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Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2018	Mar. 01, 2019	Jun. 29, 2018
Document and Entity Information
Entity Registrant Name	WRAP TECHNOLOGIES, INC.
Document Type	10-K
Document Period End Date	Dec. 31, 2018
Amendment Flag	false
Entity Central Index Key	0001702924
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		27,364,607
Entity Public Float			$ 22,087,352
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	true
Entity Extended Transition Period	false
Entity Small Business	true
Entity Shell Company	false
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY

Condensed Balance Sheets - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Current assets:
Cash	$ 12,358,896	$ 3,083,976
Accounts receivable	4,396	0
Inventories	158,267	131,192
Prepaid expenses and other current assets	114,863	11,446
Total current assets	12,636,422	3,226,614
Property and equipment, net	30,373	36,668
Intangible assets, net	118,715	0
Other assets	1,512	1,512
Total assets	12,787,022	3,264,794
Current Liabilities:
Accounts payable	232,915	36,165
Accrued liabilities	68,453	60,314
Deferred and accrued officer compensation	96,000	96,000
Total current liabilities	397,368	192,479
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock - 5,000,000 authorized; par value $0.0001 per share; none issued and outstanding	0	0
Common stock - 150,000,000 authorized; par value $0.0001 per share; 27,364,607 and 22,803,533 shares issued and outstanding, respectively	2,736	2,280
Additional paid in capital	16,791,254	4,137,936
Accumulated deficit	(4,404,336)	(1,067,901)
Total stockholders' equity	12,389,654	3,072,315
Total liabilities and stockholders' equity	$ 12,787,022	$ 3,264,794

Condensed Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Preferred stock, authorized	5,000,000	5,000,000
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, authorized	150,000,000	150,000,000
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, issued	27,364,607	22,803,533
Common stock, outstanding	27,364,607	22,803,533

Condensed Statements of Operations - USD ($)	12 Months Ended
Condensed Statements of Operations - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Revenues:
Product sales	$ 18,830	$ 0
Other revenue	4,320	0
Total revenues	23,150	0
Cost of revenues	18,611	0
Gross profit	4,539	0
Operating expenses:
Selling, general and administrative	2,607,397	522,210
Research and development	734,776	311,335
Total expenses	3,342,173	833,545
Loss from operations	(3,337,634)	(833,545)
Other income (expense):
Interest income	2,912	0
Interest expense	(1,304)	0
Other	(409)	0
Other income (expense)	1,199	0
Net loss	$ (3,336,435)	$ (833,545)
Net loss per basic common share	$ (.14)	$ (.04)
Weighted average common shares used to compute net loss per basic common share	23,578,291	20,194,560

Condensed Statement of Stockholders' Equity - USD ($)	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Beginning Balance, shares at Dec. 31, 2016	17,445,408
Beginning Balance, amount at Dec. 31, 2016	$ 1,745	$ 440,755	$ (234,356)	$ 208,144
Sale of common stock in January 2017 at $0.10447 per share, shares	2,153,754
Sale of common stock in January 2017 at $0.10447 per share, amount	$ 215	224,785		225,000
Shares issued to acquire merger subsidiary to effect reverse recapitalization, shares	400,838
Shares issued to acquire merger subsidiary to effect reverse recapitalization, amount	$ 40	(40)
Sale of common stock in July 2017 at $0.10447 per share, shares	475,000
Sale of common stock in July 2017 at $0.10447 per share, amount	$ 47	49,953		50,000
Sale of common stock in public offering at $1.50 per share in fourth quarter of 2017, net of issuance costs	2,328,533
Sale of common stock in public offering at $1.50 per share in fourth quarter of 2017, net of issuance costs	$ 233	3,422,483		3,422,716
Share-based compensation expense				0
Net loss for the period			(833,545)	(833,545)
Ending Balance, shares at Dec. 31, 2017	22,803,533
Ending Balance, amount at Dec. 31, 2017	$ 2,280	4,137,936	(1,067,901)	3,072,315
Sale of common stock and warrants at $3.00 per share and placement agent warrants in private offering, net of issuance costs, shares	4,561,074
Sale of common stock and warrants at $3.00 per share and placement agent warrants in private offering, net of issuance costs, amount	$ 456	12,140,330		12,140,786
Share-based compensation expense			512,988	512,988
Net loss for the period			(3,336,435)	(3,336,435)
Ending Balance, shares at Dec. 31, 2018	27,364,607
Ending Balance, amount at Dec. 31, 2018	$ 2,736	$ 16,791,254	$ (4,404,336)	$ 12,389,654

Condensed Statements of Cash Flows - USD ($)	12 Months Ended
Condensed Statements of Cash Flows - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Cash Flows From Operating Activities:
Net loss	$ (3,336,435)	$ (833,545)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	21,875	6,661
Share-based compensation	512,988	0
Changes in assets and liabilities:
Accounts receivable	(4,396)
Inventories	(27,075)	(131,192)
Prepaid expenses and other current assets	(63,982)	16,853
Accounts payable	196,750	24,100
Deferred and accrued officer compensation	0	26,000
Accrued liabilities and other	8,139	57,414
Net cash used in operating activities	(2,692,136)	(833,709)
Cash Flows From Investing Activities:
Capital expenditures for property and equipment	(14,225)	(35,103)
Investment in patents and trademarks	(120,070)	0
Net cash used in investing activities	(134,295)	(35,103)
Cash Flows From Financing Activities:
Sale of common stock and warrants	13,683,222	3,767,800
Offering costs paid	(1,542,436)	(70,084)
Payment of notes payable	(39,435)	0
Net cash provided by financing activities	12,101,351	3,697,716
Net increase in cash and cash equivalents	9,274,920	2,828,904
Cash, beginning of period	3,083,976	255,072
Cash, end of period	12,358,896	3,083,976
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Interest paid	1,304	0
Non-cash investing and financing activities:
Prepaid insurance financed with note payable	39,435	0
Issuance costs relating to warrants issued to private offering selling agent	$ 664,427	$ 0

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2018

Organization And Summary Of Significant Accounting Policies

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business Description

Wrap Technologies, Inc., a Delaware corporation (the “Company”), is a developer of security products designed for use by law enforcement and security personnel. The Company’s first product is the BolaWrap 100 remote restraint device.

The Company resulted from the March 31, 2017 merger of Wrap Technologies, LLC (“Wrap LLC”) with and into its wholly-owned subsidiary MegaWest Energy Montana Corp. (“MegaWest”) (the “Merger”). Wrap LLC ceased separate existence, and MegaWest continued as the surviving entity. MegaWest then changed its name to Wrap Technologies, Inc. and an amended and restated certificate of incorporation changing the Company’s corporate name, authorizing 150,000,000 shares of common stock, par value $0.0001 per share, and authorizing 5,000,000 shares of preferred stock, par value $0.0001 per share, was filed with the Delaware Department of Corporations. All 835.75 membership units of Wrap LLC outstanding immediately prior to the Merger were exchanged, on a pro rata basis, for an aggregate of 20,000,000 shares of common stock of the Company in the Merger.

Prior to the Merger, on March 22, 2017, Wrap LLC acquired privately held MegaWest from Petro River Oil Corp. (“Petro River”) through the issuance of 16.75 membership units, representing a 2% ownership interest in Wrap LLC. At that time, Petro River was owned 11% by Scot Cohen, Executive Chairman and a Manager of Petro River, a 26% owner of Wrap LLC, and a director and officer of the Company. MegaWest had no assets or liabilities at the date of acquisition and was not considered an operating business.

