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Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2020	Jul. 29, 2020
Document and Entity Information
Entity Registrant Name	WRAP TECHNOLOGIES, INC.
Document Type	10-Q
Document Period End Date	Jun. 30, 2020
Amendment Flag	false
Entity Central Index Key	0001702924
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		0
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Small Business	true
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity Interactive Data Current	Yes
Entity Incorporation, State or Country Code	DE
Entity File Number	000-55838
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q2

Condensed Balance Sheets - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 35,385,246	$ 16,983,864
Accounts receivable	492,186	195,347
Inventories, net	2,086,505	2,244,541
Prepaid expenses and other current assets	280,270	250,947
Total current assets	38,244,207	19,674,699
Property and equipment, net	264,170	242,876
Operating lease right-of-use asset, net	201,131	260,931
Intangible assets, net	306,990	230,283
Other assets, net	12,681	12,681
Total assets	39,029,179	20,421,470
Current Liabilities:
Accounts payable	783,289	406,967
Accrued liabilities	345,115	194,294
Customer deposits	183,537	343,724
Deferred revenue	2,484	2,684
Operating lease liability - short term	113,954	128,131
Note payable to bank - short term	159,815	0
Total current liabilities	1,588,194	1,075,800
Operating lease liability - long term	101,826	150,018
Note payable to bank - long term	255,228	0
Total long-term liabilities	357,054	150,018
Total liabilities	1,945,248	1,225,818
Commitments and contingencies (Note 11)
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; 34,361,591 and 29,829,916 shares issued and outstanding each period, respectively	3,436	2,983
Additional paid-in capital	54,972,797	31,922,493
Accumulated deficit	(17,892,302)	(12,729,824)
Total stockholders' equity	37,083,931	19,195,652
Total liabilities and stockholders' equity	$ 39,029,179	$ 20,421,470

Condensed Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
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	34,361,591	29,829,916
Common stock, outstanding	34,361,591	29,829,916

Condensed Statements of Operations - USD ($)	3 Months Ended		6 Months Ended
Condensed Statements of Operations - USD ($)	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenues:
Total revenues	$ 832,592	$ 59,444	$ 1,522,029	$ 177,255
Cost of revenues	564,970	35,695	970,782	96,915
Gross profit	267,622	23,749	551,247	80,340
Operating expenses:
Selling, general and administrative	2,537,547	1,481,187	4,677,797	2,669,063
Research and development	577,478	516,213	1,110,956	891,032
Total operating expenses	3,115,025	1,997,400	5,788,753	3,560,095
Loss from operations	(2,847,403)	(1,973,651)	(5,237,506)	(3,479,755)
Other income (expense):
Interest income	30,578	61,777	75,096	87,187
Other	322	(2,200)	(68)	(2,287)
Other income (expense)	30,900	59,577	75,028	84,900
Net loss	$ (2,816,503)	$ (1,914,074)	$ (5,162,478)	$ (3,394,855)
Net loss per basic common share	$ (0.09)	$ (0.07)	$ (0.17)	$ (0.12)
Weighted average common shares used to compute net loss per basic common share	31,241,470	27,848,421	30,749,532	27,606,514
Product Sales
Revenues:
Total revenues	$ 823,164	$ 48,948	$ 1,497,777	$ 162,901
Other Revenue
Revenues:
Total revenues	$ 9,428	$ 10,496	$ 24,252	$ 14,354

