining performance obligations related to contracts with durations of one year or less as allowed by the practical expedient applicable to such contracts. The Company disaggregates its revenues by major geographic region. See Note 11, Concentrations, Geographic Data, and Sales by Major Customers, for further information. The Company accounts for fees paid to Amazon for products sold through its Amazon Stores as operating expense. The Company offers various discounts, pricing concessions, and other allowances to customers, all of which are considered in determining the transaction price. Certain discounts and allowances are fixed and determinable at the time of sale and are recorded at the time of sale as a reduction to revenue. Other discounts and allowances can vary and are determined at management’s discretion (variable consideration). Specifically, the Company occasionally grants discretionary credits to facilitate markdowns and sales of slow-moving merchandise, and consequently accrues an allowance based on historic credits and management estimates. Further, the Company allows sales returns, consequently records a sales return allowance based upon historic return amounts and management estimates. These allowances (variable consideration) are estimated using the expected value method and are recorded at the time of sale as a reduction to revenue. The Company adjusts its estimate of variable consideration at least quarterly or when facts and circumstances used in the estimation process may change. The variable consideration is not constrained as the Company has sufficient history on the related estimates and does not believe there is a risk of significant revenue reversal. The Company also participates in cooperative advertising arrangements with some customers, whereby it allows a discount from invoiced product amounts in exchange for customer purchased advertising that features the Company’s products. Generally, these allowances range from 2% to 5% of gross sales and are generally based upon product purchases or specific advertising campaigns. Such allowances are accrued when the related revenue is recognized. These cooperative advertising arrangements provide a distinct benefit and fair value, and are accounted for as direct selling expenses. Sales commissions are expensed when incurred as the related revenue is recognized at a point in time and therefore, the amortization period is less than one year. As a result, these costs are recorded as direct selling expenses, as incurred. The Company has also elected to adopt the practical expedient related to shipping and handling fees which allows the Company to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations. Therefore, shipping and handling activities are considered part of the Company’s obligation to transfer the products and therefore are recorded as direct selling expenses, as incurred The Company’s reserve for sales returns and allowances amounted to $13,000 as of December 31, 2019, compared to $13,000 as of December 31, 2018. |
Concentrations
Concentrations | 12 Months Ended |
Dec. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
Concentrations | NOTE 11: CONCENTRATIONS Concentration of Purchase Order Financing The Company used a third-party financing company for the years ended December 31, 2019 and 2018, 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 69% and 74% of the total revenues for the years ended December 31, 2019 and 2018, respectively. The same four customers accounted for 78% and 69% of the total accounts receivable balance due to the Company at December 31, 2019 and 2018, respectively. Concentration of Suppliers The Company purchased products from four vendors for the years ended December 31, 2019 that accounted for approximately 76% of its total cost of goods sold. 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. 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, 2019. The Company’s bank balances exceeded FDIC insured amounts at times during the years ended December 31, 2019 and 2018, respectively. At December 31, 2019 and 2018, the Company’s bank balance exceeded the FDIC insured amounts by $0 and $5,209,884, respectively. Geographic Concentration Geographical distribution of net revenue consisted of the following for the years ended December 31, 2019 and 2018, respectively, as follows: For the Year Ended December 31, 2019 2018 Australia 9 % 11 % USA 66 % 75 % Other 25 % 14 % |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2019 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 12: SUBSEQUENT EVENTS The Company evaluated subsequent events through March __, 2020, 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, 2019, and events which occurred subsequent to December 31, 2019 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 February 24, 2020, ToughBuilt Industries, Inc. (the “Company”) closed on the public offering of 4.45 million shares of its common stock, for gross proceeds of $934,500 based upon the overallotment option arising from the closing of its January 28, 2020 public offering. In the January 28, 2020 public offering, the Company sold 43 million shares of its common stock and 47.45 million warrants (each exercisable into ½ of a share of common stock for a total of 23.725 million shares of common stock) from which it received gross proceeds of $9,030,000. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
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, 2019 and 2018, 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, 2019 and 2018, 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, 2019 and 2018, 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 |
Debt Issuance Costs | Debt Issuance Costs Costs incurred in connection with the issuance of debt are capitalized and amortized to interest expense over the term of the related debt using the straight-line method which approximates the effective interest method. The costs associated with the outstanding loans payable are amortized over the term of the respective loan. The unamortized amount is presented as a reduction of debt on the accompanying balance sheets. |
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 Company had no derivative instruments as of December 31, 2019 requiring such valuation. Level 3 Fair Value Sensitivity Warrant derivative 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 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. 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, January 1, 2019 $ 23,507,247 Series B Warrants exercised or expired during the three months ended March 31, 2019 (14,584,371 ) Series B Warrants exchanged for Series C Preferred Stock (3,671,024 ) Change in the fair value of warrant derivative (5,251,852 ) Balance, December 31, 2019 $ - Balance, January 1, 2018 $ - Fair value of warrant derivative at Issuance date 9,170,822 Change in the fair value of warrant derivative 14,336,425 Balance, December 31, 2018 $ 23,507,247 |
