Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Mar. 09, 2020 | Jun. 28, 2019 | |
Document and Entity Information | |||
Entity Registrant Name | WRAP TECHNOLOGIES, INC. | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2019 | ||
Amendment Flag | false | ||
Entity Central Index Key | 0001702924 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Common Stock, Shares Outstanding | 30,044,241 | ||
Entity Public Float | $ 79,544,812 | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Current Reporting Status | Yes | ||
Entity Voluntary Filers | No | ||
Entity Well-known Seasoned Issuer | No | ||
Document Fiscal Year Focus | 2019 | ||
Document Fiscal Period Focus | FY | ||
Interactive data current | Yes |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Current Assets: | ||
Cash and cash equivalents | $ 16,983,864 | $ 12,358,896 |
Accounts receivable | 195,347 | 4,396 |
Inventories, net | 2,244,541 | 158,267 |
Prepaid expenses and other current assets | 250,947 | 114,863 |
Total current assets | 19,674,699 | 12,636,422 |
Property and equipment, net | 242,876 | 30,373 |
Operating lease right-of-use asset, net | 260,931 | 0 |
Intangible assets, net | 230,283 | 118,715 |
Other assets, net | 12,681 | 1,512 |
Total assets | 20,421,470 | 12,787,022 |
Current Liabilities: | ||
Accounts payable | 406,967 | 232,915 |
Accrued liabilities | 194,294 | 68,453 |
Customer deposits | 343,724 | 0 |
Deferred revenue | 2,684 | 0 |
Operating lease liability- short term | 128,131 | 0 |
Deferred and accrued officer compensation | 0 | 96,000 |
Total current liabilities | 1,075,800 | 397,368 |
Operating lease liability - long term | 150,018 | 0 |
Total liabilities | 1,225,818 | 397,368 |
Commitments and contingencies (Note 11) | ||
Stockholders' Equity: | ||
Preferred stock - 5,000,000 authorized; par value $0.0001 per share; none issued and outstanding | 0 | 0 |
Common stock - 150,000,000 authorized; par value $0.0001 per share; 29,829,916 and 27,364,607 shares issued and outstanding each period, respectively | 2,983 | 2,736 |
Additional paid in capital | 31,922,493 | 16,791,254 |
Accumulated deficit | (12,729,824) | (4,404,336) |
Total stockholders' equity | 19,195,652 | 12,389,654 |
Total liabilities and stockholders' equity | $ 20,421,470 | $ 12,787,022 |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Preferred stock, authorized | 5,000,000 | 5,000,000 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, authorized | 150,000,000 | 150,000,000 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, issued | 29,829,916 | 27,364,607 |
Common stock, outstanding | 29,829,916 | 27,364,607 |
Condensed Statements of Operati
Condensed Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Revenues: | ||
Product sales | $ 656,071 | $ 18,830 |
Other revenue | 40,719 | 4,320 |
Total revenues | 696,790 | 23,150 |
Cost of revenues | 420,016 | 18,611 |
Gross profit | 276,774 | 4,539 |
Operating Expenses: | ||
Selling, general and administrative | 6,653,465 | 2,607,397 |
Research and development | 2,236,985 | 734,776 |
Total expenses | 8,890,450 | 3,342,173 |
Loss from operations | (8,613,676) | (3,337,634) |
Other Income (Expense): | ||
Interest income | 291,494 | 2,912 |
Interest expense | 0 | (1,304) |
Other | (3,306) | (409) |
Other income (expense) | 288,188 | 1,199 |
Net loss | $ (8,325,488) | $ (3,336,435) |
Net loss per basic and diluted common share | $ (0.29) | $ (0.14) |
Weighted average common shares used to compute net loss per basic and diluted common share | 28,652,625 | 23,578,291 |
Condensed Statement of Stockhol
Condensed Statement of Stockholders' Equity - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, shares at Dec. 31, 2017 | 22,803,533 | |||
Beginning balance, amount at Dec. 31, 2017 | $ 2,280 | $ 4,137,936 | $ (1,067,901) | $ 3,072,315 |
Sale of common stock and warrants at $3.00 per share and placement agent warrants in private offering, net of issuance costs, shares | 4,561,074 | |||
Sale of common stock and warrants at $3.00 per share and placement agent warrants in private offering, net of issuance costs, amount | $ 456 | 12,140,330 | 12,140,786 | |
Share-based compensation expense | 512,988 | 512,988 | ||
Net loss for the period | (3,336,435) | (3,336,435) | ||
Ending balance, shares at Dec. 31, 2018 | 27,364,607 | |||
Ending balance, amount at Dec. 31, 2018 | $ 2,736 | 16,791,254 | (4,404,336) | 12,389,654 |
Sale of common stock and warrants at $6.50 per share and placement agent warrants in public offering, net of issuance costs, shares | 1,923,076 | |||
Sale of common stock and warrants at $6.50 per share and placement agent warrants in public offering, net of issuance costs, amount | $ 192 | 11,351,022 | 11,351,214 | |
Common shares issued upon exercise of warrants at $3.00 per share, shares | 127,649 | |||
Common shares issued upon exercise of warrants at $3.00 per share, amount | $ 13 | 382,934 | 382,947 | |
Common shares issued upon exercise of warrants at $5.00 per share, net of issuance costs, shares | 345,834 | |||
Common shares issued upon exercise of warrants at $5.00 per share, net of issuance costs, amount | $ 35 | 1,700,469 | 1,700,504 | |
Common shares issued upon exercise of stock options, shares | 38,750 | |||
Common shares issued upon exercise of stock options, amount | $ 4 | 58,121 | 58,125 | |
Share-based compensation expense | 1,536,096 | 1,536,096 | ||
Common shares issued for services, shares | 30,000 | |||
Common shares issued for services, amount | $ 3 | 102,597 | 102,600 | |
Net loss for the period | (8,325,488) | (8,325,488) | ||
Ending balance, shares at Dec. 31, 2019 | 29,829,916 | |||
Ending balance, amount at Dec. 31, 2019 | $ 2,983 | $ 31,922,493 | $ (12,729,824) | $ 19,195,652 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Cash Flows From Operating Activities: | ||
Net loss | $ (8,325,488) | $ (3,336,435) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 46,945 | 21,875 |
Warranty provision | 13,495 | 0 |
Inventory write-off | (193,506) | 0 |
Non-cash lease expense | 80,069 | 0 |
Share-based compensation | 1,536,096 | 512,988 |
Common shares issued for services | 102,600 | 0 |
Changes in assets and liabilities: | ||
Accounts receivable | (190,951) | (4,396) |
Inventories | (1,892,768) | (27,075) |
Prepaid expenses and other current assets | (136,084) | (63,982) |
Accounts payable | 174,052 | 196,750 |
Operating lease liability | (62,851) | 0 |
Customer deposits | 343,724 | 0 |
Accrued liabilities and other | 112,346 | 8,139 |
Deferred compensation | (96,000) | 0 |
Deferred revenue | 2,684 | 0 |
Net cash used in operating activities | (8,485,637) | (2,692,136) |
Cash Flows From Investing Activities: | ||
Capital expenditures for property and equipment | (256,742) | (14,225) |
Investment in patents and trademarks | (114,274) | (120,070) |
Long-term deposits | (11,169) | 0 |
Net cash used in investing activities | (382,185) | (134,295) |
Cash Flows From Financing Activities: | ||
Sale of common stock and warrants | 12,499,994 | 13,683,222 |
Offering costs paid on sale of stock and warrants | (1,148,780) | (1,542,436) |
Proceeds from exercise of warrants | 2,112,117 | 0 |
Offering costs paid on exercise of warrants | (28,666) | 0 |
Proceeds from exercise of stock options | 58,125 | 0 |
Payment of notes payable | 0 | (39,435) |
Net cash provided by financing activities | 13,492,790 | 12,101,351 |
Net increase in cash and cash equivalents | 4,624,968 | 9,274,920 |
Cash and cash equivalents, beginning of period | 12,358,896 | 3,083,976 |
Cash and cash equivalents, end of period | 16,983,864 | 12,358,896 |
Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||
Interest paid | 0 | 1,304 |
Prepaid insurance financed with note payable | 0 | 39,435 |
Right-of-use assets and liabilites recorded during period | 341,000 | 0 |
Issuance costs relating to warrants issued to public offering selling agent | $ 205,894 | $ 664,427 |
1. ORGANIZATION AND SUMMARY OF
