Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2020 | |
Cover [Abstract] | |
Entity Registrant Name | Grom Social Enterprises, Inc. |
Entity Central Index Key | 0001662574 |
Document Type | S-1/A |
Amendment Flag | false |
Entity Filer Category | Non-accelerated Filer |
Entity Incorporation State Country Code | FL |
Entity Small Business | true |
Entity Emerging Growth | true |
Entity Ex Transition Period | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Current Assets | ||
Cash and cash equivalents | $ 120,300 | $ 506,219 |
Accounts receivable, net | 587,932 | 545,662 |
Inventory, net | 48,198 | 29,562 |
Prepaid expenses and other current assets | 386,165 | 329,128 |
Total current assets | 1,142,595 | 1,410,571 |
Operating lease right of use assets | 602,775 | 874,159 |
Property and equipment, net | 965,109 | 852,145 |
Goodwill | 8,380,504 | 8,853,261 |
Intangible assets, net | 5,566,339 | 5,953,255 |
Deferred tax assets, net - noncurrent | 531,557 | 238,581 |
Other assets | 76,175 | 79,065 |
Total assets | 17,265,054 | 18,261,037 |
Current Liabilities | ||
Accounts payable | 1,126,114 | 808,520 |
Accrued liabilities | 1,794,232 | 1,651,482 |
Advanced payments and deferred revenues | 967,053 | 627,082 |
Convertible notes - current | 2,349,677 | 4,828,656 |
Derivative liabilities | 0 | 77,584 |
Loans payable | 189,963 | 0 |
Related party payables | 143,741 | 462,137 |
Income taxes payable | 102,870 | 0 |
Lease liabilities - current | 304,326 | 263,252 |
Total current liabilities | 6,977,976 | 8,718,713 |
Convertible debentures, net of loan discounts | 897,349 | 505,000 |
Lease liabilities | 328,772 | 633,098 |
Loans payable | 95,931 | 0 |
Other noncurrent liabilities | 367,544 | 227,229 |
Total liabilities | 8,667,572 | 10,084,040 |
Commitments and contingencies | ||
Stockholders' Equity | ||
Common stock, $0.001 par value. 500,000,000 shares authorized; 188,354,282 and 167,382,807 shares issued and outstanding as of December 31, 2020 and December 31, 2019, respectively | 188,355 | 167,383 |
Additional paid-in capital | 64,234,749 | 58,154,730 |
Accumulated earnings (deficit) | (55,791,914) | (50,048,481) |
Accumulated other comprehensive income | (39,334) | (97,560) |
Total stockholders' equity | 8,597,482 | 8,176,997 |
Total liabilities and equity | 17,265,054 | 18,261,037 |
Series A Preferred Stock [Member] | ||
Stockholders' Equity | ||
Preferred stock value | 0 | 925 |
Series B Preferred Stock [Member] | ||
Stockholders' Equity | ||
Preferred stock value | $ 5,626 | $ 0 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2020 | Dec. 31, 2019 | Feb. 22, 2019 |
Preferred stock, par value | $ 0.001 | ||
Preferred stock, shares authorized | 25,000,000 | ||
Common stock, par value | $ 0.001 | $ 0.001 | |
Common stock, shares authorized | 500,000,000 | 500,000,000 | |
Common stock, shares issued | 188,354,282 | 167,382,807 | |
Common stock, shares outstanding | 188,354,282 | 167,382,807 | |
Series A Preferred Stock [Member] | |||
Preferred stock, par value | $ 0.001 | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | 2,000,000 |
Preferred stock, shares issued | 0 | 925,000 | |
Preferred stock, shares outstanding | 0 | 925,000 | |
Series B Preferred Stock [Member] | |||
Preferred stock, par value | $ 0.001 | $ 0.001 | |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | |
Preferred stock, shares issued | 5,625,884 | 0 | |
Preferred stock, shares outstanding | 5,625,884 | 0 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Loss - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Statement [Abstract] | ||
Sales | $ 6,159,531 | $ 8,296,997 |
Cost of good sold | 3,352,640 | 4,610,961 |
Gross margin | 2,806,891 | 3,686,036 |
Operating expenses: | ||
Depreciation and amortization | 449,379 | 435,649 |
Selling and marketing | 118,844 | 116,291 |
General and administrative | 4,462,095 | 5,140,100 |
Professional fees | 623,014 | 908,093 |
Stock-based compensation | 62,600 | 64,800 |
Impairment charge | 472,757 | 0 |
Total operating expenses | 6,188,689 | 6,664,933 |
Loss from operations | (3,381,798) | (2,978,897) |
Other income (expense) | ||
Interest expense, net | (1,398,731) | (1,705,123) |
Derivative expense | 0 | (42,140) |
Loss on settlement of debt | (1,312,983) | (363,468) |
Unrealized gain on change in fair value of derivative liabilities | 77,584 | 7,826 |
Other gains or income | 48,468 | 525,903 |
Total other income (expense) | (2,585,662) | (1,577,002) |
Loss before income taxes | (5,967,460) | (4,555,899) |
Provision for income taxes (benefit) | (224,027) | 35,375 |
Net loss | (5,743,433) | (4,591,274) |
Convertible preferred stock beneficial conversion feature and other discounts accreted as a deemed dividend | (277,500) | (740,899) |
Net loss attributable to common stockholders | $ (6,020,933) | $ (5,332,173) |
Basic and diluted earnings (loss) per common share | $ (0.03) | $ (0.04) |
Weighted-average number of common shares outstanding: | ||
Basic and diluted | 180,182,382 | 147,441,651 |
Comprehensive loss: | ||
Net loss | $ (5,743,433) | $ (4,591,274) |
Foreign currency translation adjustment | 58,226 | 55,694 |
Comprehensive loss | $ (5,685,207) | $ (4,535,580) |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Series A Preferred Stock | Series B Preferred Stock | Common Stock [Member | Additional Paid-In Capital | Retained Earnings / Accumulated Deficit | Accumulated Other Comprehensive Income | Total |
Beginning balance, shares at Dec. 31, 2018 | 138,553,655 | ||||||
Beginning balance, value at Dec. 31, 2018 | $ 138,554 | $ 52,254,286 | $ (45,457,207) | $ (153,254) | $ 6,782,379 | ||
Net loss | (4,591,274) | (4,591,274) | |||||
Change in foreign currency translation | 55,694 | 55,694 | |||||
Issuance of Series A preferred stock in connection with sales made under private offerings, shares | 925,000 | ||||||
Issuance of Series A preferred stock in connection with sales made under private offerings, value | $ 925 | 410,226 | 411,151 | ||||
Issuance of common stock in connection with sales of Series A preferred stock, shares | 4,625,000 | ||||||
Issuance of common stock in connection with sales of Series A preferred stock, value | $ 4,625 | 509,224 | 513,849 | ||||
Beneficial conversion feature related to preferred stock | 231,050 | 231,050 | |||||
Deemed dividend on conversion of convertible preferred stock to common stock | (231,050) | (231,050) | |||||
Accretion of Series A preferred stock | 509,849 | 509,849 | |||||
Deemed dividend on accretion of Series A preferred stock | (509,849) | (509,849) | |||||
Issuance of common stock in connection with sales made under private offerings, shares | 5,450,000 | ||||||
Issuance of common stock in connection with sales made under private offerings, value | $ 5,450 | 539,550 | 545,000 | ||||
Issuance of common stock in exchange for consulting, professional and other services, shares | 3,877,516 | ||||||
Issuance of common stock in exchange for consulting, professional and other services, value | $ 3,877 | 774,534 | 778,411 | ||||
Issuance of common stock in lieu of cash for accounts payable, loans payable and other accrued obligations, shares | 1,707,690 | ||||||
Issuance of common stock in lieu of cash for accounts payable, loans payable and other accrued obligations, value | $ 1,708 | 587,732 | 589,440 | ||||
Issuance of common stock in connection with the issuance of convertible notes, shares | 160,260 | ||||||
Issuance of common stock in connection with the issuance of convertible notes, value | $ 160 | 32,258 | 32,418 | ||||
Issuance of common stock in connection with the amendment of terms of promissory notes, shares | 800,000 | ||||||
Issuance of common stock in connection with the amendment of terms of promissory notes, value | $ 800 | 219,200 | 220,000 | ||||
Conversion of convertible notes and accrued interest into common stock, shares | 12,208,686 | ||||||
Conversion of convertible notes and accrued interest into common stock, value | $ 12,209 | 2,775,990 | 2,788,199 | ||||
Recognition of beneficial conversion features related to convertible notes | 51,730 | 51,730 | |||||
Ending balance, shares at Dec. 31, 2019 | 925,000 | 167,382,807 | |||||
Ending balance, value at Dec. 31, 2019 | $ 925 | $ 167,383 | 58,154,730 | (50,048,481) | (97,560) | 8,176,997 | |
Net loss | (5,743,433) | (5,743,433) | |||||
Change in foreign currency translation | 58,226 | 58,226 | |||||
Exchange of Series A preferred stock for Series B preferred stock, shares | (925,000) | 1,202,500 | |||||
Exchange of Series A preferred stock for Series B preferred stock, value | $ (925) | $ 1,202 | (277) | ||||
Accretion of Series B preferred stock | 277,500 | 277,500 | |||||
Deemed dividend on accretion of Series B preferred stock | (277,500) | (277,500) | |||||
Issuance of Series B preferred stock with common stock in connection with sales made under private offerings, shares | 483,500 | ||||||
Issuance of Series B preferred stock with common stock in connection with sales made under private offerings, value | $ 484 | 483,016 | 483,500 | ||||
Exchange of convertible notes and accrued interest for Series B preferred stock, shares | 3,939,884 | ||||||
Exchange of convertible notes and accrued interest for Series B preferred stock, value | $ 3,940 | 3,935,944 | 3,939,884 | ||||
Issuance of common stock as compensation to employees, officers and/or directors, shares | 420,000 | ||||||
Issuance of common stock as compensation to employees, officers and/or directors, value | $ 420 | 35,180 | 35,600 | ||||
Issuance of common stock in exchange for consulting, professional and other services, shares | 6,487,706 | ||||||
Issuance of common stock in exchange for consulting, professional and other services, value | $ 6,488 | 572,157 | 578,645 | ||||
Issuance of common stock in lieu of cash for accounts payable, loans payable and other accrued obligations, shares | 500,000 | ||||||
Issuance of common stock in lieu of cash for accounts payable, loans payable and other accrued obligations, value | $ 500 | 49,500 | 50,000 | ||||
Issuance of common stock in connection with the issuance of convertible notes, shares | 10,869,677 | ||||||
Issuance of common stock in connection with the issuance of convertible notes, value | $ 10,870 | 725,144 | 736,014 | ||||
Issuance of common stock warrants in connection with the issuance of convertible notes | 63,991 | 63,991 | |||||
Conversion of convertible notes and accrued interest into common stock, shares | 2,694,092 | ||||||
Conversion of convertible notes and accrued interest into common stock, value | $ 2,694 | 107,743 | 110,437 | ||||
Recognition of beneficial conversion features related to convertible notes | 107,621 | 107,621 | |||||
Ending balance, shares at Dec. 31, 2020 | 5,625,884 | 188,354,282 | |||||
Ending balance, value at Dec. 31, 2020 | $ 5,626 | $ 188,355 | $ 64,234,749 | $ (55,791,914) | $ (39,334) | $ 8,597,482 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Cash flows from operating activities of continuing operations: | ||
Net income (loss) | $ (5,743,433) | $ (4,591,274) |
Adjustments to reconcile net loss to cash used in operating activities: | ||
Depreciation and amortization | 848,463 | 863,994 |
Amortization of debt discount | 629,790 | 638,626 |
Provision for doubtful accounts | (35,341) | 41,985 |
Provision for excess or obsolete inventory | 0 | 0 |
Common stock issued for financing costs | 167,614 | 32,418 |
Common stock issued in exchange for fees and services | 578,645 | 778,411 |
Deferred taxes | (292,976) | 11,252 |
Derivative expense | 0 | 42,140 |
Impairment charge | 472,757 | 0 |
Stock-based compensation | 62,600 | 64,800 |
Loss on extinguishment of debt | 1,312,983 | 363,468 |
Unrealized (gain) loss on change in fair value of contingent consideration | 0 | (429,000) |
Unrealized (gain) loss on change in fair value of derivative liabilities | (77,584) | (7,826) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (6,929) | 535,846 |
Inventory | (18,636) | (20,544) |
Prepaid expenses and other current assets | (84,037) | 55,912 |
Operating lease right of use assets | 30,247 | 22,406 |
Other assets | 2,891 | 35,536 |
Accounts payable | 317,524 | 153,075 |
Accrued liabilities | 347,514 | 762,909 |
Advanced payments and deferred revenues | 339,970 | (493,146) |
Income taxes payable and other noncurrent liabilities | 243,185 | (38,665) |
Related party payables | (318,395) | (519,508) |
Net cash provided by (used in) operating activities | (1,223,148) | (1,697,185) |
Cash flows from investing activities: | ||
Purchase of fixed assets | (574,512) | (292,911) |
Net cash provided by (used in) investing activities | (574,512) | (292,911) |
Cash flows from financing activities: | ||
Proceeds from issuance of preferred stock, net of issuance costs | 483,500 | 411,151 |
Proceeds from issuance of common stock, net of issuance costs | 0 | 1,058,849 |
Proceeds from issuance of convertible notes | 4,143,500 | 600,000 |
Proceeds from loans payable | 303,912 | 0 |
Repayments of convertible notes | (3,537,335) | (262,857) |
Repayments of loans payable | (18,018) | 0 |
Net cash provided by (used in) financing activities | 1,375,559 | 1,807,143 |
Effect of exchange rates on cash and cash equivalents | 36,182 | 55,579 |
Net increase (decrease) in cash and cash equivalents | (385,919) | (127,374) |
Cash and cash equivalents at beginning of period | 506,219 | 633,593 |
Cash and cash equivalents at end of period | 120,300 | 506,219 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 420,802 | 521,408 |
Cash paid for income taxes | 0 | 0 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Common stock issued for financing costs incurred in connection with convertible notes | 568,400 | 0 |
Common stock issued to reduce accounts payable and other accrued liabilities | 50,000 | 589,440 |
Common stock warrants issued in connection with convertible notes | 33,056 | 0 |
Conversion of convertible debentures and accrued interest into common stock | 110,436 | 3,788,199 |
Discount for beneficial conversion features on convertible notes | 107,621 | 51,730 |
Discount related to fair value of derivative liabilities associated with convertible notes | $ 0 | $ 43,270 |
1. Nature of Operations
1. Nature of Operations | 12 Months Ended |
Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations | 1. NATURE OF OPERATIONS Grom Social Enterprises, Inc. (the “Company”, “Grom” “we”, “us” or “our”), a Florida corporation f/k/a Illumination America, Inc. (“Illumination”), is a media, technology and entertainment company that focuses on delivering content to children under the age of 13 years in a safe secure platform that is compliant with the Children’s Online Privacy Protection Act (“COPPA” and can be monitored by parents or guardians. The Company operates its business through the following four wholly-owned subsidiaries: · Grom Social, Inc. (“Grom Social”) was incorporated in the State of Florida on March 5, 2012 and operates the Company’s social media network designed for children under the age of 13 years. · TD Holdings Limited (“TD Holdings”) was incorporated in Hong Kong on September 15, 2005. TD Holdings operates through its two subsidiary companies: (i) Top Draw Animation Hong Kong Limited (“TDAHK”), a Hong Kong corporation and (ii) Top Draw Animation, Inc. (“Top Draw” or “TDA”), a Philippines corporation. The group’s principal activities are the production of animated films and televisions series. · Grom Educational Services, Inc. (“GES”) was incorporated in the State of Florida on January 17, 2017. GES operates the Company’s web filtering services provided to schools and government agencies. · Grom Nutritional Services, Inc. (“GNS”) was incorporated in the State of Florida on April 19, 2017. GNS intends to market and distribute nutritional supplements to children. GNS has not generated any revenue since its inception. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2020 | |