Revenue Recognition | Revenue Recognition In May of 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09 – Revenue from Contracts with Customers (Topic 606). The core principle of the new accounting guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new accounting guidance provides a five-step analysis of transactions to determine when and how revenue is recognized and requires enhanced disclosures about revenue. The Company adopted ASC 606, including all related amendments, with a date of initial application of January 1, 2019 using the modified retrospective approach. The Company applied the guidance to contracts with customers that were not substantially complete as of January 1, 2019. The results for reporting periods beginning after January 1, 2019 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported with the Company’s historic accounting under ASC 605 – Revenue Recognition. For contracts, which were modified before the adoption date, the Company has not restated the contract for those modifications. Instead, the Company reflected the aggregate effect of all modifications when identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction price, if necessary. The cumulative effect of initially applying ASC 606 is to be applied as an adjustment to the opening balance of retained earnings. The Company analyzed this effect and found the adoption of ASC 606 did not have a material impact on its financial statements and revenue recognition is consistent with the Company’s historical accounting policies. The Company recognizes revenues when 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 FASB – Accounting Standards Codification 606 “Revenue From Contracts With Customers |
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): Year Ended December 31, 2019 December 31, 2018 Preferred shares 7,043,000 517,875 Warrants 11,449,884 364,859 Options 1,063,419 125,000 Series A and Series B Notes 5,602,750 Total anti-dilutive weighted average shares 25,159,053 1,007,734 |
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 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 June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (“Topic 326”)”. The ASU introduces a new accounting model, the Current Expected Credit Losses model (“CECL”), which requires earlier recognition of credit losses and additional disclosures related to credit risk. The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses at the time the financial asset is originated or acquired. ASU 2016-13 is effective for annual period beginning after December 15, 2022, including interim reporting periods within those annual reporting periods. The Company is currently evaluating this guidance to determine its impact it may have on its financial statements. In December 2019, the FASB Issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting of Income Taxes”, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating this guidance to determine its impact it may have on its financial statements. In January 2016, the FASB issued ASU 2016-01, “ Financial Instruments - Overall Recognition and Measurement of Financial Assets and Financial Liabilities. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
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, January 1, 2019 $ 23,507,247 Series B Warrants exercised or expired during the three months ended March 31, 2019 (14,584,371 ) Series B Warrants exchanged for Series C Preferred Stock (3,671,024 ) Change in the fair value of warrant derivative (5,251,852 ) Balance, December 31, 2019 $ - Balance, January 1, 2018 $ - Fair value of warrant derivative at Issuance date 9,170,822 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): Year Ended December 31, 2019 December 31, 2018 Preferred shares 7,043,000 517,875 Warrants 11,449,884 364,859 Options 1,063,419 125,000 Series A and Series B Notes 5,602,750 Total anti-dilutive weighted average shares 25,159,053 1,007,734 |
Factor Receivables, Letters o_2
Factor Receivables, Letters of Credit Payable and Loan Payable (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of Factor Loan Payable Activity | Financial information on factoring is set forth in the below table: For the Year Ended December 31, 2019 2018 Factor payables, beginning balance $ 1,304,512 $ 1,078,941 - - New factorings 2,891,727 5,532,225 Payments, net of returns and discounts (4,070,594 ) (5,306,654 ) Factor loan payable, net $ 125,645 $ 1,304,512 |
Inventory (Tables)
Inventory (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | Inventory consists of the following: Description December 31, 2019 December 31, 2018 Finished goods $ 2,215,497 $ 379,915 |
Property and Equipment, Net (Ta
Property and Equipment, Net (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property and Equipment | Property and equipment consists of the following: December 31, 2019 December 31, 2018 Furniture $ 111,490 $ 61,722 Computers 254,243 88,615 Production equipment 182,446 75,233 Tooling and molds 605,485 249,690 Website design 360,943 9,850 Leasehold Improvements 42,249 37,899 Less: accumulated depreciation (526,971 ) (298,813 ) Property and Equipment, net $ 1,029,885 $ 224,196 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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 2020 $ 383,601 2021 502,872 2022 343,821 2023 341,293 2024 353,765 2025 88,411 Total $ 2,013,793 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Equity [Abstract] | |
Summary of Terms of Series D Preferred Stock | Stated Value $1,000 per share, subject to increase for (a) any capitalized dividends and (b) on June 30, 2020 (and each six month anniversary thereafter), the Stated Value shall increase by 5%. Dividends: The Series D Preferred Stock shall participate with any dividends paid to the holders of Common Stock. In addition, from now until June 30, 2020, shall accrue dividends at a rate of 8% per annum and from June 30, 2020 and thereafter, at 12% per annum, which shall capitalize to the stated value of the Series D Preferred Stock on a monthly basis. Upon the occurrence of certain triggering events, the Series D Preferred Stock shall accrue additional dividends at a default rate set forth in the definitive documentation. Conversion Price: The Investor may elect to convert the Series D Preferred Stock into shares of Common Stock at a conversion price (the “ Conversion Price Voting Rights Series D Preferred Stock vote together on all matters as a class, with the approval of a majority of the Series D Preferred Stock required to amend or waive any term or condition of the Series D Preferred Stock. Series D Preferred Stock shall vote on an as-converted basis with the holders of Common Stock on all matters (subject to applicable ownership blockers, including not exceeding 19.9% in any event). Company Exchange Right The Company shall have the right to exchange the Series D Preferred Stock, at its option back into senior secured convertible notes in the form of the Existing Notes, at any time, with such New Exchange Notes having an initial outstanding amount equal to the stated value, accrued and unpaid dividends and any other amounts outstanding with respect to such Series D Preferred Stock subject to such exchange. Limitations on Beneficial Ownership: Notwithstanding anything herein to the contrary, no Preferred Stock of any Investor shall be issued or shall be convertible if after such conversion such Investor would beneficially own more than 4.99% of the shares of Common Stock then outstanding (as defined under Section 13(d) of the Securities Act of 1933, as amended). Exchange Cap The Series D Preferred Stock shall share the Exchange Cap of the August 19, 2019 Series A Note and Series B Note and, to the extent the Existing Notes have been converted into 19.9% of the Common Stock, shall not be convertible until such time as stockholder approval has been obtained and/or additional shares of Common Stock are eligible to be converted thereunder in compliance with the rules and regulations of the Principal Market. |
Income Tax (Tables)
Income Tax (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Schedule of Income Tax Expense | Income tax expense for the years ended December 31, 2019 and 2018 is summarized as follows. December 31, 2019 December 31, 2018 Deferred: Federal $ (2,034,701 ) $ (2,720,081 ) State (693,481 ) (904,569 ) Change in valuation allowance 2,728,182 3,624,650 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, 2019 December 31, 2018 Book income (loss) 21.00 % 21.00 % State taxes 6.98 % 6.98 % Change in the fair value of warrant derivative 34.17 % -14.51 % Other permanent items 2.57 % -0.36 % Valuation allowance (64.72 )% -13.11 % 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, 2019 and 2018 are as follows: December 31, 2019 December 31, 2018 Deferred tax assets: Net operating loss carryforward $ 9,044,119 $ 6,357,768 Other 267,766 225,935 Total gross deferred tax assets 9,311,885 6,583,703 Less: valuation allowance (9,311,885 ) (6,583,703 ) Net deferred tax assets $ - $ - |
Concentrations (Tables)
Concentrations (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Risks and Uncertainties [Abstract] | |
Schedule of Geographical Distribution of Revenue Percentage | Geographical distribution of net revenue consisted of the following for the years ended December 31, 2019 and 2018, respectively, as follows: For the Year Ended December 31, 2019 2018 Australia 9 % 11 % USA 66 % 75 % Other 25 % 14 % |
Nature of Operations (Details N
Nature of Operations (Details Narrative) - USD ($) | Feb. 24, 2020 | Jan. 28, 2020 | Aug. 19, 2019 | Apr. 11, 2019 | Jan. 24, 2019 | Dec. 17, 2018 | Nov. 14, 2018 | Sep. 04, 2018 | Jun. 19, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 23, 2019 | Dec. 21, 2019 |
Common stock, par value | $ 0.0001 | $ 0.0001 | |||||||||||
Warrants to purchase common stock | 3,070,500 | ||||||||||||
Anti-dilution shares embedded | 25,159,053 | 1,007,734 | |||||||||||
Proceeds from promissory note | $ 652,579 | $ 100,000 | $ 4,815,000 | $ 752,579 | |||||||||
Percentage for original issue discount | 14.00% | ||||||||||||
Debt instrument face amount | $ 114,000 | ||||||||||||
Payment of promissory note | $ 114,000 | ||||||||||||
Preferred stock, shares authorized | 5,000,000 | 5,000,000 | |||||||||||
Preferred stock, par value | $ 0.0001 | $ 0.0001 | |||||||||||
Stock issued during the period, value | $ 8,014,228 | ||||||||||||
Accumulated deficit | $ (43,413,370) | (39,112,401) | |||||||||||
Net loss | (4,300,969) | (27,651,412) | |||||||||||
Net cash used in operating activities | $ (10,229,337) | $ (8,243,415) | |||||||||||
Investor [Member] | |||||||||||||
Warrants price per share | $ 1 | ||||||||||||
Investor [Member] | Series A Note [Member] | |||||||||||||
Debt instrument face amount | $ 6,720,000 | ||||||||||||
Payment of promissory note | $ 5,000,000 | ||||||||||||
Investor [Member] | Notes [Member] | |||||||||||||
Percentage for original issue discount | 15.00% | ||||||||||||
Debt instrument face amount | $ 4,780,000 | ||||||||||||
Series D Preferred Stock [Member] | |||||||||||||
Initial public offering, shares | |||||||||||||
Preferred stock, shares authorized | 5,775 | 0 | |||||||||||
Preferred stock, par value | $ 1,000 | $ 1,000 | |||||||||||
Stock issued during the period, value | |||||||||||||
Net loss | |||||||||||||
Series D Preferred Stock [Member] | Board of Directors [Member] | |||||||||||||
Preferred stock, shares authorized | 5,775 | ||||||||||||
Investors [Member] | Series C Convertible Preferred Stock [Member] | |||||||||||||
Conversion of common stock | 4,268,000 | ||||||||||||
Conversion of stock, description | The shares of Series C Convertible Preferred Stock are convertible into 4,268,000 shares of the Company's common stock, and rights to convert into common stock are subject to limitations on ownership at any one time of Company common stock up to 9.9% of the issued and outstanding shares of common stock of the Company; otherwise, the Series C Convertible Preferred Stock has no rights not awarded to holders of common stock of the Company. | ||||||||||||
Securities Purchase Agreement [Member] | Institutional Investor [Member] | |||||||||||||
Proceeds from promissory note | $ 11,500,000 | ||||||||||||
Percentage for original issue discount | 15.00% | ||||||||||||
Description for market capitalization | The Investor Note is subject to optional prepayment at any time at the option of the investor and mandatory prepayment, at the Company's option, subject to certain equity conditions, at any time 45 Trading Days after the effectiveness of a resale registration statement (or otherwise the applicability of Rule 144 promulgated under the Securities Act of 1933, as amended). Notwithstanding the foregoing, the Company may not effect a mandatory prepayment if the shares underlying the Series A Note and the portion of the Series B Note that has become unrestricted exceeds 35% of the market capitalization of the Company. | ||||||||||||
Exchange Agreement [Member] | Investor [Member] | |||||||||||||
Debt instrument face amount | $ 5,500,000 | ||||||||||||
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 | ||||||||||||
Public Offering [Member] | Subsequent Event [Member] | |||||||||||||
Initial public offering, shares | 4,450,000 | 23,725,000 | |||||||||||
Proceeds from initial public offering | $ 934,500 | ||||||||||||
Stock issued during the period, value | $ 934,500 | $ 9,030,000 | |||||||||||
Class A Units [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 Warrant [Member] | |||||||||||||
