0001654954-21-002358 | 10-K | XBRL Viewer

Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2020	Mar. 03, 2021	Jun. 30, 2020
Cover [Abstract]
Entity Registrant Name	WRAP TECHNOLOGIES, INC.
Document Type	10-K
Document Period End Date	Dec. 31, 2020
Amendment Flag	false
Entity Central Index Key	0001702924
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		37,644,556
Entity Public Float			$ 196,229,092
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Small Business	true
Entity Shell Company	false
Entity Interactive Data Current	Yes
Entity Incorporation, State or Country Code	DE
Entity File Number	000-55838
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	FY

Consolidated Balance Sheets - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Current Assets:
Cash and cash equivalents	$ 16,646,811	$ 16,983,864
Short-term investments	24,994,360	0
Accounts receivable	1,870,934	195,347
Inventories, net	2,655,390	2,244,541
Prepaid expenses and other current assets	759,445	250,947
Total current assets	46,926,940	19,674,699
Property and equipment, net	357,287	242,876
Operating lease right-of-use asset, net	139,088	260,931
Intangible assets, net	1,396,484	230,283
Other assets, net	12,681	12,681
Total assets	48,832,480	20,421,470
Current Liabilities:
Accounts payable	1,232,349	406,967
Accrued liabilities	721,075	194,294
Customer deposits	2,095	343,724
Deferred revenue	16,015	2,684
Operating lease liability- short term	94,011	128,131
Business acquisition liability - short term	275,000	0
Total current liabilities	2,340,545	1,075,800
Operating lease liability - long term	56,006	150,018
Business acquisition liability - long term	22,500	0
Tota long-term liabilities	78,506	150,018
Total liabilities	2,419,051	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; 37,554,162 and 29,829,916 shares issued and outstanding each period, respectively	3,756	2,983
Additional paid in capital	71,704,857	31,922,493
Accumulated deficit	(25,310,033)	(12,729,824)
Accumulated other comprehensive income	14,849	0
Total stockholders' equity	46,413,429	19,195,652
Total liabilities and stockholders' equity	$ 48,832,480	$ 20,421,470

Consolidated Balance Sheets (Parenthetical) - $ / shares	Dec. 31, 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
Preferred stock, outstanding		0
Common stock, authorized	150,000,000	150,000,000
Common stock, par value	$ 0.0001	$ 0.0001
Common stock, issued	37,554,162	29,829,916
Common stock, outstanding	37,554,162	29,829,916

Consolidated Statements of Operations - USD ($)	12 Months Ended
Consolidated Statements of Operations - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Revenues:
Product sales	$ 3,868,384	$ 656,071
Other revenue	75,673	40,719
Total revenues	3,944,057	696,790
Cost of revenues	2,601,323	420,016
Gross profit	1,342,734	276,774
Operating Expenses:
Selling, general and administrative	11,630,644	6,653,465
Research and development	2,788,887	2,236,985
Total expenses	14,419,531	8,890,450
Loss from operations	(13,076,797)	(8,613,676)
Other Income (Expense):
Interest income	83,272	291,494
Debt forgiveness income	416,683	0
Other	(3,367)	(3,306)
Other income (expense)	496,588	288,188
Net loss	$ (12,580,209)	$ (8,325,488)
Net loss per basic and diluted common share	$ (0.37)	$ (0.29)
Weighted average common shares used to compute net loss per basic and diluted common share	33,846,338	28,652,625
Comprehensive loss
Net loss	$ (12,580,209)	$ (8,325,488)
Net unrealized gain on short-term investments	14,849	0
Comprehensive loss	$ (12,565,360)	$ (8,325,488)

Consolidated Statement of Stockholders' Equity - USD ($)	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Accumulated Other Comprehensive Income	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)	$ 0	$ 12,389,654
Sale of common stock and warrants at $6.50 per share and placement agent warrants in public offering, net of issuance costs, shares	1,923,076
Sale of common stock and warrants at $6.50 per share and placement agent warrants 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	127,649
Common shares issued upon exercise of warrants at $3.00 per share, amount	$ 13	382,934			382,947
Common shares issued upon exercise of warrants at $5.00 per share, net of issuance costs, shares	345,834
Common shares issued upon exercise of warrants at $5.00 per share, net of issuance costs, amount	$ 35	1,700,469			1,700,504
Common shares issued upon exercise of stock options, shares	38,750
Common shares issued upon exercise of stock options, amount	$ 4	58,121			58,125
Share-based compensation expense		1,536,096			1,536,096
Net unrealized gain on short-term investments					0
Common shares issued for services, shares	30,000
Common shares issued for services, amount	$ 3	102,597			102,600
Net loss for the period			(8,325,488)		(8,325,488)
Ending balance, shares at Dec. 31, 2019	29,829,916
Ending balance, amount at Dec. 31, 2019	$ 2,983	31,922,493	(12,729,824)	0	19,195,652
Sale of common stock and warrants at $6.00 per share and placement agent warrants in public offering, net of issuance costs, shares	2,066,667
Sale of common stock and warrants at $6.00 per share and placement agent warrants 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	328,458
Common shares issued upon exercise of warrants at $3.00 per share, amount	$ 33	960,993			961,026
Common shares issued upon exercise of warrants at $5.00 per share, net of issuance costs, shares	3,890,839
Common shares issued upon exercise of warrants at $5.00 per share, net of issuance costs, amount	$ 389	18,718,605			18,718,994
Common shares issued uppon exercise of warrants at $6.00 per share, net of issuance costs, shares	675,000
Common shares issued uppon exercise of warrants at $6.00 per share, net of issuance costs, amount	$ 68	3,847,432			3,847,500
Common shares issued uppon exercise of warrants at $6.50 per share, net of issuance costs, shares	261,679
Common shares issued uppon exercise of warrants at $6.50 per share, net of issuance costs, amount	$ 26	1,646,292			1,646,318
Common shares issued upon exercise of stock options, shares	371,000
Common shares issued upon exercise of stock options, amount	$ 37	705,313			705,350
Common shares issued upon vesting of restricted stock units, shares	130,603
Common shares issued upon vesting of restricted stock units, amount	$ 13	(13)			0
Share-based compensation expense		2,236,743			2,236,743
Net unrealized gain on short-term investments				14,849	14,849
Net loss for the period			(12,580,209)		(12,580,209)
Ending balance, shares at Dec. 31, 2020	37,554,162
Ending balance, amount at Dec. 31, 2020	$ 3,756	$ 71,704,857	$ (25,310,033)	$ 14,849	$ 46,413,429

Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
Consolidated Statements of Cash Flows - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Cash Flows From Operating Activities:
Net loss	$ (12,580,209)	$ (8,325,488)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	163,262	46,945
Warranty provision	30,364	13,495
Inventory write-off	(68,108)	(193,506)
Non-cash lease expense	121,843	80,069
Share-based compensation	2,236,743	1,536,096
Debt forgiveness income	(416,683)	0
Non-cash interest expense	2,321	0
Common shares issued for services	0	102,600
Provision for doubtful accounts	10,140	0
Changes in assets and liabilities:
Accounts receivable	(1,685,727)	(190,951)
Inventories	(342,741)	(1,892,768)
Prepaid expenses and other current assets	(508,498)	(136,084)
Accounts payable	825,382	174,052
Operating lease liability	(128,132)	(62,851)
Customer deposits	(341,629)	343,724
Accrued liabilities and other	492,564	112,346
Deferred compensation	0	(96,000)
Warranty settlement	3,853	0
Deferred revenue	(1,669)	2,684
Net cash used in operating activities	(12,186,924)	(8,485,637)
Cash Flows From Investing Activities:
Purchase of short-term investments	(34,979,511)	0
Proceeds from maturities of short-term investments	10,000,000	0
Capital expenditures for property and equipment	(248,897)	(256,742)
Investment in patents and trademarks	(128,914)	(114,274)
Purchase of intangible assets	(543,563)	0
Business acquisition	(210,000)	0
Long-term deposits	0	(11,169)
Net cash used in investing activities	(26,110,885)	(382,185)
Cash Flows From Financing Activities:
Sale of common stock and warrants	12,400,002	12,499,994
Offering costs paid on sale of stock and warrants	(732,796)	(1,148,780)
Proceeds from exercise of warrants	26,190,483	2,112,117
Offering costs paid on exercise of warrants	(1,016,645)	(28,666)
Proceeds from exercise of stock options	705,350	58,125
Proceeds from bank note	414,362	0
Net cash provided by financing activities	37,960,756	13,492,790
Net increase (decrease) in cash and cash equivalents	(337,053)	4,624,968
Cash and cash equivalents, beginning of period	16,983,864	12,358,896
Cash and cash equivalents, end of period	16,646,811	16,983,864
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Business acquisition liability	297,500	0
Business acquisition cost in deferred revenue	15,000	0
Change in unrealized gain on short-term investments	14,849	0
Right-of-use assets and liabilities recorded during period	0	341,000
Issuance costs relating to warrants issued to public offering selling agent	$ 0	$ 205,894

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business Description

Wrap Technologies, Inc., a Delaware corporation (the “Company”, “we”, “us”, and “our”), is a publicly traded company with our Common Stock, par value $0.0001 per share (“Common Stock”), listed on the Nasdaq Capital Market (“Nasdaq”) under the trading symbol “WRAP”. The Company is a developer and supplier of public safety products and training services for law enforcement and security personnel. The Company’s primary product is the BolaWrap® remote restraint device. The principal markets for the Company’s proprietary products and services are in North and South America, Europe, Middle East and Asia.