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 in order to fund its operations. Basis of Presentation The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and are expressed in United States dollars. For the years ended December 31, 2020 and 2019, the consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Grom Social, TD Holdings, GES, and GNS. All intercompany accounts and transactions are eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. 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 The Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) Other Assets and Deferred Costs – Contracts with Customers Animation Revenue For years ended December 31, 2020 and 2019, the Company recorded a total of $5,483,332 and $7,565,672, respectively, of animation revenue from contracts with customers. Animation revenue is primarily generated from contracts with customers for preproduction and production services related to the development of animated movies and television series. Preproduction activities include producing storyboards, location design, model and props design, background color and color styling. Production focuses on library creation, digital asset management, background layout scene assembly, posing, animation and after effects. The Company provides services under fixed-price contracts. Under fixed-price contracts, the Company agrees to perform the specified work for a pre-determined price. To the extent actual costs vary from estimated costs, the Company’s profit may increase, decrease, or result in a loss. The Company identifies a contract under ASC 606 once (i) it is approved by all parties, (ii) the rights of the parties are identified, (iii) the payment terms are identified, (iv) the contract has commercial substance, and (v) collectability of consideration is probable. The Company evaluates 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 the Company’s 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 standalone selling prices for all of these distinct components. Accordingly, our contracts are typically accounted for as containing multiple performance obligations. The Company determines the transaction price for each contract based on the consideration it expects to receive for the distinct services being provided under the contract. The Company recognizes revenue as performance obligations are satisfied and the customer obtains control of the services. In determining when performance obligations are satisfied, the Company considers factors such as contract terms, payment terms and whether there is an alternative future use of the product or service. Substantially all of the Company’s revenue is recognized over time as it performs 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 made towards completion of the performance obligation. The Company uses the percentage-of-completion cost-to-cost measure of progress because it best depicts the transfer of control to the customer as the Company incurs costs against its 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. The percentage-of-completion cost-to-cost method requires management to make estimates and assumptions that affect the reported amounts of contract 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 the total estimated amount of costs that will be incurred for a project or job. Web Filtering Revenue For years ended December 31, 2020 and 2019, the Company recorded a total of $673,182 and $723,800, respectively, of web filtering revenue from contracts with customers. Web filtering revenue from subscription sales is recognized on a pro-rata basis over the subscription period. Typically, a subscriber purchases computer hardware and a software and support service license for a period of use between one year to five years. The subscriber is billed in full at the time of the sale. The Company immediately recognizes revenue attributable to the computer hardware as it is non-refundable and control passes to the customer. The advanced billing component for software and service is initially recorded as deferred revenue and subsequently recognized as revenue on a straight-line basis over the subscription period. Contract Assets and Liabilities 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. Revenues from web filtering contracts are all billed in advance and therefore represent contract liabilities until fully recognized on a ratable basis over the contract life. The following table depicts the composition of our contract assets and liabilities as of December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Animation contract assets $ 525,709 $ 513,388 Web filtering contract assets 54,886 24,937 Other contract assets 7,337 7,337 Total contract assets $ 587,932 $ 545,662 Animation contract liabilities $ 410,709 $ 51,054 Web filtering contract liabilities 544,844 564,528 Other contract liabilities 11,500 11,500 Total contract liabilities $ 967,053 $ 627,082 For the years ended December 31, 2020 and 2019, the Company recorded $51,054 and $380,749, respectively, in animation revenue and $399,033 and $461,843, respectively, in web filtering revenue which was included in each respective year’s opening contract liability balance. Fair Value Measurements FASB ASC 820, Fair Value Measurements and Disclosures · Level 1: Quoted prices in active markets for identical assets or liabilities. · Level 2: Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable. · Level 3: Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2020 and 2019. 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. 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 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. Accounts receivable includes unbilled accounts receivable. Unbilled accounts receivable is a contract asset related to amounts that are unbilled due to agreed-upon contractual terms in which billing occurs subsequent to revenue recognition. This situation typically occurs when the Company recognizes revenue for episodic development activities performed but not yet billed. Episodic development activities are typically billable upon delivery. Inventory Inventory consists of supplies used for the sole purpose of completing animation projects. 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 and indefinite-lived assets 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. Indefinite-lived intangible assets are evaluated for impairment at the individual asset level by assessing whether it is more likely than not that the asset is impaired (for example, that the fair value of the asset is below its carrying amount). If it is more likely than not that the asset is impaired, its carrying amount is written down to its fair value. 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, 2020 on its subsidiaries with material goodwill and intangible asset amounts on their respective balance sheets and determined that an impairment charge of $472,757 was necessary. See Note 7 – Goodwill and Intangible Assets for more information. 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, 2020, 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. Right of Use Assets and Lease Liabilities FASB ASU No. 2016-02, "Leases" (ASC 842) requires lessees to recognize almost all leases on the balance sheet as a right of use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory, and permits the exclusion of leases with an original lease term of less than one year. Under ASC 842, the Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company's leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Operating leases are included in operating lease right-of-use assets, operating lease liabilities, current and operating lease liabilities, non-current on the Company's condensed consolidated balance sheets. 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 FASB ASC 830, Foreign Currency Matters 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 FASB ASC 220, Comprehensive Income 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 FASB 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 January 2017, the FASB issued Accounting Standards Update No. 2017-04, Simplifying the Test for Goodwill Impairment On November 15, 2019, the FASB issued ASU 2019-10, which (1) provides a framework to stagger effective dates for future major accounting standards and (2) amends the effective dates for certain major new accounting standards to give implementation relief to certain types of entities. Specifically, ASU 2019-10 amends the effective date for ASU 2017-04 to fiscal years beginning after December 15, 2022, and interim periods therein. Early adoption continues to be permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not anticipate the adoption of ASU 2017-04 will have a material impact on its financial statements for both annual and interim reporting periods. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40) |
3. Accounts Receivable, net
3. Accounts Receivable, net | 12 Months Ended |
Dec. 31, 2020 | |
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, 2020 and 2019: December 31, 2020 December 31, 2019 Billed accounts receivable $ 443,806 $ 353,778 Unbilled accounts receivable 188,029 233,869 Allowance for doubtful accounts (43,903 ) (41,985 ) Total accounts receivable, net $ 587,932 $ 545,662 During the year ended December 31, 2020, the Company had three customers that accounted for 68.5% of revenues and two customers that accounted for 29.9% of accounts receivable. During the year ended December 31, 2019, the Company had three customers that accounted for approximately 42.3% of revenues and one customer that accounted for 38.7% of accounts receivable. |
4. Prepaid Expenses and Other C
4. Prepaid Expenses and Other Current Assets | 12 Months Ended |
Dec. 31, 2020 | |
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, 2020 and 2019: December 31, 2020 December 31, 2019 Prepaid rent $ 18,679 $ 17,863 Vendor advances 6,085 6,221 Prepaid service agreements 101,886 172,602 Employee advance and other payroll related items 74,773 56,356 Other prepaid expenses and current assets 184,742 76,086 Total $ 386,165 $ 329,128 Prepaid expenses and other assets represent advances or 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, 2020 | |
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, 2020 and 2019: December 31, 2020 December 31, 2019 Cost Accumulated Net Book Cost Accumulated Net Book Capital assets subject to depreciation: Computers, software and office equipment $ 2,800,872 $ (2,257,797 ) $ 543,075 $ 2,184,327 $ (1,882,567 ) $ 301,760 Machinery and equipment 192,988 (152,149 ) 40,839 175,761 (125,272 ) 50,489 Vehicles 163,525 (106,826 ) 56,699 158,849 (77,133 ) 81,716 Furniture and fixtures 422,234 (364,655 ) 57,579 399,512 (323,771 ) 75,741 Leasehold improvements 1,143,704 (903,381 ) 240,323 1,081,076 (764,070 ) 317,006 Total fixed assets 4,723,323 (3,784,808 ) 938,515 3,999,525 (3,172,813 ) 826,712 Capital assets not subject to depreciation: Construction in progress 26,594 – 26,594 25,433 – 25,433 Total fixed assets $ 4,749,917 $ (3,784,808 ) $ 965,109 $ 4,024,958 $ (3,172,813 ) $ 852,145 For the years ended December 31, 2020 and 2019, the Company recorded depreciation expense of $461,548 and $477,079 respectively. |
6. Leases
6. Leases | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
Leases | 6. LEASES The Company has entered into operating leases primarily for real estate. These leases have terms which range from three years to five years, and often include one or more options to renew or in the case of equipment rental, to purchase the equipment. In the United States, the Company leases approximately 2,100 square feet of office space in Boca Raton, Florida at the rate of $4,000 per month pursuant to a three-year lease which expires in October 2021. The Florida office space is the location of the Company’s corporate headquarters and administrative staff. The Company’s animation operations leases portions of three floors aggregating 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. The Company pays approximately $24,000 per month in the aggregate for such space (which increases by approximately 5% annually). These leases expire in December 2022. The Company’s web filtering operations lease approximately 1,400 square feet of office space in Norcross, Georgia. The Company pays approximately $2,100 per month pursuant to a five-year lease which expires in December 2023. The lease payment increases by approximately 3% annually. The future minimum payment obligations at December 31, 2020 for operating leases are as follows: 2021 $ 367,636 2022 $ 335,659 2023 $ 28,588 These operating leases are listed as separate line items on the Company's Consolidated Balance Sheets and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are also listed as separate line items on the Company's Consolidated Balance Sheets. Operating lease ROU assets and liabilities commencing after January 1, 2019 are recognized at commencement date based on the present value of lease payments over the lease term. Based on the present value of the lease payments for the remaining lease term of the Company's existing leases, the Company recognized ROU assets and lease liabilities for operating leases of approximately $602,775 in assets, $304,326 in current liabilities and $328,772 in noncurrent liabilities as of December 31, 2020. During the year ended December 31, 2020, the Company recognized approximately $363,974 in total lease costs. Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. Information related to the Company's operating right-of-use assets and related lease liabilities were as follows: Year Ended Cash paid for operating lease liabilities $ 355,766 Weighted-average remaining lease term (in years) 2.2 Weighted-average discount rate 10% Minimum future lease payments $ 731,883 The following table presents the amortization of the Company’s lease liabilities under ASC 842 at December 31, 2020: 2021 $ 304,326 2022 $ 302,781 2023 $ 25,990 |
7. Goodwill and Intangible Asse
7. Goodwill and Intangible Assets | 12 Months Ended |
Dec. 31, 2020 | |
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 for the year ended December 31, 2020: Balance, December 31, 2019 $ 8,853,261 Impairment charge (472,757 ) Balance, December 31, 2020 $ 8,380,504 At December 31, 2020, the Company performed its annual impairment tests as prescribed by ASC 350 on the carrying value of its goodwill and recorded an impairment charge totaling $472,757; of which $420,257 was attributed to the assets of Fyoosion LLC acquired in 2017 and $52,500 was attributed to the assets of Bonnie Boat and Friends acquired in 2018. 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. At December 31, 2020 and 2019, the carrying amount of the Company’s goodwill was $8,380,504 and $8,853,261, respectively. The following table sets forth the components of the Company’s intangible assets at December 31, 2020 and 2019: December 31, 2020 December 31, 2019 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 $ (716,429 ) $ 883,857 $ 1,600,286 $ (556,400 ) $ 1,043,886 Mobile software applications 2.00 282,500 (282,500 ) – 282,500 (282,500 ) – Web filtering software 5.00 1,134,435 (907,548 ) 226,887 1,134,435 (680,661 ) 453,774 Noncompete agreements 2.00 846,638 (846,638 ) – 846,638 (846,638 ) – Subtotal – 3,863,859 (2,753,115 ) 1,110,744 3,863,859 (1,979,283 1,497,660 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 $ (2,753,115 ) $ 5,566,339 $ 8,319,454 $ (1,979,283 ) $ 5,953,255 For the years ended December 31, 2020 and 2019, the Company recorded amortization expense for intangible assets subject to amortization of $386,916 and $428,686, respectively. The following table provides information regarding estimated amortization expense for intangible assets subject to amortization for each of the following years ending December 31: 2021 $ 386,916 2022 160,029 2023 160,029 2024 160,029 2025 160,029 Thereafter 83,712 $ 1,110,744 |
8. Other Assets
8. Other Assets | 12 Months Ended |
Dec. 31, 2020 | |
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, 2020 | |
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, 2020 and 2019: December 31, 2020 December 31, 2019 Executive and employee compensation $ 1,642,959 $ 1,237,531 Interest on convertible promissory notes 134,127 314,309 Other accrued expenses and liabilities 15,293 99,641 Total accrued liabilities $ 1,792,379 $ 1,651,482 |
10. Related Party Payables