Condensed Statements of Stockholders Equity - USD ($)	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Beginning balance, shares at Dec. 31, 2018	27,364,607
Beginning balance, amount at Dec. 31, 2018	$ 2,736	$ 16,791,254	$ (4,404,336)	$ 12,389,654
Sale of common stock and warrants at $6.50 per share in public offering, net of issuance costs, shares	1,923,076
Sale of common stock and warrants at $6.50 per share in public offering, net of issuance costs, amount	$ 192	11,351,022		11,351,214
Common shares issued upon exercise of warrants at $3.00 per share, shares	62,150
Common shares issued upon exercise of warrants at $3.00 per share, amount	$ 6	186,444		186,450
Common shares issued upon exercise of warrants at $5.00 per share, shares	274,167
Common shares issued upon exercise of warrants at $5.00 per share, amount	$ 28	1,370,807		1,370,835
Common shares issued upon exercise of stock options, shares	16,250
Common shares issued upon exercise of stock options, amount	$ 2	24,373		24,375
Stock-based compensation expense		600,898		600,898
Net loss for the period			(3,394,855)	(3,394,855)
Ending balance, shares at Jun. 30, 2019	29,640,250
Ending balance, amount at Jun. 30, 2019	$ 2,964	30,324,798	(7,799,191)	22,528,571
Beginning balance, shares at Mar. 31, 2019	27,364,607
Beginning balance, amount at Mar. 31, 2019	$ 2,736	17,018,301	(5,885,117)	11,135,920
Sale of common stock and warrants at $6.50 per share in public offering, net of issuance costs, shares	1,923,076
Sale of common stock and warrants at $6.50 per share in public offering, net of issuance costs, amount	$ 192	11,351,022		11,351,214
Common shares issued upon exercise of warrants at $3.00 per share, shares	62,150
Common shares issued upon exercise of warrants at $3.00 per share, amount	$ 6	186,444		186,450
Common shares issued upon exercise of warrants at $5.00 per share, shares	274,167
Common shares issued upon exercise of warrants at $5.00 per share, amount	$ 28	1,370,807		1,370,835
Common shares issued upon exercise of stock options, shares	16,250
Common shares issued upon exercise of stock options, amount	$ 2	24,373		24,375
Stock-based compensation expense		373,851		373,851
Net loss for the period			(1,914,074)	(1,914,074)
Ending balance, shares at Jun. 30, 2019	29,640,250
Ending balance, amount at Jun. 30, 2019	$ 2,964	30,324,798	(7,799,191)	22,528,571
Beginning balance, shares at Dec. 31, 2019	29,829,916
Beginning balance, amount at Dec. 31, 2019	$ 2,983	31,922,493	(12,729,824)	19,195,652
Sale of common stock and warrants at $6.00 per share in public offering, net of issuance costs, shares	2,066,667
Sale of common stock and warrants at $6.00 per share in public offering, net of issuance costs, amount	$ 207	11,666,999		11,667,206
Common shares issued upon exercise of warrants at $3.00 per share, shares	150,504
Common shares issued upon exercise of warrants at $3.00 per share, amount	$ 15	439,973		439,988
Common shares issued upon exercise of warrants at $5.00 per share, shares	1,851,003
Common shares issued upon exercise of warrants at $5.00 per share, amount	$ 185	8,868,263		8,868,448
Common shares issued upon exercise of warrants at $6.50 per share, shares	83,693
Common shares issued upon exercise of warrants at $6.50 per share, amount	$ 8	543,997		544,005
Common shares issued upon exercise of stock options, shares	293,250
Common shares issued upon exercise of stock options, amount	$ 29	514,846		514,875
Common shares issued upon vesting of restricted stock units, shares	86,558
Common shares issued upon vesting of restricted stock units, amount	$ 9	(9)		0
Stock-based compensation expense		1,016,235		1,016,235
Net loss for the period			(5,162,478)	(5,162,478)
Ending balance, shares at Jun. 30, 2020	34,361,591
Ending balance, amount at Jun. 30, 2020	$ 3,436	54,972,797	(17,892,302)	37,083,931
Beginning balance, shares at Mar. 31, 2020	30,073,724
Beginning balance, amount at Mar. 31, 2020	$ 3,007	33,191,001	(15,075,799)	18,118,209
Sale of common stock and warrants at $6.00 per share in public offering, net of issuance costs, shares	2,066,667
Sale of common stock and warrants at $6.00 per share in public offering, net of issuance costs, amount	$ 207	11,666,999		11,667,206
Common shares issued upon exercise of warrants at $3.00 per share, shares	138,721
Common shares issued upon exercise of warrants at $3.00 per share, amount	$ 14	404,625		404,639
Common shares issued upon exercise of warrants at $5.00 per share, shares	1,731,603
Common shares issued upon exercise of warrants at $5.00 per share, amount	$ 173	8,271,275		8,271,448
Common shares issued upon exercise of warrants at $6.50 per share, shares	83,693
Common shares issued upon exercise of warrants at $6.50 per share, amount	$ 8	543,997		544,005
Common shares issued upon exercise of stock options, shares	180,625
Common shares issued upon exercise of stock options, amount	$ 18	345,920		345,938
Common shares issued upon vesting of restricted stock units, shares	86,558
Common shares issued upon vesting of restricted stock units, amount	$ 9	(9)		0
Stock-based compensation expense		548,989		548,989
Net loss for the period			(2,816,503)	(2,816,503)
Ending balance, shares at Jun. 30, 2020	34,361,591
Ending balance, amount at Jun. 30, 2020	$ 3,436	$ 54,972,797	$ (17,892,302)	$ 37,083,931

Condensed Statements of Cash Flows - USD ($)	6 Months Ended
Condensed Statements of Cash Flows - USD ($)	Jun. 30, 2020	Jun. 30, 2019
Cash Flows From Operating Activities:
Net loss	$ (5,162,478)	$ (3,394,855)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	52,586	12,573
Warranty provision	18,909	3,503
Inventory write-off	(48,000)	(65,012)
Non-cash lease expense	59,800	22,211
Share-based compensation	1,016,235	600,898
Provision for doubtful accounts	10,140	0
Changes in assets and liabilities:
Accounts receivable	(306,979)	(26,863)
Inventories	206,036	(1,032,308)
Prepaid expenses and other current assets	(29,323)	(71,182)
Accounts payable	376,322	183,478
Operating lease liability	(62,369)	(20,893)
Customer deposits	(193,019)	0
Accrued liabilities and other	165,425	59,416
Deferred revenue	(200)	3,357
Net cash used in operating activities	(3,896,915)	(3,725,677)
Cash Flows From Investing Activities:
Capital expenditures for property and equipment	(68,584)	(108,616)
Investment in patents and trademarks	(82,003)	(68,501)
Long-term deposits	0	(11,169)
Net cash used in investing activities	(150,587)	(188,286)
Cash Flows From Financing Activities:
Sale of common stock and warrants	12,400,002	12,499,994
Offering costs paid on sale of common stock and warrants	(732,796)	(1,148,780)
Proceeds from exercise of warrants	10,250,532	1,557,285
Offering costs paid on exercise of warrants	(398,091)	0
Proceeds from exercise of stock options	514,875	24,375
Proceeds from bank note	414,362	0
Net cash provided by financing activities	22,448,884	12,932,874
Net decrease in cash and cash equivalents	18,401,382	9,018,911
Cash and cash equivalents, beginning of period	16,983,864	12,358,896
Cash and cash equivalents, end of period	35,385,246	21,377,807
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Right-of-use assets and liabilites recorded during period	0	341,000
Issuance costs relating to warrants issued to public offering selling agent	$ 0	$ 205,894

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business Description

Wrap Technologies, Inc., a Delaware corporation (the “Company”), is a publicly traded company listed on the Nasdaq Capital Market (“Nasdaq”) under the trading symbol “WRTC”. 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 that discharges an eight-foot bola style Kevlar® tether to entangle a subject at a range of 10-25 feet. The principal markets for the Company’s proprietary products are in North and South America, Europe, Middle East and Asia.