Principles of Consolidation

The Company has one wholly-owned subsidiary, Wrap Reality, Inc. formed in December 2020 (see Note 3) and has commenced selling its virtual reality training system primarily targeting law enforcement agencies. The consolidated financial statements include the accounts of this subsidiary after elimination of intercompany transactions and accounts.

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., share-based compensation valuation, allowance for doubtful accounts, valuation of inventory and intangible assets, warranty reserve, accrued costs, valuation allowance related to deferred tax assets 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.

Concentrations of Risk

Credit Risk – Financial instruments that potentially subject the Company to concentration of credit risk consisted primarily of cash, cash equivalents, U.S. treasury bills and accounts receivable from customers. The Company maintains its cash and cash equivalent 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 and are managed within established guidelines to mitigate risks. To date, the Company has not experienced any losses on its cash and cash equivalents.

Concentrations of Accounts Receivable and Revenue – The Company has a limited number of domestic and international customers. The Company may experience concentrations in both accounts receivable and revenue due to the timing of sales and collections of related payments (see Note 16).

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, 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 December 2019, a novel strain of coronavirus (“COVID-19”) emerged in China. In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it spread to other countries and infections have been reported globally. The extent to which the coronavirus impacts our operations will continue to depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. In particular, the continued spread of the coronavirus globally or emergence of new strains could adversely impact our operations, including our manufacturing and supply chain. Our operations could be negatively affected if employees are quarantined as the result of exposure to a contagious illness. Similarly, travel restrictions resulting from the rapid spread of contagious illnesses may have a material adverse effect on our business and results of operations.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. Cash equivalents consist primarily of amounts invested in Money Market Funds and United States (“U.S.”) Treasury bills and are stated at fair value.

Short-Term Investments

The Company’s short-term investments consist of U.S. Treasury bills with original maturities beyond three months at the date of purchase and one year or less from the balance sheet date. As of December 31, 2020, all of the Company’s short-term investments were classified as available-for-sale and are carried at estimated fair value with any unrealized gains and losses, unrelated to credit loss factors, included in other comprehensive income in our consolidated statements of stockholders’ equity.

We adopted Accounting Standards Codification (“ASC”) Topic 326 issued by the Financial Accounting Standards Board (“FASB”) effective January 1, 2020, and applied the credit loss guidance related to short-term investments prospectively as we had no historical short-term investments. Because we do not have any history of losses for our short-term investments, our expected loss allowance methodology is developed using published or estimated credit default rates for similar investments and current and future economic and market conditions. Any unrealized losses related to credit loss factors are recorded through an allowance for credit losses in other (expense) income, in our consolidated statements of operations, rather than as a reduction to the amortized cost basis in other comprehensive (loss) income, when a decline in fair value has resulted from a credit loss. We determine realized gains or losses on the sale of investments on a specific identification method, and record such gains or losses as other (expense) income, in our consolidated statements of operations. We did not record a credit loss reserve for short-term investments during the year ended December 31, 2020.

Share-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 share-based transactions with non-employees. Share-based compensation expense recognized during 2020 and 2019 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 share-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. We determine the amount of share-based compensation expense based on awards that we ultimately expect to vest and account for forfeitures as they occur. The fair value of share-based compensation is amortized to compensation expense over the vesting term.

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 7,566,502 and 9,857,457 shares of Common Stock were outstanding at December 31, 2020 and 2019, respectively. 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.

Accounts Receivable and Allowance for Doubtful Accounts

The Company carries accounts receivable at historical cost, less an allowance for doubtful accounts. On a periodic basis, the Company evaluates accounts receivable and establishes an allowance for doubtful accounts for estimated losses. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, when available any published or estimated credit default rates for entities that represent our customer base, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. Our monitoring activities include account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible.

At December 31, 2020 the Company had an allowance of $10,140 resulting in part from global uncertainty resulting from the COVID-19 virus. There was no allowance for doubtful accounts recorded at December 31, 2019. 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 December 31, 2020 and 2019 the Company had no reserve for obsolescence.

Contract Manufacturers

The Company employs contract manufacturers for production of certain components and sub-assemblies. The Company may provide parts and components to such parties from time to time, but recognizes no revenue or markup on such transactions. During 2020 and 2019, the Company performed assembly of products in-house using components and sub-assemblies from a variety of contract manufacturers and suppliers.

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.

Business Combinations

Transactions in which the Company obtains control of a business are accounted for according to the acquisition method as described in ASC 805, Business Combinations. The assets acquired and liabilities assumed are recognized and measured at their fair values as of the date control is obtained. The Company measures goodwill as the excess of consideration transferred, which the Company also measures at fair value, over the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed. Acquisition related costs in connection with a business combination are expensed as incurred. Contingent consideration is recognized and measured at fair value at the acquisition date and until paid is re-measured on a recurring basis and classified as a liability.

Intangible Assets

Intangible assets consisted of (a) capitalized legal fees and filing costs related to obtaining patents and trademarks, (b) customer agreements, tradenames, software, non-solicitation and non-compete agreements acquired in business combinations and valued at fair value at the acquisition date, and (c) the purchase cost of indefinite-lived website domains. The estimated useful lives of identifiable intangible assets with definite useful lives have been estimated to be between one and twenty years. Purchased website domain costs with an indefinite useful life are not subject to amortization, but are subject to an annual impairment test, by comparing their carrying amount with their corresponding fair value. For any given intangible asset with an indefinite useful life, if its fair value exceeds its carrying amount no impairment loss shall be recognized.

The carrying value of intangibles is periodically reviewed and impairments, if any, are recognized when the future undiscounted cash flows realized from the assets is less than its carrying value.

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 years ended December 31, 2020 and 2019.

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, 2020, the Company has no warrants or other derivative financial instruments that require separate accounting as liabilities and periodic revaluation.

Advertising and Promotion Costs

Advertising costs are charged to expense as incurred and were $287,266 and $165,119 for the years ended December 31, 2020 and 2019, respectively. The Company also incurred product promotion costs for demonstration products delivered to prospective customers of $747,443 and $433,172 for the years ended December 31, 2020 and 2019, respectively. Advertising and promotion costs are included in selling, general and administrative expenses in the accompanying statements of operations.

Demonstration and Training Costs

The Company maintains a demonstration and training department as a part of its sales and marketing activities and does not charge for product demonstrations or training. Training is not a condition or requirement of sale as most sales are made through distributors to their end customers. The Company conducts local and regional in-person, webinar and on-line demonstrations and use of force and escalation training to support law enforcement agencies with no purchase requirement. Such training, when provided, may occur before or after initial or subsequent purchase or field deployment of the Company’s products. The Company believes that law enforcement trainers and officers that have seen demonstrations or have been trained about its products are more supportive of their departments purchase and deployment of product.

Research and Development Costs

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

Leases

At the commencement date of a lease, the Company recognizes a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term. As its leases typically do not provide an implicit rate and due to lack of borrowing history or ability, the Company uses as its incremental borrowing rate a low-grade debt rate published by the Federal Reserve Bank. The right-of-use (“ROU”) asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred by the Company and excludes lease incentives. Lease liabilities are recorded as a current liability for the portion due within one year with the balance as a long-term liability. ROU assets are recorded as operating lease right-of-use asset, net.

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 $75,106 and $22,177 for the years ended December 31, 2020 and 2019, respectively. Actual revenues from shipping and handling were $62,679 and $21,414 for the years ended December 31, 2020 and 2019, respectively.

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 $48,140 and $13,923 at December 31, 2020 and 2019. Actual warranty costs could differ from estimates.

Segment Information

ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.

Income Taxes

No income tax expense was recorded for the periods ended December 31, 2020 and 2019 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, 2020 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, 2020.

Recently Issued Accounting Guidance

Adopted 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.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments which was further updated and clarified by the FASB through issuance of additional related ASUs. Under ASU 2016-13, existing guidance on reporting credit losses for trade and other receivables and available for sale debt securities have been replaced with a new forward-looking “expected loss” model that has resulted in the earlier recognition of allowances for losses. The adoption of these standards in the first quarter ended March 31, 2020 had no impact on the Company’s financial statements or disclosures. As part of our assessment of the adequacy of our allowances for credit losses, we consider a number of factors including, but not limited to, customer credit ratings, bankruptcy filings, published or estimated credit default rates, age of receivables, expected loss rates and collateral exposures.

Other Guidance:

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.

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (“Subtopic 470-20”) and Derivatives and Hedging—Contracts in Entity’s Own Equity “(Subtopic 815-40”): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.

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, 2020

Revenues:

REVENUE AND PRODUCT COSTS

The Company enters into contracts that include various combinations of products, accessories. software and services, 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.

Most of the Company’s products and accessories are sold through domestic and international distributors. 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 quality control inspections, and (iii) has been tagged and packed for shipment, separated from other 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.

Time-based virtual reality system contracts generally include setup, training and the use of software and hardware for a fixed term, generally one to five years and support and upgrade services during the same period. The Company does not sell time-based arrangements without setup, training and support services and therefore revenues for the entire arrangement are recognized on a straight-line basis over the term. When hardware is bundled and not sold separately the Company allocates the contract transaction price to each performance obligation using the SSP of each distinct good and service in the contract.

