Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Apr. 16, 2019 | Jun. 30, 2018 | |
Document And Entity Information | |||
Entity Registrant Name | Grom Social Enterprises, Inc. | ||
Entity Central Index Key | 0001662574 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Public Float | $ 4,300,293 | ||
Entity Common Stock, Shares Outstanding | 144,926,927 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 | ||
Entity Small Business | true | ||
Entity Emerging Growth | true | ||
Entity Ex Transition Period | false | ||
Entity Shell Company | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Current Assets | ||
Cash and cash equivalents | $ 633,593 | $ 436,869 |
Accounts receivable, net | 1,123,493 | 445,388 |
Inventory, net | 9,018 | 426,998 |
Prepaid expenses and other current assets | 449,840 | 1,035,379 |
Total current assets | 2,215,944 | 2,344,634 |
Property and equipment, net | 1,036,313 | 849,893 |
Goodwill | 8,853,261 | 8,800,761 |
Intangible assets, net | 6,340,171 | 6,768,857 |
Deferred tax assets, net - noncurrent | 249,833 | 201,290 |
Other assets | 114,601 | 81,345 |
Total assets | 18,810,123 | 19,046,780 |
Current Liabilities | ||
Accounts payable | 682,285 | 882,504 |
Accrued liabilities | 1,433,037 | 1,592,726 |
Advanced payments and deferred revenues | 1,120,228 | 1,184,624 |
Convertible debentures, net current | 676,223 | 75,000 |
Senior secured promissory notes, net - current | 3,828,818 | 0 |
Related party payables | 1,181,645 | 2,076,640 |
Income taxes payable | 41,097 | 46,963 |
Total current liabilities | 8,963,333 | 5,858,457 |
Convertible debentures, net of loan discounts | 2,410,614 | 1,582,273 |
Senior secured promissory notes, net of loan discounts | 0 | 3,953,661 |
Contingent purchase consideration | 429,000 | 429,000 |
Other noncurrent liabilities | 224,797 | 237,495 |
Total liabilities | 12,027,744 | 11,941,886 |
Commitments and contingencies | ||
Stockholders' Equity | ||
Preferred stock, $0.001 par value. 25,000,000 shares authorized; zero shares issued and outstanding | 0 | 0 |
Common stock, $0.001 par value. 200,000,000 shares authorized; 138,553,655 and 124,373,548 shares issued and outstanding as of December 31, 2018 and December 31, 2017, respectively | 138,554 | 124,274 |
Common stock held in treasury, at cost, nil and nil shares held at December 31, 2018 and December 31, 2017, respectively | 0 | 0 |
Additional paid-in capital | 52,254,286 | 47,901,532 |
Accumulated earnings (deficit) | (45,457,207) | (40,843,568) |
Accumulated other comprehensive income | (153,254) | (77,344) |
Total stockholders' equity | 6,782,379 | 7,104,894 |
Total liabilities and equity | $ 18,810,123 | $ 19,046,780 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Common stock, par value | $ .001 | $ .001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 138,553,655 | 124,373,548 |
Common stock, shares outstanding | 138,553,655 | 124,373,548 |
Preferred stock, par value | $ .001 | $ .001 |
Preferred stock, shares authorized | 25,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Treasury shares | 0 | 0 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Loss - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | ||
Sales | $ 8,644,383 | $ 7,692,927 |
Cost of good sold | 4,378,658 | 4,248,372 |
Gross margin | 4,265,725 | 3,444,555 |
Operating expenses: | ||
Depreciation and amortization | 473,360 | 1,138,583 |
Selling and marketing | 216,548 | 279,586 |
General and administrative | 5,559,389 | 4,302,869 |
Professional fees | 1,522,881 | 1,809,571 |
Stock-based compensation | 369,318 | 2,658,633 |
Total operating expenses | 8,141,496 | 10,189,242 |
Income (loss) from operations | (3,875,771) | (6,744,687) |
Other income (expense) | ||
Interest income (expense), net | (1,021,801) | (659,293) |
Gain (loss) on settlement of debt | 0 | 0 |
Other gains (losses) | 35,136 | 1,392,017 |
Total other income (expense) | (986,665) | 732,724 |
Income (loss) before income taxes | (4,862,436) | (6,011,963) |
Provision for income taxes (benefit) | 14,944 | 33,696 |
Net income (loss) | $ (4,877,380) | $ (6,045,659) |
Basic and diluted earnings (loss) per common share | $ (0.04) | $ (0.06) |
Weighted average number of shares outstanding - basic and diluted | 128,081,259 | 109,579,213 |
Comprehensive loss: | ||
Net income (loss) | $ (4,877,380) | $ (6,045,659) |
Foreign currency translation adjustment | (75,910) | (24,709) |
Comprehensive income (loss) | $ (4,953,290) | $ (6,070,368) |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Preferred Stock | Common Stock | Treasury Stock | Additional Paid-In Capital | Retained Earnings / Accumulated Deficit | Other Comprehensive Income / Loss | Total |
Beginning balance, shares at Dec. 31, 2016 | 0 | 101,452,789 | |||||
Beginning balance, value at Dec. 31, 2016 | $ 0 | $ 101,454 | $ 0 | $ 41,195,941 | $ (34,797,909) | $ (54,656) | $ 6,444,830 |
Net income (loss) | (6,045,659) | (6,045,659) | |||||
Issuance of common stock in connection with the exercise of common stock purchase warrants, shares | 6,530,220 | ||||||
Issuance of common stock in connection with the exercise of common stock purchase warrants, value | $ 6,530 | 1,559,470 | 1,566,000 | ||||
Issuance of common stock as compensation to employees, officers and/or directors, shares | 1,156,931 | ||||||
Issuance of common stock as compensation to employees, officers and/or directors, value | $ 1,157 | 834,068 | 835,225 | ||||
Issuance of common stock in exchange for consulting, professional and other services, shares | 3,264,965 | ||||||
Issuance of common stock in exchange for consulting, professional and other services, value | $ 3,265 | 1,889,470 | 1,892,735 | ||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, shares | 1,045,870 | ||||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, value | $ 1,046 | 531,954 | 533,000 | ||||
Issuance of common stock in connection with the issuance of convertible debenture(s), shares | 150,305 | ||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), value | $ 150 | 78,172 | 78,322 | ||||
Issuance of common stock in connection with the acquisition of a business, shares | 300,000 | ||||||
Issuance of common stock in connection with the acquisition of a business, value | $ 300 | 146,700 | 147,000 | ||||
Issuance of common stock in connection with the acquisition of certain intangible assets, shares | 83,400 | ||||||
Issuance of common stock in connection with the acquisition of certain intangible assets, value | $ 83 | 59,917 | 60,000 | ||||
Conversion of convertible debentures and accrued interest into common stock, shares | 24,324 | ||||||
Conversion of convertible debentures and accrued interest into common stock, value | $ 24 | 17,475 | 17,499 | ||||
Recapitalization, shares | 10,264,744 | ||||||
Recapitalization, value | $ 10,265 | (235,043) | (224,778) | ||||
Stock-based compensation expense related to stock options | 1,823,408 | 1,823,408 | |||||
Ending balance, shares at Dec. 31, 2017 | 0 | 124,273,548 | |||||
Ending balance, value at Dec. 31, 2017 | $ 0 | $ 124,274 | 0 | 47,901,532 | (40,843,568) | (77,344) | 7,104,894 |
Net income (loss) | (4,877,380) | (4,877,380) | |||||
Change in foreign currency translation | (75,910) | (75,910) | |||||
Adjustment due to the adoption of ASC 606 | 263,741 | 263,741 | |||||
Issuance of common stock in connection with sales made under private offerings, shares | 3,854,869 | ||||||
Issuance of common stock in connection with sales made under private offerings, value | $ 3,855 | 604,863 | 608,718 | ||||
Issuance of common stock in connection with the exercise of common stock purchase warrants, shares | 256,455 | ||||||
Issuance of common stock in connection with the exercise of common stock purchase warrants, value | $ 256 | 61,244 | 61,500 | ||||
Issuance of common stock as compensation to employees, officers and/or directors, shares | 1,200,321 | ||||||
Issuance of common stock as compensation to employees, officers and/or directors, value | $ 1,200 | 457,618 | 458,808 | ||||
Issuance of common stock in exchange for consulting, professional and other services, shares | 2,385,505 | ||||||
Issuance of common stock in exchange for consulting, professional and other services, value | $ 2,386 | 822,784 | 825,170 | ||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, shares | 3,995,304 | ||||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, value | $ 3,995 | 1,317,381 | 1,321,376 | ||||
Issuance of common stock in connection with the issuance of convertible debenture(s), shares | 1,432,653 | ||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), value | $ 1,433 | 522,168 | 523,601 | ||||
Issuance of common stock in connection with the amendment of terms of promissory note(s), shares | 805,000 | ||||||
Issuance of common stock in connection with the amendment of terms of promissory note(s), value | $ 805 | 481,445 | 482,250 | ||||
Issuance of common stock in connection with the acquisition of a business, shares | 150,000 | ||||||
Issuance of common stock in connection with the acquisition of a business, value | $ 150 | 52,350 | 52,500 | ||||
Conversion of convertible debentures and accrued interest into common stock, shares | 200,000 | ||||||
Conversion of convertible debentures and accrued interest into common stock, value | $ 200 | 29,800 | 300,000 | ||||
Recognition of beneficial conversion features related to convertible debentures | 801 | 801 | |||||
Stock-based compensation expense related to stock options | 2,300 | 2,300 | |||||
Ending balance, shares at Dec. 31, 2018 | 0 | 138,553,655 | |||||
Ending balance, value at Dec. 31, 2018 | $ 0 | $ 138,554 | $ 0 | $ 52,254,286 | $ (45,457,207) | $ (153,254) | $ 6,782,379 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash flows from operating activities of continuing operations: | ||
Net income (loss) | $ (4,877,380) | $ (6,045,659) |
Adjustments to reconcile net loss to cash used in operating activities: | ||
Depreciation and amortization | 824,241 | 844,294 |
Amortization of debt discount | 628,423 | 141,278 |
Common stock issued for financing costs | 2,250 | 17,499 |
Common stock issued in exchange for fees and services | 753,170 | 956,705 |
Deferred taxes | (48,544) | (8,240) |
Stock-based compensation | 461,118 | 2,376,835 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (232,540) | (245,867) |
Inventory | (212,259) | (16,458) |
Prepaid expenses and other current assets | 657,538 | (200,558) |
Other assets | (33,256) | (18,882) |
Accounts payable | (28,742) | (74,775) |
Accrued liabilities | (230,081) | 318,547 |
Advanced payments and deferred revenues | (64,396) | 406,721 |
Income taxes payable and other noncurrent liabilities | (18,564) | (36,689) |
Related party payables | 105,005 | 315,520 |
Net cash provided by (used in) operating activities | (1,865,601) | (1,269,729) |
Cash flows from investing activities: | ||
Cash acquired in acquisition of business | 0 | 182 |
Purchase of fixed assets | (581,975) | (155,420) |
Net cash provided by (used in) investing activities | (581,975) | (155,238) |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock, net of issuance costs | 608,717 | 0 |
Proceeds from exercise of common stock purchase warrants, net of issuance costs | 61,500 | 1,511,000 |
Proceeds from issuance of convertible debentures | 1,914,702 | 0 |
Repayments of senior secured promissory notes | (10,000) | 0 |
Proceeds from issuance of senior, secured promissory notes | 0 | 32,000 |
Repayments of convertible debentures | (75,000) | (125,000) |
Net cash provided by (used in) financing activities | 2,499,919 | 1,418,000 |
Effect of exchange rates on cash and cash equivalents | 144,381 | (24,708) |
Net increase (decrease) in cash and cash equivalents | 196,724 | (31,675) |
Cash and cash equivalents at beginning of period | 436,869 | 443,494 |
Cash and cash equivalents at end of period | 633,593 | 436,869 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 277,149 | 0 |
Cash paid for income taxes | 0 | 0 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Common stock issued related to acquisition of business | 52,500 | 0 |
Common stock issued related to acquisition of intangible assets | 0 | 60,000 |
Common stock issued for financing costs incurred in connection with convertible and promissory notes | 1,003,621 | 0 |
Common stock issued in connection with long term service contracts | 72,000 | 0 |
Common stock issued to reduce convertible and promissory notes payable | 30,000 | 500,000 |
Common stock issued to reduce accounts payable and other accrued liabilities | 1,321,376 | 33,000 |
Contingent purchase consideration | 0 | 362,500 |
Debt issued related to acquisition of a business | 0 | 1,000,000 |
Discount for beneficial conversion features on convertible debentures | $ 801 | $ 60,123 |
1. Nature of Operations
1. Nature of Operations | 12 Months Ended |
Dec. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | 1. NATURE OF OPERATIONS Effective August 17, 2017 (the “Effective Date”), Grom Social Enterprises, Inc. (the “Company”, “Grom” “we”, “us” or “our”) a Florida corporation f/k/a Illumination America, Inc. (“Illumination”), consummated the acquisition of Grom Holdings, Inc. (“Grom Holdings”). Pursuant to the terms of the Share Exchange Agreement (“Share Exchange”) that was entered into on May 15, 2017, the Company amended its Articles of Incorporation to increase its authorized capital to 200,000,000 shares of common stock, as well as to change its name to “Grom Social Enterprises, Inc.” On the Effective Date, the Company issued an aggregate of 110,853,883 shares of its common stock to the Grom Holdings shareholders, pro rata to their respective ownership percentage. Each share of Grom Holdings was exchanged for 4.17 shares of Illumination common stock. As a result, the stockholders of Grom Holdings are now stockholders of the Company and own approximately 92% of the Company’s issued and outstanding shares of common stock. As a result of the acquisition of Grom Holdings, Inc. the Company now operates its business through five wholly-owned subsidiaries, including: · Grom Social, Inc. (“Grom Social”) was incorporated in the State of Florida on March 5, 2012 and operates our social media network designed for children. · TD Holdings Limited (“TD Holdings”), which was acquired in July 2016, was incorporated in Hong Kong on September 15, 2005. Its operations are conducted through its subsidiary companies, Top Draw Animation Hong Kong Limited (“TDAHK”) and Top Draw Animation, Inc (“Top Draw” or “TDA”). The group’s principal activities are the production of animated films based in Manila, the Philippines. · Grom Educational Services, Inc. (“GES”), was incorporated in the State of Florida on January 17, 2017, and operates our NetSpective Webfiltering services to schools and libraries. · Grom Nutritional Services, Inc. (“GNS”) was incorporated in the State of Florida on April 19, 2017. We intend to market and distribute four flavors of a nutritional supplement to children through GNS. GNS did not record any revenue in 2018. · Illumination America Lighting, Inc. (“IAL”), was incorporated in the State of Florida on August 21, 2017. IAL operates our LED lighting business that was our principal business prior to the Share Exchange. IAL did not record any revenue in 2018. Retroactive Application of the Share Exchange Ratio All references to Common Share totals or values in this Form 10-Q, unless otherwise stated, have been adjusted, retroactively, to reflect the Share Exchange ratio of 4.17 as of August 17, 2017. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Going Concern The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these financial statements. On a consolidated basis, the Company has incurred significant operating losses since inception. Because the Company does not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about the Company’s ability to continue as a going concern. Therefore, the Company will need to raise additional funds and is currently exploring alternative sources of financing. Historically, the Company has raised capital through private placements, convertible debentures and officer loans as an interim measure to finance working capital needs and may continue to raise additional capital through the sale of common stock or other securities and obtaining some short-term loans. The Company will be required to continue to so until its consolidated operations become profitable. Also, the Company has, in the past, paid for consulting services with its common stock to maximize working capital, and intends to continue this practice where feasible. Basis of Presentation The Company deemed the transfer of net assets pursuant to the Share Exchange Agreement to be a reverse acquisition in accordance with FASB ASC 805-40, "Reverse Acquisitions" The consolidated financial statements of the Company have been prepared in accordance with US GAAP and are expressed in United States dollars. For the years ended December 31, 2018 and 2017, the consolidated financial statements include the accounts of the Company; and its wholly-owned subsidiaries Grom Social, TD Holdings, GES, GNS, and Illumination America Lighting. TD Holdings was acquired on July 1, 2016; and GES was formed in January 2017 to operate the NetSpective WebFiltering assets and business which was acquired on January 1, 2017. GNS which was formed in April 2017, had not recorded any activity through the date of this Annual Report. All intercompany accounts and transactions are eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to revenue recognition, valuation of accounts receivable and inventories, purchase price allocation of acquired businesses, impairment of long-lived assets and goodwill, valuation of financial instruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. Revenue Recognition In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) Other Assets and Deferred Costs - Contracts with Customers Entities have the option of using either a full retrospective or a modified approach to adopt the guidance. The Company adopted this ASU in accordance with the modified retrospective method, effective January 1, 2018 for all contracts not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 while prior period amounts continue to be reported in accordance with legacy GAAP. Under the applicable revenue recognition guidance for fiscal years 2017 and prior, these transactions were recognized when the amounts were billed to the customer. As a result of the Company’s transition to ASC 606, the Company recorded a net change in beginning retained earnings of 263,741 on January 1, 2018 due to the cumulative effect of adopting ASC 606. For year ended December 31, 2018, the Company recorded a total of $7,801,157 of animation revenue from contracts with customers which include $ 528,822 in additional revenue as a result of the adoption of ASC 606. Under ASC 606 our animation revenues are generated primarily from contracts with customers for preproduction and production services related to the development of animated movies and television series. TDA preproduction activities include producing storyboards, location design, model and props design, background color and color styling. For production, TDA focuses on library creation, digital asset management, background layout scene assembly, posing, animation and after effects. We provide our services under fixed-price contracts. Under fixed-price contracts, we agree to perform the specified work for a pre-determined price. To the extent our actual costs vary from the estimates upon which the price was negotiated, we will generate more or less profit or could incur a loss. We account for a contract after it has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We evaluate the services promised in each contract at inception to determine whether the contract should be accounted for as having one or more performance obligations. The services in our contracts are distinct from one another as the referring parties typically can direct all, limited, or single portions of the various preproduction and production activities required to create and design and entire episode to us and we therefore have a history of developing stand alone selling prices for all of these distinct components. Accordingly, our contracts are typically accounted for as containing multiple performance obligations. We determine the transaction price for each contract based on the consideration we expect to receive for the distinct services being provided under the contract. We recognize revenue as performance obligations are satisfied and the customer obtains control of the services. In determining when performance obligations are satisfied, we consider factors such as contract terms, payment terms and whether there is an alternative future use of the product or service. Substantially all of our revenue is recognized over time as we perform under the contract due to the contractual terms present in each contract which irrevocably transfer control of the work product to the customer as the services are performed. For performance obligations recognized over time, revenue is recognized based on the extent of progress towards completion of the performance obligation, generally using the percentage-of-completion cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer as we incur costs on our contracts. Under the percentage-of-completion cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs to complete the performance obligation. Webfiltering revenue Revenue from subscription sales for webfiltering at NetSpective is recognized on a pro-rata basis over the subscription period. Typically, a subscriber purchases computer hardware and a service license for a period of use between one year to five years for software and support. The subscriber is billed in full at the time of the sale. The Company immediately recognizes any revenue attributable to the computer hardware as it is non-refundable and control of the hardware has passed to the customer. The advanced billing for software and service is initially recorded as deferred revenue and subsequently recognized as revenue over time evenly throughout the subscription period. Adoption of ASC 606 had no impact on NetSpective’s revenues. Substantially all of the revenue at TDA and Netspective come from the North American in the form of animation and webfiltering services, respectively. Historically and going forward, TDA’s business is concentrated on five to eight key clients, that vary form year to year based upon discrete projects which become available based on the popularity of a particular TV series, or the expected acceptance of new animated series. TDA receives advance payments for a significant portion of the work it performs. Netspective, as consistent with industry practice receives full payment in advance of providing webfiltering services over a period of one to five years. Revenue recognition under ASC 606 and historically was unrelated to the timing of milestone or advance payments. Netspective’s business is focused on forty to fifty US-based school districts located in the US. Both TDA and Netspective earn revenue via services transferred over time to the client. Approximately 1/10 of Netspective’s business is recognized at a point time due to the non-refundable sale of computer hardware associated with web filtering services. Contract Assets and Liabilities Revenues from NetSpective contracts are all billed in advance and therefore represent contract liabilities until fully recognized on a ratable basis over the contract life. Animation revenue contracts vary with movie contracts typically allowing for progress billings over the contract term while other episodic development activities are typically billable upon delivery of the performance obligation for an episode. These episodic activities typically create unbilled contract assets between episode delivery dates while movies can create contract assets or liabilities based on the progress of activities versus the arranged billing schedule. Approximately $468,277 of NetSpective revenue and $428,481 of animation revenue recognized during 2018 was included in the respective opening contract liability balance. Remaining revenue expected to be recognized on contracts with customers are as follows as of December 31, 2018: 2019 2020 2021 and beyond Total Animation $ 380,750 – – $ 380,750 NetSpective $ 461,843 $ 165,386 $ 100,751 $ 727,979 Total $ 842,593 $ 165,386 $ 100,751 $ 1,108,729 Fair Value Measurements The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures” (“ASC 820”) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1 Level 2 Level 3 Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2018 and December 31, 2017. The Company uses the market approach to measure fair value for its Level 1 financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The respective carrying value of certain balance sheet financial instruments approximates its fair value. These financial instruments include cash, trade receivables, related party payables, accounts payable, accrued liabilities and short-term borrowings. Fair values were estimated to approximate carrying values for these financial instruments since they are short term in nature, and they are receivable or payable on demand. The estimated fair value of assets and liabilities acquired in business combinations and reporting units and long-lived assets used in the related asset impairment tests utilize inputs classified as Level 3 in the fair value hierarchy. The Company determines the fair value of contingent consideration based on a probability-weighted discounted cash flow analysis. The fair value remeasurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in the fair value hierarchy. In each period, the Company reassesses its current estimates of performance relative to the stated targets and adjusts the liability to fair value. Any such adjustments are included as a component of Other Income (Expense) in the Consolidated Statements of Operations and Comprehensive Loss. The following table summarizes the change in the Company’s financial assets and liabilities measured at fair value as of December 31, 2018 and December 31, 2017. Level 1 Level 2 Level 3 Earnout liability $ – $ – $ 429,000 The following table summarizes the change in the Company’s financial assets and liabilities measured at fair value as of December 31, 2018 and December 31, 2017. Fair value, December 31, 2016 1,931,707 Fair value of contingent consideration issued during the period 362,500 Change in fair value (1,865,207 ) Fair value, December 31, 2017 $ 429,000 Change in fair value – Fair value, December 31, 2018 $ 429,000 Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible and other promissory notes are reviewed to determine whether they contain embedded derivative instruments that are required to be accounted for separately from the host contract and recorded on the balance sheet at fair value. The fair value of derivative liabilities is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. Beneficial Conversion Features In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options” the Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt or preferred stock instruments that have conversion features at fixed rates that are in-the-money when issued. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is generally calculated at the commitment date as the difference between the conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. If certain other securities are issued with the convertible security, the proceeds are allocated among the different components. The portion of the proceeds allocated to the convertible security is divided by the contractual number of the conversion shares to determine the effective conversion price, which is used to measure the BCF. The effective conversion price is used to compute the intrinsic value. The value of the BCF is limited to the basis that is initially allocated to the convertible security. Stock Purchase Warrants The Company accounts for warrants issued to purchase shares of its common stock as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity. Cash and cash equivalents The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market funds, the fair value of which approximates cost. The Company maintains its cash balances with a high-credit-quality financial institution. At times, such cash may be more than the Federal Deposit Insurance Corporation-insured limit of $250,000. The Company has not experienced any losses in such accounts, and management believes the Company is not exposed to any significant credit risk on its cash and cash equivalents. Accounts receivable Accounts receivable are customer obligations due under normal trade terms which are recorded at net realizable value. The Company establishes an allowance for doubtful accounts based on management’s assessment of the collectability of trade receivables. A considerable amount of judgment is required in assessing the amount of the allowance. The Company makes judgments about the creditworthiness of each customer based on ongoing credit evaluations and monitors current economic trends that might impact the level of credit losses in the future. If the financial condition of the customers were to deteriorate, resulting in their inability to make payments, a specific allowance will be required. Recovery of bad debt amounts previously written off is recorded as a reduction of bad debt expense in the period the payment is collected. If the Company’s actual collection experience changes, revisions to its allowance may be required. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Inventory Materials are recorded at cost, determined using the first-in, first-out method. Work-in-process inventories are valued at the actual cost incurred for a specific project. The cost of work-in-process includes materials, direct labor, other direct costs, and related production overheads. Inventories are measured at the lower of cost or net realizable value. Historically, costs are generally lower in the case of the Company’s inventories since all animation projects are contract based on guaranteed payments from its customers. Materials-in-transit, if any, are stated at invoice cost plus any importation or other incidental charges. A provision for inventory obsolescence or slow-moving inventory is set-up, if necessary, based on a review of the movement and current condition of raw materials. The Company does not believe that any obsolescence exists on finished work in process. In the event of a dispute with a client regarding quality or specifications, the Company may incur additional costs because of retakes and editing to achieve customer satisfaction. The Company believes that no reserve for obsolete inventory is necessary as of December 31, 2018 and December 31, 2017. Property and equipment Property and equipment are stated at cost or fair value if acquired as part of a business combination. Depreciation is computed by the straight-line method and is charged to operations over the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred. The carrying amount and accumulated depreciation of assets sold or retired are removed from the accounts in the year of disposal and any resulting gain or loss is included in results of operations. The estimated useful lives of property and equipment are as follows: Computers, software, and office equipment 1 – 5 years Machinery and equipment 3 – 5 years Vehicles 5 years Furniture and fixtures 5 – 10 years Leasehold improvements Lesser of the lease term or estimated useful life Construction in process is not depreciated until the construction is completed and the asset is placed into service. Goodwill and Intangible Assets Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the Company’s acquisitions is attributable to the value of the potential expanded market opportunity with new customers. Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets consist of customer relationships and non-compete agreements. Their useful lives range from 1.5 to 10 years. The Company’s indefinite-lived intangible assets consist of trade names. Goodwill and indefinite-lived assets are not amortized but are subject to annual impairment testing unless circumstances dictate more frequent assessments. The Company performs an annual impairment assessment for goodwill during the fourth quarter of each year and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount. Goodwill impairment testing is a two-step process performed at the reporting unit level. Step one compares the fair value of the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows. For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s size and industry and other Company-specific risks. Other significant assumptions used in the income approach include the terminal value, growth rates, future capital expenditures and changes in future working capital requirements. The market approaches use key multiples from guideline businesses that are comparable and are traded on a public market. If the fair value of the reporting unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then the second step must be completed to measure the amount of impairment, if any. Step two calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit is allocated to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount equal to the excess. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, strategic plans, and future market conditions, among others. There can be no assurance that the Company’s estimates and assumptions made for purposes of the goodwill impairment testing will prove to be accurate predictions of the future. Changes in assumptions and estimates could cause the Company to perform an impairment test prior to scheduled annual impairment tests. The Company performed its annual fair value assessment at December 31, 2018, on its subsidiaries with material goodwill and intangible asset amounts on their respective balance sheets and determined that no impairment exists. Long-Lived Assets The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances have indicated that an asset may not be recoverable. The long-lived asset is grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows is less than the carrying value of the assets, the assets are written down to the estimated fair value. The Company evaluated the recoverability of its long-lived assets on December 31, 2018 and at December 31, 2017, respectively on its subsidiaries with material amounts on their respective balance sheets and determined that no impairment exists. Income taxes The Company accounts for income taxes under FASB ASC 740, “Accounting for Income Taxes” “Accounting for Uncertainty in Income Taxes” The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company assesses the validity of its conclusions regarding uncertain tax positions on a quarterly basis to determine if facts or circumstances have arisen that might cause it to change its judgment regarding the likelihood of a tax position’s sustainability under audit. Foreign Currency Translation The functional and reporting currency of TD Holdings and TDAHK is the Hong Kong Dollar. The functional and reporting currency of Top Draw is the Philippine Peso. Management has adopted ASC 830 “Foreign Currency Matters” for transactions that occur in foreign currencies. Monetary assets denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods. Assets and liabilities of the Company’s operations are translated into the reporting currency, United States dollars, at the exchange rate in effect at the balance sheet dates. Revenue and expenses are translated at average rates in effect during the reporting periods. Equity transactions are recorded at the historical rate when the transaction occurred. The resulting translation adjustment is reflected as accumulated other comprehensive income, a separate component of stockholders' equity in the statement of stockholders' equity. Differences may arise in the amount of bad debt expense, depreciation expense and amortization expense reported in the Company's operating results as compared to the corresponding change in the allowance for doubtful accounts, accumulated depreciation, and accumulated amortization, respectively, due to foreign currency translation. These translation adjustments are reflected in accumulated other comprehensive income, a separate component of the Company's stockholders' equity. Comprehensive Gain or Loss ASC 220 “Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As of December 31, 2018, and December 31, 2017, the Company determined that it had items that represented components of comprehensive income (loss) and, therefore, has included a statement of comprehensive income (loss) in the financial statements. Advertising expenses Advertising costs are expensed as incurred and included in selling and marketing expenses. Shipping and handling costs Shipping and handling costs related to the acquisition of goods from vendors are included in the cost of sales. Basic and Diluted Net Income (Loss) Per Share The Company computes net income (loss) per share in accordance with ASC 260, “Earnings per Share” Recent accounting pronouncements The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations except as noted below: In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Codification Improvements Codification Improvements to Topic 842, Leases (Topic 842) Targeted Improvements, ASC 842 will be effective for us beginning on January 1,2019. As of December 31, 2018 we had $364,371 if future lease commitments. |
3. Accounts Receivable, net
3. Accounts Receivable, net | 12 Months Ended |
Dec. 31, 2018 | |
Receivables [Abstract] | |
Accounts Receivable, net | 3. ACCOUNTS RECEIVABLE, NET The following table sets forth the components of the Company’s accounts receivable at December 31, 2018 and December 31, 2017: December 31, 2018 December 31, 2017 Accounts receivable $ 1,123,493 $ 445,338 Total accounts receivable, net $ 1,123,493 $ 445,338 As of December 31, 2018, and December 31, 2017, the Company evaluated its outstanding trade receivables and determined that no allowance for bad debts was required so as a result no bad debt expense was recorded during the years ended December 31, 2018 and December 31, 2017. During the year ended December 31, 2018, the Company had three customers that accounted for 50.1% of revenues and one customer that accounted for 9.2% of accounts receivable. During the year ended December 31, 2017, the Company had four customers that accounted for approximately 71.6% of consolidated revenues and three customers that accounted for 77.3% of consolidated accounts receivable. |
4. Prepaid Expenses and Other C
4. Prepaid Expenses and Other Current Assets | 12 Months Ended |
Dec. 31, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Prepaid Expenses and Other Current Assets | 4. PREPAID EXPENSES AND OTHER CURRENT ASSETS The following table sets forth the components of the Company’s prepaid expenses and other current assets at December 31, 2018 and December 31, 2017: December 31, 2018 December 31, 2017 Collaborative development agreement $ 95,766 $ 191,531 Prepaid rent 31,773 55,211 Vendor advances 7,867 43,219 Prepaid service agreements 174,920 578,732 Employee advance and other payroll related items 16,208 15,734 Other prepaid expenses and current assets 123,306 150,952 Total $ 449,840 $ 1,035,379 Prepaid expenses and other assets represent prepayments made in the normal course and in which the economic benefit is expected to be realized within twelve months. |
5. Property and Equipment
5. Property and Equipment | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | 5. PROPERTY AND EQUIPMENT The following table sets forth the components of the Company’s property and equipment at December 31, 2018 and December 31, 2017: December 31, 2018 December 31, 2017 Cost Accumulated Depreciation Net Book Value Cost Accumulated Depreciation Net Book Value Capital assets subject to depreciation: Computers, software and office equipment $ 1,937,987 $ (1,508,104 ) 429,883 $ 1,792,499 $ (1,319,388 ) $ 473,111 Machinery and equipment 167,731 (99,900 ) 67,831 95,356 (88,342 ) 7,014 Vehicles 153,927 (120,728 ) 33,199 159,431 (110,098 ) 49,333 Furniture and fixtures 381,248 (284,410 ) 96,838 305,855 (273,768 ) 32,087 Leasehold improvements 1,031,687 (623,125 ) 408,562 654,309 (585,808 ) 68,501 Total fixed assets 3,672,580 (2,636,267 ) 1,036,313 $ 3,007,450 $ (2,377,404 ) $ 630,046 Capital assets not subject to depreciation: Construction in progress – – – 219,847 – 219,847 Total fixed assets $ 3,672,580 $ (2,636,267 ) $ 1,036,313 $ 3,227,297 $ (2,377,404 ) $ 849,893 For the years ended December 31, 2018 and the year ended December 31, 2017, the Company recorded depreciation expense of $395,556 and $277,407 respectively. |
6. Business Combinations
6. Business Combinations | 12 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
Business Combinations | 6. BUSINESS COMBINATIONS Acquisition of NetSpective Webfiltering On January 1, 2017, Grom Holdings acquired the assets of NetSpective Webfilter, a division of TeleMate.net Software (“TeleMate”). Under the terms of the agreement, Grom Holdings paid $1.0 million in consideration in the form of a $1.0 million redeemable, convertible promissory note. The note bears interest at 0.68% per annum. All note principal and accrued interest is payable January 1, 2020. The note is convertible at the election of TeleMate into the Company’s common stock at a conversion rate of $0.78 per share. Furthermore, if not previously converted by TeleMate, the note may be converted by the Company into shares of the Company’s common stock at a rate of $0.48 per share commencing on November 1, 2019. TeleMate had the opportunity for contingent, earn-out payments of up to $362,500 if certain net cash flow thresholds are achieved during the one-year post-closing period. The earn-out payments, if made, shall be payable entirely in common stock. Consideration Paid: Cash and cash equivalents $ – Common stock, 41,700 shares paid with letter of intent 32,500 Senior, secured promissory notes 1,000,000 Financial liabilities assumed 521,735 Contingent purchase consideration 362,500 Fair value of total consideration $ 1,916,735 Recognized amount of identifiable assets acquired, and liabilities assumed: Financial assets: Intangible asset Brand name $ 69,348 Software 1,134,435 Customer relationships 74,004 Financial liabilities: Deferred revenues (521,735 ) Write-down of purchase consideration 463,978 Goodwill 696,705 $ 1,916,735 Additionally, since the valuation report reflected that the earnout threshold would not be reached, and the earnout was achieved, the Company recorded an additional expense of $362,500 related to the acquisition of Netspective. In determining the fair value of the convertible promissory note issued, the Company considered, among other factors, the market yields on debt securities for similar time horizons and level of perceived risk of the investment. Based on the conversion factors and interest rate contained in the note, the Company believes the note represents fair value. We used a lattice model to estimate the fair value of the contingent consideration. We forecast future up and down movements based on the 9.7% historical volatility of “Net Cash Flow” which includes the years 2014-2016. The weighted average probability of each scenario was calculated and since it did not reach the earnout threshold, we did not record any contingent consideration provision. The fair value of the internally developed software was estimated using a replacement cost approach similar to the Constructive Cost Model (“COCOMO”) II. The model is an algorithmic software cost estimation tool that estimates the cost, effort, and schedule of a hypothetical software project. We estimated costs based on total lines of code in the program and labor cost rates for the required personnel, in addition to a profit component. Although this is a replacement cost model, we believe it represents fair value from a market participant perspective. The key assumptions used include average labor rates, total estimated labor hours, and an income tax rate of 40%. In determining the purchase price allocation, the Company considered, among other factors, how a market participant would likely use the acquired assets. The estimated fair value of intangible assets was based on the income approach for customer relationships and tradename and a replacement cost method for the software programs. The income approach requires a projection of the cash flow that the asset is expected to generate in the future. The projected cash flow is discounted to its present value using a rate of return, or discount rate, which accounts for the time value of money and the degree of risk inherent in the asset. The expected future cash flow that is projected should include all of the economic benefits attributable to the asset, including the tax savings associated with the amortization of the intangible asset value over the tax life of the asset. The income approach may take the form of a “relief-from-royalty” methodology, a cost savings methodology, a “with and without” methodology, or excess earnings methodology, depending on the specific asset under consideration. The replacement cost model uses estimated current costs at the Measurement Date, plus a profit component. The “relief-from-royalty” method was used to value the trade names acquired from TeleMate. The “relief-from-royalty” method estimates the cost savings that accrue to the owner of an intangible asset that would otherwise be required to pay royalties or license fees on revenues earned through the use of the asset. The royalty rate used is based on an analysis of empirical, market-derived royalty rates for guideline intangible assets. Typically, revenue is projected over the expected remaining useful life of the intangible asset. The key assumptions in the prospective cash flows include a 15% compound annual sales growth rate over the five years period subsequent to the acquisition. The royalty rate is then applied to estimate the royalty savings. The key assumptions used in valuing the existing trade names acquired were as follows: royalty rate of 1.0%, discount rate of 17.1%, and a tax rate of 40.0%. The trade names are expected to be used indefinitely and the value includes a terminal value, based on a long-term sustainable growth rate of 2.0%, of the after-tax royalty savings determined using a form of the Gordon Growth model. The fair value of customer relationships was valued using an income method. Net Operating Profit After Tax (“NOPAT”) per customer is a function of the gross profit margin of the Company, applicable contributory assets (i.e., working capital, fixed capital, workforce, brand, IPR&D) charges, and the discount rate reflecting the riskiness of the asset undervaluation. NOPAT per customer was used to estimate the value of customer relationships. The key assumptions used include a revenue attrition rate of 10%, an income tax rate of 40%, and a discount rate of 17.1%. |
7. Goodwill and Intangible Asse
7. Goodwill and Intangible Assets | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | 7. GOODWILL AND INTANGIBLE ASSETS The following table sets forth the changes in the carrying amount of the Company’s goodwill at December 31, 2018 and December 31, 2017: Balance, December 31, 2016 $ 8,104,056 Acquisition of Netspective Webfiltering 696,705 Balance, December 31, 2017 8,800,761 Acquisition of Bonnie Boat assets 52,500 Balance, December 31, 2018 $ 8,853,261 The following table sets forth the components of the Company’s intangible assets at December 31, 2018 and December 31, 2017: December 31, 2018 December 31, 2017 Amortization Period (Years) Gross Carrying Amount Accumulated Amortization Net Book Value Gross Carrying Amount Accumulated Amortization Net Book Value Intangible assets subject to amortization: Customer relationships 10.00 $ 1,600,286 $ (396,371 ) $ 1,203,915 $ 1,600,286 $ (236,343 ) $ 1,363,943 Mobile software applications 2.00 282,500 (282,500 ) – 282,500 (240,729 ) 41,771 NetSpective webfiltering software 5.00 1,134,435 (453,774 ) 680,661 1,134,435 (226,887 ) 907,548 Noncompete agreements 2.00 846,638 (846,638 ) – 846,638 (846,638 ) – Subtotal – 3,863,859 (1,979,283 ) 1,884,576 3,863,859 (1,550,597) 2,313,262 Intangible assets not subject to amortization: Trade names – 4,455,595 – 4,455,595 4,455,595 – 4,455,595 Total intangible assets – $ 8,319,454 $ (1,979,283 ) $ 6,340,171 $ 8,319,454 $ (1,550,597 ) $ 6,768,857 The Company recorded amortization expense for intangible assets subject to amortization of $428,686 for the year ended December 31, 2018 and $1,092,592 during the year ended December 31, 2017. The following table provides information regarding estimated amortization expense for intangible assets subject to amortization for each of the following years ending December 31: 2019 $ 386,916 2020 386,916 2021 386,916 2022 160,029 2023 160,029 Thereafter 403,772 $ 1,884,578 |
