Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Mar. 15, 2019 | Jun. 30, 2018 | |
Document And Entity Information | |||
Entity Registrant Name | TOMI Environmental Solutions, Inc. | ||
Entity Central Index Key | 0000314227 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Common Stock, Shares Outstanding | 124,690,418 | ||
Entity Public Float | $ 7,980,134 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 |
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash and Cash Equivalents | $ 2,004,938 | $ 4,550,003 |
Accounts Receivable - net | 2,145,622 | 1,835,949 |
Inventories (Note 3) | 2,682,014 | 3,518,884 |
Deposits on Merchandise (Note 10) | 109,441 | 0 |
Prepaid Expenses | 301,797 | 270,419 |
Total Current Assets | 7,243,812 | 10,175,255 |
Property & Equipment - net (Note 4) | 1,588,591 | 712,822 |
Other Assets: | ||
Intangible Assets - net (Note 5) | 1,235,816 | 1,548,532 |
Security Deposits | 11,395 | 4,700 |
Total Other Assets | 1,247,211 | 1,553,232 |
Total Assets | 10,079,614 | 12,441,309 |
Current Liabilities: | ||
Accounts Payable | 1,133,649 | 751,730 |
Accrued Expenses and Other Current Liabilities (Note 11) | 415,199 | 267,136 |
Accrued Officers Compensation | 70,000 | 0 |
Accrued Interest (Note 6) | 66,667 | 80,000 |
Customer Deposits | 1,486 | 3,062 |
Deferred Rent | 13,215 | 781 |
Total Current Liabilities | 1,700,216 | 1,102,709 |
Deferred Rent and Tenant Improvement Allowances | 401,734 | 0 |
Convertible Notes Payable, net of discount of $17,534 and $55,625 at December 31, 2018 and 2017, respectively (Note 6) | 4,982,466 | 5,944,375 |
Total Long-Term Liabilities | 5,384,200 | 5,944,375 |
Total Liabilities | 7,084,416 | 7,047,084 |
Commitments and Contingencies | ||
Stockholders’ Equity: | ||
Cumulative Convertible Series A Preferred Stock; par value $0.01 per share, 1,000,000 shares authorized; 510,000 shares issued and outstanding at December 31, 2018 and December 31, 2017 | 5,100 | 5,100 |
Cumulative Convertible Series B Preferred Stock; $1,000 stated value; 7.5% Cumulative dividend; 4,000 shares authorized; none issued and outstanding at December 31, 2018 and December 31, 2017 | 0 | 0 |
Common stock; par value $0.01 per share, 200,000,000 shares authorized; 124,290,418 and 122,049,958 shares issued and outstanding at December 31, 2018 and December 31, 2017, respectively. | 1,242,904 | 1,220,499 |
Additional Paid-in Capital | 42,948,705 | 42,139,675 |
Accumulated Deficit | (41,201,511) | (37,971,049) |
Total Stockholders' Equity | 2,995,198 | 5,394,225 |
Total Liabilities and Stockholders' Equity | $ 10,079,614 | $ 12,441,309 |
CONSOLIDATED BALANCE SHEET (Par
CONSOLIDATED BALANCE SHEET (Parenthetical) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 |
Stockholders' Equity ( Deficiency): | ||
Cumulative Convertible Preferred Stock Series A, Par Value | $ 0.01 | $ 0.01 |
Cumulative Convertible Preferred Stock Series A, Shares Authorized | 1,000,000 | 1,000,000 |
Cumulative Convertible Preferred Stock Series A, Shares Issued | 510,000 | 510,000 |
Cumulative Convertible Preferred Stock Series A, Shares Outstanding | 510,000 | 510,000 |
Cumulative Convertible Preferred Stock Series B, Stated Value | $ 1,000 | $ 1,000 |
Cumulative Convertible Preferred Stock Series B, Shares Authorized | 4,000 | 4,000 |
Cumulative Convertible Preferred Stock Series B, Shares Issued | 0 | 0 |
Cumulative Convertible Preferred Stock Series B, Shares Outstanding | 0 | 0 |
Cumulative Convertible Preferred Stock Series B, Dividend Percentage | 7.50% | 7.50% |
Common Stock; Par Value | $ 0.01 | $ 0.01 |
Common Stock; Shares Authorized | 200,000,000 | 200,000,000 |
Common Stock; Stock Issued | 124,290,418 | 122,049,958 |
Common Stock; Stock Outstanding | 124,290,418 | 122,049,958 |
CONSOLIDATED STATEMENT OF OPERA
CONSOLIDATED STATEMENT OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | ||
Sales, net | $ 5,584,612 | $ 4,993,668 |
Cost of Sales | 2,467,114 | 1,927,773 |
Gross Profit | 3,117,498 | 3,065,895 |
Operating Expenses: | ||
Professional Fees | 329,674 | 876,880 |
Depreciation and Amortization | 634,671 | 607,127 |
Selling Expenses | 1,360,430 | 1,256,465 |
Research and Development | 916,003 | 454,089 |
Equity Compensation Expense (Note 7) | 77,242 | 649,348 |
Consulting fees | 140,858 | 210,538 |
General and Administrative | 2,728,840 | 2,774,916 |
Other | 0 | (319,388) |
Total Operating Expenses | 6,187,718 | 6,509,976 |
Loss From Operations | (3,070,219) | (3,444,081) |
Other Income (Expense): | ||
Gain on Redemption of Convertible Note | 150,000 | 0 |
Amortization of Debt Discounts | (38,091) | (6,279) |
Induced Conversion Costs | (57,201) | 0 |
Interest Income | 6,928 | 1,800 |
Interest expense | (221,878) | (191,256) |
Total Other Income (Expense) | (160,242) | (195,735) |
Net Loss | $ (3,230,462) | $ (3,639,815) |
Loss Per Common Share | ||
Basic and Diluted | $ (0.03) | $ (0.03) |
Basic and Diluted Weighted Average Common Shares Outstanding | 123,574,672 | 121,372,605 |
CONSOLIDATED STATEMENTS OF STOC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIENCY) - USD ($) | Series A Preferred | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Shares at Dec. 31, 2016 | 510,000 | 120,825,134 | |||
Beginning Balance, Amount at Dec. 31, 2016 | $ 5,100 | $ 1,208,252 | $ 41,367,946 | $ (34,331,233) | $ 8,250,063 |
Equity based compensation | 635,223 | 635,223 | |||
Common stock issued for services provided, Shares | 249,824 | ||||
Common stock issued for services provided, Amount | $ 2,498 | 35,602 | 38,100 | ||
Warrants exercised, Shares | 975,000 | ||||
Warrants exercised, Amount | $ 9,750 | 39,000 | 48,750 | ||
Warrants issued as part of debt private placement | 61,904 | 61,904 | |||
Induced Conversion Costs | 0 | ||||
Net Loss | (3,639,814) | (3,639,815) | |||
Ending Balance, Shares at Dec. 31, 2017 | 510,000 | 122,049,958 | |||
Ending Balance, Amount at Dec. 31, 2017 | $ 5,100 | $ 1,220,500 | 42,139,675 | (37,971,049) | 5,394,225 |
Equity based compensation | 31,522 | 31,522 | |||
Common stock issued for services provided, Shares | 362,500 | ||||
Common stock issued for services provided, Amount | $ 3,625 | 33,875 | 37,500 | ||
Conversion of Notes Payable and Accrued Interest into Common Stock, Shares | 1,877,960 | ||||
Conversion of Notes Payable and Accrued Interest into Common Stock, Amount | $ 18,780 | 686,432 | 705,212 | ||
Warrants exercised, Amount | 0 | ||||
Induced Conversion Costs | 57,201 | (57,201) | |||
Net Loss | (3,230,462) | (3,230,462) | |||
Ending Balance, Shares at Dec. 31, 2018 | 510,000 | 124,290,418 | |||
Ending Balance, Amount at Dec. 31, 2018 | $ 5,100 | $ 1,242,904 | $ 42,948,705 | $ (41,201,511) | $ 2,995,198 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash Flow From Operating Activities: | ||
Net Loss | $ (3,230,462) | $ (3,639,815) |
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities: | ||
Depreciation and Amortization | 634,671 | 607,127 |
Amortization of Debt Discount | 38,091 | 6,279 |
Equity Based Compensation | 31,522 | 635,223 |
Value of Equity Issued for Services | 37,500 | 38,100 |
Induced Conversion Costs | (57,201) | 0 |
Reserve for Bad Debts | (200,000) | 200,000 |
Inventory Reserve | 100,000 | 0 |
Gain on Disposition of Property and Equipment | (150,000) | 0 |
Decrease (increase) in: | ||
Accounts Receivable | (109,673) | (514,572) |
Inventory | 629,023 | 204,622 |
Prepaid Expenses | (88,170) | (165,971) |
Deposits on Merchandise | (109,441) | 147,010 |
Security Deposits | (6,695) | 0 |
Increase (Decrease) in: | ||
Accounts Payable | 381,919 | 15,851 |
Accrued Expenses | 148,063 | (11,277) |
Accrued Interest | (8,122) | 80,000 |
Accrued Officer Compensation | 70,000 | 0 |
Deferred Rent | 9,168 | (7,760) |
Customer Deposits | (1,576) | (27,058) |
Net Cash Used in Operating Activities | (1,766,980) | (2,432,241) |
Cash Flow From Investing Activities: | ||
Purchase of Property and Equipment | (628,085) | (14,829) |
Net Cash Used in Investing Activities | (628,085) | (14,829) |
Cash Flow From Financing Activities: | ||
Proceeds from Exercise of Warrants | 0 | 48,750 |
Repayment of Principal Balance on Convertible Note | (150,000) | 0 |
Proceeds from Convertible Notes | 0 | 6,000,000 |
Net Cash Provided by Financing Activities | (150,000) | 6,048,750 |
Increase (Decrease) In Cash and Cash Equivalents | (2,545,065) | 3,601,679 |
Cash and Cash Equivalents - Beginning | 4,550,003 | 948,324 |
Cash and Cash Equivalents - Ending | 2,004,938 | 4,550,003 |
Supplemental Cash Flow Information: | ||
Cash Paid For Interest | 230,000 | 111,256 |
Cash Paid For Income Taxes | 800 | 800 |
Non-Cash Investing and Finance Activities: | ||
Establishment of discount on convertible debt | 0 | 61,904 |
Transfer of equipment from inventory to property and equipment | 107,846 | 323,805 |
Trademark Costs Reclassified to intangible assets, net | 56,792 | 0 |
Establishment of Tenant Improvement Allowance | 405,000 | 0 |
Abandonment of Fully Depreciated Property and Equipment | 66,428 | 0 |
Common Stock Issued Upon Conversion of Note Payable and Accrued Interest | $ 705,212 | $ 0 |
1. DESCRIPTION OF BUSINESS
1. DESCRIPTION OF BUSINESS | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
NOTE 1. DESCRIPTION OF BUSINESS | TOMI Environmental Solutions, Inc. (“TOMI”, the “Company”, “we”, “our” and “us”) is a global provider of disinfection and decontamination essentials through its premier Binary Ionization Technology® (BIT™) platform, under which it manufactures, licenses, services and sells its SteraMist™ brand of products, including SteraMist™ BIT™, a hydrogen peroxide-based mist and fog. Invented under a defense grant in association with the Defense Advanced Research Projects Agency (DARPA) of the U.S. Department of Defense, BIT™ is registered with the U.S. Environmental Protection Agency (“EPA”) and uses a low percentage hydrogen peroxide as its only active ingredient to produce a fog composed mostly of a hydroxyl radical ( . TOMI’s products are designed to service a broad spectrum of commercial structures, including, but not limited to, hospitals and medical facilities, bio-safety labs, pharmaceutical facilities, meat and produce processing facilities, universities and research facilities, vivarium labs, all service industries including cruise ships, office buildings, hotel and motel rooms, schools, restaurants, military barracks, police and fire departments, and athletic facilities. TOMI products are also used in single-family homes and multi-unit residences. TOMI’s mission is to help its customers create a healthier world through its product line in its divisions (Healthcare, Life Sciences, TOMI Service Network and Food Safety) and its motto is “innovating for a safer world” for healthcare and life. |