Basis of Presentation and Use of Estimates

The Company’s unaudited interim financial statements and related notes included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and in accordance with Article 8 of Regulation S-X and the rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed balance sheet at December 31, 2019 was derived from audited financial statements but certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In management’s opinion, the accompanying statements reflect adjustments necessary to present fairly the financial position, results of operations, and cash flows for the periods indicated, and contain adequate disclosure to make the information presented not misleading. Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the footnotes. The interim financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2019. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.

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., stock-based compensation valuation, allowance for doubtful accounts, valuation of inventory and intangible assets, warranty reserve, accrued costs and recognition and measurement of contingencies) 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.

Where necessary, the prior year’s information has been reclassified to conform to the current year presentation.

Concentrations of Risk and Uncertainties

Credit Risk – Financial instruments that potentially subject the Company to concentration of credit risk consisted primarily of cash and cash equivalents and accounts receivable from customers. The Company maintains its cash deposits at two domestic financial institutions. The Company is exposed to credit risk in the event of default by a financial institution to the extent that cash and cash equivalents are in excess of the amount insured by the Federal Deposit Insurance Corporation. The Company places its cash and cash equivalents with high-credit quality financial institutions. To date, the Company has not experienced any losses on its cash and cash equivalents.

Concentrations of Accounts Receivable and Revenue – The Company has recently commenced sales activities with a limited number of customers. The Company may experience concentrations in both accounts receivable and revenue due to the timing of sales and collections of related payments.

Concentration of Suppliers – The Company relies on a limited number of component suppliers and contract suppliers. In particular, a single supplier is currently the sole manufacturer of the Company’s laser assembly with some parts sole sourced from other suppliers. 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.

Impact of COVID-19 - In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues to spread throughout the United States and the World. The COVID-19 pandemic has impacted and could further impact our operations and the operations of our customers and suppliers as a result of quarantines, facility closures, illnesses, and travel and logistics restrictions. The extent to which the COVID-19 pandemic further impacts our business, results of operations, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to the duration, spread, severity, and impact of the COVID-19 pandemic, the effects of the COVID-19 pandemic on our customers and suppliers and the remedial actions and stimulus measures adopted by federal, state, and local governments, and to what extent normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts to its business as a result of any economic recession or depression that has occurred or may occur in the future.

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 three and six months ended June 30, 2020 includes stock option and restricted stock unit compensation expense. The grant date fair value of stock options is determined using the Black-Scholes option-pricing 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. The Black-Scholes option-pricing model requires inputs including the market price of the Company’s Common Stock on the date of grant, the term that the stock options are expected to be outstanding, the implied stock volatilities of several publicly-traded peers over the expected term of stock options, risk-free interest rate and expected dividend. Each of these inputs is subjective and generally requires significant judgment to determine. The grant date fair value of restricted stock units is based upon the market price of the Company’s Common Stock on the date of the grant. The fair value of stock-based compensation is amortized to compensation expense over the vesting term.

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.

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. There was no allowance for doubtful accounts recorded at December 31, 2019. At June 30, 2020 the Company had an allowance of $10,140 resulting in part from global uncertainty resulting from the COVID-19 virus. Accounts that are deemed uncollectible will be written off against the allowance for doubtful accounts. 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 the Company’s inventory is determined by the FIFO 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 June 30, 2020 and the Company had a reserve for obsolescence of $48,000 related to parts expected to be displaced by product improvement initiatives.

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, restricted stock units and warrants exercisable or issuable for a total of 10,018,461 shares of Common Stock were outstanding at June 30, 2020. 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.

Income Taxes

Until its conversion to a corporation 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. No income tax expense was recorded for period ended June 30, 2020 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.

Recent Issued Accounting Guidance

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 adoption of this standard in the first quarter ended March 31, 2020 had no impact on the Company’s financial statements or disclosures.

Other Pronouncements:

In December 2019, the FASB issued Accounting Standards Update 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We do not expect that the adoption of this ASU will have a significant impact on our financial statements.

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.

REVENUE AND PRODUCT COSTS

6 Months Ended

Jun. 30, 2020

Revenues:

REVENUE AND PRODUCT COSTS

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. Periodically, certain customers request bill and hold transactions for future delivery as scheduled and designated by them. In such cases, revenue is not recognized until after control, title and risk of ownership has transferred which is generally when the customer has requested such transaction under normal billing and payment terms and has been notified that the product (i) has been completed according to customer specifications, (ii) has passed our quality control inspections, and (iii) has been tagged and packed for shipment, separated from our inventory and ready for physical transfer to the customer. The value associated with custodial storage services is deemed immaterial in the context of such contracts and in total, and accordingly, none of the transaction price is allocated to such service.

The Company has elected to recognize shipping costs as an expense in cost of revenue when control has transferred to the customer. The revenue and cost of training associated with a customer contract 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 June 30, 2020 the Company had deferred revenue of $2,484 related to future training and extended warranties.

The Company may also receive consideration, per terms of a contract, from customers prior to transferring goods to the customer. The Company records customer deposits as a contract liability.

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 June 30, 2020 and December 31, 2019. 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 expense.

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.

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI http://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=121604090&loc=SL49130554-203045

+ Details

INVENTORIES, NET

6 Months Ended

Jun. 30, 2020

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 FIFO cost method. Inventories consisted of the following:

	June 30,			December 31,
	2020			2019
Finished goods	$	719,104		$	653,323
Work in process		22,149			413
Raw materials		1,393,252			1,590,805
		2,134,505			2,244,541
Less allowance for obsolescence		(48,000	)		-
Inventories - net	$	2,086,505		$	2,244,541

At June 30, 2020 the Company established a reserve for obsolescence of $48,000 related to parts expected to be displaced by product improvement initiatives.