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, 2020 the Company’s deferred revenue totaled $16,015, of which $14,125 related to virtual reality training and $1,890 related to extended warranties. At December 31, 2019 the Company had deferred revenue of $2,684 related to future training contracted as part of a sale.

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 December 31, 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.

3. ACQUISITION

12 Months Ended

Dec. 31, 2020

Business Combination, Description [Abstract]

ACQUISITION

On December 14, 2020, the Company, through a new wholly-owned subsidiary, Wrap Reality, Inc., entered into an Asset Purchase Agreement with NSENA Inc, a Delaware corporation, to acquire all of NSENA’s tangible and intangible assets, properties, and rights held for use in connection with NSENA’s virtual reality training business. The acquisition enhances the Company’s training services primarily targeting law enforcement agencies.

The Company paid to NSENA cash consideration of $210,000 and recorded a short-term business acquisition liability of $275,000. The liability is payable $100,000 on March 15, 2021, $100,000 on June 15, 2021 and $75,000 on September 15, 2021. In addition, the Company assumed a $15,000 liability for unearned revenues. As additional earn-out consideration, the Company agreed to pay NSENA 10% of net revenues (or a lesser amount equal to 50% of direct profit) from specific identified prospects that become revenue customers before September 30, 2021 but only on amounts collected between Closing and June 30, 2022. The fair value of contingent consideration determined as $22,500 is included as a long-term business acquisition liability on our consolidated balance sheet.

The acquisition was accounted for under the acquisition method of accounting. Under acquisition accounting, the acquired tangible and intangible assets and liabilities of NSENA have been recorded at their respective fair values. The following table summarizes the estimates of fair value of the assets acquired and liabilities assumed on December 14, 2020:

Equipment	$	10,250
Software		460,250
Customer contracts		40,000
Tradenames		2,000
Noncompete agreements		10,000
Deferred revenue		(15,000	)
Total consideration	$	507,500

A portion of the fair value of the consideration transferred has been assigned to identifiable intangible assets as follows:

Description		Useful life in years			Fair Value
Software	5		$	460,250
Customer contracts	1			40,000
Tradenames	1			2,000
Noncompete agreements	2			10,000
Total acquired intangible assets					$	512,250

All assets acquired were determined to be finite-lived intangible assets and are being amortized on a straight-line basis over its estimated useful life with no residual value.

4. FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2020

Financial Instruments, Owned, at Fair Value [Abstract]

FINANCIAL INSTRUMENTS

Assets and liabilities recorded at fair value on a recurring basis in the Consolidated Balance Sheets and assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The Company’s cash equivalent Money Market Funds and short-term investments consisting of U.S. Treasury bill securities are classified as Level 1 because they are valued using quoted market prices.

The following table shows the Company’s cash and cash equivalents, Money Market Funds and short-term investments by significant investment category as of December 31, 2020. The Company only had cash and cash equivalents, including Money Market Funds of $16,618,498 at December 31, 2019 all which were considered Level 1.

	As of December 31, 2020
	Adjusted		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Level 1:
Money Market Funds	$	6,034,757	$	-	$	-	$	6,034,757
U.S. Treasury securities considered cash equivalents		9,997,812		-		-		9,997,812
U.S. Treasury securities in short-term investments		24,979,511		14,849				24,994,360
Total Financial Assets	$	41,012,080	$	14,849	$	-	$	41,026,929

Unrealized gains or losses resulting from our short-term investments are recorded in accumulated other comprehensive gain or loss. As of December 31, 2020, $14,849 was recorded to accumulated other comprehensive gain.

Our financial instruments also include accounts receivable, accounts payable, accrued liabilities and business acquisition liabilities. Due to the short-term nature of these instruments, their fair values approximate their carrying values on the balance sheet.

5. INVENTORIES, NET

12 Months Ended

Dec. 31, 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:

	December 31,		December 31,
	2020		2019
Finished goods	$	1,248,893	$	653,323
Work in process		64,451		413
Raw materials		1,342,046		1,590,805
Inventories, net	$	2,655,390	$	2,244,541

During the years ended December 31, 2020 and 2019 the Company wrote off $68,108 and $193,506, respectively, of raw material and scrap parts primarily due to startup production, model changes and improvements.

6. PROPERTY AND EQUIPMENT, NET

12 Months Ended

Dec. 31, 2020

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following:

	December 31,			December 31,
	2020			2019
Production and lab equipment	$	147,781		$	44,454
Tooling		80,936			59,004
Computer equipment		180,573			83,368
Furniture, fixtures and improvements		165,465			128,782
		574,755			315,608
Accumulated depreciation		(217,468	)		(72,732	)
Property and equipment, net	$	357,287		$	242,876

Depreciation expense was $144,736 and $44,239 for the years ended December 31, 2020 and 2019, respectively.

7. INTANGIBLE ASSETS, NET

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS, NET

Intangible assets consisted of the following:

	December 31,			December 31,
	2020			2019
Amortizable intangible assets:
Patents	$	279,294		$	176,425
Trademarks		83,964			57,919
Purchased software		662,250			-
Other		50,000			-
		1,075,508			234,344
Accumulated amortization		(22,587	)		(4,061	)
Total amortizable		1,052,921			230,283
Indefinite life assets (non-amortizable)		343,563			-
Total intangible assets-net	$	1,396,484		$	230,283

Amortization expense was $18,526 and $2,706 for the years ended December 31, 2020 and 2019, respectively.

At December 31, 2020, annual amortization of intangible assets, based upon the Company’s existing intangible assets and current useful lives, is estimated to be the following:

2021	$	186,266
2022		150,766
2023		145,766
2024		145,766
2025		145,766
Thereafter		278,591
Total estimated amortization expense	$	1,052,921

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

12 Months Ended

Dec. 31, 2020

Payables and Accruals [Abstract]

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable includes $52,950 due to related party Syzygy Licensing, LLC (“Syzygy”) as of December 31, 2020. Accounts payable at December 31, 2020 also included $10,000 due to related party V3 Capital Partners, LLC (see Note 14).

Accrued liabilities consist of the following:

	December 31,		December 31,
	2020		2019
Patent and legal costs	$	64,800	$	9,851
Accrued compensation		562,792		144,193
Warranty costs		48,140		13,923
Consulting costs		2,083		7,500
Taxes and other		43,260		18,827
Accrued liabilities	$	721,075	$	194,294

Accrued compensation includes $555,000 in bonuses and $7,792 in commissions payable at December 31, 2020.

9. LEASES

12 Months Ended

Dec. 31, 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. The adoption of the standard resulted in the recognition of a ROU asset and lease liability of $12,900 for one operating lease as of January 1, 2019, with no impact to retained earnings. Prior year amounts have not been restated. That lease is for 1,890 square feet of improved office and warehouse space in Las Vegas, Nevada. In January 2019, the Company recorded an additional $17,101 ROU remeasurement asset and liability from an extension of the facility lease to December 31, 2020. In March 2019, the Company recorded a $57,587 ROU asset and liability for a two-year facility operating lease for 1,906 square feet of improved office and warehouse space in Lake Forest, California expiring in February 2021. In June 2019, the Company recorded a $253,412 ROU asset and liability for a 38-month facility operating lease for 11,256 square feet of improved office, assembly, training and warehouse space in Tempe, Arizona expiring in July 2022.

Amortization of ROU operating lease assets was $121,844 and $80,069 for the years ended December 31, 2020 and 2019, respectively.

Operating lease expense for capitalized operating leases included in operating activities was $137,228 and $94,599 for the years ended December 31, 2020 and 2019, respectively. Operating lease obligations recorded on the balance sheet at December 31, 2020 are:

Operating lease liability- short term	$	94,011
Operating lease liability - long term		56,006
Total Operating Lease Liability	$	150,017

Future lease payments included in the measurement of lease liabilities on the balance sheet at December 31, 2020 for future periods are as follows:

2021		101,406
2022		57,328
Total future minimum lease payments		158,734
Less imputed interest		(8,717	)
Total	$	150,017

The weighted average remaining lease term is 1.54 years and the weighted average discount rate is 7.0%.

The Company did not have any short-term lease expense during the years ended December 31, 2020 and December 31, 2019. The Company does not have any finance leases.

10. DEBT

12 Months Ended

Dec. 31, 2020

Debt Disclosure [Abstract]

DEBT

The Company’s debt at December 31, 2020 included operating lease liabilities (see Note 9) and business acquisition liabilities (see Note 3). Debt at December 31, 2019 consisted of operating lease liabilities.

On May 1, 2020, the Company received loan proceeds of $414,362 from Bank of America, N.A. (the “Lender”), as a potentially forgivable loan (the “PPP Loan”) from the U.S. Small Business Administration pursuant to the Paycheck Protection Program (the “PPP”) enacted by Congress under Division A, Title 1 of the Coronavirus Aid, Relief, and Economic Security Act (15 U.S.C. 636(a)(36)) (the “CARES Act”), which was enacted March 27, 2020. The PPP Loan was in the form of a two-year Promissory Note dated May 1, 2020 payable to the Lender (the “PPP Note”), bearing interest at a rate of 1% per annum.

Under the terms of the CARES Act, the Company subsequently applied for and in December 2020 was granted forgiveness for the PPP Loan plus interest. The Company’s PPP Loan in the amount of $414,362 and accrued interest was forgiven in full by the Small Business Administration. The Company recognized $416,683 in debt forgiveness income as a result of the forgiveness.