10. Related Party Payables | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Payables | 10. RELATED PARTY PAYABLES AND ACTIVITY Acquisition of TD Holdings Wayne Dearing, the Managing Director of TD Holdings, was issued a promissory note in the principal amount of $2,000,000 on July 1, 2016 in connection with the Company’s acquisition of TD Holdings. The note, as amended, was due to mature on April 1, 2020. On March 16, 2020, the Company paid Mr. Dearing $1,500,000 against the principal amount of the note and restructured the remaining $500,000 in unpaid principal. Under the new terms, the note bears interest at a rate of 12% per annum and matures on June 30, 2021. Principal and interest are payable monthly in arrears, amortized over a four-year period. At December 31, 2020, the principal balance remaining on this note totaled $441,088 and is classified under Convertible Notes – Current in the Company’s consolidated financial statements. Additionally, Mr. Dearing was entitled to 50% of any earnout payment contingent upon TD Holdings achieving certain financial milestones as defined in the Share Exchange Agreement. The earnout period, as amended, was extended until December 31, 2019. No earnout consideration was achieved, nor payment made, for any measurement period through December 31, 2019. Mr. Dearing’s wife, Stella Dearing, is the Director of Operations of Top Draw and receives an annual salary of $83,000. Darren Marks’s Family The Company has engaged the family of Darren Marks, its Chief Executive Officer, to assist in the development of the Grom Social website and mobile application. These individuals have created over 1,400 hours of original short form content. Sarah Marks, the wife of Darren Marks, our President and Chief Executive Officer, Zach Marks, Luke Marks, Jack Marks, Dawson Marks, Caroline Marks and Victoria Marks, each Darren Marks’s children, are, or have been, by the Company employed or independently contracted. During the year ended December 31, 2020, the Marks family was paid as follows: Zach $28,050, Dawson $500, and Victoria $500. During the year ended December 31, 2019, the Marks family was paid as follows: Sarah $12,600, Zach $40,593, Luke $17,659, Jack $1,800, Victoria $2,250 and Caroline $3,750. Compensation for services provided by the Marks family is expected to continue for the foreseeable future. Each member of the Marks family is actively involved in the creation of content for the website and mobile app, including numerous videos focusing on social responsibility, anti-bullying, digital citizenship, unique blogs, and special events. Liabilities Due to Officers and Directors Pursuant to verbal agreements, Messrs. Marks and Leiner have made loans to the Company to help fund operations. These loans are non-interest bearing and callable on demand. During the years ended December 31, 2020 and 2019, Mr. Marks loaned $0 and $22,000, respectively, and Mr. Leiner loaned $47,707 and $81,500, respectively, to the Company. During the year ended December 31, 2019, Mr. Marks and Mr. Leiner agreed to convert portions of their loans into equity. These transactions are summarized as follows: Name Date Amount of Share Price Trading price Shares Darren Marks 12/10/2019 100,000 $ 0.18 0.10 571,429 Melvin Leiner 12/10/2019 100,000 $ 0.18 0.10 571,428 At December 31, 2020 and 2019, the outstanding amounts due to Mr. Marks were $43,429 and $215,122, respectively, and the outstanding amounts due to Mr. Leiner were $50,312 and $210,929, respectively. On July 13, 2018, our director Dr. Thomas Rutherford loaned the Company $50,000. The loan is non-interest bearing and callable on demand. At December 31, 2020 and 2019, the aggregate related party payables were $143,741 and $462,137, respectively. |
11. Other Noncurrent Liabilitie
11. Other Noncurrent Liabilities | 12 Months Ended |
Dec. 31, 2020 | |
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”. At December 31, 2020 and 2019, accrued retirement benefit costs were $367,544 and $227,229, respectively. |
12. Debt
12. Debt | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Debt | 12. DEBT Convertible Notes The following tables set forth the components of the Company’s convertible notes at December 31, 2020 and 2019: December 31, December 31, 8% Convertible Promissory Notes (Bridge Notes) $ 373,587 $ – 10% Unsecured Convertible Redeemable Notes – Variable Conversion Price 265,000 100,000 10% Secured Convertible Notes with Original Issuance Discounts (OID Notes) 153,250 664,473 12% Senior Secured Convertible Notes (Newbridge) 52,572 289,143 12% Senior Secured Convertible Notes (Original TDH Notes) 882,175 4,000,000 12% Senior Secured Convertible Notes (TDH Secured Notes) 1,645,393 505,000 12% Senior Secured Convertible Notes (Additional Secured Notes) 260,315 – Loan discounts (385,266 ) (224,958 ) Total convertible notes, net 3,247,026 Less: current portion of convertible notes, net (2,349,677 ) (4,828,658 ) Convertible notes, net $ 897,349 $ 505,000 8% Convertible Promissory Notes (Bridge Notes) On November 30, 2020, the Company entered into a securities purchase agreement with EMA Financial, LLC (“EMA”) pursuant to which the Company issued to EMA a nine-month 8% convertible promissory note in the principal amount of $260,000 (the “EMA Note”) for a $234,000 investment. The term of the EMA Note may be extended by EMA up to an additional year. The EMA Note is convertible into common stock of the Company at any time after 180 days from issuance. The conversion price of the EMA Note is equal to the lower of: (i) $0.06 per share, or (ii) 70% of the lowest trading price of the common stock during the ten consecutive trading days including and immediately preceding the conversion date. On December 17, 2020, the Company entered into a note purchase agreement with Quick Capital, LLC (“Quick Capital”) pursuant to which the Company issued Quick Capital a nine-month convertible promissory note in the principal amount of $113,587 (the “Quick Note”) for a $100,000 investment, which included an original issuance discount of 8% and a $4,500 credit for Quick Captial’s transaction expenses. The Quick Note may be converted into shares of common stock at (i) a 30% discount to the lowest price per share of any debt or securities offering by the Company if the Company’s common stock is listed on NASDAQ or NYSE within 90 days of the Quick Note issuance; (ii) the lesser of (A) $0.04 or (B) a 30% discount to the average of the two lowest closing prices during the ten trading days prior to the conversion date; (iii) $0.04 per share, upon an event of default as described in the Note. The Company analyzed the conversion feature of the note for a beneficial conversion feature, for which the Company concluded that a beneficial conversion feature existed. The beneficial conversion feature was measured using the commitment-date stock price and its fair value was determined to be $12,621. This amount is recorded as a debt discount and is amortized as interest expense over the term of the related convertible note. In connection with the Quick Note issuance, the Company also issued a three-year warrant to purchase up to an aggregate of 1,183,197 shares of the Company’s common stock at an exercise price of $0.05 per share. ASC 470-20 requires proceeds from the sale of a debt instrument with stock purchase warrants be allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance. This resulted in the debt being recorded at a discount which will be amortized to interest expense over the term of the loan using the effective interest method so the debt, at its term, is recorded at its face value. The Company estimated the fair value of this warrant at date of grant using the Black-Scholes option pricing model using the following inputs: (i) stock price on the date of grant of $0.05, (ii) the contractual term of the warrant of 3 years, (iii) a risk-free interest rate of 0.19% and (iv) an expected volatility of the price of the underlying common stock of 224.3%. As a result, the Company allocated a fair value of $33,056 to the stock warrants. At December 31, 2020, the principal balance of these notes was $373,587 and the remaining balance on the associated loan discounts was $75,593. 10% Unsecured Convertible Redeemable Note – Variable Conversion Price On July 9, 2019, the Company issued a convertible redeemable note to an unrelated party in the principal amount of $100,000 less $5,000 in third party fees resulting in net cash proceeds to the Company of $95,000. The note accrues interest at a rate of 10% per annum, is due on July 9, 2020 and is convertible into common stock of the Company at the option of the noteholder six months after issuance at a rate equal to a 30% discount from the lowest volume weighted average price of the Company’s common stock in the preceding 20 trading days. The Company analyzed the conversion feature of the note for a beneficial conversion feature, for which the Company concluded that a beneficial conversion feature existed. The beneficial conversion feature was measured using the commitment-date stock price and its fair value was determined to be $51,730. This amount is recorded as a debt discount and is amortized as interest expense over the term of the related convertible note. The Company also analyzed the conversion feature of the note for derivative accounting consideration and determined that the embedded conversion features should be classified as a derivative because the exercise price of the convertible note is subject to a variable conversion rate. The aggregate fair value of the derivative at the issuance date of the note was $85,410 which was recorded as a derivative liability on the balance sheet. The Company recorded a debt discount of $43,270 which was up to the face value of the convertible note with the excess fair value at initial measurement of $42,140 being recognized as derivative expense. On January 13, 2020, the lender converted $10,000 of note principal and $5,000 of accrued interest into 259,300 shares of the Company’s common stock. On March 2, 2020, the lender converted $13,636 of note principal and $1,364 of accrued interest into 249,285 shares of the Company’s common stock. On June 30, 2020, the lender converted $23,503 of note principal and $2,545 of accrued interest into 650,000 shares of the Company’s common stock. On October 2, 2020, the lender converted the remaining $52,861 of note principal and $1,527 of accrued interest into 1,535,507 shares of the Company’s common stock. As of December 31, 2020, the principal balance and all interest due under the note was fully satisfied and the associated derivative liability was relieved. On March 1, 2020, the Company issued a convertible redeemable note to an unrelated party in the principal amount of $100,000. The note accrues interest at a rate of 10% per annum, was due on August 31, 2020 and is convertible into common stock of the Company at the option of the noteholder at a rate equal to a 30% discount from the lowest volume weighted average price of the Company’s common stock in the preceding 20 trading days. The Company analyzed the conversion feature of the note for a beneficial conversion feature, for which the Company concluded that a beneficial conversion feature existed. The beneficial conversion feature was measured using the commitment-date stock price and its fair value was determined to be $44,129. This amount is recorded as a debt discount and is amortized as interest expense over the term of the note. In connection with the note issuance, the Company also issued a five-year warrant to purchase up to an aggregate of 500,00 shares of the Company’s common stock at an exercise price of $0.10 per share. ASC 470-20 requires proceeds from the sale of a debt instrument with stock purchase warrants be allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance. This resulted in the debt being recorded at a discount which will be amortized to interest expense over the term of the loan using the effective interest method so the debt, at its term, is recorded at its face value. The Company estimated the fair value of this warrant at date of grant using the Black-Scholes option pricing model using the following inputs: (i) stock price on the date of grant of $0.10, (ii) the contractual term of the warrant of 5 years, (iii) a risk-free interest rate of 0.89% and (iv) an expected volatility of the price of the underlying common stock of 144.4%. As a result, the Company allocated a fair value of $30,935 to the stock warrants. At December 31, 2020, the remaining principal balance of $100,000 and accrued interest of $8,356 was in default of payment. No formal notices of default or demands for payment have been received by the Company. On November 20, 2020, the Company issued a convertible redeemable note to an unrelated party in the principal amount of $165,000 less a $15,000 original issuance discount resulting in net cash proceeds to the Company of $150,000. The note accrues interest at a rate of 10% per annum, is due on February 15, 2021 and is convertible into common stock of the Company at the option of the noteholder at a rate equal to a 30% discount from the lowest volume weighted average price of the Company’s common stock in the preceding 20 trading days. The Company analyzed the conversion feature of the note for a beneficial conversion feature, for which the Company concluded that a beneficial conversion feature existed. The beneficial conversion feature was measured using the commitment-date stock price and its fair value was determined to be $50,871. This amount is recorded as a debt discount and is amortized as interest expense over the term of the note. At December 31, 2020, the remaining principal balance of $165,000 and the remaining balance on the associated loan discounts was $43,914. 10% Secured Convertible Notes with Original Issuance Discounts (OID Notes) During the year ended December 31, 2017, the Company issued secured, convertible notes with original issuance discounts to accredited investors for gross proceeds of $601,223. The notes were issued with original issuance discounts of 10.0%, or $60,122, bear interest at a rate of 10% per annum, are payable semiannually in cash, and carry a two-year term with a fixed conversion price of $0.78. In connection with the issuance of these notes, the Company issued to such investors 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 $0.48 and $0.70 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 notes. On August 6, 2020, the Company entered into debt exchange agreements with certain holders of these 10% convertible notes pursuant to which an aggregate of 331,954 shares of the Company’s Series B preferred stock (“Series B Stock) were issued to noteholders for an aggregate of $211,223 of outstanding principal and accrued and unpaid interest. On November 30, 2020, the Company entered into a debt exchange agreement with the remaining holder of these 10% convertible notes pursuant to which an aggregate of 158,000 shares of Series B Stock were issued to the noteholder for an aggregate of $111,250 of outstanding principal and accrued and unpaid interest. At December 31, 2020, the principal balance of these notes was $0 and all associated loan discounts were fully amortized. During the year ended December 31, 2018, the Company issued secured, convertible notes with original issuance discounts to accredited investors for gross proceeds of $1,313,485 in a private offering. The notes were issued with original issuance discounts of 10.0%, or $131,348, bear interest at a rate of 10% per annum, are payable semiannually in cash, and carry a two-year term with a fixed conversion price of $0.78. In connection with the issuance of these notes, the Company issued to such investors an aggregate of 328,371 shares of common stock as an inducement to lend. These shares were valued at $198,259 with share prices ranging between $0.30 and $0.81 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 notes. On August 6, 2020, the Company entered into debt exchange agreements with certain holders of these 10% convertible notes pursuant to which an aggregate of 316,000 shares of the Company’s Series B Stock were issued to noteholders for an aggregate of $200,000 of outstanding principal and accrued and unpaid interest. At December 31, 2020, the principal balance of these notes was $97,250 and all associated loan discounts were fully amortized. While the remaining notes are past their original maturity dates, no formal notices of default or demands for payment have been received by the Company. During the year ended December 31, 2018, the Company also issued secured, convertible notes with original issuance discounts to accredited investors for gross proceeds of $356,000 in a private offering. The notes were issued with original issuance discounts of 20.0%, or $71,200, bear interest at a rate of 10% per annum, are payable semiannually in cash, and carry a two-year term with a fixed conversion price of $0.50. In connection with the issuance of these notes, the Company issued to such investors an aggregate of 203,000 shares of common stock as an inducement to lend. These shares were valued at $62,269 with share prices ranging between $0.29 and $0.35 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 notes. At December 31, 2020, the principal balance of these notes was $56,000 and all associated loan discounts were fully amortized. While the remaining notes are past their original maturity dates, no formal notices of default or demands for payment have been received by the Company. 