Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Mar. 13, 2019 | Jun. 30, 2018 | |
Document And Entity Information | |||
Entity Registrant Name | Superior Drilling Products, Inc. | ||
Entity Central Index Key | 0001600422 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business Flag | true | ||
Entity Emerging Growth Company | true | ||
Entity Ex Transition Period | true | ||
Entity Shell Company | false | ||
Entity Public Float | $ 0 | ||
Entity Common Stock, Shares Outstanding | 25,018,098 | ||
Trading Symbol | SDPI | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash | $ 4,264,767 | $ 2,375,179 |
Accounts receivable, net | 2,273,189 | 2,667,042 |
Prepaid expenses | 133,607 | 111,530 |
Inventories | 1,003,623 | 1,196,813 |
Total current assets | 7,675,186 | 6,350,564 |
Property, plant and equipment, net | 8,226,009 | 8,809,348 |
Intangible assets, net | 3,686,111 | 6,132,778 |
Related party Note receivable | 7,367,212 | 7,367,212 |
Other noncurrent assets | 51,887 | 15,954 |
Total assets | 27,006,405 | 28,675,856 |
Current liabilities | ||
Accounts payable | 721,361 | 1,021,469 |
Accrued expenses | 631,860 | 543,758 |
Current portion of long-term debt, net of discounts | 4,578,759 | 6,101,678 |
Total current liabilities | 5,931,980 | 7,666,905 |
Long-term debt, less current portion, net of discounts | 6,296,994 | 6,706,375 |
Total liabilities | 12,228,974 | 14,373,280 |
Commitments and contingencies (Notes 6 and 7) | ||
Shareholders' equity | ||
Common stock - $0.001 par value; 100,000,000 shares authorized; 25,018,098 and 24,535,334 shares outstanding, respectively | 25,018 | 24,535 |
Additional paid-in-capital | 39,440,611 | 38,907,864 |
Accumulated deficit | (24,688,198) | (24,629,823) |
Total shareholders' equity | 14,777,431 | 14,302,576 |
Total liabilities and shareholders' equity | $ 27,006,405 | $ 28,675,856 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Common stock, par value per share | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares, issued | 25,018,098 | 24,535,334 |
Common stock, shares, outstanding | 25,018,098 | 24,535,334 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | ||
Revenue | $ 18,245,212 | $ 15,595,659 |
Operating cost and expenses | ||
Cost of revenue | 7,077,344 | 5,960,223 |
Selling, general, and administrative expenses | 7,107,432 | 5,734,315 |
Depreciation and amortization expense | 3,760,231 | 3,676,598 |
Total operating costs and expenses | 17,945,007 | 15,371,136 |
Operating income | 300,205 | 224,523 |
Other income (expense) | ||
Interest income | 432,753 | 346,926 |
Interest expense | (773,680) | (905,990) |
Other income | 43,669 | |
Gain (loss) on disposition of assets | (14,013) | 12,167 |
Total other expense | (354,940) | (503,228) |
Loss before income taxes | (54,735) | (278,705) |
Income tax expense | (3,640) | |
Net loss | $ (58,375) | $ (278,705) |
Basic loss per common share | $ 0 | $ (0.01) |
Basic weighted average common shares outstanding | 24,608,967 | 24,268,409 |
Diluted loss per common share | $ 0 | $ (0.01) |
Diluted weighted average Common shares outstanding | 24,608,967 | 24,268,409 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Equity - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2016 | $ 24,120 | $ 38,295,428 | $ (24,351,118) | $ 13,968,430 |
Balance, shares at Dec. 31, 2016 | 24,120,695 | |||
Share-based compensation expense | $ 415 | 612,436 | 612,851 | |
Share-based compensation expense, shares | 414,639 | |||
Stock issued in stock option exercise | 14,274 | 14,274 | ||
Net loss | (278,705) | (278,705) | ||
Balance at Dec. 31, 2017 | $ 24,535 | 38,907,864 | (24,629,823) | 14,302,576 |
Balance, shares at Dec. 31, 2017 | 24,535,334 | |||
Share-based compensation expense | $ 483 | 518,473 | 518,956 | |
Share-based compensation expense, shares | 482,764 | |||
Net loss | (58,375) | (58,375) | ||
Balance at Dec. 31, 2018 | $ 25,018 | $ 39,440,611 | $ (24,688,198) | $ 14,777,431 |
Balance, shares at Dec. 31, 2018 | 25,018,098 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash Flows from Operating Activities | ||
Net loss | $ (58,375) | $ (278,705) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization expense | 3,760,231 | 3,676,598 |
Amortization of debt discount | 77,641 | 79,424 |
Share based compensation expense | 518,956 | 612,851 |
Impairment of inventories | 116,396 | |
Loss (gain) on disposition of assets | 14,013 | (12,167) |
Changes in operating assets and liabilities: | ||
Accounts receivable | 393,853 | (1,628,378) |
Inventories | 77,760 | (29,121) |
Prepaid expenses and other current assets | (58,010) | (21,757) |
Accounts payable and accrued expenses | (212,006) | 13,990 |
Other long-term liabilities | (53,355) | |
Net Cash Provided by (Used In) Operating Activities | 4,630,459 | 2,359,380 |
Cash Flows From Investing Activities | ||
Purchases of property, plant and equipment | (745,204) | (936,118) |
Proceeds from sale of fixed assets | 2,483,921 | |
Net Cash Provided by Investing Activities | (745,204) | 1,547,803 |
Cash Flows from Financing Activities | ||
Principal payments on debt | (2,009,941) | (3,482,311) |
Principal payments on capital lease obligations | (217,302) | |
Principal payments on related party debt | (74,293) | |
Proceeds from exercised stock options | 14,274 | |
Net Cash Provided by (Used in) Financing Activities | (1,995,667) | (3,773,906) |
Net Increase in Cash | 1,889,588 | 133,277 |
Cash at Beginning of Period | 2,375,179 | 2,241,902 |
Cash at End of Period | 4,264,767 | 2,375,179 |
Supplemental information: | ||
Cash paid for Interest | 577,814 | 851,671 |
Non-cash payment of other long-term liabilities and interest by offsetting related-party note receivable | $ 377,746 | 1,267,711 |
Acquisition of equipment by issuance of note payable | $ 16,557 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Operations Superior Drilling Products, Inc. (the “Company”, “SDPI”, “we”, “our” or “us”) is an innovative drilling and completion tool technology company providing cost saving solutions that drive production efficiencies for the oil and natural gas drilling industry. The Company innovates, designs, engineers, manufactures, sells, rents and repairs drilling and completion tools. Our subsidiaries include (a) Superior Drilling Solutions, LLC (previously known as Superior Drilling Products, LLC), a Utah limited liability company (“SDS”), together with its wholly owned subsidiary Superior Design and Fabrication, LLC, a Utah limited liability company (“SDF”), (b) Extreme Technologies, LLC, a Utah limited liability company (“ET”), (c) Meier Properties Series, LLC, a Utah limited liability company (“MPS”), (d) Meier Leasing, LLC, a Utah limited liability company (“ML”), and (e) Hard Rock Solutions, LLC (“HR” or “Hard Rock”). Basis of Presentation The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements include the accounts of Superior Drilling Products Inc. and all of its wholly-owned subsidiaries. All significant intercompany accounts have been eliminated in consolidation. The Company does not have investments in any unconsolidated subsidiaries. In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an emerging growth company can utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for implementing new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to nonissuers. We have elected to delay such adoption of new or revised accounting standards, and as a result, we may not implement new or revised accounting standards on the relevant dates on which adoption of such standards is required for other issuer companies. Subject to certain conditions set forth in the JOBS Act, as an emerging growth company, we intend to rely on certain of these exemptions, including without limitation, providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404 and implementing any requirement that may be adopted regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis). We will remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of June of that year, (ii) the end of the fiscal year in which we have total annual gross revenues of $1.07 billion or more during such fiscal year, (iii) the date on which we issue more than $1.0 billion in non-convertible debt in a three-year period or (iv) January 1, 2020. Segment Reporting We operate as a single operating segment, which reflects how we manage our business. We operate in the United States and the Middle East. Our operations in the Middle East represented less than 10% of our consolidated operations for all periods presented in these consolidated financial statements. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. Significant items subject to estimates and assumptions include the carrying amount and useful lives of property and equipment and intangible assets, impairment assessments, share-based compensation expense, and valuation allowances for accounts receivable, inventories, and deferred tax assets. Revenue Recognition We are a drilling and completion tool technology company and we generate revenue from the manufacturing, repair, rental and sale of drilling and completion tools. Our manufactured products are produced in a standard manufacturing operation, even when produced to our customer’s specifications. We also earn royalty fees under certain arrangements for the tools we sell. Tool sales, rentals and other related revenue Tool and Product Sales Tool Rental Other Related Revenue: Contract Services Drill Bit Manufacturing and Refurbishment Cash and cash equivalents Cash and cash equivalents consist of cash on deposit. We maintain cash deposits with financial institutions that may exceed federally insured limits at times. We have chosen credible institutions and believe our risk of loss is negligible. Fair Value of Financial Instruments The Company’s financial instruments consist of cash and cash equivalents, receivables, payables, and bank debt. The Company believes that the carrying values of these instruments on the accompanying consolidated balance sheets approximate their fair values. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are generally due within 60 days of the invoice date. No interest is charged on past-due balances. We grant credit to our customers based upon an evaluation of each customer’s financial condition. We periodically monitor the payment history and ongoing creditworthiness of our customers. An allowance for doubtful accounts is established at a level estimated by management to be adequate based upon various factors including historical experience, aging status of customer accounts, payment history and financial condition of our customers. The allowance for doubtful accounts was $9,288 and $18,450 as of December 31, 2018, and 2017, respectively. Inventories Inventories consist of raw materials, work-in-process and finished goods and are stated at the lower of cost, determined using the weighted-average cost method, or net realizable value. Finished goods inventories include raw materials, direct labor and production overhead. The Company regularly reviews inventories on hand and current market conditions to determine if the cost of finished goods inventories exceed current market prices and impairs the cost basis of the inventory accordingly. Property, Plant and Equipment Property, plant and equipment is stated at cost. The cost of ordinary maintenance and repair is charged to operating expense, while replacement of critical components and major improvements are capitalized. Depreciation or amortization of property and equipment, is calculated using the straight-line method over the asset’s estimated useful life as follows: Buildings and leasehold Improvements 2-39 years Machinery, equipment and rental tools 18 months -10 years Office equipment, fixtures and software 3-7 years Transportation equipment 5 - 30 years Property, plant and equipment is reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value of an asset or asset group may not be recoverable. Indicative events or circumstances include, but are not limited to, matters such as a significant decline in market value or a significant change in business climate. An impairment loss is recognized when the carrying value of an asset exceeds the estimated undiscounted future cash flows from the use of the asset and its eventual disposition. The amount of impairment loss recognized is the excess of the asset’s carrying value over its fair value. Assets to be disposed of are reported at the lower of the carrying value or the fair value less cost to sell. Upon sale or other disposition of an asset, the Company recognizes a gain or loss on disposal measured as the difference between the net carrying value of the asset and the net proceeds received. Impairment of Long-Lived Assets We review the recoverability of long-lived assets, such as property and equipment, when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows (undiscounted) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and the carrying value. We concluded there were no indicators evident or other circumstances present that these assets were not recoverable and accordingly, no impairment charges of long-lived assets were recognized for 2018 and 2017. Intangible Assets The Company’s intangible assets with finite lives consist of developed technology, customer contracts and relationships, and trade names and trademarks. The cost of intangible assets with finite lives is amortized using the straight-line method over the estimated period of economic benefit, ranging from 3 to 17 years. Asset lives are adjusted whenever there is a change in the estimated period of economic benefit. No residual value has been assigned to these intangible assets. Intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. These conditions may include a change in the extent or manner in which the asset is being used or a change in future operations. The Company assesses the recoverability of the carrying amount by preparing estimates of future revenue, margins, and cash flows. If the sum of expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, an impairment loss is recognized. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value. Fair value of these assets may be determined by a variety of methodologies, including discounted cash flow models. Research and Development We expense research and development costs as they are incurred. For the years ended December 31, 2018 and 2017, these expenses were approximately $1,265,000 and $746,000, respectively, and are included in the selling, general, and administrative expenses in the statement of operations. Earnings (Loss) Per Share Basic earnings (loss) per common share is calculated by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding, including potentially dilutive common share equivalents, if the effect is dilutive. Potentially dilutive common shares equivalents include stock options and warrants. Approximately 30,502 options to purchase our common stock were excluded from this calculation because they were antidilutive for the year ended December 31, 2018. Income Taxes The Company recognizes an asset or liability for the deferred tax consequences of all temporary differences between the tax basis of assets or liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years when the reported amounts of the asset or liabilities are recovered or settled and for operating loss carry forwards. These deferred tax assets and liabilities are measured using the enacted tax rates that will be in effect when the differences are expected to reverse and the carry forwards are expected to be realized. Deferred tax assets are reviewed periodically for recoverability and a valuation allowance is provided as necessary. Debt Issuance Costs Costs related to debt issuance are capitalized and amortized as interest expense over the term of the related debt using the straight-line method, which approximates the effective interest method. Upon the repayment of debt, the Company accelerates the recognition of an appropriate amount of the costs as interest expense. Debt issuance costs related to the Hard Rock Note are presented as a direct reduction from the carrying amount of the note payable. As of December 31, 2018 and 2017, the amortized debt issuance costs were $77,641 and $79,424, respectively. Share Based Compensation Share based compensation expense for share based payments, related to stock option and restricted stock awards, is recognized based on their grant-date fair values. The Company recognizes compensation expense on a straight-line basis over the requisite service period of the award. Concentrations and Credit Risk The Company has two significant customers that represented 95% and 97% of our revenue for the years ended December 31, 2018 and 2017, respectively. These customers had approximately $1,863,000 and $2,523,000 in accounts receivable at December 31, 2018 and 2017, respectively. The Company had one vendor that represented 11% of our purchases for the year ended December 31, 2018. This vendor had approximately $158,000 in accounts payable at December 31, 2018. We had one significant vendor that represented 17% of our purchases for the year ended December 31, 2017, and had approximately $151,000 in accounts payable at December 31, 2017. Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (the “FASB”) issued an accounting standards update for “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in “Topic 605, Revenue Recognition.” This accounting standard update provides new guidance concerning recognition and measurement of revenue and requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers. We adopted this pronouncement on January 1, 2019 using the full retrospective method. Our evaluation efforts to determine the impact of this standard on our consolidated financial statements included identifying revenue streams with similar contract structures, performing a detailed review of key contracts by revenue stream, and comparing and analyzing historical policies and practices to the new standard. Based on our assessment performed, we have determined that our revenue recognition methodology does not materially change and the adoption of this pronouncement will not have a material impact on the consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “ Leases |
Inventories
Inventories | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Inventories | NOTE 2. INVENTORIES Inventories were comprised of the following: December 31, 2018 December 31, 2017 Raw material $ 738,330 $ 1,040,795 Work in progress 217,158 77,702 Finished goods 48,135 78,316 $ 1,003,623 $ 1,196,813 The Company recorded an impairment loss in the cost of sales of $116,396 during the year ended December 31, 2018 relating to slow moving inventory and steel inventory sold to a third-party wholesaler for no gain or loss. There were no impairment losses recorded by the Company during the year ended December 31, 2017. |
Property, Plant and Equipment
Property, Plant and Equipment | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | NOTE 3. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are comprised of the following: December 31, 2018 December 31, 2017 Land $ 880,416 $ 880,416 Buildings 4,847,778 4,847,778 Leasehold improvements 755,039 717,232 Machinery and equipment 8,816,880 8,216,237 Office equipment, fixtures and software 518,806 507,557 Transportation assets 811,378 811,378 16,630,297 15,980,598 Accumulated depreciation (8,404,288 ) (7,171,250 ) $ 8,226,009 $ 8,809,348 Depreciation expense related to property, plant and equipment for the year ended December 31, 2018 and 2017 was $1,313,564 and $1,229,932 respectively. |
Intangible Assets
Intangible Assets | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | NOTE 4. INTANGIBLE ASSETS Intangible assets are comprised of the following: December 31, 2018 December 31, 2017 Developed technology $ 7,000,000 $ 7,000,000 Customer contracts 6,400,000 6,400,000 Trademarks 1,500,000 1,500,000 14,900,000 14,900,000 Accumulated amortization (11,213,889 ) (8,767,222 ) $ 3,686,111 $ 6,132,778 Amortization expense related to intangible assets for the years ended December 31, 2018 and 2017 was $2,446,667 and $2,446,666, respectively. These intangible assets will be amortized over their expected useful lives using the straight-line method, which is a weighted-average amortization period of 6.3 years. As of December 31, 2018, the Company will recognize the following amortization expense for the respective periods ending December 31 noted below: 2019 1,700,000 2020 1,166,667 2021 583,334 2022 166,667 2023 69,443 Total $ 3,686,111 During the years ended December 31, 2018 and 2017, there were no impairments recognized related to other intangible assets. |