Wrap LLC’s acquisition of MegaWest and its subsequent merger with and into the MegaWest wholly-owned subsidiary and exchange of member units for common stock was accounted for as a reverse recapitalization of Wrap LLC. Wrap LLC, now the Company, was deemed the accounting acquirer with MegaWest the accounting acquiree. The Company’s financial statements are in substance those of Wrap LLC, and are deemed to be a continuation of Wrap LLC’s business from its inception date of March 2, 2016. The balance sheet of the Company continues at historical cost, as the accounting acquiree had no assets or liabilities and no goodwill or intangible assets were recorded as part of the recapitalization of the Company.

To reflect the recapitalization, historical common shares and additional paid-in capital have been retroactively adjusted using the exchange ratio of approximately 23,930.60 shares for each membership unit of Wrap LLC.

Basis of Presentation and Use of Estimates

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions (e.g., recognition and measurement of contingencies and accrued costs) that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

Public and Private Offerings

In December 2017, the Company completed a self-underwritten public offering raising gross proceeds of approximately $3.49 million from the sale of 2,328,533 shares of common stock at $1.50 per share. Three officers of the Company purchased an aggregate of 40,000 shares of the offering for an aggregate of $60,000.

On October 30, 2018, the Company obtained gross cash proceeds of $13.68 million and net cash proceeds of approximately $12.14 million from the sale of 4,561,074 units (“Units”) for $3.00 per Unit in a private offering. Each Unit consisted of one share of common stock and one detachable two-year warrant to purchase one share of common stock at an exercise price of $5.00 per share.

Stock Based Compensation

The Company follows the fair value recognition provisions issued by the Financial Accounting Standards Board (“FASB”) in Accounting Standards Codification (“ASC”) Topic 718, Stock Compensation (“ASC 718”) and has adopted Accounting Standards Update (“ASU”) 2018-07 for stock-based transactions with non-employees. Stock based compensation expense recognized during the year ended December 31, 2018 includes compensation expense for all stock-based payments based on a grant date fair value using the Black-Scholes valuation model. The grant date is the date at which an employer and employee or non-employee reach a mutual understanding of the key terms and conditions of a stock-based payment award.

Loss per Share

Basic loss per common share is computed by dividing net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per common share reflects the potential dilution of securities that could share in the earnings of an entity. The Company’s losses for the periods presented cause the inclusion of potential common stock instruments outstanding to be antidilutive. Stock options and warrants exercisable into a total of 7,084,681 shares of common stock were outstanding at December 31, 2018. These securities are not included in the computation of diluted net loss per common share for the periods presented as their inclusion would be antidilutive due to losses incurred by the Company.

Fair Value of Financial Instruments

The carrying amounts of cash, accounts payable and accrued liabilities approximate fair values due to the short nature of these instruments.

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash. Due to the relative short nature of such instrument, the carrying amount approximates fair value. The Company places its cash in a demand deposit account at one bank and such balances may at times be in excess of amounts insured by federal agencies, which is $250,000 as of December 31, 2018. The Company does not believe that it is subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships. The Company performs periodic evaluations of the relative credit standing of these financial institutions. The Company has not experienced any significant losses on its cash.

Accounts Receivable and Allowance for Doubtful Accounts

The Company’s policy is to evaluate the collectability of accounts receivable based on an assessment of the collectability of specific customer accounts and then record an allowance for doubtful accounts to reduce the receivables to an amount that management reasonably estimates will be collected. The following factors are considered when determining if collection of a receivable is reasonably assured: customer credit-worthiness, past transaction history with the customer, current economic industry trends and changes in customer payment terms. There was no allowance for doubtful accounts recorded at December 31, 2018. Accounts that are deemed uncollectible will be written off against the allowance for doubtful accounts after all reasonable collection efforts have been exhausted. If a major customer’s creditworthiness deteriorates, or actual defaults exceed our historical experience, such estimates could change and impact our future reported financial results.

Inventories

Inventories are valued at the lower of cost or net realizable value. The cost of substantially all of the Company’s inventory is determined by the weighted average cost method. Inventory is comprised of raw materials, assemblies and finished products intended for sale to customers. The Company evaluates the need for reserves for excess and obsolete inventories determined primarily based upon estimates of future demand for the Company’s products. At December 31, 2018 the Company had no reserve for obsolescence.

Property, Equipment and Depreciation

Property and equipment is stated at cost. Depreciation on property and equipment is computed over the estimated useful lives of three years using the straight-line method. The Company intends, on any retirement or disposition of property and equipment, that the related cost and accumulated depreciation or amortization will be removed and a gain or loss recorded.

Intangible Assets

Intangible assets consisted of capitalized legal fees and filing costs related to obtaining patents and trademarks. Intangible assets are carried at cost, less accumulated amortization. Amortization for patents is computed on a straight-line basis over the estimated remaining lives of issued patents which is 20 years from the initial filing. Trademarks are amortized on a straight-line basis over ten years, the estimated useful life of the assets.

Impairment of Long-Lived Assets

Long-lived assets and identifiable intangibles held for use are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of undiscounted expected future cash flows is less than the carrying amount of the asset or if changes in facts and circumstances indicate, an impairment loss is recognized and measured using the asset’s fair value. The Company did not recognize any impairment loss during the periods ended December 31, 2017 and 2018.

Classification and Valuation of Warrants

The Company accounts for warrants as either equity or liabilities based upon the characteristics and provisions of each particular instrument. Warrants valued and classified as equity are recorded as additional paid-in capital based on the issue date fair value and no further adjustment to valuation is made. As of December 31, 2018, the Company had no warrants or other derivative financial instruments that require separate accounting as liabilities and periodic revaluation.

Advertising and Promotion Costs

The Company expenses advertising costs in the period in which they are incurred. The Company incurred advertising costs of $27,218 and $11,812 for the years ended December 31, 2018 and 2017, respectively. The Company incurred product promotion costs for demonstration products delivered to prospective customers of $192,484 for the year ended December 31, 2018. Advertising and promotion costs are included in selling, general and administrative expenses in the accompanying statements of operations.

Research and Development Costs

Research and development costs consist primarily of contract development costs and experimental work materials and certain startup patent costs. Research and development costs with no alternative use are expensed as incurred.

Leases

Leases entered into are classified as either capital or operating leases. At the time a capital lease is entered into, an asset is recorded, together with its related long-term obligation to reflect the purchase and financing. At December 31, 2018 and 2017, the Company had no capital lease obligations.

Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) and ASC Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers (“ASC 340-40”), (collectively, “Topic 606”). On January 1, 2018, the Company adopted Topic 606 and, as it had no prior revenue or contracts with customers, there was no transition required nor any impact on prior results. ASU 2014-09 requires entities to recognize revenue through the application of a five-step model, which includes identification of the contract, identification of the performance obligations, determination of the transaction price, allocation of the transaction price to the performance obligations and recognition of revenue as the entity satisfies the performance obligations. See Note 2 for additional information.

Shipping and Handling Costs

Shipping and handling costs are included in cost of revenues. Shipping and handling costs invoiced to customers are included in revenue. Actual shipping and handling costs were $1,570 for the year ended December 31, 2018. Actual revenues from shipping and handling were $670 for the year ended December 31, 2018.

Warranty Reserves

The Company warrants its products and accessories to be free from defects in materials and workmanship for a period of one year from the date of purchase. The warranty is generally limited. The Company currently provides direct warranty service. International market warranties are generally similar to the U.S. market.

