Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | May 19, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | DIGITAL ALLY INC | |
Entity Central Index Key | 0001342958 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
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 | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 16,127,110 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2020 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 328,526 | $ 359,685 |
Accounts receivable-trade, less allowance for doubtful accounts of $123,224 - 2020 and 2019 | 1,538,487 | 1,071,018 |
Accounts receivable-other | 558,763 | 514,730 |
Inventories, net | 5,137,886 | 5,280,412 |
Income tax refund receivable, current | 44,650 | 44,650 |
Prepaid expenses | 420,812 | 381,090 |
Total current assets | 8,029,124 | 7,651,585 |
Furniture, fixtures and equipment, net | 150,468 | 197,063 |
Intangible assets, net | 417,585 | 413,268 |
Operating lease right of use assets | 94,449 | 122,459 |
Other assets | 545,252 | 532,500 |
Total assets | 9,236,878 | 8,916,875 |
Current liabilities: | ||
Accounts payable | 2,305,070 | 2,339,985 |
Accrued expenses | 874,364 | 845,881 |
Current portion of operating lease obligations | 49,828 | 159,160 |
Contract liabilities-current | 1,897,502 | 1,707,943 |
Unsecured promissory note payable, net of unamortized discount of $0 - 2020 and $66,061 - 2019 | 300,000 | 233,939 |
Unsecured promissory note payable - related party | 289,000 | |
Secured convertible notes at fair value - current portion | 1,593,809 | |
Income taxes payable | 5,934 | 5,934 |
Total current liabilities | 5,721,698 | 6,886,651 |
Long-term liabilities: | ||
Proceeds investment agreement, at fair value | 6,193,000 | 6,500,000 |
Operating lease obligation, long term | 44,620 | 44,460 |
Contract liabilities-long term | 1,751,070 | 1,803,143 |
Total liabilities | 13,710,388 | 15,234,254 |
Commitments and contingencies | ||
Stockholders' Deficit: | ||
Common stock, $0.001 par value; 50,000,000 shares authorized; shares issued: 16,067,928 - 2020 and 12,079,095 - 2019 | 16,068 | 12,079 |
Additional paid in capital | 87,390,377 | 83,216,387 |
Treasury stock, at cost (63,518 shares) | (2,157,226) | (2,157,226) |
Accumulated deficit | (89,722,729) | (87,388,619) |
Total stockholders' deficit | (4,473,510) | (6,317,379) |
Total liabilities and stockholders' deficit | $ 9,236,878 | $ 8,916,875 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts receivable | $ 123,224 | $ 123,224 |
Net of unamortized discount | $ 0 | $ 66,061 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 16,067,928 | 12,079,095 |
Treasury stock shares | 63,518 | 63,518 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenue: | ||
Total revenue | $ 2,425,745 | $ 2,550,796 |
Cost of revenue: | ||
Total cost of revenue | 1,160,717 | 1,369,056 |
Gross profit | 1,265,028 | 1,181,740 |
Selling, general and administrative expenses: | ||
Research and development expense | 485,748 | 462,171 |
Selling, advertising and promotional expense | 682,381 | 755,989 |
Stock-based compensation expense | 311,677 | 725,198 |
General and administrative expense | 1,712,590 | 2,324,540 |
Total selling, general and administrative expenses | 3,192,396 | 4,267,898 |
Operating loss | (1,927,368) | (3,086,158) |
Other income (expense): | ||
Interest income | 6,263 | 17,984 |
Interest expense | (307,560) | |
Change in fair value of secured convertible notes | (412,445) | |
Change in fair value of proceeds investment agreement | 307,000 | (137,000) |
Total other expense | (406,742) | (119,016) |
Loss before income tax benefit | (2,334,110) | (3,205,174) |
Income tax benefit | ||
Net loss | $ (2,334,110) | $ (3,205,174) |
Net loss per share information: | ||
Basic | $ (0.17) | $ (0.29) |
Diluted | $ (0.17) | $ (0.29) |
Weighted average shares outstanding: | ||
Basic | 13,888,438 | 10,941,856 |
Diluted | 13,888,438 | 10,941,856 |
Product [Member] | ||
Revenue: | ||
Total revenue | $ 1,766,536 | $ 1,920,464 |
Cost of revenue: | ||
Total cost of revenue | 989,247 | 1,263,071 |
Service and other [Member] | ||
Revenue: | ||
Total revenue | 659,209 | 630,332 |
Cost of revenue: | ||
Total cost of revenue | $ 171,470 | $ 105,985 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' Deficit (Unaudited) - USD ($) | Common Stock [Member] | Additional Paid in Capital [Member] | Treasury Stock [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2018 | $ 10,445 | $ 78,117,507 | $ (2,157,226) | $ (77,382,906) | $ (1,412,180) |
Balance, shares at Dec. 31, 2018 | 10,445,445 | ||||
Stock-based compensation | 725,198 | 725,198 | |||
Restricted common stock grant | $ 522 | (522) | |||
Restricted common stock grant, shares | 522,110 | ||||
Restricted common stock forfeitures | $ (2) | 2 | |||
Restricted common stock forfeitures, shares | (2,500) | ||||
Issuance of common stock upon exercise of common stock purchase warrants | $ 161 | 515,839 | 516,000 | ||
Issuance of common stock upon exercise of common stock purchase warrants, shares | 161,000 | ||||
Net loss | (3,205,174) | (3,205,174) | |||
Balance at Mar. 31, 2019 | $ 11,126 | 79,358,024 | (2,157,226) | (80,588,080) | (3,376,156) |
Balance, shares at Mar. 31, 2019 | 11,126,055 | ||||
Balance at Dec. 31, 2018 | $ 10,445 | 78,117,507 | (2,157,226) | (77,382,906) | (1,412,180) |
Balance, shares at Dec. 31, 2018 | 10,445,445 | ||||
Net loss | 10,000,000 | ||||
Balance at Dec. 31, 2019 | $ 12,079 | 83,216,387 | (2,157,226) | (87,388,619) | (6,317,379) |
Balance, shares at Dec. 31, 2019 | 12,079,095 | ||||
Stock-based compensation | 311,677 | 311,677 | |||
Restricted common stock grant | $ 530 | (530) | |||
Restricted common stock grant, shares | 530,050 | ||||
Restricted common stock forfeitures | $ (23) | 23 | |||
Restricted common stock forfeitures, shares | (22,500) | ||||
Issuance of common stock through underwritten public offering (net of offering expenses and underwriters' discount) | $ 2,522 | 2,499,614 | 2,502,136 | ||
Issuance of common stock through underwritten public offering (net of offering expenses and underwriters' discount), shares | 2,521,740 | ||||
Issuance of common stock upon conversion of secured convertible debentures and accrued interest | $ 960 | 1,342,400 | 1,343,360 | ||
Issuance of common stock upon conversion of secured convertible debentures and accrued interest, shares | 959,543 | ||||
Issuance of common stock purchase warrants in connection with issuance of unsecured promissory note payable | 20,806 | 20,806 | |||
Net loss | (2,334,110) | (2,334,110) | |||
Balance at Mar. 31, 2020 | $ 16,068 | $ 87,390,377 | $ (2,157,226) | $ (89,722,729) | $ (4,473,510) |
Balance, shares at Mar. 31, 2020 | 16,067,928 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Cash Flows From Operating Activities: | |||
Net loss | $ (2,334,110) | $ (3,205,174) | $ 10,000,000 |
Adjustments to reconcile net loss to net cash flows used in operating activities: | |||
Depreciation and amortization | 72,941 | 109,116 | |
Stock based compensation | 311,677 | 725,198 | |
Provision for inventory obsolescence | 285,130 | 162,856 | |
Amortization of discount on unsecured promissory notes | 86,867 | ||
Change in fair value of secured convertible notes | 412,445 | ||
Change in fair value of proceeds investment agreement | (307,000) | 137,000 | |
(Increase) decrease in: | |||
Accounts receivable - trade | (467,469) | 145,637 | |
Accounts receivable - other | (44,033) | (52,539) | |
Inventories | (142,604) | (159,129) | |
Prepaid expenses | (39,722) | 191,772 | |
Operating lease right of use assets | 28,010 | 113,325 | |
Other assets | (12,752) | (41,803) | |
Increase (decrease) in: | |||
Accounts payable | (34,915) | 839,108 | |
Accrued expenses | 112,769 | (419,695) | |
Income taxes payable | 244 | ||
Operating lease obligations | (109,172) | (32,164) | |
Contract liabilities | 137,486 | (164,272) | |
Net cash used in operating activities | (2,044,452) | (1,650,520) | |
Cash Flows from Investing Activities: | |||
Purchases of furniture, fixtures and equipment | (1,666) | (59,277) | |
Additions to intangible assets | (28,997) | (25,489) | |
Proceeds from the sale of equipment | |||
Net cash used in investing activities | (30,663) | (84,766) | |
Cash Flows from Financing Activities: | |||
Proceeds from unsecured promissory note payable, related party | 289,000 | ||
Proceeds from unsecured promissory note payable | 100,000 | ||
Proceeds from sale of common stock in underwritten public offering | 2,502,136 | ||
Principal payment on subordinated notes payable | (100,000) | ||
Principal payment on secured convertible notes | (747,180) | ||
Proceeds from issuance of common stock upon exercise of warrants | 516,000 | ||
Net cash provided by financing activities | 2,043,956 | 516,000 | |
Net decrease in cash and cash equivalents | (31,159) | (1,219,286) | |
Cash, cash equivalents, beginning of period | 359,685 | 3,598,807 | 3,598,807 |
Cash, cash equivalents, end of period | 328,526 | 2,379,521 | $ 359,685 |
Supplemental disclosures of cash flow information: | |||
Cash payments for interest | 119,835 | ||
Cash payments for income taxes | 5,756 | ||
Supplemental disclosures of non-cash investing and financing activities: | |||
Restricted common stock grant | 530 | 522 | |
Restricted common stock forfeitures | 23 | 2 | |
Impact of Adoption of ASC 842 - obtaining right of use asset for lease liability | 500,751 | ||
Issuance of common stock upon conversion of secured convertible notes | 1,343,360 | ||
Amounts allocated to common stock purchase warrants in connection with issuance of unsecured promissory note payable | $ 20,806 |
Nature of Business and Summary
Nature of Business and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business and Summary of Significant Accounting Policies | NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations: Digital Ally, Inc. and subsidiary (collectively, “Digital Ally,” “Digital,” the “Company”) produces digital video imaging and storage products for use in law enforcement, security and commercial applications. Its products are an in-car digital video/audio recorder contained in a rear-view mirror for use in law enforcement and commercial fleets; a system that provides its law enforcement customers with audio/video surveillance from multiple vantage points and hands-free automatic activation of body-worn cameras and in-car video systems; a miniature digital video system designed to be worn on an individual’s body; and cloud storage solutions. The Company has recently added a line of disinfectants manufactured by a third party for use against viruses and bacteria and is offering such products to its law enforcement and commercials customers beginning in the second quarter 2020. The Company has active research and development programs to adapt its technologies to other applications. It can integrate electronic, radio, computer, mechanical, and multi-media technologies to create unique solutions to address needs in a variety of other industries and markets, including mass transit, school bus, taxicab and the military. The Company sells its products to law enforcement agencies, private security customers and organizations and consumer and commercial fleet operators through direct sales domestically and third-party distributors internationally. The Company was originally incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc. and had no operations until 2004. On November 30, 2004, Vegas Petra, Inc. entered into a Plan of Merger with Digital Ally, Inc., at which time the merged entity was renamed Digital Ally, Inc. Basis of Presentation: The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The balance sheet at December 31, 2019 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. For further information, refer to the financial statements and footnotes included in the Company’s annual report on Form 10-K for the year ended December 31, 2019. COVID-19 pandemic: The World Health Organization has declared the outbreak of Covid-19, or coronavirus, which began in December 2019, a pandemic and the U.S. federal government has declared it a national emergency. The Covid-19 pandemic had a negative impact our revenues in the first quarter 2020 and we expect it will adversely affect our business and operations during the remainder of 2020 and while its full and continued impact cannot be determined at present, however it will have a material adverse effect on our future business, financial condition, results of operations, or cash flows. The global spread of Covid-19 has already created significant volatility, uncertainty and economic disruption in the markets in which we operate. Governments, public institutions, and other organizations in countries and localities where cases of Covid-19 have been detected are taking certain emergency measures to mitigate its spread, including implementing travel restrictions and closing factories, schools, public buildings, and businesses. We are closely monitoring the spread of Covid-19 and continually assessing its potential effects on our business. The extent to which our future results are affected by COVID-19 will largely depend on future developments that cannot be accurately predicted, including the duration and scope of the pandemic, governmental and business responses to the pandemic and the impact on the global economy, our customers’ demand for our products and services, and our ability to provide our products and services, particularly as result of our employees working remotely and/or the closure of certain offices and facilities. While these factors are uncertain, the COVID-19 pandemic or the perception of its effects will have a material adverse effect on our business, financial condition, results of operations, or cash flows. Management’s Liquidity Plan and Going Concern: The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred operating losses for the three months ended March 31, 2020 and for the year ended December 31, 2019 primarily due to reduced revenues and gross margins caused by a variety of factors, including the Covid-19 pandemic and its related effects on our customers and our supply chain, and by competitors’ introduction of newer products with more advanced features together with significant price cutting of their products. The Company incurred net losses of approximately $2.3 million during the three months ended March 31, 2020 and $10.0 million for the year ended December 31, 2019 and it had an accumulated deficit of $89.7 million as of March 31, 2020. During 2019, the Company settled one of its patent infringement cases and received a lump sum payment of $6.0 million, which was used to pay its obligations under its Proceeds Investment Agreement, as more fully described in Note 3. In recent years the Company has accessed the public and private capital markets to raise funding through the issuance of debt and equity. In that regard, the Company raised $2.5 million in an underwritten public offering of common stock and $389,000 in unsecured promissory notes and detachable warrants during the three months ended March 31, 2020. In addition, the Company raised $1,564,000 in the year ended December 31, 2019 from the exercise of warrants, the Company borrowed $300,000 pursuant to a short-term promissory note payable on December 23, 2019 with detachable warrants to purchase 107,000 shares of common stock and on August 5, 2019, it raised funds from the issuance of $2.78 million principal balance of secured convertible notes with detachable warrants to purchase 571,248 shares of common stock with the net proceeds being used for working capital purposes as more fully described in Note 3. These debt and equity raises were utilized to fund its operations and management expects to continue this pattern until it achieves positive cash flows from operations, although it can offer no assurance in this regard. On April 4, 2020, the Company entered into a promissory note providing for a loan of $1,418,900 (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan has a two-year term and bears interest at a rate of 0.98% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The promissory note contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that the PPP Loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. The Company intends to use the majority of the PPP Loan amount for qualifying expenses and to apply for forgiveness of the loan in accordance with the terms of the CARES Act. The Company settled its lawsuit with the PGA Tour and the case was dismissed by the Plaintiff with prejudice on April 17, 2019. Additionally, the Company settled its lawsuit with WatchGuard on May 13, 2019 and the case was dismissed. See Note 8, “Contingencies” for the details respecting