11. STOCKHOLDERS' EQUITY

12 Months Ended

Dec. 31, 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”).

2019 Follow-On Public Offering

On June 18, 2019, the Company consummated the June 2019 Follow-On Offering, pursuant to which a total of 1,923,076 Units were offered and sold at the public offering price of $6.50 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 $6.50 per share. The offering resulted in the Company’s receipt of gross cash proceeds of $12.5 million, or net cash proceeds of $11.35 million after deduction of commissions and offering costs.

In connection with the June 2019 Follow-On Offering, the Company also issued placement agent warrants exercisable for 153,846 shares of Common Stock for two years at an exercise price of $8.125 per share. The estimated fair value of these warrants was $205,894, as determined using the Black-Scholes methodology (assuming estimated volatility of 49%, risk-free interest rate of 1.86%, 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.

2020 Follow-On Public Offering

On June 2, 2020, the Company consummated a follow-on public offering (the “Unit Offering”) whereby the Company offered and sold certain securities consisting 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 (a “Unit”) at the public offering price of $6.00 per Unit. Pursuant to the Unit Offering, the Company sold 2,066,667 Units, resulting 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 years ended December 31, 2020 and 2019:

	Number			Average Purchase Price Per Share
Shares purchasable under outstanding warrants at December 31, 2018		5,017,181		$	4.82
Stock purchase warrants issued		2,076,922		$	6.62
Stock purchase warrants exercised		(473,483	)	$	4.46
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		(5,155,976	)	$	5.08
Stock purchase warrants cancelled		(324,401	)	$	5.00
Shares purchasable under outstanding warrants at December 31, 2020		3,206,910		$	6.36

During the year ended December 31, 2020 the Company received gross proceeds of $26,190,483 from the exercise of 5,155,976 warrants and paid $1,016,645 as an agent fee to facilitate exercise of certain warrants resulting in net proceeds of $25,173,838. Company officer Elwood Norris exercised 333,334 of these warrants at $5.00 per share for cash of $1,666,670.

During the year ended December 31, 2019 the Company received gross proceeds of $2,112,117 from the exercise of 2,076,922 warrants and paid an agent fee of $28,666 for net proceeds of $2,083,451.

The Company has outstanding Common Stock purchase warrants as of December 31, 2020 as follows:

	Number of		Exercise Price
Description	Common Shares		Per Share		Expiration Date
Purchase Warrants		1,661,397	$	6.50	June 18, 2021
Agent Warrants		153,846	$	8.125	June 18, 2021
Purchase Warrants		1,391,667	$	6.00	June 1, 2022
		3,206,910

12. SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

SHARE-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 (“RSUs”) 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 share-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 years ended December 31, 2019 and 2020:

				Weighted Average
	Options on					Remaining		Aggregate
	Common			Exercise		Contractual		Intrinsic
	Shares			Price		Term			Value
Outstanding December 31, 2018		2,067,500		$	1.68		4.44
Granted		1,000,000		$	5.41		-
Exercised		(38,750	)	$	1.50		-
Forfeited, cancelled, expired		(100,000	)	$	1.50		-
Outstanding December 31, 2019		2,928,750		$	2.96		3.71
Granted		1,423,836		$	6.66		-
Exercised		(371,000	)	$	1.90		-
Forfeited, cancelled, expired		(50,000	)	$	3.00		-
Outstanding December 31, 2020		3,931,586		$	4.41		4.89		$	5,176,337
Vested and exercisable at December 31, 2020		2,091,084		$	2.68		2.60		$	4,965,155

In connection with the NSENA acquisition in December 2020 the Company granted 190,000 service-based options and 100,000 performance-based options for future services as employees and consultants at an exercise price of $5.46 per share. Other than the 100,000 performance-based options, all outstanding options at December 31, 2020 are service-based options.

Subsequent to December 31, 2020 a total of 58,500 options were exercised for cash proceeds of $87,750.

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 non-employees:

	For the Year Ended
	December 31,
	2020			2019
Expected stock price volatility		47	%		49	%
Risk-free interest rate		0.38	%		2.41	%
Forfeiture rate		0	%		0	%
Expected dividend yield		0	%		0	%
Expected life of options - years		5.64			3.50
Weighted-average fair value of options granted	$	2.90		$	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.

The following table summarizes information about stock options outstanding at December 31, 2020:

				Weighted
				Average		Weighted				Weighted
				Remaining		Average				Average
Range of		Number		Contractual		Exercise		Number		Exercise
Exercise Prices		Outstanding		Life (Years)		Price		Exercisable		Price
$	1.50		1,422,750		2.39	$	1.50		1,422,750	$	1.50
$	3.15 - $3.61		85,000		2.86	$	3.75		85,000	$	3.75
$	4.26 - $6.58		2,073,836		5.89	$	5.29		583,334	$	5.41
$	11.22		350,000		9.58	$	11.22		-		-

Restricted Stock Units

The Plan provides for the grant of restricted stock units (“RSUs”). RSUs are settled in shares of the Company’s Common Stock as the RSUs become vested. In January 2019 the Company granted 263,087 service-based RSUs to officers and employees vesting over a period of three years. In August and September 2019, the Company granted 45,000 service-based RSUs to employees vesting over a period of three years. In January 2020 the Company granted 73,992 service-based RSUs to officers and directors vesting over a period of three years. In April 2020 the Company granted 122,222 service-based RSUs to employees vesting over a period of three years. Also, in April 2020 the Company granted an officer 35,211 performance-based RSUs. During the period July 2020 to December 2020 the Company granted 114,660 service-based RSU’s to employees vesting over three and four years.

The following table summarizes RSU activity under the Plan for the years ended December 31, 2019 and 2020:

				Weighted Average		Weighted Average
	Service-Based			Grant Date		Vesting
	RSU's			Fair Value			Period
Unvested at December 31, 2018		-			-
Granted - service based		308,087		$	6.77	3.00 Years
Unvested at December 31, 2019		308,087		$	6.77
Granted - service based		310,874		$	6.02	3.02 Years
Granted - performance based		35,211		$	4.26
Vested		(144,687	)	$	5.17
Forfeited and cancelled		(81,479	)	$	6.47
Unvested at December 31, 2020		428,006		$	6.13	2.27 Years

Share-Based Compensation Expense

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

	For the Year Ended
	December 31,
	2020		2019
Selling, general and administrative	$	1,956,818	$	1,410,095
Research and development		279,925		126,001
Total share-based expense	$	2,236,743	$	1,536,096

As of December 31, 2020, total estimated compensation cost of stock options granted and outstanding but not yet vested was $4.6 million which is expected to be recognized over the weighted average period of 2.8 years. As of December 31, 2020, total estimated compensation cost of RSUs granted and outstanding but not yet vested was $2.2 million which is expected to be recognized over the weighted average period of 2.3 years.

13. COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

Facility Leases

See Note 9.

Related Party Technology License Agreement

The Company is obligated to pay royalties and 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 recorded $143,390 and $23,297 for royalties incurred during the years ended December 31, 2020 and 2019, respectively.

Purchase Commitments

At December 31, 2020 the Company was committed for approximately $2.2 million for future component deliveries and contract services 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.

Litigation

Securities Litigation

On September 23, 2020, Carone Cobden filed a putative class action complaint against the Company, former Chief Executive Officer David Norris (“Norris”), Chief Financial Officer, James A. Barnes (“Barnes”), and President, Thomas Smith (“Smith”) in the United States District Court for the Central District of California, docketed as Case No. 2-20-cv-08760-DMG-PVCx (the “Cobden Complaint”). The Cobden Complaint alleges that the named defendants, in their capacities as officers of the Company, knowingly made false or misleading statements or omissions regarding trials of the Company’s BolaWrap product conducted by the Los Angeles Police Department (the “BolaWrap Pilot Program”). The Cobden Complaint also alleges that the conduct of the named defendants artificially inflated the price of the Company’s traded securities, and that the disclosure of certain adverse information to the public led to a decline in the market value of the Company’s securities. The Cobden Complaint further alleges violations of Sections 10(b) and 20(a) of the Exchange Act, and Rule 10b-5 promulgated thereunder, and defines the class period as July 31, 2020 through September 23, 2020.

On October 1, 2020, Joseph Mercurio filed a second putative class action complaint against the Company, Norris, Smith, and Barnes in the same court, which contains substantially the same factual allegations and legal claims as set forth in the Cobden Complaint, and is docketed as Case No. 2-20-cv-09030-DMG-PVCx (the “Mercurio Complaint”). On October 15, 2020, Paula Earley filed a third putative class action complaint against the Company, Smith, Norris, Barnes, Chief Strategy Officer Mike Rothans (“Rothans”), and former Chief Executive Officer, Marc Thomas (“Thomas”) in the same court, which contains many of the same factual allegations and legal claims as set forth in the Cobden and Mercurio Complaints, but defines the class period as April 29, 2020 through September 23, 2020, and alleges additional false or misleading statements in connection with BolaWrap and the BolaWrap Pilot Program (the “Earley Complaint”). The Earley Complaint is docketed as Case No. 2-20-cv-09444-DMG-PVCx.