8. Other Assets
8. Other Assets | 12 Months Ended |
Dec. 31, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Other Assets | 8. OTHER ASSETS Other assets are comprised solely of guarantee deposits at TDA which are refundable upon termination of contract or delivery of subject matter of the contract. These are initially recorded at cost which is the fair value at the time of the transaction and are subsequently measured at amortized cost. |
9. Accounts Payable and Accrued
9. Accounts Payable and Accrued Liabilities | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
Accounts Payable and Accrued Liabilities | 9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Trade payables are recognized initially at the transaction price and subsequently measured at the undiscounted amount of cash or other consideration expected to be paid. Accrued expenses are recognized based on the expected amount required to settle the obligation or liability. The following table sets forth the components of the Company’s accrued liabilities at December 31, 2018 and December 31, 2017. December 31, 2018 December 31, 2017 Earnout consideration payable in connection with Netspective acquisition $ 362,500 $ 362,500 Executive and employee compensation 792,402 838,689 Interest on convertible debentures and promissory notes 210,221 356,599 Other accrued expenses and liabilities 67,914 34,938 Total accrued liabilities $ 1,433,037 $ 1,592,726 Accrued expenses for both periods include approximately $138,000 for an estimated compromise settlement relating to tax deductions against supplier invoices in the Philippines at TDA. The Company in accordance with ASC 740-10 has determined that the recording of this amount is required because it is more likely than not that the tax will be assessed. |
10. Related Party Payables
10. Related Party Payables | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Payables | 10. RELATED PARTY PAYABLES AND ACTIVITY The Company has engaged the Chief Executive Officer, Darren Mark’s family to assist in the development of the Grom Social website and to create original content for the site. Since these individuals have been responsible for creating in excess of 500 episodes of original content. Mr. Marks wife Sarah; his sons Zach the founder of Grom, Luke, Jack, Dawson, and his daughters Caroline and Victoria all work for the Company either as employees or contractors. The amount they were paid for the year ended December 31, 2018 are as follows: Sarah $33,600, Zach $90,000, Luke $33,800, Jack $5,400, Victoria $6,750 and Caroline $11,250. The total annual compensation payable to these six individuals for the periods ended December 31, 2018, and December 31, 2017, was $180,800 and $165,800, respectively, which the Company believes is below market rate for the value of the services performed. This expenditure for services provided by the Marks family is expected to continue for the foreseeable future. Members of the Marks family are actively involved on a daily basis in creating all of the current content for the website which includes numerous videos on social responsibility, anti-bullying, digital citizenship, unique blogs, and special events. Liabilities Due to Executive and Other Officers Messrs. Darren Marks and Melvin Leiner, both officers of the Company, have made numerous loans to Grom to help fund operations. These loans are non-interest bearing and callable on demand. No such loans were made to the Company during the years ended December 31, 2018, and December 31, 2017. Neither Mr. Marks nor Mr. Leiner have any intention of calling these loans at present. The loan balances are classified as short-term obligations under Related Party Payables on the Company’s balance sheet. During 2017 and 2018 Mr. Marks and Mr. Leiner on several occasions agreed to convert a portion of their loans into equity. These transactions are summarized as follows: Name Date Amount of Loan Principal Converted to Equity Share Price Used for conversion Trading price of Grom stock on the date of conversion Shares issued Darren Marks 12/29/2017 333,333 $ 0.50 0.30 666,666 10/15/2018 333,333 $ 0.31 0.19 1,075,268 Melvin Leiner 12/29/2017 166,667 $ 0.50 0.30 333,334 10/15/2018 166,667 $ 0.31 0.19 537,635 The outstanding amount due to Mr. Marks and Mr. Leiner’s LLC’s were $469,506 and $1,215,442; and $451,944 and $861,198 as of December 31, 2018 and December 31, 2017, respectively. Additionally, we owed $50,000 to Dr. Rutherford our director who extended a short-term loan to the Company, and $210,145 to Wayne and Stella Dearing who have extended loans to Top Draw animation to assist with its liquidity. As of December 31, 2018, and December 31, 2017, the balances in related party payables were $1,181,645 and $2,076,640, respectively. |
11. Other Noncurrent Liabilitie
11. Other Noncurrent Liabilities | 12 Months Ended |
Dec. 31, 2018 | |
Other Liabilities Disclosure [Abstract] | |
Other Noncurrent Liabilities | 11. OTHER NONCURRENT LIABILITIES Other noncurrent liabilities are comprised solely of retirement benefit costs. The Philippine Republic Act (RA) No. 7641, mandates all private employers to provide retirement benefits to employees who upon reaching the age of sixty years or more, but not beyond sixty-five years, have served at least five years in the said establishment. The amount of retirement benefit was defined as “at least one-half month salary for every year of service, a fraction of at least six months being considered as one whole year”. The balance of the accrued retirement benefit cost as of December 31, 2018 and December 31, 2017 amounted to $224,797 and $237,496, respectively. |
12. Debt
12. Debt | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Debt | 12. DEBT Convertible Debentures The following tables set forth the components of the Company’s, convertible debentures as of December 31, 2018 and December 31, 2017: December 31, December 31, Redeemable unsecured convertible note -TeleMate $ 1,000,000 1,000,000 Principal value of secured convertible notes 2,822,708 676,223 Loan discounts (735,871 ) (137,950 ) Less: Current portion (676,223 ) (75,000 ) Total convertible notes, net $ 2,410,614 $ 1,463,273 Redeemable unsecured convertible note -TeleMate On January 1, 2017, the Company issued a three-year 0.68% redeemable convertible note for $1,000,000 to TeleMate. net in connection with the acquisition of the NetSpective Webfiltering assets from them. All note principal and accrued interest is payable January 1, 2020. The note is convertible at the election of the noteholders into the Company’s’ common stock at a conversion rate of $0.78 per share. Furthermore, if not previously converted by the noteholders, the note may be converted by the Company into shares of the Company’s common stock at a rate of $0.48 per share commencing on November 1, 2019. Under the terms of the asset purchase agreement in which TeleMate had the obligation to collect certain monies on behalf of the Company, TeleMate failed to remit $146,882 it had collected on the Company’s behalf from NetSpective customers. As a result of TeleMate’s non-payment, and to avoid litigation, on January 12, 2018, we entered into a First Modification to the Purchase and Sale Agreement (the “Modification”). Under the terms of the Modification, the TeleMate agreed to the following terms: · To pay the Company $10,000 per month against their outstanding balance of $146,822. To date, they have paid the Company $30,000 and are current on their monthly payment obligations. · They cannot exercise the conversion feature of their $1.0 million promissory note, nor will any of the $362,500 Earnout shares (464,744) until all payments are made in full. · The December 31, 2019 maturity date of the $1,000,000 convertible note is extended indefinitely until all payments are made in full. · All interest payments ($6,800 annually) due from the Company to TeleMate were suspended indefinitely until all payments are made in full. Under the terms of the First Modification, TeleMate agreed to pay us $10,000 per month against their outstanding balance due to us of $146,822. The TeleMate Note may not be converted or any earnout shares issued by us until the outstanding balance is paid in full, and all interest payments due under the TeleMate Note have been suspended until all payments owing the Company has been made. If and when TeleMate is permitted to convert the TeleMate Note, the number of shares converted thereunder will be subject to a one-year leakout agreement. Telemate has paid in full by April 2019. If TeleMate does not convert the TeleMate Note to equity by October 1, 2019, the Company has the right to force conversion at a conversion price of $0.48 per share. Newbridge Offering On November 30, 2018, the Company closed a private offering in which it sold 12% secured convertible promissory notes in an aggregate principal amount of $552,000 and issued an aggregate of 730,974 shares of its common stock to nine accredited investors pursuant to a private placement memorandum and subscription agreement. The Notes which are due and payable two years from issuance are secured by certain assets of the Company and rank senior to all other indebtedness of the Company except for the $4,000,000 promissory notes (the “TD Notes”) issued to TD Holdings in connection with the Share Sale Agreement, dated June 30, 2016, as amended. Messrs. Marks and Leiner also pledged an aggregate of 10,000,000 shares pursuant to a pledge and security agreement to secure the timely payment of the Notes. The Notes are convertible, in whole or in part, by the note holder at a conversion rate of $0.40 if the Company’s common stock trades or is quoted at more than $0.40 per share for 10 consecutive days. The conversion price is subject to adjustment resulting from certain corporate actions including the subdivision or combination of stock, payment of dividends, reorganization, reclassification, consolidations, merger or sale of the Company. Interest on the Note is payable monthly in 21 equal installments commencing four months after the issuance of the Notes. Upon the occurrence of an “event of default” as described in the Notes, the interest rate will increase to 15% and the Notes shall become immediately due and payable. The Company may prepay the Notes in full at any time by paying accrued interest and 110% of the outstanding principal balance. Newbridge Securities Corporation acted as exclusive placement agent for the offering and received (i) $55,200, (ii) 113,586 shares of common stock (the “Placement Agent Shares”); and (iii) $11,040, representing a non-accountable expense allowance, for its services. Secured Convertible Notes 2018 During the year ended December 31, 2018, the Company privately placed a series of secured, convertible, original issue discount (OID) notes with accredited investors for gross proceeds of $1,238,485. The Notes were issued with OID discounts of 20.0%, or $247,697. The debentures carried an interest rate of 10% per annum, payable semiannually in cash, for a two-year term with a fixed conversion price of $0.50 if converted within one year of issuance and $0.78 per share thereafter. During the year ended December 31, 2017, the Company privately placed a series of secured, convertible, original issue discount (OID) notes with accredited investors for gross proceeds of $601,223. The Notes were issued with OID discounts of 10.0%, or $60,122. The debentures carried an interest rate of 10% per annum, payable semiannually in cash, for a two-year term with a fixed conversion price of $0.78. In connection with the issuance of these convertible debentures, the Company issued to its noteholders an aggregate of 150,305 shares of common stock as an inducement to lend. These shares were valued at $78,321 with share prices ranging between $0.38 and $0.54 per share. The Company recorded the value of these shares as a loan discount to be amortized as interest expense over the term of the related convertible debentures. The related amortization expense was $4,543 for the year ended December 31, 2017. Additionally, at the end of 2017, there were two convertible notes outstanding amounting to $75,000 that had been issued in 2016 with a fixed conversion price of $1.19. Senior Secured Promissory Notes The following tables set forth the components of the Company’s senior, secured promissory notes at December 31, 2018 and December 31, 2017: December 31, December 31, Principal value of promissory notes $ 4,000,000 $ 4,000,000 Loan discounts (171,182 ) (86,339 ) Total promissory notes, net $ 3,828,818 $ 3,953,661 On June 20, 2016, the Company issued a secured promissory note to the TDA Sellers in connection with the share sale agreement. The note totaled $4.0 million, bears interest at 5.0% per annum and is due on the earlier of (i) April 1, 2020 or (ii) the date on which the Company successfully completes a qualified initial public offering as defined in the agreement. The note is collateralized by all of the assets of TD Holdings. First Amendment of TDA Sellers Note On January 3, 2018, we entered into an amendment to the acquisition agreement with the TDA Sellers (the “Amendment”): · The TDA Sellers agreed to extend the maturity date of the $4.0 secured promissory note one year until July 1, 2019 (see 2016 description below); · The interest rate on the Note during the one-year extension period from July 2, 2018 to July 1, 2019 was changed to 10%. The interest rate on the Note remained at 5%, payable annually in arrears, until June 30, 2018; · During the one-year extension period, the interest will be paid quarterly in arrears, instead of annually in arrears. The first such quarterly interest payment of $100,000 is due on September 30, 2018; and · Under the terms of the terms acquisition agreement, the Sellers had an opportunity to earn up to $5.0 million in contingent Earnout Payments (as described above). The original Earn out measurement period ended on December 31, 2018. As part of the consideration for the Sellers agreeing to enter the Amendment, we agreed to extend the Earnout Period, one year, to December 31, 2019. Also, as additional consideration, we issued an additional 800,000 restricted shares of our common stock to the TDA Sellers which were expensed in 2018. Second Amendment of TDA Sellers Note On January 15, 2019, we entered into a second amendment to the TDH Acquisition Agreement (the “Second Amendment”). Under the terms of the Second Amendment: · the maturity date of the Note was extended from July 1. 2019 to April 2, 2020. · the TDA Sellers shall have the right to convert the Note at a conversion price of $0.27 per share, either in whole or in part at any time prior to the maturity, subject to the terms and conditions set forth in the Amendment · in the event the Note is not repaid prior to July 2, 2019: (i) no management fee shall be paid by TDA to the Company as provided in the Share Sale Agreement. Management fees paid by TDA to the Company to date are approximately $100,000 per month. Non-payment of the management fees to the Company by TDA due to the non-payment of the Note would have a material adverse impact on the Company. · The earnout was modified for 50% cash and 50% stock, to 75% cash and 25% stock. · The Sellers received 800,000 shares of the Company’s restricted common stock. Maturities of the Company’s borrowings for each of the next five years are as follows: 2019 $ 1,676,223 2020 $ 7,146,285 2021 $ – |
13. Income Taxes