PROPERTY AND EQUIPMENT, NET

6 Months Ended

Jun. 30, 2020

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:

	June 30,			December 31,
	2020			2019
Laboratory equipment	$	55,645		$	44,454
Tooling		77,459			59,004
Computer equipment		106,765			83,368
Furniture, fixtures and improvements		144,323			128,782
		384,192			315,608
Accumulated depreciation		(120,022	)		(72,732	)
	$	264,170		$	242,876

Depreciation expense was $24,793 and $47,290 for the three and six months ended June 30, 2020 and was $7,621 and $12,186 for the three and six months ended June 30, 2019, respectively.

INTANGIBLE ASSETS, NET

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS, NET

Intangible assets consisted of the following:

	June 30,			December 31,
	2020			2019

Patents	$	242,202		$	176,425
Trademarks		74,145			57,919
		316,347			234,344
Accumulated amortization		(9,357	)		(4,061	)
	$	306,990		$	230,283

Amortization expense was $2,695 and $5,296 for the three and six months ended June 30, 2020 and was $203 and $387 for the three and six months ended June 30, 2019, respectively.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

6 Months Ended

Jun. 30, 2020

Payables and Accruals [Abstract]

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable includes $28,481 and $18,809 due to related party Syzygy Licensing, LLC (“Syzygy”) as of June 30, 2020 and December 31, 2019, respectively. Accounts payable at June 30, 2020 also included $185,000 due to related party V3 Capital Partners, LLC. See Notes 11 and 12 for additional related party information.

Accrued liabilities consist of the following:

	June 30,		December 31,
	2020		2019
Patent and legal costs	$	25,000	$	9,851
Accrued compensation		264,311		144,193
Warranty costs		32,832		13,923
Consulting costs		5,000		7,500
Taxes and other		17,972		18,827
	$	345,115	$	194,294

LEASES

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

LEASES

The Company adopted ASU 2016-02, Leases (Topic 842) on January 1, 2019 using the modified retrospective approach. The Company has elected not to apply ASC Topic 842 to arrangements with lease terms of 12 months or less.

Amortization of ROU operating lease assets was $30,172 and $59,800 for the three and six months ended June 30, 2020 and was $16,432 and $22,211 for the three and six months ended June 30, 2019, respectively.

Operating lease expense for capitalized operating leases included in operating activities was $34,322 and $68,644 for the three and six months ended June 30, 2020 and was $19,305 and $25,956 for the three and six months ended June 30, 2019, respectively. Operating lease obligations recorded on the balance sheet at June 30, 2020 are:

Operating lease liability- short term	$	113,954
Operating lease liability - long term		101,826
Total Operating Lease Liability	$	215,780

Future lease payments included in the measurement of lease liabilities on the balance sheet at June 30, 2020 for future periods are as follows:

Remainder of 2020 (six months)	$	72,362
2021		101,406
2022		57,328
Total future minimum lease payments		231,096
Less imputed interest		(15,316	)
Total	$	215,780

The weighted average remaining lease term is 1.9 years and the weighted average discount rate is 7.0%.

The Company does not have any finance leases.

NOTES PAYABLE TO BANK

6 Months Ended

Jun. 30, 2020

Notes Payable to Bank [Abstract]

NOTES PAYABLE TO BANK

On May 1, 2020, the Company received loan proceeds of $414,362 from Bank of America, N.A., pursuant to the Paycheck Protection Program (the “PPP Loan”) under Division A, Title 1 of the CARES Act, which was enacted March 27, 2020.

The PPP Loan, which was in the form of a Promissory Note dated May 1, 2020 has a two-year term and bears interest at a rate of 1% per annum. Monthly principal and interest payments are deferred for six months after the date of disbursement. Beginning seven months from the date of the PPP Note, the Company is required to make monthly payments of principal and interest of approximately $23,320. The Company recorded accrued interest of $681 at June 30, 2020. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Promissory Note contains events of default and other provisions customary for a loan of this type.

Under the terms of the CARES Act, PPP Loan participants can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. Under the terms of the PPP, PPP loans and accrued interest are forgivable between eight weeks and twenty-four weeks, as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The Company intends to use the loan proceeds for purposes consistent with the PPP, and anticipates that all or a majority of the loan amount may be forgiven, but there is no assurance provided that the Company will obtain forgiveness of the PPP Loan in whole or part.

STOCKHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2020

Stockholders' equity:

STOCKHOLDERS' EQUITY

The Company’s authorized capital consists of 150,000,000 shares of Common Stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share (“Preferred Stock”).

2020 Follow-On Public Offering

On June 2, 2020, the Company consummated a follow-on public offering, pursuant to which a total of 2,066,667 Units were offered and sold at the public offering price of $6.00 per Unit. Each Unit sold 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 $6.00 per share. The offering resulted in the Company’s receipt of gross cash proceeds of $12.4 million and net cash proceeds of $11.67 million after deduction of commissions and offering costs.

Summary of Stock Purchase Warrants

The following table summarizes warrant activity during the six months ended June 30, 2020:

	Number			Average Purchase Price Per Share
Shares purchasable under outstanding warrants at December 31, 2019		6,620,620		$	5.41
Stock purchase warrants issued		2,066,667		$	6.00
Stock purchase warrants exercised		(2,085,200	)	$	4.92
Shares purchasable under outstanding warrants at June 30, 2020		6,602,087		$	5.75

During the six months ended June 30, 2020 the Company received gross proceeds of $10,250,532 from the exercise of warrants and paid $398,091 as an agent fee to facilitate exercise of certain warrants resulting in net proceeds of $9,852,441. The Company is obligated to pay an agent fee of 5% on certain warrant exercises facilitated by the agent through September 15, 2020.