The Company establishes a warranty reserve based on anticipated warranty claims at the time product revenues are recognized. Factors affecting warranty reserve levels include the number of units sold, anticipated cost of warranty repairs and anticipated rates of warranty claims. The Company evaluates the adequacy of the provision for warranty costs each reporting period. The warranty reserve was $428 at December 31, 2018.

Segment Information

The Company has one operating segment with one business activity, providing restraint solutions. The Company’s chief operating decision maker is its Chief Executive Officer, who manages operations on a consolidated basis for purposes of allocating resources.

Income Taxes

Until its reverse recapitalization on March 31, 2017, the Company was treated as a partnership for federal and state income tax purposes and did not incur income taxes. Instead, its losses were included in the income tax returns of the member partners. Accordingly, no provision or liability for federal or state income taxes has been included in these financial statements for the period prior to March 31, 2017 and no income tax expense was recorded for period ended December 31, 2018 due to losses incurred.

Deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes.

The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the Federal tax laws. Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimates.

Subsequent Events

Management has evaluated events subsequent to December 31, 2018 through the date the accompanying financial statements were filed with the Securities and Exchange Commission and noted that there have been no events or transactions which would affect the Company’s financial statements for the year ended December 31, 2018.

Recent Issued Accounting Guidance

Recently Adopted Accounting Pronouncement:

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this ASU change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. The amendments in Part I of this ASU are effective for the Company as of January 1, 2019 with early adoption permitted. The amendments in Part II of this ASU replace the indefinite deferral of certain guidance in Topic 480 with a scope exception. The amendments in Part II of this ASU do not require any transition guidance. The adoption of this ASU did not have any impact on the Company’s historical financial statements and the Company was permitted and adopted retrospectively to January 1, 2018 the standard for any equity securities with down round features.

As discussed above under “Revenue Recognition”, the Company adopted Topic 606 on January 1, 2018.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is intended to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. In July 2018, the FASB issued additional guidance which provided an additional transition method for adopting the updated guidance. Under the additional transition method, entities may elect to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. We currently plan to adopt this standard using this modified retrospective approach.

Effective the first quarter of 2019:

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is intended to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. In July 2018, the FASB issued additional guidance which provided an additional transition method for adopting the updated guidance. Under the additional transition method, entities may elect to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. We currently plan to adopt this standard using this modified retrospective approach.

Most prominent among the changes in the standard is the requirement for lessees to recognize ROU assets and lease liabilities for those leases classified as operating leases under current U.S. GAAP. The standard requires additional disclosures to enable users of financial statements to assess the amount, timing, and certainty of cash flows arising from leases. We intend to elect certain of the available practical expedients upon adoption. We have evaluated our existing lease portfolio and believe that our population of leases is low in number. We have implemented key processes and controls to enable the accurate assessment of leases and preparation of related financial information.

We expect adoption of the standard will result in the recognition of an ROU asset and lease liability of approximately $12,900 for one operating lease as of January 1, 2019, with no impact to retained earnings. We had no capital leases at December 31, 2018.

Effective the first quarter of 2020:

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (“Topic 820”): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU modifies the disclosure requirements in Topic 820, Fair Value Measurement, to improve the effectiveness of fair value measurement disclosures by removing or modifying certain disclosure requirements and adding other requirements. This ASU is effective for public companies for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019. The Company is currently evaluating the effect, if any, that ASU 2018-13 will have on its financial statements.

Other pronouncements:

The Company has reviewed other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoptions of any such pronouncements will be expected to cause a material impact on its financial condition or the results of operations.

2. REVENUE AND PRODUCT COSTS

12 Months Ended

Dec. 31, 2018

Revenue And Product Costs

REVENUE AND PRODUCT COSTS

The Company had no historical revenue prior to the year ended December 31, 2018 and accordingly all revenue has been reported in accordance with Topic 606, which the Company adopted on January 1, 2018. There were no adjustments to prior period amounts nor changes to stockholders’ equity (accumulated deficit) required upon adoption.

The Company enters into contracts that include various combinations of products, accessories and services, such as training, each of which are generally distinct and are accounted for as separate performance obligations.

A performance obligation is a promise in a contract to transfer a distinct good or service to a customer, and is the unit of account in Topic 606. For contracts with a single performance obligation, the entire transaction price is allocated to the single performance obligation. For contracts with multiple performance obligations, the Company allocates the contract transaction price to each performance obligation using the Company’s estimate of the standalone selling price (“SSP”) of each distinct good or service in a contract. The Company determines standalone selling prices based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price considering available information such as market conditions and internally approved pricing guidelines related to the performance obligations.

Performance obligations to deliver products and accessories are generally satisfied at the point in time the Company ships the product, as this is when the customer obtains control of the asset under our standard terms and conditions. The Company has elected to recognize shipping costs as an expense in cost of revenues when control has transferred to the customer. The revenues and costs of training are recognized when the training is completed, generally following delivery of related products.

The timing of revenue recognition may differ from the timing of invoicing to customers. The Company generally has an unconditional right to consideration when customers are invoiced and a receivable is recorded. A contract asset is recognized when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized subsequent to invoicing. At December 31, 2018 the Company had no contract assets and no deferred revenue related to products or training for product delivered during the year.

The Company recognizes an asset if there are incremental costs of obtaining a contract with a customer such as commissions. These costs are ascribed to or allocated to the underlying performance obligations in the contract and amortized consistent with the recognition timing of the revenue for any such underlying performance obligations. The Company had no such assets at December 31, 2018. The Company will apply the practical expedient to expense any sales commissions related to performance obligations with an amortization of one year or less when incurred within selling, general and administrative expenses.

Estimated costs for the Company’s standard one-year warranty are charged to cost of products sold when revenue is recorded for the related product. Royalties are also charged to cost of products sold.

3. INVENTORIES, NET

12 Months Ended

Dec. 31, 2018

Inventory Disclosure [Abstract]

INVENTORIES, NET

Inventory is recorded at the lower of cost or net realizable value. The cost of substantially all the Company’s inventory is determined by the weighted average cost method. Inventories consisted of the following:

	December 31,
	2018		2017
Finished goods	$	82,313	$	5,308
Work in process		12,695		5,484
Raw materials		63,259		120,400
	$	158,267	$	131,192

4. PROPERTY AND EQUIPMENT, NET

12 Months Ended

Dec. 31, 2018

Property And Equipment Net

PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:

	December 31,
	2018			2017
Laboratory equipment	$	13,980		$	12,730
Tooling		22,683			18,165
Computer equipment		12,608			4,151
Furniture and fixtures		9,595			9,595
		58,866			44,641
Accumulated depreciation		(28,493	)		(7,973	)
	$	30,373		$	36,668

Depreciation expense was $20,520 and $6,661 for the years ended December 31, 2018 and 2017, respectively.

5. INTANGIBLE ASSETS, NET

12 Months Ended

Dec. 31, 2018

Intangible Assets Net

INTANGIBLE ASSETS, NET

Intangible assets at December 31, 2018 consisted of patent and trademark costs of $120,070. Upon the Company’s first patent approval in July 2018 the Company commenced capitalizing patent and trademark costs which consist of legal and filing fees related to the prosecution of patent filings. When a patent or trademark is issued the cost is amortized using the straight-line method over the estimated remaining lives. An impairment charge is recognized if the carrying amount is not recoverable and the carrying amount exceeds the fair value of the intangible assets as determined by projected discounted net future cash flows. Amortization expense was $1,355 for the year ended December 31, 2018.