the settlements. The Company will have to restore positive operating cash flows and profitability over the next year and/or raise additional capital to fund its operational plans, meet its customary payment obligations and otherwise execute its business plan. There can be no assurance that it will be successful in restoring positive cash flows and profitability, or that it can raise additional financing when needed, and obtain it on terms acceptable or favorable to the Company. The Company has increased its addressable market to non-law enforcement customers and obtained new non-law enforcement contracts in 2020 and 2019, which contracts include recurring revenue during the period 2020 to 2023. The Company believes that its quality control and cost cutting initiatives, expansion to non-law enforcement sales channels and new product introduction will eventually restore positive operating cash flows and profitability, although it can offer no assurances in this regard. The extent to which our future operating results are affected by COVID-19 will largely depend on future developments which cannot be accurately predicted, including the duration and scope of the pandemic, governmental and business responses to the pandemic and the impact on the global economy, our customers’ demand for our products and services, and our ability to provide our products and services, particularly as result of our employees working remotely and/or the closure of certain offices and facilities. While these factors are uncertain, the COVID-19 pandemic or the perception of its effects will have a material adverse effect on our business, financial condition, results of operations, or cash flows. Based on the uncertainties described above, the Company believes its business plan does not alleviate the existence of substantial doubt about its ability to continue as a going concern within one year from the date of the issuance of these unaudited condensed consolidated financial statements. The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Basis of Consolidation: The accompanying financial statements include the consolidated accounts of Digital Ally and its wholly-owned subsidiary, Digital Ally International, Inc. All intercompany balances and transactions have been eliminated during consolidation. The Company formed Digital Ally International, Inc. during August 2009 to facilitate the export sales of its products. Segments of Business: Management has determined that its operations are comprised of one reportable segment: the sale of digital audio and video recording and speed detection devices. For the three months ended March 31, 2020 and 2019, sales by geographic area were as follows: Three Months Ended 2020 2019 Sales by geographic area: United States of America $ 2,371,687 $ 2,514,342 Foreign 54,058 36,454 $ 2,425,745 $ 2,550,796 Sales to customers outside of the United States are denominated in U.S. dollars. All Company assets are physically located within the United States. Recently Adopted Accounting Standards: In February 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-02, Leases The Company adopted the new guidance on January 1, 2019 using the optional transitional method and elected to use the package of three practical expedients which allows the Company not to reassess whether contracts are or contain leases, lease classification and whether initial direct costs qualify for capitalization. The Company has completed its assessment of the impact of the standard and determined that the only lease that the Company held was an operating lease for its office and warehouse space. Upon adoption of the standard, the Company recorded Right of Use (ROU) assets of approximately $501,000 and lease liabilities of approximately $582,000 related to it office and warehouse space operating leases. The Company also removed deferred rent of approximately $81,000 when adopting the new guidance. ASU 2018-09, Codification improvements, clarifies the accounting for a debt extinguishment when the fair value option is elected. Upon extinguishment an entity shall include in net income the cumulative amount of the gain or loss previously recorded in other comprehensive income for the extinguished debt that resulted from changes in instrument-specific credit risk. The ASU is effective for calendar-year public business entities beginning in 2019. For all other calendar-year entities, it is effective for annual periods beginning in 2020 and interim periods beginning in 2021. Early adoption is permitted for any fiscal year or interim period for which an entity’s financial statements have not yet been issued or have not been made available to be issued. We have considered this guidance and its impact on this debt accounted for at fair value. Based on discussions with our valuation expert and knowledge of the Company there was no change in valuation caused by a change in the Company’s credit risk during the period such debt was outstanding. Since there is no change accounted for as a change in Credit Risk (included in other comprehensive income/loss), there is no impact to the Company’s financial statements from this new guidance. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” to improve information on credit losses for financial assets and net investment in leases that are not accounted for at fair value through net income. ASU 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. In April 2019 and May 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” and ASU No. 2019-05, “Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief” which provided additional implementation guidance on the previously issued ASU. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),” which defers the effective date for public filers that are considered small reporting companies (“SRC”) as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Since the Company is an SRC, implementation will not be required until January 1, 2023. The Company will continue to evaluate the effect of adopting ASU 2016-13 will have on the Company’s consolidated financial statements. In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement In August 2018, the FASB issued ASU No. 2018-15, Intangible-Goodwill and Other Internal-Use Software (Subtopic 350-40) In December 2019, the FASB issued ASU No. 2019-12, Income Taxes - simplifying the accounting for income taxes (Topic 740), which is meant to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, Income Taxes. The amendment also improves consistent application and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The adoption of this standard did not have a significant impact on the Company’s financial position and results of operations. |
Inventories
Inventories | 3 Months Ended |
Mar. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Inventories | NOTE 2. INVENTORIES Inventories consisted of the following at March 31, 2020 and December 31, 2019: March 31, December 31, 2019 Raw material and component parts $ 4,312,384 $ 4,481,611 Work-in-process 60,862 35,858 Finished goods 4,881,662 4,906,956 Subtotal 9,254,908 9,424,425 Reserve for excess and obsolete inventory (4,117,022 ) (4,144,013 ) Total $ 5,137,886 $ 5,280,412 Finished goods inventory includes units held by potential customers and sales agents for test and evaluation purposes. The cost of such units totaled $124,557 and $80,711 as of March 31, 2020 and December 31, 2019, respectively. |
Debt Obligations
Debt Obligations | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Debt Obligations | NOTE 3. DEBT OBLIGATIONS Debt obligations is comprised of the following: March 31, December 31, 2019 2019 Secured convertible notes, at fair value $ — $ 1,593,809 2018 Proceeds investment agreement, at fair value 6,193,000 6,500,000 Unsecured promissory notes payable, less unamortized discount of $-0- and $66,061 at March 31, 2020 and December 31, 2019, respectively 300,000 233,939 Unsecured promissory notes payable – Related party 289,000 — Debt obligations $ 6,782,000 $ 8,327,748 2019 Secured Convertible Notes On August 5, 2019, the Company, entered into a securities purchase agreement with several accredited investors providing for the issuance of (i) the Company’s 8% secured convertible notes due August 4, 2020 with a principal face amount of $2,777,777.78, which convertible notes are, subject to certain conditions, convertible into 1,984,126 shares of the Company’s common stock, at a price per share of $1.40; (ii) five-year warrants to purchase an aggregate of 571,428 shares of Common Stock at an exercise price of $1.8125, which warrants are immediately exercisable upon issuance and on a cashless basis if the Warrants have not been registered 180 days after the date of issuance; and (iii) the issuance of shares of common stock equal to 5% of the aggregate purchase price of the convertible notes, with an aggregate value of $125,000 (the “Commitment Shares”). The accredited investors purchased the foregoing securities for an aggregate cash purchase price of $2,500,000. Under the purchase agreement, the convertible notes and warrants contain provisions whereby the accredited investors are prohibited from exercising their rights to convert the notes or exercise the warrants if, as a result of such conversion or exercise, such holder, together with its affiliates, would own more than 4.99% of the total number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise. However, the investors may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after such notice to the Company. The Company elected to account for the secured convertible notes on the fair value basis. Therefore, the Company determined the fair value of the (1) secured convertible notes, (2) the Commitment Shares and (3) the common stock purchase warrants which yielded estimated fair values of the secured convertible notes including their embedded derivatives, the Commitment Shares and the detachable common stock purchase warrants. The following represents the resulting fair value as determined on August 5, 2019, the date of origination: Secured convertible notes $ 1,845,512 Common stock issued as Commitment Shares 118,749 Common stock purchase warrants 535,739 Gross cash proceeds $ 2,500,000 During the three months ended March 31, 2020, the holders of the 2019 Convertible Notes exercised their right to convert principal balances aggregating $1,259,074 into equity. In addition, the Company paid regular monthly principal payments totaling $172,839 during the three months ended March 31, 2020 and on March 3, 2020, the Company exercised its right to prepay in cash the remaining outstanding principal balance aggregating $574,341. There remains no outstanding 2019 Convertible notes as of March 31, 2020 as a result of these conversions and prepayments. Under the fair value basis, the Company determines the fair value of the secured convertible notes and adjusts the carrying value of the secured convertible notes at each reporting date with the resulting charge or credit being reflected in the condensed consolidated statement of operations. Following is an analysis of the activity in the secured convertible notes during the three months ended March 31, 2020: Amount Balance at December 31, 2019 $ 1,593,809 Principal repaid during the period by issuance of common stock (1,259,074 ) Principal repaid during the period by payment of cash (747,180 ) Change in fair value of secured convertible note during the period 412,445 Balance at March 31, 2020 $ — Following is a range of certain estimates and assumptions utilized as of December 31, 2019 to determine the fair value of secured convertible notes: December 31, 2019 Assumptions Volatility – range 115 % Risk-free rate 1.60 % Contractual term 0.6 years Calibrated stock price $ 1.06 Debt yield 123.6 % 2018 Proceeds Investment Agreement On July 31, 2018, the Company entered into a Proceeds Investment Agreement (the “PIA Agreement”) with Brickell Key Investments LP (“BKI”), pursuant to which BKI funded an aggregate of $500,000 (the “First Tranche”) to be used (i) to fund the Company’s litigation proceedings relating to the infringement of certain patent assets listed in the PIA Agreement and (ii) to repay the Company’s existing debt obligations and for certain working capital purposes set forth in the PIA Agreement. Pursuant to the PIA Agreement, BKI was granted an option to provide the Company with an additional $9.5 million, at BKI’s sole discretion (the “Second Tranche”). On August 21, 2018, BKI exercised its option on the Second Tranche for $9.5 million which completed the $10 million funding. Pursuant to the PIA Agreement and in consideration for the $10 million in funding, the Company agreed to assign to BKI (i) 100% of all gross, pre-tax monetary recoveries paid by any defendant(s) to the Company or its affiliates agreed to in a settlement or awarded in judgment in connection with the patent assets, plus any interest paid in connection therewith by such defendant(s) (the “Patent Assets Proceeds”), up to the minimum return (as defined in the Agreement) and (ii) if BKI has not received its minimum return by the earlier of a liquidity event (as defined in the Agreement) and July 31, 2020, then the Company agreed to assign to BKI 100% of the Patent Asset Proceeds until BKI has received an amount equal to the minimum return on $4.0 million. Pursuant to the PIA Agreement, the Company granted BKI (i) a senior security interest in the Patent Assets, the claims (as defined in the Agreement) and the Patent Assets Proceeds until such time as the minimum return is paid, in which case, the security interest on the patent assets, the claims and the Patent Assets Proceeds will be released, and (ii) a senior security interest in all other assets of the Company until such time as the minimum return is paid on $4.0 million, in which case, the security interest on such other assets will be released. The security interest is enforceable by BKI if the Company is in default under the PIA Agreement which would occur if (i) the Company fails, after five (5) days’ written notice, to pay any due amount payable to BKI under the PIA Agreement, (ii) the Company fails to comply with any provision of the PIA Agreement or any other agreement or document contemplated under the PIA Agreement, (iii) the Company becomes insolvent or insolvency proceedings are commenced (and not subsequently discharged) with respect to the Company, (iv) the Company’s creditors commence actions against the Company (which are not subsequently discharged) that affect material assets of the Company, (v) the Company, without BKI’s consent, incurs indebtedness other than immaterial ordinary course indebtedness up to $500,000, (vi) the Company fails, within five (5) business days following the closing of the second tranche, to fully satisfy its obligations to certain holders of the Company’s senior secured convertible promissory notes listed in the PIA Agreement and fails to obtain unconditional releases from such holders as to the Company’s obligations to such holders and the security interests in the Company held by such holders or (vii) there is an uncured non-compliance of the Company’s obligations or misrepresentations by the Company under the PIA Agreement. Under the PIA Agreement, the Company issued BKI a warrant to purchase up to 465,712 shares of the Company’s common stock, par value $0.001 per share (the “PIA Warrant”), at an exercise price of $2.60 per share provided that the holder of the PIA Warrant will be prohibited from exercising the PIA Warrant if, as a result of such exercise, such holder, together with its affiliates, would own more than 4.99% of the total number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise. However, such holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after such notice to the Company. The PIA Warrant is exercisable for five years from the date of issuance and is exercisable on a cashless exercise basis if there is no effective registration statement. No contractual registration rights were given. The Company elected to account for the PIA on the fair value basis. Therefore, the Company determined the fair value of the PIA and PIA Warrants which yielded estimated fair values of the PIA including their embedded derivatives and the detachable PIA Warrants as follows: Proceeds investment agreement $ 9,067,513 Common stock purchase warrants 932,487 Gross cash proceeds $ 10,000,000 The Company utilized a probability weighted present value of expected patent asset proceeds for the litigation involving both Axon and WatchGuard (see Note 12 – Commitments and Contingencies) which involved estimates of the amount and timing of the expected patent asset proceeds from the alleged