| 2. Summary of Significant Accounting Policies | Basic of Presentation and Consolidation The accompanying interim unaudited condensed
consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial
information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. In our opinion, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results
for the three months ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending December
31, 2018. This report should be read in conjunction with the audited consolidated financial statements and the footnotes thereto
for the fiscal year ended December 31, 2017 included in the Companys Form 10-K as filed with the Securities and Exchange
Commission on April 17, 2018. These condensed consolidated financial statements
and related notes include the records of the Company and the Companys wholly-owned subsidiaries, Nimbo Tracking LLC, and
Medallion GPS both formed in the State of California, USA. All intercompany transactions and balances
have been eliminated. These consolidated financial statements are presented in accordance with accounting principles generally
accepted in the United States (U.S. GAAP), are expressed in U.S. dollars, and, in managements opinion, have
been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies
summarized below. Use of Estimates The preparation of these consolidated financial
statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements,
and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions
related to allowance for doubtful accounts, valuation of inventory, the useful life and recoverability of equipment, impairment
of goodwill, valuation of notes payable and convertible debentures, fair value of derivative liabilities, fair value of stock-based
compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts,
historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that
are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely
from the Companys estimates. To the extent there are material differences between the estimates and the actual results,
future results of operations will be affected. Cash and Cash Equivalents The Company considers all highly liquid instruments
purchased with an original maturity of three months or less at the time of acquisition to be cash equivalents. Accounts Receivable Accounts receivable are recognized and carried
at the original invoice amount less an allowance for expected uncollectible amounts. Inherent in the assessment of the allowance
for doubtful accounts are certain judgments and estimates including, among others, the customers willingness or ability
to pay, the Companys compliance with customer invoicing requirements, the effect of general economic conditions and the
ongoing relationship with the customer. Accounts with outstanding balances longer than the payment terms are considered past due.
We do not charge interest on past due balances. The Company writes off trade receivables when all reasonable collection efforts
have been exhausted. Bad debt expense is reflected as a component of general and administrative expenses in the condensed consolidated
statements of operations and comprehensive loss. Inventory Inventory consists of vehicle tracking and
recovery devices and is comprised entirely of finished goods that can be resold. Inventory is stated at the lower of cost or net
realizable value. Cost is determined on a first-in, first-out (FIFO) basis. Net realizable value is the estimated selling price
in the ordinary course of business, less estimated costs of completion and selling costs. There was no provision for inventory
recorded as of March 31, 2018 and December 31, 2017. Equipment Office equipment, computer equipment, and software
are recorded at cost. Depreciation is recorded over their estimated useful lives. Management reviews the estimates of useful lives
of the assets every year and adjusts them on prospective basis, if needed. For purposes of computing depreciation, the method of
depreciating equipment is as follows:
Computer equipment 55% declining balance
Office equipment 20% declining balance
Software 3 years straight-line Goodwill Goodwill represents the excess of the acquisition
price over the fair value of identifiable net assets acquired. Goodwill is allocated at the date of the business combination. Goodwill
is not amortized, but is tested for impairment annually, during the fourth quarter, or more frequently if events or changes in
circumstances indicate the asset may be impaired. These events and circumstances may include a significant change in legal factors
or in the business climate, a significant decline in the Companys share price, an adverse action of assessment by a regulator,
unanticipated competition, a loss of key personnel, significant disposal activity and the testing of recoverability for a significant
asset group. The impairment testing is carried out in two
steps. In the first step, the carrying amount of the reporting unit including goodwill is compared with its fair value. When the
carrying amount of a reporting unit exceeds its fair value, goodwill of the reporting unit is considered to be impaired and the
second step is necessary. If the total of the expected undiscounted
future cash flows is less than the carrying amount of the goodwill, a loss is recognized for the excess of the carrying amount
over the fair value of the goodwill. Establishing an implied fair value of goodwill requires the Company to make estimates for
key inputs into complex valuation models and to apply significant judgment in the selection of estimates, assumptions and methodologies
required to complete the analysis. Areas of judgment include, but are not limited to, development of multi-year business cash
flow forecasts, the selection of discount rates, and the identification and valuation of unrecorded assets. Impairment of Long-lived Assets The Company reviews long-lived assets, such
as equipment, for impairment whenever events or changes in the circumstances indicate that the carrying value may not be recoverable.
If the total of the estimated undiscounted future cash flows is less than the carrying value of the asset, an impairment loss is
recognized for the excess of the carrying value over the fair value of the asset during the year the impairment occurs. Subsequent
expenditure relating to an item of office equipment is capitalized when it is probable that future economic benefits from the use
of the assets will be increased. Financial Instruments In accordance with Financial Accounting Standard
Board (FASB) Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures,
the Company is to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to
measure fair value. A financial instruments categorization within the fair value hierarchy is based upon the lowest level
of input that is significant to the fair value measurement. ASC 820 prioritizes the inputs into three levels that may be used to
measure fair value: Level 1 Level 1 applies to assets or liabilities for
which there are quoted prices in active markets for identical assets or liabilities. Level 2 Level 2 applies to assets or liabilities for
which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar
assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume
or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can
be derived principally from, or corroborated by, observable market data. Level 3 Level 3 applies to assets or liabilities for
which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the
assets or liabilities. The fair values of cash and restricted cash,
accounts and other receivables, and accounts payable and accrued liabilities, approximate their carrying values due to the immediate
or short-term maturity of these financial instruments. Foreign currency transactions are primarily undertaken in Canadian dollars.