13. Income Taxes | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 13. INCOME TAXES The following table sets forth the components of income tax expense (benefit) for the years ended December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Current: Federal $ – $ – State and local – – Foreign 74,356 70,457 Total current 74,356 70,457 Deferred: Federal – – State and local – – Foreign (59,412 ) (36,851 ) Total deferred (59,412 ) (36,851 ) Total $ 14,944 $ 33,696 The following table sets forth a reconciliation of income tax expense (benefit) at the federal statutory rate to recorded income tax expense (benefit) for the years ended December 31, 2018 and 2017: December 31, December 31, 2017 Tax benefit at the statutory federal rate –% –% Increase (decrease) in rate(s) resulting from: Foreign operations, net (0.3 ) (0.6 ) Change in deferred taxes 21.3 (26.6 ) Change in valuation allowance (21.3 ) 26.6 Total (0.3 )% (0.6 )% The following tables set forth the components of income taxes payable as of December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Federal $ – $ – State and local – – Foreign 41,907 46,963 Total $ 41,907 $ 46,963 (a) The reduction of the valuation allowance was due to the change in U.S. corporate tax rates from 34% to 21% starting in 2018. The following tables set forth the components of deferred income taxes as of December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Non-current deferred tax assets: Retirement benefits $ 67,439 $ 71,249 Write down of investment(s) 62,421 65,958 Deferred revenue net 96,090 43,193 Other 23,833 20,890 Net operating loss carryforwards 4,150,813 5,143,029 Less: valuation allowance (4,150,813 ) (5,143,029 ) Total non-current deferred tax asset 249,783 201,290 Total deferred tax asset $ 249,783 $ 201,290 The deferred tax asset relates solely to the Company’s foreign operations at TDH. The company believes these assets are realizable in future periods due to the consistent historic profitability of TDH. On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (“TCJA”), which instituted fundamental changes to the taxation of multinational corporations, including a reduction the U.S. corporate income tax rate to 21% beginning in 2018. The TCJA also requires a one-time transition tax on the mandatory deemed repatriation of the cumulative earnings of certain of the Company’s foreign subsidiaries as of December 31, 2017. To determine the amount of this transition tax, the Company must determine the amount of earnings generated since inception by the relevant foreign subsidiaries, as well as the amount of non-U.S. income taxes paid on such earnings, in addition to potentially other factors. The Company believes that no such tax will be due since TDH has paid taxes locally and that the cumulative undistributed earnings of TDH are not material. As of December 31, 2018, the Company had federal, state and foreign net operating loss carryforwards of approximately $19,765,774 that are available to offset future liabilities for income taxes. The Company has generally established a valuation allowance against these carryforwards based on an assessment that it is more likely than not that these benefits will not be realized in future years. The federal and state net operating loss carryforwards expire at various dates through 2036. The Company remains subject to examination in federal, state and foreign jurisdictions in which the Company conducts its operations and files tax returns. These tax years range from 2013 through 2017. The Company believes that the results of current or any prospective audits will not have a material effect on its financial position or results of operations as adequate reserves have been provided to cover any potential exposures related to these ongoing audits. The Company has made its assessment of the level of tax authority for each tax position (including the potential application of interest and penalties) based on the technical merits and determined that no unrecognized tax benefits associated with the tax positions exist. |
14. Stockholders' Equity
14. Stockholders' Equity | 12 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
Stockholders' Equity | 14. STOCKHOLDERS’ EQUITY Preferred Stock The Company is authorized to issue 25,000,000 shares of Preferred Stock at a par value of $0.001. No shares of Preferred Stock were issued and outstanding as of December 31, 2018 or December 31, 2017. Common stock The Company is authorized to issue 200,000,000 shares of common stock at a par value of $0.001 and had 138,553,655 and 124,273,548 shares of common stock issued and outstanding as of December 31, 2018 and December 31, 2017, respectively. Common Stock Issued in Private Placements During the year ended December 31, 2018, the Company issued 3,854,869 shares and realized proceeds of $608,718. During the year ended December 31, 2017, the Company did not issue any shares of stock in private placements. Common Stock Issued in Connection with the Exercise of Warrants During the year ended December 31, 2018, the Company issued 256,455 shares of common stock for proceeds of 61,500 under a series of stock warrant exercises with a share price of approximately $0.24 per share. During the year ended December 31, 2017, the Company issued 6,530,220 shares of common stock for proceeds of $1,566,000 under a series of stock warrant exercises with a share price of approximately $0.24 per share. Common Stock Issued in Exchange for Consulting, Professional and Other Services During the year ended December 31, 2018 the Company issued 1,200,321 shares of common stock with a fair market value of $458,918 to employees in lieu of cash payment. Additionally, the Company issued 2,385,505 shares of common stock with a fair value of $825,170 to consultants and other professionals in lieu of cash payments. During the year ended December 31, 2017, the Company issued 1,156,931 shares of common stock with a fair market value of $835,225 to employees, officers and directors in lieu of cash payment. Additionally, the Company issued 3,264,965 shares of common stock with a fair value of $1,892,735 to consultants and other professionals in lieu of cash payments. Each share issuance made in exchange for services was valued based upon the private placement offering price of the Company’s common stock in place on its respective date of award. Common Stock Issued In lieu of Cash for Loans Payable and Other Accrued Obligations During the year ended December 31, 2018, the Company issued 3,995,304 shares of common stock with a fair market value of $1,321,376 to satisfy loans payable and other accrued obligations. During the year ended December 31, 2017, the Company issued 1,045,870 shares of common stock with a fair market value of $533,000 to satisfy loans payable and other accrued obligations. Common Stock Issued in Connection with the Amendment of Terms of a Promissory Note During the year ended December 31, 2018, the Company issued 805,000 shares of common stock valued at $482,250 to amend the terms of a promissory note. Common Stock Issued in Connection with the Issuance of Convertible Debentures During the year ended December 31, 2018 the Company issued 1,432,653 shares of common stock valued at $523,601 in connection with the issuance of convertible notes. Common Stock Issued in the Acquisition of a Business During the year ended December 31, 2018 the Company issued 150,000 shares of common stock valued at $52,500 in connection with the acquisition of a business. Conversion of Convertible Debentures and Accrued Interest into Common stock During the year ended December 31, 2018, the Company issued 200,000 shares of common stock valued at $30,000 in connection with the conversion of convertible debentures and accrued interest into common stock. Common Stock Issued in Connection with Secured convertible OID notes In 2017, we issued $601,223 of secured convertible OID Notes at an interest rate of 10%. In connection with the issuance of these Notes and as an inducement to enter into these Notes we issued 150,305 shares valued at $78,321. Stock Purchase Warrants The stock purchase warrants have been accounted for as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and potentially settled in, a company’s own stock, distinguishing liabilities from equity. The following table reflects all outstanding and exercisable warrants at December 31, 2018 and December 31, 2017. All stock warrants are exercisable for a period of approximately five years from the date of issuance. Number of Warrants Outstanding Weighted Avg. Exercise Price Weighted Avg. Contractual Life (Yrs.) Balance January 1, 2017 7,608,154 $ 0.26 0.75 Warrants issued 567,166 $ 1.50 2.25 Less: Warrants exercised (7,107,765 ) $ 0.24 Warrants forfeited (29,190 ) $ 0.24 December 31, 2017 1,038,365 $ 1.36 2.38 Warrants issued – – Warrants exercised (256,455 ) – Balance 31, 2018 781,910 $ 1.36 1.38 Stock Options The following table represents all outstanding and exercisable stock options as of December 31, 2018. Options Options Options Vested Strike Price Weighted Average Remaining Life (Yrs.) 7,735,350 – 7,735,350 7,735,350 $ 0.24 4.27 9,695,250 417,000 9,278,250 9,278,250 $ 0.36 0.44 13,135,500 3,544,500 9,591,000 9,591,000 $ 0.72 1.25 5,481,000 1,042,500 4,438,500 4,011,019 $ 0.78 2.20 Total 36,047,100 5,004,000 31,043,100 30,615,619 $ 0.50 1.90 The Company did not issue any stock options in 2018. The remaining stock-based compensation to be recorded on the above issuance was zero as of December 31, 2018. During the years ended December 31, 2018 and 2017, the Company recorded $2,300 and $1,823,408 in stock-based compensation expense related to these stock options. |
15. Commitments and Contingenci
15. Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 15. COMMITMENTS AND CONTINGENCIES In the United States, the Company leases approximately 1,550 square feet of office space in Boca Raton, Florida at the rate of $3,958 per month pursuant to a three-year lease which expired in October 2018. In October 2018 the Company entered into a new three-year lease at the same location and added an additional 513 sq. feet in space at a total rate of $4,223 per month. The Florida office houses the Company’s corporate headquarters and administrative staff. The Company animation subsidiary TDH leases portions of 3 floors comprising in the aggregate approximately 28,800 square feet in the West Tower of the Philippine Stock Exchange Centre in Pasig City, Manila. The space is used for administration and production purposes and the Company pays approximately $22,533 per month in the aggregate for such space (which increases by approximately 5% per year. These leases expire in December 2022. The Company opened a new 1,400 square foot office in Norcross, Georgia on January 1, 2018 to house its NetSpective Webfilter division. The monthly rent pursuant to a five-year lease which expires in December 2023, is $2,055 per month which increases by approximately 3% annually . The future minimum payment obligations as of December 31, 2018, for operating leases are as follows: 2019 $ 97,859 2020 $ 98,599 2021 $ 90,892 2022 $ 49,402 2023 $ 27,619 |
16. Subsequent Events
16. Subsequent Events | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | 16. SUBSEQUENT EVENTS On February 22, 2019, the Company designated 2,000,000 shares of its Preferred Stock as 10% Series A Convertible preferred stock, par value $0.001 per share (“Series A”). On each of February 27, 2019 and March 11, 2019, the Company received $400,000, or a total of $800,000, in proceeds from the sale of 400,000 shares of Series A to each accredited investor in a private offering pursuant to Section 4(a)(2) and/or Rule 506(b) of Regulation D, as promulgated under the Securities Act, As an inducement to purchase the Series A Stock, each investor also received 2,000,000 restricted shares of the Company’s common stock. On April 2, 2019 we received an addition $125,000 in proceeds from the sale of 125,000 shares of Series A to one of the same accredited investors made the February 22 nd The Series A Stock is convertible, at any time, into five shares of common stock of the Company. |
2. Summary of Significant Acc_2
2. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Going Concern | Going Concern The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business for the twelve-month period following the date of these financial statements. On a consolidated basis, the Company has incurred significant operating losses since inception. Because the Company does not expect that existing operational cash flow will be sufficient to fund presently anticipated operations, this raises substantial doubt about the Company’s ability to continue as a going concern. Therefore, the Company will need to raise additional funds and is currently exploring alternative sources of financing. Historically, the Company has raised capital through private placements, convertible debentures and officer loans as an interim measure to finance working capital needs and may continue to raise additional capital through the sale of common stock or other securities and obtaining some short-term loans. The Company will be required to continue to so until its consolidated operations become profitable. Also, the Company has, in the past, paid for consulting services with its common stock to maximize working capital, and intends to continue this practice where feasible. |
Basis of Presentation | Basis of Presentation The Company deemed the transfer of net assets pursuant to the Share Exchange Agreement to be a reverse acquisition in accordance with FASB ASC 805-40, "Reverse Acquisitions" The consolidated financial statements of the Company have been prepared in accordance with US GAAP and are expressed in United States dollars. For the years ended December 31, 2018 and 2017, the consolidated financial statements include the accounts of the Company; and its wholly-owned subsidiaries Grom Social, TD Holdings, GES, GNS, and Illumination America Lighting. TD Holdings was acquired on July 1, 2016; and GES was formed in January 2017 to operate the NetSpective WebFiltering assets and business which was acquired on January 1, 2017. GNS which was formed in April 2017, had not recorded any activity through the date of this Annual Report. All intercompany accounts and transactions are eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to revenue recognition, valuation of accounts receivable and inventories, purchase price allocation of acquired businesses, impairment of long-lived assets and goodwill, valuation of financial instruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. |