2. SUMMARY OF SIGNIFICANT ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Principles of Consolidation The accompanying consolidated financial statements include the accounts of TOMI and its wholly-owned subsidiary, TOMI Environmental Solutions, Inc., a Nevada corporation. All significant intercompany accounts and transactions have been eliminated in consolidation. Reclassification of Accounts Certain reclassifications have been made to prior-year comparative financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or financial position. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the accompanying consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable, inventory, fair values of financial instruments, intangible assets, useful lives of intangible assets and property and equipment, fair values of stock-based awards, income taxes, and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of our assets and liabilities. Fair Value Measurements The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The guidance describes a fair value hierarchy based on the levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or corroborated by observable market data or substantially the full term of the assets or liabilities. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the value of the assets or liabilities. Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and convertible debt. All these items were determined to be Level 1 fair value measurements. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximated fair value because of the short maturity of these instruments. The recorded value of convertible debt approximates its fair value as the terms and rates approximate market rates (See Note 6). Cash and Cash Equivalents For purposes of the statement of cash flows, cash and cash equivalents includes cash on hand held at financial institutions and other liquid investments with original maturities of three months or less. At times, these deposits may be in excess of insured limits. Accounts Receivable Our accounts receivable are typically from credit worthy customers or, for certain international customers, are supported by pre-payments. For those customers to whom we extend credit, we perform periodic evaluations of them and maintain allowances for potential credit losses as deemed necessary. We have a policy of reserving for doubtful accounts based on our best estimate of the amount of potential credit losses in existing accounts receivable. We periodically review our accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Bad debt expense for the years ended December 31, 2018 and 2017 was $96,929 and $263,882, respectively. At December 31, 2018 and December 31, 2017, the allowance for doubtful accounts was $300,000 and $500,000, respectively. As of December 31, 2018, two customers accounted for 37% of accounts receivable. One customer accounted for 13% of net revenues for the year ended December 31, 2018. As of December 31, 2017, two customers accounted for 24% of accounts receivable. Two customers accounted for 22% of net revenues for the year ended December 31, 2017. Inventories Inventories are valued at the lower of cost or market using the first-in, first-out (FIFO) method. Inventories consist primarily of finished goods. We expense costs to maintain certification to cost of goods sold as incurred. We review inventory on an ongoing basis, considering factors such as deterioration and obsolescence. We record an allowance for estimated losses when the facts and circumstances indicate that particular inventories will not be usable. Our reserve for obsolete inventory was $100,000 and $0 for the years ended December 31, 2018 and 2017, respectively. Property and Equipment We account for property and equipment at cost less accumulated depreciation. We compute depreciation using the straight-line method over the estimated useful lives of the assets, generally three to five years. Depreciation for equipment, furniture and fixtures and vehicles commences once placed in service for its intended use. Leasehold improvements are amortized using the straight-line method over the lives of the respective leases or service lives of the improvements, whichever is shorter. Accounts Payable As of December 31, 2018, three vendors accounted for approximately 63% of total accounts payable. As of December 31, 2017, one vendor accounted for approximately 45% of total accounts payable. One vendor accounted for 70% and 73% of cost of sales for the years ended December 31, 2018 and 2017, respectively. Accrued Warranties Accrued warranties represent the estimated costs, if any, that will be incurred during the warranty period of our products. We make an estimate of expected costs that will be incurred by us during the warranty period and charge that expense to the consolidated statement of operations at the date of sale. Our manufacturer assumes the warranty against product defects for one year from date of sale, which we extend to our customers upon sale of the product. We assume responsibility for product reliability and results. As of December 31, 2018, and 2017, our warranty reserve was $30,000 and $5,000, respectively. Income Taxes Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse. The measurement of deferred income tax assets is reduced, if necessary, by a valuation allowance for any tax benefits that are, on a more likely than not basis, not expected to be realized in accordance with Accounting Standards Codification (“ASC”) guidance for income taxes. Net deferred tax benefits have been fully reserved at December 31, 2018 and 2017. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. Leases and Tenant Improvement Allowance For lease agreements that provide for escalating rent payments or free-rent occupancy periods, we recognize rent expense on a straight-line basis over the non-cancelable lease term and option renewal periods where failure to exercise such options would result in an economic penalty in such amount that renewal appears, at the inception of the lease, to be reasonably assured. The lease term commences on the date that the Company takes possession of or controls the physical use of the property. Deferred rent is included in other liabilities on the consolidated balance sheet. We record landlord allowances and incentives received as deferred rent based on their short-term or long-term nature. These landlord allowances are amortized using the straight-line method over the reasonably assured lease term as a reduction of rent expense. We consider improvements to be a lessor asset if all of the following criteria are met: ● the lease specifically requires the lessee to make the improvement; ● the improvement is fairly generic; ● the improvement increases the fair value of the property to the lessor; and ● the useful life of the improvement is longer than the lease term. At December 31, 2018 and 2017 our short term deferred rent was $13,215 and $0, respectively. At December 31, 2018 and 2017, our long term deferred rent and tenant improvement allowances was $401,734 and $0, respectively. Net Loss Per Share Basic net loss per share is computed by dividing the Company’s net loss by the weighted average number of shares of common stock outstanding during the period presented. Diluted loss per share is based on the treasury stock method and includes the effect from potential issuance of shares of common stock, such as shares issuable pursuant to the exercise of options and warrants and conversions of preferred stock or debentures. Potentially dilutive securities as of December 31, 2018 consisted of 9,259,250 shares of common stock from convertible debentures, 26,550,611 shares of common stock issuable upon exercise of outstanding warrants, 320,000 shares of common stock issuable upon outstanding options and 510,000 shares of common stock issuable upon conversion of outstanding shares of Preferred A stock (“Convertible Series A Preferred Stock”). Diluted and basic weighted average shares are the same, as potentially dilutive shares are anti-dilutive. Potentially dilutive securities as of December 31, 2017 consisted of 11,111,100 shares of common stock from convertible debentures, 35,501,411 shares of common stock issuable upon exercise of outstanding warrants, 200,000 shares of common stock issuable upon outstanding options and 510,000 shares of common stock issuable upon conversion of outstanding shares of Preferred A stock (“Convertible Series A Preferred Stock”). Diluted and basic weighted average shares are the same, as potentially dilutive shares are anti-dilutive. Diluted net loss per share is computed similarly to basic net loss per share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential shares of common stock had been issued and if such additional shares were dilutive. Options, warrants, preferred stock and shares associated with the conversion of debt to purchase approximately 36.6 million and 47.3 million shares of common stock were outstanding at December 31, 2018 and 2017, respectively, but were excluded from the computation of diluted net loss per share due to the anti-dilutive effect on net loss per share. For the Year Ended December 31, 2018 2017 Net loss $ (3,230,462 ) $ (3,639,815 ) Adjustments for convertible debt - as converted Interest on convertible debt 221,878 191,256 Amortization of debt discount on convertible debt 38,091 6,279 Net loss attributable to common shareholders $ (2,970,473 ) $ (3,442,279 ) Weighted average number of shares of common stock outstanding: Basic and diluted 123,574,672 121,372,605 Net loss attributable to common shareholders per share: Basic and diluted $ (0.02 ) $ (0.03 ) Revenue Recognition We recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) Disaggregation of Revenue The following table presents our revenues disaggregated by revenue source. Net Revenue Product and Service Revenue For the year ended December 31, 2018 2017 SteraMist Product $ 4,652,000 $ 4,097,000 Service and Training 933,000 897,000 Total $ 5,585,000 $ 4,994,000 Revenue by Geographic Region For the year ended December 31, 2018 2017 United States $ 4,197,000 $ 3,495,000 International 1,388,000 1,499,000 Total $ 5,585,000 $ 4,994,000 Product revenue includes sales from our standard and customized equipment, solution and accessories sold with our equipment. Revenue is recognized upon transfer of control of promised products to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Service and training revenue include sales from our high-level decontamination and service engagements, validation of our equipment and technology and customer training. Service revenue is recognized as the agreed upon services are rendered to our customers in an amount that reflects the consideration we expect to receive in exchange for those services. Costs to Obtain a Contract with a Customer We apply a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses. These costs include our internal sales force compensation program and certain partner sales incentive programs as we have determined annual compensation is commensurate with annual sales activities. Contract Balances As of December 31, 2018, and December 31, 2017 we did not have any unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. Arrangements with Multiple Performance Obligations Our contracts with customers may include multiple performance obligations. We enter into contracts that can include various combinations of products and services, which are primarily distinct and accounted for as separate performance obligations. Significant Judgments Our contracts with customers for products and services often dictate the terms and conditions of when the control of the promised products or services is transferred to the customer and the amount of consideration to be received in exchange for the products and services. Equity Compensation Expense We account for equity compensation expense in accordance with FASB ASC 718, “Compensation—Stock Compensation.” Under the provisions of FASB ASC 718, equity compensation expense cost is estimated at the grant date based on the award’s fair value and is recognized as expense over the requisite service period. On July 7, 2017, our shareholders approved the 2016 Equity Incentive Plan (the “2016 Plan”). The 2016 Plan authorizes the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and performance units/shares. Up to 5,000,000 shares of common stock are authorized for issuance under the 2016 Plan. Shares issued under the 2016 Plan may be either authorized but unissued shares, treasury shares, or any combination thereof. Provisions in the 2016 Plan permit the reuse or reissuance by the 2016 Plan of shares of common stock for numerous reasons, including, but not limited to, shares of common stock underlying canceled, expired, or forfeited awards of stock-based compensation and stock appreciation rights paid out in the form of cash. Equity compensation expense will typically be awarded in consideration for the future performance of services to us. All recipients of awards under the 2016 Plan are required to enter into award agreements with the Company at the time of the award; awards under the 2016 Plan are expressly conditioned upon such agreements. For the year ended December 31, 2017, the Company issued 200,000 shares of common stock out of the 2016 Plan. In addition, for the year ended December 31, 2018, the Company issued 300,000 shares of common stock out of the 2016 Plan. Concentrations of Credit Risk Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents. We maintain cash balances at financial institutions which exceed the current Federal Deposit Insurance Corporation limit of $250,000 at times during the year. Long-Lived Assets Including Acquired Intangible Assets We assess long-lived assets for potential impairments at the end of each year, or during the year if an event or other circumstance indicates that we may not be able to recover the carrying amount of the asset. In evaluating long-lived assets for impairment, we measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If our long-lived assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value. We base the calculations of the estimated fair value of our long-lived assets on the income approach. For the income approach, we use an internally developed discounted cash flow model that includes, among others, the following assumptions: projections of revenues and expenses and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. We base these assumptions on our historical data and experience, industry projections, micro and macro general economic condition projections, and our expectations. We had no long-lived asset impairment charges for the years ended December 31, 2018 and 2017. Advertising and Promotional Expenses We expense advertising costs in the period in which they are incurred. Advertising and promotional expenses for the years ended December 31, 2018 and 2017, were approximately $204,000 and $66,000, respectively. Research and Development Expenses We expense research and development expenses in the period in which they are incurred. For the years ended December 31, 2018 and 2017, research and development expenses were approximately $916,000 and $454,000, respectively. Shipping and Handling Costs We include shipping and handling costs relating to the delivery of products directly from vendors to the Company in cost of sales. Other shipping and handling costs, including third-party delivery costs relating to the delivery of products to customers, are classified as a general and administrative expense. Shipping and handling costs included in general and administrative expense were approximately $206,000 and $119,000 for the years ended December 31, 2018 and 2017, respectively. Business Segments We currently have one reportable business segment due to the fact that we derive our revenue primarily from one product. A breakdown of revenue is presented in “Revenue Recognition” in Note 2 above. Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers Deferral of the Effective Date In February 2016, the FASB issued ASU No. 2016-02, Leases, to require lessees to recognize all leases, with limited exceptions, on the balance sheet, while recognition on the statement of operations will remain similar to current lease accounting. The ASU also eliminates real estate-specific provisions and modifies certain aspects of lessor accounting. Subsequently, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, ASU No. 2018-11, Targeted Improvements, and ASU No. 2018-20, Narrow-Scope Improvements for Lessors, to clarify and amend the guidance in ASU No. 2016-02. The ASUs are effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. We will adopt the ASUs on January 1, 2019 on a modified retrospective basis through a cumulative adjustment to our beginning accumulated deficit balance. Prior comparative periods will not be restated under this method, and we will adopt all available practical expedients, as applicable. Upon adoption, our consolidated balance sheet will include an overall increase in assets of approximately $800,000 and an increase in liabilities of approximately $800,000. The ASUs are not expected to have a material impact on our beginning accumulated deficit, consolidated statement of operations or the consolidated statement of cash flows. In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting |
3. INVENTORIES
3. INVENTORIES | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
NOTE 3: INVENTORIES | Inventories consist of the following at: December 31, 2018 December 31, 2017 Finished goods $ 2,782,014 $ 3,518,884 Inventory Reserve (100,000 ) - $ 2,682,014 $ 3,518,884 |
4. PROPERTY AND EQUIPMENT
4. PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
NOTE 4. PROPERTY AND EQUIPMENT | Property and equipment consist of the following at: December 31, December 31, 2018 2017 Furniture and fixtures $ 277,976 $ 91,216 Equipment 1,300,139 1,192,293 Vehicles 60,703 56,410 Computer and software 143,579 113,319 Leasehold improvements 355,898 15,554 Tenant Improvement Allowance 405,000 - 2,543,295 1,468,792 Less: Accumulated depreciation 954,704 755,969 $ 1,588,591 $ 712,822 For the years ended December 31, 2018 and 2017, depreciation was $265,163 and $237,619, respectively. |
5. INTANGIBLE ASSETS
5. INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
NOTE 5. INTANGIBLE ASSETS | Intangible assets consist of patents and trademarks related to our Binary Ionization Technology. We amortize the patents over the estimated remaining lives of the related patents. The trademarks have an indefinite life. Amortization expense was $369,508 and $369,508 for the years ended December 31, 2018 and 2017, respectively. Definite life intangible assets consist of the following: December 31, 2018 December 31, 2017 Intellectual Property and Patents $ 2,848,300 $ 2,848,300 Less: Accumulated Amortization 2,109,276 1,739,768 Intangible Assets, net $ 739,024 $ 1,108,532 Indefinite life intangible assets consist of the following: Trademarks $ 496,792 $ 440,000 Total Intangible Assets, net $ 1,235,816 $ 1,548,532 Approximate amortization over the next five years is as follows: Twelve Month Period Ending December 31, Amount 2019 $ 370,000 2020 369,000 2021 - 2022 - 2023 - $ 739,000 |
6. CONVERTIBLE DEBT
6. CONVERTIBLE DEBT | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
NOTE 6. CONVERTIBLE DEBT | In March and May 2017, the Company closed a private placement transaction in which it issued to certain accredited investors unregistered senior callable convertible promissory notes (the “Notes”) and three-year warrants to purchase an aggregate of 999,998 shares of common stock at an exercise price of $0.69 per share in exchange for aggregate gross proceeds of $6,000,000. The Notes bear interest at a rate of 4% per annum. $5,300,000 in principal was originally scheduled to mature on August 31, 2018 and $700,000 in principal was originally scheduled to mature on November 8, 2018, unless earlier redeemed, repurchased or converted. The Notes are convertible at the option of the holder into common stock at a conversion price of $0.54 per share. Subsequent to September 1, 2017, we may redeem the Notes that are scheduled to mature on August 31, 2018 at any time prior to maturity at a price equal to 100% of the outstanding principal amount of the Notes to be redeemed, plus accrued and unpaid interest as of the redemption date. Prior to November 8, 2018, we may redeem the Notes that are scheduled to mature on such date at any time prior to maturity at a price equal to 100% of the outstanding principal amount of the Notes to be redeemed, plus accrued and unpaid interest as of the redemption date. Interest on the Notes is payable semi-annually in cash on February 28 and August 31 of each year, beginning on August 31, 2017. Interest expense related to the Notes for the year ended December 31, 2018 and 2017 was $221,878 and $191,256, respectively. The warrants were valued at $62,559 using the Black-Scholes pricing model with the following assumptions: expected volatility: 104.06% –111.54%; expected dividend: $0; expected term: 3 years; and risk-free rate: 1.49%–1.59%. The Company recorded the warrants’ relative fair value of $61,904 as an increase to additional paid-in capital and a discount against the related Notes. The debt discount is being amortized over the life of the Notes using the effective interest method. Amortization expense for the years ended December 31, 2018 and 2017, was $38,091 and $6,279, respectively. In February and March 2018, we extended the maturity date of the Notes—we extended the maturity dates for $5,300,000 of principal on the Notes to April 1, 2019 and $700,000 in principal of the Notes to June 8, 2019. No additional consideration was paid or accrued by the Company. The stated rate of the Notes was unchanged, and the estimated fair value of the new debt approximates its carrying amount (principal plus accrued interest at the date of the modification). We determined that the modification of these Notes is not a substantial modification in accordance with ASC 470-50, “Modifications and Extinguishments”. In May 2018, we offered a noteholder the option to convert its Note at a reduced conversion price of $0.46. Pursuant to the terms of the conversion offer, an aggregate of $700,000 of principal and $5,212 of accrued interest outstanding under the Note were converted into 1,877,960 shares of common stock. The Company recognized an induced conversion cost of $57,201 related to the conversion. In December 2018, a noteholder redeemed a note with a principal balance of $300,000 in exchange for $150,000 in cash. On March 30, 2019, the remaining note holders agreed to extend the maturity dates of their aggregate of $5,000,000 in notes to April 3, 2020. See Note 14-Subsequent Events. Convertible notes consist of the following at: December 31, 2018 December 31, 2017 Convertible notes $ 5,000,000 $ 6,000,000 Initial discount (53,873 ) (61,904 ) Accumulated amortization 36,339 6,279 Convertible notes, net $ 4,982,466 $ 5,944,375 |
7. STOCKHOLDERS' EQUITY
7. STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
NOTE 7. STOCKHOLDERS' EQUITY | Our Board of Directors (the “Board”) may, without further action by our shareholders, from time to time, direct the issuance of any authorized but unissued or unreserved shares of preferred stock in series and at the time of issuance, determine the rights, preferences and limitations of each series. The holders of such preferred stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding-up of the Company before any payment is made to the holders of our common stock. Furthermore, the Board could issue preferred stock with voting and other rights that could adversely affect the voting power of the holders of our common stock. Convertible Series A Preferred Stock Our authorized Convertible Series A Preferred Stock, $0.01 par value, consists of 1,000,000 shares. At December 31, 2018 and 2017, there were 510,000 shares issued and outstanding. The Convertible Series A Preferred Stock is convertible at the rate of one share of common stock for one share of Convertible Series A Preferred Stock. Convertible Series B Preferred Stock Our authorized Convertible Series B Preferred Stock, $1,000 stated value, 7.5% cumulative dividend, consists of 4,000 shares. At December 31, 2018 and 2017, there were no shares issued and outstanding, respectively. Each share of Convertible Series B Preferred Stock may be converted (at the holder’s election) into two hundred shares of our common stock. Common Stock During the year ended December 31, 2017, the Company issued 249,824 shares of common stock valued at $38,100 for professional services rendered, of which the Company issued 200,000 shares that were valued at $32,000 and issued to our Board (See Note 9). In August 2017, warrants to purchase 375,000 and 600,000 shares of common stock were exercised, which resulted in gross proceeds to the Company of $18,750 and $30,000, respectively. During the year ended December 31, 2018, we issued 362,500 shares of common stock valued at $33,500 to members of our Board (see Note 9). In May 2018, we issued shares of common stock in connection with the conversion of $705,212 of principal and accrued interest outstanding under a Note (see Note 6). Stock Options In January 2018, we issued options to purchase an aggregate of 100,000 shares of common stock to our Chief Operating Officer, valued at $11,780. The options have an exercise price of $0.12 per share and expire in January 2023. The options were valued using the Black-Scholes model using the following assumptions: volatility: 146%; dividend yield: 0%; zero coupon rate: 2.27%; and a life of 5 years. In January 2018, we issued options to purchase an aggregate of 20,000 shares of common stock to our Scientific Advisory Board members, valued at $1,810 in total. The options have an exercise price of $0.10 per share and expire in January 2028. The options were valued using the Black-Scholes model using the following assumptions: volatility: 147%; dividend yield: 0%; zero coupon rate: 2.41%; and a life of 10 years. The following table summarizes stock options outstanding as of December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Number of Options Weighted Average Exercise Price Number of Options Weighted Average Exercise Price Outstanding, beginning of period 200,000 $ 0.76 200,000 $ 0.76 Granted 120,000 $ 0.12 — — Exercised — — — — Outstanding, end of period 320,000 $ 0.52 200,000 $ 0.76 Options outstanding and exercisable by price range as of December 31, 2018 were as follows: Outstanding Options Average Weighted Exercisable Options Range Number Remaining Contractual Life in Years Number Weighted Average Exercise Price $ 0.05 20,000 2.02 20,000 $ 0.05 $ 0.10 20,000 9.08 20,000 $ 0.10 $ 0.12 100,000 4.02 100,000 $ 0.12 $ 0.27 40,000 6.01 40,000 $ 0.27 $ 0.55 100,000 7.10 100,000 $ 0.55 $ 2.10 40,000 1.01 40,000 $ 2.10 320,000 5.05 320,000 $ 0.52 Stock Warrants In March and May of 2017, in connection with the issuance of the Notes, we issued three-year warrants to purchase up to an aggregate of 999,998 shares of common stock at an exercise price of $0.69 per share (see Note 6). On June 30, 2017, we issued warrants to purchase up to 15,000 shares of common stock at an exercise price of $0.10 per share to the members of the Scientific Advisory Board with a term of five years, which vested upon issuance. The Company utilized the Black-Scholes method to fair value the warrants received by the members of the Scientific Advisory Board at $1,400 with the following assumptions: volatility, 150%; expected dividend yield, 0%; risk free interest rate, 1.83%; and a life of 5 years. The grant date fair value of each share underlying the warrant was $0.09. During the first and second quarter of 2017, we recognized approximately $23,000 in equity compensation expense for the vested and unvested portion of a warrant issued to a former employee pursuant to his agreement with the Company. In September 2017, the employee resigned from his position with the Company and the unvested portion of his warrant was terminated. For the year ended December 31, 2017, we reversed the equity compensation expense for the accrued but unvested portion of his warrant of $22,000. In June 2017, we modified the terms of outstanding warrants to purchase 4,000,000 shares of common stock. Pursuant to a settlement agreement, the term of the warrants was increased by 2 years and the exercise price was modified to $0.12 per share (decrease of $0.03 per share). Pursuant to ASC 718, the modified terms of the warrants resulted in approximately $196,000 in incremental equity compensation expense for the year ended December 31, 2017. We utilized the Black-Scholes method to fair value the warrants under the original and modified terms with the following range of assumptions: volatility, 81%-97%; expected dividend yield, 0%; risk free interest rate, 1.28%; and a life of 0.33 - 2.33 years, respectively. The grant date fair value of each share of common stock underlying the warrant was $0.01 and $0.06, respectively. In July 2017 we issued a warrant to purchase 250,000 shares of common stock to the CEO at an exercise price of $0.10 per share pursuant to his employment agreement with the Company. The warrant was valued at approximately $23,000 and has a term of 5 years. We utilized the Black-Scholes method to fair value the warrant received by the CEO with the following assumptions: volatility, 153%; expected dividend yield, 0%; risk free interest rate, 1.90%; and a life of 5 years. The grant date fair value of each share of common stock underlying the warrant was $0.09. In October 2017, we issued warrants to purchase up to 10,000 shares of common stock at an exercise price of $0.17 per share to the members of the Scientific Advisory Board with a term of five years, which vested upon issuance. The Company utilized the Black-Scholes method to fair value the warrants received by the members of the Scientific Advisory Board at approximately $1,500 with the following assumptions: volatility, 147%; expected dividend yield, 0%; risk free interest rate, 1.98%; and a life of 5 years. The grant date fair value of each share underlying the warrant was $0.15. In December 2017 we issued a warrant to purchase 3,500,000 shares of common stock to the CEO at an exercise price of $0.12 per share pursuant to his employment agreement with the Company. The warrant was valued at approximately $412,000 and has a term of 5 years. We utilized the Black-Scholes method to fair value the warrant received by the CEO with the following assumptions: volatility, 145%; expected dividend yield, 0%; risk free interest rate, 2.23%; and a life of 5 years. The grant date fair value of each share of common stock underlying the warrant was $0.12. In November 2018 we issued a warrant to purchase 250,000 shares of common stock to the CEO at an exercise price of $0.08 per share pursuant to his employment agreement with the Company. The warrant was valued at approximately $18,000 and has a term of 5 years. We utilized the Black-Scholes method to fair value the warrant received by the CEO with the following assumptions: volatility, 142%; expected dividend yield, 0%; risk free interest rate, 2.95%; and a life of 5 years. The grant date fair value of each share of common stock underlying the warrant was $0.07. The following table summarizes the outstanding common stock warrants as of December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Number of Warrants Weighted Average Exercise Price Number of Warrants Weighted Average Exercise Price Outstanding, beginning of period 35,501,411 $ 0.33 37,076,413 $ 0.31 Granted 250,000 0.08 4,774,998 0.24 Exercised - - (975,000 ) 0.05 Expired (9,200,800 ) (0.30 ) (5,375,000 ) 0.13 Outstanding, end of period 26,550,611 $ 0.34 35,501,411 $ 0.33 Warrants outstanding and exercisable by price range as of December 31, 2018 were as follows: Outstanding Warrants Exercisable Warrants Exercise Price Number Average Weighted Remaining Contractual Life in Years Number Weighted Average Exercise Price $ 0.08 250,000 4.89 250,000 $ 0.08 $ 0.10 265,000 3.53 265,000 $ 0.10 $ 0.12 3,500,000 3.98 3,500,000 $ 0.12 $ 0.12 4,000,000 0.79 4,000,000 $ 0.12 $ 0.17 10,000 3.82 10,000 $ 0.17 $ 0.27 250,000 3.00 250,000 $ 0.27 $ 0.29 10,125,613 1.80 10,125,613 $ 0.29 $ 0.30 3,300,000 1.17 3,300,000 $ 0.30 $ 0.32 250,000 2.75 250,000 $ 0.32 $ 0.42 250,000 2.50 250,000 $ 0.42 $ 0.50 250,000 2.25 250,000 $ 0.50 $ 0.55 100,000 2.08 100,000 $ 0.55 $ 0.69 999,998 1.22 999,998 $ 0.69 $ 1.00 3,000,000 1.34 3,000,000 $ 1.00 26,550,611 2.24 26,550,611 $ 0.34 There were no unvested warrants outstanding as of December 31, 2018. |
8. COMMITMENTS AND CONTINGENCIE
8. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
NOTE 8. COMMITMENTS AND CONTINGENCIES | Lease Commitments In September 2014, we entered into a lease agreement for office and warehouse space in Frederick, Maryland. As part of the lease agreement, we received a rent holiday in the first 5 months of the lease. The lease also provides for an escalation clause pursuant to which the Company was subject to an annual rent increase of 3%, year over year. The term of the lease expired on January 31, 2018 and was extended on a month-to-month basis through the occupancy date of our new lease. In April 2018, we entered into a 10-year lease agreement for a new 9,000-square-foot facility that contains office, warehouse, lab and research and development space in Frederick, Maryland. The lease agreement was scheduled to commence on December 1, 2018 or when the property was ready for occupancy. The agreement provided for annual rent of $143,460, an escalation clause that increases the rent 3% year over year, a landlord tenant improvement allowance of $405,000 and additional landlord work as discussed in the lease agreement. We took occupancy of the property on December 17, 2018 and the lease was amended in March 2019 to provide for a 4-month rent holiday and a commencement date of April 1, 2019. Approximate minimum annual rents under the lease are as follows: Twelve Month Period Ending December 31, Amount 2019 $ 102,000 2020 147,000 2021 151,000 2022 156,000 2023 160,000 Thereafter 923,000 $ 1,639,000 Legal Contingencies We may become a party to litigation in the normal course of business. In the opinion of management, there are no legal matters involving us that would have a material adverse effect upon our financial condition, results of operations or cash flows. In addition, from time to time, we may have to file claims against parties that infringe on our intellectual property. Product Liability As of December 31, 2018, and 2017, there were no claims against us for product liability. |
9. CONTRACTS AND AGREEMENTS
9. CONTRACTS AND AGREEMENTS | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
9. CONTRACTS AND AGREEMENTS | Agreements with Directors In December 2017, we increased the annual board fee to directors to $40,000, to be paid in cash on a quarterly basis, with the exception of the audit committee chairperson, whose annual fee we increased to $45,000, also to be paid in cash on a quarterly basis. The board fee also includes the issuance of 75,000 shares of common stock on an annual basis. For the year ended December 31, 2018, we issued an aggregate of 362,500 shares of common stock that were valued at $33,500 to members of our Board. In January 2018, Dr. Lim Boh Soon was elected to our Board. His term is for three years or until his successor is elected, or he resigns or is removed. His director agreement provides for an annual cash board fee of $40,000 and annual issuance of shares of common stock, as indicated above. Other Agreements In June 2015, we launched the TOMI Service Network (“TSN”). The TSN is a national service network composed of existing full-service restoration industry specialists that have entered into licensing agreements with us to become Primary Service Providers (“PSPs”). The licensing agreements grant protected territories to PSPs to perform services using our SteraMist™ platform of products and also provide for potential job referrals to PSPs whereby we are entitled to referral fees. Additionally, the agreement provides for commissions due to PSPs for equipment and solution sales they facilitate to other service providers in their respective territories. As part of these agreements, we are obligated to provide to the PSPs various training, ongoing support and facilitate a referral network call center. As of December 31, 2018, we had entered into 87 licensing agreements in connection with the launch of the TSN. The licensing agreements contain fixed price minimum equipment and solution orders based on the population of the territories granted pursuant to the licensing agreements. The nature and terms of our TSN agreements may represent multiple deliverable arrangements. Each of the deliverables in these arrangements typically represent a separate unit of accounting. |
10. INCOME TAXES
10. INCOME TAXES | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
