| 2. Summary of Significant Accounting Policies | Basic
of Presentation and Consolidation These
consolidated financial statements and related notes include the records of the Company and the Company’s wholly-owned subsidiary,
Nimbo, which is formed in the 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 management’s 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 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 Company’s 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 customer’s
willingness or ability to pay, the Company’s 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 consolidated statements of operations. 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, 2019 and December 31, 2018. Equipment Office
equipment, computer equipment, and software are recorded at cost. Depreciation is provided annually at rates and methods 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. All equipment was fully depreciated as of March 31, 2019. For purposes of computing depreciation, the method
of depreciating equipment is as follows:
Computer
equipment 3 years
straight-line
Office equipment 5 years straight-line
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 on December 31
of each year 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 Company’s 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. Prior
to January 1, 2018, the goodwill impairment test consisted of two steps. In step one, the Company compared the carrying value
of each reporting unit to its fair value. In step two, if the carrying value of a reporting unit exceeded its fair value, the
Company would measure goodwill impairment as the excess of the carrying value of the reporting unit’s goodwill over the
fair value of its goodwill, if any. The fair value of goodwill was derived as the excess of the fair value of the reporting unit
over the fair value of the reporting unit’s identifiable assets and liabilities. Effective
January 1, 2018, the Company elected to early adopt guidance issued by the FASB which simplified the subsequent measurement of
goodwill by eliminating “Step 2” from the goodwill impairment test. Instead, as of January 1, 2018 and all subsequent
periods, goodwill impairment is measured as the amount by which a reporting unit’s carrying value exceeds its fair value. 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 instrument’s 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 cash equivalents, accounts and other receivables, restricted cash, 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 cash equivalents 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 Company’s 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. The Company places its cash and cash equivalents 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 from Contracts with
Customers 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 reasonably assured
at the time of sale, the Company does not recognize revenue until collection occurs. Revenue
relating to the sale of service fees on its vehicle tracking and recovery services is recognized over the life of the contact.
The service renewal fees are offered in terms ranging from 12 to 36 months and are generally payable upon delivery of the vehicle
tracking devices or 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 consolidated balance 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 statement of operations. 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
Company’s 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. During 2018, the Company recorded $ 60,910 of accumulated other comprehensive income
associated with its Canadian Subsidiary that was dissolved in 2017. Stock-based
Compensation We
account for stock-based compensation under the provisions of the Financial Accounting Standards Board (the “FASB”)
Accounting Standards Codification (“ASC”) – 718 Compensation – Stock Compensation. The guidance under
ASC 718 requires companies to estimate the fair value of the stock-based compensation awards on the date of grant for employees
and directors and record expense over the related service periods, which are generally the vesting period of the equity awards.
Awards for consultants are accounted for under ASC 505-50 - Equity Based Payments to Non-Employees. The estimated fair values
of employee and non - 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 recipient’s payroll costs are classified. 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 counterparty’s 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 Company’s
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, 2019 and 2018, the Company has 8,089,673 and 16,534,818 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 period ended March 31, 2018, comprehensive income (loss) consists of foreign
currency translation gains and losses. Recent
Accounting Pronouncements In
May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers 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 adopted this standard on January 1, 2019, which had no impact on the consolidated financial statements. In
January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other 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. |