6. CURRENT LIABILITIES

12 Months Ended

Dec. 31, 2018

Current Liabilities

CURRENT LIABILITIES

Accounts payable includes $871 due to related party Syzygy Licensing, LLC (“Syzygy”). See note 9.

Accrued liabilities consist of the following:

	December 31,
	2018		2017

Patent costs	$	11,600	$	900
Accrued compensation		55,493		50,000
Warranty costs		428		-
Other		932		9,414
	$	68,453	$	60,314

In January 2018, the Company financed $39,435 of insurance obligations pursuant to a short-term note agreement, which note accrued interest at a rate of 7.15% per annum, and which was payable in ten monthly principal and interest payments of $4,074 due through November 2018. The note was paid in November 2018.

7. DEFERRED AND ACCRUED COMPENSATION

12 Months Ended

Dec. 31, 2018

Deferred And Accrued Compensation

DEFERRED AND ACCRUED COMPENSATION

From March 2016 through February 2017, the Company accrued monthly compensation for the services of two officers in the aggregate amount of $7,000 per month payable to Syzygy. In March 2017 the Company accrued and deferred $6,000 compensation to each of the two officers. The balance payable to Syzygy as of December 31, 2018 was $84,000 and the accrued deferred compensation aggregated $12,000. These balances accrue without interest. No payment terms or schedule has been established.

8. STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2018

Stockholders Equity And Share-based Compensation

STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION

The Company’s authorized capital consists of 150,000,000 shares of common stock, par value $0.0001, and 5,000,000 shares of preferred stock, par value $0.0001. To reflect the recapitalization (see Note 1) historical shares of common stock and additional paid-in capital have been retroactively adjusted using the exchange ratio of approximately 23,930.60 shares of common stock for each member unit of Wrap LLC.

Public Offering

In December 2017, the Company completed a self-underwritten public offering raising gross proceeds of $3,492,800 from the sale of 2,328,533 shares of common stock at $1.50 per share. Net cash proceeds to the Company were $3,422,716 after deduction of $70,084 of offering costs. Three officers of the Company purchased an aggregate of 40,000 shares of the offering for an aggregate of $60,000.

Private Offering

On October 30, 2018 the Company consummated a private offering, pursuant to which it sold 4,561,074 units (“Units”) to certain accredited investors for $3.00 per Unit. Each Unit consisted of one share of common stock and one detachable two-year warrant to purchase one share of common stock at an exercise price of $5.00 per share. The offering resulted in the Company’s receipt of gross cash proceeds of $13,683,222 and net cash proceeds of $12,140,786 after deduction of commissions and offering costs. One officer, Elwood G. Norris, purchased 333,334 of the Units for cash of $1,000,000 on the same terms as those applicable to all other investors.

In connection with the offering, the Company also issued placement agent warrants exercisable for 456,107 shares of common stock for two years at an exercise price of $3.00 per share. The estimated fair value of these warrants was $664,427, as determined using the Black-Scholes methodology (assuming estimated volatility of 49%, risk-free interest rate of 2.84%, and expected dividend yield of 0.0%). This amount was recorded as both an increase to additional paid in capital and as a non-cash issuance cost of the offering.

Stock Options

Effective with the Merger, on March 31, 2017, the Company adopted and the shareholders approved the 2017 Stock Incentive Plan (the “Plan”) authorizing 2,000,000 shares of Company common stock for issuance as stock options, shares of common stock, restricted stock awards and restricted stock units to employees, directors or consultants. The Company generally recognizes stock compensation expense on the grant date and over the period of vesting or period that services will be provided.

In October 2018 the Company granted a consultant options outside of the Plan exercisable for 100,000 shares of common stock at an exercise price of $3.00 per share with 50% vesting ratably over 18 months and the balance vesting based on performance.

The following table summarizes stock option activity for the year ended December 31, 2018:

			Weighted Average
	Options on				Remaining		Aggregate
	Common		Exercise		Contractual		Intrinsic
	Shares		Price		Term		Value
Outstanding January 1, 2018		-		-		-	$	-
Granted		2,067,500	$	1.68		4.44		-
Exercised		-		-		-		-
Forfeited, cancelled, expired		-		-		-		-
Outstanding December 31, 2018		2,067,500	$	1.68		4.44	$	3,063,375
Vested and exercisable at December 31, 2018		225,000	$	1.50		4.39	$	371,250

The Company recorded stock-based compensation in its statements of operations as follows:

	Year
	Ended December 31,
	2018		2017
Selling, general and administrative	$	417,151	$	-
Research and development		95,837		-
Total stock-based expense	$	512,988	$	-

As of December 31, 2018, total estimated compensation cost of stock options granted but not yet vested was $970,576, which is expected to be recognized over the weighted average period of 1.1 years.

The Company uses the Black-Scholes option pricing model to determine the fair value of the options granted. The following table summarizes the assumptions used to compute the fair value of options granted to employees and nonemployees:

	Year
	Ended
	December 31,
	2018
Expected stock price volatility	47% to 49%
Risk-free interest rate	2.67% to 2.99%
Forfeiture rate		0	%
Expected dividend yield		0	%
Expected life of options - years		2.75 - 5.00
Weighted-average fair value of options granted	$	0.72

Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of awards. The Company’s estimated volatility was based on an average of the historical volatility of peer entities whose stock prices were publicly available. The Company’s calculation of estimated volatility is based on historical stock prices of these peer entities over a period equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price, as it only recently commenced trading.

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the options. The dividend yield of zero is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends. The Company calculates the expected life of the options using the Simplified Method for the employee stock options as the Company does not have sufficient historical data. The Company has elected to use the contract life of the option for nonemployee stock options.

The following table summarizes information about stock options outstanding at December 31, 2018:

				Weighted
				Average		Weighted				Weighted
				Remaining		Average				Average
Range of		Number		Contractual		Exercise		Number		Exercise
Exercise Prices		Outstanding		Life		Price		Exercisable		Price
$	1.50		1,847,500		4.39	$	1.50		225,000	$	1.50
$	3.00 - $3.61		220,000		4.82	$	3.23		-		-

Warrants

The Company has outstanding common stock purchase warrants as of December 31, 2018 as follows:

Number of

Exercise Price

Description

Common Shares

Per Share

Expiration Date

Purchase Warrants (1)

4,561,074

5.00

October 30, 2020

Agent Warrants

456,107

3.00

October 30, 2020

(1)	333,334 warrants are held by a family trust of officer Elwood G. Norris.

The above warrants resulted from the private offering consummated in October 2018. No warrants were exercised during the period from issuance to December 31, 2018.

9. COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2018

Commitments And Contingencies

COMMITMENTS AND CONTINGENCIES

Facility Leases

Commencing December 1, 2016, the Company leased 1,890 square feet of improved office, assembly and warehouse space in Las Vegas, Nevada. The term of the lease agreement is 37 months, with a termination date of December 31, 2019. The gross monthly rent is currently $1,588, subject to certain possible adjustments. In January 2019 the Company entered into an amendment extending the lease to December 31, 2020 with a gross monthly rent of $2,100 per month for the year 2020.

Rent expense for the year ended December 31, 2018 and 2017 was $18,157 and $18,120, respectively. The remaining future annual minimum lease obligations under the foregoing facility lease, as amended at December 31, 2018, are $19,051 and $25,200 for 2019 and 2020, respectively.