Warrants to purchase common stock | 1 | ||||||||||||
Series A Warrants [Member] | Investors [Member] | |||||||||||||
Warrants to purchase common stock | 1,189,560 | 508,940 | |||||||||||
Conversion of common stock | 508,940 | ||||||||||||
Series A Warrants [Member] | Underwriting Agreement [Member] | |||||||||||||
Warrants to purchase common stock | 400,500 | ||||||||||||
Warrants price per share | $ 0.01 | ||||||||||||
Series A Warrants [Member] | Exchange Agreements [Member] | |||||||||||||
Warrants to purchase common stock | 424,116 | ||||||||||||
Stock issuance cost | $ 159,958 | ||||||||||||
Gross proceeds of warrant | $ 2,172,680 | ||||||||||||
Series A Warrants [Member] | IPO [Member] | |||||||||||||
Warrants price per share | $ 215,625 | ||||||||||||
Conversion of common stock | 1,366,768 | ||||||||||||
Series B Warrants [Member] | Investors [Member] | |||||||||||||
Warrants to purchase common stock | 1,005,760 | ||||||||||||
Anti-dilution shares embedded | 4,268 | ||||||||||||
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 | ||||||||||||
Conversion of common stock | 1,366,768 | ||||||||||||
New Warrants [Member] | Investors [Member] | |||||||||||||
Warrants to purchase common stock | 933,056 | ||||||||||||
Warrants price per share | $ 3.67 | ||||||||||||
Common Stock [Member] | |||||||||||||
Initial public offering, shares | 2,670,000 | ||||||||||||
Stock issued during the period, value | $ 267 | ||||||||||||
Net loss | |||||||||||||
Common Stock [Member] | Public Offering [Member] | Subsequent Event [Member] | |||||||||||||
Initial public offering, shares | 43,000,000 | ||||||||||||
Warrant [Member] | Public Offering [Member] | Subsequent Event [Member] | |||||||||||||
Initial public offering, shares | 47,450,000 |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Cash equivalents | ||
Allowance for doubtful accounts | ||
Allowances for sales discount | 13,000 | 13,000 |
Inventory reserves for obsolete | ||
Assets impairment loss | ||
Minimum [Member] | ||
Estimated useful life of property plant and equipment | 3 years | |
Maximum [Member] | ||
Estimated useful life of property plant and equipment | 7 years |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Warrants Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||
Beginning balance | $ 23,507,247 | |
Series B Warrants exercised or expired during the quarter ended | (14,584,371) | |
Series B Warrants exchanged for Series C Preferred Stock | (3,671,024) | |
Change in the fair value of warrant derivative | (5,251,852) | 14,336,425 |
Fair value of warrant derivative at Issuance date | 9,170,822 | |
Ending balance | $ 23,507,247 |
Summary of Significant Accoun_6
Summary of Significant Accounting Policies - Schedule of Potential Dilutive Securities (Details) - shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Total potentially dilutive securities | 25,159,053 | 1,007,734 |
Preferred Shares [Member] | ||
Total potentially dilutive securities | 7,043,000 | 517,875 |
Warrants [Member] | ||
Total potentially dilutive securities | 11,449,884 | 364,859 |
Options [Member] | ||
Total potentially dilutive securities | 1,063,419 | 125,000 |
Series A and Series B Notes [Member] | ||
Total potentially dilutive securities | 5,602,750 |
Factor Receivables, Letters o_3
Factor Receivables, Letters of Credit Payable and Loan Payable (Details Narrative) | 12 Months Ended |
Dec. 31, 2019 | |
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. |
Factor Receivables, Letters o_4
Factor Receivables, Letters of Credit Payable and Loan Payable - Schedule of Factor Loan Payable Activity (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Debt Disclosure [Abstract] | ||
Factor receivables beginning balance | $ 1,304,512 | $ 1,078,941 |
New factorings | 2,891,727 | 5,532,225 |
Payments, net of returns and discounts | (4,070,594) | (5,306,654) |
Factor loan payable, ending balance | $ 125,645 | $ 1,304,512 |
Inventory - Schedule of Invento
Inventory - Schedule of Inventory (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 2,215,497 | $ 379,915 |
Property and Equipment, Net (De
Property and Equipment, Net (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 225,426 | $ 120,723 |
Property and Equipment, Net - S
Property and Equipment, Net - Schedule of Property and Equipment (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Less: accumulated depreciation | $ (526,971) | $ (298,813) |
Property and Equipment, net | 1,029,885 | 224,196 |
Furniture [Member] | ||
Property and Equipment, gross | 111,490 | 61,722 |
Computers [Member] | ||
Property and Equipment, gross | 254,243 | 88,615 |
Production Equipment [Member] | ||
Property and Equipment, gross | 182,446 | 75,233 |
Tooling and Molds [Member] | ||
Property and Equipment, gross | 605,485 | 249,690 |
Website Design [Member] | ||
Property and Equipment, gross | 360,943 | 9,850 |
Leasehold Improvements [Member] | ||
Property and Equipment, gross | $ 42,249 | $ 37,899 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) | Aug. 19, 2019USD ($)IntegerFounder$ / shares | Dec. 17, 2018USD ($) | Nov. 14, 2018USD ($)shares | Nov. 05, 2018USD ($)$ / sharesshares | Sep. 04, 2018USD ($) | Aug. 31, 2018USD ($)shares | Jun. 19, 2018USD ($) | Mar. 14, 2018shares | Dec. 31, 2019USD ($)shares | Dec. 31, 2018USD ($)shares | Dec. 23, 2019USD ($) | Dec. 21, 2019shares |
Promissory note face amount | $ 114,000 | |||||||||||
Promissory note payable date | Dec. 31, 2020 | Sep. 30, 2018 | Nov. 15, 2018 | |||||||||
Cash proceeds on the promissory note | $ 652,579 | $ 100,000 | $ 4,815,000 | $ 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 | 626,546 | 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 | shares | 3,070,500 | |||||||||||
Debt instrument, convertible percentage | 85.00% | |||||||||||
Debt instrument conversion price | $ / shares | $ 1 | |||||||||||
Fair value of warrant liability | (5,251,852) | $ 14,336,425 | ||||||||||
Debt issuance cost | 626,546 | |||||||||||
Debt discount | 1,386,443 | |||||||||||
Payment of promissory note | $ 114,000 | |||||||||||
Debt installment, description | The Company shall repay the Principal Amount of the Notes in 12 installments, with the first installment starting on February 1, 2020 (each, an "Installment Date"). Installments 1-3 shall be 1/36th of the Principal Amount, Installments 4-6 shall be 1/18th of the Principal Amount and Installments 7-12 shall be 1/8th of the Principal Amount. The repayment amount shall be payable in cash, or, subject to the satisfaction of equity conditions, at the option of the Company, in registered Common Stock or a combination of cash and registered Common Stock. | |||||||||||
Debt market price rate | 50.00% | |||||||||||