Note 10. INCOME TAXES | The Company’s income tax expense consisted of: For the Year Ended December 31, December 31, 2018 2017 Current: United States $ - $ - Foreign - - - - Deferred: United States - - Foreign - - - - Total $ - $ - The Company’s net income (loss) before income tax consisted of: For the Year Ended December 31, December 31, 2018 2017 United States $ (3,230,462 ) $ (3,639,814 ) Foreign - - Total $ (3,230,462 ) $ (3,639,814 ) Our income tax expense differed from the amounts computed by applying the United States statutory corporate income tax rate for the following reasons: On December 22, 2017, the 2017 Tax Cuts and Jobs Act (“Tax Act”) was enacted into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease from 35% to 21% for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. We are required to recognize the effect of the tax law changes in the period of enactment, such as re-measuring our U.S. deferred tax assets and liabilities as well as reassessing the net realizability of our deferred tax assets and liabilities. The Tax Act did not give rise to any material impact on the consolidated balance sheets and consolidated statements of operations due to our historical worldwide loss position and the full valuation allowance on our net U.S. deferred tax assets. In December 2017, the Securities and Exchange Commission staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act The reconciliation of taxes at the federal and state statutory rate to our provision for income taxes for the years ended December 31, 2018 and 2017 was as follows: For the Year Ended December 31, December 31, 2018 2017 Loss before income tax $ (3,230,462 ) $ (3,639,814 ) US statutory corporate income tax rate (federal and state) 28.00 % 39.45 % Income tax expense computed at US statutory corporate income tax rate Income tax expense computed at US statutory corporate income tax rate (904,529 ) (1,435,907 ) Reconciling items: Effect of U.S. tax law change (1) - 1,793,212 Change in valuation allowance on deferred tax assets 741,982 (675,889 ) Provision to prior year tax return 113,068 69,767 Incentive stock options and warrants 21,628 256,168 Amortized debt discount 1,758 2,477 Meals and Entertainment 4,134 5,825 Induced Conversion Costs 16,016 - Other 5,943 (15,653 ) Income tax expense $ - $ - (1) Due to the Tax Act, our U.S. deferred tax assets and liabilities as of December 31, 2017 were re-measured from 39.45% to 28%. The change in tax rate resulted in a decrease to our gross U.S. deferred tax assets which is offset by a corresponding decrease to our valuation allowance. Components of our deferred income tax assets (liabilities) are as follows: December 31, 2018 December 31, 2017 Deferred tax assets: Reserve for Bad Debt $ 84,000 $ 140,000 Inventory Reserve 28,000 - Inventory Capitalization - 94,000 Accrued Expenses 52,000 31,000 Deferred Rent 4,000 - Warranty Reserve 8,000 - Property and Equipment - 21,000 Intangible Assets 362,000 208,000 Net operating losses 4,718,000 3,724,000 Valuation Allowance (4,959,000 ) (4,218,000 ) Deferred Tax Assets $ 297,000 $ - Deferred tax liabilities: Property Plant and Equipment $ (297,000 ) $ - $ (297,000 ) - Net Deferred Tax Assets and Liabilities $ - $ - Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse. The measurement of deferred income tax assets is reduced, if necessary, by a valuation allowance for any tax benefits, which are, on a more likely than not basis, not expected to be realized; in accordance with ASC guidance for income taxes. As of December 31, 2018, we recorded a valuation allowance of $4,959,000 for the portion of the deferred tax assets that we do not expect to be realized. The valuation allowance on our net deferred taxes increased by $741,000 during the year ended December 31, 2018, primarily due to U.S. deferred tax assets incurred in the current year that cannot be realized. The 2017 additional U.S. deferred tax assets are net of re-measurement from 35% to 21% as a result of the Tax act. Management believes that based on the available information, it is more likely than not that the U.S. deferred tax assets will not be realized, such that a valuation allowance is required against U.S. deferred tax assets. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. For income tax purposes in the United States, we had available federal net operating loss carryforwards ("NOL") as of December 31, 2018 and 2017 of approximately $17,544,000 and $13,898,000 respectively to reduce future federal taxable income. For income tax purposes in the United States, we had available state NOL carryforwards as of December 31, 2018 and 2017 of approximately $14,773,000 and $11,506,000 respectively to reduce future state taxable income. We record uncertain tax positions in accordance with ASC 740 on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. As of December 31, 2018, and 2017, the management of the Company determined there were no reportable uncertain tax positions. |
11. ACCRUED EXPENSES AND OTHER
11. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
11. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | Accrued expenses and other current liabilities consisted of the following at: December 31, 2018 December 31, 2017 Commissions $ 136,631 $ 115,506 Payroll and related costs 144,359 43,484 Director fees 41,250 27,750 Accrued warranty 30,000 5,000 Other accrued expenses 62,959 75,396 Total $ 415,199 $ 267,136 |
12. ACCRUED WARRANTY
12. ACCRUED WARRANTY | 12 Months Ended |
Dec. 31, 2018 | |
Accrued Warranty | |
NOTE 12. ACCRUED WARRANTY | Our manufacturer assumes warranty against product defects for one year from the sale to customers, which we extend to our customers upon sale of the product. We assume responsibility for product reliability and results. The warranty is generally limited to a refund of the original purchase price of the product or a replacement part. We estimate warranty costs based on historical warranty claim experience. The following table presents warranty reserve activities at: December 31, 2018 December 31, 2017 Beginning accrued warranty costs $ 5,000 $ - Provision for warranty expense 47,454 10,731 Settlement of warranty claims (22,454 ) (5,731 ) Ending accrued warranty costs $ 30,000 $ 5,000 |
13. CUSTOMER CONCENTRATION
13. CUSTOMER CONCENTRATION | 12 Months Ended |
Dec. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
13. CUSTOMER CONCENTRATION | The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s accounts receivable. As of December 31, 2018, two customers accounted for 37% of accounts receivable. One customer accounted for 13% of net revenues for the year ended December 31, 2018. As of December 31, 2017, two customers accounted for 24% of accounts receivable. Two customers accounted for 22% of net revenues for the year ended December 31, 2017. |
14. SUBSEQUENT EVENTS
14. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
NOTE 14. SUBSEQUENT EVENTS | In January of 2019, TOMI entered into an exclusive co-marketing and supply agreement with Arkema Inc. to further develop a market for our fogging/misting technology within the Food Safety industry. The agreement provides that the parties will develop the market for TOMI’s Fogging Technology using the TOMI SteraMist Technology for food safety applications. Arkema Inc. will manufacture and supply the food grade hydrogen peroxide for use in an EPA-registered solution. Together, the companies will address the need in the industry for a non-bleach, quick and effective food safety process and bring it to Arkema’s global food clients who currently use its hydrogen peroxide for organic-certified products. In January 2019 we issued a warrant to purchase 1,000,000 shares of common stock to the CEO at an exercise price of $0.10 per share pursuant to his employment agreement with the Company. The warrant was valued at approximately $90,000 and has a term of 5 years. We utilized the Black-Scholes method to fair value the warrant received by the CEO with the following assumptions: volatility, 143%; expected dividend yield, 0%; risk free interest rate, 2.58%; and a life of 5 years. The grant date fair value of each share of common stock underlying the warrant was $0.09. In January 2019 we issued an option to purchase 250,000 shares of common stock to the COO at an exercise price of $0.11 per share pursuant to her employment agreement with the Company. The option was valued at approximately $25,000, has a term of 5 years. We utilized the Black-Scholes method to fair value the option received by the COO with the following assumptions: volatility, 144%; expected dividend yield, 0%; risk free interest rate, 2.47%; and a life of 5 years. The grant date fair value of each share of common stock underlying the option was $0.10. The value of this stock option was included in accrued expenses at December 31, 2018. In January 2019 we issued an option to purchase 50,000 shares of common stock to the CFO at an exercise price of $0.10 per share. The option was valued at approximately $4,000 and has a term of 5 years. We utilized the Black-Scholes method to fair value the option received by the CFO with the following assumptions: volatility, 143%; expected dividend yield, 0%; risk free interest rate, 2.58%; and a life of 5 years. The grant date fair value of each share of common stock underlying the option was $0.09. Pursuant to our agreement with our Board, in January 2019, we issued an aggregate of 400,000 shares of common stock valued at approximately $44,000. The agreements with our Board provide for the annual issuance of shares of our common stock. On March 30, 2019, the two remaining note holders agreed to extend the maturity dates of their notes totaling $5,000,000 to April 3, 2020. As part of the extensions, the Company agreed that if it does not make payment on or before the new maturity dates, after five (5) days written notice, the holders will have the right, but not the obligation, to convert the notes into common shares of the Company at a conversion price of $0.11 per share or a total of 45,454,545 shares. All other provisions of the notes remain unchanged. |
2. SUMMARY OF SIGNIFICANT ACC_2
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Summary Of Significant Accounting Policies | |
Principles of Consolidation | The accompanying consolidated financial statements include the accounts of TOMI and its wholly-owned subsidiary, TOMI Environmental Solutions, Inc., a Nevada corporation. All significant intercompany accounts and transactions have been eliminated in consolidation. |
Reclassification of Accounts | Certain reclassifications have been made to prior-year comparative financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or financial position. |
Use of Estimates | The preparation of consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the accompanying consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including those related to accounts receivable, inventory, fair values of financial instruments, intangible assets, useful lives of intangible assets and property and equipment, fair values of stock-based awards, income taxes, and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of our assets and liabilities. |
Fair Value Measurements | The authoritative guidance for fair value measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact. The guidance describes a fair value hierarchy based on the levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or corroborated by observable market data or substantially the full term of the assets or liabilities. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the value of the assets or liabilities. Our financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and convertible debt. All these items were determined to be Level 1 fair value measurements. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable and accrued expenses approximated fair value because of the short maturity of these instruments. The recorded value of convertible debt approximates its fair value as the terms and rates approximate market rates (See Note 6). |
Cash and Cash Equivalents | For purposes of the statement of cash flows, cash and cash equivalents includes cash on hand held at financial institutions and other liquid investments with original maturities of three months or less. At times, these deposits may be in excess of insured limits. |
Accounts Receivable | Our accounts receivable are typically from credit worthy customers or, for certain international customers, are supported by pre-payments. For those customers to whom we extend credit, we perform periodic evaluations of them and maintain allowances for potential credit losses as deemed necessary. We have a policy of reserving for doubtful accounts based on our best estimate of the amount of potential credit losses in existing accounts receivable. We periodically review our accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Bad debt expense for the years ended December 31, 2018 and 2017 was $96,929 and $263,882, respectively. At December 31, 2018 and December 31, 2017, the allowance for doubtful accounts was $300,000 and $500,000, respectively. As of December 31, 2018, two customers accounted for 37% of accounts receivable. One customer accounted for 13% of net revenues for the year ended December 31, 2018. As of December 31, 2017, two customers accounted for 24% of accounts receivable. Two customers accounted for 22% of net revenues for the year ended December 31, 2017. |
Inventories | Inventories are valued at the lower of cost or market using the first-in, first-out (FIFO) method. Inventories consist primarily of finished goods. We expense costs to maintain certification to cost of goods sold as incurred. We review inventory on an ongoing basis, considering factors such as deterioration and obsolescence. We record an allowance for estimated losses when the facts and circumstances indicate that particular inventories will not be usable. Our reserve for obsolete inventory was $100,000 and $0 for the years ended December 31, 2018 and 2017, respectively. |