In February 2019, the Company entered into a two-year lease commencing March 1, 2019 for 1906 square feet of office, assembly and warehousing space located in Lake Forest, California at an initial monthly rate of $2,723. Minimum annual lease commitments are $27,230, $33,436 and $5,598 for 2019, 2020 and 2021, respectively.

Related Party Technology License Agreement

The Company is obligated to pay royalties and pay development and patent costs pursuant to an exclusive Amended and Restated Intellectual Property License Agreement dated as of September 30, 2016 with Syzygy, a company owned and controlled by stockholders/officers Mr. Elwood Norris and Mr. James Barnes. The agreement provides for royalty payments of 4% of revenue from products employing the licensed ensnarement device technology up to an aggregate of $1,000,000 in royalties or until September 30, 2026, whichever occurs earlier. The Company accrued $871 at December 31, 2018 for royalties incurred in 2018.

Suppliers

The Company has a number of components produced by outside suppliers, some of which are sourced from a single supplier, which can magnify the risk of shortages and decrease the Company’s ability to negotiate with suppliers on the basis of price. If supplier shortages occur, or quality problems arise, then production schedules could be significantly delayed or costs significantly increased, which could in turn have a material adverse effect on the Company’s financial condition, results of operation and cash flows.

At December 31, 2018, the Company was committed for approximately $1.5 million for future component deliveries

that are generally subject to modification or rescheduling in the normal course of business.

Indemnifications and Guarantees

Our officers and directors are indemnified as to personal liability as provided by the Delaware law and the Company’s articles and bylaws. The Company may also undertake indemnification obligations in the ordinary course of business related to its operations. The Company is unable to estimate with any reasonable accuracy the liability that may be incurred pursuant to any such indemnification obligations now or in the future. Because of the uncertainty surrounding these circumstances, the Company’s current or future indemnification obligations could range from immaterial to having a material adverse impact on its financial position and its ability to continue in the ordinary course of business. The Company has no liabilities recorded for such indemnities.

Regulatory Agencies

The Company may be subject to oversight from regulatory agencies regarding firearms that arise in the ordinary course of its business.

10. INCOME TAXES

12 Months Ended

Dec. 31, 2018

Income Taxes

INCOME TAXES

Until its reverse recapitalization on March 31, 2017, the Company was treated as a partnership for federal and state income tax purposes and did not incur income taxes. The Company accounts for income taxes under ASC 740. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is "more likely than not" that some component or all of the benefits of deferred tax assets will not be realized.

The Company did not provide any current or deferred U.S. federal income tax provision or benefit for the periods presented because of operating losses since inception. As of December 31, 2018, the Company has net operating loss carryforwards of approximately $3,591,000 to reduce future taxable income through 2038. Certain changes in stock ownership can result in a limitation on the amount of net operating loss and tax credit carryovers that can be utilized each year. As of December 31, 2018, management has not determined the extent of any such limitations, if any.

The Company provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward period. As a result of the change in future Federal statutory tax rates due to the passing of the Tax Cuts and Jobs Act of 2017, management has determined that the deferred tax assets and liabilities should not be valued at a federal statutory rate of 34% but rather at the rate in which the benefit of the deferred tax asset or liability will be realized by the Company. As such, the Federal statutory rate used to value the Company's deferred tax assets and liabilities is 21%.

The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the period ended December 31, 2018 applicable under FASB ASC 740. The Company did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet. All tax returns for the Company remain open.

The provision for (benefit from) income taxes consists of the following:

	Year Ended December 31,
	2018			2017

Current tax benefit	$	-		$	-
Deferred tax benefit		678,000			136,000
Change in valuation allowance		(678,000	)		(136,000	)
Income tax benefit (provision)	$	-		$	-

A reconciliation of the provision for income taxes at the federal statutory rate of 21% to the Company’s provision for income tax is as follows:

	Year Ended December 31,
	2018			2017

Income taxes benefit computed at federal statutory rate	$	701,000		$	133,000
Research tax credits		15,000			6,000
Permanent differences and other		(38,000	)		(3,000	)
Change in valuation allowance		(678,000	)		(136,000	)
Income tax benefit (provision)	$	-		$	-

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table presents the significant components of the Company’s deferred tax assets and liabilities for the periods presented:

	December 31,
	2018			2017
Deferred tax assets:
Net operating losses	$	756,000		$	132,000
Research tax credits		23,000			6,000
Deferred compensation		20,000			20,000
Stock compensation		76,000			-
Accruals and other		-			13,000
		875,000			171,000
Deferred tax liabilities:
Depreciation and other		29,000			3,000
		29,000			3,000
Net deferred tax assets		846,000			168,000
Less valuation allowance		(846,000	)		(168,000	)
Net deferred taxes after valuation allowance	$	-		$	-

11. RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2018

RELATED PARTY TRANSACTIONS

Commencing in October 2017 the Company began reimbursing officer Mr. Elwood Norris $1,500 per month on a month to month basis for laboratory costs for an aggregate of $18,000 and $4,500 during the years ended December 31, 2018 and 2017, respectively.

See Notes 1, 6, 7, 8 and 9 for additional related party transactions and information.