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Organization and Business Description Wrap Technologies, Inc., a Delaware corporation (the “ Company Nasdaq Basis of Presentation and Use of Estimates The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“ U.S. GAAP Public and Private Offerings In December 2017, the Company completed a self-underwritten public offering raising gross proceeds of approximately $3.49 million from the sale of 2,328,533 shares of Common Stock at $1.50 per share. Three officers of the Company purchased 40,000 shares of the offering for $60,000. On October 30, 2018 the Company obtained gross cash proceeds of $13.68 million and net cash proceeds of approximately $12.14 million from the sale of 4,561,074 units (“ Units On June 18, 2019, the Company consummated a June 2019 Follow-On Offering, pursuant to which a total of 1,923,076 Units were offered and sold at a public offering price of $6.50 per Unit. Each Unit sold consisted of one share of Common Stock and one detachable two-year warrant to purchase one share of Common Stock at an exercise price of $6.50 per share. The offering resulted in the Company’s receipt of gross cash proceeds of $12.5 million, or net cash proceeds of $11.35 million after deduction of commissions and offering costs. Concentrations of Risk Credit Risk Concentrations of Accounts Receivable and Revenue Concentration of Suppliers Stock Based Compensation The Company follows the fair value recognition provisions issued by the Financial Accounting Standards Board (“ FASB ASC ASC 718 ASU The grant date fair value of stock options is determined using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires inputs including the market price of the Company’s Common Stock on the date of grant, the term that the stock options are expected to be outstanding, the implied stock volatilities of several publicly-traded peers over the expected term of stock options, risk-free interest rate and expected dividend. Each of these inputs is subjective and generally requires significant judgment to determine. The grant date fair value of restricted stock units is based upon the market price of the Company’s Common Stock on the date of the grant. The fair value of share-based compensation is amortized to compensation expense over the vesting term. Loss per Share Basic loss per common share is computed by dividing net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per common share reflects the potential dilution of securities that could share in the earnings of an entity. The Company’s losses for the periods presented cause the inclusion of potential common stock instruments outstanding to be antidilutive. Stock options, restricted stock units and warrants exercisable or issuable for a total of 9,857,457 and 7,084,681 shares of Common Stock were outstanding at December 31, 2019 and 2018, respectively. These securities are not included in the computation of diluted net loss per common share for the periods presented as their inclusion would be antidilutive due to losses incurred by the Company. Fair Value of Financial Instruments The carrying amounts of cash, accounts receivable, accounts payable and accrued liabilities approximate fair values due to the short nature of these instruments. Accounts Receivable and Allowance for Doubtful Accounts The Company’s policy is to evaluate the collectability of accounts receivable based on an assessment of the collectability of specific customer accounts and then record an allowance for doubtful accounts to reduce the receivables to an amount that management reasonably estimates will be collected. There was no allowance for doubtful accounts recorded at December 31, 2019 or 2018. Accounts that are deemed uncollectible will be written off against the allowance for doubtful accounts. If a major customer’s creditworthiness deteriorates, or actual defaults exceed our historical experience, such estimates could change and impact our future reported financial results. Inventories Inventories are valued at the lower of cost or net realizable value. Prior to October 1, 2019 substantially all of the Company’s inventory was determined by the weighted average cost method which approximated the first in first out (FIFO) cost method. Effective October 1, 2019, with the change to a new computerized inventory system, the Company commenced identifying FIFO layers. The Company believes this transition change to FIFO will improve financial reporting by better reflecting the current value of inventory on the balance sheet, more closely aligning the flow of physical inventory with the accounting for the inventory and providing better matching of revenues and expenses. As the Company has only recently started selling products, and had limited purchase and sales activity, the weighted average method approximated FIFO and this change to FIFO had no material effect on the prior balance sheet, statement of operations or cash flows. Accordingly, no retrospective changes have been recorded. Inventory is comprised of raw materials, assemblies and finished products intended for sale to customers . Contract Manufacturers The Company employs contract manufacturers for production of certain components and sub-assemblies. The Company may provide parts and components to such parties from time to time, but recognizes no revenue or markup on such transactions. During 2019 and 2018, the Company performed assembly of products in-house using components and sub-assemblies from a variety of contract manufacturers and suppliers. Property, Equipment and Depreciation Property and equipment is stated at cost. Depreciation on property and equipment is computed over the estimated useful lives of three years using the straight-line method. The Company intends, on any retirement or disposition of property and equipment, that the related cost and accumulated depreciation or amortization will be removed and a gain or loss recorded. Intangible Assets Intangible assets consisted of capitalized legal fees and filing costs related to obtaining patents and trademarks. Upon the Company’s first patent approval in July 2018 the Company commenced capitalizing patent and trademark costs. When a patent or trademark is issued the cost is amortized using the straight-line method over the estimated remaining lives which is 20 years from the initial filing. Trademarks are amortized on a straight-line basis over ten years, the estimated useful life of the assets. Impairment of Long-Lived Assets Long-lived assets and identifiable intangibles held for use are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of undiscounted expected future cash flows is less than the carrying amount of the asset or if changes in facts and circumstances indicate, an impairment loss is recognized and measured using the asset’s fair value. The Company did not recognize any impairment loss during the periods ended December 31, 2018 and 2019. Classification and Valuation of Warrants The Company accounts for warrants as either equity or liabilities based upon the characteristics and provisions of each particular instrument. Warrants valued and classified as equity are recorded as additional paid-in capital based on the issue date fair value and no further adjustment to valuation is made. As of December 31, 2019, the Company has no warrants or other derivative financial instruments that require separate accounting as liabilities and periodic revaluation. However, in accordance with ASC 480 changes in director and officer ownership or other factors in future periods could require reclassification of outstanding warrants as a liability with changes in value thereafter reflected in the statement of operations. Advertising and Promotion Costs The Company expenses advertising costs in the period in which they are incurred. The Company incurred advertising costs of $165,119 and $27,218 for the years ended December 31, 2019 and 2018, respectively. The Company incurred product promotion costs for demonstration products delivered to prospective customers of $433,172 and $192,484 for the years ended December 31, 2019 and 2018, respectively. Advertising and promotion costs are included in selling, general and administrative expenses in the accompanying statements of operations. Research and Development Costs Research and development costs consist primarily of contract development costs and experimental work materials and certain startup costs. Research and development costs with no alternative use are expensed as incurred. Leases At the commencement date of a lease, the Company recognizes a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term. As its leases typically do not provide an implicit rate and due to lack of borrowing history or ability, the Company uses as its incremental borrowing rate a low-grade debt rate published by the Federal Reserve Bank. The right-of-use (“ROU”) asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred by the Company and excludes lease incentives. Lease liabilities are recorded as a current liability for the portion due within one year with the balance as a long-term liability. ROU assets are recorded as other asset, net. Revenue Recognition In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ ASU 2014-09 ASC 340-40 Topic 606 Shipping and Handling Costs Shipping and handling costs are included in cost of revenues. Shipping and handling costs invoiced to customers are included in revenue. Actual shipping and handling costs were $22,177 and $1,570 for the years ended December 31, 2019 and 2018, respectively. Actual revenues from shipping and handling were $21,414 and $670 for the years ended December 31, 2019 and 2018, respectively. Warranty Reserves The Company warrants its products and accessories to be free from defects in materials and workmanship for a period of one year from the date of purchase. The warranty is generally limited. The Company currently provides direct warranty service. International market warranties are generally similar to the U.S. market. The Company establishes a warranty reserve based on anticipated warranty claims at the time product revenues are recognized. Factors affecting warranty reserve levels include the number of units sold, anticipated cost of warranty repairs and anticipated rates of warranty claims. The Company evaluates the adequacy of the provision for warranty costs each reporting period. The warranty reserve was $13,923 and $428 at December 31, 2019 and 2018. Actual warranty costs could differ from estimates. Segment Information The Company has one operating segment with one business activity, providing restraint solutions. The Company’s chief operating decision maker is its Chief Executive Officer, who manages operations for purposes of allocating resources. Income Taxes Until its conversion to a corporation on March 31, 2017, the Company was treated as a partnership for federal and state income tax purposes and did not incur income taxes. Instead, its losses were included in the income tax returns of the member partners. No income tax expense was recorded for the periods ended December 31, 2019 and 2018 due to losses incurred. Deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the Federal tax laws. Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimates. Subsequent Events Management has evaluated events subsequent to December 31, 2019 through the date the accompanying financial statements were filed with the Securities and Exchange Commission and noted that there have been no events or transactions which would affect the Company’s financial statements for the year ended December 31, 2019. Recent Issued Accounting Guidance Recently Adopted Accounting Pronouncement: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is intended to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ ROU Effective the First Quarter of 2020: In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (“ Topic 820 Other Pronouncements: The Company has reviewed other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoptions of any such pronouncements will be expected to cause a material impact on its financial condition or the results of operations. |
2. REVENUE AND PRODUCT COSTS
2. REVENUE AND PRODUCT COSTS | 12 Months Ended |
Dec. 31, 2019 | |
Revenues: | |
REVENUE AND PRODUCT COSTS | The Company enters into contracts that include various combinations of products, accessories and services, such as training, each of which are generally distinct and are accounted for as separate performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account in Topic 606. For contracts with a single performance obligation, the entire transaction price is allocated to the single performance obligation. For contracts with multiple performance obligations, the Company allocates the contract transaction price to each performance obligation using the Company’s estimate of the standalone selling price (“ SSP Performance obligations to deliver products and accessories are generally satisfied at the point in time the Company ships the product, as this is when the customer obtains control of the asset under our standard terms and conditions. The Company has elected to recognize shipping costs as an expense in cost of revenue when control has transferred to the customer. The revenue and cost of training, when part of the performance obligations, is recognized when the training is completed, generally following delivery of related products. The timing of revenue recognition may differ from the timing of invoicing to customers. The Company generally has an unconditional right to consideration when customers are invoiced and a receivable is recorded. A contract asset is recognized when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized subsequent to invoicing. At December 31, 2018 the Company had no contract assets and no deferred revenue related to products or training for product delivered during the year. At December 31, 2019 the Company had deferred revenue of $2,684 related to future training. We may also receive consideration, per terms of a contract, from customers prior to transferring goods to the customer. We record customer deposits as a contract liability. The Company recognizes an asset if there are incremental costs of obtaining a contract with a customer such as commissions. These costs are ascribed to or allocated to the underlying performance obligations in the contract and amortized consistent with the recognition timing of the revenue for any such underlying performance obligations. The Company had no such assets at December 31, 2019 and December 31, 2018. The Company will apply the practical expedient to expense any sales commissions related to performance obligations with an amortization of one year or less when incurred within selling, general and administrative expense. Estimated costs for the Company’s standard one-year warranty are charged to cost of products sold when revenue is recorded for the related product. Royalties are also charged to cost of products sold. |
3. INVENTORIES, NET
3. INVENTORIES, NET | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
INVENTORIES, NET | Inventory is recorded at the lower of cost or net realizable value. The cost of substantially all the Company’s inventory is determined by the FIFO cost method. Inventories consisted of the following: December 31, 2019 2018 Finished goods $ 653,323 $ 82,313 Work in process 413 12,695 Raw materials 1,590,805 63,259 $ 2,244,541 $ 158,267 During the year ended December 31, 2019 the Company wrote off $193,506 of raw material and scrap parts primarily due to startup production, model changes and improvements. |
4. PROPERTY AND EQUIPMENT, NET
4. PROPERTY AND EQUIPMENT, NET | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT, NET | Property and equipment consisted of the following: December 31, 2019 2018 Laboratory equipment $ 44,454 $ 13,980 Tooling 59,004 22,683 Computer equipment 83,368 12,608 Furniture, fixtures and improvements 128,782 9,595 315,608 58,866 Accumulated depreciation (72,732 ) (28,493 ) $ 242,876 $ 30,373 Depreciation expense was $44,239 and $20,520 for the years ended December 31, 2019 and 2018, respectively. |
5. INTANGIBLE ASSETS, NET
5. INTANGIBLE ASSETS, NET | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS, NET | Intangible assets consisted of the following: December 31, 2019 2018 Patents $ 176,425 $ 111,160 Trademarks 57,919 8,910 234,344 120,070 Accumulated amortization (4,061 ) (1,355 ) $ 230,283 $ 118,715 Amortization expense was $2,706 and $1,355 for the years ended December 31, 2019 and 2018, respectively. |
6. ACCOUNTS PAYABLE AND ACCRUED
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | 12 Months Ended |
Dec. 31, 2019 | |
Payables and Accruals [Abstract] | |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | Accounts payable includes $18,809 due to related party Syzygy Licensing, LLC (“ Syzygy Accrued liabilities consist of the following: December 31, 2019 2018 Patent costs $ 6,851 $ 11,600 Accrued compensation 144,193 55,493 Warranty costs 13,923 428 Taxes and other 29,327 932 $ 194,294 $ 68,453 |
7. LEASES
7. LEASES | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
LEASES | The Company adopted ASU 2016-02, Leases (Topic 842) on January 1, 2019 using the modified retrospective approach. The Company has elected not to apply ASC Topic 842 to arrangements with lease terms of 12 months or less. The adoption of the standard resulted in the recognition of a ROU asset and lease liability of $12,900 for one operating lease as of January 1, 2019, with no impact to retained earnings. Prior year amounts have not been restated. That lease is for 1,890 square feet of improved office, assembly and warehouse space in Las Vegas, Nevada. In January 2019 the Company recorded an additional $17,101 ROU remeasurement asset and liability from an extension of the operating facility lease to December 31, 2020. In March 2019 the Company recorded a $57,587 ROU asset and liability for a two-year facility operating lease for 1,906 square feet of improved office, assembly and warehouse space in Lake Forest, California expiring in February 2021. In June 2019 the Company recorded a $253,412 ROU asset and liability for a 38-month facility operating lease for 11,256 square feet of improved office, assembly, training and warehouse space in Tempe, Arizona expiring in July 2022. Due to lack of borrowing history or ability the Company used as its incremental borrowing rate a low-grade debt rate published by the Federal Reserve Bank and determined a discount rate of 7.5% for the remeasurement in January 2019, 6.8% for the March 2019 operating lease and 7.0% for the June 2019 operating lease. Management determined these are reasonable borrowing rates. Amortization of ROU operating lease assets was $80,069 for the year ended December 31, 2019. Operating lease expense for capitalized operating leases included in operating activities was $94,599 for the year ended December 31, 2019. Operating lease obligations recorded on the balance sheet at December 31, 2019 are: Operating lease liability- short term $ 128,131 Operating lease liability - long term 150,018 Total Operating Lease Liability $ 278,149 Future lease payments included in the measurement of lease liabilities on the balance sheet at December 31, 2019 for future periods are as follows: Table 2020 $ 143,574 2021 101,406 2022 57,328 Total future minimum lease payments 302,308 Less imputed interest (24,159 ) Total $ 278,149 The weighted average remaining lease term is 2.3 years and the weighted average discount rate is 7.0%. The Company does not have any finance leases. |