Conversion price, description | The shares used to meet a Principal Repayment ("Installment Shares") would be valued at a conversion Price, calculated as the lesser of (i) 85% of the arithmetic average of the three lowest daily VWAPs of the 20 trading days prior to the payment date or (ii) 85% of the VWAP of the trading day prior to payment date ("Installment Price") with a floor of $0.10. | |||||||||||
Debt instrument trading days | Founder | 20 | |||||||||||
Percentage to purchase outstanding notes in cash | 125.00% | |||||||||||
Debt issuance, description | Until the 3 year anniversary of the maturity date, the investor shall have the right (but not the obligation) to participate in 50% of any subsequent equity or debt issuance. | |||||||||||
Preferred stock, shares authorized | shares | 5,000,000 | 5,000,000 | ||||||||||
Notes payable - current | $ 4,216,307 | |||||||||||
Notes payable - long term | $ 2,975,101 | |||||||||||
Series A Warrant [Member] | ||||||||||||
Number of warrants issued | shares | 1 | |||||||||||
Series B Warrant [Member] | ||||||||||||
Number of warrants issued | shares | 1 | |||||||||||
Series A Warrants and Series B Warrants [Member] | ||||||||||||
Fair value of warrant liability | $ 980,375 | $ 3,657,507 | ||||||||||
Institutional Investor [Member] | Securities Purchase Agreement [Member] | ||||||||||||
Cash proceeds on the promissory note | $ 11,500,000 | |||||||||||
Original issue discount, percentage | 15.00% | |||||||||||
Debt issuance cost | $ 485,000 | |||||||||||
Description for market capitalization | The Investor Note is subject to optional prepayment at any time at the option of the investor and mandatory prepayment, at the Company's option, subject to certain equity conditions, at any time 45 Trading Days after the effectiveness of a resale registration statement (or otherwise the applicability of Rule 144 promulgated under the Securities Act of 1933, as amended). Notwithstanding the foregoing, the Company may not effect a mandatory prepayment if the shares underlying the Series A Note and the portion of the Series B Note that has become unrestricted exceeds 35% of the market capitalization of the Company. | |||||||||||
Investor [Member] | ||||||||||||
Debt instrument conversion price | $ / shares | $ 500,000 | |||||||||||
Fair value of warrant liability | $ 575,000 | |||||||||||
Debt installment, description | All amortization payments shall be subject to the Investors' right to (a) defer some or all of any Installment Payment to a subsequent Installment Date; and (b) at any time during an installment period, convert up to four times the installment amount at the Installment Price; provided shares received pursuant to such accelerated conversions shall be subject to a leak-out provision that solely limits sales of such shares received by the investor in such accelerated conversion (and not any other sales) to the greater of (a) $500,000 per trading day or (b) 40% of the volume traded on a given day as reported by Bloomberg LP. | |||||||||||
Debt market price rate | 40.00% | |||||||||||
Debt instrument trading days | Integer | 20 | |||||||||||
Warrants term | 5 years | |||||||||||
Warrants conversion price percentage | 50.00% | |||||||||||
Warrants exercise price | $ / shares | $ 1 | |||||||||||
Investor [Member] | Exchange Agreement [Member] | ||||||||||||
Promissory note face amount | $ 5,500,000 | |||||||||||
Class B Convertible Preferred Stock [Member] | ||||||||||||
Stock issued during period, shares | shares | 81,000 | |||||||||||
Class A Units [Member] | IPO [Member] | Series A Warrant [Member] | ||||||||||||
Conversion of stock, shares issued | shares | 1,366,768 | |||||||||||
Class A Units [Member] | IPO [Member] | Series B Warrant [Member] | ||||||||||||
Conversion of stock, shares issued | shares | 1,366,768 | |||||||||||
Class A Units [Member] | Holders of Six Promissory Notes [Member] | IPO [Member] | ||||||||||||
Debt instrument, convertible percentage | 80.00% | |||||||||||
Conversion of stock, shares issued | shares | 215,625 | |||||||||||
Debt instrument conversion price | $ / shares | $ 4 | |||||||||||
Class A Units [Member] | Holders of Six Promissory Notes [Member] | IPO [Member] | Series A Warrant [Member] | ||||||||||||
Conversion of stock, shares issued | shares | 215,625 | |||||||||||
Class A Units [Member] | Holders of Six Promissory Notes [Member] | IPO [Member] | Series B Warrant [Member] | ||||||||||||
Conversion of stock, shares issued | shares | 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 | |||||||||||
Series D Preferred Stock [Member] | ||||||||||||
Stock issued during period, shares | shares | ||||||||||||
Preferred stock, shares authorized | shares | 5,775 | 0 | ||||||||||
Series D Preferred Stock [Member] | Board of Directors [Member] | ||||||||||||
Preferred stock, shares authorized | shares | 5,775 | |||||||||||
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 | shares | 7,500 | |||||||||||
6 Note Holders [Member] | Class B Convertible Preferred Stock [Member] | ||||||||||||
Stock issued during period, shares | shares | 18,750 | |||||||||||
Series A Note [Member] | Investor [Member] | ||||||||||||
Promissory note face amount | $ 6,720,000 | |||||||||||
Payment of promissory note | 5,000,000 | |||||||||||
Notes [Member] | Investor [Member] | ||||||||||||
Promissory note face amount | $ 4,780,000 | |||||||||||
Original issue discount, percentage | 15.00% | |||||||||||
Notes Payable [Member] | ||||||||||||
Notes payable - current | $ 5,602,750 |
Commitments and Contingencies_2
Commitments and Contingencies (Details Narrative) | Nov. 26, 2019USD ($) | Dec. 24, 2018USD ($)Founder | Nov. 14, 2018USD ($)shares | Sep. 13, 2018USD ($)shares | Aug. 30, 2018USD ($) | Apr. 12, 2018USD ($) | Jan. 03, 2017USD ($)$ / sharesshares | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Sep. 30, 2018USD ($)$ / shares |
Operating lease term | 5 years | |||||||||
Security deposit | $ 29,297 | |||||||||
Direct costs estimated percentage | 22.54% | |||||||||
Direct cost lease per month | $ 6,201 | |||||||||
Lease commenced date | Dec. 1, 2019 | |||||||||
Lease due date | Apr. 1, 2020 | |||||||||
Operating lease rental expense | $ 201,540 | $ 164,626 | ||||||||
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 | |||||||||
American Arbitration Association [Member] | ||||||||||
Loss contingency, damages sought, value | $ 169,094 | |||||||||
American Arbitration Association [Member] | Cross-Demand [Member] | ||||||||||
Loss contingency, damages sought, value | $ 394,956 | |||||||||
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 | |||||||||
Loss contingency, damages awarded, value | $ 235,542 | |||||||||
Ownership percentage | 7.00% | |||||||||
Litigation expense | $ 252,949 | |||||||||
Number of shares issued during period | shares | 376,367 | |||||||||
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% | |||||||||
April 1, 2020 through March 31, 2025 [Member] | ||||||||||