Related Party Note Receivable
Related Party Note Receivable | 12 Months Ended |
Dec. 31, 2018 | |
Receivables [Abstract] | |
Related Party Note Receivable | NOTE 5. RELATED PARTY NOTE RECEIVABLE In January 2014, we entered into a Note Purchase and Sale Agreement under which we agreed to purchase a loan made to Tronco Energy Corporation (“Tronco”), a party related to us through common control, in order to take over the legal position as Tronco’ s senior secured lender. That agreement provided that, upon our full repayment of the Tronco loan from the proceeds of the Offering, the lender would assign to us all of its rights under the Tronco loan, including all of the collateral documents. On May 30, 2014, we closed our purchase of the Tronco loan for a total payoff of $8.3 million, including principal, interest, and early termination fees. As a result of that purchase, we became Tronco’ s senior secured lender, and as a result are entitled to receive all proceeds from sales of the Tronco-owned collateral, as discussed below. The interest rate on the note is 5.5%. We earned interest of $377,746 and $338,204 in the years ending December 31, 2018 and 2017, respectively. On December 18, 2018, the Board of Directors approved a bonus to Troy and Annette Meier with an approximate value of $587,500. The Board and the Meiers decided a portion of the dollar value of such awards would be used to pay the annual interest on the Tronco Note of $211,741 and $190,045 remitted for taxes on the Meiers behalf. The remainder of $185,714 was given to the Meiers in the form of restricted stock units. See Note 10 – Share-Based Compensation. On March 28, 2017, Tronco finalized an agreement with a third party and pursuant to this agreement, the third party acquired all of the Ohio assets of Tronco for $550,000. As Tronco’s senior secured lender, we agreed to release our lien and security interest on these assets in accordance with the agreement. The Company agreed to a non-cash receipt of the $550,000 from Tronco by reducing our bonus accrual liabilities, which was earned by the Meiers in 2014, but not paid, and was recorded in other long-term liability. As a result of this agreement, we reduced both the other long-term liability and the Tronco related party note receivable during the first quarter of 2017. On August 8, 2017, the Board of Directors agreed to extend the terms of the Tronco loan to interest only payments due December 31, 2017, 2018, 2019, 2020, and 2021, with a balloon payment of all unpaid interest and principal due upon full maturity on December 31, 2022. On December 4, 2017, as part of the annual awards made to employees of the Company, the Board of Directors approved grants of restricted stock units to Troy and Annette Meier with an approximate value of $587,500. The Board and the Meiers decided in lieu of making such awards, the dollar value of such awards would be used to pay the annual interest on the Tronco note of $34,992, and the principal on the Tronco note of $379,507 in 2017. The remainder of approximately $173,000 were remitted for taxes on the Meiers behalf. See Note 10 – Share-Based Compensation. We have the direct legal right to enforce the collateral and guaranty agreements entered into in connection with the Tronco loan and to collect Tronco’s collateral sales proceeds, in order to recover the loan purchase amount. The Tronco loan continues to be secured by the guarantees of Troy and Annette Meier (the “Meier Guaranties”), which are directly payable to and legally enforceable by us. In addition, the Meiers have provided us with stock pledges in which they pledge a portion of their shares of our common stock held by their family entities (the “Meier Stock Pledge”), as collateral for the Meiers guaranties until full repayment of Tronco loan. The pledged shares, which are subject to insider timing requirements and volume limitations under Rule 144 of the Securities Act and required periodic black-out periods, are being held in third-party escrow by the Company’s attorneys until full repayment of the Tronco loan, the balance of which is $7,367,212. The Company holds 8,267,860 shares as collateral for the Tronco note as of December 31, 2018. The Company believes the market value of the 8,267,860 shares is sufficient collateral for the note. |
Long-Term Debt
Long-Term Debt | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | NOTE 6. LONG-TERM DEBT Long-term debt is comprised of the following: December 31, 2018 December 31, 2017 Real estate loans $ 4,255,152 $ 4,518,424 Hard Rock Note, net of discount 6,000,000 7,422,912 Machinery loans 327,879 513,317 Transportation loans 292,722 353,400 10,875,753 12,808,053 Current portion of long-term debt (4,578,759 ) (6,101,678 ) $ 6,296,994 $ 6,706,375 Real Estate Loans On February 1, 2019, we signed a loan agreement for $3,129,861 related to our commercial bank loan for our Vernal, Utah Campus. We paid $1,000,000 towards the previous loan that was scheduled to mature on February 15, 2019, upon refinancing. The loan requires monthly payments of approximately $43,000, including principal and interest at 7.25%, and is secured by the land and buildings at our Vernal, Utah Campus. A balloon payment of $2,500,000 is due upon maturity on February 15, 2021. Hard Rock Note In 2014, the Company purchased all of the interests of Hard Rock. Consideration consisted of $12.5 million paid in cash at closing and a $12.5 million seller’s note (the “Hard Rock Note”). The Hard Rock Note and subsequent amendments are secured by the patents, patents pending, other patent rights, and trademarks transferred to Hard Rock by Hard Rock in the closing of the acquisition. At issuance, the fair value of the Hard Rock Note was determined to be $11,144,000, which was less than the face value due to a below-market interest rate. The resulting discount of $1,356,000 is amortized to interest expense using the effective interest method, totaling approximately $78,000 and $76,000 during 2018 and 2017, respectively. On November 21, 2018, certain of our subsidiaries entered into an amended and restated note with the seller in our acquisition of Hard Rock Solutions, LLC. As amended and restated, the Hard Rock Note accrues interest at 7.25% per annum and matures on October 5, 2020. We made all the required principal and accrued interest payments related to the note for 2018. Under the current terms of Hard Rock Note, we are required to pay principal payments of $750,000 (plus accrued interest) on each January 5, April 5, July 5 and October 5 in 2019 and 2020. On January 10, 2019, the Company made a principal payment of $750,000 and an interest payment of $183,411. Transportation Loans Vehicles Our loans for Company vehicles and other transportation are with various financing parties we have engaged with in connection with the acquisition of the vehicles. As of December 31, 2018, the loans bear interest ranging from 0%-8.29% with maturity dates ranging from October 2019 through October 2021, and are collateralized by the vehicles. Our cumulative monthly payment under these loans as of December 31, 2018 was approximately $2,200, including principal and interest. Airplane Loan Our loan for the Company airplane bears interest at 7.35%, requires monthly payments of principal and interest of approximately $3,500, matures in May of 2026 and is collateralized by the airplane. Future annual maturities of total debt are as follows (1) : Year 2019 $ 4,578,760 2020 3,519,077 2021 2,599,458 2022 51,962 2023 33,520 Total debt $ 10,782,777 (1) Excludes discounts for debt issuance costs. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | NOTE 7. COMMITMENTS AND CONTINGENCIES We are subject to litigation that arises from time to time in the ordinary course of our business activities. In February 2019, the Company filed a patent infringement lawsuit in the United States District Court for the Western District of Louisiana Lafayette Division asserting Stabil Drill Specialties, LLC (“Stabil Drill”) infringed on our patent that covers the Company’s well bore conditioning tool, the Drill-N-Ream. Stabil Drill has not yet responded to the lawsuit. As of the date of this annual report, the lawsuit is in initial stages . We cannot predict the outcome of this matter, but our legal costs could have a material effect on our financial position or results of operations in future periods. We are not currently involved in any other litigation which management believes could have a material effect on our financial position or results of operations. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 8. RELATED PARTY TRANSACTIONS Notes Payable In 2014, the Company issued notes payable to related parties in the amount of $2 million. The notes bear interest at 7.5% and were scheduled to mature on January 2, 2017. The Company did not pay these notes upon maturity as the Company and the related parties informally agreed to offset these notes payable with the related-party note receivable. During the year ended December 31, 2017, the Company made principal payments and interest payments of $80,000 related to the notes payable. Additionally, the Company applied $207,942 in principal and interest due to the Company on the related party note receivable (see Note 5 – Related Party Note Receivable) during the year ended December 31, 2017 and reduced the balance to $0 as of December 31, 2017. Related Party Note Receivable The Company holds 8,267,860 shares as collateral for the Tronco Note (see Note 5 – Related Party Note Receivable). |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 9. INCOME TAXES Components of income tax benefit are as follows: Current income taxes: For the Year Ended December 31, 2018 For the Year Ended December 31, 2017 Federal $ - $ - State - - Current provision for income taxes 3,640 Deferred provision (benefit) for income taxes: Federal - - State - - Deferred provision (benefit) for income taxes - - Provision for income taxes $ 3,640 $ - The non-current deferred tax assets and liabilities consist of the following: Deferred tax assets: 263A adjustment $ 12,295 $ 14,326 Accrued expenses - - Stock compensation 81,133 48,489 Stock option 58,102 44,922 Amortization of intangibles 2,965,622 2,796,867 Net operating loss 2,458,939 2,999,467 Others 39,752 12,660 Total non-current deferred tax assets 5,615,843 5,916,731 Deferred tax liabilities: Prepaid expenses (13,781 ) (23,301 ) Depreciation on fixed assets (697,478 ) (853,089 ) Total non-current deferred tax liabilities (711,259 ) (876,390 ) Net non-current deferred tax assets/liabilities 4,904,584 5,040,341 Less: Valuation Allowance (4,904,584 ) (5,040,341 ) Total deferred tax liabilities $ - $ - Reconciliation of the tax rate to the U.S. federal statutory tax rate which relate to the year ended December 31, 2018 and 2017 is as follows: For the Year Ended December 31, 2018 For the Year Ended December 31, 2017 Tax at federal statutory rate $ (11,494 ) $ (80,922 ) State income taxes 2,875 - Permanent differences 61,495 118,253 Change in valuation allowance (135,758 ) (2,436,734 ) Other - State rate effect (2,044 ) (9,578 ) Change in status 104,960 2,408,980 Other (16,394 ) - Provision for income taxes $ 3,640 $ - On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the 2017 Tax Cuts and Jobs Act (“2017 Tax Reform”). The 2017 Tax Reform significantly revises the future ongoing U.S. corporate income tax by, among other things, lowering U. S. corporate income tax rates and implementing a territorial tax system. We have reasonably estimated the effects of the 2017 Tax Reform and recorded provisional amounts in our financial statements as of December 31, 2017. This amount is primarily comprised of the re-measurement of federal net deferred tax liabilities resulting from the permanent reduction in the U.S. statutory corporate tax rate to 21% from 35%. We also recorded a corresponding decrease in our valuation allowance for the impact of the 2017 Tax Reform of approximately $5.040 million, with minimal to no effect of our current statement of operations. During the year ended December 31, 2018, the Company reviewed additional tax guidance provided, and implemented new internal policies to eliminate business entertainment expenses, other than business meals. We determined no revisions were necessary to the tax provision for the year ended December 31, 2017. The tax provision for the year ended December 31, 2018 is consistent with prior years and at the current U.S. corporate tax rate of 21%. |
Share-Based Compensation
Share-Based Compensation | 12 Months Ended |
Dec. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Share-Based Compensation | NOTE 10. SHARE-BASED COMPENSATION In 2014, the Company’s Board of Directors approved that the Directors stock compensation would be included in the Employee Stock Incentive Plan (“Stock Plan”) that reserves 1,724,128 shares of common stock for issuance. Equity and equity-based compensation plans are intended to make available incentives that will assist us in attracting, retaining, and motivating employees, officers, consultants, and directors by allowing them to acquire an ownership interest in our business, and, as a result, encouraging them to contribute to our success. We may provide these incentives through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other cash-based or stock-based awards. As a result, we expect to incur non-cash, stock-based compensation expenses in future periods. The Board of Directors has frozen the 2014 Incentive Plan, such that no future grants of awards will be made and the 2014 Incentive Plan shall only remain in effect with respect to awards under that Plan outstanding as of June 15, 2015 until they expire according to their terms. In 2015, our stockholders approved the Superior Drilling Company, Inc. 2015 Long Term Incentive Plan (the “2015 Incentive Plan”). The purpose of the 2015 Incentive Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and its affiliates and by motivating such persons to contribute to the growth and profitability of the Company and our affiliates. In 2017, the Company’s board of directors approved an additional 1,440,000 shares of the Company’s common stock to be added to the 2015 Incentive Plan. Subject to adjustment as provided in the 2015 Incentive Plan, the maximum aggregate number of shares of the Company’s common stock that may be issued with respect to awards under the 2015 Incentive Plan is 2,992,905. As of December 31, 2018, there were 845,679 shares outstanding with respect to awards granted under the Company’s 2015 Incentive Plan. Restricted stock units On August 3, 2018, the Board of Directors granted 189,038 restricted stock units from the Company’s 2015 incentive plan to executive management and directors based on the average price of the Company’s common stock on the date of the grant. These restricted units will vest over a three - year period. On December 18, 2018, the Board of Directors granted 147,391 restricted stock units from the Company’s 2015 incentive plan to Troy and Annette Meier based on the average price of the Company’s common stock on the date of the grant. These restricted units will vest over a three - year period (see Note 6-Related Party Note Receivable). On December 4, 2017, the Board of Directors granted 267,443 restricted stock units from the Company’s 2015 incentive plan to executive management and directors based on the closing price of the Company’s common stock on the date of the grant. These restricted units will vest over a three - year period. On December 4, 2017, the Board of Directors approved grants of restricted stock units to Troy and Annette Meier with an approximate value of $587,500. The Board and the Meiers decided in lieu of making such awards, the dollar value of such awards would be used to pay interest and principal on the Tronco Note (see Note 5-Related Party Note Receivable ). Compensation expense recognized for grants vesting under the 2014 Incentive Plan was $0 and approximately $142,000 for the years ending December 31, 2018 and 2017, respectively. Compensation expense recognized for grants of restricted stock vesting under the 2015 Incentive Plan was approximately $458,000 and $456,000 for the years ending December 31, 2018 and 2017, respectively. The Company recognized compensation expense and recorded it as share-based compensation in the consolidated statement of operations. Total unrecognized compensation expense related to unvested restricted stock units expected to be recognized over the remaining weighted vesting period of 1.44 years equaled approximately $622,000 at December 31, 2018. These shares vest over three years. The following table summarizes RSU activity for the years ended December 31, 2018 and 2017: 2018 2017 Number of Restricted Stock Units Weighted - Average Grant Date Fair Value Number of Restricted Stock Units Weighted - Average Grant Date Fair Value Unvested RSU’s at beginning of period 647,195 $ 1.12 702,608 $ 1.31 Granted 336,429 1.60 282,578 1.27 Forfeited - - - - Vested (286,579 ) 1.12 (337,991 ) 1.64 Unvested RSU’s at end of period 697,048 $ 1.35 647,195 $ 1.12 Stock Options On October 8, 2018, the Board of Directors granted 5,000 stock options from the Company’s 2015 Incentive Plan to officers and employees based on the Company’s common stock on the date of grant, which was $4.05. These options vest 33% on the first anniversary of the grant date, 33% on the second anniversary of the grant date, and 34% on the third anniversary of the grant date. On December 7, 2018, the Board of Directors granted 75,000 stock options from the Company’s 2015 Incentive Plan to officers and employees based on the Company’s common stock on the date of grant, which was $1.69. These options vest 33% on the first anniversary of the grant date, 33% on the second anniversary of the grant date, and 34% on the third anniversary of the grant date. On December 1, 2017, the Board of Directors granted 67,500 stock options from the Company’s 2015 Incentive Plan to officers and employees based on the Company’s common stock on the date of grant, which was $1.30. These options vest 33% on the first anniversary of the grant date, 33% on the second anniversary of the grant date, and 34% on the third anniversary of the grant date. Compensation expense recognized for option grants vesting under the 2015 Incentive Plan was approximately $61,000 and $15,000 for the years ending December 31, 2018 and 2017. The Company recognized compensation expense and recorded it as share-based compensation in the consolidated condensed statement of operations. The following table summarizes stock options outstanding and changes during the years ended December 31, 2018 and 2017: 2018 2017 Number of Stock Options Weighted - Average Exercise Price Number of Stock Options Weighted - Average Exercise Price Stock options outstanding at beginning of period 458,827 $ 1.50 425,000 $ 1.52 Granted 93,206 1.80 67,500 1.30 Exercised (9,364 ) 1.52 - - Expired (10,135 ) 1.76 (6,701 ) 1.44 Canceled or forfeited (566 ) 1.26 (26,972 ) 1.28 Stock options outstanding at end of period 531,968 1.56 458,827 $ 1.50 Stock options exercised at end of period - $ - - $ - The fair value of stock options granted to employees and directors in 2018 was estimated at the grant date using the Black-Scholes option pricing model using the following assumptions: Expected volatility 56.7 % Discount rate 2.71 % Expected life (years) 3 Dividend yield N/A Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Expected price volatility is based on the historical volatility of our common stock. Changes in the subjective input assumptions can materially affect the fair value estimate. The expected term of the options granted is derived from the output of the option pricing model and represents the period of time that the options granted are expected to be outstanding. The discount rate for the periods within the contractual term of the option is based on the U.S. Treasury yield curve in effect at the date of grant. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 11. SUBSEQUENT EVENTS In February 2019, the Company entered into a $4.3 million financing agreement comprised of a $0.8 million term loan and a $3.5 million asset-based revolving credit facility. The interest rate for the term loan and the revolver is prime plus 2%. The obligations of the borrowers, which includes the Company and its subsidiaries, under the agreement are secured by a security interest in substantially all of the tangible and intangible assets of the borrowers, other than any assets owned by the borrowers that constitute real property (and fixtures affixed to such real property), certain excluded equipment, intellectual property, or aircraft. The credit facility matures on February 20, 2023, subject to early termination pursuant to the terms of the agreement or extension as may be agreed by the parties. Also in February 2019, the Company filed a patent infringement lawsuit in the United States District Court for the Western District of Louisiana Lafayette Division asserting Stabil Drill infringed on our patent that covers the Company’s well bore conditioning tool, the Drill-N-Ream. Stabil Drill has not yet responded to the lawsuit. As of the date of this annual report, the lawsuit is in initial stages. We cannot predict the outcome of this matter, but our legal costs could have a material effect on our financial position or results of operations in future periods. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Organization and Nature of Operations | Organization and Nature of Operations Superior Drilling Products, Inc. (the “Company”, “SDPI”, “we”, “our” or “us”) is an innovative drilling and completion tool technology company providing cost saving solutions that drive production efficiencies for the oil and natural gas drilling industry. The Company innovates, designs, engineers, manufactures, sells, rents and repairs drilling and completion tools. Our subsidiaries include (a) Superior Drilling Solutions, LLC (previously known as Superior Drilling Products, LLC), a Utah limited liability company (“SDS”), together with its wholly owned subsidiary Superior Design and Fabrication, LLC, a Utah limited liability company (“SDF”), (b) Extreme Technologies, LLC, a Utah limited liability company (“ET”), (c) Meier Properties Series, LLC, a Utah limited liability company (“MPS”), (d) Meier Leasing, LLC, a Utah limited liability company (“ML”), and (e) Hard Rock Solutions, LLC (“HR” or “Hard Rock”). |
Basis of Presentation | Basis of Presentation The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements include the accounts of Superior Drilling Products Inc. and all of its wholly-owned subsidiaries. All significant intercompany accounts have been eliminated in consolidation. The Company does not have investments in any unconsolidated subsidiaries. In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an emerging growth company can utilize the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for implementing new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to nonissuers. We have elected to delay such adoption of new or revised accounting standards, and as a result, we may not implement new or revised accounting standards on the relevant dates on which adoption of such standards is required for other issuer companies. Subject to certain conditions set forth in the JOBS Act, as an emerging growth company, we intend to rely on certain of these exemptions, including without limitation, providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404 and implementing any requirement that may be adopted regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis). We will remain an emerging growth company until the earliest of (i) the end of the fiscal year in which the market value of our common stock that is held by exceeds $700.0 million as of June of that year, (ii) the end of the fiscal year in which we have total annual gross revenues of $1.07 billion or more during such fiscal year, (iii) the date on which we issue more than $1.0 billion in debt in a three-year period or (iv) January 1, 2020. |
Segment Reporting | Segment Reporting We operate as a single operating segment, which reflects how we manage our business. We operate in the United States and the Middle East. Our operations in the Middle East represented less than 10% of our consolidated operations for all periods presented in these consolidated financial statements. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates. Significant items subject to estimates and assumptions include the carrying amount and useful lives of property and equipment and intangible assets, impairment assessments, share-based compensation expense, and valuation allowances for accounts receivable, inventories, and deferred tax assets. |
Revenue Recognition | Revenue Recognition We are a drilling and completion tool technology company and we generate revenue from the manufacturing, repair, rental and sale of drilling and completion tools. Our manufactured products are produced in a standard manufacturing operation, even when produced to our customer’s specifications. We also earn royalty fees under certain arrangements for the tools we sell. Tool sales, rentals and other related revenue Tool and Product Sales Tool Rental Other Related Revenue: Contract Services Drill Bit Manufacturing and Refurbishment |
Cash and Cash Equivalents | Cash and cash equivalents Cash and cash equivalents consist of cash on deposit. We maintain cash deposits with financial institutions that may exceed federally insured limits at times. We have chosen credible institutions and believe our risk of loss is negligible. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s financial instruments consist of cash and cash equivalents, receivables, payables, and bank debt. The Company believes that the carrying values of these instruments on the accompanying consolidated balance sheets approximate their fair values. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are generally due within 60 days of the invoice date. No interest is charged on past-due balances. We grant credit to our customers based upon an evaluation of each customer’s financial condition. We periodically monitor the payment history and ongoing creditworthiness of our customers. An allowance for doubtful accounts is established at a level estimated by management to be adequate based upon various factors including historical experience, aging status of customer accounts, payment history and financial condition of our customers. The allowance for doubtful accounts was $9,288 and $18,450 as of December 31, 2018, and 2017, respectively. |
Inventories | Inventories Inventories consist of raw materials, work-in-process and finished goods and are stated at the lower of cost, determined using the weighted-average cost method, or net realizable value. Finished goods inventories include raw materials, direct labor and production overhead. The Company regularly reviews inventories on hand and current market conditions to determine if the cost of finished goods inventories exceed current market prices and impairs the cost basis of the inventory accordingly. |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment is stated at cost. The cost of ordinary maintenance and repair is charged to operating expense, while replacement of critical components and major improvements are capitalized. Depreciation or amortization of property and equipment, is calculated using the straight-line method over the asset’s estimated useful life as follows: Buildings and leasehold Improvements 2-39 years Machinery, equipment and rental tools 18 months -10 years Office equipment, fixtures and software 3-7 years Transportation equipment 5 - 30 years Property, plant and equipment is reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value of an asset or asset group may not be recoverable. Indicative events or circumstances include, but are not limited to, matters such as a significant decline in market value or a significant change in business climate. An impairment loss is recognized when the carrying value of an asset exceeds the estimated undiscounted future cash flows from the use of the asset and its eventual disposition. The amount of impairment loss recognized is the excess of the asset’s carrying value over its fair value. Assets to be disposed of are reported at the lower of the carrying value or the fair value less cost to sell. Upon sale or other disposition of an asset, the Company recognizes a gain or loss on disposal measured as the difference between the net carrying value of the asset and the net proceeds received. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets We review the recoverability of long-lived assets, such as property and equipment, when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows (undiscounted) of the related operations. If these cash flows are less than the carrying value of such asset, an impairment loss is recognized for the difference between estimated fair value and the carrying value. We concluded there were no indicators evident or other circumstances present that these assets were not recoverable and accordingly, no impairment charges of long-lived assets were recognized for 2018 and 2017. |
Intangible Assets | Intangible Assets The Company’s intangible assets with finite lives consist of developed technology, customer contracts and relationships, and trade names and trademarks. The cost of intangible assets with finite lives is amortized using the straight-line method over the estimated period of economic benefit, ranging from 3 to 17 years. Asset lives are adjusted whenever there is a change in the estimated period of economic benefit. No residual value has been assigned to these intangible assets. Intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. These conditions may include a change in the extent or manner in which the asset is being used or a change in future operations. The Company assesses the recoverability of the carrying amount by preparing estimates of future revenue, margins, and cash flows. If the sum of expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, an impairment loss is recognized. The impairment loss recognized is the amount by which the carrying amount exceeds the fair value. Fair value of these assets may be determined by a variety of methodologies, including discounted cash flow models. |
