Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 14, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Polar Power, Inc. | |
Entity Central Index Key | 1,622,345 | |
Document Type | 10-Q | |
Trading Symbol | POLA | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | true | |
Entity Small Business | true | |
Entity Ex Transition Period | true | |
Entity Common Stock, Shares Outstanding | 10,143,158 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
CONDENSED BALANCE SHEETS (Unaud
CONDENSED BALANCE SHEETS (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Current assets | ||
Cash and cash equivalents (including restricted cash of $1,002,304 and $1,001,180 at September 30, 2018 and December 31, 2017, respectively) | $ 10,607,455 | $ 14,201,163 |
Accounts receivable | 3,751,157 | 3,058,266 |
Inventories, net | 7,413,615 | 5,487,053 |
Prepaid expenses | 836,052 | 236,670 |
Refundable income taxes | 629,316 | 629,316 |
Total current assets | 23,237,595 | 23,612,468 |
Other assets: | ||
Property and equipment, net | 1,426,098 | 824,076 |
Deposits | 111,701 | 87,496 |
Total assets | 24,775,394 | 24,524,040 |
Current liabilities | ||
Accounts payable | 789,548 | 757,753 |
Customer deposits | 202,324 | 40,039 |
Accrued expenses and other current liabilities | 683,715 | 586,391 |
Current portion of notes payable | 196,323 | 110,237 |
Total current liabilities | 1,871,910 | 1,494,420 |
Notes payable, net of current portion | 621,113 | 126,818 |
Total liabilities | 2,493,023 | 1,621,238 |
Stockholders' Equity | ||
Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no shares issued and outstanding | ||
Common stock, $0.0001 par value, 50,000,000 shares authorized, 10,143,158 shares issued and outstanding | 1,014 | 1,014 |
Additional paid-in capital | 19,483,002 | 19,250,955 |
Retained earnings | 2,798,355 | 3,650,833 |
Total stockholders' equity | 22,282,371 | 22,902,802 |
Total liabilities and stockholders' equity | $ 24,775,394 | $ 24,524,040 |
CONDENSED BALANCE SHEETS (Una_2
CONDENSED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Restricted cash | $ 1,002,304 | $ 1,001,180 |
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, authorized | 5,000,000 | 5,000,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, authorized | 50,000,000 | 50,000,000 |
Common stock, issued | 10,143,158 | 10,143,158 |
Common stock, outstanding | 10,143,158 | 10,143,158 |
CONDENSED STATEMENTS OF OPERATI
CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Income Statement [Abstract] | ||||
Net Sales | $ 5,061,158 | $ 3,030,026 | $ 15,748,845 | $ 10,438,761 |
Cost of Sales | 3,530,847 | 2,201,083 | 10,672,707 | 6,925,464 |
Gross Profit | 1,530,311 | 828,943 | 5,076,138 | 3,513,297 |
Operating Expenses | ||||
Sales and Marketing | 717,983 | 395,793 | 1,968,152 | 861,230 |
Research and development | 571,300 | 480,405 | 1,371,981 | 947,427 |
General and administrative | 996,087 | 633,776 | 2,562,577 | 1,988,831 |
Depreciation and amortization | 8,897 | 7,621 | 26,441 | 23,029 |
Total operating expenses | 2,294,267 | 1,517,595 | 5,929,151 | 3,820,517 |
Loss from operations | (763,956) | (688,652) | (853,013) | (307,220) |
Other (expenses) income | ||||
Interest expense | (2,777) | (4,463) | (8,181) | (14,656) |
Other income (expenses), net | 9,616 | 18,531 | 8,716 | 42,605 |
Total other (expenses) income, net | 6,839 | 14,068 | 535 | 27,949 |
Loss before income taxes | (757,117) | (674,584) | (852,478) | (279,271) |
Income tax provision | 264,681 | 113,118 | ||
Net Loss | $ (757,117) | $ (409,903) | $ (852,478) | $ (166,153) |
Net Loss per share - basic and diluted (in dollars per share) | $ (0.07) | $ (0.04) | $ (0.08) | $ (0.02) |
Weighted average shares outstanding, basic and diluted (in shares) | 10,143,158 | 10,143,158 | 10,143,158 | 10,143,158 |
CONDENSED STATEMENT OF STOCKHOL
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY - 9 months ended Sep. 30, 2018 - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Balance at beginning at Dec. 31, 2017 | $ 1,014 | $ 19,250,955 | $ 3,650,833 | $ 22,902,802 |
Balance at beginning (in shares) at Dec. 31, 2017 | 10,143,158 | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Fair value of vested stock options | 232,047 | 232,047 | ||
Net loss | (852,478) | (852,478) | ||
Balance at end at Sep. 30, 2018 | $ 1,014 | $ 19,483,002 | $ 2,798,355 | $ 22,282,371 |
Balance at end (in shares) at Sep. 30, 2018 | 10,143,158 |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Cash flows from operating activities: | ||
Net Loss | $ (852,478) | $ (166,153) |
Adjustments to reconcile net loss to net cash used in provided by operating activities: | ||
Fair value of vested stock options | 232,047 | |
Depreciation and amortization | 269,726 | 185,759 |
Changes in operating assets and liabilities | ||
Accounts receivable | (692,891) | 2,425,017 |
Inventories | (1,926,562) | (436,735) |
Prepaid expenses | (599,382) | (153,257) |
Deposits | (24,205) | (10,500) |
Refundable income taxes | (1,257,585) | |
Deferred tax assets | (52,641) | |
Accounts payable | 31,795 | (388,244) |
Income taxes payable | (1,227,308) | |
Customer deposits | 162,285 | (1,843) |
Accrued expenses and other current liabilities | 97,324 | (111,988) |
Net cash used in operating activities | (3,302,341) | (1,195,479) |
Cash flows from investing activities: | ||
Acquisition of property and equipment | (208,998) | (182,397) |
Net cash used in investing activities | (208,998) | (182,397) |
Cash flows from financing activities: | ||
Repayment of notes | (82,369) | (85,254) |
Net cash used in financing activities | (82,369) | (85,254) |
Decrease in cash and cash equivalents | (3,593,708) | (1,463,130) |
Cash and cash equivalents, beginning of period | 14,201,163 | 16,242,158 |