On November 3, 2020, the Hon. Dolly M. Gee consolidated the three above-mentioned cases under the caption In re Wrap Technologies, Inc. Securities Exchange Act Litigation, Case No. 20-8760-DMG (“PVCx”) (the “Securities Action”). On January 7, 2021, the Court appointed a lead plaintiff in the Securities Action, who designated its attorneys as lead counsel. On January 21, 2021, Judge Gee ordered that a consolidated amended complaint be filed in the Securities Action on or before March 12, 2021, with defendants’ motion to dismiss to be filed on or before April 26, 2021, and a hearing on the motion to dismiss to be held on July 23, 2021. The Company believes that the complaints underlying the Securities Action are without merit and intends to vigorously defend against the claims raised therein.

Shareholder Derivative Litigation

On November 13, 2020, Naresh Rammohan filed a shareholder derivative action in the United States District Court for the Central District of California against Smith, Barnes, Rothans, Thomas, Norris, and Messrs. Scot Cohen, Patrick Kinsella, Michael Parris, and Wayne Walker, alleging unjust enrichment, breach of fiduciary duty, waste of corporate assets, and contribution claims under the Securities Exchange Act of 1934, docketed as Case No. 2:20-cv-10444-DMG-PVCx (the “Rammohan Complaint”). The Rammohan Complaint names the Company as a nominal defendant and recites many of the allegations set forth in the Securities Action relating to the BolaWrap Pilot Program. On January 20, 2021, Ray Westerman filed a second derivative complaint in the same court against the same parties, alleging breach of fiduciary duty and contribution claims under the Securities Exchange Act of 1934, docketed as Case No. 2:21-cv-00550-DMG-PVCx (the “Westerman Complaint”). On January 22, 2021, Jesse Lowe filed a third derivative complaint in the same court against the same parties, alleging breach of fiduciary duty and asserting various claims under the Securities Exchange Act of 1934, docketed as Case No. 2:21-cv-00597-DMG-PVCx (the “Lowe Complaint”).

The above-mentioned derivative cases (collectively, the “Derivative Actions”) each been have been transferred to Judge Gee as cases related to the Securities Action. On January 27, 2021, the Judge Gee issued an order to show cause why the Derivative Actions should not be consolidated under the caption In re Wrap Technologies, Inc. Shareholder Derivative Litigation, Case No. 2:20-10444-DMG-PVCx and stayed pending the resolution of the anticipated motion to dismiss in the Securities Action. On February 5, 2021, the parties in the Derivative Actions responded jointly to the order to show cause, stipulating that the case should be consolidated and stayed as suggested by the Court. We believe that the Derivative Actions will be consolidated and stayed by the Court. As with the Securities Action, the Company believes that the Derivative Actions are without merit and intends to vigorously defend against the claims raised therein.

14. RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 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 $18,000 during the year ended December 31, 2020 and 2019, respectively.

From April 2020 through December 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 for an aggregate of $90,000 during the year ended December 31, 2020. In addition, the Company paid V3 a bonus of $175,000 for assistance in a financing that was consummated in July 2020.

See Notes 8, 11 and 13 for additional information on related party transactions and obligations.

15. INCOME TAXES

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

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, 2020, the Company has federal net operating loss carryforwards of approximately $24,449,000 to reduce future taxable income that will expire beginning in 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, 2020, 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 primarily of net operating loss carry forwards, because management has determined that it is more likely than not that the Company 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 determined that the deferred tax assets and liabilities should be valued at a federal statutory rate of 21%.

The Company has not taken a tax position that, if challenged, would have a material effect on the financial statements for the periods ended December 31, 2020 and 2019 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 consist of the following:

	Year Ended December 31,
	2020			2019
Current tax benefit	$	-		$	-
Deferred tax benefit		3,158,000			1,800,000
Change in valuation allowance		(3,158,000	)		(1,800,000	)
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,
	2020			2019
Income taxes benefit computed at federal statutory rate	$	2,642,000		$	1,748,000
State income taxes, net of federal effect		216,000			114,000
Permanent differences and other		300,000			(62,000	)
Change in valuation allowance		(3,158,000	)		(1,800,000	)
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,
	2020			2019
Deferred tax assets:
Net operating losses	$	5,444,000		$	2,430,000
Research tax credits		45,000			26,000
Stock compensation		542,000			239,000
Accruals and other		169,000			9,000
		6,200,000			2,704,000
Deferred tax liabilities:
Depreciation and other		396,000			58,000
		396,000			58,000
Net deferred tax assets		5,804,000			2,646,000
Less valuation allowance		(5,804,000	)		(2,646,000	)
Net deferred taxes after valuation allowance	$	-		$	-

In accordance with ASU 2016-09, Compensation-Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting, the Company recognizes windfall tax benefits associated with the exercise of stock options as a component of tax expense (rather than equity). Accordingly, our federal and state operating loss carryforwards include net windfall tax deductions from stock option exercises and RSU vesting of approximately $720,000 and $144,000 during the years ended December 31, 2020 and 2019, respectively.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References + Details

16. MAJOR CUSTOMERS AND RELATED INFORMATION

12 Months Ended

Dec. 31, 2020

Revenue from Contract with Customer [Abstract]

MAJOR CUSTOMERS AND RELATED INFORMATION

Major Customers

For the year ended December 31, 2020, revenues from two distributors accounted for approximately 17% and 16% of revenues with no other single customer accounting for more than 10% of total revenues. These distributors accounted for 28% and 26% of accounts receivable at December 31, 2020. For the year ended December 31, 2019, revenues from one distributor accounted for 22% revenues with no other single customer accounting for more than 10% of total revenues. This customer accounted for 54% of accounts receivable at December 31, 2019.

The following table summarizes revenues by geographic region. Revenues are attributed to countries based on customer’s delivery location.

	For the Year
	Ended December 31,
	2020		2019
Americas	$	1,442,822	$	481,622
Europe, Middle East and Africa		1,046,499		116,547
Asia Pacific		1,454,736		98,621
	$	3,944,057	$	696,790

See Note 1 – Concentrations of Risks for information on reliance on suppliers.