Research and Development | Research and Development We expense research and development costs as they are incurred. For the years ended December 31, 2018 and 2017, these expenses were approximately $1,265,000 and $746,000, respectively, and are included in the selling, general, and administrative expenses in the statement of operations. |
Earnings (Loss) Per Share | Earnings (Loss) Per Share Basic earnings (loss) per common share is calculated by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding, including potentially dilutive common share equivalents, if the effect is dilutive. Potentially dilutive common shares equivalents include stock options and warrants. Approximately 30,502 options to purchase our common stock were excluded from this calculation because they were antidilutive for the year ended December 31, 2018. |
Income Taxes | Income Taxes The Company recognizes an asset or liability for the deferred tax consequences of all temporary differences between the tax basis of assets or liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years when the reported amounts of the asset or liabilities are recovered or settled and for operating loss carry forwards. These deferred tax assets and liabilities are measured using the enacted tax rates that will be in effect when the differences are expected to reverse and the carry forwards are expected to be realized. Deferred tax assets are reviewed periodically for recoverability and a valuation allowance is provided as necessary. |
Debt Issuance Costs | Debt Issuance Costs Costs related to debt issuance are capitalized and amortized as interest expense over the term of the related debt using the straight-line method, which approximates the effective interest method. Upon the repayment of debt, the Company accelerates the recognition of an appropriate amount of the costs as interest expense. Debt issuance costs related to the Hard Rock Note are presented as a direct reduction from the carrying amount of the note payable. As of December 31, 2018 and 2017, the amortized debt issuance costs were $77,641 and $79,424, respectively. |
Share Based Compensation | Share Based Compensation Share based compensation expense for share based payments, related to stock option and restricted stock awards, is recognized based on their grant-date fair values. The Company recognizes compensation expense on a straight-line basis over the requisite service period of the award. |
Concentrations and Credit Risk | Concentrations and Credit Risk The Company has two significant customers that represented 95% and 97% of our revenue for the years ended December 31, 2018 and 2017, respectively. These customers had approximately $1,863,000 and $2,523,000 in accounts receivable at December 31, 2018 and 2017, respectively. The Company had one vendor that represented 11% of our purchases for the year ended December 31, 2018. This vendor had approximately $158,000 in accounts payable at December 31, 2018. We had one significant vendor that represented 17% of our purchases for the year ended December 31, 2017, and had approximately $151,000 in accounts payable at December 31, 2017. |
Recently Issued Accounting Standards | Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (the “FASB”) issued an accounting standards update for “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in “Topic 605, Revenue Recognition.” This accounting standard update provides new guidance concerning recognition and measurement of revenue and requires additional disclosures about the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers. We adopted this pronouncement on January 1, 2019 using the full retrospective method. Our evaluation efforts to determine the impact of this standard on our consolidated financial statements included identifying revenue streams with similar contract structures, performing a detailed review of key contracts by revenue stream, and comparing and analyzing historical policies and practices to the new standard. Based on our assessment performed, we have determined that our revenue recognition methodology does not materially change and the adoption of this pronouncement will not have a material impact on the consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, “ Leases |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Schedule of Property and Equipment Useful Life | Depreciation or amortization of property and equipment, including assets held under capital leases, is calculated using the straight-line method over the asset’s estimated useful life as follows: Buildings and leasehold Improvements 2-39 years Machinery, equipment and rental tools 18 months -10 years Furniture and fixtures 7 years Transportation equipment 5 - 30 years Computer equipment and software 3-5 years |
Inventories (Tables)
Inventories (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventories | Inventories were comprised of the following: December 31, 2018 December 31, 2017 Raw material $ 738,330 $ 1,040,795 Work in progress 217,158 77,702 Finished goods 48,135 78,316 $ 1,003,623 $ 1,196,813 |
Property, Plant and Equipment (
Property, Plant and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property, Plant and Equipment | Property, plant and equipment are comprised of the following: December 31, 2018 December 31, 2017 Land $ 880,416 $ 880,416 Buildings 4,847,778 4,847,778 Leasehold improvements 755,039 717,232 Machinery and equipment 8,816,880 8,216,237 Office equipment, fixtures and software 518,806 507,557 Transportation assets 811,378 811,378 16,630,297 15,980,598 Accumulated depreciation (8,404,288 ) (7,171,250 ) $ 8,226,009 $ 8,809,348 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | Intangible assets are comprised of the following: December 31, 2018 December 31, 2017 Developed technology $ 7,000,000 $ 7,000,000 Customer contracts 6,400,000 6,400,000 Trademarks 1,500,000 1,500,000 14,900,000 14,900,000 Accumulated amortization (11,213,889 ) (8,767,222 ) $ 3,686,111 $ 6,132,778 |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | As of December 31, 2018, the Company will recognize the following amortization expense for the respective periods ending December 31 noted below: 2019 1,700,000 2020 1,166,667 2021 583,334 2022 166,667 2023 69,443 Total $ 3,686,111 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt Instruments | Long-term debt is comprised of the following: December 31, 2018 December 31, 2017 Real estate loans $ 4,255,152 $ 4,518,424 Hard Rock Note, net of discount 6,000,000 7,422,912 Machinery loans 327,879 513,317 Transportation loans 292,722 353,400 10,875,753 12,808,053 Current portion of long-term debt (4,578,759 ) (6,101,678 ) $ 6,296,994 $ 6,706,375 |
Schedule of Future Annual Maturities of Long-Term Debt | Future annual maturities of total debt are as follows (1) : Year 2019 $ 4,578,760 2020 3,519,077 2021 2,599,458 2022 51,962 2023 33,520 Total debt $ 10,782,777 (1) Excludes discounts for debt issuance costs. |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Income Tax Expense (Benefit) | Components of income tax benefit are as follows: Current income taxes: For the Year Ended December 31, 2018 For the Year Ended December 31, 2017 Federal $ - $ - State - - Current provision for income taxes 3,640 Deferred provision (benefit) for income taxes: Federal - - State - - Deferred provision (benefit) for income taxes - - Provision for income taxes $ 3,640 $ - |
Schedule of Deferred Tax Assets and Liabilities | The non-current deferred tax assets and liabilities consist of the following: Deferred tax assets: 263A adjustment $ 12,295 $ 14,326 Accrued expenses - - Stock compensation 81,133 48,489 Stock option 58,102 44,922 Amortization of intangibles 2,965,622 2,796,867 Net operating loss 2,458,939 2,999,467 Others 39,752 12,660 Total non-current deferred tax assets 5,615,843 5,916,731 Deferred tax liabilities: Prepaid expenses (13,781 ) (23,301 ) Depreciation on fixed assets (697,478 ) (853,089 ) Total non-current deferred tax liabilities (711,259 ) (876,390 ) Net non-current deferred tax assets/liabilities 4,904,584 5,040,341 Less: Valuation Allowance (4,904,584 ) (5,040,341 ) Total deferred tax liabilities $ - $ - |
Schedule of Effective Income Tax Rate Reconciliation | Reconciliation of the tax rate to the U.S. federal statutory tax rate which relate to the year ended December 31, 2018 and 2017 is as follows: For the Year Ended December 31, 2018 For the Year Ended December 31, 2017 Tax at federal statutory rate $ (11,494 ) $ (80,922 ) State income taxes 2,875 - Permanent differences 61,495 118,253 Change in valuation allowance (135,758 ) (2,436,734 ) Other - State rate effect (2,044 ) (9,578 ) Change in status 104,960 2,408,980 Other (16,394 ) - Provision for income taxes $ 3,640 $ - |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of Share-Based Compensation, Restricted Stock Units Award Activity | The following table summarizes RSU activity for the years ended December 31, 2018 and 2017: 2018 2017 Number of Restricted Stock Units Weighted - Average Grant Date Fair Value Number of Restricted Stock Units Weighted - Average Grant Date Fair Value Unvested RSU’s at beginning of period 647,195 $ 1.12 702,608 $ 1.31 Granted 336,429 1.60 282,578 1.27 Forfeited - - - - Vested (286,579 ) 1.12 (337,991 ) 1.64 Unvested RSU’s at end of period 697,048 $ 1.35 647,195 $ 1.12 |
Schedule of Share-Based Compensation, Stock Options, Activity | The following table summarizes stock options outstanding and changes during the years ended December 31, 2018 and 2017: 2018 2017 Number of Stock Options Weighted - Average Exercise Price Number of Stock Options Weighted - Average Exercise Price Stock options outstanding at beginning of period 458,827 $ 1.50 425,000 $ 1.52 Granted 93,206 1.80 67,500 1.30 Exercised (9,364 ) 1.52 - - Expired (10,135 ) 1.76 (6,701 ) 1.44 Canceled or forfeited (566 ) 1.26 (26,972 ) 1.28 Stock options outstanding at end of period 531,968 1.56 458,827 $ 1.50 Stock options exercised at end of period - $ - - $ - |
Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions | The fair value of stock options granted to employees and directors in 2018 was estimated at the grant date using the Black-Scholes option pricing model using the following assumptions: Expected volatility 56.7 % Discount rate 2.71 % Expected life (years) 3 Dividend yield N/A |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details Narrative) | 12 Months Ended | |||
Dec. 31, 2018USD ($)Integershares | Dec. 31, 2017USD ($) | Dec. 31, 2014 | Jun. 30, 2018USD ($) | |
Annual gross revenues | $ 1,070,000,000 | |||
Non-convertible debt | $ 1,000,000,000 | |||
Debt term | 3 years | |||
Debt maturity date | Jan. 1, 2020 | Jan. 2, 2017 | ||
Number of segment reporting | Integer | 1 | |||
Concentration risk, percentage | 10.00% | |||
Allowance for doubtful accounts | $ 9,288 | $ 18,450 | ||
Impairment charges of long-lived assets | ||||
Research and development expenses | 1,265,000 | 746,000 | ||
Amortized debt issuance costs | 77,641 | 79,424 | ||
Accounts payable | 721,361 | 1,021,469 | ||
Two Customers [Member] | ||||
Accounts receivable | $ 1,863,000 | $ 2,523,000 | ||
Two Customers [Member] | Revenue [Member] | ||||
Concentration risk, percentage | 95.00% | 97.00% | ||
One Customers [Member] | ||||
Accounts payable | $ 158,000 | $ 151,000 | ||
One Customers [Member] | Revenue [Member] | ||||
Concentration risk, percentage | 11.00% | 17.00% | ||
Options [Member] | ||||
Antidilutive securities excluded from computation of earnings per share | shares | 30,502 | |||
Maximum [Member] | ||||
Finite-lived intangible asset, useful life | 17 years | |||
Maximum [Member] | Non-affiliates [Member] | ||||
Market value of common stock | $ 700,000,000 | |||
Minimum [Member] | ||||
Finite-lived intangible asset, useful life | 3 years |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies - Schedule of Property and Equipment Useful Life (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Buildings and Leasehold Improvements [Member] | Minimum [Member] | |
Property, plant and equipment, useful life | 2 years |
Buildings and Leasehold Improvements [Member] | Maximum [Member] | |
Property, plant and equipment, useful life | 39 years |
Machinery, Equipment and Rental Tools [Member] | Minimum [Member] | |
Property, plant and equipment, useful life | 18 months |
Machinery, Equipment and Rental Tools [Member] | Maximum [Member] | |
Property, plant and equipment, useful life | 10 years |
Furniture and Fixtures [Member] | Minimum [Member] | |
Property, plant and equipment, useful life | 3 years |
Furniture and Fixtures [Member] | Maximum [Member] | |
Property, plant and equipment, useful life | 7 years |
Transportation Equipment [Member] | Minimum [Member] | |
Property, plant and equipment, useful life | 5 years |
Transportation Equipment [Member] | Maximum [Member] | |
Property, plant and equipment, useful life | 30 years |
Inventories (Details Narrative)
Inventories (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Impairment of inventories | ||
Slow Moving Inventory [Member] | ||
Impairment of inventories | $ 116,396 |
Inventories - Schedule of Inven
Inventories - Schedule of Inventories (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw material | $ 738,330 | $ 1,040,795 |
Work in progress | 217,158 | 77,702 |
Finished goods | 48,135 | 78,316 |
Inventories, net | $ 1,003,623 | $ 1,196,813 |
Property, Plant and Equipment_2
Property, Plant and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense related to property, plant and equipment | $ 1,313,564 | $ 1,229,932 |
Property, Plant and Equipment -
Property, Plant and Equipment - Schedule of Property, Plant and Equipment (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Property, Plant and Equipment [Abstract] | ||
Land | $ 880,416 | $ 880,416 |
Buildings | 4,847,778 | 4,847,778 |
Leasehold improvements | 755,039 | 717,232 |
Machinery and equipment | 8,816,880 | 8,216,237 |
Office equipment, fixtures and software | 518,806 | 507,557 |
Transportation assets | 811,378 | 811,378 |
Property, plant and equipment, gross | 16,630,297 | 15,980,598 |
Accumulated depreciation | (8,404,288) | (7,171,250) |
Property, plant and equipment, net | $ 8,226,009 | $ 8,809,348 |
Intangible Assets (Details Narr
Intangible Assets (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization of intangible assets | $ 2,446,667 | $ 2,446,666 |
Finite lived intangible assets weighted average amortization period | 6 years 3 months 19 days | |
Impairment of intangible assets |
Intangible Assets - Schedule of
Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | $ 14,900,000 | $ 14,900,000 |
Accumulated amortization | (11,213,889) | (8,767,222) |
Finite-lived intangible assets, net | 3,686,111 | 6,132,778 |
Developed Technology [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 7,000,000 | 7,000,000 |
Customer Contracts [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | 6,400,000 | 6,400,000 |
Trademarks [Member] | ||
Finite-Lived Intangible Assets [Line Items] | ||
Intangible assets, gross | $ 1,500,000 | $ 1,500,000 |
Intangible Assets - Schedule _2
Intangible Assets - Schedule of Finite-Lived Intangible Assets, Future Amortization Expense (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2019 | $ 1,700,000 | |
2020 | 1,166,667 | |
2021 | 583,334 | |
2022 | 166,667 | |
2023 | 69,443 | |
Total | $ 3,686,111 | $ 6,132,778 |
Related Party Note Receivable (
Related Party Note Receivable (Details Narrative) - USD ($) | Dec. 18, 2018 | Dec. 04, 2017 | Aug. 08, 2017 | Mar. 28, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2014 | May 30, 2014 |
Debt interest rate | 7.50% | |||||||
Interest income related party | $ 377,746 | $ 338,204 | ||||||
Debt instrument maturity date | Jan. 1, 2020 | Jan. 2, 2017 | ||||||
Repayment for third-party | 74,293 | |||||||
Tronco Note [Member] | ||||||||
Debt annual interest | $ 211,741 | |||||||
Number of collateral shares | 8,267,860 | |||||||
Tronco Loan [Member] | ||||||||
Repayment for third-party | $ 7,367,212 | |||||||
Tronco Energy Corporation [Member] | ||||||||
Notes Receivable | $ 8,300,000 | |||||||
Debt interest rate | 5.50% | |||||||
Debt annual interest | $ 34,992 | |||||||
Assets acquired | $ 550,000 | |||||||
Non cash receipt of accrual liabilities | $ 550,000 | |||||||
Debt instrument maturity date | Dec. 31, 2022 | Dec. 31, 2017 | ||||||
Debt instrument, face amount | $ 379,507 | |||||||
Troy and Annette Meier [Member] | ||||||||
Number of units granted | 587,500 | |||||||
Troy and Annette Meier [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||
Number of units granted | $ 587,500 | |||||||
Meiers [Member] | ||||||||
Debt instrument, remaining amount | 190,045 | |||||||
Meiers [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||
Number of units granted | $ 185,714 | |||||||
Annette Meier [Member] | ||||||||
Debt instrument, remaining amount | $ 173,000 |
Long-Term Debt (Details Narrati
Long-Term Debt (Details Narrative) - USD ($) | Nov. 21, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2014 |
Debt instrument, periodic principal payments including interest | $ 80,000 | |||
Debt instrument, interest rate | 7.50% | |||
Debt instrument maturity date | Jan. 1, 2020 | Jan. 2, 2017 | ||
Amortization of debt discount | $ 77,641 | $ 79,424 | ||
Transportation Loans [Member] | Vehicles [Member] | ||||
Debt instrument, periodic principal payments including interest | $ 2,200 | |||
Debt instrument, maturity date description | Maturity dates ranging from October 2019 through October 2021 | |||
Transportation Loans [Member] | Vehicles [Member] | Minimum [Member] | ||||
Debt instrument, interest rate | 0.00% | |||
Transportation Loans [Member] | Vehicles [Member] | Maximum [Member] | ||||
Debt instrument, interest rate | 8.29% | |||
January 10, 2019 [Member] | ||||
Debt instrument, principal payments | $ 750,000 | |||
Debt instrument, interest payment | 183,411 | |||
Commercial Bank Loan [Member] | February 2019 [Member] | ||||
Debt instrument | 3,129,861 | |||
Previous debt payment | 1,000,000 | |||
Debt instrument, periodic principal payments including interest | $ 43,000 | |||
Debt instrument, interest rate | 7.25% | |||
Debt instrument, maturity date description | We paid $1,000,000 towards the previous loan that was scheduled to mature on February 15, 2019, upon refinancing. | |||
Debt balloon payment | $ 2,500,000 | |||
Debt instrument maturity date | Feb. 15, 2021 | |||
Hard Rock Note [Member] | ||||
Debt instrument, interest rate | 7.25% | |||
Debt instrument maturity date | Oct. 5, 2020 | |||
Business combination, consideration transferred, liabilities incurred | $ 12,500,000 | |||
Payments to acquire businesses, gross | 12,500,000 | |||
Debt instrument, fair value disclosure | 11,144,000 | |||
Amortization of debt discount | $ 1,356,000 | |||
Hard Rock Note [Member] | January 5, 2019 [Member] | ||||
Debt instrument, periodic principal payments including interest | $ 750,000 | |||
Hard Rock Note [Member] | January 5, 2020 [Member] | ||||
Debt instrument, periodic principal payments including interest | 750,000 | |||
Hard Rock Note [Member] | April 5, 2019 [Member] | ||||
Debt instrument, periodic principal payments including interest | 750,000 | |||
Hard Rock Note [Member] | April 5, 2020 [Member] | ||||
Debt instrument, periodic principal payments including interest | 750,000 | |||
Hard Rock Note [Member] | July 5, 2019 [Member] | ||||
Debt instrument, periodic principal payments including interest | 750,000 | |||
Hard Rock Note [Member] | July 5, 2020 [Member] | ||||
Debt instrument, periodic principal payments including interest | 750,000 | |||
Hard Rock Note [Member] | October 5, 2019 [Member] | ||||
Debt instrument, periodic principal payments including interest | 750,000 | |||
Hard Rock Note [Member] | October 5, 2020 [Member] | ||||
Debt instrument, periodic principal payments including interest | 750,000 | |||
Airplane Loan [Member] | Transportation Loans [Member] | ||||
Debt instrument, periodic principal payments including interest | $ 3,500 | |||
Debt instrument, interest rate | 7.35% | |||