The Company has outstanding Common Stock purchase warrants as of June 30, 2020 as follows:

	Number of		Exercise Price
Description	Common Shares		Per Share
Purchase Warrants (1)		2,364,237	$	5.00
Agent Warrants		177,954	$	3.00
Purchase Warrants		1,839,383	$	6.50
Agent Warrants		153,846	$	8.125
Purchase Warrants		2,066,667	$	6.00
		6,602,087

(1) Warrants to purchase 233,334 shares of common stock are held by a family trust of Elwood G. Norris, the Company’s Chief Technology Officer. Mr. Norris exercised the 233,334 warrants in July 2020 for cash of $1,166,670.

Subsequent to June 30, 2020 a total of ___________ warrants, including those of Mr. Norris, were exercised for gross proceeds of $____________.

STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

On March 31, 2017, the Company adopted, and the stockholders approved the 2017 Stock Incentive Plan (the “Plan”) authorizing 2,000,000 shares of Company Common Stock for issuance as stock options and restricted stock units to employees, directors or consultants. In May 2019, the stockholders ratified an increase in the Plan authorizing an additional 2,100,000 shares of Common Stock and in June 2020 ratified a further authorization of 1,900,000 shares of Common Stock for a total of 6,000,000 shares subject to the Plan.

The Company generally recognizes stock-based compensation expense on the grant date and over the period of vesting or period that services will be provided.

Stock Options

The following table summarizes stock option activity for the six months ended June 30, 2020:

				Weighted Average
	Options on					Remaining		Aggregate
	Common			Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding December 31, 2019		2,928,750		$	2.96		3.71
Granted		381,336		$	4.37		-
Exercised		(293,250	)	$	1.76		-
Forfeited, cancelled, expired		(50,000	)	$	3.00		-
Outstanding June 30, 2020		2,966,836		$	3.26		4.08	$	21,409,000
Vested and exercisable at June 30, 2020		1,984,667		$	2.42		3.09	$	15,999,867

The Company uses the Black-Scholes option pricing model to determine the fair value of the options granted.

	For the Six Months
	Ended June 30,
	2020	2019
Expected stock price volatility	45%	49%
Risk-free interest rate	0.42%	2.41%
Forfeiture rate	0%	0%
Expected dividend yield	0%	0%
Expected life of options - years	6.03	3.50
Weighted-average fair value of options granted	$1.86	$2.06

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.

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.

Restricted Stock Units

The Plan provides for the grant of restricted rtock units (RSUs). On January 16, 2020 the Company granted 73,392 of service based RSUs to officers and directors vesting over three years that convert to Common Stock as vesting occurs. On April 1, 2020 the Company granted 122,222 of service based RSUs to employees vesting over three years that convert to Common Stock as vesting occurs. Also, on April 1, 2020 the Company granted an officer 35,211 of performance based RSUs.

The following table summarizes RSU activity under the Plan for the six months ended June 30, 2020:

				Weighted Average
	Service-Based			Grant Date		Vesting
	RSU's			Fair Value		Period
Unvested at January 1, 2020		308,087		$	6.77
Granted - service based		196,214		$	4.72	3 Years
Granted - performance based		35,211		$	4.72
Vested		(86,558	)	$	7.24
Forfeited and cancelled		(3,416	)	$	7.24
Unvested at June 30, 2020		449,538		$	5.62

The Company recorded stock-based compensation for options and RSUs in its statements of operations for the relevant periods as follows:

	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2020		2019		2020		2019
Selling, general and administrative	$	496,036	$	345,217	$	925,134	$	548,417
Research and development		52,953		28,634		91,101		52,481
Total stock-based expense	$	548,989	$	373,851	$	1,016,235	$	600,898

As of June 30, 2020, total estimated compensation cost of stock options and RSUs granted but not yet vested was $4.0 million which is expected to be recognized over the weighted average period of 2.1 years.

COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

Facility Leases

See Note 7.

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, both of whom are stockholders and officers of the Company. 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 recorded $28,481 and $53,467 for royalties incurred during the three and six months ended June 30, 2020 and $2,231 and $6,719 incurred for the three and six months ended June 30, 2019, respectively

Purchase Commitments

At June 30, 2020 the Company was committed for approximately $1.7 million for future component deliveries and contract services that are generally subject to modification or rescheduling in the normal course of business.

RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2020

RELATED PARTY TRANSACTIONS

Commencing in October 2017 the Company began reimbursing Mr. Elwood Norris, an officer and stockholder of the Company, $1,500 per month on a month to month basis for laboratory facility costs, for an aggregate of $9,000 during the six months ended June 30, 2020 and 2019, respectively.

Commencing in April 2020 the Company engaged V3 Capital Partners, LLC (“V3”), a company owned and controlled by Scot Cohen, the Company’s Executive Chairman, to provide certain investor, shareholder and marketing services, in consideration for the payment to V3 of $10,000 per month on a month to month basis. In addition, the Company agreed to pay V3 a bonus of $175,000 for assistance in a qualified financing that was consummated in June 2020. This bonus was paid in July 2020.

See Notes 6, 9 and 11 for additional information on related party transactions and obligations.

SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2020

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

The Company evaluated subsequent events for their potential impact on the financial statements and disclosures through the date the financial statements were available to be issued, and determined that, except as disclosed herein, no subsequent events occurred that were reasonably expected to impact the financial statements presented herein.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	6 Months Ended
	Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization and Business Description	Wrap Technologies, Inc., a Delaware corporation (the “Company”), is a publicly traded company listed on the Nasdaq Capital Market (“Nasdaq”) under the trading symbol “WRTC”. 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 that discharges an eight-foot bola style Kevlar® tether to entangle a subject at a range of 10-25 feet. The principal markets for the Company’s proprietary products are in North and South America, Europe, Middle East and Asia.
Basis of Presentation and Use of Estimates	The Company’s unaudited interim financial statements and related notes included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and in accordance with Article 8 of Regulation S-X and the rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed balance sheet at December 31, 2019 was derived from audited financial statements but certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In management’s opinion, the accompanying statements reflect adjustments necessary to present fairly the financial position, results of operations, and cash flows for the periods indicated, and contain adequate disclosure to make the information presented not misleading. Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the footnotes. The interim financial statements and notes thereto should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2019. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year. 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., stock-based compensation valuation, allowance for doubtful accounts, valuation of inventory and intangible assets, warranty reserve, accrued costs and recognition and measurement of contingencies) 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. Where necessary, the prior year’s information has been reclassified to conform to the current year presentation.
Concentrations of Risk and Uncertainties	Credit Risk – Financial instruments that potentially subject the Company to concentration of credit risk consisted primarily of cash and cash equivalents and accounts receivable from customers. The Company maintains its cash deposits at two domestic financial institutions. The Company is exposed to credit risk in the event of default by a financial institution to the extent that cash and cash equivalents are in excess of the amount insured by the Federal Deposit Insurance Corporation. The Company places its cash and cash equivalents with high-credit quality financial institutions. To date, the Company has not experienced any losses on its cash and cash equivalents. Concentrations of Accounts Receivable and Revenue – The Company has recently commenced sales activities with a limited number of customers. The Company may experience concentrations in both accounts receivable and revenue due to the timing of sales and collections of related payments. Concentration of Suppliers – The Company relies on a limited number of component suppliers and contract suppliers. In particular, a single supplier is currently the sole manufacturer of the Company’s laser assembly with some parts sole sourced from other suppliers. 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. Impact of COVID-19 - In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues to spread throughout the United States and the World. The COVID-19 pandemic has impacted and could further impact our operations and the operations of our customers and suppliers as a result of quarantines, facility closures, illnesses, and travel and logistics restrictions. The extent to which the COVID-19 pandemic further impacts our business, results of operations, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to the duration, spread, severity, and impact of the COVID-19 pandemic, the effects of the COVID-19 pandemic on our customers and suppliers and the remedial actions and stimulus measures adopted by federal, state, and local governments, and to what extent normal economic and operating conditions can resume. Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts to its business as a result of any economic recession or depression that has occurred or may occur in the future.
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 three and six months ended June 30, 2020 includes stock option and restricted stock unit compensation expense. The grant date fair value of stock options is determined using the Black-Scholes option-pricing 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. The Black-Scholes option-pricing model requires inputs including the market price of the Company’s Common Stock on the date of grant, the term that the stock options are expected to be outstanding, the implied stock volatilities of several publicly-traded peers over the expected term of stock options, risk-free interest rate and expected dividend. Each of these inputs is subjective and generally requires significant judgment to determine. The grant date fair value of restricted stock units is based upon the market price of the Company’s Common Stock on the date of the grant. The fair value of stock-based compensation is amortized to compensation expense over the vesting term.
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.
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. There was no allowance for doubtful accounts recorded at December 31, 2019. At June 30, 2020 the Company had an allowance of $10,140 resulting in part from global uncertainty resulting from the COVID-19 virus. Accounts that are deemed uncollectible will be written off against the allowance for doubtful accounts. 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 the Company’s inventory is determined by the FIFO 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 June 30, 2020 and the Company had a reserve for obsolescence of $48,000 related to parts expected to be displaced by product improvement initiatives.
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, restricted stock units and warrants exercisable or issuable for a total of 10,018,461 shares of Common Stock were outstanding at June 30, 2020. 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.
Income Taxes	Until its conversion to a corporation 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. No income tax expense was recorded for period ended June 30, 2020 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.
Recent Issued Accounting Guidance	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 adoption of this standard in the first quarter ended March 31, 2020 had no impact on the Company’s financial statements or disclosures. Other Pronouncements: In December 2019, the FASB issued Accounting Standards Update 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. We do not expect that the adoption of this ASU will have a significant impact on our financial statements. 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.

INVENTORIES, NET (Tables)

6 Months Ended

Jun. 30, 2020

Inventory Disclosure [Abstract]

Inventories

	June 30,			December 31,
	2020			2019
Finished goods	$	719,104		$	653,323
Work in process		22,149			413
Raw materials		1,393,252			1,590,805
		2,134,505			2,244,541
Less allowance for obsolescence		(48,000	)		-
Inventories - net	$	2,086,505		$	2,244,541

PROPERTY AND EQUIPMENT, NET (Tables)

6 Months Ended

Jun. 30, 2020

Property, Plant and Equipment [Abstract]

Property and equipment

	June 30,			December 31,
	2020			2019
Laboratory equipment	$	55,645		$	44,454
Tooling		77,459			59,004
Computer equipment		106,765			83,368
Furniture, fixtures and improvements		144,323			128,782
		384,192			315,608
Accumulated depreciation		(120,022	)		(72,732	)
	$	264,170		$	242,876

INTANGIBLE ASSETS, NET (Tables)

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible assets

	June 30,			December 31,
	2020			2019

Patents	$	242,202		$	176,425
Trademarks		74,145			57,919
		316,347			234,344
Accumulated amortization		(9,357	)		(4,061	)
	$	306,990		$	230,283

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2020

Payables and Accruals [Abstract]

Accrued liabilities

	June 30,		December 31,
	2020		2019
Patent and legal costs	$	25,000	$	9,851
Accrued compensation		264,311		144,193
Warranty costs		32,832		13,923
Consulting costs		5,000		7,500
Taxes and other		17,972		18,827
	$	345,115	$	194,294

LEASES (Tables)

6 Months Ended

Jun. 30, 2020

Leases [Abstract]

Operating lease liabilities

Operating lease liability- short term	$	113,954
Operating lease liability - long term		101,826
Total Operating Lease Liability	$	215,780