12% Senior Secured Convertible Notes (Newbridge Offering) On November 30, 2018, the Company closed a private offering in which it sold 12% secured convertible promissory notes (“12% 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 12% 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 the shareholders of TD Holdings in connection with a share sale agreement dated June 30, 2016, as amended. Messrs. Marks and Leiner pledged an aggregate of 10,000,000 shares of common stock of the Company pursuant to a pledge and security agreement to secure the timely payment of the 12% Notes. The 12% Notes are convertible, in whole or in part, by the note holders 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 12% Notes is payable monthly in 21 equal installments commencing four months after the issuance of the 12% Notes. Upon the occurrence of an event of default, the interest rate will increase to 15% and the 12% Notes will become immediately due and payable. The Company may prepay the 12% 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; and (iii) $11,040, representing a non-accountable expense allowance for its services. At December 31, 2020 and 2019, the remaining principal balance on the 12% Notes was $52,572 and $289,143, respectively, and the remaining unamortized discounts were $0 and $161,864, respectively. 12% Senior Secured Convertible Notes (Original TDH Notes) On June 20, 2016, the Company issued $4,000,000 of senior secured promissory notes to the shareholders of TD Holdings (the “TDH Sellers”) in connection with a share sale agreement pursuant to which the Company acquired 100% of the common stock of TD Holdings (“the TDH Share Sale Agreement”). The notes bear interest at 5.0% per annum and are due on the earlier of (i) June 20, 2018 or (ii) the date on which the Company successfully completes a qualified initial public offering as defined in the agreement. The notes are collateralized by all of the assets of TD Holdings. First Amendment to the TDH Share Sale Agreement On January 3, 2018, the Company entered into an amendment to the TDH Share Sale Agreement (the “First Amendment”). Under the terms of the First Amendment: · The maturity date of the notes was extended from July 1, 2018 until July 1, 2019. · The interest rate on the notes during for one-year extension period from July 2, 2018 to July 1, 2019 was increased to 10%. · Interest is payable quarterly in arrears during the one-year extension period, instead of annually in arrears. The first such quarterly interest payment of $100,000 is due on September 30, 2018. · Under the terms of the terms of TDH Share Sale Agreement, the TDH Sellers could earn up to an additional $5.0 million in contingent earnout payments. The original earnout period ended on December 31, 2018. The First Amendment extended the earnout period by one year to December 31, 2019. As consideration to enter into the First Amendment, the Company issued 800,000 shares of its common stock valued at $480,000 to the TDH Sellers. Second Amendment to the TDH Share Sale Agreement On January 15, 2019, the Company entered into a second amendment to the TDH Share Sale Agreement (the “Second Amendment”). Under the terms of the Second Amendment: · The maturity date of the notes was extended from July 1, 2019 to April 2, 2020. · The TDH Sellers shall have the right to convert the notes 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 Second Amendment. · In the event that the notes are not repaid prior to July 2, 2019, no funds will be transferred by TDH to the Company. · The payment terms of the contingent earnout was modified from 50% payable in cash and 50% payable in stock to 75% payable in cash and 25% payable in stock. As consideration to enter into the Second Amendment, the Company issued an additional 800,000 shares of its common stock valued at $220,000 to the TDH Sellers. Due to the inclusion of a conversion feature, the Second Amendment was considered an extinguishment and subsequent reissuance of the notes under the guidelines of ASC 470-20-40-7 through 40-9. As a result, the Company recorded a loss on the extinguishment of debt of $363,468 related to the Second Amendment during the year ended December 31, 2019. The principal value of the notes was reclassified to convertible notes, net – current on the Company’s consolidated financial statements. Third Amendment to the TDH Share Sale Agreement On March 16, 2020, the Company entered into a third amendment (the “Third Amendment”) to the TDH Share Sale Agreement, pursuant to which the Company’s subsidiary, Grom Holdings, had acquired 100% of the common stock of TDH (representing ownership of the animation studio) from certain individuals (the “TDH Sellers”). The Company used the proceeds received from the TDH Secured Notes Offering to pay the TDH Sellers $3,000,000 of the principal due under the Original TDH Notes, leaving a balance due to the TDH Sellers of $1,000,000 in principal (plus accrued interest and costs). In addition, the accrued interest of $361,767 due to the TDH Sellers pursuant to the Original TDH Notes will be paid by three monthly payments of $93,922, commencing April 16, 2020, and 12 monthly installments of $6,667 commencing April 16, 2020. Pursuant to the Third Amendment, the TDH Sellers and the Company agreed, among other things: · To extend the maturity date of the remaining Original TDH Notes by one year to June 30, 2021; · To increase the interest rate on the remaining Original TDH Notes to 12%; · To grant a first priority security interest on the shares of TDH and TDAHK to the TDH Sellers, pari passu with the holders of the TDH Secured Notes; and · To pay the balance of the Original TDH Notes monthly in arrears, amortized over a four-year period. At December 31, 2020, the principal balance of the Original TDH Notes was $882,175. 12% Senior Secured Convertible Notes (“TDH Secured Notes”) On March 16, 2020, the Company sold (the “TDH Secured Notes Offering”) an aggregate $3,000,000 of its 12% senior secured convertible notes (the “TDH Secured Notes”), to eleven accredited investors (the “TDH Secured Note Lenders”), pursuant to a subscription agreement with the TDH Secured Note Lenders. Interest on the TDH Secured Notes accrues on the outstanding principal amount at the rate of 12% per annum. Principal and interest on the TDH Secured Notes are payable monthly, on an amortized basis over 48 months, with the last payment due on March 16, 2024. Pursuant to the TDH Secured Notes, TD Holdings will pay amounts due under the TDH Secured Notes. Prepayment of amounts due under TDH Secured Notes is subject to a prepayment penalty in an amount equal to 4% of the amount prepaid. The TDH Secured Notes are convertible at the option of the holders at 75% of the average sales price of the Company’s common stock over the 60 trading days immediately preceding conversion provided that the conversion price shall not be less than $0.10 per share. The Company’s obligations under the TDH Secured Notes, are secured by Grom Holdings’ shares of stock of TDH, and of its wholly owned subsidiary, TDAHK. The TDH Secured Notes rank equally and ratably on a pari passu basis with (i) the other TDH Secured Notes and (ii) the Original TDH Notes issued by the Company pursuant to TDH Share Sale Agreement. If the Company sells the animation studio located in Manila, Philippines, which is currently owned by TDH through TDAHK (the “Animation Studio”), for more than $12,000,000, and so long as any amount of principal is outstanding under the TDH Secured Notes, the Company will pay the TDH Secured Notes holders from the proceeds of the sale (i) all amounts of principal outstanding under the TDH Secured Notes, (ii) such amount of interest which would be due and payable assuming the TDH Secured Notes were held to maturity (minus any amounts of interest previously paid hereunder), and (iii) an additional 10% of the amount of principal outstanding under the TDH Secured Notes within five days of the closing of such sale. In connection with the issuance of the TDH Secured Notes, the Company issued to each TDH Secured Note holder shares of common stock equal to 20% of the principal amount of such holder’s TDH Secured Note, divided by $0.10. Accordingly, an aggregate of 6,000,000 shares of common stock were issued to the TDH Secured Note holders on March 16, 2020. These shares were valued at $420,000, or $0.07 per share, which represents fair market value. The Company recorded the value of these shares as a loan discount to be amortized as interest expense over the term of the notes. On August 6, 2020, the Company entered into debt exchange agreements with certain holders of these 12% TDH Secured Notes pursuant to which an aggregate of 1,739,580 shares of the Company’s Series B Stock were issued to noteholders for an aggregate of $1,101,000 of outstanding principal and accrued and unpaid interest. On November 30, 2020, the Company entered into debt exchange agreements with another holder of these 10% convertible notes pursuant to which an aggregate of 158,000 shares of Series B Stock were issued to the noteholder for an aggregate of $99,633 of outstanding principal and accrued and unpaid interest. At December 31, 2020, the principal balance of these notes was $1,654,393 and the remaining balance on the associated loan discounts was $202,782. 12% Senior Secured Convertible Notes (Additional Secured Notes) On March 16, 2020, the Company issued to seven accredited investors (the “Additional Secured Note Lenders”) an aggregate of $1,060,000 of its 12% senior secured convertible notes (the “Additional Secured Notes”) in a private offering pursuant to a subscription agreement with substantially the same terms as the TDH Secured Notes except that the Additional Secured Notes are secured by all of the assets of the Company other than the shares and other assets of TDH and TDAHK, pursuant to a security agreement by and among the Company and the Additional Secured Note Lenders. Interest on the Additional Secured Notes accrues on the outstanding principal amount at the rate of 12% per annum. Principal and interest on the Additional Secured Notes are payable monthly, on an amortized basis over 48 months, with the last payment due on March 16, 2024. Prepayment of the amounts due under the Additional Secured Notes is subject to a prepayment penalty of 4% of the amount prepaid. The Additional Secured Notes are convertible at the option of the holders at 75% of the average sales price of the Company’s common stock over the 60 trading days immediately preceding conversion provided that the conversion price shall not be less than $0.10 per share. In connection with the issuance of the Additional Secured Notes, the Company issued to each Additional Secured Note Lender shares of common stock equal to 20% of the principal amount of such holder’s Additional Secured Note, divided by $0.10. Accordingly, an aggregate of 2,120,000 shares of common stock were issued. These shares were valued at $148,000, or $0.07 per share, which represents fair market value. 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 notes. On August 6, 2020, the Company entered into debt exchange agreements with certain holders of these 12% Additional Secured Notes pursuant to which an aggregate of 1,236,350 shares of the Company’s Series B Stock were issued to noteholders for an aggregate of $782,500 of outstanding principal and accrued and unpaid interest. At December 31, 2020, the principal balance of these notes was $260,315 and the remaining balance on the associated loan discounts . Future Minimum Principal Payments The principal repayments based upon the maturity dates of the Company’s borrowings for each of the next five years are as follows: 2021 $ 2,184,677 2022 $ 527,784 2023 $ 594,720 2024 $ 160,111 2025 and thereafter $ – |
13. Income Taxes
13. Income Taxes | 12 Months Ended |
Dec. 31, 2020 | |
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, 2020 and 2019: December 31, 2020 December 31, 2019 Current: Federal $ – $ – State and local – – Foreign – – Total current – – Deferred: Federal – – State and local – – Foreign (224,027 ) 35,375 Total deferred (224,027 ) 35,375 Total $ (224,027 ) $ 35,375 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, 2020 and 2019: December 31, December 31, 2019 Tax benefit at the statutory federal rate – % – % Increase (decrease) in rate(s) resulting from: Foreign operations, net 3.8 (0.8 ) Change in deferred taxes 17.2 21.8 Change in valuation allowance (17.2 ) (21.8 ) Total 3.8 % (0.8 )% The following tables set forth the components of income taxes payable at December 31, 2020 and 2019: December 31, 2020 December 31, Federal $ – $ – State and local – – Foreign – – Total $ – $ – The following tables set forth the components of deferred income taxes at December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Non-current deferred tax assets: Retirement benefits $ 110,263 $ 68,169 Write down of investment(s) 68,408 65,420 Deferred revenue net 149,112 59,016 Other 203,773 45,976 Net operating loss carryforwards 5,009,036 4,661,804 Less: valuation allowance (5,009,036 ) (4,661,804 ) Total non-current deferred tax asset 531,557 238,581 Total deferred tax asset $ 531,557 $ 238,581 The deferred tax asset relates solely to the Company’s foreign animation operations. The Company believes these assets are realizable in future periods due to the historic profitability of its animation business. 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 the foreign subsidiaries have paid taxes locally and that the cumulative undistributed earnings of the foreign subsidiaries are not material. As of December 31, 2020, the Company had federal, state and foreign net operating loss carryforwards of approximately $23.9 million of which $15.2 million may be available to reduce future liabilities for income taxes through 2037 and $8.7 million may be available to reduce future liabilities for income taxes indefinitely. 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 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 2015 through 2019. 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, 2020 | |
Equity [Abstract] | |
Stockholders' Equity | 14. STOCKHOLDERS’ EQUITY Preferred Stock The Company is authorized to issue 25,000,000 shares of preferred stock, par value of $0.001 per share. Series A Preferred Stock 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 Stock”). Each share of Series A Stock is convertible, at any time, into five shares of common stock of the Company. On each of February 27, 2019 and March 11, 2019, the Company received $400,000 from the sale of 400,000 shares of Series A Stock to accredited investors in private offerings pursuant to Section 4(a)(2) and/or Rule 506(b) of Regulation D, as promulgated under the Securities Act of 1933, as amended (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, the Company received $125,000 from the sale of 125,000 shares of Series A Stock to an 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, the investor also received 625,000 restricted shares of the Company’s common stock. As a result of the issuance of the Series A Stock, the Company recorded a beneficial conversion feature and other discounts as a deemed dividend in its condensed consolidated financial statements of $740,899. On August 6, 2020, the Company entered into exchange agreements with the holders of 925,000 issued and outstanding shares of the Company’s Series A Stock pursuant to which such shares of Series A Stock were exchanged for an aggregate of 1,202,500 shares of the Company’s Series B Stock. See Series B Preferred Stock below for more details. At December 31, 2020 and December 31, 2019, the Company had zero and 925,000 shares of Series A Stock issued and outstanding, respectively. Series B Preferred Stock On August 4, 2020, the Company filed with the Secretary of State of the State of Florida a Certificate of Designation of Preferences, Rights and Limitations of Series B Stock designating 10,000,000 shares as Series B Preferred Stock (the “Series B Stock”). The Series B Stock ranks senior and prior to all other classes or series of the Company’s preferred stock and common stock. The holder may at any time after the 12-month anniversary of the issuance of the shares of Series B Stock convert such shares into common stock at a conversion price equal to the 30-day volume weighted average price (“VWAP”) of a share of common stock for each share of Series B Stock to be converted. In addition, the Company at any time may require conversion of all or any of the Series B Stock then outstanding at a 50% discount to the 30-day VWAP. Each share of Series B Stock entitles the holder to fifty votes for each share of Series B Stock. The consent of the holders of at least two-thirds of the shares of Series B Stock is required for the amendment to any of the terms of the Series B Stock, to create any additional class of stock unless the stock ranks junior to the Series B Stock, to make any distribution or dividend on any securities ranking junior to the Series B Stock, to merge or sell all or substantially all of the assets of the Company or acquire another business or effectuate any liquidation of the Company. Cumulative dividends accrue on each share of Series B Stock at the rate of 8% per annum of the stated