8. DEFERRED AND ACCRUED COMPENS
8. DEFERRED AND ACCRUED COMPENSATION | 12 Months Ended |
Dec. 31, 2019 | |
Payables and Accruals [Abstract] | |
DEFERRED AND ACCRUED COMPENSATION | From March 2016 through February 2017, the Company accrued monthly compensation for the services of two officers in the aggregate amount of $7,000 per month payable to Syzygy. In March 2017 the Company accrued and deferred $6,000 compensation to each of the two officers. The balance payable to Syzygy of $84,000 and deferred compensation of an aggregate of $12,000 was paid in August 2019 without interest. |
9. STOCKHOLDERS' EQUITY
9. STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2019 | |
Stockholders' Equity: | |
STOCKHOLDERS' EQUITY | The Company’s authorized capital consists of 150,000,000 shares of Common Stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share (“ Preferred Stock 2018 Private Offering On October 30, 2018 the Company consummated a private offering of 4,561,074 units (“ Units In connection with the offering the Company also issued placement agent warrants exercisable for 456,107 shares of common stock for two years at an exercise price of $3.00 per share. The estimated fair value of these warrants was $664,427, as determined using the Black-Scholes methodology (assuming estimated volatility of 49%, risk-free interest rate of 2.84%, and expected dividend yield of 0.0%). This amount was recorded as both an increase to additional paid in capital and as a non-cash issuance cost of the offering. 2019 Follow-On Public Offering On June 18, 2019, the Company consummated the June 2019 Follow-On Offering, pursuant to which a total of 1,923,076 Units were offered and sold at the public offering price of $6.50 per Unit. Each Unit sold consisted of one share of Common Stock and one detachable two-year warrant to purchase one share of Common Stock at an exercise price of $6.50 per share. The offering resulted in the Company’s receipt of gross cash proceeds of $12.5 million, or net cash proceeds of $11.35 million after deduction of commissions and offering costs. In connection with the June 2019 Follow-On Offering, the Company also issued placement agent warrants exercisable for 153,846 shares of Common Stock for two years at an exercise price of $8.125 per share. The estimated fair value of these warrants was $205,894, as determined using the Black-Scholes methodology (assuming estimated volatility of 49%, risk-free interest rate of 1.86%, and expected dividend yield of 0.0%). This amount was recorded as both an increase to additional paid in capital and as a non-cash issuance cost of the offering. Summary of Stock Purchase Warrants The following table summarizes warrant activity during the years ended December 31, 2018 and 2019: Number Average Purchase Price Per Share Stock purchase warrants issued October 30, 2018 5,017,181 $ 4.82 Stock purchase warrants exercised - Shares purchasable under outstanding warrants at December 31, 2018 5,017,181 $ 4.82 Stock purchase warrants issued 2,076,922 $ 6.62 Stock purchase warrants exercised (473,483 ) $ 4.46 Shares purchasable under outstanding warrants at December 31, 2019 6,620,620 $ 5.41 The Company determined that the warrants issued in connection with the 2018 Private Offering and the June 2019 Follow-On Offering should be classified as equity in accordance with ASC 480. However, changes in director and officer ownership or other factors in future periods could require reclassification of outstanding warrants as a liability with changes in value thereafter reflected in the statement of operations. The Company has outstanding Common Stock purchase warrants as of December 31, 2019 as follows: Number of Exercise Price Description Common Shares Per Share Expiration Date Purchase Warrants (1) 4,215,240 $ 5.00 October 30, 2020 Agent Warrants 328,458 $ 3.00 October 30, 2020 Purchase Warrants 1,923,076 $ 6.50 June 18, 2021 Agent Warrants 153,846 $ 8.125 June 18, 2021 (1) Subsequent to December 31, 2019 a total of 129,950 warrants were exercised for cash proceeds of $628,650. |
10. SHARE-BASED COMPENSATION
10. SHARE-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
SHARE-BASED COMPENSATION | On March 31, 2017, the Company adopted and the stockholders approved the 2017 Stock Incentive Plan (the “ Plan RSUs In October 2018 the Company granted consultant options outside of the Plan exercisable for 100,000 shares of common stock at an exercise price of $3.00 per share with 50% vesting ratably over 18 months and the balance vesting based on performance. The following table summarizes stock option activity for the years ended December 31, 2018 and 2019: Weighted Average Options on Remaining Aggregate Common Exercise Contractual Intrinsic Shares Price Term Value Outstanding January 1, 2018 - - Granted 2,067,500 $ 1.68 Exercised - - Forfeited, cancelled, expired - - Outstanding December 31, 2018 2,067,500 $ 1.68 4.44 Granted 1,000,000 5.41 5.00 Exercised (38,750 ) 1.50 - Forfeited, cancelled, expired (100,000 ) 1.50 - Outstanding December 31, 2019 2,928,750 $ 2.96 3.71 $10,031,388 Vested and exercisable at December 31, 2019 1,573,853 $ 1.64 3.43 $7,479,791 Subsequent to December 31, 2019 a total of 84,375 options were exercised for cash proceeds of $126,562. The Company uses the Black-Scholes option pricing model to determine the fair value of the options granted. The following table summarizes the assumptions used to compute the fair value of options granted to employees and nonemployees: Year Ended December 31, 2019 2018 Expected stock price volatility 49 % 47% to 49% Risk-free interest rate 2.41 % 2.67% to 2.99% Forfeiture rate 0 % 0 % Expected dividend yield 0 % 0 % Expected life of options - years 3.50 2.75-5.00 Weighted-average fair value of options granted $ 2.06 $ 0.72 Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of awards. The Company’s estimated volatility was based on an average of the historical volatility of peer entities whose stock prices were publicly available. The Company’s calculation of estimated volatility is based on historical stock prices of these peer entities over a period equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price, as it only recently commenced trading. The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the options. The dividend yield of zero is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. The Company calculates the expected life of the options using the Simplified Method for the employee stock options as the Company does not have sufficient historical data. The following table summarizes information about stock options outstanding at December 31, 2019: Average Weighted Weighted Remaining Average Average Range of Number Contractual Exercise Number Exercise Exercise Prices Outstanding Life Price Exercisable Price $ 1.50 1,708,750 3.4 $ 1.50 1,448,853 $ 1.50 $ 3.00 - $3.61 220,000 4.07 $ 3.23 125,000 3.83 $ 5.41 1,000,000 4.22 $ 5.41 - - During 2019 the Company granted a total of 308,087 service-based RSUs to employees and consultants vesting over three years that convert to Common Stock as vesting occurs. A summary is set forth below: Weighted Average Service-Based Grant Date Vesting RSU's Fair Value Period Unvested at January 1, 2019 - Granted 308,087 $ 6.77 3 Years Vested - Forfeited and cancelled - Unvested at December 31, 2019 308,087 The Company recorded stock-based compensation in its statements of operations for the relevant periods as follows: Year Ended December 31, 2019 2018 Selling, general and administrative $ 1,410,095 $ 417,151 Research and development 126,001 95,837 Total stock-based expense $ 1,536,096 $ 512,988 As of December 31, 2019, total estimated compensation cost of stock options and RSUs granted but not yet vested was $3.5 million which is expected to be recognized over the weighted average period of 2.14 years. |
11. COMMITMENTS AND CONTINGENCI
11. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Facility Leases See Note 7. Related Party Technology License Agreement The Company is obligated to pay royalties and pay development and patent costs pursuant to an exclusive Amended and Restated Intellectual Property License Agreement dated as of September 30, 2016 with Syzygy, a company owned and controlled by stockholders/officers Mr. Elwood Norris and Mr. James Barnes. The agreement provides for royalty payments of 4% of revenue from products employing the licensed ensnarement device technology up to an aggregate of $1,000,000 in royalties or until September 30, 2026, whichever occurs earlier. The Company recorded $23,297 and $871 for royalties incurred during the years ended December 31, 2019 and 2018, respectively. Purchase Commitments At December 31, 2019 the Company was committed for approximately $82,000 for future component deliveries that are generally subject to modification or rescheduling in the normal course of business. Indemnifications and Guarantees Our officers and directors are indemnified as to personal liability as provided by the Delaware law and the Company’s articles and bylaws. The Company may also undertake indemnification obligations in the ordinary course of business related to its operations. The Company is unable to estimate with any reasonable accuracy the liability that may be incurred pursuant to any such indemnification obligations now or in the future. Because of the uncertainty surrounding these circumstances, the Company’s current or future indemnification obligations could range from immaterial to having a material adverse impact on its financial position and its ability to continue in the ordinary course of business. The Company has no liabilities recorded for such indemnities. Regulatory Agencies The Company may be subject to oversight from regulatory agencies regarding firearms that arise in the ordinary course of its business. |
12. INCOME TAXES
12. INCOME TAXES | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | Until its reverse recapitalization on March 31, 2017, the Company was treated as a partnership for federal and state income tax purposes and did not incur income taxes. The Company accounts for income taxes under ASC 740. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is "more likely than not" that some component or all of the benefits of deferred tax assets will not be realized. The Company did not provide any current or deferred U.S. federal income tax provision or benefit for the periods presented because of operating losses since inception. As of December 31, 2019, the Company has federal net operating loss carryforwards of approximately $11,080,000 to reduce future taxable income that will expire beginning in 2038. Certain changes in stock ownership can result in a limitation on the amount of net operating loss and tax credit carryovers that can be utilized each year. As of December 31, 2019, management has not determined the extent of any such limitations, if any. The Company provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward period. As a result of the change in future Federal statutory tax rates due to the passing of the Tax Cuts and Jobs Act of 2017, management has determined that the deferred tax assets and liabilities should not be valued at a federal statutory rate of 34% but rather at the rate in which the benefit of the deferred tax asset or liability will be realized by the Company. As such, the Federal statutory rate used to value the Company's deferred tax assets and liabilities is 21%. The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the periods ended December 31, 2018 and 2019 applicable under FASB ASC 740. The Company did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet. All tax returns for the Company remain open. The provision for (benefit from) income taxes consists of the following: Year Ended December 31, 2019 2018 Current tax benefit $ - $ - Deferred tax benefit 1,800,000 678,000 Change in valuation allowance (1,800,000 ) (678,000 ) Income tax benefit (provision) $ - $ - A reconciliation of the provision for income taxes at the federal statutory rate of 21% to the Company’s provision for income tax is as follows: Year Ended December 31, 2019 2018 Income taxes benefit computed at federal statutory rate $ 1,748,000 $ 701,000 State income taxes, net of federal effect 114,000 - Research tax credits - 15,000 Permanent differences and other (62,000 ) (38,000 ) Change in valuation allowance (1,800,000 ) (678,000 ) Income tax benefit (provision) $ - $ - Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table presents the significant components of the Company’s deferred tax assets and liabilities for the periods presented: December 31, 2019 2018 Deferred tax assets: Net operating losses $ 2,430,000 $ 756,000 Research tax credits 26,000 23,000 Deferred compensation - 20,000 Stock compensation 239,000 76,000 Accruals and other 9,000 - 2,704,000 875,000 Deferred tax liabilities: Depreciation and other 58,000 29,000 58,000 29,000 Net deferred tax assets 2,646,000 846,000 Less valuation allowance (2,646,000 ) (846,000 ) Net deferred taxes after valuation allowance $ - $ - In accordance with ASU 2016-09, Compensation-Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting |
13. MAJOR CUSTOMERS AND RELATED
13. MAJOR CUSTOMERS AND RELATED INFORMATION | 12 Months Ended |
Dec. 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |
MAJOR CUSTOMERS AND RELATED INFORMATION | Major Customers For the year ended December 31, 2019, revenues from one distributor accounted for 22% of revenues with no other single customer accounting for more than 10% of total revenues. This customer accounted for 54% of accounts receivable at December 31, 2019. Sales were nominal for the year ended December 31, 2018 with a limited number of customers. The following table summarizes revenues by geographic region. Revenues are attributed to countries based on customer’s delivery location. Year Ended December 31, 2019 2018 Americas $ 481,622 $ 18,670 Europe, Middle East and Africa 116,547 - Asia Pacific 98,621 4,480 $ 696,790 $ 23,150 See Note 1 – Concentrations of Risks |
14. RELATED PARTY TRANSACTIONS
14. RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | Commencing in October 2017 the Company commenced reimbursing officer Mr. Elwood Norris $1,500 per month on a month to month basis for laboratory costs for an aggregate of $18,000 each year during the years ended December 31, 2018 and 2019. See Notes 6, 9 and 11 for additional related party transactions and information. |
1. ORGANIZATION AND SUMMARY O_2
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Organization and Business Description | Wrap Technologies, Inc., a Delaware corporation (the “ Company Nasdaq |
Basis of Presentation and Use of Estimates | The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“ U.S. GAAP |
Public and Private Offerings | In December 2017, the Company completed a self-underwritten public offering raising gross proceeds of approximately $3.49 million from the sale of 2,328,533 shares of Common Stock at $1.50 per share. Three officers of the Company purchased 40,000 shares of the offering for $60,000. On October 30, 2018 the Company obtained gross cash proceeds of $13.68 million and net cash proceeds of approximately $12.14 million from the sale of 4,561,074 units (“ Units On June 18, 2019, the Company consummated a June 2019 Follow-On Offering, pursuant to which a total of 1,923,076 Units were offered and sold at a public offering price of $6.50 per Unit. Each Unit sold consisted of one share of Common Stock and one detachable two-year warrant to purchase one share of Common Stock at an exercise price of $6.50 per share. The offering resulted in the Company’s receipt of gross cash proceeds of $12.5 million, or net cash proceeds of $11.35 million after deduction of commissions and offering costs. |
Concentrations of Risk | Credit Risk Concentrations of Accounts Receivable and Revenue Concentration of Suppliers |
Stock Based Compensation | The Company follows the fair value recognition provisions issued by the Financial Accounting Standards Board (“ FASB ASC ASC 718 ASU The grant date fair value of stock options is determined using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires inputs including the market price of the Company’s Common Stock on the date of grant, the term that the stock options are expected to be outstanding, the implied stock volatilities of several publicly-traded peers over the expected term of stock options, risk-free interest rate and expected dividend. Each of these inputs is subjective and generally requires significant judgment to determine. The grant date fair value of restricted stock units is based upon the market price of the Company’s Common Stock on the date of the grant. The fair value of share-based compensation is amortized to compensation expense over the vesting term. |
Loss per Share | Basic loss per common share is computed by dividing net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per common share reflects the potential dilution of securities that could share in the earnings of an entity. The Company’s losses for the periods presented cause the inclusion of potential common stock instruments outstanding to be antidilutive. Stock options, restricted stock units and warrants exercisable or issuable for a total of 9,857,457 and 7,084,681 shares of Common Stock were outstanding at December 31, 2019 and 2018, respectively. These securities are not included in the computation of diluted net loss per common share for the periods presented as their inclusion would be antidilutive due to losses incurred by the Company. |