Future lease payments

Remainder of 2020 (six months)	$	72,362
2021		101,406
2022		57,328
Total future minimum lease payments		231,096
Less imputed interest		(15,316	)
Total	$	215,780

STOCKHOLDERS' EQUITY (Tables)

6 Months Ended

Jun. 30, 2020

Stockholders' equity:

Warrant activity

	Number			Average Purchase Price Per Share
Shares purchasable under outstanding warrants at December 31, 2019		6,620,620		$	5.41
Stock purchase warrants issued		2,066,667		$	6.00
Stock purchase warrants exercised		(2,085,200	)	$	4.92
Shares purchasable under outstanding warrants at June 30, 2020		6,602,087		$	5.75

Stock purchase warrants

	Number of		Exercise Price
Description	Common Shares		Per Share
Purchase Warrants (1)		2,364,237	$	5.00
Agent Warrants		177,954	$	3.00
Purchase Warrants		1,839,383	$	6.50
Agent Warrants		153,846	$	8.125
Purchase Warrants		2,066,667	$	6.00
		6,602,087

STOCK-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Stock option activity

				Weighted Average
	Options on					Remaining		Aggregate
	Common			Exercise		Contractual		Intrinsic
	Shares			Price		Term		Value
Outstanding December 31, 2019		2,928,750		$	2.96		3.71
Granted		381,336		$	4.37		-
Exercised		(293,250	)	$	1.76		-
Forfeited, cancelled, expired		(50,000	)	$	3.00		-
Outstanding June 30, 2020		2,966,836		$	3.26		4.08	$	21,409,000
Vested and exercisable at June 30, 2020		1,984,667		$	2.42		3.09	$	15,999,867

Assumptions used to to determine the fair value of the options granted

	For the Six Months
	Ended June 30,
	2020	2019
Expected stock price volatility	45%	49%
Risk-free interest rate	0.42%	2.41%
Forfeiture rate	0%	0%
Expected dividend yield	0%	0%
Expected life of options - years	6.03	3.50
Weighted-average fair value of options granted	$1.86	$2.06

Service-based RSU activity

				Weighted Average
	Service-Based			Grant Date		Vesting
	RSU's			Fair Value		Period
Unvested at January 1, 2020		308,087		$	6.77
Granted - service based		196,214		$	4.72	3 Years
Granted - performance based		35,211		$	4.72
Vested		(86,558	)	$	7.24
Forfeited and cancelled		(3,416	)	$	7.24
Unvested at June 30, 2020		449,538		$	5.62

Stock-based compensation

	For the Three Months				For the Six Months
	Ended June 30,				Ended June 30,
	2020		2019		2020		2019
Selling, general and administrative	$	496,036	$	345,217	$	925,134	$	548,417
Research and development		52,953		28,634		91,101		52,481
Total stock-based expense	$	548,989	$	373,851	$	1,016,235	$	600,898

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Allowance for doubtful accounts	$ 10,140
Inventory write-off	$ (48,000)	$ (65,012)

INVENTORIES, NET (Details) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Finished goods	$ 719,104	$ 653,323
Work in process	22,149	413
Raw materials	1,393,252	1,590,805
Inventory, gross	2,134,505	2,244,541
Less allowance for obsolescence	(48,000)	0
Inventory, net	$ 2,086,505	$ 2,244,541

PROPERTY AND EQUIPMENT, NET (Details) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Property and equipment, gross	$ 384,192	$ 315,608
Accumulated depreciation	(120,022)	(72,732)
Property and equipment, net	264,170	242,876
Laboratory Equipment
Property and equipment, gross	55,645	44,454
Tooling
Property and equipment, gross	77,459	59,004
Computer Equipment
Property and equipment, gross	106,765	83,368
Furniture, Fixtures and Improvements
Property and equipment, gross	$ 144,323	$ 128,782

PROPERTY AND EQUIPMENT, NET (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 24,793	$ 7,621	$ 47,290	$ 12,186

INTANGIBLE ASSETS, NET (Details) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Intangible assets, gross	$ 316,347	$ 234,344
Accumulated amortization	(9,357)	(4,061)
Intangible assets, net	306,990	230,283
Patents
Intangible assets, gross	242,202	176,425
Trademarks
Intangible assets, gross	$ 74,145	$ 57,919

INTANGIBLE ASSETS, NET (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
INTANGIBLE ASSETS, NET (Details Narrative) - USD ($)	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 2,695	$ 203	$ 5,296	$ 387

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Payables and Accruals [Abstract]
Patent and legal costs	$ 25,000	$ 9,851
Accrued compensation	264,311	144,193
Warranty costs	32,832	13,923
Consulting costs	5,000	7,500
Taxes and other	17,972	18,827
Accrued liabilities	$ 345,115	$ 194,294

LEASES (Details) - USD ($)	Jun. 30, 2020	Dec. 31, 2019
Leases [Abstract]
Operating lease liability - short term	$ 113,954	$ 128,131
Operating lease liability - long term	101,826	$ 150,018
Total operating lease liability	$ 215,780

LEASES (Details 1)	Jun. 30, 2020 USD ($)
Leases [Abstract]
Remainder of 2020 (six months)	$ 72,362
2021	101,406
2022	57,328
Total future minimum lease payments	231,096
Less imputed interest	(15,316)
Total	$ 215,780

LEASES (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
LEASES (Details Narrative) - USD ($)	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Leases [Abstract]
Amortization of ROU operating lease assets	$ 30,172	$ 16,432	$ 59,800	$ 22,211
Operating lease expense	$ 34,322	$ 19,305	$ 68,644	$ 25,956
Weighted average remaining lease term	1 year 10 months 24 days		1 year 10 months 24 days
Weighted average discount rate	7.00%		7.00%