value of $1.00 per share and are payable in common stock in arrears quarterly commencing 90 days from issuance. Upon a liquidation, dissolution or winding up of the Company, the holders of the Series B Stock are entitled to $1.00 per share plus all accrued and unpaid dividends. No distribution may be made to holders of shares of capital stock ranking junior to the Series B Stock upon a liquidation until Series B stockholders receive their liquidation preference. The holders of 66 2/3% of the then outstanding shares of Series B Stock, may elect to deem a merger, reorganization or consolidation of the Company into or with another corporation, not affiliated with said majority, or other similar transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of in exchange for property, rights or securities distributed to holders thereof by the acquiring person, firm or other entity, or the sale of all or substantially all of the assets of the Company. On June 19, 2020, the Company received gross cash proceeds of $250,000 from an accredited investor pursuant to the terms of a subscription agreement and subsequently issued an aggregate of 250,000 shares of Series B Stock on August 6, 2020. On August 6, 2020, the Company entered into debt exchange agreements with holders of the Company’s (i) OID Notes in the aggregate amount of $411,223 of outstanding principal and accrued and unpaid interest; (ii) TDH Secured Notes, in the aggregate amount of $1,101,000 of outstanding principal and accrued and unpaid interest; and (iii) Additional Secured Notes, which were secured by all of the other assets of the Company in the aggregate amount of $782,500 of outstanding principal and accrued and unpaid interest. Pursuant to the terms of the debt exchange agreements, the holders of the notes exchanged outstanding and all amounts owed by the Company thereunder, for an aggregate of 3,623,884 shares of the Company’s Series B Stock. At the time of the exchange, all amounts due under the notes were deemed to be paid-in-full and the notes were cancelled. In addition, on August 6, 2020, the Company entered into exchange agreements (the “Series A Exchange Agreements”) with the holders of 925,000 issued and outstanding shares of the Company’s Series A Stock. Pursuant to the terms of the Series A Exchange Agreements, the holders of Series A Stock exchanged their shares for an aggregate of 1,202,500 shares of the Company’s Series B Stock. At the time of the exchange, all of the exchanged shares of Series A Stock were cancelled. On September 22, 2020, the Company received gross cash proceeds of $233,500 from two accredited investors, pursuant to the terms of a subscription agreement, and subsequently issued an aggregate of 233,500 shares of Series B Stock on November 30, 2020. On November 30, 2020, the Company entered into debt exchange agreements with holders of the Company’s (i) OID Notes in the aggregate amount of $111,250 of outstanding principal and accrued and unpaid interest; and (ii) TDH Secured Notes, in the aggregate amount of $99,633 of outstanding principal and accrued and unpaid interest. Pursuant to the terms of the debt exchange agreements, the holders of the notes exchanged outstanding and all amounts owed by the Company thereunder, for an aggregate of 316,000 shares of the Company’s Series B Stock. At the time of the exchange, all amounts due under the notes were deemed to be paid-in-full and the notes were cancelled. At December 31, 2020 and 2019, the Company had 5,625,884 and zero shares of Series B Stock issued and outstanding, respectively. Common stock The Company is authorized to issue 500,000,000 shares of common stock, par value of $0.001 per share and had 188,354,282 and 167,382,807 shares of common stock issued and outstanding as of December 31, 2020 and 2019, respectively. Common Stock Issued in Private Placements During the year ended December 31, 2019, the Company issued 5,450,000 shares of common stock and warrants to purchase 5,450,000 shares of common stock at an exercise price of $0.25 Common Stock Issued as Compensation to Employees, Officers and/or Directors During the year ended December 31, 2020, the Company issued 420,000 shares of common stock with a fair market value of $35,600 to employees, officers and/or directors as compensation. Common Stock Issued in Exchange for Consulting, Professional and Other Services During the year ended December 31, 2020, the Company issued 6,487,706 shares of common stock with a fair market value of $578,645 to contractors for services rendered. During the year ended December 31, 2019, the Company issued 3,877,516 shares of common stock with a fair market value of $778,411 to contractors for services rendered. Common Stock Issued in lieu of Cash for Loans Payable and Other Accrued Obligations During the year ended December 31, 2020, the Company issued 500,000 shares of common stock with a fair market value of $50,000 to satisfy loans payable and other accrued obligations. During the year ended December 31, 2019, the Company issued 1,707,690 shares of common stock with a fair market value of $589,440 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, 2019, the Company issued 800,000 shares of common stock valued at $220,000 to amend the terms of a promissory note. Common Stock Issued in Connection with the Issuance of Convertible Promissory Notes During the year ended December 31, 2020, the Company issued 10,869,677 shares of common stock valued at $736,014 in connection with the issuance of convertible notes. Refer to the disclosures for the TDH Secured Notes and Additional Secured Notes under “Note 12 –Debt” for additional information. During the year ended December 31, 2019, the Company issued 160,260 shares of common stock valued at $32,418 in connection with the issuance of convertible notes. Conversion of Convertible Notes and Accrued Interest into Common stock During the year ended December 31, 2020, the Company issued 2,694,092 shares of common stock valued at $110,437 in connection with the conversion of convertible notes and accrued interest into common stock. During the year ended December 31, 2019, the Company issued 12,208,686 shares of common stock valued at $2,788,199 in connection with the conversion of convertible notes and accrued interest into common stock. Stock Purchase Warrants Stock purchase warrants are accounted for as equity in accordance with 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, 2020 and 2019. All stock warrants are exercisable for a period ranging from three to five years from the date of issuance. See Note 12 – Debt for more information. Number of Warrants Outstanding Weighted Avg. Exercise Price Weighted Avg. Contractual Life (Yrs.) Balance January 1, 2019 781,910 $ 1.36 1.38 Warrants issued 5,450,000 $ 0.25 Warrants exercised – $ – Warrants forfeited (567,166 ) $ – December 31, 2019 5,664,744 $ 0.28 1.79 Warrants issued 1,683,197 $ 0.06 Warrants exercised – $ – Warrants forfeited – $ – Balance 31, 2020 7,347,941 $ 0.23 1.66 Stock Options The following table represents all outstanding and exercisable stock options at December 31, 2020. Year Issued Options Options Options Vested Strike Weighted 2013 7,735,350 (834,000 ) 6,901,350 6,901,350 $ 0.24 2.72 2015 11,467,500 (11,467,500 ) – – $ – – 2016 5,421,000 – 5,421,000 5,421,000 $ 0.78 0.19 2018 60,000 – 60,000 60,000 $ 0.78 2.33 Total 24,683,850 (12,301,500 ) 12,382,350 12,382,350 $ 0.48 1.90 During the years ended December 31, 2020 and 2019, the Company did not record any stock-based compensation expense related to stock options. |
15. Commitments and Contingenci
15. Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 15. COMMITMENTS AND CONTINGENCIES None. |
16. Subsequent Events
16. Subsequent Events | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | 16. SUBSEQUENT EVENTS In accordance with FASB ASC 855-10, Subsequent Events Exchange Agreements On February 17, 2021, the Company, entered into debt exchange agreements with holders of the Company’s convertible promissory notes in the aggregate principal and accrued interest amount of $1,700,905. Pursuant to the terms of the debt exchange agreements, the noteholders exchanged the outstanding notes, and all amounts owed by the Company thereunder, for an aggregate of 2,564,175 shares of the Company’s 8% Series B convertible preferred stock and the notes were cancelled. Series B Purchases On February 17, 2021, the Company entered into subscription agreements with two accredited investors, pursuant to which the Company sold an aggregate of 300,000 shares of Series B Stock for aggregate gross proceeds of $300,000. On March 31, 2021, the Company entered into subscription agreements with three accredited investors, pursuant to which the Company sold the investors an aggregate of 650,000 shares of Series B Stock for aggregate gross proceeds of $650,000. Auctus Fund Financing On February 9, 2021, the Company entered into a securities purchase agreement (the “Auctus Purchase Agreement”) with Auctus Fund, LLC, a Delaware limited liability company (“Auctus”), pursuant to which the Company issued to Auctus a convertible promissory note in the principal amount of $500,000 (the “Auctus Note”). In connection with the issuance of the Auctus Note, Auctus was also issued a five-year warrant (the “Auctus Warrant”) to purchase up to an aggregate of 6,250,000 shares of the Company’s common stock (the “Auctus Warrant Shares”), at an exercise price of $0.06 per share. The net proceeds received by the Company were $428,000 (after deducting fees and expenses related to the transaction). The Company intends to use the net proceeds for working capital and general corporate purposes. Pursuant to the Auctus Purchase Agreement, the Company granted Auctus piggyback registration rights with respect to the shares underlying the Auctus Note and the Auctus Warrant. In addition, the Company agreed that, while any amount remains unpaid under the Auctus Note, it would not sell securities on more favorable terms than those provided to Auctus, without adjusting Auctus’ terms accordingly. Further, among other things, the Company agreed that, while any amount remains unpaid under the Auctus Note, it would not enter into any variable rate transactions. The Auctus Note has a principal balance of $500,000, and a stated maturity date of one year from the date of issuance. The Auctus Note bears interest at a rate of 12% per annum, which is also payable on maturity, with the understanding that the first 12 months of interest (equal to $60,000) is guaranteed and deemed to be earned in full as of the date of issuance. In the event the Company fails to pay any amount when due under the Auctus Note, the interest rate will increase to the greater of 16%, or the maximum amount permitted by law. The Auctus Note may not be prepaid in whole or in part. Auctus may convert any amount due under the Auctus Note at any time, and from time to time, into shares of the Company’s common stock at a conversion price of $0.06 per share; provided, however, The Auctus Warrant provides for the purchase of up to 6,250,000 shares of the Company's common stock, an exercise price of $0.06 per share; provided, however, that Auctus may not exercise the Auctus Warrant with respect to any number of Auctus Warrant Shares that would cause it to beneficially own in excess of 4.99% of the Company’s common stock. The Auctus Warrant is exercisable for a term of 5 years from the date of issuance. The Auctus Warrant may be exercised for cash, or, if the “market price” of the Company’s common stock is greater than the Auctus Warrant’s exercise price, and there is not an effective registration statement covering the Auctus Warrant Shares, the Auctus Warrant may be exercised on a cashless basis. The number of shares of common stock to be deliverable upon exercise of the Auctus Warrant is subject to adjustment for subdivision or consolidation of shares and other standard dilutive events, or in the event the Company effects a reorganization, reclassification, merger, consolidation, disposition of assets, or other fundamental transaction. FirstFire Global Financing On March 11, 2021 the Company entered into a securities purchase agreement (the “FirstFire Purchase Agreement”) with FirstFire Global Opportunities Fund, LLC, a Delaware limited liability company (“FirstFire”), pursuant to which the Company issued to FirstFire a one-year 12% convertible promissory note in the principal amount of $300,000 (the “FirstFire Note”). In connection with the issuance of the FirstFire Note, FirstFire was also issued a five-year warrant (the “FirstFire Warrant”) to purchase up to an aggregate of 3,750,000 shares of the Company’s common stock (the “FirstFire Warrant Shares”), at an exercise price of $0.06 per share. The net proceeds received by the Company were $270,000, after deducting an original issue discount in the amount of $30,000. In the event the Company fails to pay any amount when due under the FirstFire Note, the interest rate will increase to the lesser of 20%, or the maximum amount permitted by law. At any time while the FirstFire Warrant Shares are subject to an effective registration statement, or, if no registration statement covering the FirstFire Warrant Shares is effective, at any time after 180 days from the date of issuance, FirstFire may convert any amount due under the FirstFire Note into shares of the Company’s common stock (“FirstFire Conversion Shares”) at a conversion price of $0.06 per share; provided, however, that, if an event of default exists, the conversion price will be the lesser of (i) $0.03 per share, or (ii) 70% of the lowest trading price of the Company’s common stock during the ten consecutive trading days prior to the conversion. FirstFire may not convert any portion of the FirstFire Note of the FirstFireWarrant that would cause it and its afiliates to beneficially own in excess of 4.99% of the Company’s common stock (which may be waived, up to 9.99%, by FirstFire upon 61 days' prior notice to the Company). The conversion price and number of shares of the Company’s common stock issuable upon conversion of the FirstFire Note will be subject to adjustment in the event of any merger, consolidation, distribution of shares, or other dilutive issuances. The FirstFire Warrant may be exercised for cash, or, if there is not an effective registration statement covering the FirstFire Warrant Shares, on a cashless basis. The exercise price and number of Warrant Shares is subject to adjustment for subdivision or consolidation of shares, or other dilutive issuances. Pursuant to the FirstFire Purchase Agreement, the Company agreed that, while any of the FirstFire Note, the FirstFire Conversion Shares, the FirstFire Warrants, or the FirstFire Warrant Shares remain outstanding, it would not sell securities on more favorable terms than those provided to FirstFire without adjusting FirstFire’s securities to incorporate those more favorable terms. FirstFire has a right of first refusal to participate in sale of the Company’s securities for a period of 18 months and mandatory registration rights with respect to the FirstFire Conversion Shares and the FirstFire Warrant Shares. Curiosity Ink Media Letter of Intent On April 1, 2021, the Company entered into a binding letter of intent with Curiosity Ink Media, LLC, a California limited liability company (“Curiosity”), Russell Hicks (“Hicks”), Brent Watts (“Watts”), and the other members of Curiosity (collectively, the “Sellers”), pursuant to which the Company agreed to acquire an aggregate of 80% of Curiosity’s membership interests (the “80% Membership Interests”) from the Sellers, on a pro rata basis, for a purchase price of $3,678,000, of which: (i) $400,000 is payable in cash, to be used to pay down a portion of loans made to Curiosity by Hicks and Watts; (ii) $3,000,000 is payable in shares of the Company’s common stock, valued at a price per share equal to the 20-day volume-weighted average price of the Company’s common stock; and (iii) $278,000 is payable by the issuance to Hicks and Watts of 8% convertible promissory notes payable in equal monthly installments, on an amortized basis over 18 months. The Sellers will have the opportunity to receive up to an additional $2,000,000 in acquisition consideration, paid in shares of the Company’s common stock, based upon the successful execution of certain specified contracts and/or material agreements. The Sellers will also have the opportunity to receive an additional $17,500,000 in purchase consideration, paid 50% in cash and 50% in shares of the Company’s common stock, based upon achieving certain performance milestones through December 31, 2023. The Company has the exclusive right to acquire the 80% Membership Interests through June 30, 2021. The consummation of the acquisition is contingent upon the parties entering into a definitive agreement and other closing conditions. |