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	12 Months Ended
	Dec. 31, 2018
Organization And Summary Of Significant Accounting Policies Policies
Organization and Business Description	Wrap Technologies, Inc., a Delaware corporation (the “Company”), is a developer of security products designed for use by law enforcement and security personnel. The Company’s first product is the BolaWrap 100 remote restraint device. The Company resulted from the March 31, 2017 merger of Wrap Technologies, LLC (“Wrap LLC”) with and into its wholly-owned subsidiary MegaWest Energy Montana Corp. (“MegaWest”) (the “Merger”). Wrap LLC ceased separate existence, and MegaWest continued as the surviving entity. MegaWest then changed its name to Wrap Technologies, Inc. and an amended and restated certificate of incorporation changing the Company’s corporate name, authorizing 150,000,000 shares of common stock, par value $0.0001 per share, and authorizing 5,000,000 shares of preferred stock, par value $0.0001 per share, was filed with the Delaware Department of Corporations. All 835.75 membership units of Wrap LLC outstanding immediately prior to the Merger were exchanged, on a pro rata basis, for an aggregate of 20,000,000 shares of common stock of the Company in the Merger. Prior to the Merger, on March 22, 2017, Wrap LLC acquired privately held MegaWest from Petro River Oil Corp. (“Petro River”) through the issuance of 16.75 membership units, representing a 2% ownership interest in Wrap LLC. At that time, Petro River was owned 11% by Scot Cohen, Executive Chairman and a Manager of Petro River, a 26% owner of Wrap LLC, and a director and officer of the Company. MegaWest had no assets or liabilities at the date of acquisition and was not considered an operating business. Wrap LLC’s acquisition of MegaWest and its subsequent merger with and into the MegaWest wholly-owned subsidiary and exchange of member units for common stock was accounted for as a reverse recapitalization of Wrap LLC. Wrap LLC, now the Company, was deemed the accounting acquirer with MegaWest the accounting acquiree. The Company’s financial statements are in substance those of Wrap LLC, and are deemed to be a continuation of Wrap LLC’s business from its inception date of March 2, 2016. The balance sheet of the Company continues at historical cost, as the accounting acquiree had no assets or liabilities and no goodwill or intangible assets were recorded as part of the recapitalization of the Company. To reflect the recapitalization, historical common shares and additional paid-in capital have been retroactively adjusted using the exchange ratio of approximately 23,930.60 shares for each membership unit of Wrap LLC.
Basis of Presentation and Use of Estimates	The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions (e.g., recognition and measurement of contingencies and accrued costs) that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements and affect the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.
Public and Private Offerings	In December 2017, the Company completed a self-underwritten public offering raising gross proceeds of approximately $3.49 million from the sale of 2,328,533 shares of common stock at $1.50 per share. Three officers of the Company purchased an aggregate of 40,000 shares of the offering for an aggregate of $60,000. On October 30, 2018, the Company obtained gross cash proceeds of $13.68 million and net cash proceeds of approximately $12.14 million from the sale of 4,561,074 units (“Units”) for $3.00 per Unit in a private offering. Each Unit consisted of one share of common stock and one detachable two-year warrant to purchase one share of common stock at an exercise price of $5.00 per share.
Stock Based Compensation	The Company follows the fair value recognition provisions issued by the Financial Accounting Standards Board (“FASB”) in Accounting Standards Codification (“ASC”) Topic 718, Stock Compensation (“ASC 718”) and has adopted Accounting Standards Update (“ASU”) 2018-07 for stock-based transactions with non-employees. Stock based compensation expense recognized during the year ended December 31, 2018 includes compensation expense for all stock-based payments based on a grant date fair value using the Black-Scholes valuation model. The grant date is the date at which an employer and employee or non-employee reach a mutual understanding of the key terms and conditions of a stock-based payment award.
Loss per Share	Basic loss per common share is computed by dividing net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per common share reflects the potential dilution of securities that could share in the earnings of an entity. The Company’s losses for the periods presented cause the inclusion of potential common stock instruments outstanding to be antidilutive. Stock options and warrants exercisable into a total of 7,084,681 shares of common stock were outstanding at December 31, 2018. These securities are not included in the computation of diluted net loss per common share for the periods presented as their inclusion would be antidilutive due to losses incurred by the Company.
Fair Value of Financial Instruments	The carrying amounts of cash, accounts payable and accrued liabilities approximate fair values due to the short nature of these instruments.
Concentrations of Credit Risk	Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash. Due to the relative short nature of such instrument, the carrying amount approximates fair value. The Company places its cash in a demand deposit account at one bank and such balances may at times be in excess of amounts insured by federal agencies, which is $250,000 as of December 31, 2018. The Company does not believe that it is subject to any unusual financial risk beyond the normal risk associated with commercial banking relationships. The Company performs periodic evaluations of the relative credit standing of these financial institutions. The Company has not experienced any significant losses on its cash.
Accounts Receivable and Allowance for Doubtful Accounts	The Company’s policy is to evaluate the collectability of accounts receivable based on an assessment of the collectability of specific customer accounts and then record an allowance for doubtful accounts to reduce the receivables to an amount that management reasonably estimates will be collected. The following factors are considered when determining if collection of a receivable is reasonably assured: customer credit-worthiness, past transaction history with the customer, current economic industry trends and changes in customer payment terms. There was no allowance for doubtful accounts recorded at December 31, 2018. Accounts that are deemed uncollectible will be written off against the allowance for doubtful accounts after all reasonable collection efforts have been exhausted. If a major customer’s creditworthiness deteriorates, or actual defaults exceed our historical experience, such estimates could change and impact our future reported financial results.
Inventories	Inventories are valued at the lower of cost or net realizable value. The cost of substantially all of the Company’s inventory is determined by the weighted average cost method. Inventory is comprised of raw materials, assemblies and finished products intended for sale to customers. The Company evaluates the need for reserves for excess and obsolete inventories determined primarily based upon estimates of future demand for the Company’s products. At December 31, 2018 the Company had no reserve for obsolescence.
Property, Equipment and Depreciation	Property and equipment is stated at cost. Depreciation on property and equipment is computed over the estimated useful lives of three years using the straight-line method. The Company intends, on any retirement or disposition of property and equipment, that the related cost and accumulated depreciation or amortization will be removed and a gain or loss recorded.
Intangible Assets	Intangible assets consisted of capitalized legal fees and filing costs related to obtaining patents and trademarks. Intangible assets are carried at cost, less accumulated amortization. Amortization for patents is computed on a straight-line basis over the estimated remaining lives of issued patents which is 20 years from the initial filing. Trademarks are amortized on a straight-line basis over ten years, the estimated useful life of the assets.
Impairment of Long-Lived Assets	Long-lived assets and identifiable intangibles held for use are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of undiscounted expected future cash flows is less than the carrying amount of the asset or if changes in facts and circumstances indicate, an impairment loss is recognized and measured using the asset’s fair value. The Company did not recognize any impairment loss during the periods ended December 31, 2017 and 2018.
Classification and Valuation of Warrants	The Company accounts for warrants as either equity or liabilities based upon the characteristics and provisions of each particular instrument. Warrants valued and classified as equity are recorded as additional paid-in capital based on the issue date fair value and no further adjustment to valuation is made. As of December 31, 2018, the Company had no warrants or other derivative financial instruments that require separate accounting as liabilities and periodic revaluation.
Advertising and Promotion Costs	The Company expenses advertising costs in the period in which they are incurred. The Company incurred advertising costs of $27,218 and $11,812 for the years ended December 31, 2018 and 2017, respectively. The Company incurred product promotion costs for demonstration products delivered to prospective customers of $192,484 for the year ended December 31, 2018. Advertising and promotion costs are included in selling, general and administrative expenses in the accompanying statements of operations.
Research and Development Costs	Research and development costs consist primarily of contract development costs and experimental work materials and certain startup patent costs. Research and development costs with no alternative use are expensed as incurred.
Leases	Leases entered into are classified as either capital or operating leases. At the time a capital lease is entered into, an asset is recorded, together with its related long-term obligation to reflect the purchase and financing. At December 31, 2018 and 2017, the Company had no capital lease obligations.
Revenue Recognition	In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”) and ASC Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers (“ASC 340-40”), (collectively, “Topic 606”). On January 1, 2018, the Company adopted Topic 606 and, as it had no prior revenue or contracts with customers, there was no transition required nor any impact on prior results. ASU 2014-09 requires entities to recognize revenue through the application of a five-step model, which includes identification of the contract, identification of the performance obligations, determination of the transaction price, allocation of the transaction price to the performance obligations and recognition of revenue as the entity satisfies the performance obligations. See Note 2 for additional information.
Shipping and Handling Costs	Shipping and handling costs are included in cost of revenues. Shipping and handling costs invoiced to customers are included in revenue. Actual shipping and handling costs were $1,570 for the year ended December 31, 2018. Actual revenues from shipping and handling were $670 for the year ended December 31, 2018.
Warranty and Reserves	The Company warrants its products and accessories to be free from defects in materials and workmanship for a period of one year from the date of purchase. The warranty is generally limited. The Company currently provides direct warranty service. International market warranties are generally similar to the U.S. market. The Company establishes a warranty reserve based on anticipated warranty claims at the time product revenues are recognized. Factors affecting warranty reserve levels include the number of units sold, anticipated cost of warranty repairs and anticipated rates of warranty claims. The Company evaluates the adequacy of the provision for warranty costs each reporting period. The warranty reserve was $428 at December 31, 2018.
Segment Information	The Company has one operating segment with one business activity, providing restraint solutions. The Company’s chief operating decision maker is its Chief Executive Officer, who manages operations on a consolidated basis for purposes of allocating resources.
Income Taxes	Until its reverse recapitalization on March 31, 2017, the Company was treated as a partnership for federal and state income tax purposes and did not incur income taxes. Instead, its losses were included in the income tax returns of the member partners. Accordingly, no provision or liability for federal or state income taxes has been included in these financial statements for the period prior to March 31, 2017 and no income tax expense was recorded for period ended December 31, 2018 due to losses incurred. Deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the Federal tax laws. Changes in circumstances, such as the Company generating taxable income, could cause a change in judgment about the realizability of the related deferred tax asset. Any change in the valuation allowance will be included in income in the year of the change in estimates.
Subsequent Events	Management has evaluated events subsequent to December 31, 2018 through the date the accompanying financial statements were filed with the Securities and Exchange Commission and noted that there have been no events or transactions which would affect the Company’s financial statements for the year ended December 31, 2018.
Recent Accounting Pronouncements	Recently Adopted Accounting Pronouncement: In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this ASU change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. The amendments in Part I of this ASU are effective for the Company as of January 1, 2019 with early adoption permitted. The amendments in Part II of this ASU replace the indefinite deferral of certain guidance in Topic 480 with a scope exception. The amendments in Part II of this ASU do not require any transition guidance. The adoption of this ASU did not have any impact on the Company’s historical financial statements and the Company was permitted and adopted retrospectively to January 1, 2018 the standard for any equity securities with down round features. As discussed above under “Revenue Recognition”, the Company adopted Topic 606 on January 1, 2018. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is intended to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. In July 2018, the FASB issued additional guidance which provided an additional transition method for adopting the updated guidance. Under the additional transition method, entities may elect to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. We currently plan to adopt this standard using this modified retrospective approach. Effective the first quarter of 2019: In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which is intended to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. In July 2018, the FASB issued additional guidance which provided an additional transition method for adopting the updated guidance. Under the additional transition method, entities may elect to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the year of adoption. We currently plan to adopt this standard using this modified retrospective approach. Most prominent among the changes in the standard is the requirement for lessees to recognize ROU assets and lease liabilities for those leases classified as operating leases under current U.S. GAAP. The standard requires additional disclosures to enable users of financial statements to assess the amount, timing, and certainty of cash flows arising from leases. We intend to elect certain of the available practical expedients upon adoption. We have evaluated our existing lease portfolio and believe that our population of leases is low in number. We have implemented key processes and controls to enable the accurate assessment of leases and preparation of related financial information. We expect adoption of the standard will result in the recognition of an ROU asset and lease liability of approximately $12,900 for one operating lease as of January 1, 2019, with no impact to retained earnings. We had no capital leases at December 31, 2018. Effective the first quarter of 2020: In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (“Topic 820”): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement. The ASU modifies the disclosure requirements in Topic 820, Fair Value Measurement, to improve the effectiveness of fair value measurement disclosures by removing or modifying certain disclosure requirements and adding other requirements. This ASU is effective for public companies for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019. The Company is currently evaluating the effect, if any, that ASU 2018-13 will have on its financial statements. Other pronouncements: The Company has reviewed other recently issued, but not yet effective, accounting pronouncements and does not believe the future adoptions of any such pronouncements will be expected to cause a material impact on its financial condition or the results of operations.