Cash and cash equivalents, end of period | 10,607,455 | 14,779,028 |
Supplemental Cash Flow Information: | ||
Taxes Paid | 2,424,417 | |
Interest Paid | 8,181 | 10,193 |
Supplemental non-cash investing and financing activities: | ||
Assets acquired through issuance of notes payable | $ 662,750 |
ORGANIZATION AND SUMMARY OF SIG
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 – ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company Polar Power, Inc. was incorporated in the State of Washington as Polar Products, Inc. and in 1991 reincorporated in the State of California under the name Polar Power, Inc. In December 2016, Polar Power, Inc. reincorporated in the State of Delaware (the “Company”). The Company designs, manufactures and sells direct current, or DC, power systems to supply reliable and low-cost energy to off-grid, bad-grid and backup power applications. The Company’s products integrate DC generator and proprietary automated controls, lithium batteries and solar systems to provide low operating cost and lower emissions alternative power needs in telecommunications, defense, automotive and industrial markets. Basis of Presentation of Unaudited Financial Information The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K for scaled disclosures for smaller reporting companies. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the Company’s financial position and results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2017 was derived from the audited financial statements included in the Company’s financial statements as of and for the years ended December 31, 2017 and 2016 contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 2, 2018. These financial statements should be read in conjunction with that report. Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Material estimates relate to the assumptions made in determining reserves for uncollectible receivables, inventory reserves and returns, impairment analysis of long term assets and deferred tax assets, income tax accruals, accruals for potential liabilities and assumptions made in valuing the fair market value of equity transactions. Actual results may differ from those estimates. Revenue Recognition In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (ASC 606). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Under ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products or services to our customers based on written sales terms, which is also when control is transferred. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products or services to a customer. The Company adopted the guidance of ASC 606 on January 1, 2018. The implementation of ASC 606 had no impact on the condensed consolidated financial statements and no cumulative effect adjustment was recognized. Accounts Receivable Trade receivables are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts, as needed. The Company uses the allowance method to account for uncollectible trade receivable balances. Under the allowance method, if needed, an estimate of uncollectible customer balances is made based upon specific account balances that are considered uncollectible. Factors used to establish an allowance include the credit quality and payment history of the customer. The Company did not deem it necessary to provide an allowance for doubtful accounts as of as of September 30, 2018 and December 31, 2017. Inventories Inventories consist of raw materials and finished goods and are stated at the lower of cost or market. Cost is determined principally on a first-in-first-out average cost basis. Inventory quantities on hand are reviewed regularly and write-downs for obsolete inventory are recorded based on an estimated forecast of the inventory item demand in the near future. As of September 30, 2018 and December 31, 2017, the Company has established inventory reserves of $330,000 for obsolete and slow-moving inventory. As of September 30, 2018 and December 31, 2017, the components of inventories were as follows: September 30, 2018 (unaudited) December 31, 2017 Raw materials $ 5,025,755 $ 2,716,392 Finished goods 2,717,860 3,100,661 7,743,615 5,817,053 Less: Inventory reserve (330,000 ) (330,000 ) Total Inventories, net $ 7,413,615 $ 5,487,053 Product Warranties The Company provides limited warranties for parts and labor at no cost to its customers within a specified time period after the sale. The warranty terms are typically from one to five years. Provisions for estimated expenses related to product warranties are made at the time products are sold. These estimates are established using historical information about the nature, frequency and average cost of warranty claim settlements as well as product manufacturing and recovery from suppliers. Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty costs. The Company estimates the actual historical warranty claims coupled with an analysis of unfulfilled claims to record a liability for specific warranty purposes. The Company’s product warranty obligations are included in other accrued liabilities in the balance sheets. As of September 30, 2018 and December 31, 2017, the Company had accrued a liability for warranty reserve of $175,000 and $175,000, respectively. Management believes that the warranty accrual is appropriate; however, actual claims incurred could differ from original estimates, requiring adjustments to the accrual. The product warranty accrual is included in current liabilities in the accompanying balance sheets. The following is a tabular reconciliation of the product warranty liability, excluding the deferred revenue related to the Company’s warranty coverage: Changes in estimates for warranties September 30, 2018 (unaudited) December 31, 2017 Balance at beginning of the period $ 175,000 $ 175,000 Payments (145,867 ) (364,463 ) Provision for warranties 145,867 364,163 Balance at end of the period $ 175,000 $ 175,000 Income Taxes The Company accounts for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized before the Company is able to realize their benefits, or that future deductibility is uncertain. Tax benefits from an uncertain tax position are recognized only if it more likely than not that the tax position will be sustained on examination by the taxing authorities based on technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has greater than 50 percent likelihood of being realized upon ultimate resolution. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Segments The Company operates in one segment for the manufacture and distribution of its products. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying consolidated financial statements. Concentrations Cash. Net Sales Accounts receivable Accounts payable Purchases Net Income (Loss) Per Share Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing the net income applicable to common stock holders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued using the treasury stock method. Potential common shares are excluded from the computation when their effect is antidilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net income per share if the exercise prices were lower than the average fair market value of common shares during the reporting period. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive: September 30, 2018 (Unaudited) September 30, 2017 Options 360,000 — Warrants 115,000 115,000 Total 475,000 115,000 Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements. |
RESTRICTED CASH
RESTRICTED CASH | 9 Months Ended |
Sep. 30, 2018 | |
Receivables [Abstract] | |
RESTRICTED CASH | NOTE 2 – RESTRICTED CASH As of September 30, 2018 and December 31, 2017, the Company’s cash balance included restricted cash of $1,002,304 and $1,001,180, respectively. The restricted cash serves as a collateral to the line of credit (see Note 5). |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 3 – PROPERTY AND EQUIPMENT Property and equipment consists of the following: September 30, 2018 (Unaudited) December 31, 2017 Production tooling, jigs, fixtures $ 70,749 $ 70,749 Shop equipment and machinery 2,268,078 1,451,423 Vehicles 127,495 122,264 Leasehold improvements 72,161 42,173 Office equipment 129,171 114,454 Software 105,690 97,533 Total property and equipment, cost 2,770,344 1,898,596 Less: accumulated depreciation and amortization (1,344,246 ) (1,074,520 ) Property and equipment, net $ 1,426,098 $ 824,076 Depreciation and amortization expense on property and equipment for the three months ended September 30, 2018 and September 30, 2017 was $114,779 and $65,679, respectively, and allocated between cost of sales and operating expenses. During the three months ended September 30, 2018 and September 30, 2017, $105,882 and $58,058, respectively, of depreciation expense was included in the balance of cost of sales. Depreciation and amortization expense on property and equipment for the nine months ended September 30, 2018 and September 30, 2017 was $269,726 and $185,759, respectively, and allocated between cost of sales and operating expenses. During the nine months ended September 30, 2018 and September 30, 2017, $243,285 and $162,730, respectively, of depreciation expense was included in the balance of cost of sales. |
NOTES PAYABLE
NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2018 | |
Payables and Accruals [Abstract] | |
NOTES PAYABLE | NOTE 4 – NOTES PAYABLE Notes payable consist of the following: September 30, 2018 December 31, (Unaudited) 2017 Total Equipment Notes Payable $ 817,436 $ 237,055 Less Current Portion (196,323 ) (110,237 ) Notes Payable, Long term $ 621,113 $ 126,818 As of December 31, 2017, the Company’s notes payable related to several financing agreements for the purchase of equipment, with terms ranging from 2 years to 5 years, with interest rates ranging from 1.9% to 6.9% per annum, and secured by the purchased equipment. During the nine months ended September 30, 2018, the Company acquired additional equipment under financing agreements for total principal amount of approximately $660,000, with term of 5 years, interest rate of 5% per annum, and also secured by the purchased equipment. As of September 30, 2018, the balance of notes payable was $817,436. The aggregate monthly payments of principal and interest of the outstanding notes payable as of September 30, 2018 is approximately $23,000 and due through 2023. |
LINE OF CREDIT
LINE OF CREDIT | 9 Months Ended |
Sep. 30, 2018 | |
Debt Disclosure [Abstract] | |
LINE OF CREDIT | NOTE 5 – LINE OF CREDIT On March 21, 2017, the Company entered into a Credit Agreement and related documents with Citibank, N.A. for a revolving credit facility in an aggregate amount of up to $1,000,000. The credit facility will expire at such time the parties mutually agree to terminate the credit facility or at the election of the lender. Interest accrues on the principal amount of revolving loans outstanding under the credit facility at a rate equal to the greater of (i) the prime rate of interest as published by Citibank, or (ii) the one-month London Interbank Offered Rate plus 2%. Amounts outstanding from time to time under the credit facility are due and payable monthly in an amount equal to the greater of 2% of the outstanding principal balance or $100, plus accrued interest. Upon the termination of the credit facility, any amounts owed under the credit facility will be payable by the Company in 48 equal consecutive monthly installments of principal, together with accrued monthly interest and any other charges beginning the first calendar month after the date