STOCKHOLDERS' EQUITY (Details)	6 Months Ended
STOCKHOLDERS' EQUITY (Details)	Jun. 30, 2020 $ / shares shares
Stockholders' equity:
Warrants outstanding, beginning \| shares	6,620,620
Issued \| shares	2,066,667
Exercised \| shares	(2,085,200)
Warrants outstanding, ending \| shares	6,602,087
Average purchase price per share outstanding, beginning \| $ / shares	$ 5.41
Issued \| $ / shares	6.00
Exercised \| $ / shares	4.92
Average purchase price per share outstanding, ending \| $ / shares	$ 5.75

STOCKHOLDERS' EQUITY (Details 1)

Jun. 30, 2020

USD ($)

$ / shares

Number of common shares

$ 6,602,087

Purchase Warrants

Number of common shares

$ 2,364,237

^[1]

Exercise price per share | $ / shares

$ 5.00

Agent Warrants

Number of common shares

$ 177,954

Exercise price per share | $ / shares

$ 3.00

Purchase Warrants

Number of common shares

$ 1,839,383

Exercise price per share | $ / shares

$ 6.50

Agent Warrants

Number of common shares

$ 153,846

Exercise price per share | $ / shares

$ 8.125

Purchase Warrants

Number of common shares

$ 2,066,667

Exercise price per share | $ / shares

$ 6.00

[1]	Warrants to purchase 233,334 shares of common stock are held by a family trust of Elwood G. Norris, the Company's Chief Technology Officer. Mr. Norris exercised the 233,334 warrants in July 2020 for cash of $1,166,670.

STOCKHOLDERS' EQUITY (Details Narrative) - $ / shares	Jun. 30, 2020	Dec. 31, 2019
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

STOCK-BASED COMPENSATION (Details)	6 Months Ended
STOCK-BASED COMPENSATION (Details)	Jun. 30, 2020 USD ($) $ / shares shares
Share-based Payment Arrangement [Abstract]
Number of options outstanding, beginning \| shares	2,928,750
Number of options granted \| shares	381,336
Number of options exercised \| shares	(239,250)
Number of options forfeited/cancelled/expired \| shares	(50,000)
Number of options outstanding, ending \| shares	2,966,836
Number of options vested and exercisable \| shares	1,984,667
Weighted average exercise price outstanding, beginning	$ 2.96
Weighted average exercise price granted	4.37
Weighted average exercise price exercised	1.76
Weighted average exercise price forfeited/cancelled/expired	3.00
Weighted average exercise price outstanding, ending	3.26
Weighted average exercise price vested and exercisable	$ 2.42
Weighted average remaining contractual term outstanding, beginning	3 years 8 months 16 days
Weighted average remaining contractual term outstanding, ending	4 years 29 days
Weighted average remaining contractual term vested and exercisable	3 years 1 month 2 days
Aggregate intrinsic value outstanding, beginning \| $	$ 0
Aggregate intrinsic value granted	$ 0
Aggregate intrinsic value exercised \| $	$ 0
Aggregate intrinsic value forfeited/cancelled/expired	$ 0
Aggregate intrinsic value outstanding, ending \| $	$ 21,409,000
Aggregate intrinsic value vested and exercisable \| $	$ 15,999,867

STOCK-BASED COMPENSATION (Details 1) - $ / shares	6 Months Ended
STOCK-BASED COMPENSATION (Details 1) - $ / shares	Jun. 30, 2020	Jun. 30, 2019
Share-based Payment Arrangement [Abstract]
Expected stock price volatility	45.00%	49.00%
Risk-free interest rate	0.42%	2.41%
Forfeiture rate	0.00%	0.00%
Expected dividend yield	0.00%	0.00%
Expected life of options - years	6 years 11 days	3 years 6 months
Weighted-average fair value of options granted	$ 1.86	$ 2.06

STOCK-BASED COMPENSATION (Details 2)	6 Months Ended
STOCK-BASED COMPENSATION (Details 2)	Jun. 30, 2020 $ / shares shares
Unvested service-based RSUs outstanding, beginning \| shares	308,087
Vested \| shares	(86,558)
Forfeited and cancelled \| shares	(3,416)
Unvested service-based RSUs outstanding, ending \| shares	449,538
Grant date fair value, beginning \| $ / shares	$ 6.77
Vested \| $ / shares	7.24
Forfeited and cancelled \| $ / shares	7.24
Grant date fair value, ending \| $ / shares	$ 5.62
Vesting period	3 years
Service Based
Granted \| shares	196,214
Granted \| $ / shares	$ 4.72
Performance Based
Granted \| shares	35,211
Granted \| $ / shares	$ 4.72

STOCK-BASED COMPENSATION (Details 3) - USD ($)	3 Months Ended		6 Months Ended
STOCK-BASED COMPENSATION (Details 3) - USD ($)	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Stock-based compensation	$ 548,989	$ 373,851	$ 1,016,235	$ 600,898
Selling, General and Administrative
Stock-based compensation	496,036	345,217	925,134	548,417
Research and Development
Stock-based compensation	$ 52,953	$ 28,634	$ 91,101	$ 52,481

STOCK-BASED COMPENSATION (Details Narrative)	6 Months Ended
STOCK-BASED COMPENSATION (Details Narrative)	Jun. 30, 2020 USD ($)
Share-based Payment Arrangement [Abstract]
Estimated compensation cost of stock options and RSUs granted but not yet vested	$ 4,000,000
Estimated compensation cost of stock options and RSUs granted but not yet vested, recognition period	2 years 1 month 6 days

COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]
Royalties	$ 28,481	$ 2,231	$ 53,467	$ 6,719
Purchase commitment	$ 1,700,000		$ 1,700,000

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
Related Party Transactions [Abstract]
Payment to related party during period	$ 9,000	$ 9,000