patent infringement. The fair value of the PIA is updated for actual and estimated activity affecting the probability weighted present value of expected patent asset proceeds at each reporting date with the change charged/credited to operations. Following is a range of certain estimates and assumptions utilized as of March 31, 2020 and December 31, 2019 to probability weighted present value of expected patent asset proceeds for the litigation involving both Axon and WatchGuard: March 31, 2020 December 31, 2019 Discount rate 3.6% - 21.3 % 3.0% - 16.6 % Expected term to patent asset proceeds payment 0.33 years – 3.75 years 0.58 years - 4 years Probability of success 5.9% - 38.5 % 5.9% - 38.5 % Estimated minimum return payable to BKI $ 21 million $ 21 million Negotiation discount 43.3 % 43.3 % In May 2019, the Company settled its patent infringement litigation with WatchGuard whereby it received a lump-sum payment of $6.0 million as further described in Note 8. In accordance with the terms of the PIA, the Company remitted the $6.0 as a principal payment toward its minimum return payment obligations under the PIA. The following represents activity in the PIA during the three months ended March 31, 2020: Beginning balance as of December 31, 2019 $ 6,500,000 Repayment of obligation — Change in the fair value during the period (307,000 ) Ending balance as of March 31, 2020 $ 6,193,000 Unsecured Promissory Notes Payable On December 23, 2019, the Company, borrowed $300,000 under an unsecured note payable to a private, third-party lender. The promissory note bears interest at the rate of 8% per annum with principal and accrued interest payable on or before its maturity date of March 31, 2020 (this note was repaid in full on May 6, 2020).. The Company granted the lender warrants exercisable to purchase a total of 107,000 shares of its common stock at an exercise price of $1.40 per share until December 23, 2024. The Company allocated $71,869 of the proceeds of the promissory note to additional paid-in-capital, which represented the grant date relative fair value of the warrants issued to the lender. The discount was amortized to interest expense ratably over the term of the promissory note which approximates the effective interest method. The amortization of discount resulted in $66,061 of the discount amortized to interest expense during the three months ended March 31, 2020. On January 17, 2020, the Company, borrowed $100,000 under an unsecured note payable to a private, third-party lender. The promissory note bore interest at the rate of 8% per annum with principal and accrued interest payable on or before its maturity date of April 17, 2020. The Company granted the lender warrants exercisable to purchase a total of 35,750 shares of its common stock at an exercise price of $1.40 per share until January 17, 2025. The Company allocated $20,806 of the proceeds of the promissory note to additional paid-in-capital, which represented the grant date relative fair value of the warrants issued to the lender. The note was repaid in full on March 12, 2020 and the discount was amortized to interest expense through the date of payment. The amortization of discount resulted in $20,806 of the discount amortized to interest expense during the three months ended March 31, 2020. Unsecured Promissory Notes Payable – Related party During February 2020, the Company borrowed a total of $289,000 from the Company’s Chairman, CEO & President under an unsecured promissory note bearing interest at 6% through its May 28, 2020 maturity date. The proceeds from the note were used for general corporate purposes. Total interest accrued through March 31, 2020 on this promissory note was $2,067. |
Fair Value Measurement
Fair Value Measurement | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Measurement | NOTE 4. FAIR VALUE MEASUREMENT In accordance with ASC Topic 820 — Fair Value Measurements and Disclosures ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels: ● Level 1 — Quoted prices in active markets for identical assets and liabilities ● Level 2 — Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities) ● Level 3 — Significant unobservable inputs (including the Company’s own assumptions in determining the fair value) The following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019: March 31, 2020 Level 1 Level 2 Level 3 Total Liabilities: Secured convertible debentures $ — $ — $ — $ — Proceeds investment agreement — — 6,193,000 6,193,000 $ — $ — $ 6,193,000 $ 6,193,000 December 31, 2019 Level 1 Level 2 Level 3 Total Liabilities: Secured convertible debentures $ — $ — $ 1,593,809 $ 1,593,809 Proceeds investment agreement — — 6,500,000 6,500,000 $ — $ — $ 8,093,809 $ 8,093,809 The following table represents the change in Level 3 tier value measurements: 2019 Secured Proceeds Convertible Investment Notes Agreement Total Balance, December 31, 2019 $ 1,593,809 $ 6,500,000 $ 8,093,809 Conversion of secured convertible debentures (1,259,074 ) — (1,259,074 ) Repayment of 2019 secured convertible notes (747,180 ) (747,180 ) Change in fair value of secured convertible debentures and proceeds investment agreement 412,445 (307,000 ) 105,445 Balance, March 31, 2020 $ — $ 6,193,000 $ 6,193,000 |
Accrued Expenses
Accrued Expenses | 3 Months Ended |
Mar. 31, 2020 | |
Payables and Accruals [Abstract] | |
Accrued Expenses | NOTE 5. ACCRUED EXPENSES Accrued expenses consisted of the following at March 31, 2020 and December 31, 2019: March 31, 2020 December 31, 2019 Accrued warranty expense $ 17,008 $ 17,838 Accrued litigation costs 250,000 295,000 Accrued sales commissions 25,631 28,480 Accrued payroll and related fringes 390,550 233,254 Accrued insurance 20,812 78,579 Accrued sales returns and allowances 5,542 18,258 Accrued sales taxes 49,503 50,136 Other 115,318 124,336 $ 874,364 $ 845,881 Accrued warranty expense was comprised of the following for the three months ended March 31, 2020: Beginning balance $ 17,838 Provision for warranty expense 26,095 Charges applied to warranty reserve (26,925 ) Ending balance $ 17,008 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 6. INCOME TAXES The effective tax rate for the three months ended March 31, 2020 and 2019 varied from the expected statutory rate due to the Company continuing to provide a 100% valuation allowance on net deferred tax assets. The Company determined that it was appropriate to continue the full valuation allowance on net deferred tax assets as of March 31, 2020 primarily because of the Company’s history of operating losses. The Company has incurred operating losses in recent years and it continues to be in a three-year cumulative loss position at March 31, 2020. Accordingly, the Company determined there was not sufficient positive evidence regarding its potential for future profits to outweigh the negative evidence of our three-year cumulative loss position under the guidance provided in ASC 740. Therefore, it determined to continue to provide a 100% valuation allowance on its net deferred tax assets. The Company expects to continue to maintain a full valuation allowance until it determines that it can sustain a level of profitability that demonstrates its ability to realize these assets. To the extent the Company determines that the realization of some or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed. The Company has available to it approximately $67 million in net operating loss carryforwards to offset future taxable income as of March 31, 2020. |
Operating Lease
Operating Lease | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Operating Lease | NOTE 7. OPERATING LEASE The Company entered into an operating lease with a third party in September 2012 for office and warehouse space in Lenexa, Kansas. The terms of the lease include monthly payments ranging from $38,026 to $38,533 with a maturity date of April 2020. The Company has the option to renew for an additional three years beyond the original expiration date, which may be exercised at the Company’s sole discretion. The Company evaluated the renewal option at the lease commencement date to determine if it is reasonably certain the exercise the option and concluded that it is not reasonably certain that any options will be exercised. The weighted average remaining lease term for the Company’s office and warehouse operating lease as of March 31, 2020 was one month. The Company has entered into a lease for new office and warehouse space: See NOTE 13. SUBSEQUENT EVENTS. The Company entered into an operating lease with a third party in October 2019 for copiers used for office and warehouse purposes. The terms of the lease include 48 monthly payments of $1,598 with a maturity date of October 2023. The Company has the option to Purchase the equipment at maturity for its estimated fair market value at that point in time. The remaining lease term for the Company’s copier operating lease as of March 31, 2020 was 43 months. Lease expense related to the office space and copier operating leases were recorded on a straight-line basis over their respective lease terms. Total lease expense under the two operating leases was $98,836 for the three months ended March 31, 2020. The discount rate implicit within the Company’s operating leases was not generally determinable and therefore the Company determined the discount rate based on its incremental borrowing rate on the information available at commencement date. As of commencement date, the operating lease liabilities reflect a weighted average discount rate of 8%. The following sets forth the operating lease right of use assets and liabilities as of March 31, 2020: Assets: Operating lease right of use assets $ 94,449 Liabilities: Operating lease obligations-current portion $ 49,828 Operating lease obligations-less current portion $ 44,620 Total operating lease obligations $ 94,448 The components of lease expense were as follows for the three months ended March 31, 2020: Selling, general and administrative expenses $ 98,836 Following are the minimum lease payments for each year and in total. Year ending December 31: 2020 $ 52,915 2021 19,176 2022 19,176 2023 15,980 Total undiscounted minimum future lease payments 107,247 Imputed interest (12,799 ) Total operating lease liability $ 94,448 |
Contingencies
Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Contingencies | NOTE 8. CONTINGENCIES COVID-19 pandemic The World Health Organization has declared the outbreak of COVID-19, or coronavirus, which began in December 2019, a pandemic and the U.S. federal government has declared it a national emergency. Our business and operations could be materially and adversely affected by the effects of COVID-19. The global spread of COVID-19 has already created significant volatility, uncertainty and economic disruption in the markets in which we operate. Governments, public institutions, and other organizations in countries and localities where cases of COVID-19 have been detected are taking certain emergency measures to mitigate its spread, including implementing travel restrictions and closing factories, schools, public buildings, and businesses. While the full impact of this outbreak is not yet known, we are closely monitoring the spread of COVID-19 and continually assessing its potential effects on our business. The extent to which our results are affected by COVID-19 will largely depend on future developments which cannot be accurately predicted, including the duration and scope of the pandemic, governmental and business responses to the pandemic and the impact on the global economy, our customers’ demand for our products and services, and our ability to provide our products and services, particularly as result of our employees working remotely and/or the closure of certain offices and facilities. While these factors are uncertain, the COVID-19 pandemic or the perception of its effects will have a material adverse effect on our business, financial condition, results of operations, or cash flows. Litigation. From time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us. It is our policy to not disclose the specifics of any claim or threatened lawsuit until the summons and complaint are actually served on us. After carefully assessing the claim, and assuming we determine that we are not at fault or we disagree with the damages or relief demanded, we vigorously defend any lawsuit filed against us. We record a liability when losses are deemed probable and reasonably estimable. When losses are deemed reasonably possible but not probable, we determine whether it is possible to provide an estimate of the amount of the loss or range of possible losses for the claim, if material for disclosure. In evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our historical experience with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of our prevailing, the availability of insurance, and the severity of any potential loss. We reevaluate and update accruals as matters progress over time. While the ultimate resolution is unknown, based on the information currently available, we do not expect that these lawsuits will individually, or in the aggregate, have a material adverse effect to our results of operations, financial condition or cash flows. However, the outcome of any litigation is inherently uncertain and there can be no assurance that any expense, liability or damages that may ultimately result from the resolution of these matters will be covered by our insurance or will not be in excess of amounts recognized or provided by insurance coverage and will not have a material adverse effect on our operating results, financial condition or cash flows. Axon The Company owns U.S. Patent No. 9,253,452 (the “ ‘452 Patent”), which generally covers the automatic activation and coordination of multiple recording devices in response to a triggering event, such as a law enforcement officer activating the light bar on the vehicle. The Company filed suit on January 15, 2016 in the U.S. District Court for the District of Kansas (Case No: 2:16-cv-02032) against Axon, alleging willful patent infringement against Axon’s body camera product line and Signal auto-activation product. The Company is seeking both monetary damages and a permanent injunction against Axon for infringement of the ‘452 Patent. In December 2016 and January 2017, Axon filed two petitions for Inter Partes The District Court litigation in Kansas was temporarily stayed following the filing of the petitions for IPR. However, on November 17, 2017, the Federal District Court of Kansas rejected Axon’s request to maintain the stay. With this significant ruling, the parties will now proceed towards trial. Since litigation has resumed, the Court has issued a claim construction order (also called a Markman Markman On June 17, 2019, the Court granted Axon’s motion for summary judgment that Axon did not infringe on the Company’s patent and dismissed the case. Importantly, the Court’s ruling did not find that Digital’s ‘452 Patent was invalid. It also did not address any other issue, such as whether Digital’s requested damages were appropriate, and it did not impact the Company’s ability to file additional lawsuits to hold other competitors accountable for patent infringement. This ruling solely related to an interpretation of the claims as they relate to Axon and was unrelated to the supplemental briefing Digital recently filed on its damages claim and the WatchGuard settlement. Those issues are separate and the judge’s ruling on summary judgment had nothing to do with Digital’s damages request. The Company filed an appeal to this ruling asking the appellate court to reverse this decision. The Company filed its Opening Appeal Brief on August 26, 2019 and Axon filed its Responsive Brief on November 6, 2019 and the Company filed its Reply Brief responding to Axon on November 27, 2019. The United States Court of Appeals for the Federal Circuit scheduled oral argument on the Company’s appeal of the district court’s summary judgment order on April 6, 2020. This appeal will address the incorrect and mistaken dismissal of Digital Ally’s claims against Axon by Judge Carlos Murguia in the U.S. District Court of Kansas litigation. If the Court of Appeals overturned the summary judgment ruling, a new judge would be assigned to handle the litigation with Axon due to the resignation of Judge Murguia. On March 12, 2020, the panel of judges for the United States Court of Appeals issued an order cancelling the oral arguments previously set for April 6, 2020 having determined that they will decide the appeal based on the parties’ briefs without oral argument. On April 22, 2020, a three-judge panel of the United States Court of Appeals denied the Company’s