2. Summary of Significant Acc_2
2. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
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 in order to fund its operations. |
Basis of Presentation | Basis of Presentation The consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and are expressed in United States dollars. For the years ended December 31, 2020 and 2019, the consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Grom Social, TD Holdings, GES, and GNS. All intercompany accounts and transactions are eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with U.S. 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 The Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) Other Assets and Deferred Costs – Contracts with Customers |
Animation Revenue | Animation Revenue For years ended December 31, 2020 and 2019, the Company recorded a total of $5,483,332 and $7,565,672, respectively, of animation revenue from contracts with customers. Animation revenue is primarily generated from contracts with customers for preproduction and production services related to the development of animated movies and television series. Preproduction activities include producing storyboards, location design, model and props design, background color and color styling. Production focuses on library creation, digital asset management, background layout scene assembly, posing, animation and after effects. The Company provides services under fixed-price contracts. Under fixed-price contracts, the Company agrees to perform the specified work for a pre-determined price. To the extent actual costs vary from estimated costs, the Company’s profit may increase, decrease, or result in a loss. The Company identifies a contract under ASC 606 once (i) it is approved by all parties, (ii) the rights of the parties are identified, (iii) the payment terms are identified, (iv) the contract has commercial substance, and (v) collectability of consideration is probable. The Company evaluates 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 the Company’s 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 standalone selling prices for all of these distinct components. Accordingly, our contracts are typically accounted for as containing multiple performance obligations. The Company determines the transaction price for each contract based on the consideration it expects to receive for the distinct services being provided under the contract. The Company recognizes revenue as performance obligations are satisfied and the customer obtains control of the services. In determining when performance obligations are satisfied, the Company considers factors such as contract terms, payment terms and whether there is an alternative future use of the product or service. Substantially all of the Company’s revenue is recognized over time as it performs 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 made towards completion of the performance obligation. The Company uses the percentage-of-completion cost-to-cost measure of progress because it best depicts the transfer of control to the customer as the Company incurs costs against its 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. The percentage-of-completion cost-to-cost method requires management to make estimates and assumptions that affect the reported amounts of contract 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 the total estimated amount of costs that will be incurred for a project or job. |
Webfiltering Revenue | Web Filtering Revenue For years ended December 31, 2020 and 2019, the Company recorded a total of $673,182 and $723,800, respectively, of web filtering revenue from contracts with customers. Web filtering revenue from subscription sales is recognized on a pro-rata basis over the subscription period. Typically, a subscriber purchases computer hardware and a software and support service license for a period of use between one year to five years. The subscriber is billed in full at the time of the sale. The Company immediately recognizes revenue attributable to the computer hardware as it is non-refundable and control passes to the customer. The advanced billing component for software and service is initially recorded as deferred revenue and subsequently recognized as revenue on a straight-line basis over the subscription period. |
Contract Assets and Liabilities | Contract Assets and Liabilities 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. Revenues from web filtering contracts are all billed in advance and therefore represent contract liabilities until fully recognized on a ratable basis over the contract life. The following table depicts the composition of our contract assets and liabilities as of December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Animation contract assets $ 525,709 $ 513,388 Web filtering contract assets 54,886 24,937 Other contract assets 7,337 7,337 Total contract assets $ 587,932 $ 545,662 Animation contract liabilities $ 410,709 $ 51,054 Web filtering contract liabilities 544,844 564,528 Other contract liabilities 11,500 11,500 Total contract liabilities $ 967,053 $ 627,082 For the years ended December 31, 2020 and 2019, the Company recorded $51,054 and $380,749, respectively, in animation revenue and $399,033 and $461,843, respectively, in web filtering revenue which was included in each respective year’s opening contract liability balance. |
Fair Value Measurements | Fair Value Measurements FASB ASC 820, Fair Value Measurements and Disclosures · Level 1: Quoted prices in active markets for identical assets or liabilities. · Level 2: Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable. · Level 3: Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumptions that market participants would use in pricing. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2020 and 2019. 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. |
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 |
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. Accounts receivable includes unbilled accounts receivable. Unbilled accounts receivable is a contract asset related to amounts that are unbilled due to agreed-upon contractual terms in which billing occurs subsequent to revenue recognition. This situation typically occurs when the Company recognizes revenue for episodic development activities performed but not yet billed. Episodic development activities are typically billable upon delivery. |
Inventory | Inventory Inventory consists of supplies used for the sole purpose of completing animation projects. |
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 and indefinite-lived assets 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. Indefinite-lived intangible assets are evaluated for impairment at the individual asset level by assessing whether it is more likely than not that the asset is impaired (for example, that the fair value of the asset is below its carrying amount). If it is more likely than not that the asset is impaired, its carrying amount is written down to its fair value. 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, 2020 on its subsidiaries with material goodwill and intangible asset amounts on their respective balance sheets and determined that an impairment charge of $472,757 was necessary. See Note 7 – Goodwill and Intangible Assets for more information. |
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, 2020, 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. |
Right of Use Assets And Lease Liabilities | Right of Use Assets and Lease Liabilities FASB ASU No. 2016-02, "Leases" (ASC 842) requires lessees to recognize almost all leases on the balance sheet as a right of use (“ROU”) asset and a lease liability and requires leases to be classified as either an operating or a finance type lease. The standard excludes leases of intangible assets or inventory, and permits the exclusion of leases with an original lease term of less than one year. Under ASC 842, the Company determines if an arrangement is a lease at inception. ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, the Company considers only payments that are fixed and determinable at the time of commencement. As most of the Company's leases do not provide an implicit rate, the Company estimated the incremental borrowing rate in determining the present value of lease payments. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. The Company lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Operating leases are included in operating lease right-of-use assets, operating lease liabilities, current and operating lease liabilities, non-current on the Company's condensed consolidated balance sheets. |
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 FASB ASC 830, Foreign Currency Matters 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 FASB ASC 220, Comprehensive Income |
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 FASB 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 January 2017, the FASB issued Accounting Standards Update No. 2017-04, Simplifying the Test for Goodwill Impairment On November 15, 2019, the FASB issued ASU 2019-10, which (1) provides a framework to stagger effective dates for future major accounting standards and (2) amends the effective dates for certain major new accounting standards to give implementation relief to certain types of entities. Specifically, ASU 2019-10 amends the effective date for ASU 2017-04 to fiscal years beginning after December 15, 2022, and interim periods therein. Early adoption continues to be permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company does not anticipate the adoption of ASU 2017-04 will have a material impact on its financial statements for both annual and interim reporting periods. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) In February 2020, the FASB issued ASU 2020-02, Financial Instruments-Credit Losses (Topic 326) and Leases (Topic 842) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 119 and Update to SEC Section on Effective Date Related to Accounting Standards Update No. 2016-02, Leases (Topic 842) In August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40) |
2. Summary of Significant Acc_3
2. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Schedule of contract assets and liabilities | The following table depicts the composition of our contract assets and liabilities as of December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Animation contract assets $ 525,709 $ 513,388 Web filtering contract assets 54,886 24,937 Other contract assets 7,337 7,337 Total contract assets $ 587,932 $ 545,662 Animation contract liabilities $ 410,709 $ 51,054 Web filtering contract liabilities 544,844 564,528 Other contract liabilities 11,500 11,500 Total contract liabilities $ 967,053 $ 627,082 |
Property and equipment useful lives | 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 |
3. Accounts Receivable (Tables)
3. Accounts Receivable (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Receivables [Abstract] | |
Schedule of accounts receivable | The following table sets forth the components of the Company’s accounts receivable at December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Billed accounts receivable $ 443,806 $ 353,778 Unbilled accounts receivable 188,029 233,869 Allowance for doubtful accounts (43,903 ) (41,985 ) Total accounts receivable, net $ 587,932 $ 545,662 |
4. Prepaid Expenses and Other_2
4. Prepaid Expenses and Other Current Assets (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
Schedule of 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, 2020 and 2019: December 31, 2020 December 31, 2019 Prepaid rent $ 18,679 $ 17,863 Vendor advances 6,085 6,221 Prepaid service agreements 101,886 172,602 Employee advance and other payroll related items 74,773 56,356 Other prepaid expenses and current assets 184,742 76,086 Total $ 386,165 $ 329,128 |
5. Property and Equipment (Tabl
5. Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | The following table sets forth the components of the Company’s property and equipment at December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Cost Accumulated Net Book Cost Accumulated Net Book Capital assets subject to depreciation: Computers, software and office equipment $ 2,800,872 $ (2,257,797 ) $ 543,075 $ 2,184,327 $ (1,882,567 ) $ 301,760 Machinery and equipment 192,988 (152,149 ) 40,839 175,761 (125,272 ) 50,489 Vehicles 163,525 (106,826 ) 56,699 158,849 (77,133 ) 81,716 Furniture and fixtures 422,234 (364,655 ) 57,579 399,512 (323,771 ) 75,741 Leasehold improvements 1,143,704 (903,381 ) 240,323 1,081,076 (764,070 ) 317,006 Total fixed assets 4,723,323 (3,784,808 ) 938,515 3,999,525 (3,172,813 ) 826,712 Capital assets not subject to depreciation: Construction in progress 26,594 – 26,594 25,433 – 25,433 Total fixed assets $ 4,749,917 $ (3,784,808 ) $ 965,109 $ 4,024,958 $ (3,172,813 ) $ 852,145 |
6. Leases (Tables)
6. Leases (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Leases [Abstract] | |
Schedule of Future Minimum Rental Payments for Operating Leases | The future minimum payment obligations at December 31, 2020 for operating leases are as follows: 2021 $ 367,636 2022 $ 335,659 2023 $ 28,588 |
Schedule of operating right-of-use assets | Information related to the Company's operating right-of-use assets and related lease liabilities were as follows: Year Ended Cash paid for operating lease liabilities $ 355,766 Weighted-average remaining lease term (in years) 2.2 Weighted-average discount rate 10% Minimum future lease payments $ 731,883 |
Schedule of amortization of lease liabilities | The following table presents the amortization of the Company’s lease liabilities under ASC 842 at December 31, 2020: 2021 $ 304,326 2022 $ 302,781 2023 $ 25,990 |
7. Goodwill and Intangible As_2
7. Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of goodwill | Balance, December 31, 2019 $ 8,853,261 Impairment charge (472,757 ) Balance, December 31, 2020 $ 8,380,504 |
Schedule of intangible assets | The following table sets forth the components of the Company’s intangible assets at December 31, 2020 and 2019: December 31, 2020 December 31, 2019 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 $ (716,429 ) $ 883,857 $ 1,600,286 $ (556,400 ) $ 1,043,886 Mobile software applications 2.00 282,500 (282,500 ) – 282,500 (282,500 ) – Web filtering software 5.00 1,134,435 (907,548 ) 226,887 1,134,435 (680,661 ) 453,774 Noncompete agreements 2.00 846,638 (846,638 ) – 846,638 (846,638 ) – Subtotal – 3,863,859 (2,753,115 ) 1,110,744 3,863,859 (1,979,283 1,497,660 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 $ (2,753,115 ) $ 5,566,339 $ 8,319,454 $ (1,979,283 ) $ 5,953,255 |
Schedule of amortization expense for intangible assets | The following table provides information regarding estimated amortization expense for intangible assets subject to amortization for each of the following years ending December 31: 2021 $ 386,916 2022 160,029 2023 160,029 2024 160,029 2025 160,029 Thereafter 83,712 $ 1,110,744 |
9. Accounts Payable and Accru_2
9. Accounts Payable and Accrued Liabilities (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Payables and Accruals [Abstract] | |
Schedule of accounts payable and accrued liabilities | The following table sets forth the components of the Company’s accrued liabilities at December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Executive and employee compensation $ 1,642,959 $ 1,237,531 Interest on convertible promissory notes 134,127 314,309 Other accrued expenses and liabilities 15,293 99,641 Total accrued liabilities $ 1,792,379 $ 1,651,482 |
10. Related Party Payables (Tab
10. Related Party Payables (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related party transactions | During the year ended December 31, 2019, Mr. Marks and Mr. Leiner agreed to convert portions of their loans into equity. These transactions are summarized as follows: Name Date Amount of Share Price Trading price Shares Darren Marks 12/10/2019 100,000 $ 0.18 0.10 571,429 Melvin Leiner 12/10/2019 100,000 $ 0.18 0.10 571,428 |
12. Debt (Tables)
12. Debt (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of convertible debt | The following tables set forth the components of the Company’s convertible notes at December 31, 2020 and 2019: December 31, December 31, 8% Convertible Promissory Notes (Bridge Notes) $ 373,587 $ – 10% Unsecured Convertible Redeemable Notes – Variable Conversion Price 265,000 100,000 10% Secured Convertible Notes with Original Issuance Discounts (OID Notes) 153,250 664,473 12% Senior Secured Convertible Notes (Newbridge) 52,572 289,143 12% Senior Secured Convertible Notes (Original TDH Notes) 882,175 4,000,000 12% Senior Secured Convertible Notes (TDH Secured Notes) 1,645,393 505,000 12% Senior Secured Convertible Notes (Additional Secured Notes) 260,315 – Loan discounts (385,266 ) (224,958 ) Total convertible notes, net 3,247,026 Less: current portion of convertible notes, net (2,349,677 ) (4,828,658 ) Convertible notes, net $ 897,349 $ 505,000 |