of cancellation. The credit facility is also subject to an annual finance charge of $2,500, which amount was waived for the first year. The credit facility is secured by a Certificate of Deposit (restricted cash) account opened by the Company with Citibank in the amount of $1,000,000 (see Note 2). The Company’s credit facility contains negative covenants prohibiting it from (i) creating or permitting to exist any liens, security interests or other encumbrances on the Company’s assets, (ii) engaging in any business activities substantially different than those in which the Company is presently engaged, (iii) ceasing operations, liquidating, merging, transferring, acquiring or consolidating with any other entity, changing its name, dissolving or transferring or selling collateral out of the ordinary course of business, or (iv) paying dividends on the Company’s capital stock (other than dividends payable in stock). The Company was in compliance with all covenants at September 30, 2018. As of September 30, 2018 and December 31, 2017, the Company had not borrowed any funds under the credit facility and thus had borrowing availability of $1,000,000. |
STOCK OPTIONS
STOCK OPTIONS | 9 Months Ended |
Sep. 30, 2018 | |
Stock Options | |
STOCK OPTIONS | NOTE 6 – STOCK OPTIONS Number of Weighted Average Options Exercise Price Outstanding, December 31, 2017 30,000 $ 4.84 Granted 330,000 5.32 Exercised — — Outstanding, September 30, 2018 360,000 $ 5.28 Exercisable, September 30, 2018 — — Effective July 8, 2016 the Company’s board of directors approved the Polar Power 2016 Omnibus Incentive Plan (the “2016 Plan”), authorizing the issuance of up to 1,754,385 shares of common stock as incentives to employees and consultants to the Company with awards limited to a maximum of 350,877 shares to any one participant in any calendar year. During the nine months ended September 30, 2018, the Company granted options to purchase an aggregate of 330,000 shares of the Company’s common stock to three of its executive officers, with exercise prices ranging from $5.09 to $5.60 per share, that expire ten years from the date of grant, and with one-third of the total options granted vesting on each of the first, second, and third anniversaries of the grant date. The fair value of each of the option award was estimated on the date of grant using the Black-Scholes option pricing model based on the following assumptions: (i) volatility rate of 57.71%, (ii) discount rate of 2.42%, (iii) zero expected dividend yield, and (iv) expected life of 6.5 years, which is the average of the term of the options and their vesting periods. The total fair value of these options at their grant dates was approximately $948,000. During the nine months ended September 30, 2018, the Company expensed total stock-based compensation related to the vested options of $232,047, and the remaining unamortized cost of the outstanding options at September 30, 2018 was approximately $781,617. This cost will be amortized on a straight-line basis over the weighted average remaining vesting period of 3 years. At September 30, 2018, the 360,000 outstanding stock options had an intrinsic value of approximately $298,000. |
WARRANTS
WARRANTS | 9 Months Ended |
Sep. 30, 2018 | |
Warrants | |
WARRANTS | NOTE 7 – WARRANTS At September 30, 2018, warrant shares outstanding were as follows: Number of Warrants Weighted Average Exercise Price Outstanding December 31, 2017 115,000 $ 8.75 Issued — — Exercised — — Outstanding, September 30, 2018 115,000 $ 8.75 In connection with the Company’s underwritten initial public offering in December 2016, the Company issued warrants to the underwriters to purchase up to 115,000 shares of its common stock with an exercise price of $8.75 per share, which warrants expire five years from the date of issuance. There was no intrinsic value of the outstanding and exercisable warrants at September 30, 2018. |
DISTRIBUTION AGREEMENT WITH A R
DISTRIBUTION AGREEMENT WITH A RELATED ENTITY | 9 Months Ended |
Sep. 30, 2018 | |
Distribution Agreement With Related Entity | |
DISTRIBUTION AGREEMENT WITH A RELATED ENTITY | NOTE 8 – DISTRIBUTION AGREEMENT WITH A RELATED ENTITY On March 1, 2014, the Company entered into a subcontractor installer agreement with Smartgen Solutions, Inc. (“Smartgen”), a related entity that is engaged in business of equipment rental and provider of maintenance, repair and installation services to mobile telecommunications towers in California. Under the terms of the agreement, Smartgen has been appointed as a non-exclusive, authorized service provider for the installation, repair and service of the Company’s products in Southern California. The agreement has a term of three years from the date of execution and automatically renews for additional one year periods if not terminated. During the three months ended September 30, 2018 and 2017, Smartgen performed $26,550 and $31,005 in field services, respectively. Smartgen performed $71,820 and $127,887 in field services for the nine months ended September 30, 2018 and 2017, respectively. Smartgen had no purchases from the Company during the three and nine months ended September 30, 2018. Smartgen had $0 and $1,136 in purchases of goods, parts and services from the Company during the three and nine months ended September 30, 2017, respectively. |
COMMITMENT AND CONTINGENCIES