appeal and affirmed the District Court’s previous decision to grant Axon summary judgment. The Company is evaluating its alternatives including whether to file a motion requesting a rehearing in front of the three-judge panel or the entire Court of Appeals. WatchGuard On May 27, 2016, the Company filed suit against WatchGuard, (Case No. 2:16-cv-02349-JTM-JPO) alleging patent infringement based on WatchGuard’s VISTA Wifi and 4RE In-Car product lines. On May 13, 2019, the parties resolved the dispute and executed a settlement agreement in the form of a Release and License Agreement. The litigation has been dismissed as a result of this settlement. The Release and License Agreement encompasses the following key terms: ● WatchGuard paid Digital Ally a one-time, lump settlement payment of $6,000,000. ● Digital Ally granted WatchGuard a perpetual covenant not to sue if WatchGuard’s products incorporate agreed-upon modified recording functionality. Digital Ally also granted WatchGuard a license to the ‘292 Patent and the ‘452 Patent (and related patents, now existing and yet-to-issue) through December 31, 2023. The parties agreed to negotiate in good faith to attempt to resolve any alleged infringement that occurs after the license period expires. ● The parties further agreed to release each other from all claims or liabilities pre-existing the settlement. ● As part of the settlement, the parties agreed that WatchGuard made no admission that it infringed any of Digital Ally’s patents. Upon receipt of the $6,000,000 the parties filed a joint motion to dismiss the lawsuit which the Judge granted. PGA Tour, Inc. On January 22, 2019 the PGA Tour, Inc. (the “PGA”) filed suit against the Company in the Federal District Court for the District of Kansas (Case No. 2:19-cv-0033-CM-KGG) alleging breach of contract and breach of implied covenant of good faith and fair dealing relative to the Web.com Tour Title Sponsor Agreement (the “Agreement”). The contract was executed on April 16, 2015 by and between the parties. Under the Agreement, Digital Ally would be a title sponsor of and receive certain naming and other rights and benefits associated with the Web.com Tour for 2015 through 2019 in exchange for Digital Ally’s payment to Tour of annual sponsorship fees. The suit was resolved and the case was dismissed by Plaintiff with prejudice on April 17, 2019. NASDAQ LISTING. Our Common Stock is listed on The Nasdaq Capital Market If our Common Stock is delisted from Nasdaq On July 11, 2019, Nasdaq notified us that, for the previous 30 consecutive business days, the minimum Market Value of Listed Securities (the “MVLS”) for our Common Stock was below the $35 million minimum MVLS requirement for continued listing on Nasdaq Nasdaq The Nasdaq Capital Market On January 8, 2020, we received a determination letter from the staff of Nasdaq stating that we had not regained compliance with the MVLS Standard, since our Common Stock was below the $35 million minimum MVLS requirement for continued listing on Nasdaq under the MLVS Rule and had not been at least $35 million for a minimum of ten consecutive business days at any time during the 180-day grace period granted to us. Pursuant to the letter, unless we requested a hearing to appeal this determination by January 15, 2020, our Common Stock would be delisted from Nasdaq and trading of our Common Stock would have been suspended at the opening of business on January 17, 2020. On January 13, 2020, we requested a hearing before the Nasdaq Hearings Panel to appeal the Letter and the Staff of Nasdaq notified us that a hearing was scheduled for February 20, 2020. We were asked to provide the Panel with a plan to regain compliance with the minimum MLVS requirement under the MLVS Rule, which needed to include a discussion of the events that we believe will enable us to timely regain compliance with the minimum MLVS requirement. On January 21, 2020, we submitted such a compliance plan. On March 6, 2020, we received notice from the NASDAQ hearing panel that the Company has been granted an extension until June 30, 2020 to regain compliance with Rule 5550(b), which requires us to have at least i) $2.5 million in shareholder equity; or ii) $35 million in market value of listed securities, or iii) net income from continuing operations of at least $500,000 in the most recently completed fiscal year or in two of the last three fiscal years. Our goal is to meet the $2.5 million minimum shareholder equity requirement for continued listing on NASDAQ. There can be no assurance that we will regain compliance with the NASDAQ’s Listing Rule regarding our $2.5 million minimum shareholder equity requirement on or prior to the June 30, 2020 required date. Furthermore, even if we regain compliance on or prior to such date, we must thereafter continue to maintain compliance the continued listing rule. NASDAQ has not provided any guidance whether the extension until June 30, 2020 will be affected by the Covid-19 pandemic. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | NOTE 9. STOCK-BASED COMPENSATION The Company recorded pretax compensation expense related to the grant of stock options and restricted stock issued of $311,677 and $725,198 for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, the Company had adopted seven separate stock option and restricted stock plans: (i) the 2005 Stock Option and Restricted Stock Plan (the “2005 Plan”), (ii) the 2006 Stock Option and Restricted Stock Plan (the “2006 Plan”), (iii) the 2007 Stock Option and Restricted Stock Plan (the “2007 Plan”), (iv) the 2008 Stock Option and Restricted Stock Plan (the “2008 Plan”), (v) the 2011 Stock Option and Restricted Stock Plan (the “2011 Plan”), (vi) the 2013 Stock Option and Restricted Stock Plan (the “2013 Plan”), (vii) the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”) and (vii) the 2018 Stock Option and Restricted Stock Plan (the “2018 Plan”). The 2005 Plan, 2006 Plan, 2007 Plan, 2008 Plan, 2011 Plan, 2013 Plan, 2015 Plan and 2018 Plan are referred to as the “Plans.” These Plans permit the grant of stock options or restricted stock to its employees, non-employee directors and others for up to a total of 4,175,000 shares of common stock. The 2005 Plan terminated during 2015 with 19,678 shares not awarded or underlying options, which shares are now unavailable for issuance. Stock options granted under the 2005 Plan that remain unexercised and outstanding as of March 31, 2020 total 8,063. The 2006 Plan terminated during 2016 with 27,412 shares not awarded or underlying options, which shares are now unavailable for issuance. Stock options granted under the 2006 Plan that remain unexercised and outstanding as of March 31, 2020 total 40,062. The 2007 Plan terminated during 2017 with 89,651 shares not awarded or underlying options, which shares are now unavailable for issuance. Stock options granted under the 2007 Plan that remain unexercised and outstanding as of March 31, 2020 total 5,000. The 2008 Plan terminated during 2018 with 9,249 shares not awarded or underlying options, which shares are now unavailable for issuance. Stock options granted under the 2008 Plan that remain unexercised and outstanding as of March 31, 2020 total 31,250. The Company believes that such awards better align the interests of our employees with those of its stockholders. Option awards have been granted with an exercise price equal to the market price of its stock at the date of grant with such option awards generally vesting based on the completion of continuous service and having ten-year contractual terms. These option awards typically provide for accelerated vesting if there is a change in control (as defined in the Plans). The Company has registered all shares of common stock that are issuable under its Plans with the SEC. A total of 121,636 shares remained available for awards under the various Plans as of March 31, 2020. The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. Activity in the various Plans during the three months ended March 31, 2020: Options Number of Weighted Outstanding at December 31, 2019 589,125 $ 3.74 Granted — — Exercised — — Forfeited (5,000 ) (9.40 ) Outstanding at March 31, 2020 584,125 $ 3.69 Exercisable at March 31, 2020 539,125 $ 3.75 The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model. The total estimated grant date fair value stock options issued during the three months ended March 31, 2020 was $-0- as there were no grants during that period. The Plans allow for the cashless exercise of stock options. This provision allows the option holder to surrender/cancel options with an intrinsic value equivalent to the purchase/exercise price of other options exercised. There were no shares surrendered pursuant to cashless exercises during the three months ended March 31, 2020 and 2019. At March 31, 2020, the aggregate intrinsic value of options outstanding was approximately $-0- and the aggregate intrinsic value of options exercisable was approximately $-0-. No options were exercised in the three months ended March 31, 2020 and 2019. As of March 31, 2020, the unrecognized portion of stock compensation expense on all existing stock options was $72,703 and will be recognized over the next two months. The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Company’s option plans as of March 31, 2020: Outstanding options Exercisable options Exercise price range Number of options Weighted average remaining contractual life Number of options Weighted average remaining contractual life $ 0.01 to $3.49 470,313 8.1 years 425,313 8.0 years $ 3.50 to $4.99 64,000 4.1 years 64,000 4.1 years $ 5.00 to $6.49 — — years — — years $ 6.50 to $7.99 7,562 1.6 years 7,562 1.6 years $ 8.00 to $9.99 2,500 1.2 years 2,500 1.2 years $ 10.00 to $19.99 39,750 0.8 years 39,750 0.8 years 584,125 7.1 years 539,125 6.9 years Restricted stock grants. A summary of all restricted stock activity under the equity compensation plans for the three months ended March 31, 2020 is as follows: Number of Weighted Nonvested balance, January 1, 2020 514,875 $ 2.97 Granted 530,050 1.08 Vested (274,925 ) (2.74 ) Forfeited (22,500 ) (1.92 ) Nonvested balance, March 31, 2020 747,500 $ 1.75 The Company estimated the fair market value of these restricted stock grants based on the closing market price on the date of grant. As of March 31, 2020, there were $706,239 of total unrecognized compensation costs related to all remaining non-vested restricted stock grants, which will be amortized over the next 21 months in accordance with their respective vesting scale. The nonvested balance of restricted stock vests as follows: Years ended Number of 2020 (April 1, 2020 through December 31, 2020) 13,125 2021 488,750 2022 245,625 |
Common Stock Purchase Warrants
Common Stock Purchase Warrants | 3 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
Common Stock Purchase Warrants | NOTE 10. COMMON STOCK PURCHASE WARRANTS The Company has issued common stock purchase warrants in conjunction with various debt and equity issuances. The warrants are either immediately exercisable, or have a delayed initial exercise date, no more than six months from their respective issue date and allow the holders to purchase up to 4,860,323 shares of common stock at $1.40 to $16.50 per share as of March 31, 2020. The warrants expire from July 15, 2020 through January 17, 2025 and allow for cashless exercise. Certain common stock purchase warrants issued in August 2014 contained anti-dilution provisions that triggered a reset as a result of the April 2018 financing transaction. The reset provisions resulted in the 12,200 warrants held at an exercise price of $7.32 per share increased by 159,538 warrants resulting in a final reset to 172,038 warrants at an exercise price of $0.52 per share. All warrants subject to the reset provision have now been exercised. The following table summarizes information about shares issuable under warrants outstanding during the three months ended March 31, 2020: Warrants Weighted Vested Balance, January 1, 2020 4,824,573 $ 5.15 Granted 35,750 1.40 Exercised — — Cancelled — — Vested Balance, March 31, 2020 4,860,323 $ 5.12 The total intrinsic value of all outstanding warrants aggregated $-0- as of March 31, 2020 and the weighted average remaining term is 30.4 months. The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable warrants to purchase common shares as of March 31, 2020: Outstanding and exercisable warrants Exercise price Number of warrants Weighted average $ 1.40 142,750 4.7 years $ 1.81 571,428 4.4 years $ 2.60 465,712 3.3 years $ 3.00 701,667 3.0 years $ 3.25 120,000 2.7 years $ 3.36 680,000 1.9 years $ 3.36 200,000 2.9 years $ 3.65 200,000 2.2 years $ 3.75 94,000 2.4 years $ 5.00 800,000 1.8 years $ 13.43 879,766 0.8 years $ 16.50 5,000 0.3 years 4,860,323 2.5 years |
Stockholders' Equity
Stockholders' Equity | 3 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
Stockholders' Equity | NOTE 11. STOCKHOLDERS’ EQUITY Underwritten Public Offering The underwriting agreement contained customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Underwriters. The Underwriters received discounts and commissions of seven percent (7%) of the gross cash proceeds received by the Company from the sale of the common shares in the Offering. In addition, the Company agreed to pay the Underwriters (a) a non-accountable expense reimbursement of 1% of the gross proceeds received and (b) “road show” expenses, diligence fees and the fees and expenses of the Underwriters’ legal counsel not to exceed $50,000. The net proceeds to the Company from the Offering totaled approximately $2,502,136, after deducting underwriting discounts and commissions and estimated expenses payable by the Company. Under the underwriting agreement the Company agreed not to contract to issue or announce the issuance or proposed issuance of any Common Stock or Common Stock equivalents for forty-five (45) days following the closing of the Offering, subject to certain exclusions as set forth therein. The Company’s executive officers and directors have entered into forty-five (45)-day Lock-Up Agreements with the Representative pursuant to which they have agreed not to sell, transfer, assign or otherwise dispose of the shares of the Company’s common stock owned by them, subject to certain exclusions as set forth therein. 2020 Issuance of Restricted Common Stock |
Net Loss Per Share