Base rent amount | 25,200 | |||||||||
Beginning December 1, 2023 [Member] | ||||||||||
Base rent amount | 29,480 | |||||||||
April 2020 [Member] | ||||||||||
Initial rent paid | $ 68,128 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Future Minimum Lease Commitments (Details) | Dec. 31, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2020 | $ 383,601 |
2021 | 502,872 |
2022 | 343,821 |
2023 | 341,293 |
2024 | 353,765 |
2025 | 88,411 |
Total | $ 2,013,793 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | Dec. 23, 2019 | Apr. 11, 2019 | 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, 2019 | Dec. 31, 2018 | Dec. 21, 2019 | Aug. 19, 2019 | Sep. 12, 2018 | Jun. 19, 2018 | Dec. 31, 2017 |
Common stock, shares authorized | 200,000,000 | 200,000,000 | ||||||||||||||||||||||
Preferred stock, shares authorized | 5,000,000 | 5,000,000 | ||||||||||||||||||||||
Common stock par value | $ 0.0001 | $ 0.0001 | ||||||||||||||||||||||
Preferred stock par value | $ 0.0001 | $ 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. | |||||||||||||||||||||||
Conversion price per share | $ 1 | |||||||||||||||||||||||
Promissory note face amount | $ 114,000 | |||||||||||||||||||||||
Fair value of warrant liability | $ (5,251,852) | $ 14,336,425 | ||||||||||||||||||||||
Common stock, shares issued | 33,000,151 | 9,870,873 | ||||||||||||||||||||||
Common stock, shares outstanding | 33,000,151 | 9,870,873 | ||||||||||||||||||||||
Warrants to purchase common stock | 3,070,500 | |||||||||||||||||||||||
Legal fees | $ 30,571 | |||||||||||||||||||||||
Escrow fees | $ 4,000 | |||||||||||||||||||||||
Number of convertible debentures exchanged for preferred stock | $ 4,961,568 | |||||||||||||||||||||||
Number of shares issued value | 8,014,228 | |||||||||||||||||||||||
Debt conversion converted instrument amount | 6,268,096 | |||||||||||||||||||||||
Compensation expense | $ 336,637 | 557,042 | ||||||||||||||||||||||
2018 Equity Incentive Plan [Member] | ||||||||||||||||||||||||
Number of options forfeited | 61,581 | |||||||||||||||||||||||
Compensation expense | $ 290,524 | $ 402,027 | ||||||||||||||||||||||
Unrecognized compensation expense | $ 548,865 | |||||||||||||||||||||||
Compensation expense recognition period | 2 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 | |||||||||||||||||||||||
Series C Preferred Stock [Member] | ||||||||||||||||||||||||
Preferred stock, shares authorized | 1,268 | 0 | ||||||||||||||||||||||
Preferred stock par value | $ 0.0001 | $ 0.0001 | ||||||||||||||||||||||
Stock issued during period, shares | ||||||||||||||||||||||||
Conversion of convertible debentures, shares | ||||||||||||||||||||||||
Number of convertible debentures exchanged for preferred stock, shares | ||||||||||||||||||||||||
Number of convertible debentures exchanged for preferred stock | ||||||||||||||||||||||||
Number of shares issued value | ||||||||||||||||||||||||
Debt conversion converted instrument amount | ||||||||||||||||||||||||
Preferred Stock, shares issued | 1,268 | 0 | ||||||||||||||||||||||
Preferred Stock, shares outstanding | 1,268 | 0 | ||||||||||||||||||||||
Series D Preferred Stock [Member] | ||||||||||||||||||||||||
Preferred stock, shares authorized | 5,775 | 0 | ||||||||||||||||||||||
Preferred stock par value | $ 1,000 | $ 1,000 | ||||||||||||||||||||||
Stock issued during period, shares | ||||||||||||||||||||||||
Conversion of convertible debentures, shares | ||||||||||||||||||||||||
Number of convertible debentures exchanged for preferred stock, shares | ||||||||||||||||||||||||
Number of convertible debentures exchanged for preferred stock | ||||||||||||||||||||||||
Number of shares issued value | ||||||||||||||||||||||||
Debt conversion converted instrument amount | ||||||||||||||||||||||||
Preferred Stock, shares issued | 5,775 | 0 | ||||||||||||||||||||||
Preferred Stock, shares outstanding | 5,775 | 0 | ||||||||||||||||||||||
Series D Preferred Stock [Member] | Senior Secured Convertible Notes [Member] | ||||||||||||||||||||||||
Conversion of convertible debentures, shares | 5,775 | |||||||||||||||||||||||
Debt conversion converted instrument amount | $ 5,500,000 | |||||||||||||||||||||||
Class B Convertible Preferred Stock [Member] | ||||||||||||||||||||||||
Stock issued during period, shares | 81,000 | |||||||||||||||||||||||
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 | |||||||||||||||||||||||
Net proceeds from sale of stock | 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 | |||||||||||||||||||||||
Placement Agent [Member] | ||||||||||||||||||||||||
Payments for commissions | $ 64,800 | |||||||||||||||||||||||
Placement Agent [Member] | ||||||||||||||||||||||||
Number of shares sold during transaction | 140,000 | 140,000 | ||||||||||||||||||||||
Sale of stock, consideration received on transaction | $ 700,000 | |||||||||||||||||||||||
Net proceeds from sale of stock | 587,957 | |||||||||||||||||||||||
Payments for commissions | 74,574 | |||||||||||||||||||||||
Legal fees | 33,469 | |||||||||||||||||||||||
Escrow fees | $ 4,000 | |||||||||||||||||||||||
Class A Units [Member] | Convertible Debt Instruments [Member] | ||||||||||||||||||||||||
Conversion price per share | $ 5 | |||||||||||||||||||||||
Conversion of convertible debentures, shares | 1,726,678 | |||||||||||||||||||||||
Class A Units [Member] | Unsecured Promissory notes [Member] | ||||||||||||||||||||||||
Conversion price per share | $ 4 | |||||||||||||||||||||||
Conversion of convertible debentures, shares | 215,625 | |||||||||||||||||||||||
Class A Units [Member] | IPO [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 | |||||||||||||||||||||||
Underwriting discounts and commission | 934,500 | |||||||||||||||||||||||
Stock issuance cost | $ 743,765 | |||||||||||||||||||||||
Exercise price of warrants | $ 5 | |||||||||||||||||||||||
Class A Units [Member] | IPO [Member] | Class B Convertible Preferred Stock [Member] | ||||||||||||||||||||||||
Conversion of stock, shares issued | 1,366,768 | |||||||||||||||||||||||
Conversion price per share | $ 3.50 | |||||||||||||||||||||||
Fair value of warrant liability | $ 1,872,271 | |||||||||||||||||||||||
Common Stock [Member] | ||||||||||||||||||||||||
Stock issued during period, shares | 2,670,000 | |||||||||||||||||||||||
Conversion of convertible debentures, shares | 1,726,678 | |||||||||||||||||||||||
Number of convertible debentures exchanged for preferred stock, shares | 1,366,768 | |||||||||||||||||||||||
Number of convertible debentures exchanged for preferred stock | $ 137 | |||||||||||||||||||||||
Number of shares issued value | 267 | |||||||||||||||||||||||
Debt conversion converted instrument amount | $ 172 | |||||||||||||||||||||||
Series A Warrants [Member] | April 2019 Exchange [Member] | ||||||||||||||||||||||||
Warrants to purchase common stock | 1,189,560 | |||||||||||||||||||||||
