| Summary of Significant Accounting Policies | 3. Summary of Significant Accounting Policies Principles of Consolidation The accompanying condensed consolidated
financial statements have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP").
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, which include
Helix TCS, LLC ("Helix TCS"), Security Grade, BioTrackTHC (since June 1, 2018), Engeni US (since August 3, 2018), and
Green Tree International, Inc. (since September 10, 2019). As of July 31, 2020, the date of the consummation of the sale of the
Guarding segment, formerly owned subsidiaries Security Consultants Group, LLC ("Security Consultants"), Boss Security
Solutions, Inc. ("Boss Security"), and Tan Security are presented as part of discontinued operations. These interim
statements should be read in conjunction with the Company's consolidated financial statements for the year ended December
31, 2019. Use of Estimates The preparation of financial statements
in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue
and expense during the reporting period. Changes in estimates and assumptions are reflected in reported results in the period in
which they become known. Use of estimates includes the following: 1) allowance for doubtful accounts, 2) estimated useful lives
of property, equipment and intangible assets, 3) intangibles impairment, 4) valuation of convertible notes payable and 5) revenue
recognition. Actual results could differ from estimates. Discontinued Operations In the third quarter of 2020, the Company
determined that the Security and Guarding segment met the criteria to be classified as a discontinued operation as a result of
the combined sale of the assets of Security Consultants, Boss Security, and Tan Security. These businesses represented the majority
of the Company's Security and Guarding segment. As the combined sale of the Security and
Guarding segment represented a strategic shift that will have a major effect on our operations and financial results, these businesses
were presented in discontinued operations separate from continuing operations for the three and nine months ended September 30,
2020 and 2019, as applicable. Cash Cash consists of checking accounts. The
Company considers all highly liquid investments purchased with a maturity of three months or less at the time of purchase to be
cash equivalents. The Company has no cash equivalents as of September 30, 2020 or December 31, 2019. From time to time, the Company's
cash balances may exceed FDIC-insured limits. As of September 30, 2020, and December 31, 2019, the Company's cash balances
exceeded FDIC-insured limits by approximately $1,078,000 and $120,000, respectively. The Company's cash accounts have been
placed with high credit quality financial institutions. The Company has not experienced, nor does it anticipate, any losses with
respect to such accounts. Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the
invoiced amount, net of an allowance for doubtful accounts. The Company performs ongoing credit evaluations of its customers and
adjusts credit limits based upon payment history and the customer's current credit worthiness, as determined by the review
of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience,
customer specific facts and economic conditions. Management charges balances off against
the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company
determines when receivables are past due, or delinquent based on how recently payments have been received. Outstanding account balances are reviewed
individually for collectability. The allowance for doubtful accounts is the Company's best estimate of the amount of probable
credit losses in the Company's existing accounts receivable. Allowance for doubtful accounts was $362,631 and $273,138 at
September 30, 2020 and December 31, 2019, respectively. Long-Lived Assets, Including Definite Lived Intangible
Assets Long-lived assets, other than goodwill
and other indefinite-lived intangibles, are evaluated for impairment whenever events or changes in circumstances indicate that
the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows derived from such
assets. Definite-lived intangible assets primarily consist of non-compete agreements and customer relationships. For long-lived
assets used in operations, impairment losses are only recorded if the asset's carrying amount is not recoverable through
its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between
the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value. Goodwill Goodwill, which
represents the excess of purchase price over the fair value of net assets acquired, is carried at cost. Goodwill is not amortized;
rather, it is subject to a periodic assessment for impairment by applying a fair value-based test. Helix reviews goodwill for possible
impairment annually during the fourth quarter, or whenever events or circumstances indicate that the carrying amount may not be
recoverable. The impairment
model prescribes a two-step method for determining goodwill impairment. However, an entity is permitted to first assess
qualitative factors to determine whether the two-step goodwill impairment test is necessary. The qualitative factors
considered by Helix may include, but are not limited to, general economic conditions, Helix's outlook, market performance
of Helix's industry and recent and forecasted financial performance. Further testing is only required if the entity determines,
based on the qualitative assessment, that it is more likely than not that a reporting unit's fair value is less than its
carrying amount. Otherwise, no further impairment testing is required. In the first step, Helix determines the fair value of its
reporting unit using a discounted cash flow analysis. If the net book value of the reporting unit exceeds its fair value, Helix
then performs the second step of the impairment test, which requires allocation of the reporting unit's fair value to all
of its assets and liabilities using the acquisition method prescribed under authoritative guidance for business combinations with
any residual fair value being allocated to goodwill. An impairment charge is recognized when the implied fair value of Helix's
goodwill is less than its carrying amount. Assumptions and
estimates used in the evaluation of impairment may affect the carrying value of long-lived assets, which could result in impairment
charges in future periods. Such assumptions include projections of future cash flows and the current fair value of the asset Accounting for Acquisitions In accordance with the guidance for business
combinations, the Company determines whether a transaction or other event is a business combination, which requires that the assets
acquired, and liabilities assumed constitute a business. Each business combination is then accounted for by applying the acquisition
method. If the assets acquired are not a business, the Company accounts for the transaction or other event as an asset acquisition.