Net Loss Per Share | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Net Loss Per Share | NOTE 12. NET LOSS PER SHARE The calculation of the weighted average number of shares outstanding and loss per share outstanding for the three months ended March 31, 2020 and 2019 are as follows: Three months ended March 31, 2020 2019 Numerator for basic and diluted income per share – Net loss $ (2,334,110 ) $ (3,205,174 ) Denominator for basic loss per share – weighted average shares outstanding 13,888,438 10,941,856 Dilutive effect of shares issuable upon conversion of convertible debt and the exercise of stock options and warrants outstanding — — Denominator for diluted loss per share – adjusted weighted average shares outstanding 13,888,438 10,941,856 Net loss per share: Basic $ (0.17 ) $ (0.29 ) Diluted $ (0.17 ) $ (0.29 ) Basic loss per share is based upon the weighted average number of common shares outstanding during the period. For the three months ended March 31, 2020 and 2019, all shares issuable upon conversion of convertible debt and the exercise of outstanding stock options and warrants were antidilutive, and, therefore, not included in the computation of diluted income (loss) per share. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 13. SUBSEQUENT EVENTS Wholesale Distribution Agreement ® ® The Company will offer the disinfecting products to its first responder customers including police, fire and paramedics. Commercial customers such as cruise lines, taxi-cab and para transit may also be good candidates for the products. The Company is considering enhancing the line of disinfectant products for additional related products including hardware to efficiently and effectively dispense the disinfectants and temperature measuring devices. Issuance of Restricted Common Stock The Committee also decided that the balance of the annual salaries of Messrs. Ross and Heckman for 2020, which are $69,230.76 and $55,384.00, respectively, as of May 1, 2020 will be paid through the issuance of shares of restricted stock under the 2018 Stock Option and Restricted Stock Plan with the Company paying the applicable federal and state taxes on such amounts. The Company issued Messrs. Ross and Heckman 75,250 shares and 60,200 shares, respectively, effective April 17, 2020 based on a closing price of $0.92 per share on such date. 2020 Secured Convertible Notes In accordance with the securities purchase agreement, an aggregate of $500,000 in principal amount of notes, and the conversion shares underlying such notes, were issued to the investors in a registered direct offering pursuant to a prospectus supplement to the Company’s currently effective registration statement on Form S-3 (File No. 333-225227), which was initially filed with the SEC on May 25, 2018, and was declared effective on June 6, 2018. In accordance with the securities purchase agreement, the Company also issued to the investors in a concurrent private placement pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and/or Regulation D the remaining aggregate of $1,166,666 in principal amount of other notes, the shares of common stock issuable from time to time upon conversion of such other notes, and warrants. In connection with the securities purchase agreement, the Company and its subsidiary entered into a security agreement, dated as of April 17, 2020, with the investors, pursuant to which the Company and its subsidiary granted to the investors a security interest in, among other items, the Company and its subsidiary’s accounts, chattel paper, documents, equipment, general intangibles, instruments and inventory, and all proceeds, as set forth in the Security Agreement. In addition, pursuant to an intellectual property security agreement, dated as of April 17, 2020, the Company granted to the investors a continuing security interest in all of the Company’s right, title and interest in, to and under certain of the Company’s trademarks, copyrights and patents. Promissory Note Under the Paycheck Protection Program Warehouse and Office Building Lease NASDAQ Listing - Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the Company has been granted a 180-calendar day compliance period to regain compliance with the minimum bid price requirement. However, the 180-day grace period to regain compliance with the Minimum Bid Price Requirement under applicable Nasdaq rules has been extended due to the global market impact caused by COVID-19. More specifically, Nasdaq has stated that the compliance periods for any company previously notified about non-compliance will be suspended effective April 16, 2020, through June 30, 2020. On July 1, 2020, companies would receive the balance of any pending compliance period exception to come back into compliance with the applicable Minimum Bid Price Requirement. As a result of this extension, the Company has until December 28, 2020, to regain compliance with the Minimum Bid Price Requirement. During the compliance period, the Company’s shares of common stock will continue to be listed and traded on the Nasdaq Capital Market. To regain compliance, the closing bid price of the Company’s shares of common stock must meet or exceed $1.00 per share for at least ten (10) consecutive business days during the 180-calendar day compliance period. Management continues to believe that adherence to its current operating and business plan will enable the Company to regain compliance. If the Company is not in compliance by December 28, 2020, the Company may be afforded a second 180-calendar day compliance period. To qualify for this additional time, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for Nasdaq with the exception of the minimum bid price requirement. If the Company does not regain compliance within the allotted compliance period(s), including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Company’s shares of common stock will be subject to delisting and may potentially be traded on the OTC market thereafter. |
Nature of Business and Summar_2
Nature of Business and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | Nature of Operations: Digital Ally, Inc. and subsidiary (collectively, “Digital Ally,” “Digital,” the “Company”) produces digital video imaging and storage products for use in law enforcement, security and commercial applications. Its products are an in-car digital video/audio recorder contained in a rear-view mirror for use in law enforcement and commercial fleets; a system that provides its law enforcement customers with audio/video surveillance from multiple vantage points and hands-free automatic activation of body-worn cameras and in-car video systems; a miniature digital video system designed to be worn on an individual’s body; and cloud storage solutions. The Company has recently added a line of disinfectants manufactured by a third party for use against viruses and bacteria and is offering such products to its law enforcement and commercials customers beginning in the second quarter 2020. The Company has active research and development programs to adapt its technologies to other applications. It can integrate electronic, radio, computer, mechanical, and multi-media technologies to create unique solutions to address needs in a variety of other industries and markets, including mass transit, school bus, taxicab and the military. The Company sells its products to law enforcement agencies, private security customers and organizations and consumer and commercial fleet operators through direct sales domestically and third-party distributors internationally. The Company was originally incorporated in Nevada on December 13, 2000 as Vegas Petra, Inc. and had no operations until 2004. On November 30, 2004, Vegas Petra, Inc. entered into a Plan of Merger with Digital Ally, Inc., at which time the merged entity was renamed Digital Ally, Inc. |
Basis of Presentation | Basis of Presentation: The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The balance sheet at December 31, 2019 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. |
COVID-19 Pandemic | COVID-19 pandemic: The World Health Organization has declared the outbreak of Covid-19, or coronavirus, which began in December 2019, a pandemic and the U.S. federal government has declared it a national emergency. The Covid-19 pandemic had a negative impact our revenues in the first quarter 2020 and we expect it will adversely affect our business and operations during the remainder of 2020 and while its full and continued impact cannot be determined at present, however it will have a material adverse effect on our future business, financial condition, results of operations, or cash flows. The global spread of Covid-19 has already created significant volatility, uncertainty and economic disruption in the markets in which we operate. Governments, public institutions, and other organizations in countries and localities where cases of Covid-19 have been detected are taking certain emergency measures to mitigate its spread, including implementing travel restrictions and closing factories, schools, public buildings, and businesses. We are closely monitoring the spread of Covid-19 and continually assessing its potential effects on our business. The extent to which our future results are affected by COVID-19 will largely depend on future developments that cannot be accurately predicted, including the duration and scope of the pandemic, governmental and business responses to the pandemic and the impact on the global economy, our customers’ demand for our products and services, and our ability to provide our products and services, particularly as result of our employees working remotely and/or the closure of certain offices and facilities. While these factors are uncertain, the COVID-19 pandemic or the perception of its effects will have a material adverse effect on our business, financial condition, results of operations, or cash flows. |
Management's Liquidity Plan and Going Concern | Management’s Liquidity Plan and Going Concern: The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred operating losses for the three months ended March 31, 2020 and for the year ended December 31, 2019 primarily due to reduced revenues and gross margins caused by a variety of factors, including the Covid-19 pandemic and its related effects on our customers and our supply chain, and by competitors’ introduction of newer products with more advanced features together with significant price cutting of their products. The Company incurred net losses of approximately $2.3 million during the three months ended March 31, 2020 and $10.0 million for the year ended December 31, 2019 and it had an accumulated deficit of $89.7 million as of March 31, 2020. During 2019, the Company settled one of its patent infringement cases and received a lump sum payment of $6.0 million, which was used to pay its obligations under its Proceeds Investment Agreement, as more fully described in Note 3. In recent years the Company has accessed the public and private capital markets to raise funding through the issuance of debt and equity. In that regard, the Company raised $2.5 million in an underwritten public offering of common stock and $389,000 in unsecured promissory notes and detachable warrants during the three months ended March 31, 2020. In addition, the Company raised $1,564,000 in the year ended December 31, 2019 from the exercise of warrants, the Company borrowed $300,000 pursuant to a short-term promissory note payable on December 23, 2019 with detachable warrants to purchase 107,000 shares of common stock and on August 5, 2019, it raised funds from the issuance of $2.78 million principal balance of secured convertible notes with detachable warrants to purchase 571,248 shares of common stock with the net proceeds being used for working capital purposes as more fully described in Note 3. These debt and equity raises were utilized to fund its operations and management expects to continue this pattern until it achieves positive cash flows from operations, although it can offer no assurance in this regard. On April 4, 2020, the Company entered into a promissory note providing for a loan of $1,418,900 (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The PPP Loan has a two-year term and bears interest at a rate of 0.98% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The promissory note contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that the PPP Loan may be partially or wholly forgiven if the funds are used for certain qualifying expenses as described in the CARES Act. The Company intends to use the majority of the PPP Loan amount for qualifying expenses and to apply for forgiveness of the loan in accordance with the terms of the CARES Act. The Company settled its lawsuit with the PGA Tour and the case was dismissed by the Plaintiff with prejudice on April 17, 2019. Additionally, the Company settled its lawsuit with WatchGuard on May 13, 2019 and the case was dismissed. See Note 8, “Contingencies” for the details respecting the settlements. The Company will have to restore positive operating cash flows and profitability over the next year and/or raise additional capital to fund its operational plans, meet its customary payment obligations and otherwise execute its business plan. There can be no assurance that it will be successful in restoring positive cash flows and profitability, or that it can raise additional financing when needed, and obtain it on terms acceptable or favorable to the Company. The Company has increased its addressable market to non-law enforcement customers and obtained new non-law enforcement contracts in 2020 and 2019, which contracts include recurring revenue during the period 2020 to 2023. The Company believes that its quality control and cost cutting initiatives, expansion to non-law enforcement sales channels and new product introduction will eventually restore positive operating cash flows and profitability, although it can offer no assurances in this regard. The extent to which our future operating results are affected by COVID-19 will largely depend on future developments which cannot be accurately predicted, including the duration and scope of the pandemic, governmental and business responses to the pandemic and the impact on the global economy, our customers’ demand for our products and services, and our ability to provide our products and services, particularly as result of our employees working remotely and/or the closure of certain offices and facilities. While these factors are uncertain, the COVID-19 pandemic or the perception of its effects will have a material adverse effect on our business, financial condition, results of operations, or cash flows. Based on the uncertainties described above, the Company believes its business plan does not alleviate the existence of substantial doubt about its ability to continue as a going concern within one year from the date of the issuance of these unaudited condensed consolidated financial statements. The accompanying unaudited condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern. |
Basis of Consolidation | Basis of Consolidation: The accompanying financial statements include the consolidated accounts of Digital Ally and its wholly-owned subsidiary, Digital Ally International, Inc. All intercompany balances and transactions have been eliminated during consolidation. The Company formed Digital Ally International, Inc. during August 2009 to facilitate the export sales of its products. |
Segments of Business | Segments of Business: Management has determined that its operations are comprised of one reportable segment: the sale of digital audio and video recording and speed detection devices. For the three months ended March 31, 2020 and 2019, sales by geographic area were as follows: Three Months Ended 2020 2019 Sales by geographic area: United States of America $ 2,371,687 $ 2,514,342 Foreign 54,058 36,454 $ 2,425,745 $ 2,550,796 Sales to customers outside of the United States are denominated in U.S. dollars. All Company assets are physically located within the United States. |
Recently Adopted Accounting Standards | Recently Adopted Accounting Standards: In February 2016, the FASB issued Accounting Standard Update (“ASU”) 2016-02, Leases The Company adopted the new guidance on January 1, 2019 using the optional transitional method and elected to use the package of three practical expedients which allows the Company not to reassess whether contracts are or contain leases, lease classification and whether initial direct costs qualify for capitalization. The Company has completed its assessment of the impact of the standard and determined that the only lease that the Company held was an operating lease for its office and warehouse space. Upon adoption of the standard, the Company recorded Right of Use (ROU) assets of approximately $501,000 and lease liabilities of approximately $582,000 related to it office and warehouse space operating leases. The Company also removed deferred rent of approximately $81,000 when adopting the new guidance. ASU 2018-09, Codification improvements, clarifies the accounting for a debt extinguishment when the fair value option is elected. Upon extinguishment an entity shall include in net income the cumulative amount of the gain or loss previously recorded in other comprehensive income for the extinguished debt that resulted from changes in instrument-specific credit risk. The ASU is effective for calendar-year public business entities beginning in 2019. For all other calendar-year entities, it is effective for annual periods beginning in 2020 and interim periods beginning in 2021. Early adoption is permitted for any fiscal year or interim period for which an entity’s financial statements have not yet been issued or have not been made available to be issued. We have considered this guidance and its impact on this debt accounted for at fair value. Based on discussions with our valuation expert and knowledge of the Company there was no change in valuation caused by a change in the Company’s credit risk during the period such debt was outstanding. Since there is no change accounted for as a change in Credit Risk (included in other comprehensive income/loss), there is no impact to the Company’s financial statements from this new guidance. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses” to improve information on credit losses for financial assets and net investment in leases that are not accounted for at fair value through net income. ASU 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. In April 2019 and May 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” and ASU No. 2019-05, “Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief” which provided additional implementation guidance on the previously issued ASU. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),” which defers the effective date for public filers that are considered small reporting companies (“SRC”) as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Since the Company is an SRC, implementation will not be required until January 1, 2023. The Company will continue to evaluate the effect of adopting ASU 2016-13 will have on the Company’s consolidated financial statements. In August 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement In August 2018, the FASB issued ASU No. 2018-15, Intangible-Goodwill and Other Internal-Use Software (Subtopic 350-40) In December 2019, the FASB issued ASU No. 2019-12, Income Taxes - simplifying the accounting for income taxes (Topic 740), which is meant to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, Income Taxes. The amendment also improves consistent application and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The adoption of this standard did not have a significant impact on the Company’s financial position and results of operations. |