3. INVENTORIES, NET (Tables)

12 Months Ended

Dec. 31, 2018

Inventories Net Tables

Schedule of inventories

	December 31,
	2018		2017
Finished goods	$	82,313	$	5,308
Work in process		12,695		5,484
Raw materials		63,259		120,400
	$	158,267	$	131,192

4. PROPERTY AND EQUIPMENT, NET (Tables)

12 Months Ended

Dec. 31, 2018

Property And Equipment Net Tables

Property and equipment

	December 31,
	2018			2017
Laboratory equipment	$	13,980		$	12,730
Tooling		22,683			18,165
Computer equipment		12,608			4,151
Furniture and fixtures		9,595			9,595
		58,866			44,641
Accumulated depreciation		(28,493	)		(7,973	)
	$	30,373		$	36,668

6. CURRENT LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2018

Current Liabilities Tables Abstract

Accrued liabilities

	December 31,
	2018		2017

Patent costs	$	11,600	$	900
Accrued compensation		55,493		50,000
Warranty costs		428		-
Other		932		9,414
	$	68,453	$	60,314

8. STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2018

Stockholders Equity And Sharebased Compensation Tables Abstract

Stock option activity

			Weighted Average
	Options on				Remaining		Aggregate
	Common		Exercise		Contractual		Intrinsic
	Shares		Price		Term		Value
Outstanding January 1, 2018		-		-		-	$	-
Granted		2,067,500	$	1.68		4.44		-
Exercised		-		-		-		-
Forfeited, cancelled, expired		-		-		-		-
Outstanding December 31, 2018		2,067,500	$	1.68		4.44	$	3,063,375
Vested and exercisable at December 31, 2018		225,000	$	1.50		4.39	$	371,250

Stock-based compensation

	Year
	Ended December 31,
	2018		2017
Selling, general and administrative	$	417,151	$	-
Research and development		95,837		-
Total stock-based expense	$	512,988	$	-

Assumptions used to compute the fair value of options granted

	Year
	Ended
	December 31,
	2018
Expected stock price volatility	47% to 49%
Risk-free interest rate	2.67% to 2.99%
Forfeiture rate		0	%
Expected dividend yield		0	%
Expected life of options - years		2.75 - 5.00
Weighted-average fair value of options granted	$	0.72

Stock options outstanding

				Weighted
				Average		Weighted				Weighted
				Remaining		Average				Average
Range of		Number		Contractual		Exercise		Number		Exercise
Exercise Prices		Outstanding		Life		Price		Exercisable		Price
$	1.50		1,847,500		4.39	$	1.50		225,000	$	1.50
$	3.00 - $3.61		220,000		4.82	$	3.23		-		-

Warrants

Number of

Exercise Price

Description

Common Shares

Per Share

Expiration Date

Purchase Warrants (1)

4,561,074

5.00

October 30, 2020

Agent Warrants

456,107

3.00

October 30, 2020

- Definition

Tabular disclosure of an entity's stock, including par or stated value per share, number and dollar amount of share subscriptions, shares authorized, shares issued, shares outstanding, number and dollar amount of shares held in an employee trust, dividend per share, total dividends, share conversion features, par value plus additional paid in capital, the value of treasury stock and other information necessary to a fair presentation, and EPS information. Stock by class includes common, convertible, and preferred stocks which are not redeemable or redeemable solely at the option of the issuer. Includes preferred stock with redemption features that are solely within the control of the issuer and mandatorily redeemable stock if redemption is required to occur only upon liquidation or termination of the reporting entity. If more than one issue is outstanding, state the title of each issue and the corresponding dollar amount; dollar amount of any shares subscribed but unissued and the deduction of subscriptions receivable there from; number of shares authorized, issued, and outstanding.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
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Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02(28))
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
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-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21553-112644

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
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Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
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-Subparagraph (SX 210.5-02(29))
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Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
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-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
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-Subparagraph (SX 210.3-04)
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-Publisher FASB
-Name Accounting Standards Codification
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-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02(27))
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 13: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
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Reference 14: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
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+ Details

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

+ References + Details

10. INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2018

Income Taxes Tables

Provision for (benefit from) income taxes

	Year Ended December 31,
	2018			2017

Current tax benefit	$	-		$	-
Deferred tax benefit		678,000			136,000
Change in valuation allowance		(678,000	)		(136,000	)
Income tax benefit (provision)	$	-		$	-