Under both methods, the Company recognizes the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest
in the acquired entity. In addition, for transactions that are business combinations, the Company evaluates the existence of goodwill
or a gain from a bargain purchase. The Company capitalizes acquisition-related costs and fees associated with asset acquisitions
and immediately expenses acquisition-related costs and fees associated with business combinations. The Company accounts for its business combinations
under the provisions of Accounting Standards Codification ("ASC") Topic 805-10, Business Combinations Business Combinations The Company accounts for its business
combinations under the provisions of Accounting Standards Codification ("ASC") Topic 805-10, Business Combinations
("ASC 805-10"), which requires that the purchase method of accounting be used for all business combinations. Assets
acquired and liabilities assumed, including non-controlling interests, are recorded at the date of acquisition at their respective
fair values. ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized
and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the tangible net assets
and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business
combinations and are expensed as incurred. If the business combination provides for contingent consideration, the Company records
the contingent consideration at fair value at the acquisition date and any changes in fair value after the acquisition date are
accounted for as measurement-period adjustments. Changes in fair value of contingent consideration resulting from events after
the acquisition date, such as earn-outs, are recognized as follows: 1) if the contingent consideration is classified as equity,
the contingent consideration is not re-measured and its subsequent settlement is accounted for within equity, or 2) if the contingent
consideration is classified as a liability, the changes in fair value are recognized in earnings. The estimated fair value of net assets
acquired, including the allocation of the fair value to identifiable assets and liabilities, was determined using established valuation
techniques. The estimated fair value of the net assets acquired was determined using the income approach to valuation based on
the discounted cash flow method. Under this method, expected future cash flows of the business on a stand-alone basis are discounted
back to a present value. The estimated fair value of identifiable intangible assets, consisting of software and trade name acquired
were determined using the relief from royalty method. The most significant assumptions under
the relief from royalty method used to value software and trade names include: estimated remaining useful life, expected revenue,
royalty rate, tax rate, discount rate and tax amortization benefit. The discounted cash flow method used to value non-compete agreements
includes assumptions such as: expected revenue, term of the non-compete agreements, probability and ability to compete, operating
margin, tax rate and discount rate. Management has developed these assumptions on the basis of historical knowledge of the business
and projected financial information of the Company. These assumptions may vary based on future events, perceptions of different
market participants and other factors outside the control of management, and such variations may be significant to estimated values. Revenue Recognition Under FASB Topic 606, Revenue from
Contacts with Customers The security services revenue is generated
from performing armed and unarmed guarding which is contracted for on an hourly basis. Revenues associated with these contracted
services are recognized under time-based arrangements as services are provided. Additionally, the Company provides transportation
security services, which are generally contracted for on a per-run basis and sometimes additional fees and surcharges are also
billed to the client depending on the length of the run. Revenues associated with these services are recognized as the transportation
service is provided. The guarding and transportation security business is now a discontinued operation. The Company still provides
monitoring services. The Company generates revenue from developing
and licensing seed to sale cannabis compliance software to both private-sector and public-sector (government agencies) businesses
that are involved in cannabis related operations. The Company also generates revenue from on-going training, support and software
customization services. Occasionally, the Company will enter into
systems installation arrangements. Installation jobs are estimated based on the cost of equipment to be installed, the number of
hours expected to be incurred to complete the job and other ancillary costs. Revenue associated with these services are recognized
over the arrangement period. Lastly, the Company generates monthly recurring
revenues from Cannalytics, its business intelligence and data tool for commercial customers. Revenue is recognized monthly. Segment Information Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 280, Segment Reporting, establishes standards for reporting information
about operating segments. Operating segments are defined as components of an enterprise about which separate financial information
is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate
resources and in assessing performance. The Company's chief operating decision-making group is composed of the Chief Executive