Series A Warrants [Member] | IPO [Member] | ||||||||||||||||||||||||
Conversion of stock, shares issued | 1,366,768 | |||||||||||||||||||||||
Conversion of convertible debentures, shares | 1,726,678 | |||||||||||||||||||||||
Exercise price of warrants | $ 215,625 | |||||||||||||||||||||||
Series B Warrant [Member] | ||||||||||||||||||||||||
Number of warrants issued | 2,670,000 | |||||||||||||||||||||||
Warrants to purchase common stock | 1 | |||||||||||||||||||||||
Number of warrants outstanding | 2,670,000 | |||||||||||||||||||||||
Series B Warrant [Member] | IPO [Member] | Class A Units [Member] | ||||||||||||||||||||||||
Conversion of stock, shares issued | 1,366,768 | |||||||||||||||||||||||
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 | 44,373 | 45,775 | ||||||||||||||||||||||
Exercise price of warrants | $ 12 | |||||||||||||||||||||||
Number of warrants outstanding | 44,373 | 45,775 | ||||||||||||||||||||||
Warrants expiration date | Oct. 17, 2021 | |||||||||||||||||||||||
Class B Warrants [Member] | ||||||||||||||||||||||||
Number of warrants issued | 265,500 | 265,500 | ||||||||||||||||||||||
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 | 265,500 | ||||||||||||||||||||||
Class B Warrants [Member] | Certain Accredited Investors [Member] | ||||||||||||||||||||||||
Number of warrants issued | 81,000 | |||||||||||||||||||||||
Exercise price of warrants | $ 12 | |||||||||||||||||||||||
Class B Convertible Preferred Stock [Member] | ||||||||||||||||||||||||
Conversion of convertible debentures, shares | 15,000 | 15,000 | ||||||||||||||||||||||
Number of warrants issued | ||||||||||||||||||||||||
Class B Convertible Preferred Stock [Member] | 6 Promissory Note Holders [Member] | ||||||||||||||||||||||||
Stock issued during period, shares | 18,750 | |||||||||||||||||||||||
Number of shares issued value | $ 187,500 | |||||||||||||||||||||||
Series A Warrant [Member] | ||||||||||||||||||||||||
Number of warrants issued | 2,670,000 | |||||||||||||||||||||||
Warrants to purchase common stock | 1 | |||||||||||||||||||||||
Number of warrants outstanding | 2,670,000 | |||||||||||||||||||||||
Series A Warrant [Member] | IPO [Member] | Class A Units [Member] | ||||||||||||||||||||||||
Conversion of stock, shares issued | 1,366,768 | |||||||||||||||||||||||
Series A Warrants and Series B Warrants [Member] | ||||||||||||||||||||||||
Fair value of warrant liability | $ 980,375 | $ 3,657,507 | ||||||||||||||||||||||
Series B Warrants [Member] | April 2019 Exchange [Member] | ||||||||||||||||||||||||
Warrants to purchase common stock | 1,005,760 | |||||||||||||||||||||||
Series B Warrants [Member] | Series C Convertible Preferred Stock [Member] | April 2019 Exchange [Member] | ||||||||||||||||||||||||
Warrants to purchase common stock | 4,268 | |||||||||||||||||||||||
Number of convertible preferred stock convertible into common stock | 4,268,000 | |||||||||||||||||||||||
Conversion of stock, description | Series B Warrants are subject to certain anti-dilution provisions imbedded in such Series B Warrants for 4,268 shares of Company's Series C Convertible Preferred Stock having the rights, preferences and privileges set forth in the Certificate of Designation, filed by the Company with the Secretary of State of Nevada The shares of Series C Convertible Preferred Stock are convertible into 4,268,000 shares of the Company's common stock, and rights to convert into common stock are subject to limitations on ownership at any one time of Company common stock up to 9.9% of the issued and outstanding shares of common stock of the Company; otherwise, the Series C Convertible Preferred Stock has no rights not awarded to holders of common stock of the Company. | |||||||||||||||||||||||
Series B Warrants [Member] | Series C Convertible Preferred Stock [Member] | April 2019 Exchange [Member] | Up to 500,000 Shares of Daily Volume [Member] | ||||||||||||||||||||||||
Percentage of trade volume based on shares daily volume | 15.00% | |||||||||||||||||||||||
Series B Warrants [Member] | Series C Convertible Preferred Stock [Member] | April 2019 Exchange [Member] | From 500,001 Shares Through 1,000,000 Shares of Daily Volume [Member] | ||||||||||||||||||||||||
Percentage of trade volume based on shares daily volume | 20.00% | |||||||||||||||||||||||
Series B Warrants [Member] | Series C Convertible Preferred Stock [Member] | April 2019 Exchange [Member] | From 1,000,001 Shares of Daily Volume [Member] | ||||||||||||||||||||||||
Percentage of trade volume based on shares daily volume | 25.00% | |||||||||||||||||||||||
Series B Warrants [Member] | IPO [Member] | ||||||||||||||||||||||||
Conversion of stock, shares issued | 1,366,768 | |||||||||||||||||||||||
Conversion of convertible debentures, shares | 1,726,678 | |||||||||||||||||||||||
Exercise price of warrants | $ 215,625 | |||||||||||||||||||||||
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] | Common Stock [Member] | IPO [Member] | ||||||||||||||||||||||||
Conversion of stock, shares issued | 42,105 | |||||||||||||||||||||||
Conversion price per share | $ 4.75 | |||||||||||||||||||||||
Promissory note face amount | $ 200,000 | |||||||||||||||||||||||
Officers and Directors [Member] | Common Stock [Member] | ||||||||||||||||||||||||
Conversion price per share | $ 4.75 | |||||||||||||||||||||||
Stock issued as a conversion of compensation | 136,863 | |||||||||||||||||||||||
Accrued and unpaid salaries | $ 650,100 | |||||||||||||||||||||||
Representative [Member] | Over-Allotment Option [Member] | ||||||||||||||||||||||||
Proceeds from over allotment options | 121,909 | |||||||||||||||||||||||
Commission and expenses | $ 10,601 | |||||||||||||||||||||||
Representative [Member] | Common Stock [Member] | Partial Over-Allotment Option [Member] | ||||||||||||||||||||||||
Stock issued during period, shares | 25,000 | |||||||||||||||||||||||
Share price | $ 4.98 | |||||||||||||||||||||||
Representative [Member] | Series A Warrants [Member] | Partial Over-Allotment Option [Member] | ||||||||||||||||||||||||
Number of warrants issued | 400,500 | |||||||||||||||||||||||
Exercise price of warrants | $ 0.01 | |||||||||||||||||||||||
Representative [Member] | Series B Warrant [Member] | Partial Over-Allotment Option [Member] | ||||||||||||||||||||||||
Number of warrants issued | 400,500 | |||||||||||||||||||||||
Exercise price of warrants | $ 0.01 | |||||||||||||||||||||||
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] | ||||||||||||||||||||||||
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 | ||||||||||||||||||||||
Risk-free interest rate | 1.72% | |||||||||||||||||||||||
Volatility rate | 315.83% | |||||||||||||||||||||||
Unrecognized compensation expense | $ 112,216 | |||||||||||||||||||||||
Compensation expense recognition period | 2 years | |||||||||||||||||||||||