Schedule of future debt maturity payments | The principal repayments based upon the maturity dates of the Company’s borrowings for each of the next five years are as follows: 2021 $ 2,184,677 2022 $ 527,784 2023 $ 594,720 2024 $ 160,111 2025 and thereafter $ – |
13. Income Taxes (Tables)
13. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of income tax expense (benefit) | The following table sets forth the components of income tax expense (benefit) for the years ended December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Current: Federal $ – $ – State and local – – Foreign – – Total current – – Deferred: Federal – – State and local – – Foreign (224,027 ) 35,375 Total deferred (224,027 ) 35,375 Total $ (224,027 ) $ 35,375 |
Schedule of reconciliation of effective income tax rate | December 31, December 31, 2019 Tax benefit at the statutory federal rate – % – % Increase (decrease) in rate(s) resulting from: Foreign operations, net 3.8 (0.8 ) Change in deferred taxes 17.2 21.8 Change in valuation allowance (17.2 ) (21.8 ) Total 3.8 % (0.8 )% |
Schedule of income tax payable | The following tables set forth the components of income taxes payable at December 31, 2020 and 2019: December 31, 2020 December 31, Federal $ – $ – State and local – – Foreign – – Total $ – $ – |
Schedule of deferred income taxes | The following tables set forth the components of deferred income taxes at December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Non-current deferred tax assets: Retirement benefits $ 110,263 $ 68,169 Write down of investment(s) 68,408 65,420 Deferred revenue net 149,112 59,016 Other 203,773 45,976 Net operating loss carryforwards 5,009,036 4,661,804 Less: valuation allowance (5,009,036 ) (4,661,804 ) Total non-current deferred tax asset 531,557 238,581 Total deferred tax asset $ 531,557 $ 238,581 |
14. Stockholders' Equity (Table
14. Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Schedule of warrants | The following table reflects all outstanding and exercisable warrants at December 31, 2020 and 2019. All stock warrants are exercisable for a period ranging from three to five years from the date of issuance. Number of Warrants Outstanding Weighted Avg. Exercise Price Weighted Avg. Contractual Life (Yrs.) Balance January 1, 2019 781,910 $ 1.36 1.38 Warrants issued 5,450,000 $ 0.25 Warrants exercised – $ – Warrants forfeited (567,166 ) $ – December 31, 2019 5,664,744 $ 0.28 1.79 Warrants issued 1,683,197 $ 0.06 Warrants exercised – $ – Warrants forfeited – $ – Balance 31, 2020 7,347,941 $ 0.23 1.66 |
Schedule of options | The following table represents all outstanding and exercisable stock options at December 31, 2020. Year Issued Options Options Options Vested Strike Weighted 2013 7,735,350 (834,000 ) 6,901,350 6,901,350 $ 0.24 2.72 2015 11,467,500 (11,467,500 ) – – $ – – 2016 5,421,000 – 5,421,000 5,421,000 $ 0.78 0.19 2018 60,000 – 60,000 60,000 $ 0.78 2.33 Total 24,683,850 (12,301,500 ) 12,382,350 12,382,350 $ 0.48 1.90 |
2. Summary of Significant Acc_4
2. Summary of Significant Accounting Policies (Details - Contract Assets and Liabilities) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Contract assets | $ 587,932 | $ 545,662 |
Contract liabilities | 967,053 | 627,082 |
Animation Contracts [Member] | ||
Contract assets | 525,709 | 513,388 |
Contract liabilities | 410,709 | 51,054 |
Web Filtering Contract [Member] | ||
Contract assets | 54,886 | 24,937 |
Contract liabilities | 544,844 | 564,528 |
Other Contracts [Member] | ||
Contract assets | 7,337 | 7,337 |
Contract liabilities | $ 11,500 | $ 11,500 |
2. Summary of Significant Acc_5
2. Summary of Significant Accounting Policies (Details - Property useful lives) | 12 Months Ended |
Dec. 31, 2020 | |
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 the lease term or estimated useful life |
2. Summary of Significant Acc_6
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Impairment of intangible assets | $ 0 | $ 0 |
Revenue | 6,159,531 | 8,296,997 |
FDIC insured amount | 250,000 | |
Animation Revenue [Member] | ||
Revenue | 51,054 | 380,749 |
Revenue from contracts with customers | 5,483,332 | 7,565,672 |
Web Filtering Revenue [Member] | ||
Revenue | 399,033 | 461,843 |
Revenue from contracts with customers | $ 673,182 | $ 723,800 |
Convertible Notes [Member] | ||
Antidilutive shares | 18,017,076 | |
Vested Stock Options [Member] | ||
Antidilutive shares | 23,849,850 | |
Purchase Warrants [Member] | ||
Antidilutive shares | 5,664,744 | |
Intangible Assets [Member] | Minimum [Member] | ||
Intangible useful lives | 1 year 6 months | |
Intangible Assets [Member] | Maximum [Member] | ||
Intangible useful lives | 10 years |
3. Accounts Receivable (Details
3. Accounts Receivable (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||
Billed accounts receivable | $ 443,806 | $ 353,778 |
Unbilled accounts receivable | 188,029 | 233,869 |
Allowance for doubtful accounts | (43,903) | (41,985) |
Total accounts receivable, net | $ 587,932 | $ 545,662 |
3. Accounts Receivable (Detai_2
3. Accounts Receivable (Details Narrative) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Sales Revenue, Net [Member] | Three Customers [Member] | ||
Concentration percentage | 68.50% | 42.30% |
Sales Revenue, Net [Member] | Two Customers [Member] | ||
Concentration percentage | 29.90% | |
Accounts Receivable [Member] | One Customer [Member] | ||
Concentration percentage | 38.70% |
4. Prepaid Expenses and Other_3
4. Prepaid Expenses and Other Current Assets (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Prepaid expenses and other current assets | $ 386,165 | $ 329,128 |
Prepaid Rent [Member] | ||
Prepaid expenses and other current assets | 18,679 | 17,863 |
Vendor Advances [Member] | ||
Prepaid expenses and other current assets | 6,085 | 6,221 |
Prepaid Service Agreements [Member] | ||
Prepaid expenses and other current assets | 101,886 | 172,602 |
Employee Advance and Other Payroll Related Items [Member] | ||
Prepaid expenses and other current assets | 74,773 | 56,356 |
Other Prepaid Expenses and Current Assets [Member] | ||
Prepaid expenses and other current assets | $ 184,742 | $ 76,086 |
5. Property and Equipment (Deta
5. Property and Equipment (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Property and equipment, gross | $ 4,749,917 | $ 4,024,958 |
Accumulated depreciation | (3,784,808) | (3,172,813) |
Property and equipment, net | 965,109 | 852,145 |
Computers, Software and Office Equipment [Member] | ||
Property and equipment, gross | 2,800,872 | 2,184,327 |
Accumulated depreciation | (2,257,797) | (1,882,567) |
Property and equipment, net | 543,075 | 301,760 |
Machinery and Equipment [Member] | ||
Property and equipment, gross | 192,988 | 175,761 |
Accumulated depreciation | (152,149) | (125,272) |
Property and equipment, net | 40,839 | 50,489 |
Vehicles [Member] | ||
Property and equipment, gross | 163,525 | 158,849 |
Accumulated depreciation | (106,826) | (77,133) |
Property and equipment, net | 56,699 | 81,716 |
Furniture and Fixtures [Member] | ||
Property and equipment, gross | 422,234 | 399,512 |
Accumulated depreciation | (364,655) | (323,771) |
Property and equipment, net | 57,579 | 75,741 |
Leasehold Improvements [Member] | ||
Property and equipment, gross | 1,143,704 | 1,081,076 |
Accumulated depreciation | (903,381) | (764,070) |
Property and equipment, net | 240,323 | 317,006 |
Construction in Progress [Member] | ||
Property and equipment, gross | 26,594 | 25,433 |
Accumulated depreciation | 0 | 0 |
Property and equipment, net | $ 26,594 | $ 25,433 |
5. Property and Equipment (De_2
5. Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 461,548 | $ 477,079 |
6. Leases (Details - Future min
6. Leases (Details - Future minimum payment obligations) | Dec. 31, 2020USD ($) |
Leases [Abstract] | |
2021 | $ 367,636 |
2022 | 335,659 |
2023 | $ 28,588 |
6. Leases (Details - Operating
6. Leases (Details - Operating right-of-use assets and related lease liabilities) | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Leases [Abstract] | |
Cash paid for operting lease liabilities | $ 355,766 |
Weighted-average remaining lease term (in years) | 2 years 2 months 12 days |
Weighted-average discount rate | 10.00% |
Minimum future lease payments | $ 731,883 |
6. Leases (Details - Amortizat
6. Leases (Details - Amortization of lease liabilities) | Dec. 31, 2020USD ($) |
Leases [Abstract] | |
2021 | $ 304,326 |
2022 | 302,781 |
2023 | $ 25,990 |
6. Leases (Details Narrative)
6. Leases (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Leases [Abstract] | ||
Righ-of-use asset | $ 602,775 | $ 874,159 |
Operating lease liability current | 304,326 | 263,252 |
Operating lease liability noncurrent | 328,772 | $ 633,098 |
Lease costs | $ 363,974 |
7. Goodwill and Intangible As_3
7. Goodwill and Intangible Assets (Details - Goodwill) | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill, beginning balance | $ 8,853,261 |
Impairment charge | (472,757) |
Goodwill, ending balance | $ 8,380,504 |
7. Goodwill and Intangible As_4
7. Goodwill and Intangible Assets (Details - Intangibles) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Finite intangible assets, gross | $ 3,863,859 | $ 3,863,859 |
Accumulated amortization | (2,753,115) | (1,979,283) |
Finite intangible assets, net | 1,110,744 | 1,497,660 |
Indefinite lived intangible asset | 8,319,454 | 8,319,454 |
Total intangible assets | 5,566,339 | 5,953,255 |
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 | (716,429) | (556,400) |
Finite intangible assets, net | $ 883,857 | 1,043,886 |
Amortization period | 10 years | |
Mobile Software Applications [Member] | ||
Finite intangible assets, gross | $ 282,500 | 282,500 |
Accumulated amortization | (282,500) | (282,500) |
Finite intangible assets, net | $ 0 | 0 |
Amortization period | 2 years | |
NetSpective Webfiltering Software [Member] | ||
Finite intangible assets, gross | $ 1,134,435 | 1,134,435 |
Accumulated amortization | (907,548) | (680,661) |
Finite intangible assets, net | $ 226,887 | 453,774 |
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, 2020 | Dec. 31, 2019 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2021 | $ 386,916 | |
2022 | 160,029 | |
2023 | 160,029 | |
2024 | 160,029 | |
2025 | 160,029 | |
Thereafter | 83,712 | |
Future amortization total | $ 1,110,744 | $ 1,497,660 |
7. Goodwill and Intangible As_6
7. Goodwill and Intangible Assets (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill | $ 8,380,504 | $ 8,853,261 |
Amortization expense | $ 386,916 | $ 428,686 |
9. Accounts Payable and Accru_3
9. Accounts Payable and Accrued Liabilities (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Payables and Accruals [Abstract] | ||
Executive and employee compensation | $ 1,642,959 | $ 1,237,531 |
Interest on convertible promissory notes | 134,127 | 314,309 |
Other accrued expenses and liabilities | 15,293 | 99,641 |
Total accrued liabilities | $ 1,792,379 | $ 1,651,482 |
10. Related Party Payables (Det
10. Related Party Payables (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 10, 2019 | |
Darren Marks [Member] | ||
Debt converted, amount converted | $ 100,000 | |
Debt converted, shares issued | 571,429 | |
Share price used for conversion | $ 0.18 | |
Trading price of Grom stock on date of conversion | 0.10 | |
Melvin Leiner [Member] | ||
Debt converted, amount converted | $ 100,000 | |
Debt converted, shares issued | 571,428 | |
Share price used for conversion | 0.18 | |
Trading price of Grom stock on date of conversion | $ 0.10 |
10. Related Party Payables (D_2
10. Related Party Payables (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Mar. 16, 2020 | Jul. 02, 2016 | Dec. 31, 2020 | Dec. 31, 2019 | Jul. 13, 2018 | |
Debt instrument, principal amount | $ 373,587 | ||||
Accounts payable, related parties | 143,741 | $ 462,137 | |||
Loan payable | 189,963 | 0 | |||
TD Holdings [Member] | |||||
Debt instrument, principal amount | $ 2,000,000 | ||||
Debt instrument, maturity date | Jun. 30, 2021 | Apr. 1, 2020 | |||
Loan payable | 441,088 | ||||
Repayment of note | $ 1,500,000 | ||||
Debt interest rate | 12.00% | ||||
Stella Dearing [Member] | |||||
Wages and salaries | 83,000 | ||||
Zach [Member] | |||||
Accounts payable, related parties | 28,050 | 40,593 | |||
Dawson [Member] | |||||
Accounts payable, related parties | 500 | ||||
Victoria [Member] | |||||
Accounts payable, related parties | 500 | 2,250 | |||
Sarah [Member] | |||||
Accounts payable, related parties | 12,600 | ||||
Luke [Member] | |||||
Accounts payable, related parties | 17,659 | ||||
Jack [Member] | |||||
Accounts payable, related parties | 1,800 | ||||
Caroline [Member] | |||||
Accounts payable, related parties | 3,750 | ||||
Mr. Marks [Member] | |||||
Loan payable | 0 | 22,000 | |||
Mr. Leiner [Member] | |||||
Loan payable | 47,707 | 81,500 | |||
Marks LLC [Member] | |||||
Accounts payable, related parties | 43,429 | 215,122 | |||
Leiner LLC [Member] | |||||
Accounts payable, related parties | $ 50,312 | $ 210,929 | |||
Rutherford [Member] | |||||
Accounts payable, related parties | $ 50,000 |
11. Other Noncurrent Liabilit_2
11. Other Noncurrent Liabilities (Details Narrative) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Other Liabilities Disclosure [Abstract] | ||
Accrued retirement benefit | $ 367,544 | $ 227,229 |
12. Debt (Details - Convertible
12. Debt (Details - Convertible debentures) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Less: current portion of convertible notes, net | $ (2,349,677) | $ (4,828,656) |
Convertible notes, net | 897,349 | 505,000 |
Convertible Debentures [Member] | ||
Loan discounts | (385,266) | (224,958) |
Total convertible notes, net | 3,247,026 | 0 |
Less: current portion of convertible notes, net | (2,349,677) | (4,828,658) |
Convertible notes, net | 897,349 | 505,000 |
Convertible Promissory Notes Bridge Notes [Member] | Convertible Debentures [Member] | ||
Convertible debt, gross | 373,587 | 0 |
Unsecured Convertible Redeemable Notes Variable Conversion Price [Member] | Convertible Debentures [Member] | ||
Convertible debt, gross | 265,000 | 100,000 |
Secured Convertible Notes OID [Member] | Convertible Debentures [Member] | ||
Convertible debt, gross | 153,250 | 664,473 |
Senior Secured Convertible Newbridge [Member] | Convertible Debentures [Member] | ||
Convertible debt, gross | 52,572 | 289,143 |
Senior Secured Convertible Original TDH Notes [Member] | Convertible Debentures [Member] | ||
Convertible debt, gross | 882,175 | 4,000,000 |
Senior Secured Convertible TDH Notes [Member] | Convertible Debentures [Member] | ||
Convertible debt, gross | 1,645,393 | 505,000 |
Senior Secured Convertible Additional Secured Notes [Member] | Convertible Debentures [Member] | ||
Convertible debt, gross | $ 260,315 | $ 0 |
12. Debt (Details - Debt maturi
12. Debt (Details - Debt maturities) | Dec. 31, 2020USD ($) |
Debt Disclosure [Abstract] | |
2020 | $ 2,184,677 |
2021 | 527,784 |
2022 | 594,720 |
2023 | 160,111 |
2024 and thereafter | $ 0 |
12. Debt (Details Narrative)
12. Debt (Details Narrative) - USD ($) | Jan. 13, 2020 | Jul. 09, 2019 | Jan. 15, 2019 | Jan. 03, 2018 | Dec. 17, 2020 | Mar. 02, 2020 | Mar. 16, 2020 | Jun. 30, 2020 | Jun. 20, 2016 | Aug. 07, 2020 | Aug. 06, 2020 | Oct. 02, 2020 | Nov. 30, 2020 | Nov. 30, 2018 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Debt face amount | $ 373,587 | |||||||||||||||||
Proceeds from convertible debt | 4,143,500 | $ 600,000 | ||||||||||||||||
Derivative expense | 0 | 42,140 | ||||||||||||||||
Gain (loss) on extinguishment of debt | (1,312,983) | (363,468) | ||||||||||||||||
Bridge Notes [Member] | ||||||||||||||||||
Convertible debt, gross | 373,587 | |||||||||||||||||
Unamortized discount | 75,593 | |||||||||||||||||
Unsecured Convertible Redeemable Note [Member] | ||||||||||||||||||
Debt face amount | $ 100,000 | |||||||||||||||||
Debt maturity date | Jul. 9, 2020 | |||||||||||||||||
Proceeds from convertible debt | $ 95,000 | |||||||||||||||||
Debt Instrument, Fee | $ 5,000 | |||||||||||||||||
Debt interest rate | 10.00% | |||||||||||||||||
Beneficial conversion feature | $ 51,730 | |||||||||||||||||
Fair value of the derivative | 85,410 | |||||||||||||||||
Derivative expense | 42,140 | |||||||||||||||||
Unamortized discount | $ 43,270 | |||||||||||||||||
Unsecured Convertible Redeemable Note [Member] | Lender Conversion [Member] | ||||||||||||||||||
Debt converted, amount converted | $ 100,000 | $ 13,636 | $ 23,503 | $ 52,861 | ||||||||||||||