Officer and the Chief Financial Officer, which reviews the financial performance and the results of operations of the segments
prepared in accordance with GAAP when making decisions about allocating resources and assessing performance of the Company. Asset information by operating segment
is not presented since the chief operating decision maker does not review this information by segment. The reporting segments
follow the same accounting policies used in the preparation of the Company's consolidated financial statements. Expenses Cost of Revenue The cost of revenues is the total cost incurred
to obtain a sale and the cost of the goods or services sold. Cost of revenues primarily consisted of hourly compensation
for security personnel and employees involved in the creation and development of licensing software. Operating Expenses Operating expenses encompass selling general
and administrative expenses, salaries and wages, professional and legal fees and depreciation and amortization. Selling, general
and administrative expenses consist primarily of rent/moving expenses, advertising and travel expenses. Salaries and wages is composed
of non-revenue generating employees. Professional services are principally comprised of outside legal, audit, information technology
consulting, marketing and outsourcing services as well as the costs related to being a publicly traded company. Other Income Other income consisted of a gain on the
change in fair value of convertible notes, gain on the change in the fair value of warrant liability, loss on the change in fair
value of convertible notes – related party, loss on the change in fair value of contingent consideration, loss on issuance
of warrants and interest expense. Property and Equipment Property and equipment are stated at cost
and depreciated on a straight-line basis over their estimated useful lives. Useful lives are 3 years for vehicles and 5 years for
furniture and equipment. Maintenance and repairs are expensed as incurred and major improvements are capitalized. When assets are
sold, or retired, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is
included in loss from operations. Contingencies Occasionally, the Company may be involved
in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability
when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these
estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company's consolidated
financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex
judgments about future events and can rely heavily on estimates and assumptions. Advertising Advertising costs are expensed as incurred
and included in selling, general and administrative expenses and amounted to $2,174 and $104,785 for the three months ended September
30, 2020 and 2019, respectively, and $9,581 and $350,840 for the nine months ended September 30, 2020 and 2019, respectively. Foreign Currency The local currency is the functional currency
for one entity's operations outside the United States. Assets and liabilities of these operations are translated to U.S.
dollars at the exchange rate in effect at the end of each period. Income statement accounts are translated at the average exchange
rate prevailing during the period. Translation adjustments arising from the use of differing exchange rates from period to period
are included as a component of other comprehensive loss within shareholders' equity. Gains and losses from foreign currency
transactions are included in net loss for the period. Income Taxes The Company accounts for income taxes under
the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities
are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating loss for financial-reporting
and tax-reporting purposes. Accordingly, for Federal and state income tax purposes, the benefit for income taxes has been offset
entirely by a valuation allowance against the related federal and state deferred tax asset for the nine months ended September
30, 2020 and 2019. Comprehensive Loss Comprehensive loss consists of consolidated
net loss and foreign currency translation adjustments. Foreign currency translation adjustments included in comprehensive loss
were not tax-effected as investments in international affiliates are deemed to be permanent. Distinguishing Liabilities from Equity The Company relies on the guidance provided
by ASC Topic 480, Distinguishing Liabilities from Equity Once the Company determines that a financial
instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented
between the liability section and the equity section of the balance sheet ("temporary equity"). The Company will determine
temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the
option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity. Initial Measurement The Company records its financial instruments
classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received. Subsequent Measurement – Financial
instruments classified as liabilities The Company records the fair value of its
financial instruments classified as liabilities at each subsequent measurement date. The changes in fair value of its financial
instruments classified as liabilities are recorded as other expense/income. Share-based Compensation The Company accounts for stock-based compensation
to employees in conformity with the provisions of ASC Topic 718, Stock Based Compensation The Company accounts for equity instruments
issued to non-employees in accordance with the provisions of ASC Topic 718, based upon the fair-value of the underlying instrument.