Debt instrument maturity date | May 1, 2026 |
Long-Term Debt - Schedule of Lo
Long-Term Debt - Schedule of Long-term Debt Instruments (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Long term debt, Total | $ 10,875,753 | $ 12,808,053 |
Current portion of long-term debt | (4,578,759) | (6,101,678) |
Long-term debt, less current portion | 6,296,994 | 6,706,375 |
Real Estate Loans [Member] | ||
Long term debt, Total | 4,255,152 | 4,518,424 |
Hard Rock Note [Member] | ||
Long term debt, Total | 6,000,000 | 7,422,912 |
Machinery Loans [Member] | ||
Long term debt, Total | 327,879 | 513,317 |
Transportation Loans [Member] | ||
Long term debt, Total | $ 292,722 | $ 353,400 |
Long-Term Debt - Schedule of Fu
Long-Term Debt - Schedule of Future Annual Maturities of Long-Term Debt (Details) | Dec. 31, 2018USD ($) | [1] |
Debt Disclosure [Abstract] | ||
2019 | $ 4,578,760 | |
2020 | 3,519,077 | |
2021 | 2,599,458 | |
2022 | 51,962 | |
2023 | 33,520 | |
Total debt | $ 10,782,777 | |
[1] | Excludes discounts for debt issuance costs. |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2014 | |
Related party notes payable | $ 2,000,000 | ||
Debt instrument, interest rate | 7.50% | ||
Debt instrument, maturity date | Jan. 1, 2020 | Jan. 2, 2017 | |
Debt instrument, principal payments including interest payments | $ 80,000 | ||
Related party transaction, due to related party | 207,942 | ||
Note receivable related party | $ 0 | ||
Tronco Note [Member] | |||
Number of collateral shares | 8,267,860 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Income Tax Disclosure [Abstract] | |
Percentage of statutory corporate tax rate | 21.00% |
Income tax reconciliation description | The 2017 Tax Reform and recorded provisional amounts in our financial statements as of December 31, 2017. This amount is primarily comprised of the re-measurement of federal net deferred tax liabilities resulting from the permanent reduction in the U.S. statutory corporate tax rate to 21% from 35%. |
Decrease in deferred tax valuation allowances | $ 5,040,000 |
Income Taxes - Schedule of Comp
Income Taxes - Schedule of Components of Income Tax Expense (Benefit) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Current income taxes: Federal | ||
Current income taxes: State | ||
Current provision for income taxes | 3,640 | |
Deferred provision (benefit) for income taxes: Federal | ||
Deferred provision (benefit) for income taxes: State | ||
Deferred provision (benefit) for income taxes | ||
Provision for income taxes | $ 3,640 |
Income Taxes - Schedule of Defe
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Income Tax Disclosure [Abstract] | ||
263A adjustment | $ 12,295 | $ 14,326 |
Accrued expenses | ||
Stock compensation | 81,133 | 48,489 |
Stock option | 58,102 | 44,922 |
Amortization of intangibles | 2,965,622 | 2,796,867 |
Net operating loss | 2,458,939 | 2,999,467 |
Others | 39,752 | 12,660 |
Total non-current deferred tax assets | 5,615,843 | 5,916,731 |
Prepaid expenses | (13,781) | (23,301) |
Depreciation on fixed assets | (697,478) | (853,089) |
Total non-current deferred tax liabilities | (711,259) | (876,390) |
Net non-current deferred tax assets/liabilities | 4,904,584 | 5,040,341 |
Less: Valuation Allowance | (4,904,584) | (5,040,341) |
Total deferred tax liabilities |
Income Taxes - Schedule of Effe
Income Taxes - Schedule of Effective Income Tax Rate Reconciliation (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Tax at federal statutory rate | $ (11,494) | $ (80,922) |
State income taxes | 2,875 | |
Permanent differences | 61,495 | 118,253 |
Change in valuation allowance | (135,758) | (2,436,734) |
Other - State rate effect | (2,044) | (9,578) |
Change in status | 104,960 | 2,408,980 |
Other | (16,394) | |
Provision for income taxes | $ 3,640 |
Share-Based Compensation (Detai
Share-Based Compensation (Details Narrative) - USD ($) | Dec. 18, 2018 | Dec. 07, 2018 | Oct. 08, 2018 | Aug. 03, 2018 | Dec. 04, 2017 | Dec. 01, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2015 | Dec. 31, 2014 |
Common stock, shares outstanding | 25,018,098 | 24,535,334 | ||||||||
Number of units granted, shares | 93,206 | 67,500 | ||||||||
Compensation expense recognized | $ 518,956 | $ 612,851 | ||||||||
Restricted Stock Units (RSUs) [Member] | ||||||||||
Number of restricted units granted | 336,429 | 282,578 | ||||||||
Restricted stock units vesting period | 1 year 5 months 9 days | |||||||||
Unrecognized compensation expense | $ 622,000 | |||||||||
Troy and Annette Meier [Member] | ||||||||||
Number of units granted | $ 587,500 | |||||||||
Troy and Annette Meier [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||
Number of units granted | $ 587,500 | |||||||||
2015 Incentive Plan [Member] | ||||||||||
Maximum aggregate number of common shares issued | 2,992,905 | |||||||||
Common stock, shares outstanding | 845,679 | |||||||||
Compensation expense recognized | $ 61,000 | $ 15,000 | ||||||||
2015 Incentive Plan [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||
Compensation expense recognized | 458,000 | 456,000 | ||||||||
2015 Incentive Plan [Member] | Board of Directors [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||
Number of restricted units granted | 189,038 | |||||||||
Restricted stock units vesting period | 3 years | |||||||||
2015 Incentive Plan [Member] | Troy and Annette Meier [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||
Restricted stock units vesting period | 3 years | |||||||||
Number of units granted, shares | 147,391 | |||||||||
2015 Incentive Plan [Member] | Officers and Employees [Member] | ||||||||||
Number of restricted units granted | 75,000 | 5,000 | 67,500 | |||||||
Restricted stock units vesting rights description | These options vest 33% on the first anniversary of the grant date, 33% on the second anniversary of the grant date, and 34% on the third anniversary of the grant date. | These options vest 33% on the first anniversary of the grant date, 33% on the second anniversary of the grant date, and 34% on the third anniversary of the grant date. | These options vest 33% on the first anniversary of the grant date, 33% on the second anniversary of the grant date, and 34% on the third anniversary of the grant date. | |||||||
Share price | $ 1.69 | $ 4.05 | $ 1.30 | |||||||
2015 Incentive Plan [Member] | Officers and Employees [Member] | First Anniversary [Member] | ||||||||||
Share based payment award vesting rights, percentage | 33.00% | 33.00% | 33.00% | |||||||
2015 Incentive Plan [Member] | Officers and Employees [Member] | Second Anniversary [Member] | ||||||||||
Share based payment award vesting rights, percentage | 33.00% | 33.00% | 33.00% | |||||||
2015 Incentive Plan [Member] | Officers and Employees [Member] | Third Anniversary [Member] | ||||||||||
Share based payment award vesting rights, percentage | 34.00% | 34.00% | 34.00% | |||||||
2014 Incentive Plan [Member] | ||||||||||
Compensation expense recognized | $ 0 | $ 142,000 | ||||||||
Board of Directors [Member] | Employee Stock Incentive Plan [Member] | ||||||||||
Number of common stock reserved for issuance | 1,724,128 | |||||||||
Board of Directors [Member] | 2015 Incentive Plan [Member] | ||||||||||
Number of common stock approved | 1,440,000 | |||||||||
Board of Directors [Member] | 2015 Incentive Plan [Member] | Restricted Stock Units (RSUs) [Member] | ||||||||||
Number of restricted units granted | 267,443 | |||||||||
Restricted stock units vesting period | 3 years |
Share-Based Compensation - Sche
Share-Based Compensation - Schedule of Share-Based Compensation, Restricted Stock Units Award Activity (Details) - Restricted Stock Units (RSUs) [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Number of Restricted Stock Units, beginning balance | 647,195 | 702,608 |
Number of Restricted Stock Units, Granted | 336,429 | 282,578 |
Number of Restricted Stock Units, Forfeited | ||
Number of Restricted Stock Units, Vested | (286,579) | (337,991) |
Number of Restricted Stock Units, ending balance | 697,048 | 647,195 |
Weighted - Average Grant Date Fair Value, beginning balance | $ 1.12 | $ 1.31 |
Weighted - Average Grant Date Fair Value, Granted | 1.60 | 1.27 |
Weighted - Average Grant Date Fair Value, Forfeited | ||
Weighted - Average Grant Date Fair Value, Vested | 1.12 | 1.64 |
Weighted - Average Grant Date Fair Value, ending balance | $ 1.35 | $ 1.12 |
Share-Based Compensation - Sc_2
Share-Based Compensation - Schedule of Share-Based Compensation, Stock Options, Activity (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Number of Stock Options outstanding, beginning balance | 458,827 | 425,000 |
Number of Stock Options, Granted | 93,206 | 67,500 |
Number of Stock Options, Exercised | (9,364) | |
Number of Stock Options, Expired | (10,135) | (6,701) |
Number of Stock Options, Canceled or forfeited | (566) | (26,972) |
Number of Stock Options outstanding, ending balance | 531,968 | 458,827 |
Number of Stock Options, exercised at end of period | ||
Weighted - Average Exercise Price, beginning balance | $ 1.50 | $ 1.52 |
Weighted - Average Exercise Price, Granted | 1.80 | 1.30 |
Weighted - Average Exercise Price, Exercised | 1.52 | |
Weighted - Average Exercise Price, Expired | 1.76 | 1.44 |
Weighted - Average Exercise Price, Canceled or forfeited | 1.26 | 1.28 |
Weighted - Average Exercise Price, ending balance | 1.56 | 1.50 |
Weighted - Average Exercise Price, exercised at end of period |
Share-Based Compensation - Sc_3
Share-Based Compensation - Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Expected volatility | 56.70% |
Discount rate | 2.71% |
Expected life (years) | 3 years |
Dividend yield | 0.00% |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | Feb. 28, 2019 | Dec. 31, 2018 | Dec. 31, 2014 |
Debt instrument interest rate | 7.50% | ||
Debt instrument maturity date | Jan. 1, 2020 | Jan. 2, 2017 | |
Subsequent Event [Member] | Financing Agreement [Member] | |||
Proceeds from financing arrangements | $ 4,300,000 | ||
Term loan | 800,000 | ||
Revolving credit facility | $ 3,500,000 | ||
Debt instrument maturity date | Feb. 20, 2023 | ||
Subsequent Event [Member] | Financing Agreement [Member] | Prime [Member] | |||
Debt instrument interest rate | 2.00% |