Debt converted, interest converted | $ 5,000 | $ 1,364 | $ 2,545 | $ 1,527 | ||||||||||||||
Debt converted, shares issued | 259,300 | 249,285 | 650,000 | 1,535,507 | ||||||||||||||
10% Unsecured Convertible Redeemable Note [Member] | ||||||||||||||||||
Convertible debt, gross | 0 | |||||||||||||||||
10% Secured Convertible Notes [Member] | Notes 2017 [Member] | ||||||||||||||||||
Convertible debt, gross | $ 0 | |||||||||||||||||
Proceeds from convertible debt | $ 601,223 | |||||||||||||||||
Debt interest rate | 10.00% | 10.00% | ||||||||||||||||
Stock issued as inducement to lend, shares | 150,305 | |||||||||||||||||
Stock issued as inducement to lend, value | $ 78,321 | |||||||||||||||||
Unamortized discount | $ 0 | $ 60,122 | ||||||||||||||||
10% Secured Convertible Notes [Member] | Notes 2017 [Member] | Series B Preferred Stock [Member] | ||||||||||||||||||
Debt converted, amount converted | $ 211,223 | $ 111,250 | ||||||||||||||||
Debt converted, shares issued | 331,954 | 158,000 | ||||||||||||||||
10% Secured Convertible Notes [Member] | Notes 2018 [Member] | ||||||||||||||||||
Convertible debt, gross | 97,250 | |||||||||||||||||
Proceeds from convertible debt | $ 1,313,485 | |||||||||||||||||
Stock issued as inducement to lend, shares | 328,371 | |||||||||||||||||
Stock issued as inducement to lend, value | $ 198,259 | |||||||||||||||||
Unamortized discount | 0 | 131,348 | ||||||||||||||||
10% Secured Convertible Notes [Member] | Notes 2018 [Member] | Series B Preferred Stock [Member] | ||||||||||||||||||
Debt converted, amount converted | $ 200,000 | |||||||||||||||||
Debt converted, shares issued | 316,000 | |||||||||||||||||
10% Secured Convertible Notes [Member] | Notes 2018 [Member] | ||||||||||||||||||
Convertible debt, gross | 56,000 | |||||||||||||||||
Proceeds from convertible debt | $ 356,000 | |||||||||||||||||
Debt interest rate | 10.00% | |||||||||||||||||
Stock issued as inducement to lend, shares | 203,000 | |||||||||||||||||
Stock issued as inducement to lend, value | $ 62,269 | |||||||||||||||||
Unamortized discount | 0 | $ 71,200 | ||||||||||||||||
12% Secured Convertible Notes [Member] | Newbridge Offering [Member] | ||||||||||||||||||
Convertible debt, gross | 52,572 | 289,143 | ||||||||||||||||
Debt face amount | $ 552,000 | |||||||||||||||||
Debt interest rate | 12.00% | |||||||||||||||||
Stock issued with debt, shares | 730,974 | |||||||||||||||||
Unamortized discount | 0 | 161,864 | ||||||||||||||||
12% Secured Convertible Notes [Member] | Original TDH Notes [Member] | ||||||||||||||||||
Debt face amount | $ 4,000,000 | |||||||||||||||||
Debt maturity date | Jul. 1, 2018 | |||||||||||||||||
Debt interest rate | 5.00% | |||||||||||||||||
12% Secured Convertible Notes [Member] | Original TDH Notes [Member] | First Amendment [Member] | ||||||||||||||||||
Debt maturity date | Jul. 1, 2019 | |||||||||||||||||
Debt interest rate | 10.00% | |||||||||||||||||
Stock issued as inducement to lend, shares | 800,000 | |||||||||||||||||
Stock issued as inducement to lend, value | $ 480,000 | |||||||||||||||||
12% Secured Convertible Notes [Member] | Original TDH Notes [Member] | Second Amendment [Member] | ||||||||||||||||||
Debt maturity date | Apr. 2, 2020 | |||||||||||||||||
Stock issued as inducement to lend, shares | 800,000 | |||||||||||||||||
Stock issued as inducement to lend, value | $ 220,000 | |||||||||||||||||
Gain (loss) on extinguishment of debt | $ (363,468) | |||||||||||||||||
12% Secured Convertible Notes [Member] | Original TDH Notes [Member] | Third Amendment [Member] | ||||||||||||||||||
Convertible debt, gross | $ 1,000,000 | 882,175 | ||||||||||||||||
Accrued interest | $ 361,767 | |||||||||||||||||
Debt maturity date | Jun. 30, 2021 | |||||||||||||||||
Debt interest rate | 12.00% | |||||||||||||||||
12% Secured Convertible Notes [Member] | TDH Secured Notes [Member] | ||||||||||||||||||
Convertible debt, gross | 1,654,393 | |||||||||||||||||
Debt face amount | $ 3,000,000 | |||||||||||||||||
Debt maturity date | Mar. 16, 2024 | |||||||||||||||||
Debt interest rate | 12.00% | |||||||||||||||||
Stock issued with debt, shares | 6,000,000 | |||||||||||||||||
Stock issued with debt, value | $ 420,000 | |||||||||||||||||
Unamortized discount | 202,782 | |||||||||||||||||
12% Secured Convertible Notes [Member] | TDH Secured Notes [Member] | Series B Preferred Stock [Member] | ||||||||||||||||||
Debt converted, amount converted | $ 1,101,000 | $ 99,633 | ||||||||||||||||
Debt converted, shares issued | 1,739,580 | 158,000 | ||||||||||||||||
12% Secured Convertible Notes [Member] | Additional Secured Notes [Member] | ||||||||||||||||||
Convertible debt, gross | 260,315 | |||||||||||||||||
Debt face amount | $ 1,060,000 | |||||||||||||||||
Debt maturity date | Mar. 16, 2024 | |||||||||||||||||
Debt interest rate | 12.00% | |||||||||||||||||
Stock issued with debt, shares | 2,120,000 | |||||||||||||||||
Stock issued with debt, value | $ 148,000 | |||||||||||||||||
Unamortized discount | $ 62,976 | |||||||||||||||||
12% Secured Convertible Notes [Member] | Additional Secured Notes [Member] | Series B Preferred Stock [Member] | ||||||||||||||||||
Debt converted, amount converted | $ 782,500 | |||||||||||||||||
Debt converted, shares issued | 1,236,350 | |||||||||||||||||
EMA Financial, LLC [Member] | Securities Purchase Agreement [Member] | Bridge Notes [Member] | ||||||||||||||||||
Debt face amount | $ 260,000 | |||||||||||||||||
Investment | $ 234,000 | |||||||||||||||||
Quick Capital, LLC [Member] | Note Purchase Agreement [Member] | Bridge Notes [Member] | ||||||||||||||||||
Debt face amount | $ 113,587 | |||||||||||||||||
Investment | 100,000 | |||||||||||||||||
Beneficial conversion feature | $ 12,621 | |||||||||||||||||
Warrant issued, shares | 1,183,197 | |||||||||||||||||
Fair value of warrants issued | $ 33,056 |
13. Income Taxes - (Details -
13. Income Taxes - (Details - Schedule of income tax expense (benefit)) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Current: | ||
Federal | $ 0 | $ 0 |
State and local | 0 | 0 |
Foreign | 0 | 0 |
Total current | 0 | 0 |
Deferred: | ||
Federal | 0 | 0 |
State and local | 0 | 0 |
Foreign | (224,027) | 35,375 |
Total deferred | (224,027) | 35,375 |
Total | $ (224,027) | $ 35,375 |
13. Income Taxes - (Details _2
13. Income Taxes - (Details - Reconciliation of income tax expense (benefit)) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Tax benefit at statutory federal rate | 0.00% | 0.00% |
Increase (decrease) in rate(s) resulting from: | ||
Foreign operations, net | 3.80% | (0.80%) |
Change in deferred taxes | 17.20% | 21.80% |
Change in valuation allowance | (17.20%) | (21.80%) |
Total | 3.80% | (0.80%) |
13. Income Taxes - (Details _3
13. Income Taxes - (Details - Schedule of income taxes payable) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Income taxes payable | $ 0 | $ 0 |
Federal [Member] | ||
Income taxes payable | 0 | 0 |
State and Local [Member] | ||
Income taxes payable | 0 | 0 |
Foreign [Member] | ||
Income taxes payable | $ 0 | $ 0 |
13. Income Taxes - (Details- S
13. Income Taxes - (Details- Schedule of deferred income taxes) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Non-current deferred tax assets: | ||
Retirement benefits | $ 110,263 | $ 68,169 |
Write down of investment(s) | 68,408 | 65,420 |
Deferred revenue net | 149,112 | 59,016 |
Other | 203,773 | 45,976 |
Net operating loss carryforwards | 5,009,036 | 4,661,804 |
Less: valuation allowance | (5,009,036) | (4,661,804) |
Total non-current deferred tax asset | 531,557 | 238,581 |
Total deferred tax asset | $ 531,557 | $ 238,581 |
13. Income Taxes (Details Narra
13. Income Taxes (Details Narrative) | 12 Months Ended |
Dec. 31, 2020USD ($) | |
Income Tax Disclosure [Abstract] | |
Operating loss carryforward | $ 23,900,000 |
Operating loss carryforward expiration date | Dec. 31, 2037 |
Deferred Tax Assets Operating Loss Carryforwards Subject To Expiration | $ 15,200,000 |
Deferred Tax Assets Operating Loss Carryforwards Not Subject To Expiration | $ 8,700,000 |
14. Stockholders' Equity (Detai
14. Stockholders' Equity (Details - Warrant activity) - $ / shares | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Number of warrants | |||
Warrants outstanding, beginning balance | 5,664,744 | 781,910 | |
Warrants issued | 1,683,197 | 5,450,000 | |
Warrants exercised | 0 | 0 | |
Warrants forfeited | 0 | (567,166) | |
Warrants outstanding, ending balance | 7,347,941 | 5,664,744 | 781,910 |
Weighted Average Exercise Price | |||
Weighted Average Exercise Price, Warrants outstanding, beginning balance | $ 0.28 | $ 1.36 | |
Weighted Average Exercise Price, Warrants issued | 0.06 | 0.25 | |
Weighted Average Exercise Price, Warrants exercised | 0 | 0 | |
Weighted Average Exercise Price, Warrants forfeited | 0 | 0 | |
Weighted Average Exercise Price, Warrants outstanding, ending balance | $ 0.23 | $ 0.28 | $ 1.36 |
Average Remaining Contractual Term, Warrants outstanding | 1 year 7 months 28 days | 1 year 9 months 14 days | 1 year 4 months 17 days |
14. Stockholders' Equity (Det_2
14. Stockholders' Equity (Details - Option Activity) - Options [Member] | 12 Months Ended |
Dec. 31, 2020$ / sharesshares | |
Options issued | 24,683,850 |
Options forfeited | (12,301,500) |
Options outstanding | 12,382,350 |
Vested options | 12,382,350 |
Strike price | $ / shares | $ 0.48 |
Weighted average remaining life | 1 year 10 months 25 days |
Option 1 [Member] | |
Options issued | 7,735,350 |
Options forfeited | (834,000) |
Options outstanding | 6,901,350 |
Vested options | 6,901,350 |
Strike price | $ / shares | $ 0.24 |
Weighted average remaining life | 2 years 8 months 19 days |
Option 2 [Member] | |
Options issued | 11,467,500 |
Options forfeited | (11,467,500) |
Options outstanding | 0 |
Vested options | 0 |
Strike price | $ / shares | $ 0 |
Weighted average remaining life | |
Option 3 [Member] | |
Options issued | 5,421,000 |
Options forfeited | 0 |
Options outstanding | 5,421,000 |
Vested options | 5,421,000 |
Strike price | $ / shares | $ 0.78 |
Weighted average remaining life | 2 months 8 days |
Option 4 [Member] | |
Options issued | 60,000 |
Options forfeited | 0 |
Options outstanding | 60,000 |
Vested options | 60,000 |
Strike price | $ / shares | $ 0.78 |
Weighted average remaining life | 2 years 3 months 29 days |
14. Stockholders' Equity (Det_3
14. Stockholders' Equity (Details Narrative) - USD ($) | Aug. 06, 2020 | Apr. 02, 2019 | Mar. 11, 2019 | Nov. 30, 2020 | Sep. 22, 2020 | Jun. 19, 2020 | Feb. 27, 2019 | Nov. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Feb. 22, 2019 | Dec. 31, 2018 |
Preferred stock, shares authorized | 25,000,000 | |||||||||||
Preferred stock, par value | $ 0.001 | |||||||||||
Stock issued for services, value | $ 578,645 | $ 778,411 | ||||||||||
Common stock, par value | $ 0.001 | $ 0.001 | ||||||||||
Common stock, shares authorized | 500,000,000 | 500,000,000 | ||||||||||
Common stock, shares outstanding | 188,354,282 | 167,382,807 | ||||||||||
Common stock, shares issued | 188,354,282 | 167,382,807 | ||||||||||
Warrant exercise price | $ 0.23 | $ 0.28 | $ 1.36 | |||||||||
Stock issued for compensation, value | $ 35,600 | |||||||||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, value | 50,000 | $ 589,440 | ||||||||||
Stock issued for conversion of securities, value | 736,014 | 32,418 | ||||||||||
Stock based compensation | 62,600 | 64,800 | ||||||||||
Issuance of common stock in connection with the amendment of terms of promissory notes, value | 220,000 | |||||||||||
Conversion of convertible notes and accrued interest into common stock, value | 110,437 | 2,788,199 | ||||||||||
Options [Member] | ||||||||||||
Stock based compensation | $ 0 | $ 0 | ||||||||||
Convertible Debentures [Member] | ||||||||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), shares | 10,869,677 | 160,260 | ||||||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), value | $ 736,014 | $ 32,418 | ||||||||||
Convertible Notes And Accrued Interest [Member] | ||||||||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), shares | 2,694,092 | |||||||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), value | $ 110,437 | |||||||||||
Conversion of convertible notes and accrued interest into common stock, shares | 12,208,686 | |||||||||||
Conversion of convertible notes and accrued interest into common stock, value | $ 2,788,199 | |||||||||||
Convertible debt and interest [Member] | ||||||||||||
Issuance of common stock in connection with the amendment of terms of promissory notes, shares | 800,000 | |||||||||||
Issuance of common stock in connection with the amendment of terms of promissory notes, value | $ 220,000 | |||||||||||
Loans Payable and Other Accrued Obligations [Member] | ||||||||||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, shares | 500,000 | 1,707,690 | ||||||||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, value | $ 50,000 | $ 589,440 | ||||||||||
Debt Exchange Agreement [Member] | OID Notes [Member] | ||||||||||||
Debt conversion, amount | $ 411,223 | $ 111,250 | ||||||||||
Debt Exchange Agreement [Member] | TDH Secured Notes [Member] | ||||||||||||
Debt conversion, amount | 1,101,000 | $ 99,633 | ||||||||||
Debt Exchange Agreement [Member] | Additional Secured Notes [Member] | ||||||||||||
Debt conversion, amount | $ 782,500 | |||||||||||
Accredited Investors [Member] | ||||||||||||
Restricted shares issued during period | 2,000,000 | |||||||||||
Accredited Investors [Member] | Private Placement [Member] | ||||||||||||
Restricted shares issued during period | 625,000 | |||||||||||
Accredited Investors [Member] | Private Offerings [Member] | ||||||||||||
Proceeds from issuance of equity | $ 545,000 | |||||||||||
Two Accredited Investors [Member] | Subscription Agreement [Member] | ||||||||||||
Proceeds from issuance of equity | $ 233,500 | |||||||||||
Employees, Officers and Director [Member] | ||||||||||||
Stock issued for compensation, shares | 420,000 | |||||||||||
Stock issued for compensation, value | $ 35,600 | |||||||||||
Contractors [Member] | ||||||||||||
Stock issued for services, shares | 6,487,706 | 3,877,516 | ||||||||||
Stock issued for services, value | $ 578,645 | $ 778,411 | ||||||||||
Series A Preferred Stock [Member] | ||||||||||||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | 2,000,000 | |||||||||
Preferred stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | |||||||||
Preferred stock, shares issued | 0 | 925,000 | ||||||||||
Preferred stock, shares outstanding | 0 | 925,000 | ||||||||||
Series A Preferred Stock [Member] | Exchange Agreements [Member] | ||||||||||||
Stock converted, shares converted | 925,000 | |||||||||||
Series A Preferred Stock [Member] | Series A Exchange Agreements [Member] | ||||||||||||
Stock converted, shares converted | 925,000 | |||||||||||
Series A Preferred Stock [Member] | Private Placement [Member] | ||||||||||||
Deemed dividend | $ 740,899 | |||||||||||
Series A Preferred Stock [Member] | Accredited Investors [Member] | ||||||||||||
Stock issued for services, shares | 400,000 | 400,000 | ||||||||||
Stock issued for services, value | $ 400,000 | $ 400,000 | ||||||||||
Series A Preferred Stock [Member] | Accredited Investors [Member] | Private Placement [Member] | ||||||||||||
Stock issued for services, shares | 125,000 | |||||||||||
Stock issued for services, value | $ 125,000 | |||||||||||
Series B Preferred Stock [Member] | ||||||||||||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | ||||||||||
Preferred stock, par value | $ 0.001 | $ 0.001 | ||||||||||
Preferred stock, shares issued | 5,625,884 | 0 | ||||||||||
Preferred stock, shares outstanding | 5,625,884 | 0 | ||||||||||
Series B Preferred Stock [Member] | Exchange Agreements [Member] | ||||||||||||
Stock converted, shares issued | 1,202,500 | |||||||||||
Series B Preferred Stock [Member] | Debt Exchange Agreement [Member] | ||||||||||||
Debt conversion, shares issued | 3,623,884 | 316,000 | ||||||||||
Series B Preferred Stock [Member] | Series A Exchange Agreements [Member] | ||||||||||||
Stock converted, shares issued | 1,202,500 | |||||||||||
Series B Preferred Stock [Member] | Accredited Investors [Member] | ||||||||||||
Stock issued for services, shares | 250,000 | |||||||||||
Stock issued new, shares | 250,000 | |||||||||||
Proceeds from issuance of equity | $ 250,000 | |||||||||||
Series B Preferred Stock [Member] | Two Accredited Investors [Member] | Subscription Agreement [Member] | ||||||||||||
Stock issued new, shares | 233,500 | |||||||||||
Common Stock [Member | Accredited Investors [Member] | Private Offerings [Member] | ||||||||||||
Stock issued new, shares | 5,450,000 | |||||||||||
Warrants [Member] | Accredited Investors [Member] | Private Offerings [Member] | ||||||||||||
Warrants issued, shares | 5,450,000 |