The fair value of cash and restricted cash is determined based on Level 1 inputs and the fair value of derivative
liabilities is determined based on Level 3 inputs. The recorded values of notes payable, approximate their current
fair values because of their nature and respective maturity dates or durations. The financial risk is the risk to the Companys
operations that arise from fluctuations in foreign exchange rates and the degree of volatility to these rates. Currently, the Company
does not use derivative instruments to reduce its exposure to foreign currency risk. Financial instruments that potentially subject
the Company to concentrations of credit risk consists of cash and restricted cash. The Company places its cash in what it believes
to be credit-worthy financial institutions. Revenue Recognition and Deferred Revenue We recognize revenue in accordance with Accounting
Standards Codification (ASC) 606, Revenue Recognition, when there is persuasive evidence that an arrangement
exists, title and risk of loss have passed, delivery has occurred or the services have been rendered, the sales price is fixed
or determinable and collection of the related receivable is reasonably assured. Title and risk of loss generally pass to our customers
upon delivery, as we have insurance for lost shipments. In limited circumstances where either title or risk of loss pass upon destination
or acceptance or when collection is not reasonably assured, we defer revenue recognition until such events occur. We derive revenues
from two primary sources: products and services. Product revenue includes the shipment of product according to the agreement with
our customers. Services include vehicle tracking services and customer support (technical support), installations and consulting.
A contract may include both product and services. Rarely, contracts with customers contain multiple performance obligations. For
these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price
is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices are
typically estimated based on observable transactions when these services are sold on a standalone basis. The Company provides product warranties with
varying lengths of time and terms. The product warranties are considered to be assurance-type in nature and do not cover anything
beyond ensuring that the product is functioning as intended. Based on the guidance in ASC 606, assurance-type warranties do not
represent separate performance obligations. The Company has historically experienced a low rate of product returns under the warranty
program. Management assesses the business environment,
customers financial condition, historical collection experience, accounts receivable aging, and customer disputes to determine
whether collectability is reasonably assured. If collectability is not considered reasonably assured at the time of sale, the Company
does not recognize revenue until collection occurs. The Company has determined that the sale of
its vehicle tracking devices and related service are considered one unit of accounting and the revenue related to the sale is deferred
and recognized over the service term, typically one year. Revenue relating to the sale of service renewal
fees on its vehicle tracking and recovery services is recognized over the life of the contract. The service renewal fees are offered
in terms ranging from 12 to 36 months and are generally payable in full upon renewal. Any revenue that has been deferred and is expected
to be recognized beyond one year is classified as deferred revenue, net of current portion. Financing Costs and Debt Discount Financing costs and debt discounts are recorded
net of notes payable and convertible debentures in the condensed consolidated balances sheets. Amortization of financing costs
and the debt discounts is calculated using the effective interest method over the term of the debt and is recorded as interest
expense in the consolidated statements of operations and comprehensive loss. Income Taxes Deferred income taxes are provided on the asset
and liability method whereby deferred income tax assets are recognized for deductible temporary differences and operating loss
and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred income tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the
deferred income tax assets will not be realized. Deferred income tax assets and liabilities are adjusted for the effects of changes
in tax laws and rates on the date of enactment. Foreign Currency Translation The Companys reporting currency is the
U.S. dollar. The consolidated financial statements of the Company are translated to U.S. dollars in accordance with ASC 830, Foreign
Currency Translation Matters. Monetary assets and liabilities denominated in foreign currencies are translated using the
exchange rate prevailing at the balance sheet date. Non-monetary assets, liabilities and items recorded in income arising from
transactions denominated in foreign currencies are translated at rates of exchange in effect at the date of the transaction. Gains
and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination
of income. Stock-Based Compensation The estimated fair values of employee stock
option grants are determined as of the date of grant using the Black-Scholes option pricing model. This method incorporates the
fair value of our common stock at the date of each grant and various assumptions such as the risk-free interest rate, expected
volatility based on the historic volatility of publicly-traded peer companies, expected dividend yield, and expected term of the
options. The estimated fair values of restricted stock awards are determined based on the fair value of our common stock on the
date of grant. The estimated fair values of stock-based awards, including the effect of estimated forfeitures, are expensed over
the requisite service period, which is generally the awards vesting period. We classify stock-based compensation expense
in the consolidated statement of operations and comprehensive loss in the same manner in which the award recipients payroll
costs are classified. Our accounting policy for equity instruments
issued to consultants and vendors in exchange for goods and services follows the guidance of ASC 718, Compensation
Stock Compensation. All transactions in which goods or services are the consideration received for the issuance of equity
instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument
issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the earlier
of the date on which the counterpartys performance is complete or the date at which a commitment for performance is reached.