Fair Value of Financial Instruments | The carrying amounts of cash, accounts receivable, accounts payable and accrued liabilities approximate fair values due to the short nature of these instruments. |
Accounts Receivable and Allowance for Doubtful Accounts | The Company’s policy is to evaluate the collectability of accounts receivable based on an assessment of the collectability of specific customer accounts and then record an allowance for doubtful accounts to reduce the receivables to an amount that management reasonably estimates will be collected. There was no allowance for doubtful accounts recorded at December 31, 2019 or 2018. Accounts that are deemed uncollectible will be written off against the allowance for doubtful accounts. If a major customer’s creditworthiness deteriorates, or actual defaults exceed our historical experience, such estimates could change and impact our future reported financial results. |
Inventories | Inventories are valued at the lower of cost or net realizable value. Prior to October 1, 2019 substantially all of the Company’s inventory was determined by the weighted average cost method which approximated the first in first out (FIFO) cost method. Effective October 1, 2019, with the change to a new computerized inventory system, the Company commenced identifying FIFO layers. The Company believes this transition change to FIFO will improve financial reporting by better reflecting the current value of inventory on the balance sheet, more closely aligning the flow of physical inventory with the accounting for the inventory and providing better matching of revenues and expenses. As the Company has only recently started selling products, and had limited purchase and sales activity, the weighted average method approximated FIFO and this change to FIFO had no material effect on the prior balance sheet, statement of operations or cash flows. Accordingly, no retrospective changes have been recorded. Inventory is comprised of raw materials, assemblies and finished products intended for sale to customers . |
Contract Manufacturers | The Company employs contract manufacturers for production of certain components and sub-assemblies. The Company may provide parts and components to such parties from time to time, but recognizes no revenue or markup on such transactions. During 2019 and 2018, the Company performed assembly of products in-house using components and sub-assemblies from a variety of contract manufacturers and suppliers. |
Property, Equipment and Depreciation | Property and equipment is stated at cost. Depreciation on property and equipment is computed over the estimated useful lives of three years using the straight-line method. The Company intends, on any retirement or disposition of property and equipment, that the related cost and accumulated depreciation or amortization will be removed and a gain or loss recorded. |
Intangible Assets | Intangible assets consisted of capitalized legal fees and filing costs related to obtaining patents and trademarks. Upon the Company’s first patent approval in July 2018 the Company commenced capitalizing patent and trademark costs. When a patent or trademark is issued the cost is amortized using the straight-line method over the estimated remaining lives which is 20 years from the initial filing. Trademarks are amortized on a straight-line basis over ten years, the estimated useful life of the assets. |
Impairment of Long-Lived Assets | Long-lived assets and identifiable intangibles held for use are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of undiscounted expected future cash flows is less than the carrying amount of the asset or if changes in facts and circumstances indicate, an impairment loss is recognized and measured using the asset’s fair value. The Company did not recognize any impairment loss during the periods ended December 31, 2018 and 2019. |
Classification and Valuation of Warrants | The Company accounts for warrants as either equity or liabilities based upon the characteristics and provisions of each particular instrument. Warrants valued and classified as equity are recorded as additional paid-in capital based on the issue date fair value and no further adjustment to valuation is made. As of December 31, 2019, the Company has no warrants or other derivative financial instruments that require separate accounting as liabilities and periodic revaluation. However, in accordance with ASC 480 changes in director and officer ownership or other factors in future periods could require reclassification of outstanding warrants as a liability with changes in value thereafter reflected in the statement of operations. |
Advertising and Promotion Costs | The Company expenses advertising costs in the period in which they are incurred. The Company incurred advertising costs of $165,119 and $27,218 for the years ended December 31, 2019 and 2018, respectively. The Company incurred product promotion costs for demonstration products delivered to prospective customers of $433,172 and $192,484 for the years ended December 31, 2019 and 2018, respectively. Advertising and promotion costs are included in selling, general and administrative expenses in the accompanying statements of operations. |
Research and Development Costs | Research and development costs consist primarily of contract development costs and experimental work materials and certain startup costs. Research and development costs with no alternative use are expensed as incurred. |
Leases | At the commencement date of a lease, the Company recognizes a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term. As its leases typically do not provide an implicit rate and due to lack of borrowing history or ability, the Company uses as its incremental borrowing rate a low-grade debt rate published by the Federal Reserve Bank. The right-of-use (“ROU”) asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred by the Company and excludes lease incentives. Lease liabilities are recorded as a current liability for the portion due within one year with the balance as a long-term liability. ROU assets are recorded as other asset, net. |
Revenue Recognition | In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ ASU 2014-09 ASC 340-40 Topic 606 |
Shipping and Handling Costs | Shipping and handling costs are included in cost of revenues. Shipping and handling costs invoiced to customers are included in revenue. Actual shipping and handling costs were $22,177 and $1,570 for the years ended December 31, 2019 and 2018, respectively. Actual revenues from shipping and handling were $21,414 and $670 for the years ended December 31, 2019 and 2018, respectively. |
Warranty Reserves | The Company warrants its products and accessories to be free from defects in materials and workmanship for a period of one year from the date of purchase. The warranty is generally limited. The Company currently provides direct warranty service. International market warranties are generally similar to the U.S. market. The Company establishes a warranty reserve based on anticipated warranty claims at the time product revenues are recognized. Factors affecting warranty reserve levels include the number of units sold, anticipated cost of warranty repairs and anticipated rates of warranty claims. The Company evaluates the adequacy of the provision for warranty costs each reporting period. The warranty reserve was $13,923 and $428 at December 31, 2019 and 2018. Actual warranty costs could differ from estimates. |
Segment Information | The Company has one operating segment with one business activity, providing restraint solutions. The Company’s chief operating decision maker is its Chief Executive Officer, who manages operations for purposes of allocating resources. |
Income Taxes | Until its conversion to a corporation on March 31, 2017, the Company was treated as a partnership for federal and state income tax purposes and did not incur income taxes. Instead, its losses were included in the income tax returns of the member partners. No income tax expense was recorded for the periods ended December 31, 2019 and 2018 due to losses incurred. Deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the Federal tax laws. Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimates. |
Subsequent Events | Management has evaluated events subsequent to December 31, 2019 through the date the accompanying financial statements were filed with the Securities and Exchange Commission and noted that there have been no events or transactions which would affect the Company’s financial statements for the year ended December 31, 2019. |