Revenue Recognition | Revenue Recognition In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) Other Assets and Deferred Costs - Contracts with Customers Entities have the option of using either a full retrospective or a modified approach to adopt the guidance. The Company adopted this ASU in accordance with the modified retrospective method, effective January 1, 2018 for all contracts not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 while prior period amounts continue to be reported in accordance with legacy GAAP. Under the applicable revenue recognition guidance for fiscal years 2017 and prior, these transactions were recognized when the amounts were billed to the customer. As a result of the Company’s transition to ASC 606, the Company recorded a net change in beginning retained earnings of 263,741 on January 1, 2018 due to the cumulative effect of adopting ASC 606. For year ended December 31, 2018, the Company recorded a total of $7,801,157 of animation revenue from contracts with customers which include $ 528,822 in additional revenue as a result of the adoption of ASC 606. Under ASC 606 our animation revenues are generated primarily from contracts with customers for preproduction and production services related to the development of animated movies and television series. TDA preproduction activities include producing storyboards, location design, model and props design, background color and color styling. For production, TDA focuses on library creation, digital asset management, background layout scene assembly, posing, animation and after effects. We provide our services under fixed-price contracts. Under fixed-price contracts, we agree to perform the specified work for a pre-determined price. To the extent our actual costs vary from the estimates upon which the price was negotiated, we will generate more or less profit or could incur a loss. We account for a contract after it has been approved by all parties to the arrangement, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. We evaluate the services promised in each contract at inception to determine whether the contract should be accounted for as having one or more performance obligations. The services in our contracts are distinct from one another as the referring parties typically can direct all, limited, or single portions of the various preproduction and production activities required to create and design and entire episode to us and we therefore have a history of developing stand alone selling prices for all of these distinct components. Accordingly, our contracts are typically accounted for as containing multiple performance obligations. We determine the transaction price for each contract based on the consideration we expect to receive for the distinct services being provided under the contract. We recognize revenue as performance obligations are satisfied and the customer obtains control of the services. In determining when performance obligations are satisfied, we consider factors such as contract terms, payment terms and whether there is an alternative future use of the product or service. Substantially all of our revenue is recognized over time as we perform under the contract due to the contractual terms present in each contract which irrevocably transfer control of the work product to the customer as the services are performed. For performance obligations recognized over time, revenue is recognized based on the extent of progress towards completion of the performance obligation, generally using the percentage-of-completion cost-to-cost measure of progress for our contracts because it best depicts the transfer of control to the customer as we incur costs on our contracts. Under the percentage-of-completion cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs to complete the performance obligation. Webfiltering revenue Revenue from subscription sales for webfiltering at NetSpective is recognized on a pro-rata basis over the subscription period. Typically, a subscriber purchases computer hardware and a service license for a period of use between one year to five years for software and support. The subscriber is billed in full at the time of the sale. The Company immediately recognizes any revenue attributable to the computer hardware as it is non-refundable and control of the hardware has passed to the customer. The advanced billing for software and service is initially recorded as deferred revenue and subsequently recognized as revenue over time evenly throughout the subscription period. Adoption of ASC 606 had no impact on NetSpective’s revenues. Substantially all of the revenue at TDA and Netspective come from the North American in the form of animation and webfiltering services, respectively. Historically and going forward, TDA’s business is concentrated on five to eight key clients, that vary form year to year based upon discrete projects which become available based on the popularity of a particular TV series, or the expected acceptance of new animated series. TDA receives advance payments for a significant portion of the work it performs. Netspective, as consistent with industry practice receives full payment in advance of providing webfiltering services over a period of one to five years. Revenue recognition under ASC 606 and historically was unrelated to the timing of milestone or advance payments. Netspective’s business is focused on forty to fifty US-based school districts located in the US. Both TDA and Netspective earn revenue via services transferred over time to the client. Approximately 1/10 of Netspective’s business is recognized at a point time due to the non-refundable sale of computer hardware associated with web filtering services. Contract Assets and Liabilities Revenues from NetSpective contracts are all billed in advance and therefore represent contract liabilities until fully recognized on a ratable basis over the contract life. Animation revenue contracts vary with movie contracts typically allowing for progress billings over the contract term while other episodic development activities are typically billable upon delivery of the performance obligation for an episode. These episodic activities typically create unbilled contract assets between episode delivery dates while movies can create contract assets or liabilities based on the progress of activities versus the arranged billing schedule. Approximately $468,277 of NetSpective revenue and $428,481 of animation revenue recognized during 2018 was included in the respective opening contract liability balance. Remaining revenue expected to be recognized on contracts with customers are as follows as of December 31, 2018: 2019 2020 2021 and beyond Total Animation $ 380,750 – – $ 380,750 NetSpective $ 461,843 $ 165,386 $ 100,751 $ 727,979 Total $ 842,593 $ 165,386 $ 100,751 $ 1,108,729 |
Fair Value Measurements | Fair Value Measurements The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820 “Fair Value Measurements and Disclosures” (“ASC 820”) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1 Level 2 Level 3 Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2018 and December 31, 2017. The Company uses the market approach to measure fair value for its Level 1 financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The respective carrying value of certain balance sheet financial instruments approximates its fair value. These financial instruments include cash, trade receivables, related party payables, accounts payable, accrued liabilities and short-term borrowings. Fair values were estimated to approximate carrying values for these financial instruments since they are short term in nature, and they are receivable or payable on demand. The estimated fair value of assets and liabilities acquired in business combinations and reporting units and long-lived assets used in the related asset impairment tests utilize inputs classified as Level 3 in the fair value hierarchy. The Company determines the fair value of contingent consideration based on a probability-weighted discounted cash flow analysis. The fair value remeasurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in the fair value hierarchy. In each period, the Company reassesses its current estimates of performance relative to the stated targets and adjusts the liability to fair value. Any such adjustments are included as a component of Other Income (Expense) in the Consolidated Statements of Operations and Comprehensive Loss. The following table summarizes the change in the Company’s financial assets and liabilities measured at fair value as of December 31, 2018 and December 31, 2017. Level 1 Level 2 Level 3 Earnout liability $ – $ – $ 429,000 The following table summarizes the change in the Company’s financial assets and liabilities measured at fair value as of December 31, 2018 and December 31, 2017. Fair value, December 31, 2016 1,931,707 Fair value of contingent consideration issued during the period 362,500 Change in fair value (1,865,207 ) Fair value, December 31, 2017 $ 429,000 Change in fair value – Fair value, December 31, 2018 $ 429,000 |
Derivative Financial Instruments | Derivative Financial Instruments The Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risk. Terms of convertible and other promissory notes are reviewed to determine whether they contain embedded derivative instruments that are required to be accounted for separately from the host contract and recorded on the balance sheet at fair value. The fair value of derivative liabilities is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results. |
Beneficial Conversion Features | Beneficial Conversion Features In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options” the Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt or preferred stock instruments that have conversion features at fixed rates that are in-the-money when issued. The BCF for the convertible instruments is recognized and measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value is generally calculated at the commitment date as the difference between the conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. If certain other securities are issued with the convertible security, the proceeds are allocated among the different components. The portion of the proceeds allocated to the convertible security is divided by the contractual number of the conversion shares to determine the effective conversion price, which is used to measure the BCF. The effective conversion price is used to compute the intrinsic value. The value of the BCF is limited to the basis that is initially allocated to the convertible security. |
Stock Purchase Warrants | Stock Purchase Warrants The Company accounts for warrants issued to purchase shares of its common stock as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity. |
Cash and cash equivalents | Cash and cash equivalents The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents consist of cash on deposit with banks and money market funds, the fair value of which approximates cost. The Company maintains its cash balances with a high-credit-quality financial institution. At times, such cash may be more than the Federal Deposit Insurance Corporation-insured limit of $250,000. The Company has not experienced any losses in such accounts, and management believes the Company is not exposed to any significant credit risk on its cash and cash equivalents. |
Accounts receivable | Accounts receivable Accounts receivable are customer obligations due under normal trade terms which are recorded at net realizable value. The Company establishes an allowance for doubtful accounts based on management’s assessment of the collectability of trade receivables. A considerable amount of judgment is required in assessing the amount of the allowance. The Company makes judgments about the creditworthiness of each customer based on ongoing credit evaluations and monitors current economic trends that might impact the level of credit losses in the future. If the financial condition of the customers were to deteriorate, resulting in their inability to make payments, a specific allowance will be required. Recovery of bad debt amounts previously written off is recorded as a reduction of bad debt expense in the period the payment is collected. If the Company’s actual collection experience changes, revisions to its allowance may be required. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. |
Inventory | Inventory Materials are recorded at cost, determined using the first-in, first-out method. Work-in-process inventories are valued at the actual cost incurred for a specific project. The cost of work-in-process includes materials, direct labor, other direct costs, and related production overheads. Inventories are measured at the lower of cost or net realizable value. Historically, costs are generally lower in the case of the Company’s inventories since all animation projects are contract based on guaranteed payments from its customers. Materials-in-transit, if any, are stated at invoice cost plus any importation or other incidental charges. A provision for inventory obsolescence or slow-moving inventory is set-up, if necessary, based on a review of the movement and current condition of raw materials. The Company does not believe that any obsolescence exists on finished work in process. In the event of a dispute with a client regarding quality or specifications, the Company may incur additional costs because of retakes and editing to achieve customer satisfaction. The Company believes that no reserve for obsolete inventory is necessary as of December 31, 2018 and December 31, 2017. |
Property and equipment | Property and equipment Property and equipment are stated at cost or fair value if acquired as part of a business combination. Depreciation is computed by the straight-line method and is charged to operations over the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred. The carrying amount and accumulated depreciation of assets sold or retired are removed from the accounts in the year of disposal and any resulting gain or loss is included in results of operations. The estimated useful lives of property and equipment are as follows: Computers, software, and office equipment 1 – 5 years Machinery and equipment 3 – 5 years Vehicles 5 years Furniture and fixtures 5 – 10 years Leasehold improvements Lesser of the lease term or estimated useful life Construction in process is not depreciated until the construction is completed and the asset is placed into service. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the Company’s acquisitions is attributable to the value of the potential expanded market opportunity with new customers. Intangible assets have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets consist of customer relationships and non-compete agreements. Their useful lives range from 1.5 to 10 years. The Company’s indefinite-lived intangible assets consist of trade names. Goodwill and indefinite-lived assets are not amortized but are subject to annual impairment testing unless circumstances dictate more frequent assessments. The Company performs an annual impairment assessment for goodwill during the fourth quarter of each year and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount. Goodwill impairment testing is a two-step process performed at the reporting unit level. Step one compares the fair value of the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows. For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s size and industry and other Company-specific risks. Other significant assumptions used in the income approach include the terminal value, growth rates, future capital expenditures and changes in future working capital requirements. The market approaches use key multiples from guideline businesses that are comparable and are traded on a public market. If the fair value of the reporting unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then the second step must be completed to measure the amount of impairment, if any. Step two calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit is allocated to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount equal to the excess. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, strategic plans, and future market conditions, among others. There can be no assurance that the Company’s estimates and assumptions made for purposes of the goodwill impairment testing will prove to be accurate predictions of the future. Changes in assumptions and estimates could cause the Company to perform an impairment test prior to scheduled annual impairment tests. The Company performed its annual fair value assessment at December 31, 2018, on its subsidiaries with material goodwill and intangible asset amounts on their respective balance sheets and determined that no impairment exists. |
Long-Lived Assets | Long-Lived Assets The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances have indicated that an asset may not be recoverable. The long-lived asset is grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows is less than the carrying value of the assets, the assets are written down to the estimated fair value. The Company evaluated the recoverability of its long-lived assets on December 31, 2018 and at December 31, 2017, respectively on its subsidiaries with material amounts on their respective balance sheets and determined that no impairment exists. |
Income taxes | Income taxes The Company accounts for income taxes under FASB ASC 740, “Accounting for Income Taxes” “Accounting for Uncertainty in Income Taxes” The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company assesses the validity of its conclusions regarding uncertain tax positions on a quarterly basis to determine if facts or circumstances have arisen that might cause it to change its judgment regarding the likelihood of a tax position’s sustainability under audit. |