- 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
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-Name Accounting Standards Codification
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	12 Months Ended
	Dec. 31, 2020
Accounting Policies [Abstract]
Organization and Business Description	Wrap Technologies, Inc., a Delaware corporation (the “Company”, “we”, “us”, and “our”), is a publicly traded company with our Common Stock, par value $0.0001 per share (“Common Stock”), listed on the Nasdaq Capital Market (“Nasdaq”) under the trading symbol “WRAP”. The Company is a developer and supplier of public safety products and training services for law enforcement and security personnel. The Company’s primary product is the BolaWrap® remote restraint device. The principal markets for the Company’s proprietary products and services are in North and South America, Europe, Middle East and Asia.
Principles of Consolidation	The Company has one wholly-owned subsidiary, Wrap Reality, Inc. formed in December 2020 (see Note 3) and has commenced selling its virtual reality training system primarily targeting law enforcement agencies. The consolidated financial statements include the accounts of this subsidiary after elimination of intercompany transactions and accounts.
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., share-based compensation valuation, allowance for doubtful accounts, valuation of inventory and intangible assets, warranty reserve, accrued costs, valuation allowance related to deferred tax assets 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.
Concentrations of Risk	Credit Risk – Financial instruments that potentially subject the Company to concentration of credit risk consisted primarily of cash, cash equivalents, U.S. treasury bills and accounts receivable from customers. The Company maintains its cash and cash equivalent 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 and are managed within established guidelines to mitigate risks. To date, the Company has not experienced any losses on its cash and cash equivalents. Concentrations of Accounts Receivable and Revenue – The Company has a limited number of domestic and international customers. The Company may experience concentrations in both accounts receivable and revenue due to the timing of sales and collections of related payments (see Note 16). 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, 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 December 2019, a novel strain of coronavirus (“COVID-19”) emerged in China. In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it spread to other countries and infections have been reported globally. The extent to which the coronavirus impacts our operations will continue to depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. In particular, the continued spread of the coronavirus globally or emergence of new strains could adversely impact our operations, including our manufacturing and supply chain. Our operations could be negatively affected if employees are quarantined as the result of exposure to a contagious illness. Similarly, travel restrictions resulting from the rapid spread of contagious illnesses may have a material adverse effect on our business and results of operations.
Cash and Cash Equivalents	The Company considers all highly liquid investments purchased with original maturities of three months or less from the purchase date to be cash equivalents. Cash equivalents consist primarily of amounts invested in Money Market Funds and United States (“U.S.”) Treasury bills and are stated at fair value.
Short-Term investments	The Company’s short-term investments consist of U.S. Treasury bills with original maturities beyond three months at the date of purchase and one year or less from the balance sheet date. As of December 31, 2020, all of the Company’s short-term investments were classified as available-for-sale and are carried at estimated fair value with any unrealized gains and losses, unrelated to credit loss factors, included in other comprehensive income in our consolidated statements of stockholders’ equity.
Share 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 share-based transactions with non-employees. Share-based compensation expense recognized during 2020 and 2019 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 share-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. We determine the amount of share-based compensation expense based on awards that we ultimately expect to vest and account for forfeitures as they occur. The fair value of share-based compensation is amortized to compensation expense over the vesting term.
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 7,566,502 and 9,857,457 shares of Common Stock were outstanding at December 31, 2020 and 2019, respectively. 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.
Accounts Receivable and Allowance for Doubtful Accounts	The Company carries accounts receivable at historical cost, less an allowance for doubtful accounts. On a periodic basis, the Company evaluates accounts receivable and establishes an allowance for doubtful accounts for estimated losses. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, when available any published or estimated credit default rates for entities that represent our customer base, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. Our monitoring activities include account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. At December 31, 2020 the Company had an allowance of $10,140 resulting in part from global uncertainty resulting from the COVID-19 virus. There was no allowance for doubtful accounts recorded at December 31, 2019. 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 December 31, 2020 and 2019 the Company had no reserve for obsolescence.
Contract Manufacturers	The Company employs contract manufacturers for production of certain components and sub-assemblies. The Company may provide parts and components to such parties from time to time, but recognizes no revenue or markup on such transactions. During 2020 and 2019, the Company performed assembly of products in-house using components and sub-assemblies from a variety of contract manufacturers and suppliers.
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.
Business Combinations	Transactions in which the Company obtains control of a business are accounted for according to the acquisition method as described in ASC 805, Business Combinations. The assets acquired and liabilities assumed are recognized and measured at their fair values as of the date control is obtained. The Company measures goodwill as the excess of consideration transferred, which the Company also measures at fair value, over the net of the acquisition date amounts of the identifiable assets acquired and liabilities assumed. Acquisition related costs in connection with a business combination are expensed as incurred. Contingent consideration is recognized and measured at fair value at the acquisition date and until paid is re-measured on a recurring basis and classified as a liability.
Intangible Assets	Intangible assets consisted of (a) capitalized legal fees and filing costs related to obtaining patents and trademarks, (b) customer agreements, tradenames, software, non-solicitation and non-compete agreements acquired in business combinations and valued at fair value at the acquisition date, and (c) the purchase cost of indefinite-lived website domains. The estimated useful lives of identifiable intangible assets with definite useful lives have been estimated to be between one and twenty years. Purchased website domain costs with an indefinite useful life are not subject to amortization, but are subject to an annual impairment test, by comparing their carrying amount with their corresponding fair value. For any given intangible asset with an indefinite useful life, if its fair value exceeds its carrying amount no impairment loss shall be recognized. The carrying value of intangibles is periodically reviewed and impairments, if any, are recognized when the future undiscounted cash flows realized from the assets is less than its carrying value.
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 years ended December 31, 2020 and 2019.
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, 2020, the Company has no warrants or other derivative financial instruments that require separate accounting as liabilities and periodic revaluation.
Advertising and Promotion Costs	Advertising costs are charged to expense as incurred and were $287,266 and $165,119 for the years ended December 31, 2020 and 2019, respectively. The Company also incurred product promotion costs for demonstration products delivered to prospective customers of $747,443 and $433,172 for the years ended December 31, 2020 and 2019, respectively. Advertising and promotion costs are included in selling, general and administrative expenses in the accompanying statements of operations.
Demonstration and Training Costs	The Company maintains a demonstration and training department as a part of its sales and marketing activities and does not charge for product demonstrations or training. Training is not a condition or requirement of sale as most sales are made through distributors to their end customers. The Company conducts local and regional in-person, webinar and on-line demonstrations and use of force and escalation training to support law enforcement agencies with no purchase requirement. Such training, when provided, may occur before or after initial or subsequent purchase or field deployment of the Company’s products. The Company believes that law enforcement trainers and officers that have seen demonstrations or have been trained about its products are more supportive of their departments purchase and deployment of product.
Research and Development Costs	Research and development costs consist primarily of contract development costs and experimental work materials and certain startup costs. Research and development costs with no alternative use are expensed as incurred.
Leases	At the commencement date of a lease, the Company recognizes a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term. As its leases typically do not provide an implicit rate and due to lack of borrowing history or ability, the Company uses as its incremental borrowing rate a low-grade debt rate published by the Federal Reserve Bank. The right-of-use (“ROU”) asset is measured at cost, which includes the initial measurement of the lease liability and initial direct costs incurred by the Company and excludes lease incentives. Lease liabilities are recorded as a current liability for the portion due within one year with the balance as a long-term liability. ROU assets are recorded as operating lease right-of-use asset, net.
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 $75,106 and $22,177 for the years ended December 31, 2020 and 2019, respectively. Actual revenues from shipping and handling were $62,679 and $21,414 for the years ended December 31, 2020 and 2019, respectively.
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 $48,140 and $13,923 at December 31, 2020 and 2019. Actual warranty costs could differ from estimates.
Segment Information	ASC Topic 280, “Segment Reporting,” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. The Company operates as a single segment and will evaluate additional segment disclosure requirements as it expands its operations.
Income Taxes	No income tax expense was recorded for the periods ended December 31, 2020 and 2019 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, 2020 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, 2020.
Recent Issued Accounting Guidance	Adopted 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. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (“Topic 326”): Measurement of Credit Losses on Financial Instruments which was further updated and clarified by the FASB through issuance of additional related ASUs. Under ASU 2016-13, existing guidance on reporting credit losses for trade and other receivables and available for sale debt securities have been replaced with a new forward-looking “expected loss” model that has resulted in the earlier recognition of allowances for losses. The adoption of these standards in the first quarter ended March 31, 2020 had no impact on the Company’s financial statements or disclosures. As part of our assessment of the adequacy of our allowances for credit losses, we consider a number of factors including, but not limited to, customer credit ratings, bankruptcy filings, published or estimated credit default rates, age of receivables, expected loss rates and collateral exposures. Other Guidance: 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. In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (“Subtopic 470-20”) and Derivatives and Hedging—Contracts in Entity’s Own Equity “(Subtopic 815-40”): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements and related disclosures. 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. ACQUISITION (Tables)

12 Months Ended

Dec. 31, 2020

Business Combination, Description [Abstract]

Assets and liabilities assumed

Equipment	$	10,250
Software		460,250
Customer contracts		40,000
Tradenames		2,000
Noncompete agreements		10,000
Deferred revenue		(15,000	)
Total consideration	$	507,500

Intangible assets

Description		Useful life in years			Fair Value
Software	5		$	460,250
Customer contracts	1			40,000
Tradenames	1			2,000
Noncompete agreements	2			10,000
Total acquired intangible assets					$	512,250

4. FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2020

Financial Instruments, Owned, at Fair Value [Abstract]

Level 1 Instruments

	As of December 31, 2020
	Adjusted		Unrealized		Unrealized		Market
	Cost		Gains		Losses		Value
Level 1:
Money Market Funds	$	6,034,757	$	-	$	-	$	6,034,757
U.S. Treasury securities considered cash equivalents		9,997,812		-		-		9,997,812
U.S. Treasury securities in short-term investments		24,979,511		14,849				24,994,360
Total Financial Assets	$	41,012,080	$	14,849	$	-	$	41,026,929

5. INVENTORIES, NET (Tables)

12 Months Ended

Dec. 31, 2020

Inventory Disclosure [Abstract]

Schedule of inventories

	December 31,		December 31,
	2020		2019
Finished goods	$	1,248,893	$	653,323
Work in process		64,451		413
Raw materials		1,342,046		1,590,805
Inventories, net	$	2,655,390	$	2,244,541

6. PROPERTY AND EQUIPMENT, NET (Tables)

12 Months Ended

Dec. 31, 2020

Property, Plant and Equipment [Abstract]

Property and equipment

	December 31,			December 31,
	2020			2019
Production and lab equipment	$	147,781		$	44,454
Tooling		80,936			59,004
Computer equipment		180,573			83,368
Furniture, fixtures and improvements		165,465			128,782
		574,755			315,608
Accumulated depreciation		(217,468	)		(72,732	)
Property and equipment, net	$	357,287		$	242,876

7. INTANGIBLE ASSETS, NET (Tables)

12 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of intangible assets

	December 31,			December 31,
	2020			2019
Amortizable intangible assets:
Patents	$	279,294		$	176,425
Trademarks		83,964			57,919
Purchased software		662,250			-
Other		50,000			-
		1,075,508			234,344
Accumulated amortization		(22,587	)		(4,061	)
Total amortizable		1,052,921			230,283
Indefinite life assets (non-amortizable)		343,563			-
Total intangible assets-net	$	1,396,484		$	230,283

Amortization of intangible assets

2021	$	186,266
2022		150,766
2023		145,766
2024		145,766
2025		145,766
Thereafter		278,591
Total estimated amortization expense	$	1,052,921

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2020

Payables and Accruals [Abstract]

Summary of accrued liabilities

	December 31,		December 31,
	2020		2019
Patent and legal costs	$	64,800	$	9,851
Accrued compensation		562,792		144,193
Warranty costs		48,140		13,923
Consulting costs		2,083		7,500
Taxes and other		43,260		18,827
Accrued liabilities	$	721,075	$	194,294

9. LEASES (Tables)

12 Months Ended

Dec. 31, 2020

Leases [Abstract]

Operating lease obligations

Operating lease liability- short term	$	94,011
Operating lease liability - long term		56,006
Total Operating Lease Liability	$	150,017

Future lease payments

2021		101,406
2022		57,328
Total future minimum lease payments		158,734
Less imputed interest		(8,717	)
Total	$	150,017

11. STOCKHOLDERS' EQUITY (Tables)

12 Months Ended

Dec. 31, 2020

Stockholders' Equity:

Warrant activity

	Number			Average Purchase Price Per Share
Shares purchasable under outstanding warrants at December 31, 2018		5,017,181		$	4.82
Stock purchase warrants issued		2,076,922		$	6.62
Stock purchase warrants exercised		(473,483	)	$	4.46
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		(5,155,976	)	$	5.08
Stock purchase warrants cancelled		(324,401	)	$	5.00
Shares purchasable under outstanding warrants at December 31, 2020		3,206,910		$	6.36