COMMITMENT AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENT AND CONTINGENCIES | NOTE 9 – COMMITMENT AND CONTINGENCIES Leases The Company entered into a non-cancellable operating lease of a manufacturing facility located in 249 E. Gardena Blvd., Gardena, CA commencing January 1, 2015 and ending on February 28, 2019. The base rent of the facility at the commencement date was $29,648 per month, which annually increases by 3%. Rent expense for the three months ended September 30, 2018 and 2017 was $97,192 and $94,361, respectively. Rent for the nine months ended September 30, 2018 and 2017 was $291,575 and $283,082, respectively. During the three months ended September 30, 2018, the Company entered into a non-cancellable operating lease of a manufacturing facility located in 400 W. Gardena Blvd., Gardena, CA commencing July 1, 2018 and ending on September 30, 2023. Possession of the property was delayed to August 21, 2018 due to the landlord requiring more time to vacate the property. The base rent of the facility at the commencement date is $22,838 per month, which annually increases by 3%. Rent expense for the three months ended September 30, 2018 was $8,104. Legal Proceedings From time to time, the Company may be involved in general commercial disputes arising in the ordinary course of our business. The Company is not currently involved in legal proceedings that could reasonably be expected to have material adverse effect on its business, prospects, financial condition or results of operations. |
ORGANIZATION AND SUMMARY OF S_2
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation of Unaudited Financial Information | Basis of Presentation of Unaudited Financial Information The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-K for scaled disclosures for smaller reporting companies. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. However, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for the fair presentation of the Company’s financial position and results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full fiscal year. The balance sheet information as of December 31, 2017 was derived from the audited financial statements included in the Company’s financial statements as of and for the years ended December 31, 2017 and 2016 contained in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 2, 2018. These financial statements should be read in conjunction with that report. |
Estimates | Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Material estimates relate to the assumptions made in determining reserves for uncollectible receivables, inventory reserves and returns, impairment analysis of long term assets and deferred tax assets, income tax accruals, accruals for potential liabilities and assumptions made in valuing the fair market value of equity transactions. Actual results may differ from those estimates. |
Revenue Recognition | Revenue Recognition In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (ASC 606). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which includes (1) identifying the contract(s) or agreement(s) with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. Under ASC 606, revenue is recognized when performance obligations under the terms of a contract are satisfied, which occurs for the Company upon shipment or delivery of products or services to our customers based on written sales terms, which is also when control is transferred. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring the products or services to a customer. The Company adopted the guidance of ASC 606 on January 1, 2018. The implementation of ASC 606 had no impact on the condensed consolidated financial statements and no cumulative effect adjustment was recognized. |
Accounts Receivable | Accounts Receivable Trade receivables are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible accounts, as needed. The Company uses the allowance method to account for uncollectible trade receivable balances. Under the allowance method, if needed, an estimate of uncollectible customer balances is made based upon specific account balances that are considered uncollectible. Factors used to establish an allowance include the credit quality and payment history of the customer. The Company did not deem it necessary to provide an allowance for doubtful accounts as of as of September 30, 2018 and December 31, 2017. |
Inventories | Inventories Inventories consist of raw materials and finished goods and are stated at the lower of cost or market. Cost is determined principally on a first-in-first-out average cost basis. Inventory quantities on hand are reviewed regularly and write-downs for obsolete inventory are recorded based on an estimated forecast of the inventory item demand in the near future. As of September 30, 2018 and December 31, 2017, the Company has established inventory reserves of $330,000 for obsolete and slow-moving inventory. As of September 30, 2018 and December 31, 2017, the components of inventories were as follows: September 30, 2018 (unaudited) December 31, 2017 Raw materials $ 5,025,755 $ 2,716,392 Finished goods 2,717,860 3,100,661 7,743,615 5,817,053 Less: Inventory reserve (330,000 ) (330,000 ) Total Inventories, net $ 7,413,615 $ 5,487,053 |
Product Warranties | Product Warranties The Company provides limited warranties for parts and labor at no cost to its customers within a specified time period after the sale. The warranty terms are typically from one to five years. Provisions for estimated expenses related to product warranties are made at the time products are sold. These estimates are established using historical information about the nature, frequency and average cost of warranty claim settlements as well as product manufacturing and recovery from suppliers. Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty costs. The Company estimates the actual historical warranty claims coupled with an analysis of unfulfilled claims to record a liability for specific warranty purposes. The Company’s product warranty obligations are included in other accrued liabilities in the balance sheets. As of September 30, 2018 and December 31, 2017, the Company had accrued a liability for warranty reserve of $175,000 and $175,000, respectively. Management believes that the warranty accrual is appropriate; however, actual claims incurred could differ from original estimates, requiring adjustments to the accrual. The product warranty accrual is included in current liabilities in the accompanying balance sheets. The following is a tabular reconciliation of the product warranty liability, excluding the deferred revenue related to the Company’s warranty coverage: Changes in estimates for warranties September 30, 2018 (unaudited) December 31, 2017 Balance at beginning of the period $ 175,000 $ 175,000 Payments (145,867 ) (364,463 ) Provision for warranties 145,867 364,163 Balance at end of the period $ 175,000 $ 175,000 |