Recent Issued Accounting Guidance | Recently Adopted Accounting Pronouncement: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is intended to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ ROU Effective the First Quarter of 2020: In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (“ Topic 820 Other Pronouncements: The Company has reviewed other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoptions of any such pronouncements will be expected to cause a material impact on its financial condition or the results of operations. |
3. INVENTORIES, NET (Tables)
3. INVENTORIES, NET (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Inventory Disclosure [Abstract] | |
Schedule of inventories | December 31, 2019 2018 Finished goods $ 653,323 $ 82,313 Work in process 413 12,695 Raw materials 1,590,805 63,259 $ 2,244,541 $ 158,267 |
4. PROPERTY AND EQUIPMENT, NET
4. PROPERTY AND EQUIPMENT, NET (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | December 31, 2019 2018 Laboratory equipment $ 44,454 $ 13,980 Tooling 59,004 22,683 Computer equipment 83,368 12,608 Furniture, fixtures and improvements 128,782 9,595 315,608 58,866 Accumulated depreciation (72,732 ) (28,493 ) $ 242,876 $ 30,373 |
5. INTANGIBLE ASSETS, NET (Tabl
5. INTANGIBLE ASSETS, NET (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Summary of intangible assets | December 31, 2019 2018 Patents $ 176,425 $ 111,160 Trademarks 57,919 8,910 234,344 120,070 Accumulated amortization (4,061 ) (1,355 ) $ 230,283 $ 118,715 |
6. ACCOUNTS PAYABLE AND ACCRU_2
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Payables and Accruals [Abstract] | |
Summary of accrued liabilities | December 31, 2019 2018 Patent costs $ 6,851 $ 11,600 Accrued compensation 144,193 55,493 Warranty costs 13,923 428 Taxes and other 29,327 932 $ 194,294 $ 68,453 |
7. LEASES (Tables)
7. LEASES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Leases [Abstract] | |
Operating lease obligations | Operating lease liability- short term $ 128,131 Operating lease liability - long term 150,018 Total Operating Lease Liability $ 278,149 |
Future lease payments | 2020 $ 143,574 2021 101,406 2022 57,328 Total future minimum lease payments 302,308 Less imputed interest (24,159 ) Total $ 278,149 |
9. STOCKHOLDERS' EQUITY (Tables
9. STOCKHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Stockholders' Equity: | |
Warrant activity | Number Average Purchase Price Per Share Stock purchase warrants issued October 30, 2018 5,017,181 $ 4.82 Stock purchase warrants exercised - Shares purchasable under outstanding warrants at December 31, 2018 5,017,181 $ 4.82 Stock purchase warrants issued 2,076,922 $ 6.62 Stock purchase warrants exercised (473,483 ) $ 4.46 Shares purchasable under outstanding warrants at December 31, 2019 6,620,620 $ 5.41 |
Summary of stock purchase warrants | Number of Exercise Price Description Common Shares Per Share Expiration Date Purchase Warrants (1) 4,215,240 $ 5.00 October 30, 2020 Agent Warrants 328,458 $ 3.00 October 30, 2020 Purchase Warrants 1,923,076 $ 6.50 June 18, 2021 Agent Warrants 153,846 $ 8.125 June 18, 2021 (1) |
10. SHARE-BASED COMPENSATION (T
10. SHARE-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Stock option activity | Weighted Average Options on Remaining Aggregate Common Exercise Contractual Intrinsic Shares Price Term Value Outstanding January 1, 2018 - - Granted 2,067,500 $ 1.68 Exercised - - Forfeited, cancelled, expired - - Outstanding December 31, 2018 2,067,500 $ 1.68 4.44 Granted 1,000,000 5.41 5.00 Exercised (38,750 ) 1.50 - Forfeited, cancelled, expired (100,000 ) 1.50 - Outstanding December 31, 2019 2,928,750 $ 2.96 3.71 $10,031,388 Vested and exercisable at December 31, 2019 1,573,853 $ 1.64 3.43 $7,479,791 |
Assumptions used to compute the fair value of options granted | Year Ended December 31, 2019 2018 Expected stock price volatility 49 % 47% to 49% Risk-free interest rate 2.41 % 2.67% to 2.99% Forfeiture rate 0 % 0 % Expected dividend yield 0 % 0 % Expected life of options - years 3.50 2.75-5.00 Weighted-average fair value of options granted $ 2.06 $ 0.72 |
Stock options outstanding | Average Weighted Weighted Remaining Average Average Range of Number Contractual Exercise Number Exercise Exercise Prices Outstanding Life Price Exercisable Price $ 1.50 1,708,750 3.4 $ 1.50 1,448,853 $ 1.50 $ 3.00 - $3.61 220,000 4.07 $ 3.23 125,000 3.83 $ 5.41 1,000,000 4.22 $ 5.41 - - |
Service-based RSU activity | Weighted Average Service-Based Grant Date Vesting RSU's Fair Value Period Unvested at January 1, 2019 - Granted 308,087 $ 6.77 3 Years Vested - Forfeited and cancelled - Unvested at December 31, 2019 308,087 |
Stock-based compensation | Year Ended December 31, 2019 2018 Selling, general and administrative $ 1,410,095 $ 417,151 Research and development 126,001 95,837 Total stock-based expense $ 1,536,096 $ 512,988 |
12. INCOME TAXES (Tables)
12. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Provision for (benefit from) income taxes | Year Ended December 31, 2019 2018 Current tax benefit $ - $ - Deferred tax benefit 1,800,000 678,000 Change in valuation allowance (1,800,000 ) (678,000 ) Income tax benefit (provision) $ - $ - |
Reconciliation of the provision for income taxes | Year Ended December 31, 2019 2018 Income taxes benefit computed at federal statutory rate $ 1,748,000 $ 701,000 State income taxes, net of federal effect 114,000 - Research tax credits - 15,000 Permanent differences and other (62,000 ) (38,000 ) Change in valuation allowance (1,800,000 ) (678,000 ) Income tax benefit (provision) $ - $ - |
Deferred tax assets and liabilities | December 31, 2019 2018 Deferred tax assets: Net operating losses $ 2,430,000 $ 756,000 Research tax credits 26,000 23,000 Deferred compensation - 20,000 Stock compensation 239,000 76,000 Accruals and other 9,000 - 2,704,000 875,000 Deferred tax liabilities: Depreciation and other 58,000 29,000 58,000 29,000 Net deferred tax assets 2,646,000 846,000 Less valuation allowance (2,646,000 ) (846,000 ) Net deferred taxes after valuation allowance $ - $ - |
13. MAJOR CUSTOMERS AND RELAT_2
13. MAJOR CUSTOMERS AND RELATED INFORMATION (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Summary of revenues by geographic region | Year Ended December 31, 2019 2018 Americas $ 481,622 $ 18,670 Europe, Middle East and Africa 116,547 - Asia Pacific 98,621 4,480 $ 696,790 $ 23,150 |
1. ORGANIZATION AND SUMMARY O_3
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||
Antidilutive securities | 9,857,457 | 7,084,681 |
Advertising costs | $ 165,119 | $ 27,218 |
Product promotion costs | 433,172 | 192,484 |
Shipping and handling costs | 22,177 | 1,570 |
Revenues from shipping and handling | 21,414 | 670 |
Warranty reserve | $ 13,923 | $ 428 |
3. INVENTORIES, NET (Details)
3. INVENTORIES, NET (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Inventory Disclosure [Abstract] | ||
Finished goods | $ 653,323 | $ 82,313 |
Work in process | 413 | 12,695 |
Raw materials | 1,590,805 | 63,259 |
Inventory | $ 2,244,541 | $ 158,267 |
3. INVENTORIES, NET (Details Na
3. INVENTORIES, NET (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | ||
Inventory write down | $ (193,506) | $ 0 |
4. PROPERTY AND EQUIPMENT, NE_2
4. PROPERTY AND EQUIPMENT, NET (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Property and equipment, gross | $ 315,608 | $ 58,866 |
Accumulated depreciation | (72,732) | (28,493) |
Property and equipment, net | 242,876 | 30,373 |
Laboratory Equipment | ||
Property and equipment, gross | 44,454 | 13,980 |
Tooling | ||
Property and equipment, gross | 59,004 | 22,683 |
Computer Equipment | ||
Property and equipment, gross | 83,368 | 12,608 |
Furniture and Fixtures | ||
Property and equipment, gross | $ 128,782 | $ 9,595 |
4. PROPERTY AND EQUIPMENT, NE_3
4. PROPERTY AND EQUIPMENT, NET (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 44,239 | $ 20,520 |
5. INTANGIBLE ASSETS, NET (Deta
5. INTANGIBLE ASSETS, NET (Details) - USD ($) | Dec. 31, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Intangible assets, gross | $ 234,344 | $ 120,070 | |
Accumulated amortization | (4,061) | (1,355) | |
Intangible assets, net | $ 230,283 | 118,715 | |
Patents | |||
Intangible assets, gross | $ 176,425 | 111,160 | |
Trademarks | |||
Intangible assets, gross | $ 57,919 | $ 8,910 |
5. INTANGIBLE ASSETS, NET (De_2
5. INTANGIBLE ASSETS, NET (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 2,706 | $ 1,355 |
6. ACCOUNTS PAYABLE AND ACCRU_3
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Accrued liabilities | $ 194,294 | $ 68,453 |
Patent Costs | ||
Accrued liabilities | 6,851 | 11,600 |
Accrued Compensation | ||
Accrued liabilities | 144,193 | 55,493 |
Warranty Costs | ||
Accrued liabilities | 13,923 | 428 |
Other | ||
Accrued liabilities | $ 29,327 | $ 932 |
7. LEASES (Details)
7. LEASES (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Leases [Abstract] | ||
Operating lease liability- short term | $ 128,131 | $ 0 |
Operating lease liability - long term | 150,018 | $ 0 |
Total operating lease liability | $ 278,149 |