Foreign Currency Translation | Foreign Currency Translation The functional and reporting currency of TD Holdings and TDAHK is the Hong Kong Dollar. The functional and reporting currency of Top Draw is the Philippine Peso. Management has adopted ASC 830 “Foreign Currency Matters” for transactions that occur in foreign currencies. Monetary assets denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods. Assets and liabilities of the Company’s operations are translated into the reporting currency, United States dollars, at the exchange rate in effect at the balance sheet dates. Revenue and expenses are translated at average rates in effect during the reporting periods. Equity transactions are recorded at the historical rate when the transaction occurred. The resulting translation adjustment is reflected as accumulated other comprehensive income, a separate component of stockholders' equity in the statement of stockholders' equity. Differences may arise in the amount of bad debt expense, depreciation expense and amortization expense reported in the Company's operating results as compared to the corresponding change in the allowance for doubtful accounts, accumulated depreciation, and accumulated amortization, respectively, due to foreign currency translation. These translation adjustments are reflected in accumulated other comprehensive income, a separate component of the Company's stockholders' equity. |
Comprehensive Gain or Loss | Comprehensive Gain or Loss ASC 220 “Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As of December 31, 2018, and December 31, 2017, the Company determined that it had items that represented components of comprehensive income (loss) and, therefore, has included a statement of comprehensive income (loss) in the financial statements. |
Advertising expenses | Advertising expenses Advertising costs are expensed as incurred and included in selling and marketing expenses. |
Shipping and handling costs | Shipping and handling costs Shipping and handling costs related to the acquisition of goods from vendors are included in the cost of sales. |
Basic and Diluted Net Income (Loss) Per Share | Basic and Diluted Net Income (Loss) Per Share The Company computes net income (loss) per share in accordance with ASC 260, “Earnings per Share” |
Recent accounting pronouncements | Recent accounting pronouncements The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new pronouncements that have been issued that might have a material impact on its financial position or results of operations except as noted below: In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) Codification Improvements Codification Improvements to Topic 842, Leases (Topic 842) Targeted Improvements, ASC 842 will be effective for us beginning on January 1,2019. As of December 31, 2018 we had $364,371 if future lease commitments. |
2. Summary of Significant Acc_3
2. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Schedule of financial assets and liabilities on a recurring basis | Level 1 Level 2 Level 3 Earnout liability $ – $ – $ 429,000 |
Schedule of changes in financial assets and liabilities | Fair value, December 31, 2016 1,931,707 Fair value of contingent consideration issued during the period 362,500 Change in fair value (1,865,207 ) Fair value, December 31, 2017 $ 429,000 Change in fair value – Fair value, December 31, 2018 $ 429,000 |
Property and equipment useful lives | Computers, software, and office equipment 1 – 5 years Machinery and equipment 3 – 5 years Vehicles 5 years Furniture and fixtures 5 – 10 years Leasehold improvements Lesser of the lease term or estimated useful life |
3. Accounts Receivable (Tables)
3. Accounts Receivable (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Receivables [Abstract] | |
Schedule of accounts receivable | December 31, 2018 December 31, 2017 Accounts receivable $ 1,123,493 $ 445,338 Total accounts receivable, net $ 1,123,493 $ 445,338 |
4. Prepaid Expenses and Other_2
4. Prepaid Expenses and Other Current Assets (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of prepaid expenses and other current assets | December 31, 2018 December 31, 2017 Collaborative development agreement $ 95,766 $ 191,531 Prepaid rent 31,773 55,211 Vendor advances 7,867 43,219 Prepaid service agreements 174,920 578,732 Employee advance and other payroll related items 16,208 15,734 Other prepaid expenses and current assets 123,306 150,952 Total $ 449,840 $ 1,035,379 |
5. Property and Equipment (Tabl
5. Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | December 31, 2018 December 31, 2017 Cost Accumulated Depreciation Net Book Value Cost Accumulated Depreciation Net Book Value Capital assets subject to depreciation: Computers, software and office equipment $ 1,937,987 $ (1,508,104 ) 429,883 $ 1,792,499 $ (1,319,388 ) $ 473,111 Machinery and equipment 167,731 (99,900 ) 67,831 95,356 (88,342 ) 7,014 Vehicles 153,927 (120,728 ) 33,199 159,431 (110,098 ) 49,333 Furniture and fixtures 381,248 (284,410 ) 96,838 305,855 (273,768 ) 32,087 Leasehold improvements 1,031,687 (623,125 ) 408,562 654,309 (585,808 ) 68,501 Total fixed assets 3,672,580 (2,636,267 ) 1,036,313 $ 3,007,450 $ (2,377,404 ) $ 630,046 Capital assets not subject to depreciation: Construction in progress – – – 219,847 – 219,847 Total fixed assets $ 3,672,580 $ (2,636,267 ) $ 1,036,313 $ 3,227,297 $ (2,377,404 ) $ 849,893 |
6. Business Combinations (Table
6. Business Combinations (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
Acquisition consideration and assets received | Consideration Paid: Cash and cash equivalents $ – Common stock, 41,700 shares paid with letter of intent 32,500 Senior, secured promissory notes 1,000,000 Financial liabilities assumed 521,735 Contingent purchase consideration 362,500 Fair value of total consideration $ 1,916,735 Recognized amount of identifiable assets acquired, and liabilities assumed: Financial assets: Intangible asset Brand name $ 69,348 Software 1,134,435 Customer relationships 74,004 Financial liabilities: Deferred revenues (521,735 ) Write-down of purchase consideration 463,978 Goodwill 696,705 $ 1,916,735 |
7. Goodwill and Intangible As_2
7. Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of goodwill | Balance, December 31, 2016 $ 8,104,056 Acquisition of Netspective Webfiltering 696,705 Balance, December 31, 2017 8,800,761 Acquisition of Bonnie Boat assets 52,500 Balance, December 31, 2018 $ 8,853,261 |
Schedule of intangible assets | December 31, 2018 December 31, 2017 Amortization Period (Years) Gross Carrying Amount Accumulated Amortization Net Book Value Gross Carrying Amount Accumulated Amortization Net Book Value Intangible assets subject to amortization: Customer relationships 10.00 $ 1,600,286 $ (396,371 ) $ 1,203,915 $ 1,600,286 $ (236,343 ) $ 1,363,943 Mobile software applications 2.00 282,500 (282,500 ) – 282,500 (240,729 ) 41,771 NetSpective webfiltering software 5.00 1,134,435 (453,774 ) 680,661 1,134,435 (226,887 ) 907,548 Noncompete agreements 2.00 846,638 (846,638 ) – 846,638 (846,638 ) – Subtotal – 3,863,859 (1,979,283 ) 1,884,576 3,863,859 (1,550,597) 2,313,262 Intangible assets not subject to amortization: Trade names – 4,455,595 – 4,455,595 4,455,595 – 4,455,595 Total intangible assets – $ 8,319,454 $ (1,979,283 ) $ 6,340,171 $ 8,319,454 $ (1,550,597 ) $ 6,768,857 |
Schedule of amortization | 2019 $ 386,916 2020 386,916 2021 386,916 2022 160,029 2023 160,029 Thereafter 403,772 $ 1,884,578 |
9. Accounts Payable and Accru_2
9. Accounts Payable and Accrued Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Payables and Accruals [Abstract] | |
Schedule of accounts payable and accrued liabilities | December 31, 2018 December 31, 2017 Earnout consideration payable in connection with Netspective acquisition $ 362,500 $ 362,500 Executive and employee compensation 792,402 838,689 Interest on convertible debentures and promissory notes 210,221 356,599 Other accrued expenses and liabilities 67,914 34,938 Total accrued liabilities $ 1,433,037 $ 1,592,726 |
10. Related Party Payables (Tab
10. Related Party Payables (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related party transactions | Name Date Amount of Loan Principal Converted to Equity Share Price Used for conversion Trading price of Grom stock on the date of conversion Shares issued Darren Marks 12/29/2017 333,333 $ 0.50 0.30 666,666 10/15/2018 333,333 $ 0.31 0.19 1,075,268 Melvin Leiner 12/29/2017 166,667 $ 0.50 0.30 333,334 10/15/2018 166,667 $ 0.31 0.19 537,635 |
12. Debt (Tables)
12. Debt (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Schedule of convertible debt | December 31, December 31, Redeemable unsecured convertible note -TeleMate $ 1,000,000 1,000,000 Principal value of secured convertible notes 2,822,708 676,223 Loan discounts (735,871 ) (137,950 ) Less: Current portion (676,223 ) (75,000 ) Total convertible notes, net $ 2,410,614 $ 1,463,273 |
Schedule of secured promissory notes | December 31, December 31, Principal value of promissory notes $ 4,000,000 $ 4,000,000 Loan discounts (171,182 ) (86,339 ) Total promissory notes, net $ 3,828,818 $ 3,953,661 |
Schedule of future debt maturity payments | 2019 $ 1,676,223 2020 $ 7,146,285 2021 $ – |
13. Income Taxes (Tables)
13. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax expense (benefit) | December 31, 2018 December 31, 2017 Current: Federal $ – $ – State and local – – Foreign 74,356 70,547 Total current 74,356 70,547 Deferred: Federal – – State and local – – Foreign (59,412 ) (36,851 ) Total deferred (59,412 ) (36,851 ) Total $ 14,944 $ 33,696 |
Schedule of reconciliation of effective income tax rate | December 31, December 31, 2017 Tax benefit at the statutory federal rate –% –% Increase (decrease) in rate(s) resulting from: Foreign operations, net (0.3 ) (0.6 ) Change in deferred taxes 21.3 (26.6 ) Change in valuation allowance (21.3 ) 26.6 Total (0.3 )% (0.6 )% |
Schedule of income tax payable | December 31, 2018 December 31, 2017 Federal $ – $ – State and local – – Foreign 41,907 46,963 Total $ 41,907 $ 46,963 |
Schedule of deferred income taxes | December 31, 2018 December 31, 2017 Non-current deferred tax assets: Retirement benefits $ 67,439 $ 71,249 Write down of investment(s) 62,421 65,958 Deferred revenue net 96,090 43,193 Other 23,833 20,890 Net operating loss carryforwards 4,150,813 5,143,029 Less: valuation allowance (4,150,813 ) (5,143,029 ) Total non-current deferred tax asset 249,783 201,290 Total deferred tax asset $ 249,783 $ 201,290 |
14. Stockholders' Equity (Table
14. Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Equity [Abstract] | |
Schedule of warrants | Number of Warrants Outstanding Weighted Avg. Exercise Price Weighted Avg. Contractual Life (Yrs.) Balance January 1, 2017 7,608,154 $ 0.26 0.75 Warrants issued 567,166 $ 1.50 2.25 Less: Warrants exercised (7,107,765 ) $ 0.24 Warrants forfeited (29,190 ) $ 0.24 December 31, 2017 1,038,365 $ 1.36 2.38 Warrants issued – – Warrants exercised (256,455 ) – Balance 31, 2018 781,910 $ 1.36 1.38 |
Schedule of options | Options Options Options Vested Strike Price Weighted Average Remaining Life (Yrs.) 7,735,350 – 7,735,350 7,735,350 $ 0.24 4.27 9,695,250 417,000 9,278,250 9,278,250 $ 0.36 0.44 13,135,500 3,544,500 9,591,000 9,591,000 $ 0.72 1.25 5,481,000 1,042,500 4,438,500 4,011,019 $ 0.78 2.20 Total 36,047,100 5,004,000 31,043,100 30,615,619 $ 0.50 1.90 |
15. Commitments and Contingen_2
15. Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum payments | 2019 $ 97,859 2020 $ 98,599 2021 $ 90,892 2022 $ 49,402 2023 $ 27,619 |
2. Summary of Significant Acc_4
2. Summary of Significant Accounting Policies (Details - Fair value) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Earnout liability | $ 429,000 | $ 429,000 | $ 1,931,707 |
Fair Value, Inputs, Level 1 [Member] | |||
Earnout liability | 0 | ||
Fair Value, Inputs, Level 2 [Member] | |||
Earnout liability | 0 | ||
Fair Value, Inputs, Level 3 [Member] | |||
Earnout liability | $ 429,000 |
2. Summary of Significant Acc_5
2. Summary of Significant Accounting Policies (Details - Change in fair value) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Accounting Policies [Abstract] | ||
Derivative fair value, beginning balance | $ 429,000 | $ 1,931,707 |
Fair value of contingent consideration issued | 0 | 362,500 |
Change in fair value | 0 | (1,865,207) |
Derivative fair value, ending balance | $ 429,000 | $ 429,000 |
2. Summary of Significant Acc_6
2. Summary of Significant Accounting Policies (Details - Property useful lives) | 12 Months Ended |
Dec. 31, 2018shares | |
Convertible Notes [Member] | |
Antidilutive shares | 6,630,103 |
Conversion rights of TDH Sellers [Member] | |
Antidilutive shares | 14,814,815 |
Vested Stock Options [Member] | |
Antidilutive shares | 31,043,000 |
Purchase Warrants [Member] | |
Antidilutive shares | 781,910 |
Customer Relationships and Non-Compete Agreements [Member] | |
Intangible useful lives | 1.5 to 10 years |
Computers, Software and Office Equipment [Member] | |
Property and equipment useful lives | 1-5 years |
Machinery and Equipment [Member] | |
Property and equipment useful lives | 3-5 years |
Vehicles [Member] | |
Property and equipment useful lives | 5 years |
Furniture and Fixtures [Member] | |
Property and equipment useful lives | 5-10 years |
Leasehold Improvements [Member] | |
Property and equipment useful lives | Lesser of lease term or estimated useful life |
3. Accounts Receivable (Details
3. Accounts Receivable (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Receivables [Abstract] | ||
Accounts receivable, gross | $ 1,123,493 | $ 445,388 |
Accounts receivable, net | $ 1,123,493 | $ 445,388 |
3. Accounts Receivable (Detai_2
3. Accounts Receivable (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Bad debt expense | $ 0 | $ 0 |
Sales Revenue, Net [Member] | 3 Customers [Member] | ||
Concentration percentage | 50.10% | |
Sales Revenue, Net [Member] | 4 Customers [Member] | ||
Concentration percentage | 71.60% | |
Accounts Receivable [Member] | 3 Customers [Member] | ||
Concentration percentage | 77.30% | |
Accounts Receivable [Member] | 1 Customer [Member] | ||
Concentration percentage | 9.20% |
4. Prepaid Expenses and Other_3
4. Prepaid Expenses and Other Current Assets (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Prepaid expenses and other current assets | $ 449,840 | $ 1,035,379 |
Collaborative Development Agreement [Member] | ||
Prepaid expenses and other current assets | 95,766 | 191,531 |
Prepaid Rent [Member] | ||
Prepaid expenses and other current assets | 31,773 | 55,211 |
Vendor Advances [Member] | ||
Prepaid expenses and other current assets | 7,867 | 43,219 |
Prepaid Service Agreements [Member] | ||
Prepaid expenses and other current assets | 174,920 | 578,732 |
Employee Advance and Other Payroll Related Items [Member] | ||
Prepaid expenses and other current assets | 16,208 | 15,734 |
Other Prepaid Expenses and Current Assets [Member] | ||
Prepaid expenses and other current assets | $ 123,306 | $ 150,952 |
5. Property and Equipment (Deta
5. Property and Equipment (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Property and equipment, gross | $ 3,672,580 | $ 3,227,297 |
Accumulated depreciation | (2,636,267) | (2,377,404) |
Property and equipment, net | 1,036,313 | 849,893 |
Computers, Software and Office Equipment [Member] | ||
Property and equipment, gross | 1,937,987 | 1,792,499 |
Accumulated depreciation | (1,508,104) | (1,319,388) |
Property and equipment, net | 429,883 | 473,111 |
Machinery and Equipment [Member] | ||
Property and equipment, gross | 167,731 | 95,356 |
Accumulated depreciation | (99,900) | (88,342) |
Property and equipment, net | 67,831 | 7,014 |
Vehicles [Member] | ||
Property and equipment, gross | 153,927 | 159,431 |
Accumulated depreciation | (120,728) | (110,098) |
Property and equipment, net | 33,199 | 49,333 |
Furniture and Fixtures [Member] | ||
Property and equipment, gross | 381,248 | 305,855 |
Accumulated depreciation | (284,410) | (273,768) |
Property and equipment, net | 96,838 | 32,087 |
Leasehold Improvements [Member] | ||
Property and equipment, gross | 1,031,687 | 654,309 |
Accumulated depreciation | (623,125) | (585,808) |
Property and equipment, net | 408,562 | 68,501 |
Construction in Progress [Member] | ||
Property and equipment, gross | 0 | 219,847 |
Accumulated depreciation | 0 | 0 |