Property and Equipment | We account for property and equipment at cost less accumulated depreciation. We compute depreciation using the straight-line method over the estimated useful lives of the assets, generally three to five years. Depreciation for equipment, furniture and fixtures and vehicles commences once placed in service for its intended use. Leasehold improvements are amortized using the straight-line method over the lives of the respective leases or service lives of the improvements, whichever is shorter. |
Accounts Payable | As of December 31, 2018, three vendors accounted for approximately 63% of total accounts payable. As of December 31, 2017, one vendor accounted for approximately 45% of total accounts payable. One vendor accounted for 70% and 73% of cost of sales for the years ended December 31, 2018 and 2017, respectively. |
Accrued Warranties | Accrued warranties represent the estimated costs, if any, that will be incurred during the warranty period of our products. We make an estimate of expected costs that will be incurred by us during the warranty period and charge that expense to the consolidated statement of operations at the date of sale. Our manufacturer assumes the warranty against product defects for one year from date of sale, which we extend to our customers upon sale of the product. We assume responsibility for product reliability and results. As of December 31, 2018, and 2017, our warranty reserve was $30,000 and $5,000, respectively. |
Income taxes | Deferred income tax assets and liabilities are determined based on differences between the financial statement reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws in effect when the differences are expected to reverse. The measurement of deferred income tax assets is reduced, if necessary, by a valuation allowance for any tax benefits that are, on a more likely than not basis, not expected to be realized in accordance with Accounting Standards Codification (“ASC”) guidance for income taxes. Net deferred tax benefits have been fully reserved at December 31, 2018 and 2017. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the period that such tax rate changes are enacted. |
Leases and Tenant Improvement Allowance | For lease agreements that provide for escalating rent payments or free-rent occupancy periods, we recognize rent expense on a straight-line basis over the non-cancelable lease term and option renewal periods where failure to exercise such options would result in an economic penalty in such amount that renewal appears, at the inception of the lease, to be reasonably assured. The lease term commences on the date that the Company takes possession of or controls the physical use of the property. Deferred rent is included in other liabilities on the consolidated balance sheet. We record landlord allowances and incentives received as deferred rent based on their short-term or long-term nature. These landlord allowances are amortized using the straight-line method over the reasonably assured lease term as a reduction of rent expense. We consider improvements to be a lessor asset if all of the following criteria are met: ● the lease specifically requires the lessee to make the improvement; ● the improvement is fairly generic; ● the improvement increases the fair value of the property to the lessor; and ● the useful life of the improvement is longer than the lease term. At December 31, 2018 and 2017 our short term deferred rent was $13,215 and $0, respectively. At December 31, 2018 and 2017, our long term deferred rent and tenant improvement allowances was $401,734 and $0, respectively. |
Net Loss Per Share | Basic net loss per share is computed by dividing the Company’s net loss by the weighted average number of shares of common stock outstanding during the period presented. Diluted loss per share is based on the treasury stock method and includes the effect from potential issuance of shares of common stock, such as shares issuable pursuant to the exercise of options and warrants and conversions of preferred stock or debentures. Potentially dilutive securities as of December 31, 2018 consisted of 9,259,250 shares of common stock from convertible debentures, 26,550,611 shares of common stock issuable upon exercise of outstanding warrants, 320,000 shares of common stock issuable upon outstanding options and 510,000 shares of common stock issuable upon conversion of outstanding shares of Preferred A stock (“Convertible Series A Preferred Stock”). Diluted and basic weighted average shares are the same, as potentially dilutive shares are anti-dilutive. Potentially dilutive securities as of December 31, 2017 consisted of 11,111,100 shares of common stock from convertible debentures, 35,501,411 shares of common stock issuable upon exercise of outstanding warrants, 200,000 shares of common stock issuable upon outstanding options and 510,000 shares of common stock issuable upon conversion of outstanding shares of Preferred A stock (“Convertible Series A Preferred Stock”). Diluted and basic weighted average shares are the same, as potentially dilutive shares are anti-dilutive. Diluted net loss per share is computed similarly to basic net loss per share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential shares of common stock had been issued and if such additional shares were dilutive. Options, warrants, preferred stock and shares associated with the conversion of debt to purchase approximately 36.6 million and 47.3 million shares of common stock were outstanding at December 31, 2018 and 2017, respectively, but were excluded from the computation of diluted net loss per share due to the anti-dilutive effect on net loss per share. For the Year Ended December 31, 2018 2017 Net loss $ (3,230,462 ) $ (3,639,815 ) Adjustments for convertible debt - as converted Interest on convertible debt 221,878 191,256 Amortization of debt discount on convertible debt 38,091 6,279 Net loss attributable to common shareholders $ (2,970,473 ) $ (3,442,279 ) Weighted average number of shares of common stock outstanding: Basic and diluted 123,574,672 121,372,605 Net loss attributable to common shareholders per share: Basic and diluted $ (0.02 ) $ (0.03 ) |
Revenue Recognition | We recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) Disaggregation of Revenue The following table presents our revenues disaggregated by revenue source. Net Revenue Product and Service Revenue For the year ended December 31, 2018 2017 SteraMist Product $ 4,652,000 $ 4,097,000 Service and Training 933,000 897,000 Total $ 5,585,000 $ 4,994,000 Revenue by Geographic Region For the year ended December 31, 2018 2017 United States $ 4,197,000 $ 3,495,000 International 1,388,000 1,499,000 Total $ 5,585,000 $ 4,994,000 Product revenue includes sales from our standard and customized equipment, solution and accessories sold with our equipment. Revenue is recognized upon transfer of control of promised products to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Service and training revenue include sales from our high-level decontamination and service engagements, validation of our equipment and technology and customer training. Service revenue is recognized as the agreed upon services are rendered to our customers in an amount that reflects the consideration we expect to receive in exchange for those services. Costs to Obtain a Contract with a Customer We apply a practical expedient to expense costs as incurred for costs to obtain a contract with a customer when the amortization period would have been one year or less. We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses. These costs include our internal sales force compensation program and certain partner sales incentive programs as we have determined annual compensation is commensurate with annual sales activities. Contract Balances As of December 31, 2018, and December 31, 2017 we did not have any unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. Arrangements with Multiple Performance Obligations Our contracts with customers may include multiple performance obligations. We enter into contracts that can include various combinations of products and services, which are primarily distinct and accounted for as separate performance obligations. Significant Judgments Our contracts with customers for products and services often dictate the terms and conditions of when the control of the promised products or services is transferred to the customer and the amount of consideration to be received in exchange for the products and services. |
Equity Compensation Expense | We account for equity compensation expense in accordance with FASB ASC 718, “Compensation—Stock Compensation.” Under the provisions of FASB ASC 718, equity compensation expense cost is estimated at the grant date based on the award’s fair value and is recognized as expense over the requisite service period. On July 7, 2017, our shareholders approved the 2016 Equity Incentive Plan (the “2016 Plan”). The 2016 Plan authorizes the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and performance units/shares. Up to 5,000,000 shares of common stock are authorized for issuance under the 2016 Plan. Shares issued under the 2016 Plan may be either authorized but unissued shares, treasury shares, or any combination thereof. Provisions in the 2016 Plan permit the reuse or reissuance by the 2016 Plan of shares of common stock for numerous reasons, including, but not limited to, shares of common stock underlying canceled, expired, or forfeited awards of stock-based compensation and stock appreciation rights paid out in the form of cash. Equity compensation expense will typically be awarded in consideration for the future performance of services to us. All recipients of awards under the 2016 Plan are required to enter into award agreements with the Company at the time of the award; awards under the 2016 Plan are expressly conditioned upon such agreements. For the year ended December 31, 2017, the Company issued 200,000 shares of common stock out of the 2016 Plan. In addition, for the year ended December 31, 2018, the Company issued 300,000 shares of common stock out of the 2016 Plan. |
Concentrations of Credit Risk | Financial instruments that potentially subject us to significant concentrations of credit risk consist principally of cash and cash equivalents. We maintain cash balances at financial institutions which exceed the current Federal Deposit Insurance Corporation limit of $250,000 at times during the year. |
Long-Lived Assets Including Acquired Intangible Assets | We assess long-lived assets for potential impairments at the end of each year, or during the year if an event or other circumstance indicates that we may not be able to recover the carrying amount of the asset. In evaluating long-lived assets for impairment, we measure recoverability of these assets by comparing the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If our long-lived assets are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair market value. We base the calculations of the estimated fair value of our long-lived assets on the income approach. For the income approach, we use an internally developed discounted cash flow model that includes, among others, the following assumptions: projections of revenues and expenses and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. We base these assumptions on our historical data and experience, industry projections, micro and macro general economic condition projections, and our expectations. We had no long-lived asset impairment charges for the years ended December 31, 2018 and 2017. |
Advertising and Promotional Expenses | We expense advertising costs in the period in which they are incurred. Advertising and promotional expenses for the years ended December 31, 2018 and 2017, were approximately $204,000 and $66,000, respectively. |
Research and Development Expenses | We expense research and development expenses in the period in which they are incurred. For the years ended December 31, 2018 and 2017, research and development expenses were approximately $916,000 and $454,000, respectively. |
Shipping and Handling Costs | We include shipping and handling costs relating to the delivery of products directly from vendors to the Company in cost of sales. Other shipping and handling costs, including third-party delivery costs relating to the delivery of products to customers, are classified as a general and administrative expense. Shipping and handling costs included in general and administrative expense were approximately $206,000 and $119,000 for the years ended December 31, 2018 and 2017, respectively. |