Reconciliation of the provision for income taxes

	Year Ended December 31,
	2018			2017

Income taxes benefit computed at federal statutory rate	$	701,000		$	133,000
Research tax credits		15,000			6,000
Permanent differences and other		(38,000	)		(3,000	)
Change in valuation allowance		(678,000	)		(136,000	)
Income tax benefit (provision)	$	-		$	-

Deferred tax assets and liabilities

	December 31,
	2018			2017
Deferred tax assets:
Net operating losses	$	756,000		$	132,000
Research tax credits		23,000			6,000
Deferred compensation		20,000			20,000
Stock compensation		76,000			-
Accruals and other		-			13,000
		875,000			171,000
Deferred tax liabilities:
Depreciation and other		29,000			3,000
		29,000			3,000
Net deferred tax assets		846,000			168,000
Less valuation allowance		(846,000	)		(168,000	)
Net deferred taxes after valuation allowance	$	-		$	-

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Organization And Summary Of Significant Accounting Policies Details Narrative
Loss from operations	$ (3,337,634)	$ (833,545)
Cash	12,358,896	3,083,976	$ 255,072
Current liabilities	$ 397,368	$ 192,479

3. INVENTORIES, NET (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Inventories Net Details
Finished goods	$ 82,313	$ 5,308
Work in process	12,695	5,484
Raw materials	63,259	120,400
Inventory	$ 158,267	$ 131,192

4. PROPERTY AND EQUIPMENT, NET (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Property and equipment, gross	$ 58,866	$ 44,641
Accumulated depreciation	(28,493)	(7,973)
Property and equipment, net	30,373	36,668
Laboratory equipment
Property and equipment, gross	13,980	12,730
Tooling
Property and equipment, gross	22,683	18,165
Computer equipment
Property and equipment, gross	12,608	4,151
Furniture and fixtures
Property and equipment, gross	$ 9,595	$ 9,595

4. PROPERTY AND EQUIPMENT, NET (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Property And Equipment Net Details Narrative
Depreciation expense	$ 21,875	$ 6,661

6. CURRENT LIABILITIES (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Accrued liabilities	$ 68,453	$ 60,314
Patent costs
Accrued liabilities	11,600	900
Accrued compensation
Accrued liabilities	55,493	50,000
Warranty costs
Accrued liabilities	428	0
Other
Accrued liabilities	$ 932	$ 9,414

8. STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION (Details)	12 Months Ended
	Dec. 31, 2018 USD ($) $ / shares shares
Stockholders' equity:
Number of options outstanding, beginning \| shares	0
Number of options granted \| shares	2,067,500
Number of options exercised \| shares	0
Number of options forfeited/cancelled \| shares	0
Number of options outstanding, ending \| shares	2,067,500
Number of options vested and exercisable \| shares	225,000
Weighted average exercise price outstanding, beginning	$ 0.00
Weighted average exercise price granted	1.68
Weighted average exercise price exercised	0.00
Weighted average exercise price forfeited/cancelled	0.00
Weighted average exercise price outstanding, ending	1.68
Weighted average exercise price vested and exercisable	$ 1.50
Weighted average remaining contractual term granted	4 years 5 months 8 days
Weighted average remaining contractual term outstanding, ending	4 years 5 months 8 days
Weighted average remaining contractual term vested and exercisable	4 years 4 months 20 days
Aggregate intrinsic value outstanding, beginning \| $	$ 0
Aggregate intrinsic value granted	$ 0
Aggregate intrinsic value exercised \| $	$ 0
Aggregate intrinsic value forfeited/cancelled	$ 0
Aggregate intrinsic value outstanding, ending \| $	$ 3,063,375
Aggregate intrinsic value vested and exercisable \| $	$ 371,250

8. STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION (Details 1) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Share-based compensation	$ 512,988	$ 0
Selling, general and administrative
Share-based compensation	417,151	0
Research and development
Share-based compensation	$ 95,837	$ 0

8. STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION (Details 2)	12 Months Ended
	Dec. 31, 2018 $ / shares
Forfeiture rate	0.00%
Expected dividend yield	0.00%
Weighted-average fair value of options granted	$ 0.72
Minimum
Expected stock price volatility	47.00%
Risk-free interest rate	2.67%
Expected life of options - years	2 years 9 months
Maximum
Expected stock price volatility	49.00%
Risk-free interest rate	2.99%
Expected life of options - years	5 years

8. STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION (Details 3) - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Number of options outstanding	2,067,500	0
Weighted average remaining contractual term outstanding	4 years 5 months 8 days
Weighted average exercise price outstanding	$ 1.68	$ 0.00
Number exercisable	225,000
Weighted average exercise price exerciseable	$ 1.50
$1.50
Number of options outstanding	1,847,500
Weighted average remaining contractual term outstanding	4 years 4 months 20 days
Weighted average exercise price outstanding	$ 1.50
Number exercisable	225,000
Weighted average exercise price exerciseable	$ 1.50
$3.00 - $3.61
Number of options outstanding	220,000
Weighted average remaining contractual term outstanding	4 years 9 months 25 days
Weighted average exercise price outstanding	$ 3.23
Number exercisable	0
Weighted average exercise price exerciseable	$ 0.00

8. STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION (Details 4)	12 Months Ended
	Dec. 31, 2018 $ / shares shares
Purchase Warrants
Number of Common Shares \| shares	4,561,074
Exercise Price Per Share \| $ / shares	$ 5.00
Expiration Date	Oct. 30, 2020
Agent Warrants
Number of Common Shares \| shares	456,107
Exercise Price Per Share \| $ / shares	$ 3.00
Expiration Date	Oct. 30, 2020

8. STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION (Details Narrative) - $ / shares	Dec. 31, 2018	Dec. 31, 2017
Stockholders' equity:
Common stock, authorized	150,000,000	150,000,000
Common stock, par value	$ 0.0001	$ 0.0001
Preferred stock, authorized	5,000,000	5,000,000
Preferred stock, par value	$ 0.0001	$ 0.0001

9. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Commitments And Contingencies Details Narrative
Rent expense	$ 18,157	$ 18,120
Future annual minimum lease obligations
2019	19,051
2020	$ 25,200

10. INCOME TAXES (Details) - USD ($)	12 Months Ended
10. INCOME TAXES (Details) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Income Taxes Details
Current tax benefit	$ 0	$ 0
Deferred tax benefit	678,000	136,000
Change in valuation allowance	(678,000)	(136,000)
Income tax benefit (provision)	$ 0	$ 0

10. INCOME TAXES (Details 1) - USD ($)	12 Months Ended
10. INCOME TAXES (Details 1) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Income Taxes Details 1
Income taxes benefit computed at federal statutory rate	$ 701,000	$ 133,000
Research tax credits	15,000	6,000
Permanent differences and other	(38,000)	(3,000)
Change in valuation allowance	(678,000)	(136,000)
Income tax benefit (provision)	$ 0	$ 0

10. INCOME TAXES (Details 2) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Deferred tax assets:
Net operating losses	$ 756,000	$ 132,000
Research tax credits	23,000	6,000
Deferred compensation	20,000	20,000
Stock compensation	76,000	0
Accruals and other	0	13,000
Deferred tax assets	875,000	171,000
Deferred tax liabilities:
Depreciation and other	29,000	3,000
Deferred tax liabilities	29,000	3,000
Net deferred tax assets	846,000	168,000
Less valuation allowance	(846,000)	(168,000)
Net deferred taxes after valuation allowance	$ 0	$ 0