Nature of Business and Summar_3
Nature of Business and Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Summary of Sales by Geographic Area | Management has determined that its operations are comprised of one reportable segment: the sale of digital audio and video recording and speed detection devices. For the three months ended March 31, 2020 and 2019, sales by geographic area were as follows: Three Months Ended 2020 2019 Sales by geographic area: United States of America $ 2,371,687 $ 2,514,342 Foreign 54,058 36,454 $ 2,425,745 $ 2,550,796 |
Inventories (Tables)
Inventories (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories consisted of the following at March 31, 2020 and December 31, 2019: March 31, December 31, 2019 Raw material and component parts $ 4,312,384 $ 4,481,611 Work-in-process 60,862 35,858 Finished goods 4,881,662 4,906,956 Subtotal 9,254,908 9,424,425 Reserve for excess and obsolete inventory (4,117,022 ) (4,144,013 ) Total $ 5,137,886 $ 5,280,412 |
Debt Obligations (Tables)
Debt Obligations (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Summary of Secured Convertible Debentures and Proceeds Investment Agreement | Debt obligations is comprised of the following: March 31, December 31, 2019 2019 Secured convertible notes, at fair value $ — $ 1,593,809 2018 Proceeds investment agreement, at fair value 6,193,000 6,500,000 Unsecured promissory notes payable, less unamortized discount of $-0- and $66,061 at March 31, 2020 and December 31, 2019, respectively 300,000 233,939 Unsecured promissory notes payable – Related party 289,000 — Debt obligations $ 6,782,000 $ 8,327,748 |
2019 Secured Convertible Notes [Member] | |
Schedule of Fair Value of Embedded Derivatives and Warrants | The following represents the resulting fair value as determined on August 5, 2019, the date of origination: Secured convertible notes $ 1,845,512 Common stock issued as Commitment Shares 118,749 Common stock purchase warrants 535,739 Gross cash proceeds $ 2,500,000 |
Summary of Fair Value and Adjusted Carrying Value of Secured Convertible Notes | Following is an analysis of the activity in the secured convertible notes during the three months ended March 31, 2020: Amount Balance at December 31, 2019 $ 1,593,809 Principal repaid during the period by issuance of common stock (1,259,074 ) Principal repaid during the period by payment of cash (747,180 ) Change in fair value of secured convertible note during the period 412,445 Balance at March 31, 2020 $ — |
Schedule of Certain Estimates and Assumptions of Fair Value of Secured Convertible Notes | Following is a range of certain estimates and assumptions utilized as of December 31, 2019 to determine the fair value of secured convertible notes: December 31, 2019 Assumptions Volatility – range 115 % Risk-free rate 1.60 % Contractual term 0.6 years Calibrated stock price $ 1.06 Debt yield 123.6 % |
2018 Proceeds Investment Agreement [Member] | |
Schedule of Fair Value of Embedded Derivatives and Warrants | The Company elected to account for the PIA on the fair value basis. Therefore, the Company determined the fair value of the PIA and PIA Warrants which yielded estimated fair values of the PIA including their embedded derivatives and the detachable PIA Warrants as follows: Proceeds investment agreement $ 9,067,513 Common stock purchase warrants 932,487 Gross cash proceeds $ 10,000,000 |
Schedule of Certain Estimates and Assumptions of Weighted Patent Asset | Following is a range of certain estimates and assumptions utilized as of March 31, 2020 and December 31, 2019 to probability weighted present value of expected patent asset proceeds for the litigation involving both Axon and WatchGuard: March 31, 2020 December 31, 2019 Discount rate 3.6% - 21.3 % 3.0% - 16.6 % Expected term to patent asset proceeds payment 0.33 years – 3.75 years 0.58 years - 4 years Probability of success 5.9% - 38.5 % 5.9% - 38.5 % Estimated minimum return payable to BKI $ 21 million $ 21 million Negotiation discount 43.3 % 43.3 % |
Schedule of Fair Value of Debentures Activity | The following represents activity in the PIA during the three months ended March 31, 2020: Beginning balance as of December 31, 2019 $ 6,500,000 Repayment of obligation — Change in the fair value during the period (307,000 ) Ending balance as of March 31, 2020 $ 6,193,000 |
Fair Value Measurement (Tables)
Fair Value Measurement (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Financial Assets and Liabilities Measured at Fair Value on Recurring Basis | The following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 and December 31, 2019: March 31, 2020 Level 1 Level 2 Level 3 Total Liabilities: Secured convertible debentures $ — $ — $ — $ — Proceeds investment agreement — — 6,193,000 6,193,000 $ — $ — $ 6,193,000 $ 6,193,000 December 31, 2019 Level 1 Level 2 Level 3 Total Liabilities: Secured convertible debentures $ — $ — $ 1,593,809 $ 1,593,809 Proceeds investment agreement — — 6,500,000 6,500,000 $ — $ — $ 8,093,809 $ 8,093,809 |
Fair Value Measurements Change in Level 3 Inputs | The following table represents the change in Level 3 tier value measurements: 2019 Secured Proceeds Convertible Investment Notes Agreement Total Balance, December 31, 2019 $ 1,593,809 $ 6,500,000 $ 8,093,809 Conversion of secured convertible debentures (1,259,074 ) — (1,259,074 ) Repayment of 2019 secured convertible notes (747,180 ) (747,180 ) Change in fair value of secured convertible debentures and proceeds investment agreement 412,445 (307,000 ) 105,445 Balance, March 31, 2020 $ — $ 6,193,000 $ 6,193,000 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Payables and Accruals [Abstract] | |
Schedule of Accrued Expenses | Accrued expenses consisted of the following at March 31, 2020 and December 31, 2019: March 31, 2020 December 31, 2019 Accrued warranty expense $ 17,008 $ 17,838 Accrued litigation costs 250,000 295,000 Accrued sales commissions 25,631 28,480 Accrued payroll and related fringes 390,550 233,254 Accrued insurance 20,812 78,579 Accrued sales returns and allowances 5,542 18,258 Accrued sales taxes 49,503 50,136 Other 115,318 124,336 $ 874,364 $ 845,881 |
Schedule of Accrued Warranty Expense | Accrued warranty expense was comprised of the following for the three months ended March 31, 2020: Beginning balance $ 17,838 Provision for warranty expense 26,095 Charges applied to warranty reserve (26,925 ) Ending balance $ 17,008 |
Operating Lease (Tables)
Operating Lease (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Leases [Abstract] | |
Schedule of Operating Leases Right of Use Assets and Liabilities | The following sets forth the operating lease right of use assets and liabilities as of March 31, 2020: Assets: Operating lease right of use assets $ 94,449 Liabilities: Operating lease obligations-current portion $ 49,828 Operating lease obligations-less current portion $ 44,620 Total operating lease obligations $ 94,448 |
Schedule of Components of Lease Expenses | The components of lease expense were as follows for the three months ended March 31, 2020: Selling, general and administrative expenses $ 98,836 |
Schedule of Future Minimum Lease Payments | Following are the minimum lease payments for each year and in total. Year ending December 31: 2020 $ 52,915 2021 19,176 2022 19,176 2023 15,980 Total undiscounted minimum future lease payments 107,247 Imputed interest (12,799 ) Total operating lease liability $ 94,448 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Summary of Stock Options Outstanding | Activity in the various Plans during the three months ended March 31, 2020: Options Number of Weighted Outstanding at December 31, 2019 589,125 $ 3.74 Granted — — Exercised — — Forfeited (5,000 ) (9.40 ) Outstanding at March 31, 2020 584,125 $ 3.69 Exercisable at March 31, 2020 539,125 $ 3.75 |
Shares Authorized Under Stock Option Plans by Exercise Price Range | The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable options under the Company’s option plans as of March 31, 2020: Outstanding options Exercisable options Exercise price range Number of options Weighted average remaining contractual life Number of options Weighted average remaining contractual life $ 0.01 to $3.49 470,313 8.1 years 425,313 8.0 years $ 3.50 to $4.99 64,000 4.1 years 64,000 4.1 years $ 5.00 to $6.49 — — years — — years $ 6.50 to $7.99 7,562 1.6 years 7,562 1.6 years $ 8.00 to $9.99 2,500 1.2 years 2,500 1.2 years $ 10.00 to $19.99 39,750 0.8 years 39,750 0.8 years 584,125 7.1 years 539,125 6.9 years |
Summary of Restricted Stock Activity | A summary of all restricted stock activity under the equity compensation plans for the three months ended March 31, 2020 is as follows: Number of Weighted Nonvested balance, January 1, 2020 514,875 $ 2.97 Granted 530,050 1.08 Vested (274,925 ) (2.74 ) Forfeited (22,500 ) (1.92 ) Nonvested balance, March 31, 2020 747,500 $ 1.75 |
Schedule of Non-vested Balance of Restricted Stock | The nonvested balance of restricted stock vests as follows: Years ended Number of 2020 (April 1, 2020 through December 31, 2020) 13,125 2021 488,750 2022 245,625 |
Common Stock Purchase Warrants
Common Stock Purchase Warrants (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Equity [Abstract] | |
Summary of Warrant Activity | The following table summarizes information about shares issuable under warrants outstanding during the three months ended March 31, 2020: Warrants Weighted Vested Balance, January 1, 2020 4,824,573 $ 5.15 Granted 35,750 1.40 Exercised — — Cancelled — — Vested Balance, March 31, 2020 4,860,323 $ 5.12 |
Summary of Range of Exercise Prices and Weighted Average Remaining Contractual Life of Warrants | The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable warrants to purchase common shares as of March 31, 2020: Outstanding and exercisable warrants Exercise price Number of warrants Weighted average $ 1.40 142,750 4.7 years $ 1.81 571,428 4.4 years $ 2.60 465,712 3.3 years $ 3.00 701,667 3.0 years $ 3.25 120,000 2.7 years $ 3.36 680,000 1.9 years $ 3.36 200,000 2.9 years $ 3.65 200,000 2.2 years $ 3.75 94,000 2.4 years $ 5.00 800,000 1.8 years $ 13.43 879,766 0.8 years $ 16.50 5,000 0.3 years 4,860,323 2.5 years |
Net Loss Per Share (Tables)
Net Loss Per Share (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Earnings Per Share [Abstract] | |
Calculation of Weighted Average Number of Shares Outstanding and Loss Per Share Outstanding | The calculation of the weighted average number of shares outstanding and loss per share outstanding for the three months ended March 31, 2020 and 2019 are as follows: Three months ended March 31, 2020 2019 Numerator for basic and diluted income per share – Net loss $ (2,334,110 ) $ (3,205,174 ) Denominator for basic loss per share – weighted average shares outstanding 13,888,438 10,941,856 Dilutive effect of shares issuable upon conversion of convertible debt and the exercise of stock options and warrants outstanding — — Denominator for diluted loss per share – adjusted weighted average shares outstanding 13,888,438 10,941,856 Net loss per share: Basic $ (0.17 ) $ (0.29 ) Diluted $ (0.17 ) $ (0.29 ) |
Nature of Business and Summar_4
Nature of Business and Summary of Significant Accounting Policies (Details Narrative) - USD ($) | Apr. 04, 2020 | Aug. 05, 2019 | May 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | Apr. 17, 2020 | Dec. 23, 2019 | Jan. 02, 2019 |
Net losses | $ (2,334,110) | $ (3,205,174) | $ 10,000,000 | ||||||
Accumulated deficit | (89,722,729) | (87,388,619) | |||||||
Lump sum payment received | $ 6,000,000 | 6,000,000 | |||||||
Proceeds from sale of common stock in underwritten public offering | 2,502,136 | ||||||||
Unsecured promissory notes and detachable warrants | 389,000 | ||||||||
Proceeds from exercise of warrants | 1,564,000 | ||||||||
Short-term promissory note payable | $ 300,000 | ||||||||
Warrants to purchase common stock | 571,248 | 107,000 | |||||||
Proceeds from convertible debentures | $ 2,780,000 | ||||||||
Operating lease right of use assets | 94,449 | $ 122,459 | |||||||
Operating lease obligations | $ 94,448 | ||||||||
ASU 2016-02 Leases [Member] | |||||||||
Operating lease right of use assets | $ 501,000 | ||||||||
Operating lease obligations | 582,000 | ||||||||
Deferred rent | $ 81,000 | ||||||||
Subsequent Event [Member] | Paycheck Protection Program [Member] | |||||||||
Proceeds from loan | $ 1,418,900 | $ 1,418,900 | |||||||
Debt instrument term | 2 years | ||||||||
Debt instrument, interest rate | 0.98% | 1.00% |
Nature of Business and Summar_5
Nature of Business and Summary of Significant Accounting Policies - Summary of Sales by Geographic Area (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Sales by geographic area | $ 2,425,745 | $ 2,550,796 |
United States of America [Member] | ||
Sales by geographic area | 2,371,687 | 2,514,342 |
Foreign [Member] | ||
Sales by geographic area | $ 54,058 | $ 36,454 |
Inventories (Details Narrative)
Inventories (Details Narrative) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Inventory Disclosure [Abstract] | ||
Finished goods inventory | $ 124,557 | $ 80,711 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Inventory Disclosure [Abstract] | ||
Raw material and component parts | $ 4,312,384 | $ 4,481,611 |
Work-in-process | 60,862 | 35,858 |
Finished goods | 4,881,662 | 4,906,956 |
Subtotal | 9,254,908 | 9,424,425 |
Reserve for excess and obsolete inventory | (4,117,022) | (4,144,013) |
Total | $ 5,137,886 | $ 5,280,412 |
Debt Obligations (Details Narra
Debt Obligations (Details Narrative) - USD ($) | Jan. 17, 2020 | Dec. 23, 2019 | Aug. 05, 2019 | Aug. 21, 2018 | Jul. 31, 2018 | Feb. 29, 2020 | May 31, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | Mar. 03, 2020 |
Warrant to purchase of common stock shares | 107,000 | 571,248 | |||||||||
Common stock for aggregate purchase price of notes | $ 2,502,136 | ||||||||||
Common stock, par value | $ 0.001 | $ 0.001 | |||||||||
Lump sum payment received | $ 6,000,000 | $ 6,000,000 | |||||||||
Minimum return payment obligations | $ 6,000,000 | ||||||||||
Amortization of debt discount | $ 86,867 | ||||||||||
Private, Third-party Lenders [Member] | |||||||||||
Debt maturity date | Mar. 31, 2020 | ||||||||||
Warrant to purchase of common stock shares | 107,000 | ||||||||||
Warrant exercise price | $ 1.40 | ||||||||||
Unsecured notes payable | $ 300,000 | ||||||||||
Debentures bear interest rate | 8.00% | ||||||||||
Warrant exercisable date | Dec. 23, 2024 | ||||||||||
Proceeds from warrants | $ 71,869 | ||||||||||
Amortization of debt discount | 66,061 | ||||||||||
Unsecured Promissory Note Payable [Member] | |||||||||||
Debt maturity date | May 28, 2020 | ||||||||||
Unsecured notes payable | $ 289,000 | ||||||||||
Debentures bear interest rate | 6.00% | ||||||||||
Total interest accrued | $ 2,067 | ||||||||||
Unsecured Promissory Note Payable [Member] | Private, Third-party Lenders [Member] | |||||||||||
Debt maturity date | Apr. 17, 2020 | ||||||||||
Warrant to purchase of common stock shares | 35,750 | ||||||||||
Warrant exercise price | $ 1.40 | ||||||||||
Unsecured notes payable | $ 100,000 | ||||||||||
Debentures bear interest rate | 8.00% | ||||||||||
Warrant exercisable date | Jan. 17, 2025 | ||||||||||
Proceeds from warrants | $ 20,806 | ||||||||||
Amortization of debt discount | 20,806 | ||||||||||
Securities Purchase Agreement [Member] | 2019 Convertible Notes [Member] | |||||||||||
Debt instrument face amount | 1,259,074 | ||||||||||
Monthly principal payments | 172,839 | ||||||||||
Prepay in cash the remaining outstanding principal | $ 574,341 | ||||||||||
Securities Purchase Agreement [Member] | Investors [Member] | |||||||||||
Warrant term | 5 years | ||||||||||
Warrant to purchase of common stock shares | 571,428 | ||||||||||
Warrant exercise price | $ 1.8125 | ||||||||||
Common stock percentage | 5.00% | ||||||||||
Common stock for aggregate purchase price of notes | $ 125,000 | ||||||||||