Business Segments | We currently have one reportable business segment due to the fact that we derive our revenue primarily from one product. A breakdown of revenue is presented in “Revenue Recognition” in Note 2 above. |
Recent Accounting Pronouncements | In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers Deferral of the Effective Date In February 2016, the FASB issued ASU No. 2016-02, Leases, to require lessees to recognize all leases, with limited exceptions, on the balance sheet, while recognition on the statement of operations will remain similar to current lease accounting. The ASU also eliminates real estate-specific provisions and modifies certain aspects of lessor accounting. Subsequently, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, ASU No. 2018-11, Targeted Improvements, and ASU No. 2018-20, Narrow-Scope Improvements for Lessors, to clarify and amend the guidance in ASU No. 2016-02. The ASUs are effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. We will adopt the ASUs on January 1, 2019 on a modified retrospective basis through a cumulative adjustment to our beginning accumulated deficit balance. Prior comparative periods will not be restated under this method, and we will adopt all available practical expedients, as applicable. Upon adoption, our consolidated balance sheet will include an overall increase in assets of approximately $800,000 and an increase in liabilities of approximately $800,000. The ASUs are not expected to have a material impact on our beginning accumulated deficit, consolidated statement of operations or the consolidated statement of cash flows. In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting |
2. SUMMARY OF SIGNIFICANT ACC_3
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Summary Of Significant Accounting Policies Tables Abstract | |
Loss per share | For the Year Ended December 31, 2018 2017 Net loss $ (3,230,462 ) $ (3,639,815 ) Adjustments for convertible debt - as converted Interest on convertible debt 221,878 191,256 Amortization of debt discount on convertible debt 38,091 6,279 Net loss attributable to common shareholders $ (2,970,473 ) $ (3,442,279 ) Weighted average number of shares of common stock outstanding: Basic and diluted 123,574,672 121,372,605 Net loss attributable to common shareholders per share: Basic and diluted $ (0.02 ) $ (0.03 ) |
Reportable business segment | Product and Service Revenue For the year ended December 31, 2018 2017 SteraMist Product $ 4,652,000 $ 4,097,000 Service and Training 933,000 897,000 Total $ 5,585,000 $ 4,994,000 Revenue by Geographic Region For the year ended December 31, 2018 2017 United States $ 4,197,000 $ 3,495,000 International 1,388,000 1,499,000 Total $ 5,585,000 $ 4,994,000 |
3. INVENTORIES (Tables)
3. INVENTORIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
INVENTORIES | Inventories consist of the following at: December 31, 2018 December 31, 2017 Finished goods $ 2,782,014 $ 3,518,884 Inventory Reserve (100,000 ) - $ 2,682,014 $ 3,518,884 |
4. PROPERTY AND EQUIPMENT (Tabl
4. PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property And Equipment | |
PROPERTY AND EQUIPMENT | December 31, December 31, 2018 2017 Furniture and fixtures $ 277,976 $ 91,216 Equipment 1,300,139 1,192,293 Vehicles 60,703 56,410 Computer and software 143,579 113,319 Leasehold improvements 355,898 15,554 Tenant Improvement Allowance 405,000 - 2,543,295 1,468,792 Less: Accumulated depreciation 954,704 755,969 $ 1,588,591 $ 712,822 |
5. INTANGIBLE ASSETS AND ASSET
5. INTANGIBLE ASSETS AND ASSET ACQUISITION (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Intangible Assets And Asset Acquisition | |
Definite life intangible assets | December 31, 2018 December 31, 2017 Intellectual Property and Patents $ 2,848,300 $ 2,848,300 Less: Accumulated Amortization 2,109,276 1,739,768 Intangible Assets, net $ 739,024 $ 1,108,532 |
Indefinite life intangible assets | Trademarks $ 496,792 $ 440,000 Total Intangible Assets, net $ 1,235,816 $ 1,548,532 |
Approximate amortization over the next five years | Twelve Month Period Ending December 31, Amount 2019 $ 370,000 2020 369,000 2021 - 2022 - 2023 - $ 739,000 |
6. CONVERTIBLE DEBT (Tables)
6. CONVERTIBLE DEBT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Convertible Debt | |
Convertible Notes and Warrants potential future financing and fundamental transactions | December 31, 2018 December 31, 2017 Convertible notes $ 5,000,000 $ 6,000,000 Initial discount (53,873 ) (61,904 ) Accumulated amortization 36,339 6,279 Convertible notes, net $ 4,982,466 $ 5,944,375 |
7. STOCKHOLDERS' EQUITY (Tables
7. STOCKHOLDERS' EQUITY (Tables) - Options [Member] | 12 Months Ended |
Dec. 31, 2018 | |
Summary of stock options outstanding | December 31, 2018 December 31, 2017 Number of Options Weighted Average Exercise Price Number of Options Weighted Average Exercise Price Outstanding, beginning of period 200,000 $ 0.76 200,000 $ 0.76 Granted 120,000 $ 0.12 — — Exercised — — — — Outstanding, end of period 320,000 $ 0.52 200,000 $ 0.76 |
Options outstanding and exercisable by price range | Outstanding Options Average Weighted Exercisable Options Range Number Remaining Contractual Life in Years Number Weighted Average Exercise Price $ 0.05 20,000 2.02 20,000 $ 0.05 $ 0.10 20,000 9.08 20,000 $ 0.10 $ 0.12 100,000 4.02 100,000 $ 0.12 $ 0.27 40,000 6.01 40,000 $ 0.27 $ 0.55 100,000 7.10 100,000 $ 0.55 $ 2.10 40,000 1.01 40,000 $ 2.10 320,000 5.05 320,000 $ 0.52 |
Summary of outstanding common stock warrants | December 31, 2018 December 31, 2017 Number of Warrants Weighted Average Exercise Price Number of Warrants Weighted Average Exercise Price Outstanding, beginning of period 35,501,411 $ 0.33 37,076,413 $ 0.31 Granted 250,000 0.08 4,774,998 0.24 Exercised - - (975,000 ) 0.05 Expired (9,200,800 ) (0.30 ) (5,375,000 ) 0.13 Outstanding, end of period 26,550,611 $ 0.34 35,501,411 $ 0.33 |
Warrants outstanding and exercisable by price range | Outstanding Warrants Exercisable Warrants Exercise Price Number Average Weighted Remaining Contractual Life in Years Number Weighted Average Exercise Price $ 0.08 250,000 4.89 250,000 $ 0.08 $ 0.10 265,000 3.53 265,000 $ 0.10 $ 0.12 3,500,000 3.98 3,500,000 $ 0.12 $ 0.12 4,000,000 0.79 4,000,000 $ 0.12 $ 0.17 10,000 3.82 10,000 $ 0.17 $ 0.27 250,000 3.00 250,000 $ 0.27 $ 0.29 10,125,613 1.80 10,125,613 $ 0.29 $ 0.30 3,300,000 1.17 3,300,000 $ 0.30 $ 0.32 250,000 2.75 250,000 $ 0.32 $ 0.42 250,000 2.50 250,000 $ 0.42 $ 0.50 250,000 2.25 250,000 $ 0.50 $ 0.55 100,000 2.08 100,000 $ 0.55 $ 0.69 999,998 1.22 999,998 $ 0.69 $ 1.00 3,000,000 1.34 3,000,000 $ 1.00 26,550,611 2.24 26,550,611 $ 0.34 |
8. COMMITMENTS AND CONTINGENC_2
8. COMMITMENTS AND CONTINGENCIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Notes to Financial Statements | |
Minimum annual rents | Twelve Month Period Ending December 31, Amount 2019 $ 102,000 2020 147,000 2021 151,000 2022 156,000 2023 160,000 Thereafter 923,000 $ 1,639,000 |
10. INCOME TAXES (Tables)
10. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Schedule of Components of Income Tax Expense | For the Year Ended December 31, December 31, 2018 2017 Current: United States $ - $ - Foreign - - - - Deferred: United States - - Foreign - - - - Total $ - $ - |
Schedule of Income (Loss) before Income Tax, Domestic and Foreign | For the Year Ended December 31, December 31, 2018 2017 United States $ (3,230,462 ) $ (3,639,814 ) Foreign - - Total $ (3,230,462 ) $ (3,639,814 ) |
Schedule of Effective Income Tax Rate Reconciliation | For the Year Ended December 31, December 31, 2018 2017 Loss before income tax $ (3,230,462 ) $ (3,639,814 ) US statutory corporate income tax rate (federal and state) 28.00 % 39.45 % Income tax expense computed at US statutory corporate income tax rate Income tax expense computed at US statutory corporate income tax rate (904,529 ) (1,435,907 ) Reconciling items: Effect of U.S. tax law change (1) - 1,793,212 Change in valuation allowance on deferred tax assets 741,982 (675,889 ) Provision to prior year tax return 113,068 69,767 Incentive stock options and warrants 21,628 256,168 Amortized debt discount 1,758 2,477 Meals and Entertainment 4,134 5,825 Induced Conversion Costs 16,016 - Other 5,943 (15,653 ) Income tax expense $ - $ - |
Schedule of Deferred Tax Assets and Liabilities | December 31, 2018 December 31, 2017 Deferred tax assets: Reserve for Bad Debt $ 84,000 $ 140,000 Inventory Reserve 28,000 - Inventory Capitalization - 94,000 Accrued Expenses 52,000 31,000 Deferred Rent 4,000 - Warranty Reserve 8,000 - Property and Equipment - 21,000 Intangible Assets 362,000 208,000 Net operating losses 4,718,000 3,724,000 Valuation Allowance (4,959,000 ) (4,218,000 ) Deferred Tax Assets $ 297,000 $ - Deferred tax liabilities: Property Plant and Equipment $ (297,000 ) $ - $ (297,000 ) - Net Deferred Tax Assets and Liabilities $ - $ - |
11. ACCRUED EXPENSES AND OTHE_2
11. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accrued Expenses And Other Current Liabilities | |
Accrued expenses and other current liabilities | December 31, 2018 December 31, 2017 Commissions $ 136,631 $ 115,506 Payroll and related costs 144,359 43,484 Director fees 41,250 27,750 Accrued warranty 30,000 5,000 Other accrued expenses 62,959 75,396 Total $ 415,199 $ 267,136 |
12. ACCRUED WARRANTY (Tables)
12. ACCRUED WARRANTY (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accrued Warranty Tables Abstract | |
Warranty reserve activity | December 31, 2018 December 31, 2017 Beginning accrued warranty costs $ 5,000 $ - Provision for warranty expense 47,454 10,731 Settlement of warranty claims (22,454 ) (5,731 ) Ending accrued warranty costs $ 30,000 $ 5,000 |
2. SUMMARY OF SIGNIFICANT ACC_4
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Summary Of Significant Accounting Policies Details Abstract | ||
Net loss | $ (3,230,462) | $ (3,639,815) |
Adjustments for convertible debt - as converted | ||
Interest on convertible debt | 221,878 | 191,256 |
Amortization of debt discount on convertible debt | 38,091 | 6,279 |
Net loss attributable to common shareholders | $ (2,970,473) | $ (3,442,279) |
Weighted average number of common shares outstanding: Basic and diluted | 123,574,672 | 121,372,605 |
Net loss attributable to common shareholders per share: Basic and diluted | $ (0.02) | $ (0.03) |
2. SUMMARY OF SIGNIFICANT ACC_5
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Net Revenue | $ 5,584,612 | $ 4,993,668 |
SteraMist Product [Member] | ||
Net Revenue | 4,652,000 | 4,097,000 |
Service & Training [Member] | ||
Net Revenue | 933,000 | 897,000 |
United States [Member] | ||
Net Revenue | 4,197,000 | 3,495,000 |
International [Member] | ||
Net Revenue | $ 1,388,000 | $ 1,499,000 |
2. SUMMARY OF SIGNIFICANT ACC_6
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Bad debt expense | $ 96,929 | $ 263,882 |
Allowance for doubtful accounts | $ 300,000 | $ 500,000 |
Potentially dilutive securities, outstanding warrants | 26,550,611 | 35,501,411 |
Potentially dilutive securities, outstanding options | 320,000 | 200,000 |
Potentially dilutive securities, convertible Series A preferred stock | 510,000 | 510,000 |
FDIC insured amount | $ 250,000 | |
Advertising and promotional expenses | 204,000 | $ 66,000 |
Research and development expenses | 916,003 | 454,089 |
Shipping and handling costs | $ 206,000 | $ 119,000 |
3. INVENTORIES (Details)
3. INVENTORIES (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw materials | $ 2,782,014 | $ 0 |
Finished goods | (100,000) | 3,518,884 |
Inventory, end of period | $ 2,682,014 | $ 3,518,884 |
4. PROPERTY AND EQUIPMENT (Deta
4. PROPERTY AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Property And Equipment Details Abstract | ||
Furniture and fixtures | $ 277,976 | $ 91,216 |
Equipment | 1,300,139 | 1,192,293 |
Vehicles | 60,703 | 56,410 |
Computer and Software | 143,579 | 113,319 |
Leasehold Improvements | 355,898 | 15,554 |
Tenant Improvement Allowance | 405,000 | 0 |
Property and Equipment Gross | 2,543,295 | 1,468,792 |
Less: Accumulated depreciation | 954,704 | 755,969 |
Property and Equipment Net | $ 1,588,591 | $ 712,822 |
4. PROPERTY AND EQUIPMENT (De_2
4. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property and Equipment | ||