For transactions in which the fair value of the equity instrument issued to non-employees is the more reliable measurement and
a measurement date has not been reached, the fair value is re-measured at each vesting and reporting date using the Black-Scholes
option pricing model. Compensation expense for these share-based awards is recognized over the term of the consulting agreement
or until the award is approved and settled. Loss Per Share Basic earnings (loss) per share are computed
by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares outstanding
(denominator) during the period. Diluted earnings per share give effect to all dilutive potential common shares outstanding during
the period including stock options, using the treasury stock method, and convertible debentures, using the if-converted method.
In computing diluted earnings (loss) per share, the average stock price for the period is used in determining the number of shares
assumed to be purchased from the exercise of stock options or warrants. Diluted earnings (loss) per share exclude all potentially
issuable shares if their effect is anti-dilutive. Because the effect of conversion of the Companys dilutive securities is
anti-dilutive, diluted loss per share is the same as basic loss per share for the periods presented. As of March 31, 2018 and December
31, 2017, the Company has 16,534,818 and 13,021,952 potentially dilutive shares outstanding, respectively. Comprehensive Income (Loss) ASC 220, Comprehensive Income
establishes standards for the reporting and display of comprehensive income and its components in the consolidated financial statements.
For the three months ended March 31, 2018 and 2017, comprehensive income (loss) consists of foreign currency translation losses. Reclassifications Certain reclassifications have been made to
the prior periods consolidated financial statements to conform to the current periods presentation. Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards
Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers". This new standard replaces most of the
existing revenue recognition guidance in U.S. GAAP permits the use of either the retrospective or cumulative effect transition
method. The new standard, as amended, became effective in the first quarter of fiscal year 2018. The Company adopted the standard
using the modified retrospective method. There was no effect for any adjustments to retained earnings (accumulated deficit) upon
adoption of the standard on January 1, 2018. In February 2016, the FASB issued new lease
accounting guidance in ASU No. 2016-02, Leases. This new guidance was initiated as a joint project with the International
Accounting Standards Board to simplify lease accounting and improve the quality of and comparability of financial information for
users. This new guidance would eliminate the concept of off-balance sheet treatment for operating leases for lessees
for the vast majority of lease contracts. Under ASU No. 2016-02, at inception, a lessee must classify all leases with a term of
over one year as either finance or operating, with both classifications resulting in the recognition of a defined right-of-use
asset and a lease liability on the balance sheet. However, recognition in the income statement will differ depending on the lease
classification, with finance leases recognizing the amortization of the right-of-use asset separate from the interest on the lease
liability and operating leases recognizing a single total lease expense. Lessor accounting under ASU No. 2016-02 would be substantially
unchanged from the previous lease requirements under GAAP. ASU No. 2016-02 will take effect for public companies in fiscal years
beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted and for leases
existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, lessees
and lessors must apply a modified retrospective transition approach. The Company is currently evaluating the new guidance and have
not determined the impact this standard may have on the consolidated financial statements. In November 2016, the FASB issued ASU No. 2016-18,
Statement of Cash Flows: Classification of Restricted Cash, which updates the guidance as to how restricted cash
should be presented and classified. The updates are intended to reduce diversity in practice. The amendments are effective for
fiscal years beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted.
The Company adopted the standard on January 1, 2018 by using the retrospective transition method. Adoption of the standard effected
the presentation of cash in the Companys condensed consolidated statements of cash flows and related disclosures, restricted
cash of $25,000 and 25,000 have been reclassified within the condensed consolidated balance sheets for the periods presented as
cash. In January 2017, the FASB issued ASU No. 2017-04,
Intangibles Goodwill and Other. ASU 2017-04 simplifies the subsequent measurement of goodwill by removing
the second step of the two-step impairment test. The amendment requires an entity to perform its annual or interim goodwill impairment
test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the
amount by which the carrying amount exceeds the reporting units fair value but the loss recognized should not exceed the
total amount of goodwill allocated to that reporting unit. The amendment should be applied on a prospective basis and is effective
for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company does not
expect ASU 2017-04 to have a material effect on the Companys consolidated financial position, results of operations and
cash flows. In May 2017, the FASB issued ASU 2017-09, Compensation
- Stock Compensation: Scope of Modification Accounting. The amendments in this update provide guidance about which changes
to the terms or conditions of a share-based payment award require an entity to apply modification accounting under Topic 718. An
entity should account for effects of a modification unless all of the following are met: (1) the fair value of the modified award
is the same as the fair value of the original award immediately before the original award is modified; (2) the vesting conditions
of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified;
(3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification
of the original award immediately before the original award is modified. The Company adopted this standard on January 1, 2018.
Adoption of the standard did not have an effect on the Companys financial position, results of operations and cash flows. The Company does not believe that there are
any other new accounting pronouncements that have been issued that might have a material impact on its consolidated financial position
or results of operations. |