Aggregate purchase price of notes | $ 2,500,000 | ||||||||||
Securities Purchase Agreement [Member] | Investors [Member] | 8% Senior Secured Convertible Promissory Notes [Member] | |||||||||||
Debt maturity date | Aug. 4, 2020 | ||||||||||
Debt instrument face amount | $ 2,777,778 | ||||||||||
Debt converted into shares | 1,984,126 | ||||||||||
Conversion price, per share | $ 1.40 | ||||||||||
Agreement description | As a result of such conversion or exercise, such holder, together with its affiliates, would own more than 4.99% of the total number of shares of the Company's common stock outstanding immediately after giving effect to such exercise. However, the investors may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after such notice to the Company. | ||||||||||
2018 Proceeds Investment Agreement [Member] | Brickell Key Investments LP [Member] | |||||||||||
Warrant term | 5 years | ||||||||||
Warrant to purchase of common stock shares | 465,712 | ||||||||||
Warrant exercise price | $ 2.60 | ||||||||||
Funded amount | $ 10,000,000 | ||||||||||
Investment agreement description | The Company agreed to assign to BKI (i) 100% of all gross, pre-tax monetary recoveries paid by any defendant(s) to the Company or its affiliates agreed to in a settlement or awarded in judgment in connection with the patent assets, plus any interest paid in connection therewith by such defendant(s) (the "Patent Assets Proceeds"), up to the minimum return (as defined in the Agreement) and (ii) if BKI has not received its minimum return by the earlier of a liquidity event (as defined in the Agreement) and July 31, 2020, then the Company agreed to assign to BKI 100% of the Patent Asset Proceeds until BKI has received an amount equal to the minimum return on $4.0 million. | ||||||||||
Payments of minimum return | $ 4,000,000 | ||||||||||
Indebtedness | $ 500,000 | ||||||||||
Common stock, par value | $ 0.001 | ||||||||||
Description of warrants reflecting agreement | An exercise price of $2.60 per share provided that the holder of the PIA Warrant will be prohibited from exercising the PIA Warrant if, as a result of such exercise, such holder, together with its affiliates, would own more than 4.99% of the total number of shares of the Company's common stock outstanding immediately after giving effect to such exercise. However, such holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective until 61 days after such notice to the Company. The PIA Warrant is exercisable for five years from the date of issuance and is exercisable on a cashless exercise basis if there is no effective registration statement. No contractual registration rights were given. | ||||||||||
2018 Proceeds Investment Agreement [Member] | Brickell Key Investments LP [Member] | First Tranche [Member] | |||||||||||
Funded amount | $ 500,000 | ||||||||||
2018 Proceeds Investment Agreement [Member] | Brickell Key Investments LP [Member] | Second Tranche [Member] | |||||||||||
Funded amount | $ 10,000,000 | $ 9,500,000 | |||||||||
Number of option exercised | 9,500,000 |
Debt Obligations - Summary of S
Debt Obligations - Summary of Secured Convertible Debentures and Proceeds Investment Agreement (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Debt obligations | $ 6,782,000 | $ 8,327,748 |
2019 Secured Convertible Notes [Member] | ||
Debt obligations | 1,593,809 | |
2018 Proceeds Investment Agreement [Member] | ||
Debt obligations | 6,193,000 | 6,500,000 |
Unsecured Promissory Note Payable [Member] | ||
Debt obligations | 300,000 | 233,939 |
Unsecured Promissory Notes Payable Related Party [Member] | ||
Debt obligations | $ 289,000 |
Debt Obligations - Summary of_2
Debt Obligations - Summary of Secured Convertible Debentures and Proceeds Investment Agreement (Details) (Parenthetical) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Debt Disclosure [Abstract] | ||
Less unamortized discount | $ 0 | $ 66,061 |
Debt Obligations - Schedule of
Debt Obligations - Schedule of Fair Value of Embedded Derivatives and Warrants (Details) - USD ($) | Aug. 05, 2019 | Mar. 31, 2020 |
2019 Secured Convertible Notes [Member] | ||
Gross cash proceeds | $ 2,500,000 | |
Secured Convertible Notes [Member] | 2019 Secured Convertible Notes [Member] | ||
Gross cash proceeds | 1,845,512 | |
Common Stock Issued as Commitment Shares [Member] | 2019 Secured Convertible Notes [Member] | ||
Gross cash proceeds | 118,749 | |
Common Stock Purchase Warrants [Member] | 2019 Secured Convertible Notes [Member] | ||
Gross cash proceeds | $ 535,739 | |
2018 Proceeds Investment Agreement [Member] | ||
Gross cash proceeds | $ 10,000,000 | |
2018 Proceeds Investment Agreement [Member] | Common Stock Purchase Warrants [Member] | ||
Gross cash proceeds | 932,487 | |
2018 Proceeds Investment Agreement [Member] | Proceeds Investment Agreement [Member] | ||
Gross cash proceeds | $ 9,067,513 |
Debt Obligations - Summary of F
Debt Obligations - Summary of Fair Value and Adjusted Carrying Value of Secured Convertible Notes (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Secured convertible notes, beginning balance | $ 1,593,809 | |
Change in fair value of secured convertible note during the period | 412,445 | |
Secured convertible notes, ending balance | ||
2019 Secured Convertible Notes [Member] | ||
Secured convertible notes, beginning balance | 1,593,809 | |
Principal repaid during the period by issuance of common stock | (1,259,074) | |
Principal repaid during the period by payment of cash | (747,180) | |
Change in fair value of secured convertible note during the period | 412,445 | |
Secured convertible notes, ending balance |
Debt Obligations - Schedule o_2
Debt Obligations - Schedule of Certain Estimates and Assumptions of Fair Value of Secured Convertible Notes (Details) - 2019 Secured Convertible Notes [Member] - Assumptions [Member] | 12 Months Ended |
Dec. 31, 2019$ / shares | |
Volatility - range | 115.00% |
Risk-free rate | 1.60% |
Contractual term | 7 months 6 days |
Calibrated stock price | $ 1.06 |
Debt yield | 123.60% |
Debt Obligations - Schedule o_3
Debt Obligations - Schedule of Certain Estimates and Assumptions of Weighted Patent Asset (Details) - 2018 Proceeds Investment Agreement [Member] - Patent Asset [Member] - Axon and WatchGuard [Member] - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Estimated minimum return payable to BKI | $ 21,000,000 | $ 21,000,000 |
Negotiation discount | 43.30% | 43.30% |
Minimum [Member] | ||
Discount rate | 3.60% | 3.00% |
Expected term to patent asset proceeds payment | 3 months 29 days | 6 months 29 days |
Probability of success | 5.90% | 5.90% |
Maximum [Member] | ||
Discount rate | 21.30% | 16.60% |
Expected term to patent asset proceeds payment | 3 years 9 months | 4 years |
Probability of success | 38.50% | 38.50% |
Debt Obligations - Schedule o_4
Debt Obligations - Schedule of Fair Value of Debentures Activity (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Debt Disclosure [Abstract] | ||
Beginning balance, Proceeds investment agreement | $ 6,500,000 | |
Repayment of obligation | ||
Change in the fair value during the period | (307,000) | $ 137,000 |
Ending balance, Proceeds investment agreement | $ 6,193,000 |
Fair Value Measurement - Financ
Fair Value Measurement - Financial Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Secured convertible debentures | $ 1,593,809 | |
Proceeds investment agreement | 6,193,000 | 6,500,000 |
Liabilities, fair value | 6,193,000 | 8,093,809 |
Level 1 [Member] | ||
Secured convertible debentures | ||
Proceeds investment agreement | ||
Liabilities, fair value | ||
Level 2 [Member] | ||
Secured convertible debentures | ||
Proceeds investment agreement | ||
Liabilities, fair value | ||
Level 3 [Member] | ||
Secured convertible debentures | 1,593,809 | |
Proceeds investment agreement | 6,193,000 | 6,500,000 |
Liabilities, fair value | $ 6,193,000 | $ 8,093,809 |
Fair Value Measurement - Fair V
Fair Value Measurement - Fair Value Measurements Change in Level 3 Inputs (Details) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Fair value measurement, beginning balance | $ 8,093,809 |
Conversion of secured convertible debentures | (1,259,074) |
Repayment of 2019 secured convertible notes | (747,180) |
Change in fair value of secured convertible debentures and proceeds investment agreement | 105,445 |
Fair value measurement, ending balance | 6,193,000 |
2019 Secured Convertible Notes [Member] | |
Fair value measurement, beginning balance | 1,593,809 |
Conversion of secured convertible debentures | (1,259,074) |
Repayment of 2019 secured convertible notes | (747,180) |
Change in fair value of secured convertible debentures and proceeds investment agreement | 412,445 |
Fair value measurement, ending balance | |
Proceeds Investment Agreement [Member] | |
Fair value measurement, beginning balance | 6,500,000 |
Conversion of secured convertible debentures | |
Change in fair value of secured convertible debentures and proceeds investment agreement | (307,000) |
Fair value measurement, ending balance | $ 6,193,000 |
Accrued Expenses - Schedule of
Accrued Expenses - Schedule of Accrued Expenses (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Payables and Accruals [Abstract] | ||
Accrued warranty expense | $ 17,008 | $ 17,838 |
Accrued litigation costs | 250,000 | 295,000 |
Accrued sales commissions | 25,631 | 28,480 |
Accrued payroll and related fringes | 390,550 | 233,254 |
Accrued insurance | 20,812 | 78,579 |
Accrued sales returns and allowances | 5,542 | 18,258 |
Accrued sales taxes | 49,503 | 50,136 |
Other | 115,318 | 124,336 |
Total accrued expenses | $ 874,364 | $ 845,881 |
Accrued Expenses - Schedule o_2
Accrued Expenses - Schedule of Accrued Warranty Expense (Details) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Payables and Accruals [Abstract] | |
Beginning balance | $ 17,838 |
Provision for warranty expense | 26,095 |
Charges applied to warranty reserve | (26,925) |
Ending balance | $ 17,008 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Effective tax rate expected statutory valuation allowance on net deferred tax assets | 100.00% | 100.00% |
Net operating loss carry-forwards | $ 67,000,000 |
Operating Lease (Details Narrat
Operating Lease (Details Narrative) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
September 2012 for Office and Warehouse Space [Member] | |
Operating lease maturity date | Apr. 30, 2020 |
Weighted average remaining lease term | 1 month |
September 2012 for Office and Warehouse Space [Member] | Minimum [Member] | |
Operating lease monthly payments | $ 38,026 |
September 2012 for Office and Warehouse Space [Member] | Maximum [Member] | |
Operating lease monthly payments | 38,533 |
October 2019 for Copiers [Member] | |
Operating lease monthly payments | $ 1,598 |
Operating lease maturity date | Oct. 31, 2023 |
Weighted average remaining lease term | 43 months |
Office Space and Copier [Member] | |
Operating lease expense | $ 98,836 |
Weighted average discount rate | 8.00% |
Operating Lease - Schedule of O
Operating Lease - Schedule of Operating Leases Right of Use Assets and Liabilities (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Leases [Abstract] | ||
Operating lease right of use assets | $ 94,449 | $ 122,459 |
Operating lease obligations-current portion | 49,828 | 159,160 |
Operating lease obligations-less current portion | 44,620 | $ 44,460 |
Total operating lease obligations | $ 94,448 |
Operating Lease - Schedule of C
Operating Lease - Schedule of Components of Lease Expenses (Details) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Selling, General and Administrative Expenses [Member] | |
Selling, general and administrative expenses | $ 98,836 |
Operating Lease - Schedule of F
Operating Lease - Schedule of Future Minimum Lease Payments (Details) | Mar. 31, 2020USD ($) |
Leases [Abstract] | |
2020 | $ 52,915 |
2021 | 19,176 |
2022 | 19,176 |
2023 | 15,980 |
Total undiscounted minimum future lease payments | 107,247 |
Imputed interest | (12,799) |
Total operating lease liability | $ 94,448 |
Contingencies (Details Narrativ
Contingencies (Details Narrative) - USD ($) | Mar. 06, 2020 | Jan. 08, 2020 | Jul. 11, 2019 | May 13, 2019 |
Market Value Listed Securities [Member] | ||||
Description on terms of Nasdaq listing | On March 6, 2020, we received notice from the NASDAQ hearing panel that the Company has been granted an extension until June 30, 2020 to regain compliance with Rule 5550(b), which requires us to have at least i) $2.5 million in shareholder equity; or ii) $35 million in market value of listed securities, or iii) net income from continuing operations of at least $500,000 in the most recently completed fiscal year or in two of the last three fiscal years. Our goal is to meet the $2.5 million minimum shareholder equity requirement for continued listing on NASDAQ. There can be no assurance that we will regain compliance with the NASDAQ's Listing Rule regarding our $2.5 million minimum shareholder equity requirement on or prior to the June 30, 2020 required date. Furthermore, even if we regain compliance on or prior to such date, we must thereafter continue to maintain compliance the continued listing rule. NASDAQ has not provided any guidance whether the extension until June 30, 2020 will be affected by the Covid-19 pandemic. | On January 8, 2020, we received a determination letter from the staff of Nasdaq stating that we had not regained compliance with the MVLS Standard, since our Common Stock was below the $35 million minimum MVLS requirement for continued listing on Nasdaq under the MLVS Rule and had not been at least $35 million for a minimum of ten consecutive business days at any time during the 180-day grace period granted to us. Pursuant to the letter, unless we requested a hearing to appeal this determination by January 15, 2020, our Common Stock would be delisted from Nasdaq and trading of our Common Stock would have been suspended at the opening of business on January 17, 2020. | On July 11, 2019, Nasdaq notified us that, for the previous 30 consecutive business days, the minimum Market Value of Listed Securities (the "MVLS") for our Common Stock was below the $35 million minimum MVLS requirement for continued listing on Nasdaq under Nasdaq Listing Rule 5550(b)(2) (the "MVLS Rule"). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we had 180 calendar days, or until January 7, 2020, to regain compliance with the MVLS Rule. To regain compliance with the MVLS Rule, the minimum MVLS for our Common Stock must have been at least $35 million for a minimum of ten consecutive business days at any time during this 180-day period. If we failed to regain compliance with such rule by January 7, 2020, we were subject to being be delisted from Nasdaq. If we were delisted from The Nasdaq Capital Market, our Common Stock may lose liquidity, increase volatility, and lose market maker support. | |
WatchGuard [Member] | ||||
One-time settlement payment | $ 6,000,000 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Stock based compensation | $ 311,677 | $ 725,198 |
Number of common stock authorized to grant | 4,175,000 | |
Number of shares, available for grant | 121,636 | |
Fair value of stock options issued | $ 0 | |
Stock options granted | ||
Aggregate intrinsic value of options outstanding | $ 0 | |
Intrinsic value of options exercisable | 0 | |
Intrinsic value of options exercised | ||
Unrecognized stock compensation expense | 72,703 | |
Non Vested Restricted Stock Grants [Member] | ||
Unrecognized stock compensation expense | $ 706,239 | |
2005 Stock Option Plan [Member] | During 2015 [Member] | ||
Number of common stock shares reserved for awards which unavailable for issuance | 19,678 | |
Unexercised and outstanding stock options | 8,063 | |
2006 Stock Option Plan [Member] | During 2016 [Member] | ||
Number of common stock shares reserved for awards which unavailable for issuance | 27,412 | |
Unexercised and outstanding stock options | 40,062 | |
2007 Stock Option Plan [Member] | During 2017 [Member] | ||
Number of common stock shares reserved for awards which unavailable for issuance | 89,651 | |
Unexercised and outstanding stock options | 5,000 | |
2008 Plan [Member] | During 2018 [Member] | ||
Number of common stock shares reserved for awards which unavailable for issuance | 9,249 | |
Unexercised and outstanding stock options | 31,250 |
Stock-Based Compensation - Summ
Stock-Based Compensation - Summary of Stock Options Outstanding (Details) | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Options Granted | |
Stock Options [Member] | |
Options Outstanding, Beginning balance | 589,125 |
Options Granted | |
Options Exercised | |
Options Forfeited | (5,000) |
Options Outstanding, Ending balance | 584,125 |