7. LEASES (Details 1)
7. LEASES (Details 1) | Dec. 31, 2019USD ($) |
Leases [Abstract] | |
2020 | $ 143,574 |
2021 | 101,406 |
2022 | 57,328 |
Total future minimum lease payments | 302,308 |
Less imputed interest | (24,159) |
Total | $ 278,149 |
7. LEASES (Details Narrative)
7. LEASES (Details Narrative) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Leases [Abstract] | |
Amortization of ROU operating lease assets | $ 80,069 |
Operating lease expense | $ 94,599 |
Weighted average remaining lease term | 2 years 3 months 18 days |
Weighted average discount rate | 7.00% |
9. STOCKHOLDERS' EQUITY (Detail
9. STOCKHOLDERS' EQUITY (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Stockholders' Equity: | ||
Warrants outstanding, beginning | 5,017,181 | 5,017,181 |
Issued | 2,076,922 | |
Exercised | (473,483) | 0 |
Warrants outstanding, ending | 6,620,620 | 5,017,181 |
Average purchase price per share outstanding, beginning | $ 4.82 | $ 4.82 |
Issued | 6.62 | |
Exercised | 4.46 | 0 |
Average purchase price per share outstanding, ending | $ 5.41 | $ 4.82 |
9. STOCKHOLDERS' EQUITY (Deta_2
9. STOCKHOLDERS' EQUITY (Details 1) | 12 Months Ended | |
Dec. 31, 2019USD ($)$ / shares | ||
Purchase Warrants | ||
Number of common shares | $ | $ 4,215,240 | [1] |
Exercise price per share | $ / shares | $ 5 | |
Expiration date | Oct. 30, 2020 | |
Agent Warrants | ||
Number of common shares | $ | $ 328,458 | |
Exercise price per share | $ / shares | $ 3 | |
Expiration date | Oct. 30, 2020 | |
Purchase Warrants | ||
Number of common shares | $ | $ 1,923,076 | |
Exercise price per share | $ / shares | $ 6.50 | |
Expiration date | Jun. 18, 2021 | |
Agent Warrants | ||
Number of common shares | $ | $ 153,846 | |
Exercise price per share | $ / shares | $ 8.125 | |
Expiration date | Jun. 18, 2021 | |
[1] | 333,334 warrants are held by a family trust of officer Elwood G. Norris. |
9. STOCKHOLDERS' EQUITY (Deta_3
9. STOCKHOLDERS' EQUITY (Details Narrative) - $ / shares | Dec. 31, 2019 | Dec. 31, 2018 |
Stockholders' Equity: | ||
Common stock, authorized | 150,000,000 | 150,000,000 |
Common stock, par value | $ 0.0001 | $ 0.0001 |
Preferred stock, authorized | 5,000,000 | 5,000,000 |
Preferred stock, par value | $ 0.0001 | $ 0.0001 |
10. SHARE-BASED COMPENSATION (D
10. SHARE-BASED COMPENSATION (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based Payment Arrangement [Abstract] | ||
Number of options outstanding, beginning | 2,067,500 | 0 |
Number of options granted | 1,000,000 | 2,067,500 |
Number of options exercised | (38,750) | 0 |
Number of options forfeited/cancelled/expired | (100,000) | 0 |
Number of options outstanding, ending | 2,928,750 | 2,067,500 |
Number of options vested and exercisable | 1,573,853 | |
Weighted average exercise price outstanding, beginning | $ 1.68 | $ .00 |
Weighted average exercise price granted | 5.41 | 1.68 |
Weighted average exercise price exercised | 1.50 | .00 |
Weighted average exercise price forfeited/cancelled/expired | 1.50 | .00 |
Weighted average exercise price outstanding, ending | 2.96 | $ 1.68 |
Weighted average exercise price vested and exercisable | $ 3.43 | |
Weighted average remaining contractual term outstanding, beginning | 4 years 5 months 28 days | |
Weighted average remaining contractual term granted | 5 years | |
Weighted average remaining contractual term outstanding, ending | 3 years 8 months 16 days | |
Weighted average remaining contractual term vested and exercisable | 3 years 5 months 5 days | |
Aggregate intrinsic value outstanding | $ 10,031,388 | |
Aggregate intrinsic value vested and exercisable | $ 7,479,791 |
10. SHARE-BASED COMPENSATION _2
10. SHARE-BASED COMPENSATION (Details 1) - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Expected stock price volatility | 49.00% | |
Risk-free interest rate | 2.41% | |
Forfeiture rate | 0.00% | 0.00% |
Expected dividend yield | 0.00% | 0.00% |
Expected life of options - years | 3 years 6 months | |
Weighted-average fair value of options granted | $ 2.06 | $ .72 |
Minimum | ||
Expected stock price volatility | 47.00% | |
Risk-free interest rate | 2.67% | |
Expected life of options - years | 2 years 9 months | |
Maximum | ||
Expected stock price volatility | 49.00% | |
Risk-free interest rate | 2.99% | |
Expected life of options - years | 5 years |
10. SHARE-BASED COMPENSATION _3
10. SHARE-BASED COMPENSATION (Details 2) - $ / shares | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Number of options outstanding | 2,928,750 | 2,067,500 | 0 |
Weighted average remaining contractual term outstanding | 3 years 8 months 16 days | ||
Weighted average exercise price outstanding | $ 2.96 | $ 1.68 | $ .00 |
Number exercisable | 1,573,853 | ||
Weighted average exercise price exerciseable | $ 3.43 | ||
$1.50 | |||
Number of options outstanding | 1,708,750 | ||
Weighted average remaining contractual term outstanding | 3 years 4 months 24 days | ||
Weighted average exercise price outstanding | $ 1.50 | ||
Number exercisable | 1,448,853 | ||
Weighted average exercise price exerciseable | $ 1.50 | ||
$3.00 - $3.61 | |||
Number of options outstanding | 220,000 | ||
Weighted average remaining contractual term outstanding | 4 years 25 days | ||
Weighted average exercise price outstanding | $ 3.23 | ||
Number exercisable | 125,000 | ||
Weighted average exercise price exerciseable | $ 3.83 | ||
$5.41 | |||
Number of options outstanding | 1,000,000 | ||
Weighted average remaining contractual term outstanding | 4 years 2 months 19 days | ||
Weighted average exercise price outstanding | $ 5.41 | ||
Number exercisable | 0 | ||
Weighted average exercise price exerciseable | $ .00 |
10. SHARE-BASED COMPENSATION _4
10. SHARE-BASED COMPENSATION (Details 3) | 12 Months Ended |
Dec. 31, 2019$ / sharesshares | |
Share-based Payment Arrangement [Abstract] | |
Unvested service-based RSUs outstanding, beginning | 0 |
Granted | 308,087 |
Vested | 0 |
Forfeited and cancelled | 0 |
Unvested service-based RSUs outstanding, ending | 308,087 |
Grant date fair value | $ / shares | $ 6.77 |
Vesting period | 3 years |
10. SHARE-BASED COMPENSATION _5
10. SHARE-BASED COMPENSATION (Details 4) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Share-based compensation | $ 1,536,096 | $ 512,988 |
Selling, General and Administrative | ||
Share-based compensation | 1,410,095 | 417,151 |
Research and Development | ||
Share-based compensation | $ 126,001 | $ 95,837 |
10. SHARE-BASED COMPENSATION _6
10. SHARE-BASED COMPENSATION (Details Narrative) | 12 Months Ended |
Dec. 31, 2019USD ($)shares | |
Share-based Payment Arrangement [Abstract] | |
Service-based RSUs granted | shares | 308,087 |
Unrecognized compensation cost | $ | $ 3,500,000 |
Unrecognized compensation cost, period of recognition | 2 years 1 month 20 days |
11. COMMITMENTS AND CONTINGEN_2
11. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Royalties incurred | $ 23,297 | $ 871 |
Purchase commitment | $ 82,000 |
12. INCOME TAXES (Details)
12. INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Current tax benefit | $ 0 | $ 0 |
Deferred tax benefit | 1,800,000 | 678,000 |
Change in valuation allowance | (1,800,000) | (678,000) |
Income tax benefit (provision) | $ 0 | $ 0 |
12. INCOME TAXES (Details 1)
12. INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Income taxes benefit computed at federal statutory rate | $ 1,748,000 | $ 701,000 |
State income taxes, net of federal effect | 114,000 | 0 |
Research tax credits | 0 | 15,000 |
Permanent differences and other | (62,000) | (38,000) |
Change in valuation allowance | (1,800,000) | (678,000) |
Income tax benefit (provision) | $ 0 | $ 0 |
12. INCOME TAXES (Details 2)
12. INCOME TAXES (Details 2) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred tax assets: | ||
Net operating losses | $ 2,430,000 | $ 756,000 |
Research tax credits | 26,000 | 23,000 |
Deferred compensation | 0 | 20,000 |
Stock compensation | 239,000 | 76,000 |
Accruals and other | 9,000 | 0 |
Deferred tax assets | 2,704,000 | 875,000 |
Deferred tax liabilities: | ||
Depreciation and other | 58,000 | 29,000 |
Deferred tax liabilities | 58,000 | 29,000 |
Net deferred tax assets | 2,646,000 | 846,000 |
Less valuation allowance | (2,646,000) | (846,000) |
Net deferred taxes after valuation allowance | $ 0 | $ 0 |
12. INCOME TAXES (Details Narra
12. INCOME TAXES (Details Narrative) | Dec. 31, 2019USD ($) |
Income Tax Disclosure [Abstract] | |
Operating loss carryforward | $ 11,080,000 |
Windfall tax deductions | $ 144,000 |
13. MAJOR CUSTOMERS AND RELAT_3
13. MAJOR CUSTOMERS AND RELATED INFORMATION (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Revenues | $ 696,790 | $ 23,150 |
Americas | ||
Revenues | 481,622 | 18,670 |
Europe, Middle East and Africa | ||
Revenues | 116,547 | 0 |
Asia Pacific | ||
Revenues | $ 98,621 | $ 4,480 |
14. RELATED PARTY TRANSACTIONS
14. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Related Party Transactions [Abstract] | ||
Payment to related party during period | $ 18,000 | $ 18,000 |