Summary of stock purchase warrants

	Number of		Exercise Price
Description	Common Shares		Per Share		Expiration Date
Purchase Warrants		1,661,397	$	6.50	June 18, 2021
Agent Warrants		153,846	$	8.125	June 18, 2021
Purchase Warrants		1,391,667	$	6.00	June 1, 2022
		3,206,910

12. SHARE-BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 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, 2018		2,067,500		$	1.68		4.44
Granted		1,000,000		$	5.41		-
Exercised		(38,750	)	$	1.50		-
Forfeited, cancelled, expired		(100,000	)	$	1.50		-
Outstanding December 31, 2019		2,928,750		$	2.96		3.71
Granted		1,423,836		$	6.66		-
Exercised		(371,000	)	$	1.90		-
Forfeited, cancelled, expired		(50,000	)	$	3.00		-
Outstanding December 31, 2020		3,931,586		$	4.41		4.89		$	5,176,337
Vested and exercisable at December 31, 2020		2,091,084		$	2.68		2.60		$	4,965,155

Assumptions used to compute the fair value of options granted

	For the Year Ended
	December 31,
	2020			2019
Expected stock price volatility		47	%		49	%
Risk-free interest rate		0.38	%		2.41	%
Forfeiture rate		0	%		0	%
Expected dividend yield		0	%		0	%
Expected life of options - years		5.64			3.50
Weighted-average fair value of options granted	$	2.90		$	2.06

Stock options outstanding

				Weighted
				Average		Weighted				Weighted
				Remaining		Average				Average
Range of		Number		Contractual		Exercise		Number		Exercise
Exercise Prices		Outstanding		Life (Years)		Price		Exercisable		Price
$	1.50		1,422,750		2.39	$	1.50		1,422,750	$	1.50
$	3.15 - $3.61		85,000		2.86	$	3.75		85,000	$	3.75
$	4.26 - $6.58		2,073,836		5.89	$	5.29		583,334	$	5.41
$	11.22		350,000		9.58	$	11.22		-		-

Service-based RSU activity

				Weighted Average		Weighted Average
	Service-Based			Grant Date		Vesting
	RSU's			Fair Value			Period
Unvested at December 31, 2018		-			-
Granted - service based		308,087		$	6.77	3.00 Years
Unvested at December 31, 2019		308,087		$	6.77
Granted - service based		310,874		$	6.02	3.02 Years
Granted - performance based		35,211		$	4.26
Vested		(144,687	)	$	5.17
Forfeited and cancelled		(81,479	)	$	6.47
Unvested at December 31, 2020		428,006		$	6.13	2.27 Years

Stock-based compensation

	For the Year Ended
	December 31,
	2020		2019
Selling, general and administrative	$	1,956,818	$	1,410,095
Research and development		279,925		126,001
Total share-based expense	$	2,236,743	$	1,536,096

- 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

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Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
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-Name Accounting Standards Codification
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+ Details

15. INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Provision for (benefit from) income taxes

	Year Ended December 31,
	2020			2019
Current tax benefit	$	-		$	-
Deferred tax benefit		3,158,000			1,800,000
Change in valuation allowance		(3,158,000	)		(1,800,000	)
Income tax benefit (provision)	$	-		$	-

Reconciliation of the provision for income taxes

	Year Ended December 31,
	2020			2019
Income taxes benefit computed at federal statutory rate	$	2,642,000		$	1,748,000
State income taxes, net of federal effect		216,000			114,000
Permanent differences and other		300,000			(62,000	)
Change in valuation allowance		(3,158,000	)		(1,800,000	)
Income tax benefit (provision)	$	-		$	-

Deferred tax assets and liabilities

	December 31,
	2020			2019
Deferred tax assets:
Net operating losses	$	5,444,000		$	2,430,000
Research tax credits		45,000			26,000
Stock compensation		542,000			239,000
Accruals and other		169,000			9,000
		6,200,000			2,704,000
Deferred tax liabilities:
Depreciation and other		396,000			58,000
		396,000			58,000
Net deferred tax assets		5,804,000			2,646,000
Less valuation allowance		(5,804,000	)		(2,646,000	)
Net deferred taxes after valuation allowance	$	-		$	-

16. MAJOR CUSTOMERS AND RELATED INFORMATION (Tables)

12 Months Ended

Dec. 31, 2020

Revenue from Contract with Customer [Abstract]

Summary of revenues by geographic region

	For the Year
	Ended December 31,
	2020		2019
Americas	$	1,442,822	$	481,622
Europe, Middle East and Africa		1,046,499		116,547
Asia Pacific		1,454,736		98,621
	$	3,944,057	$	696,790

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Accounting Policies [Abstract]
Antidilutive securities	7,566,502	9,857,457
Advertising costs	$ 287,266	$ 165,119
Product promotion costs	747,443	433,172
Shipping and handling costs	75,106	22,177
Revenues from shipping and handling	62,679	21,414
Warranty reserve	$ 48,140	$ 13,923

3. ACQUISITION (Details)	Dec. 31, 2020 USD ($)
Fair value of assets and liabilities acquired	$ 507,500
Equipment
Fair value of assets and liabilities acquired	10,250
Software
Fair value of assets and liabilities acquired	460,250
Customer Contracts
Fair value of assets and liabilities acquired	40,000
Tradenames
Fair value of assets and liabilities acquired	2,000
Noncompete Agreements
Fair value of assets and liabilities acquired	10,000
Deferred Revenue
Fair value of assets and liabilities acquired	$ (15,000)

3. ACQUISITION (Details 1)	12 Months Ended
3. ACQUISITION (Details 1)	Dec. 31, 2020 USD ($)
Intangible assets	$ 512,250
Software
Intangible assets	$ 460,250
Useful life	5 years
Customer Contracts
Intangible assets	$ 40,000
Useful life	1 year
Tradenames
Intangible assets	$ 2,000
Useful life	1 year
Noncompete Agreements
Intangible assets	$ 10,000
Useful life	2 years

4. FINANCIAL INSTRUMENTS (Details)	12 Months Ended
4. FINANCIAL INSTRUMENTS (Details)	Dec. 31, 2020 USD ($)
Adjusted Cost	$ 41,012,080
Unrealized Gains	14,849
Unrealized Losses	0
Market Value	41,026,929
Money Market Funds
Adjusted Cost	6,034,757
Unrealized Gains	0
Unrealized Losses	0
Market Value	6,034,757
U.S. Treasury securities considered cash equivalents
Adjusted Cost	9,997,812
Unrealized Gains	0
Unrealized Losses	0
Market Value	9,997,812
U.S. Treasury securities in short-term investments
Adjusted Cost	24,979,511
Unrealized Gains	14,849
Unrealized Losses	0
Market Value	$ 24,994,360

5. INVENTORIES, NET (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Finished goods	$ 1,248,893	$ 653,323
Work in process	64,451	413
Raw materials	1,342,046	1,590,805
Inventory	$ 2,655,390	$ 2,244,541

5. INVENTORIES, NET (Details Narrative) - USD ($)	12 Months Ended
5. INVENTORIES, NET (Details Narrative) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Inventory write down	$ (68,108)	$ (193,506)

6. PROPERTY AND EQUIPMENT, NET (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Property and equipment, gross	$ 574,755	$ 315,608
Accumulated depreciation	(217,468)	(72,732)
Property and equipment, net	357,287	242,876
Laboratory Equipment
Property and equipment, gross	147,781	44,454
Tooling
Property and equipment, gross	80,936	59,004
Computer Equipment
Property and equipment, gross	180,573	83,368
Furniture and Fixtures
Property and equipment, gross	$ 165,465	$ 128,782

4. PROPERTY AND EQUIPMENT, NET (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 144,736	$ 44,239

7. INTANGIBLE ASSETS, NET (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Intangible assets, gross	$ 1,075,508	$ 234,344
Accumulated amortization	(22,587)	(4,061)
Total amortizable	1,052,921	230,283
Indefinite life assets (non-amortizable)	343,563	0
Intangible assets, net	1,396,484	230,283
Patents
Intangible assets, gross	279,294	176,425
Trademarks
Intangible assets, gross	83,964	57,919
Purchased software
Intangible assets, gross	662,250	0
Other
Intangible assets, gross	$ 50,000	$ 0

7. INTANGIBLE ASSETS, NET (Details 1)	Dec. 31, 2020 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2021	$ 186,266
2022	150,766
2023	145,766
2024	145,766
2025	145,766
Thereafter	278,591
Total estimated amortization expense	$ 1,052,921

7. INTANGIBLE ASSETS, NET (Details Narrative) - USD ($)	12 Months Ended
7. INTANGIBLE ASSETS, NET (Details Narrative) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 18,526	$ 2,706

8. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Accrued liabilities	$ 721,075	$ 194,294
Patent Costs
Accrued liabilities	64,800	9,851
Accrued Compensation
Accrued liabilities	562,792	144,193
Warranty Costs
Accrued liabilities	48,140	13,923
Consulting Costs
Accrued liabilities	2,083	7,500
Taxes and Other
Accrued liabilities	$ 43,260	$ 18,827

9. LEASES (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Leases [Abstract]
Operating lease liability- short term	$ 94,011	$ 128,131
Operating lease liability - long term	56,006	150,018
Total operating lease liability	$ 150,017	$ 278,149