Options Exercisable, Ending balance | 539,125 |
Weighted Average Exercise Price, Outstanding, Beginning balance | $ / shares | $ 3.74 |
Weighted Average Exercise Price, Granted | $ / shares | |
Weighted Average Exercise Price, Exercised | $ / shares | |
Weighted Average Exercise Price, Forfeited | $ / shares | (9.40) |
Weighted Average Exercise Price, Outstanding, Ending balance | $ / shares | 3.69 |
Weighted Average Exercise Price, Exercisable, Ending balance | $ / shares | $ 3.75 |
Stock-Based Compensation - Shar
Stock-Based Compensation - Shares Authorized Under Stock Option Plans by Exercise Price Range (Details) | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Number of options, outstanding | 584,125 |
Weighted average remaining contractual life, outstanding options | 7 years 1 month 6 days |
Number of options, exercisable | 539,125 |
Weighted average remaining contractual life, exercisable options | 6 years 10 months 25 days |
Exercise Price Range One [Member] | |
Exercise price range, lower limit | $ / shares | $ 0.01 |
Exercise price range, upper limit | $ / shares | $ 3.49 |
Number of options, outstanding | 470,313 |
Weighted average remaining contractual life, outstanding options | 8 years 1 month 6 days |
Number of options, exercisable | 425,313 |
Weighted average remaining contractual life, exercisable options | 8 years |
Exercise Price Range Two [Member] | |
Exercise price range, lower limit | $ / shares | $ 3.50 |
Exercise price range, upper limit | $ / shares | $ 4.99 |
Number of options, outstanding | 64,000 |
Weighted average remaining contractual life, outstanding options | 4 years 1 month 6 days |
Number of options, exercisable | 64,000 |
Weighted average remaining contractual life, exercisable options | 4 years 1 month 6 days |
Exercise Price Range Three [Member] | |
Exercise price range, lower limit | $ / shares | $ 5 |
Exercise price range, upper limit | $ / shares | $ 6.49 |
Number of options, outstanding | |
Weighted average remaining contractual life, outstanding options | 0 years |
Number of options, exercisable | |
Weighted average remaining contractual life, exercisable options | 0 years |
Exercise Price Range Four [Member] | |
Exercise price range, lower limit | $ / shares | $ 6.50 |
Exercise price range, upper limit | $ / shares | $ 7.99 |
Number of options, outstanding | 7,562 |
Weighted average remaining contractual life, outstanding options | 1 year 7 months 6 days |
Number of options, exercisable | 7,562 |
Weighted average remaining contractual life, exercisable options | 1 year 7 months 6 days |
Exercise Price Range Five [Member] | |
Exercise price range, lower limit | $ / shares | $ 8 |
Exercise price range, upper limit | $ / shares | $ 9.99 |
Number of options, outstanding | 2,500 |
Weighted average remaining contractual life, outstanding options | 1 year 2 months 12 days |
Number of options, exercisable | 2,500 |
Weighted average remaining contractual life, exercisable options | 1 year 2 months 12 days |
Exercise Price Range Six [Member] | |
Exercise price range, lower limit | $ / shares | $ 10 |
Exercise price range, upper limit | $ / shares | $ 19.99 |
Number of options, outstanding | 39,750 |
Weighted average remaining contractual life, outstanding options | 9 months 18 days |
Number of options, exercisable | 39,750 |
Weighted average remaining contractual life, exercisable options | 9 months 18 days |
Stock-Based Compensation - Su_2
Stock-Based Compensation - Summary of Restricted Stock Activity (Details) - Restricted Stock [Member] | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Number of Restricted shares, Non-vested Beginning Balance | shares | 514,875 |
Number of Restricted shares, Granted | shares | 530,050 |
Number of Restricted shares, Vested | shares | (274,925) |
Number of Restricted shares, Forfeited | shares | (22,500) |
Number of Restricted shares, Non-vested Ending Balance | shares | 747,500 |
Weighted average grant date fair value, Non-vested Beginning Balance | $ / shares | $ 2.97 |
Weighted average grant date fair value, Granted | $ / shares | 1.08 |
Weighted average grant date fair value, Vested | $ / shares | (2.74) |
Weighted average grant date fair value, Forfeited | $ / shares | (1.92) |
Weighted average grant date fair value, Non-vested Ending Balance | $ / shares | $ 1.75 |
Stock-Based Compensation - Sche
Stock-Based Compensation - Schedule of Non-vested Balance of Restricted Stock (Details) - Restricted Stock [Member] | Mar. 31, 2020shares |
Non-vested balance, 2020 (April 1, 2020 through December 31, 2020) | 13,125 |
Non-vested balance, 2021 | 488,750 |
Non-vested balance, 2022 | 245,625 |
Common Stock Purchase Warrant_2
Common Stock Purchase Warrants (Details Narrative) - USD ($) | 3 Months Ended | |||
Mar. 31, 2020 | Dec. 23, 2019 | Aug. 05, 2019 | Apr. 30, 2018 | |
Warrants to purchase common stock | 107,000 | 571,248 | ||
Common Stock Purchase Warrants [Member] | ||||
Warrants to purchase common stock | 4,824,573 | |||
Warrant expiration term, description | July 15, 2020 through January 17, 2025 | |||
Common Stock Purchase Warrants [Member] | Minimum [Member] | ||||
Warrant, exercise per share | $ 1.40 | |||
Common Stock Purchase Warrants [Member] | Maximum [Member] | ||||
Warrant, exercise per share | $ 16.50 | |||
Warrants [Member] | ||||
Warrants to purchase common stock | 172,038 | 12,200 | ||
Warrant, exercise per share | $ 0.52 | $ 7.32 | ||
Number of warrants increased | 159,538 | |||
Intrinsic value of all outstanding warrants | $ 0 | |||
Warrants, weighted average remaining term | 30 years 4 months 24 days |
Common Stock Purchase Warrant_3
Common Stock Purchase Warrants - Summary of Warrant Activity (Details) - Warrants [Member] | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Warrants, Vested, Beginning balance | shares | 4,824,573 |
Warrants, Granted | shares | 35,750 |
Warrants, Exercised | shares | |
Warrants, Cancelled | shares | |
Warrants, Vested, Ending balance | shares | 4,860,323 |
Weighted average exercise price, Vested, Beginning balance | $ / shares | $ 5.15 |
Weighted average exercise price, Granted | $ / shares | 1.40 |
Weighted average exercise price, Exercised | $ / shares | |
Weighted average exercise price, Cancelled | $ / shares | |
Weighted average exercise price, Vested, Ending balance | $ / shares | $ 5.12 |
Common Stock Purchase Warrant_4
Common Stock Purchase Warrants - Summary of Range of Exercise Prices and Weighted Average Remaining Contractual Life of Warrants (Details) - Warrants [Member] | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Outstanding and exercisable warrants, Number of warrants | 4,860,323 |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 2 years 6 months |
Exercise Price Range One [Member] | |
Outstanding and exercisable warrants, Exercise price | $ / shares | $ 1.40 |
Outstanding and exercisable warrants, Number of warrants | 142,750 |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 4 years 8 months 12 days |
Exercise Price Range Two [Member] | |
Outstanding and exercisable warrants, Exercise price | $ / shares | $ 1.81 |
Outstanding and exercisable warrants, Number of warrants | 571,428 |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 4 years 4 months 24 days |
Exercise Price Range Three [Member] | |
Outstanding and exercisable warrants, Exercise price | $ / shares | $ 2.60 |
Outstanding and exercisable warrants, Number of warrants | 465,712 |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 3 years 3 months 19 days |
Exercise Price Range Four [Member] | |
Outstanding and exercisable warrants, Exercise price | $ / shares | $ 3 |
Outstanding and exercisable warrants, Number of warrants | 701,667 |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 3 years |
Exercise Price Range Five [Member] | |
Outstanding and exercisable warrants, Exercise price | $ / shares | $ 3.25 |
Outstanding and exercisable warrants, Number of warrants | 120,000 |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 2 years 8 months 12 days |
Exercise Price Range Six [Member] | |
Outstanding and exercisable warrants, Exercise price | $ / shares | $ 3.36 |
Outstanding and exercisable warrants, Number of warrants | 680,000 |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 1 year 10 months 25 days |
Exercise Price Range Seven [Member] | |
Outstanding and exercisable warrants, Exercise price | $ / shares | $ 3.36 |
Outstanding and exercisable warrants, Number of warrants | 200,000 |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 2 years 10 months 25 days |
Exercise Price Range Eight [Member] | |
Outstanding and exercisable warrants, Exercise price | $ / shares | $ 3.65 |
Outstanding and exercisable warrants, Number of warrants | 200,000 |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 2 years 2 months 12 days |
Exercise Price Range Nine [Member] | |
Outstanding and exercisable warrants, Exercise price | $ / shares | $ 3.75 |
Outstanding and exercisable warrants, Number of warrants | 94,000 |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 2 years 4 months 24 days |
Exercise Price Range Ten [Member] | |
Outstanding and exercisable warrants, Exercise price | $ / shares | $ 5 |
Outstanding and exercisable warrants, Number of warrants | 800,000 |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 1 year 9 months 18 days |
Exercise Price Range Eleven [Member] | |
Outstanding and exercisable warrants, Exercise price | $ / shares | $ 13.43 |
Outstanding and exercisable warrants, Number of warrants | 879,766 |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 9 months 18 days |
Exercise Price Range Twelve [Member] | |
Outstanding and exercisable warrants, Exercise price | $ / shares | $ 16.50 |
Outstanding and exercisable warrants, Number of warrants | 5,000 |
Outstanding and exercisable warrants, Weighted average remaining contractual life | 3 months 19 days |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | Mar. 03, 2020 | Jan. 03, 2020 | Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 |
Common stock, par value | $ 0.001 | $ 0.001 | |||
Purchase of additional granted common stock | |||||
Gross proceeds from offering | $ 2,502,136 | ||||
Underwriting Agreement [Member] | Officers and Employees [Member] | 2020 Issuance of Restricted Common Stock [Member] | |||||
Restricted stock granted | 530,050 | ||||
Restricted common stock description | Shares will generally vest one-half on January 2, 2021 and one half on January 2, 2022, provided that each grantee remains an officer or employee on such dates. | ||||
Underwriting Agreement [Member] | Public Offering [Member] | |||||
Underwriter's legal counsel expense, description | The Underwriters received discounts and commissions of seven percent (7%) of the gross cash proceeds received by the Company from the sale of the common shares in the Offering. In addition, the Company agreed to pay the Underwriters (a) a non-accountable expense reimbursement of 1% of the gross proceeds received and (b) "road show" expenses, diligence fees and the fees and expenses of the Underwriters' legal counsel not to exceed $50,000. | ||||
Underwriter's legal counsel expense | $ 50,000 | ||||
Gross proceeds from offering | $ 2,502,136 | ||||
Underwriting Agreement [Member] | Roth Capital Partners, LLC [Member] | Public Offering [Member] | |||||
Number of common stock issued | 2,521,740 | ||||
Common stock, par value | $ 0.001 | ||||
Stock issued price per shares | $ 1.15 | ||||
Purchase of additional granted common stock | 378,261 |
Net Loss Per Share - Calculatio
Net Loss Per Share - Calculation of Weighted Average Number of Shares Outstanding and Loss Per Share Outstanding (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Earnings Per Share [Abstract] | |||
Numerator for basic and diluted income per share - Net loss | $ (2,334,110) | $ (3,205,174) | $ 10,000,000 |
Denominator for basic loss per share - weighted average shares outstanding | 13,888,438 | 10,941,856 | |
Dilutive effect of shares issuable upon conversion of convertible debt and the exercise of stock options and warrants outstanding | |||
Denominator for diluted loss per share - adjusted weighted average shares outstanding | 13,888,438 | 10,941,856 | |
Net loss per share: Basic | $ (0.17) | $ (0.29) | |
Net loss per share: Diluted | $ (0.17) | $ (0.29) |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) | May 13, 2020USD ($) | Apr. 22, 2020Integer$ / shares | Apr. 17, 2020USD ($)$ / sharesshares | Aug. 05, 2019USD ($)$ / sharesshares | Mar. 31, 2020USD ($)$ / shares | May 01, 2020USD ($) | Apr. 04, 2020USD ($) | Dec. 31, 2019$ / shares | Dec. 23, 2019shares |
Common stock, par value | $ / shares | $ 0.001 | $ 0.001 | |||||||
Warrants to purchase common stock | shares | 571,248 | 107,000 | |||||||
Common stock for aggregate purchase price | $ 2,502,136 | ||||||||
Investors [Member] | Securities Purchase Agreement [Member] | |||||||||
Warrants term | 5 years | ||||||||
Warrants to purchase common stock | shares | 571,428 | ||||||||
Warrant, exercise per share | $ / shares | $ 1.8125 | ||||||||
Common stock for aggregate purchase price | $ 125,000 | ||||||||
Investors [Member] | 8% Senior Secured Convertible Promissory Notes [Member] | Securities Purchase Agreement [Member] | |||||||||
Debt instrument maturity date | Aug. 4, 2020 | ||||||||
Number of shares converted | shares | 1,984,126 | ||||||||
Debt instrument principal amount | $ 2,777,778 | ||||||||
Subsequent Event [Member] | |||||||||
Common stock, par value | $ / shares | $ 0.001 | ||||||||
Share issued price per share | $ / shares | $ 1 | ||||||||
Consecutive business days | Integer | 30 | ||||||||
Subsequent Event [Member] | Securities Purchase Agreement [Member] | Private Placement [Member] | |||||||||
Debt instrument principal amount | $ 1,166,666 | ||||||||
Subsequent Event [Member] | Lease Agreement [Member] | New Warehouse and Office Space [Member] | |||||||||
Debt instrument maturity date | Dec. 31, 2026 | ||||||||
Warehouse and office building lease, description | The terms of the lease include no base rent for the first six months and monthly payments ranging from $12,398 to $13,693 thereafter, with a maturity date of December 2026. The Company is responsible for property taxes, utilities, insurance and its proportionate share of common area costs related to its new location.891,095 The Company will move to occupy the new space after certain improvements are completed landlord which is expected to be in June 2020. | ||||||||
Subsequent Event [Member] | Lease Agreement [Member] | New Warehouse and Office Space [Member] | Minimum [Member] | |||||||||
Monthly principal payments | $ 12,398 | ||||||||
Subsequent Event [Member] | Lease Agreement [Member] | New Warehouse and Office Space [Member] | Maximum [Member] | |||||||||
Monthly principal payments | $ 13,693 | ||||||||
Subsequent Event [Member] | Investors [Member] | Securities Purchase Agreement [Member] | |||||||||
Debt instrument principal amount | 500,000 | ||||||||
Subsequent Event [Member] | Issuance of Restricted Common Stock [Member] | Stanton E. Ross [Member] | |||||||||
Reduction in annual salaries | 150,000 | ||||||||
Subsequent Event [Member] | Issuance of Restricted Common Stock [Member] | Thomas J. Heckman [Member] | |||||||||
Reduction in annual salaries | $ 150,000 | ||||||||
Subsequent Event [Member] | 2018 Stock Option and Restricted Stock Plan [Member] | Thomas J. Heckman [Member] | |||||||||
Annual salaries | $ 55,384 | ||||||||
Shares issued | shares | 60,200 | ||||||||
Subsequent Event [Member] | 2018 Stock Option and Restricted Stock Plan [Member] | Messrs. Ross [Member] | |||||||||
Annual salaries | $ 69,231 | ||||||||
Shares issued | shares | 75,250 | ||||||||
Subsequent Event [Member] | 2020 Issuance of Restricted Common Stock [Member] | 8% Senior Secured Convertible Promissory Notes [Member] | |||||||||
Debt instrument maturity date | Apr. 16, 2021 | ||||||||
Number of shares converted | shares | 1,650,164 | ||||||||
Subsequent Event [Member] | 2020 Issuance of Restricted Common Stock [Member] | 8% Senior Secured Convertible Promissory Notes [Member] | Securities Purchase Agreement [Member] | |||||||||
Debt instrument principal amount | $ 1,666,666 | ||||||||
Common stock, par value | $ / shares | $ 0.001 | ||||||||
Share issued price per share | $ / shares | $ 1.01 | ||||||||
Warrants term | 5 years | ||||||||
Warrants to purchase common stock | shares | 1,237,624 | ||||||||
Warrant, exercise per share | $ / shares | $ 1.31 | ||||||||
Common stock for aggregate purchase price | $ 1,500,000 | ||||||||
Subsequent Event [Member] | Paycheck Protection Program [Member] | |||||||||
Loan amount | $ 1,418,900 | $ 1,418,900 | |||||||
Debt instrument interest rate | 1.00% | 0.98% |