Depreciation | $ 265,163 | $ 237,619 |
5. INTANGIBLE ASSETS AND ASSE_2
5. INTANGIBLE ASSETS AND ASSET ACQUISITION (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
INTANGIBLE ASSETS | ||
Intellectual property and patents | $ 2,848,300 | $ 2,848,300 |
Less: Accumulated Amortization | 2,109,276 | 1,739,768 |
Intangible Assets, net | $ 739,024 | $ 1,108,532 |
5. INTANGIBLE ASSETS AND ASSE_3
5. INTANGIBLE ASSETS AND ASSET ACQUISITION (Details 1) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Intangible Assets And Asset Acquisition Details 2Abstract | ||
Trademarks | $ 469,792 | $ 440,000 |
Total Intangible Assets | $ 1,235,816 | $ 1,548,532 |
5. INTANGIBLE ASSETS AND ASSE_4
5. INTANGIBLE ASSETS AND ASSET ACQUISITION (Details 2) | Dec. 31, 2018USD ($) |
Amortization | |
2019 | $ 370,000 |
2020 | 369,000 |
2021 | 0 |
2022 | 0 |
2023 | 0 |
Total | $ 739,000 |
5. INTANGIBLE ASSETS AND ASSE_5
5. INTANGIBLE ASSETS AND ASSET ACQUISITION (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
INTANGIBLE ASSETS | ||
Amortization expense | $ 369,508 | $ 369,508 |
6. CONVERTIBLE DEBT (Details)
6. CONVERTIBLE DEBT (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Convertible Debt Details Abstract | ||
Convertible notes | $ 5,000 | $ 6,000,000 |
Initial discount | (53,873) | (61,904) |
Accumulated amortization | 36,339 | 6,279 |
Convertible notes, net | $ 4,982,466 | $ 5,944,375 |
7. STOCKHOLDERS' EQUITY (Detail
7. STOCKHOLDERS' EQUITY (Details) - Warrant [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Number of Option | ||
Outstanding, beginning of year | 200,000 | 200,000 |
Granted | 120,000 | 0 |
Exercised | 0 | 0 |
Outstanding, end of year | 320,000 | 200,000 |
Weighted Average Exercise Price | ||
Outstanding, beginning of year | $ 0.76 | $ 0.76 |
Granted | 0.12 | 0 |
Exercised | 0 | 0 |
Outstanding, end of year | $ 0.52 | $ 0.76 |
7. STOCKHOLDERS' EQUITY (Deta_2
7. STOCKHOLDERS' EQUITY (Details 1) | 12 Months Ended |
Dec. 31, 2018$ / sharesshares | |
0.05 Range [Member] | |
Options outstanding and exercisable by price range | |
Number | 20,000 |
Average Weighted Remaining Contractual Life in Years | 2 years 7 days |
Exercisable Options, Number | 20,000 |
Weighted Average Exercise Price, Exercisable Options | $ / shares | $ 0.05 |
0.10 Range [Member] | |
Options outstanding and exercisable by price range | |
Number | 20,000 |
Average Weighted Remaining Contractual Life in Years | 9 years 29 days |
Exercisable Options, Number | 20,000 |
Weighted Average Exercise Price, Exercisable Options | $ / shares | $ 0.10 |
0.12 Range [Member] | |
Options outstanding and exercisable by price range | |
Number | 100,000 |
Average Weighted Remaining Contractual Life in Years | 4 years 7 days |
Exercisable Options, Number | 100,000 |
Weighted Average Exercise Price, Exercisable Options | $ / shares | $ 0.12 |
0.27 Range [Member] | |
Options outstanding and exercisable by price range | |
Number | 40,000 |
Average Weighted Remaining Contractual Life in Years | 6 years 4 days |
Exercisable Options, Number | 40,000 |
Weighted Average Exercise Price, Exercisable Options | $ / shares | $ 0.27 |
0.55 Range [Member] | |
Options outstanding and exercisable by price range | |
Number | 100,000 |
Average Weighted Remaining Contractual Life in Years | 7 years 1 month 6 days |
Exercisable Options, Number | 100,000 |
Weighted Average Exercise Price, Exercisable Options | $ / shares | $ 0.55 |
2.10 Range [Member] | |
Options outstanding and exercisable by price range | |
Number | 40,000 |
Average Weighted Remaining Contractual Life in Years | 1 year 4 days |
Exercisable Options, Number | 40,000 |
Weighted Average Exercise Price, Exercisable Options | $ / shares | $ 2.10 |
Option Member | |
Options outstanding and exercisable by price range | |
Number | 320,000 |
Average Weighted Remaining Contractual Life in Years | 5 years 18 days |
Exercisable Options, Number | 320,000 |
Weighted Average Exercise Price, Exercisable Options | $ / shares | $ 0.52 |
7. STOCKHOLDERS' EQUITY (Deta_3
7. STOCKHOLDERS' EQUITY (Details 2) - Common Stock Warrant [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Number of Warrants | ||
Outstanding, beginning of year | 35,501,411 | 37,076,413 |
Granted | 250,000 | 4,774,998 |
Exercised | 0 | (975,000) |
Expired | (9,200,800) | (5,375,000) |
Outstanding, end of year | 26,550,611 | 35,501,411 |
Weighted Average Exercise Price | ||
Outstanding, beginning of year | $ 0.33 | $ 0.31 |
Granted | 0.08 | 0.24 |
Exercised | 0 | 0.05 |
Expired | (0.30) | 0.13 |
Outstanding, end of year | $ 0.34 | $ 0.33 |
7. STOCKHOLDERS' EQUITY (Deta_4
7. STOCKHOLDERS' EQUITY (Details 3) | 12 Months Ended |
Dec. 31, 2018$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 26,550,611 |
Average Weighted Remaining Contractual Life in Years, Warrant | 2 years 2 months 26 days |
Exercisable Warrants, Number | 26,550,611 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.34 |
0.08 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 250,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 4 years 10 months 20 days |
Exercisable Warrants, Number | 250,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.08 |
0.1 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 265,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 3 years 6 months 11 days |
Exercisable Warrants, Number | 265,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.10 |
0.12 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 3,500,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 3 years 11 months 23 days |
Exercisable Warrants, Number | 3,500,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.12 |
0.12 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 4,000,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 9 months 15 days |
Exercisable Warrants, Number | 4,000,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.12 |
0.17 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 10,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 3 years 9 months 25 days |
Exercisable Warrants, Number | 10,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.17 |
0.27 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 250,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 3 years |
Exercisable Warrants, Number | 250,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.27 |
0.29 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 10,125,613 |
Average Weighted Remaining Contractual Life in Years, Warrant | 1 year 9 months 18 days |
Exercisable Warrants, Number | 10,125,613 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.29 |
0.3 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 3,300,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 1 year 2 months 1 day |
Exercisable Warrants, Number | 3,300,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.30 |
0.32 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 250,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 2 years 9 months |
Exercisable Warrants, Number | 250,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.32 |
0.42 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 250,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 2 years 6 months |
Exercisable Warrants, Number | 250,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.42 |
0.5 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 250,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 2 years 3 months |
Exercisable Warrants, Number | 250,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.50 |
0.55 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 100,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 2 years 29 days |
Exercisable Warrants, Number | 100,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.55 |
0.69 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 999,998 |
Average Weighted Remaining Contractual Life in Years, Warrant | 1 year 2 months 19 days |
Exercisable Warrants, Number | 999,998 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 0.69 |
1 Range [Member] | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding warrants, Number | 3,000,000 |
Average Weighted Remaining Contractual Life in Years, Warrant | 1 year 4 months 2 days |
Exercisable Warrants, Number | 3,000,000 |
Weighted Average Exercise Price, Exercisable Warrants | $ / shares | $ 1 |
7. STOCKHOLDERS' EQUITY (Deta_5
7. STOCKHOLDERS' EQUITY (Details Narrative) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 |
Stockholders Equity | ||
Cumulative Convertible Preferred Stock Series A, Par Value | $ 0.01 | $ 0.01 |
Cumulative Convertible Preferred Stock Series A, Shares Authorized | 1,000,000 | 1,000,000 |
Cumulative Convertible Preferred Stock Series A, Shares Issued | 510,000 | 510,000 |
Cumulative Convertible Preferred Stock Series A, Shares Outstanding | 510,000 | 510,000 |
Convertible Preferred Stock Series B, Stated Value | $ 1,000 | $ 1,000 |
Convertible Preferred Stock Series B, Shares Authorized | 4,000 | 4,000 |
Convertible Preferred Stock Series B, Shares Issued | 0 | 0 |
Convertible Preferred Stock Series B, Shares Outstanding | 0 | 0 |
Convertible Preferred Stock, Dividend Percentage | 7.50% | 7.50% |
9. COMMITMENTS AND CONTINGENCIE
9. COMMITMENTS AND CONTINGENCIES (Details) | Dec. 31, 2018USD ($) |
Notes to Financial Statements | |
2019 | $ 102,000 |
2020 | 147,000 |
2021 | 151,000 |
2022 | 156,000 |
2023 | 160,000 |
Thereafter | 923,000 |
Total | $ 1,639,000 |
10. INCOME TAXES (Details)
10. INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Current: | ||
United States | $ 0 | $ 0 |
Foreign | 0 | 0 |
Total current taxes | 0 | 0 |
Deferred: | ||
United States | 0 | 0 |
Foreign | 0 | 0 |
Total deferred taxes | 0 | 0 |
Total | $ 0 | $ 0 |
10. INCOME TAXES (Details 1)
10. INCOME TAXES (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Taxes | ||
United States | $ (3,230,462) | $ (3,639,814) |
Foreign | 0 | 0 |
Total | $ (3,230,462) | $ (3,639,814) |
10. INCOME TAXES (Details 2)
10. INCOME TAXES (Details 2) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Taxes | ||
Loss before income tax | $ (3,230,462) | $ (3,639,814) |
US statutory corporate income tax rate | 28.00% | 39.45% |
Income tax expense computed at US statutory corporate income tax rate | $ (904,529) | $ (1,435,907) |
Reconciling items: | ||
Effect of U.S. tax law change (1) | 0 | 1,793,212 |
Change in valuation allowance on deferred tax assets | 741,982 | (675,889) |
Provision to prior year tax return | 113,068 | 69,767 |
Incentive stock options and warrants | 21,628 | 256,168 |
Amortized debt discount | 1,758 | 2,477 |
Meals and Entertainment | 4,134 | 5,825 |
Induced Conversion Costs | 16,016 | 0 |
Other | 5,943 | (15,653) |
Income tax expense | $ 0 | $ 0 |
10. INCOME TAXES (Details 3)
10. INCOME TAXES (Details 3) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred tax assets: | ||
Reserve for Bad Debt | $ 84,000 | $ 140,000 |
Inventory Reserve | 28,000 | 0 |
Inventory Capitalization | 0 | 94,000 |
Accrued Vacation | 52,000 | 31,000 |
Deferred Rent | 4,000 | 0 |
Warranty Reserve | 8,000 | 0 |
Property and Equipment | 0 | 21,000 |
Intangible Assets | 362,000 | 208,000 |
Net operating losses | 4,718,000 | 3,724,000 |
Valuation Allowance | (4,959,000) | (4,218,000) |
Deferred Tax Assets | 297,000 | 0 |
Deferred tax liabilities: | ||
Property Plant and Equipment | 297,000 | 0 |
Net Deferred Tax Assets and Liabilities | $ 0 | $ 0 |
10. INCOME TAXES (Details Narra
10. INCOME TAXES (Details Narrative) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Income Taxes Details Narrative Abstract | ||
Net operating loss carryforwards | $ 17,544,000 | $ 13,898,000 |
State net operating loss carryforwards | $ 14,773,000 | $ 11,506,000 |
11. ACCRUED EXPENSES AND OTHE_3
11. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Accrued Expenses And Other Current Liabilities Details Abstract | ||
Commissions | $ 136,631 | $ 115,506 |
Payroll and related costs | 144,359 | 43,484 |
Director fees | 41,250 | 27,750 |
Accrued Warranty | 30,000 | 5,000 |
Other accrued expenses | 62,959 | 75,396 |
Total | $ 415,199 | $ 267,136 |
12. ACCRUED WARRANTY (Details)
12. ACCRUED WARRANTY (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Accrued Warranty Details Abstract | ||
Beginning accrued warranty costs | $ 5,000 | $ 0 |
Cost of warranty claims | 47,454 | 5,731 |
Settlement of warranty claims | (22,454) | (5,731) |
Ending accrued warranty costs | $ 30,000 | $ 5,000 |