9. LEASES (Details 1) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Leases [Abstract]
2021	$ 101,406
2022	57,328
Total future minimum lease payments	158,734
Less imputed interest	(8,717)
Total	$ 150,017	$ 278,149

9. LEASES (Details Narrative) - USD ($)	12 Months Ended
9. LEASES (Details Narrative) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Leases [Abstract]
Amortization of ROU operating lease assets	$ 121,844	$ 80,069
Operating lease expense	$ 137,228	$ 94,599
Weighted average remaining lease term	1 year 6 months 14 days
Weighted average discount rate	7.00%

11. STOCKHOLDERS' EQUITY (Details) - $ / shares	12 Months Ended
11. STOCKHOLDERS' EQUITY (Details) - $ / shares	Dec. 31, 2020	Dec. 31, 2019
Stockholders' Equity:
Warrants outstanding, beginning	6,620,620	5,017,181
Issued	2,066,667	2,076,922
Exercised	(5,155,976)	(473,483)
Cancelled	(324,401)	0
Warrants outstanding, ending	3,206,910	6,620,620
Average purchase price per share outstanding, beginning	$ 5.41	$ 4.82
Issued	6.00	6.62
Exercised	5.08	4.46
Cancelled	5.00	.00
Average purchase price per share outstanding, ending	$ 6.36	$ 5.41

11. STOCKHOLDERS' EQUITY (Details 1)	12 Months Ended
11. STOCKHOLDERS' EQUITY (Details 1)	Dec. 31, 2020 USD ($) $ / shares
Number of common shares	$ 3,206,910
Purchase Warrants
Number of common shares	$ 1,661,397
Exercise price per share \| $ / shares	$ 6.50
Expiration date	Jun. 18, 2021
Agent Warrants
Number of common shares	$ 153,846
Exercise price per share \| $ / shares	$ 8.125
Expiration date	Jun. 18, 2021
Purchase Warrants
Number of common shares	$ 1,391,667
Exercise price per share \| $ / shares	$ 6.00
Expiration date	Jun. 01, 2022

11. STOCKHOLDERS' EQUITY (Details Narrative) - $ / shares	Dec. 31, 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

12. SHARE-BASED COMPENSATION (Details) - USD ($)	12 Months Ended
12. SHARE-BASED COMPENSATION (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Share-based Payment Arrangement [Abstract]
Number of options outstanding, beginning	2,928,750	2,067,500
Number of options granted	1,423,836	1,000,000
Number of options exercised	(371,000)	(38,750)
Number of options forfeited/cancelled/expired	(50,000)	(100,000)
Number of options outstanding, ending	3,931,586	2,928,750
Weighted average exercise price outstanding, beginning	$ 2.96	$ 1.68
Weighted average exercise price granted	6.66	5.41
Weighted average exercise price exercised	1.90	1.50
Weighted average exercise price forfeited/cancelled/expired	3.00	1.50
Weighted average exercise price outstanding, ending	4.41	$ 2.96
Weighted average exercise price vested and exercisable	$ 2.68
Weighted average remaining contractual term outstanding, beginning	3 years 8 months 16 days	4 years 5 months 8 days
Weighted average remaining contractual term outstanding, ending	4 years 10 months 20 days	3 years 8 months 16 days
Weighted average remaining contractual term vested and exercisable	2 years 7 months 6 days
Aggregate intrinsic value outstanding	$ 5,176,337
Aggregate intrinsic value vested and exercisable	$ 4,965,155

12. SHARE-BASED COMPENSATION (Details 1) - $ / shares	12 Months Ended
12. SHARE-BASED COMPENSATION (Details 1) - $ / shares	Dec. 31, 2020	Dec. 31, 2019
Share-based Payment Arrangement [Abstract]
Expected stock price volatility	47.00%	49.00%
Risk-free interest rate	0.38%	2.41%
Forfeiture rate	0.00%	0.00%
Expected dividend yield	0.00%	0.00%
Expected life of options - years	5 years 7 months 20 days	3 years 6 months
Weighted-average fair value of options granted	$ 2.90	$ 2.06

12. SHARE-BASED COMPENSATION (Details 2) - $ / shares	12 Months Ended
12. SHARE-BASED COMPENSATION (Details 2) - $ / shares	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Number of options outstanding	3,931,586	2,928,750	2,067,500
Weighted average remaining contractual term outstanding	4 years 10 months 20 days	3 years 8 months 16 days
Weighted average exercise price outstanding	$ 4.41	$ 2.96	$ 1.68
Weighted average exercise price exerciseable	$ 2.68
$1.50
Number of options outstanding	1,422,750
Weighted average remaining contractual term outstanding	3 years 4 months 20 days
Weighted average exercise price outstanding	$ 1.50
Number exercisable	1,422,750
Weighted average exercise price exerciseable	$ 1.50
$3.15 - $3.61
Number of options outstanding	85,000
Weighted average remaining contractual term outstanding	2 years 10 months 10 days
Weighted average exercise price outstanding	$ 3.75
Number exercisable	85,000
Weighted average exercise price exerciseable	$ 3.75
$4.26 - $6.58
Number of options outstanding	2,073,836
Weighted average remaining contractual term outstanding	5 years 10 months 20 days
Weighted average exercise price outstanding	$ 5.29
Number exercisable	583,334
Weighted average exercise price exerciseable	$ 5.41
$11.22
Number of options outstanding	350,000
Weighted average remaining contractual term outstanding	9 years 6 months 29 days
Weighted average exercise price outstanding	$ 11.22
Number exercisable	0
Weighted average exercise price exerciseable	$ .00

12. SHARE-BASED COMPENSATION (Details 3) - $ / shares	12 Months Ended
12. SHARE-BASED COMPENSATION (Details 3) - $ / shares	Dec. 31, 2020	Dec. 31, 2019
Share-based Payment Arrangement [Abstract]
Unvested RSUs outstanding, beginning	308,087	0
Granted - service based	310,874	308,087
Granted - performance based	35,211	0
Vested	144,687	0
Forfeited and cancelled	81,479	0
Unvested service-based RSUs outstanding, ending	428,006	308,087
Unvested RSUs grant date fair value, beginning	$ 6.77	$ .00
Grant date fair value, service based	6.02	6.77
Grant date fair value, performance based	4.26	.00
Vested	5.17	.00
Forfeited and cancelled	6.47	.00
Unvested RSUs grant date fair value, ending	$ 6.13	$ 6.77
Vesting period	2 years 3 months 7 days	3 years

12. SHARE-BASED COMPENSATION (Details 4) - USD ($)	12 Months Ended
12. SHARE-BASED COMPENSATION (Details 4) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Share-based compensation	$ 2,236,743	$ 1,536,096
Selling, General and Administrative
Share-based compensation	1,956,818	1,410,095
Research and Development
Share-based compensation	$ 279,925	$ 126,001

12. SHARE-BASED COMPENSATION (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Share-based Payment Arrangement [Abstract]
Service-based RSUs granted	310,874	308,087
Unrecognized compensation cost	$ 2,200,000
Unrecognized compensation cost, period of recognition	2 years 3 months 18 days

13. COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]
Royalties incurred	$ 143,390	$ 23,297
Purchase commitment	$ 2,200,000

14. RELATED PARTY TRANSACTIONS (Details Narrative)	12 Months Ended
14. RELATED PARTY TRANSACTIONS (Details Narrative)	Dec. 31, 2020 USD ($)
Norris [Member]
Payment to related party during period	$ 18,000
V3 [Member]
Payment to related party during period	$ 265,000

15. INCOME TAXES (Details) - USD ($)	12 Months Ended
15. INCOME TAXES (Details) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Current tax benefit	$ 0	$ 0
Deferred tax benefit	3,158,000	1,800,000
Change in valuation allowance	(3,158,000)	(1,800,000)
Income tax benefit (provision)	$ 0	$ 0

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

15. INCOME TAXES (Details 1) - USD ($)	12 Months Ended
15. INCOME TAXES (Details 1) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Income taxes benefit computed at federal statutory rate	$ 2,642,000	$ 1,748,000
State income taxes, net of federal effect	216,000	114,000
Permanent differences and other	300,000	(62,000)
Change in valuation allowance	(3,158,000)	(1,800,000)
Income tax benefit (provision)	$ 0	$ 0

- Definition

Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations.

+ References + Details

15. INCOME TAXES (Details 2) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Deferred tax assets:
Net operating losses	$ 5,444,000	$ 2,430,000
Research tax credits	45,000	26,000
Stock compensation	542,000	239,000
Accruals and other	169,000	9,000
Deferred tax assets	6,200,000	2,704,000
Deferred tax liabilities:
Depreciation and other	396,000	58,000
Deferred tax liabilities	396,000	58,000
Net deferred tax assets	5,804,000	2,646,000
Less valuation allowance	(5,804,000)	(2,646,000)
Net deferred taxes after valuation allowance	$ 0	$ 0

15. INCOME TAXES (Details Narrative) - USD ($)	Dec. 31, 2020	Dec. 31, 2019
Income Tax Disclosure [Abstract]
Operating loss carryforward	$ 720,000	$ 144,000

16. MAJOR CUSTOMERS AND RELATED INFORMATION (Details) - USD ($)	12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Revenues	$ 3,944,057	$ 696,790
Americas
Revenues	1,442,822	481,622
Europe, Middle East and Africa
Revenues	1,046,499	116,547
Asia Pacific
Revenues	$ 1,454,736	$ 98,621

- Definition

Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).

+ References

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+ Details