Income Taxes | Income Taxes The Company accounts for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized before the Company is able to realize their benefits, or that future deductibility is uncertain. Tax benefits from an uncertain tax position are recognized only if it more likely than not that the tax position will be sustained on examination by the taxing authorities based on technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has greater than 50 percent likelihood of being realized upon ultimate resolution. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. |
Segments | Segments The Company operates in one segment for the manufacture and distribution of its products. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying consolidated financial statements. |
Concentrations | Concentrations Cash. Net Sales Accounts receivable Accounts payable Purchases |
Net Income (Loss) Per Share | Net Income (Loss) Per Share Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed by dividing the net income applicable to common stock holders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued using the treasury stock method. Potential common shares are excluded from the computation when their effect is antidilutive. The dilutive effect of potentially dilutive securities is reflected in diluted net income per share if the exercise prices were lower than the average fair market value of common shares during the reporting period. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive: September 30, 2018 (Unaudited) September 30, 2017 Options 360,000 — Warrants 115,000 115,000 Total 475,000 115,000 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases. ASU 2016-02 requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the expected impact that the standard could have on its financial statements and related disclosures. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements. |
ORGANIZATION AND SUMMARY OF S_3
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of components of inventory | As of September 30, 2018 and December 31, 2017, the components of inventories were as follows: September 30, 2018 (unaudited) December 31, 2017 Raw materials $ 5,025,755 $ 2,716,392 Finished goods 2,717,860 3,100,661 7,743,615 5,817,053 Less: Inventory reserve (330,000 ) (330,000 ) Total Inventories, net $ 7,413,615 $ 5,487,053 |
Schedule of reconciliation of the product warranty liability | The following is a tabular reconciliation of the product warranty liability, excluding the deferred revenue related to the Company’s warranty coverage: Changes in estimates for warranties September 30, 2018 (unaudited) December 31, 2017 Balance at beginning of the period $ 175,000 $ 175,000 Payments (145,867 ) (364,463 ) Provision for warranties 145,867 364,163 Balance at end of the period $ 175,000 $ 175,000 |
Schedule of anti-dilutive | The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive: September 30, 2018 (Unaudited) September 30, 2017 Options 360,000 — Warrants 115,000 115,000 Total 475,000 115,000 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment consists of the following: September 30, 2018 (Unaudited) December 31, 2017 Production tooling, jigs, fixtures $ 70,749 $ 70,749 Shop equipment and machinery 2,268,078 1,451,423 Vehicles 127,495 122,264 Leasehold improvements 72,161 42,173 Office equipment 129,171 114,454 Software 105,690 97,533 Total property and equipment, cost 2,770,344 1,898,596 Less: accumulated depreciation and amortization (1,344,246 ) (1,074,520 ) Property and equipment, net $ 1,426,098 $ 824,076 |
NOTES PAYABLE (Tables)
NOTES PAYABLE (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Payables and Accruals [Abstract] | |
Schedule of notes payable | Notes payable consist of the following: September 30, 2018 December 31, (Unaudited) 2017 Total Equipment Notes Payable $ 817,436 $ 237,055 Less Current Portion (196,323 ) (110,237 ) Notes Payable, Long term $ 621,113 $ 126,818 |
STOCK OPTIONS (Tables)
STOCK OPTIONS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Stock Options | |
Schedule of stock option | Number of Weighted Average Options Exercise Price Outstanding, December 31, 2017 30,000 $ 4.84 Granted 330,000 5.32 Exercised — — Outstanding, September 30, 2018 360,000 $ 5.28 Exercisable, September 30, 2018 — — |
WARRANTS (Tables)
WARRANTS (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Warrants | |
Schedule of warrant activity | At September 30, 2018, warrant shares outstanding were as follows: Number of Warrants Weighted Average Exercise Price Outstanding December 31, 2017 115,000 $ 8.75 Issued — — Exercised — — Outstanding, September 30, 2018 115,000 $ 8.75 |
ORGANIZATION AND SUMMARY OF S_4
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Raw materials | $ 5,025,755 | $ 2,716,392 |
Finished goods | 2,717,860 | 3,100,661 |
Total Inventories, gross | 7,743,615 | 5,817,053 |
Less: Inventory reserve | (330,000) | (330,000) |
Total Inventories, net | $ 7,413,615 | $ 5,487,053 |
ORGANIZATION AND SUMMARY OF S_5