Board of Directors [Member] | 2018 Equity Incentive Plan [Member] | ||||||||||||||||||||||||
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] | ||||||||||||||||||||||||
Stock issued during period, shares | 1,000,000 | |||||||||||||||||||||||
Common stock reserved for future issuance | 2,000,000 | |||||||||||||||||||||||
Board of Directors [Member] | Series D Preferred Stock [Member] | ||||||||||||||||||||||||
Preferred stock, shares authorized | 5,775 | |||||||||||||||||||||||
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' Equity - Summary
Stockholders' Equity - Summary of Terms of Series D Preferred Stock (Details) - Series D Preferred Stock [Member] | 12 Months Ended |
Dec. 31, 2019 | |
Preferred Stock, Stated Value | $1,000 per share, subject to increase for (a) any capitalized dividends and (b) on June 30, 2020 (and each six month anniversary thereafter), the Stated Value shall increase by 5%. |
Preferred Stock, Dividends | The Series D Preferred Stock shall participate with any dividends paid to the holders of Common Stock. In addition, from now until June 30, 2020, shall accrue dividends at a rate of 8% per annum and from June 30, 2020 and thereafter, at 12% per annum, which shall capitalize to the stated value of the Series D Preferred Stock on a monthly basis. Upon the occurrence of certain triggering events, the Series D Preferred Stock shall accrue additional dividends at a default rate set forth in the definitive documentation. |
Preferred Stock, Conversion Price | The Investor may elect to convert the Series D Preferred Stock into shares of Common Stock at a conversion price (the "Conversion Price") equal to $1.00 per share. The Conversion Price of the Series D Preferred Stock shall be subject to customary adjustments for stock splits, dividends, recapitalizations and similar events. The Series D Preferred Stock shall be alternatively convertible at the Alternate Conversion Price (as defined in our previously outstanding notes (the "Existing Notes"). |
Preferred Stock, Voting Rights | Series D Preferred Stock vote together on all matters as a class, with the approval of a majority of the Series D Preferred Stock required to amend or waive any term or condition of the Series D Preferred Stock. Series D Preferred Stock shall vote on an as-converted basis with the holders of Common Stock on all matters (subject to applicable ownership blockers, including not exceeding 19.9% in any event). |
Preferred Stock, Company Exchange Right | The Company shall have the right to exchange the Series D Preferred Stock, at its option back into senior secured convertible notes in the form of the Existing Notes, at any time, with such New Exchange Notes having an initial outstanding amount equal to the stated value, accrued and unpaid dividends and any other amounts outstanding with respect to such Series D Preferred Stock subject to such exchange. |
Preferred Stock, Limitations on Beneficial Ownership | Notwithstanding anything herein to the contrary, no Preferred Stock of any Investor shall be issued or shall be convertible if after such conversion such Investor would beneficially own more than 4.99% of the shares of Common Stock then outstanding (as defined under Section 13(d) of the Securities Act of 1933, as amended). |
Preferred Stock, Exchange Cap | The Series D Preferred Stock shall share the Exchange Cap of the August 19, 2019 Series A Note and Series B Note and, to the extent the Existing Notes have been converted into 19.9% of the Common Stock, shall not be convertible until such time as stockholder approval has been obtained and/or additional shares of Common Stock are eligible to be converted thereunder in compliance with the rules and regulations of the Principal Market. |
Income Tax (Details Narrative)
Income Tax (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Net operating losses | $ 32,100,000 | $ 22,500,000 |
Operating loss carryforwards, expiration term | Expiring on various dates through 2037 | |
Federal loss | 22,000,000 | |
Percentage of valuation allowance on deferred tax assets | 100.00% | |
Net change in valuation allowance | $ 2,728,182 | $ 3,624,650 |
Income Tax - Schedule of Income
Income Tax - Schedule of Income Tax Expense (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Deferred: Federal | $ (2,034,701) | $ (2,720,081) |
Deferred: State | (693,481) | (904,569) |
Change in valuation allowance | 2,728,182 | 3,624,650 |
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, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Book income (loss) | 21.00% | 21.00% |
State taxes | 6.98% | 6.98% |
Change in the fair value of warrant derivative | 34.17% | (14.51%) |
Other permanent items | 2.57% | 0.36% |
Valuation allowance | (64.72%) | (13.11%) |
Tax expense at actual rate |
Income Tax - Schedule of Deferr
Income Tax - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforward | $ 9,044,119 | $ 6,357,768 |
Other | 267,766 | 225,935 |
Total gross deferred tax assets | 9,311,885 | 6,583,703 |
Less: valuation allowance | (9,311,885) | (6,583,703) |
Net deferred tax assets |
Revenue Recognition and Reser_2
Revenue Recognition and Reserve for Sales Returns and Allowances (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Revenue recognition reserve for sales returns and allowances | $ 13,000 | $ 13,000 |
Maximum [Member] | Revenue [Member] | ||
Concentration risk, percentage | 5.00% | |
Minimum [Member] | Revenue [Member] | ||
Concentration risk, percentage | 2.00% |
Concentrations (Details Narrati
Concentrations (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
FDIC insured amounts exceeded bank balance | $ 0 | $ 5,209,884 |
Four Vendors [Member] | ||
Concentration risk, percentage | 76.00% | 78.00% |
Sales Revenue [Member] | Four Customers [Member] | ||
Concentration risk, percentage | 69.00% | 74.00% |
Accounts Receivable [Member] | Four Customers [Member] | ||
Concentration risk, percentage | 78.00% | 69.00% |
Concentrations - Schedule of Ge
Concentrations - Schedule of Geographical Distribution of Revenue Percentage (Details) - Revenue [Member] | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Australia [Member] | ||
Concentration risk, percentage | 9.00% | 11.00% |
USA [Member] | ||
Concentration risk, percentage | 66.00% | 75.00% |
Other [Member] | ||
Concentration risk, percentage | 25.00% | 14.00% |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] - Public Offering [Member] - USD ($) | Feb. 24, 2020 | Jan. 28, 2020 | Jan. 28, 2020 |
Stock issued during period, shares | 4,450,000 | 23,725,000 | |
Proceeds from initial public offering | $ 934,500 | ||
Sale of common stock | 43,000,000 | ||
Number of warrants sold | 47,450,000 | ||
Warrants description | Each exercisable into ½ of a share of common stock for a total of 23.725 million shares of common stock | ||
Proceeds from issuance of equity | $ 9,030,000 |