Property and equipment, net | $ 0 | $ 219,847 |
5. Property and Equipment (De_2
5. Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 395,556 | $ 277,407 |
6. Business Combinations (Detai
6. Business Combinations (Details - Acquisition NetSpective) - USD ($) | Jan. 02, 2017 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Financial liabilities: | ||||
Goodwill | $ 8,853,261 | $ 8,800,761 | $ 8,104,056 | |
NetSpective Webfilter [Member] | ||||
Consideration Paid: | ||||
Cash and cash equivalents | $ 0 | |||
Common stock, 41,700 shares paid with letter of intent | 32,500 | |||
Senior, secured promissory notes | 1,000,000 | |||
Financial liabilities assumed | 521,735 | |||
Contingent purchase consideration | 362,500 | |||
Fair value of total consideration | 1,916,735 | |||
Financial liabilities: | ||||
Deferred revenues | (521,735) | |||
Writedown of purchase consideration | 463,978 | |||
Goodwill | 696,705 | |||
Total identifiable assets acquired, liabilities assumed and goodwill | 1,916,735 | |||
NetSpective Webfilter [Member] | Brand Name [Member] | ||||
Identifiable intangible assets: | ||||
Identifiable intangible assets | 69,348 | |||
NetSpective Webfilter [Member] | Software [Member] | ||||
Identifiable intangible assets: | ||||
Identifiable intangible assets | 1,134,435 | |||
NetSpective Webfilter [Member] | Customer Relationships [Member] | ||||
Identifiable intangible assets: | ||||
Identifiable intangible assets | $ 74,004 |
7. Goodwill and Intangible As_3
7. Goodwill and Intangible Assets (Details - Goodwill) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill, beginning balance | $ 8,800,761 | $ 8,104,056 |
Goodwill additions | 52,500 | 696,705 |
Goodwill, ending balance | $ 8,853,261 | $ 8,800,761 |
7. Goodwill and Intangible As_4
7. Goodwill and Intangible Assets (Details - Intangibles) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Finite intangible assets, gross | $ 3,863,859 | $ 3,863,859 |
Accumulated amortization | (1,979,283) | (1,550,597) |
Finite intangible assets, net | 1,884,576 | 2,313,262 |
Indefinite lived intangible asset | 8,319,454 | 8,319,454 |
Total intangible assets | 6,340,171 | 6,768,857 |
Trade Names [Member] | ||
Indefinite lived intangible asset | 4,455,595 | 4,455,595 |
Customer Relationships [Member] | ||
Finite intangible assets, gross | 1,600,286 | 1,600,286 |
Accumulated amortization | (396,371) | (236,343) |
Finite intangible assets, net | $ 1,203,915 | 1,363,943 |
Amortization period | 10 years | |
Mobile Software Applications [Member] | ||
Finite intangible assets, gross | $ 282,500 | 282,500 |
Accumulated amortization | (282,500) | (240,729) |
Finite intangible assets, net | $ 0 | 41,771 |
Amortization period | 2 years | |
NetSpective Webfiltering Software [Member] | ||
Finite intangible assets, gross | $ 1,134,435 | 1,134,435 |
Accumulated amortization | (453,774) | (226,887) |
Finite intangible assets, net | $ 680,661 | 907,548 |
Amortization period | 5 years | |
Noncompete Agreements [Member] | ||
Finite intangible assets, gross | $ 846,638 | 846,638 |
Accumulated amortization | (846,638) | (846,638) |
Finite intangible assets, net | $ 0 | $ 0 |
Amortization period | 2 years |
7. Goodwill and Intangible As_5
7. Goodwill and Intangible Assets (Details - Amortization schedule) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Future amortization 2019 | $ 386,916 | |
Future amortization 2020 | 386,916 | |
Future amortization 2021 | 386,916 | |
Future amortization 2022 | 160,029 | |
Future amortization 2023 | 160,029 | |
Future amortization Thereafter | 403,772 | |
Future amortization total | $ 1,884,576 | $ 2,313,262 |
7. Goodwill and Intangible As_6
7. Goodwill and Intangible Assets (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 428,686 | $ 1,092,592 |
9. Accounts Payable and Accru_3
9. Accounts Payable and Accrued Liabilities (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Payables and Accruals [Abstract] | ||
Earnout consideration payable in connection with Netspective acquisition | $ 362,500 | $ 362,500 |
Executive and employee compensation | 792,402 | 838,689 |
Interest on convertible debentures and promissory notes | 210,221 | 356,599 |
Other accrued expenses and liabilities | 67,914 | 34,938 |
Total accrued liabilities | $ 1,433,037 | $ 1,592,726 |
10. Related Party Payables (Det
10. Related Party Payables (Details) - USD ($) | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Oct. 15, 2018 | Dec. 29, 2017 | |
Darren Marks [Member] | ||||
Debt converted, amount converted | $ 333,333 | $ 333,333 | ||
Debt converted, shares issued | 1,075,268 | 666,666 | ||
Share price used for conversion | $ 0.31 | $ 0.50 | ||
Trading price of Grom stock on date of conversion | 0.19 | 0.30 | ||
Melvin Leiner [Member] | ||||
Debt converted, amount converted | $ 166,667 | $ 166,667 | ||
Debt converted, shares issued | 537,635 | 333,334 | ||
Share price used for conversion | 0.31 | 0.50 | ||
Trading price of Grom stock on date of conversion | $ 0.19 | $ 0.30 |
10. Related Party Payables (D_2
10. Related Party Payables (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Accounts payable, related parties | $ 1,181,645 | $ 2,076,640 |
Mark Family [Member] | ||
Wages and salaries | 180,800 | 165,800 |
Marks LLC [Member] | ||
Accounts payable, related parties | 469,506 | 1,215,442 |
Leiner LLC [Member] | ||
Accounts payable, related parties | 451,944 | $ 861,198 |
Rutherford [Member] | ||
Accounts payable, related parties | 50,000 | |
Dearings [Member] | ||
Accounts payable, related parties | $ 210,145 |
11. Other Noncurrent Liabilit_2
11. Other Noncurrent Liabilities (Details Narrative) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Other Liabilities Disclosure [Abstract] | ||
Accrued retirement benefit | $ 224,797 | $ 237,496 |
12. Debt (Details - Convertible
12. Debt (Details - Convertible debentures) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Convertible debt, current | $ 676,223 | $ 75,000 |
Convertible debt, net | 2,410,614 | 1,582,273 |
Convertible Debentures [Member] | ||
Unamortized discount | (735,871) | (137,950) |
Convertible Debentures [Member] | Redeemable unsecured Telemate [Member] | ||
Convertible debt, gross | 1,000,000 | 1,000,000 |
Convertible Debentures [Member] | Secured Convertible notes [Member] | ||
Convertible debt, gross | $ 2,822,708 | $ 676,223 |
12. Debt (Details - Secured deb
12. Debt (Details - Secured debt) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Principal value of promissory notes | $ 4,000,000 | $ 4,000,000 |
Promissory notes, net | 3,828,818 | 3,953,661 |
Secured Debt [Member] | ||
Loan discounts | $ (171,182) | $ (86,339) |
12. Debt (Details - Debt maturi
12. Debt (Details - Debt maturities) | Dec. 31, 2018USD ($) |
Debt Disclosure [Abstract] | |
2019 | $ 1,676,223 |
2020 | 7,146,285 |
2021 | $ 0 |
12. Debt (Details Narrative)
12. Debt (Details Narrative) - USD ($) | 11 Months Ended | 12 Months Ended | |
Nov. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Proceeds from convertible debt | $ 1,914,702 | $ 0 | |
Stock issued with convertible debt, value | 608,718 | ||
Amortization of loan discount | $ 628,423 | 141,278 | |
TeleMate [Member] | |||
Debt initial date | Jan. 1, 2017 | ||
Debt face amount | $ 1,000,000 | ||
Debt maturity date | Jan. 1, 2020 | ||
Convertible Notes Payable [Member] | Newbridge Offering [Member] | |||
Debt face amount | $ 552,000 | ||
Debt interest rate | 12.00% | ||
Stock issued with convertible debt, shares | 730,974 | ||
Convertible Notes Payable [Member] | OID Notes [Member] | |||
Proceeds from convertible debt | $ 1,238,485 | $ 601,223 | |
Debt interest rate | 10.00% | 10.00% | |
Original issue discount | $ 247,697 | $ 60,122 | |
Convertible Notes Payable [Member] | OID Notes [Member] | Inducement to lend [Member] | |||
Stock issued with convertible debt, shares | 150,305 | ||
Stock issued with convertible debt, value | $ 78,321 | ||
Amortization of loan discount | $ 4,543 | ||
Secured Promissory Note [Member] | TDA Sellers [Member] | |||
Debt initial date | Jun. 20, 2016 | ||
Debt face amount | $ 4,000,000 | ||
Debt maturity date | Apr. 2, 2020 | ||
Debt interest rate | 10.00% | ||
Stock issued with convertible debt, shares | 800,000 |
13. Income Taxes - (Details -
13. Income Taxes - (Details - Schedule of income tax expense (benefit)) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Current: | ||
Federal | $ 0 | $ 0 |
State and local | 0 | 0 |
Foreign | 74,356 | 70,547 |
Total current | 74,356 | 70,547 |
Deferred: | ||
Federal | 0 | 0 |
State and local | 0 | 0 |
Foreign | (59,412) | (36,851) |
Total deferred | (59,412) | (36,851) |
Total | $ 14,944 | $ 33,696 |
13. Income Taxes - (Details _2
13. Income Taxes - (Details - Reconciliation of income tax expense (benefit)) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Tax benefit at statutory federal rate | 0.00% | 0.00% |
Increase (decrease) in rate(s) resulting from: | ||
Foreign operations, net | (0.30%) | (0.60%) |
Change in deferred taxes | 2130.00% | (2660.00%) |
Change in valuation allowance | (2130.00%) | 2660.00% |
Total | (0.30%) | (0.60%) |
13. Income Taxes - (Details _3
13. Income Taxes - (Details - Schedule of income taxes payable) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Income taxes payable | $ 41,097 | $ 46,963 |
Federal [Member] | ||
Income taxes payable | 0 | 0 |
State and Local [Member] | ||
Income taxes payable | 0 | 0 |
Foreign [Member] | ||
Income taxes payable | $ 41,907 | $ 46,963 |
13. Income Taxes - (Details- S
13. Income Taxes - (Details- Schedule of deferred income taxes) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Non-current deferred tax assets: | ||
Retirement benefits | $ 67,439 | $ 71,249 |
Write down of investment(s) | 62,421 | 65,958 |
Deferred revenue net | 96,090 | 43,193 |
Other | 23,833 | 20,890 |
Net operating loss carryforwards | 4,150,813 | 5,143,029 |
Less: valuation allowance | (4,150,813) | (5,143,029) |
Total non-current deferred tax asset | 249,783 | 201,290 |
Total deferred tax asset | $ 249,783 | $ 201,290 |
13. Income Taxes (Details Narra
13. Income Taxes (Details Narrative) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Income Tax Disclosure [Abstract] | |
Operating loss carryforward | $ 19,765,774 |
Operating loss carryforward expiration date | Dec. 31, 2036 |
14. Stockholders' Equity (Detai
14. Stockholders' Equity (Details - Warrant activity) - $ / shares | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Number of warrants | ||
Warrants outstanding, beginning balance | 1,038,365 | 7,608,154 |
Warrants issued | 0 | 567,166 |
Warrants exercised | (265,455) | (7,107,765) |
Warrants forfeited | 0 | (29,190) |
Warrants outstanding, ending balance | 781,910 | 1,038,365 |
Weighted Average Exercise Price | ||
Weighted Average Exercise Price, Warrants outstanding, beginning balance | $ 1.36 | $ 0.26 |
Weighted Average Exercise Price, Warrants issued | 1.50 | |
Weighted Average Exercise Price, Warrants exercised | 0.24 | |
Weighted Average Exercise Price, Warrants forfeited | 0.24 | |
Weighted Average Exercise Price, Warrants outstanding, ending balance | $ 1.36 | $ 1.36 |
custom:AverageRemainingContractualTermAbstract | ||
Average Remaining Contractual Term, Warrants outstanding | 1 year 4 months 17 days | 2 years 4 months 17 days |
Average Remaining Contractual Term, Warrants issued | 2 years 3 months |
14. Stockholders' Equity (Det_2
14. Stockholders' Equity (Details - Option Activity) - Options [Member] | 12 Months Ended |
Dec. 31, 2018$ / sharesshares | |
Options issued | 36,047,100 |
Options forfeited | 5,004,000 |
Options outstanding | 31,043,100 |
Vested options | 30,615,519 |
Strike price | $ / shares | $ 0.50 |
Weighted average remaining life | 1 year 10 months 25 days |
Option 1 [Member] | |
Options issued | 7,735,350 |
Options forfeited | 0 |
Options outstanding | 7,735,350 |
Vested options | 7,735,350 |
Strike price | $ / shares | $ 0.24 |
Weighted average remaining life | 4 years 3 months 8 days |
Option 2 [Member] | |
Options issued | 9,695,250 |
Options forfeited | 417,000 |
Options outstanding | 9,278,250 |
Vested options | 9,278,250 |
Strike price | $ / shares | $ 0.36 |
Weighted average remaining life | 5 months 9 days |
Option 3 [Member] | |
Options issued | 13,135,500 |
Options forfeited | 3,544,500 |
Options outstanding | 9,591,000 |
Vested options | 9,591,000 |
Strike price | $ / shares | $ 0.72 |
Weighted average remaining life | 1 year 3 months |
Option 4 [Member] | |
Options issued | 5,481,000 |
Options forfeited | 1,042,500 |
Options outstanding | 4,438,500 |
Vested options | 4,011,019 |
Strike price | $ / shares | $ 0.78 |
Weighted average remaining life | 2 years 2 months 12 days |
14. Stockholders' Equity (Det_3
14. Stockholders' Equity (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Proceeds from issuance of common stock | $ 608,717 | $ 0 |
Proceeds from warrant exercises | 61,500 | 1,511,000 |
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, value | 1,321,376 | 533,000 |
Issuance of common stock in connection with the amendment of terms of promissory note(s), value | 482,250 | |
Issuance of common stock in connection with the acquisition of a business, value | 52,500 | 147,000 |
Issuance of common stock in connection with the acquisition of certain intangible assets, value | 60,000 | |
Stock issued for conversion of securities, value | 523,601 | 78,322 |
Stock based compensation | $ 369,318 | 2,658,633 |
Options [Member] | ||
Stock options issued | 0 | |
Stock based compensation | $ 2,300 | $ 1,823,408 |
Convertible debt and interest [Member] | ||
Stock issued for conversion of securities, shares | 200,000 | |
Stock issued for conversion of securities, value | $ 30,000 | |
Business Acquisition [Member] | ||
Issuance of common stock in connection with the acquisition of a business, shares | 150,000 | |
Issuance of common stock in connection with the acquisition of a business, value | $ 52,500 | |
Amended Promissory Note [Member] | ||
Issuance of common stock in connection with the amendment of terms of promissory note(s), shares | 805,000 | |
Issuance of common stock in connection with the amendment of terms of promissory note(s), value | $ 482,500 | |
Convertible Debentures [Member] | ||
Issuance of common stock in connection with the issuance of convertible debenture(s), shares | 1,432,653 | |
Issuance of common stock in connection with the issuance of convertible debenture(s), value | $ 523,601 | |
OID Notes [Member] | ||
Issuance of common stock in connection with the issuance of convertible debenture(s), shares | 150,305 | |
Loans Payable and Other Accrued Obligations [Member] | ||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, shares | 3,995,304 | 1,045,870 |
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, value | $ 1,321,376 | $ 533,000 |
Employees [Member] | ||
Stock issued for compensation, shares | 1,200,321 | |
Stock issued for compensation, value | $ 458,918 | |
Consultants and Other Professionals [Member] | ||
Stock issued for compensation, shares | 2,385,505 | 3,264,965 |
Stock issued for compensation, value | $ 825,170 | $ 1,892,735 |
Employees, Officers and Directors [Member] | ||
Stock issued for compensation, shares | 1,156,931 | |
Stock issued for compensation, value | $ 835,225 | |
Warrant Exercises [Member] | ||
Stock issued for warrant exercises | 256,455 | 6,530,220 |
Proceeds from warrant exercises | $ 61,500 | $ 1,566,000 |
Private Placement [Member] | ||
Stock issued new, shares | 3,854,869 | 0 |
Proceeds from issuance of common stock | $ 608,718 | $ 0 |
15. Commitments and Contingen_3
15. Commitments and Contingencies (Details) | Dec. 31, 2018USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2019 | $ 97,859 |
2020 | 98,599 |
2021 | 90,892 |
2022 | 49,402 |
2023 | $ 27,619 |
15. Commitments and Contingen_4
15. Commitments and Contingencies (Details Narrative) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
NetSpective Division [Member] | |
Operating lease payment frequency | monthly |
Operating lease payment | $ 2,055 |
Boca Raton, Florida [Member] | |
Operating lease payment frequency | monthly |
Operating lease payment | $ 4,223 |
Manila, Philippines [Member] | |
Operating lease payment frequency | monthly |
Operating lease payment | $ 22,533 |