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Movement in Standard Product Warranty Accrual [Roll Forward] | ||
Balance at beginning of the period | $ 175,000 | $ 175,000 |
Payments | (145,867) | (364,463) |
Provision for warranties | 145,867 | 364,163 |
Balance at end of the period | $ 175,000 | $ 175,000 |
ORGANIZATION AND SUMMARY OF S_6
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - shares | Sep. 30, 2018 | Dec. 31, 2017 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Options | 360,000 | |
Warrants | 115,000 | 115,000 |
Total | 475,000 | 115,000 |
ORGANIZATION AND SUMMARY OF S_7
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Dec. 31, 2016 | |
Allowance for doubtful accounts | $ 0 | $ 0 | $ 0 | |||
Inventory reserves | 330,000 | 330,000 | 330,000 | |||
Warranty reserve | $ 175,000 | $ 175,000 | $ 175,000 | $ 175,000 | ||
Maximum [Member] | ||||||
Warrant term | 5 years | |||||
Minimum [Member] | ||||||
Warrant term | 1 year | |||||
AT&T [Member] | Revenue[Member] | ||||||
Concentration risk | 39.00% | 9.00% | 61.00% | 3.10% | ||
AT&T [Member] | Accounts Receivable [Member] | ||||||
Concentration risk | 31.00% | 59.00% | ||||
T-Mobile [Member] | Revenue[Member] | ||||||
Concentration risk | 37.00% | 1.00% | 12.00% | 0.20% | ||
T-Mobile [Member] | Accounts Receivable [Member] | ||||||
Concentration risk | 50.00% | 0.00% | ||||
Verizon Wireless [Member] | Revenue[Member] | ||||||
Concentration risk | 4.00% | 74.00% | 13.00% | 82.10% | ||
Verizon Wireless [Member] | Accounts Receivable [Member] | ||||||
Concentration risk | 5.00% | 30.00% | ||||
Largest Vendors [Member] | Accounts Payable [Member] | ||||||
Concentration risk | 72.00% | 75.00% | ||||
Yanmar Engines Company [Member] | Cost of Sales [Member] | ||||||
Concentration risk | 48.00% | 24.00% | 76.00% | 25.00% | ||
Military contractors [Member] | Sales Backlog [Member] | ||||||
Concentration risk | 32.00% |
RESTRICTED CASH (Details Narrat
RESTRICTED CASH (Details Narrative) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Receivables [Abstract] | ||
Restricted cash | $ 1,002,304 | $ 1,001,180 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Total property and equipment, cost | $ 2,770,344 | $ 1,898,596 |
Less: accumulated depreciation and amortization | (1,344,246) | (1,074,520) |
Property and equipment, net | 1,426,098 | 824,076 |
Office Equipment [Member] | ||
Total property and equipment, cost | 129,171 | 114,454 |
Production Tooling, Jigs, Fixtures [Member] | ||
Total property and equipment, cost | 70,749 | 70,749 |
Shop Equipment And Machinery [Member] | ||
Total property and equipment, cost | 2,268,078 | 1,451,423 |
Vehicles [Member] | ||
Total property and equipment, cost | 127,495 | 122,264 |
Leasehold Improvements [Member] | ||
Total property and equipment, cost | 72,161 | 42,173 |
Software [Member] | ||
Total property and equipment, cost | $ 105,690 | $ 97,533 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Depreciation and amortization expense | $ 114,779 | $ 65,679 | $ 269,726 | $ 185,759 |
Cost of Sales [Member] | ||||
Depreciation expense | $ 105,882 | $ 58,058 | $ 243,285 | $ 162,730 |
NOTES PAYABLE (Details)
NOTES PAYABLE (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | ||
Total Equipment Notes Payable | $ 817,436 | $ 237,055 |
Less Current Portion | (196,323) | (110,237) |
Notes Payable, Long term | $ 621,113 | $ 126,818 |
NOTES PAYABLE (Details Narrativ
NOTES PAYABLE (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Notes payable | $ 621,113 | $ 126,818 | |
Equipment purchased | 208,998 | $ 182,397 | |
Equipment [Member] | Several Financing Agreements [Member] | |||
Notes payable | $ 817,436 | ||
Debt term | 5 years | ||
Interest rate | 5.00% | ||
Description of collateral | Secured by the purchased equipment. | Secured by the purchased equipment. | |
Equipment purchased | $ 660,000 | ||
Monthly payments of principal and interest | $ 23,000 | ||
Frequency of payment | Monthly | ||
Due date | Dec. 31, 2023 | ||
Minimum [Member] | Equipment [Member] | Several Financing Agreements [Member] | |||
Debt term | 2 years | ||
Interest rate | 1.90% | ||
Maximum [Member] | Equipment [Member] | Several Financing Agreements [Member] | |||
Debt term | 5 years | ||
Interest rate | 6.90% |
LINE OF CREDIT (Details Narrati
LINE OF CREDIT (Details Narrative) - Citibank, N.A. [Member] - Revolving Credit Facility [Member] - Credit Agreement [Member] - USD ($) | Mar. 21, 2017 | Sep. 30, 2018 | Dec. 31, 2017 |
Maximum borrowing capacity | $ 1,000,000 | ||
Description of expiration | Expire at such time the parties mutually agree to terminate the credit facility or at the election of the lender.</font></p>" id="sjs-B3"><p><font style="font: 10pt Times New Roman, Times, Serif">Expire at such time the parties mutually agree to terminate the credit facility or at the election of the lender.</font></p> | ||
Description of interest rate | Interest accrues on the principal amount of revolving loans outstanding under the credit facility at a rate equal to the greater of (i) the prime rate of interest as published by Citibank, or (ii) the one-month London Interbank Offered Rate plus 2%.</font></p>" id="sjs-B4"><p><font style="font: 10pt Times New Roman, Times, Serif">Interest accrues on the principal amount of revolving loans outstanding under the credit facility at a rate equal to the greater of (i) the prime rate of interest as published by Citibank, or (ii) the one-month London Interbank Offered Rate plus 2%.</font></p> | ||
Description of payments | Amounts outstanding from time to time under the credit facility are due and payable monthly in an amount equal to the greater of 2% of the outstanding principal balance or $100, plus accrued interest.</font></p>" id="sjs-B5"><p><font style="font: 10pt Times New Roman, Times, Serif">Amounts outstanding from time to time under the credit facility are due and payable monthly in an amount equal to the greater of 2% of the outstanding principal balance or $100, plus accrued interest.</font></p> | ||
Annual finance charge | $ 2,500 | ||
Description of collateral | Certificate of Deposit (restricted cash) account opened by the Company with Citibank in the amount of $1,000,000.</font></p>" id="sjs-B7"><p><font style="font: 10pt Times New Roman, Times, Serif">Certificate of Deposit (restricted cash) account opened by the Company with Citibank in the amount of $1,000,000.</font></p> | ||
Description covenant terms | <font style="font: 10pt Times New Roman, Times, Serif">(i) creating or permitting to exist any liens, security interests or other encumbrances on the Company’s assets, (ii) engaging in any business activities substantially different than those in which the Company is presently engaged, (iii) ceasing operations, liquidating, merging, transferring, acquiring or consolidating with any other entity, changing its name, dissolving or transferring or selling collateral out of the ordinary course of business, or (iv) paying dividends on the Company’s capital stock (other than dividends payable in stock). The Company was in compliance with all covenants at June 30, 2018.</font></p> <p></p>" id="sjs-B8"><p style="text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">(i) creating or permitting to exist any liens, security interests or other encumbrances on the Company’s assets, (ii) engaging in any business activities substantially different than those in which the Company is presently engaged, (iii) ceasing operations, liquidating, merging, transferring, acquiring or consolidating with any other entity, changing its name, dissolving or transferring or selling collateral out of the ordinary course of business, or (iv) paying dividends on the Company’s capital stock (other than dividends payable in stock). The Company was in compliance with all covenants at June 30, 2018.</font></p> <p></p> | ||
Remaining borrowing capacity | $ 0 | $ 1,000,000 |
STOCK OPTIONS (Details)
STOCK OPTIONS (Details) | 9 Months Ended |
Sep. 30, 2018$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |
Beginning balance | |
End balance | 360,000 |
Polar Power 2016 Omnibus Incentive Plan [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | |
Beginning balance | 30,000 |
Issued | 330,000 |
Exercised | |
End balance | 360,000 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | |
Beginning balance | $ / shares | $ 4.84 |
Issued | $ / shares | 5.32 |
Exercised | $ / shares | |
End balance | $ / shares | $ 5.28 |
STOCK OPTIONS (Details Narrativ
STOCK OPTIONS (Details Narrative) - Polar Power 2016 Omnibus Incentive Plan [Member] - USD ($) | 9 Months Ended | |
Sep. 30, 2018 | Jul. 08, 2016 | |
Number of shares authorized | 1,754,385 | |
Maximum number of shares available for issuance | 350,877 | |
Number of shares granted | 330,000 | |
Expiration period | 10 years | |
Vesting period | 1 year | |
Volatility rate | 57.71% | |
Discount rate | 2.42% | |
Expected dividend yield | 0.00% | |
Expected life | 6 years 6 months | |
Total fair value of the option grants | $ 948,000 | |
Total stock-based compensation | 232,047 | |
Unamortized compensation cost | $ 781,617 | |
Unamortized compensation cost period | 3 years | |
Intrinsic value outstanding stock options | $ 298,000 | |
Option outstanding | 360,000 | |
Minimum [Member] | ||
Exercise prices | $ 5.09 | |
Maximum [Member] | ||
Exercise prices | $ 5.60 |
WARRANTS (Details)
WARRANTS (Details) | 9 Months Ended |
Sep. 30, 2018$ / sharesshares | |
Number of Warrants [Roll Forward] | |
Outstanding at beginning | shares | 115,000 |
Issued | shares | |
Exercised | shares | |
Outstanding at end | shares | 115,000 |
Weighted Average Exercise Price [Roll Forward] | |
Outstanding at beginning | $ / shares | $ 8.75 |
Issued | $ / shares | |
Exercised | $ / shares | |
Outstanding at end | $ / shares | $ 8.75 |
WARRANTS (Details Narrative)
WARRANTS (Details Narrative) - Warrant [Member] | 1 Months Ended |
Dec. 31, 2016$ / sharesshares | |
Common stock purchases | shares | 115,000 |
Exercise price | $ / shares | $ 8.75 |
Warrant term | 5 years |
DISTRIBUTION AGREEMENT WITH A_2
DISTRIBUTION AGREEMENT WITH A RELATED ENTITY (Details Narrative) - Smartgen Solutions, Inc. ("Smartgen") [Member] - Subcontractor Installer Agreement [Member] - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Due to related party | $ 26,550 | $ 31,005 | $ 71,820 | $ 127,887 |
Due from related party | $ 0 | $ 1,136 |
COMMITMENT AND CONTINGENCIES (D
COMMITMENT AND CONTINGENCIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | |
Rent expense | $ 8,104 | ||||
Revenue | 5,061,158 | $ 3,030,026 | $ 15,748,845 | $ 10,438,761 | |
Non-Cancellable Operating Lease [Member] | Manufacturing Facility (Gardena, CA) [Member] | |||||
Lease expiration date | Feb. 28, 2019 | ||||
Monthly base rent | $ 29,648 | ||||
Percentage of annula increase in base rent | 3.00% | ||||
Rent expense | $ 97,192 | $ 94,361 | $ 291,575 | $ 283,082 | |
Non-Cancellable Operating Lease One[Member] | Manufacturing Facility (Gardena, CA) [Member] | |||||
Lease expiration date | Jun. 30, 2023 | ||||
Monthly base rent | $ 22,838 | ||||
Percentage of annula increase in base rent | 3.00% | ||||
Verizon Wireless [Member] | Revenue[Member] | |||||
Concentration risk | 4.00% | 74.00% | 13.00% | 82.10% | |
Verizon Wireless [Member] | Accounts Receivable [Member] | |||||
Concentration risk | 5.00% | 30.00% | |||
AT&T [Member] | Revenue[Member] | |||||
Concentration risk | 39.00% | 9.00% | 61.00% | 3.10% | |
AT&T [Member] | Accounts Receivable [Member] | |||||
Concentration risk | 31.00% | 59.00% |