The equity instruments are valued using the Black-Scholes valuation model. The measurement of stock-based compensation is subject
to periodic adjustments as the underlying equity instruments vest and is recognized as an expense over the period which services
are received. The Company calculates the fair value of
option grants utilizing the Black-Scholes pricing model and estimates the fair value of the stock based upon the estimated fair
value of the common stock. The amount of stock-based compensation recognized during a period is based on the value of the portion
of the awards that are ultimately expected to vest. The resulting stock-based compensation
expense for both employee and non-employee awards is generally recognized on a straight- line basis over the requisite service
period of the award. Fair Value of Financial Instruments ASC Topic 820, Fair Value Measurements
and Disclosures ASC Topic 820 defines fair value as the
price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
at the measurement date. ASC Topic 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions
developed based on market data obtained from independent sources (observable inputs) and (2) an entity's own assumptions
about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three
broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC Topic
820 are described as follows:
● Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.
● Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
● Level 3 – Inputs that are unobservable for the asset or liability. Certain assets and liabilities of the Company
are required to be recorded at fair value either on a recurring or non-recurring basis. Fair value is determined based on the price
that would be received for an asset or paid to transfer a liability in an orderly transaction based on market participants. The
following section describes the valuation methodologies that the Company used to measure, for disclosure purposes, its financial
instruments at fair value. Convertible notes payable The fair value of the Company's convertible
notes payable, approximated the carrying value as of September 30, 2020 and December 31, 2019. Factors that the Company considered
when estimating the fair value of its debt included market conditions and the term of the debt. The level of the debt would be
considered as Level 2. Warrant liabilities The fair value of the Company's
warrant liabilities approximated the carrying value as of September 30, 2020 and December 31, 2019. Factors that the Company considered
when estimating the fair value of its warrants included market conditions and the term of the warrants. The level of the warrant
liabilities would be considered as Level 3. Additional Disclosures Regarding Fair
Value Measurements The carrying value of cash, accounts receivable,
prepaid expenses and other current assets, deposits and other assets, accounts payable and accrued liabilities, advances from related
parties and obligation pursuant to acquisition approximate their fair value due to the short-term maturity of those items. Earnings (Loss) per Share The Company follows ASC 260, Earnings
Per Share For the three and nine months ended September
30, 2020 and 2019, potential common shares includable in the computation of fully-diluted per share results are not presented in
the condensed consolidated financial statements as their effect would be anti-dilutive. Earnings per share for the three and nine
months ended September 30, 2020 and 2019 were calculated as follows:
For the Three Months
Ended For the Nine Months
Ended
2020 2019 2020 2019
Net loss attributable to common shareholders $ (42,126,732 ) $ (1,373,572 ) $ (48,269,906 ) $ (7,399,308 )
Loss from continuing operations:
Basic $ (0.36 ) $ (0.01 ) $ (0.46 ) $ (0.09 )
Diluted $ (0.36 ) $ (0.01 ) $ (0.46 ) $ (0.09 )
Income (loss) from discontinued operations:
Basic $ 0.00 $ (0.00 ) $ 0.00 $ (0.00 )
Diluted $ 0.00 $ (0.00 ) $ 0.00 $ (0.00 )
Loss attributable to common shareholders:
Basic $ (0.36 ) $ (0.02 ) $ (0.46 ) $ (0.10 )
Diluted $ (0.36 ) $ (0.02 ) $ (0.46 ) $ (0.10 )
Weighted average common shares outstanding:
Basic 116,068,876 79,295,278 105,402,831 76,038,782
Diluted 116,068,876 79,295,278 105,402,831 76,038,782 The anti-dilutive shares of common stock
outstanding for the three and nine months ended September 30, 2020 and 2019 were as follows:
For the Three Months
Ended For the Nine Months
Ended
2020 2019 2020 2019
Potentially dilutive securities:
Convertible notes payable 15,520,651 3,649,021 15,520,651 3,649,021
Convertible Preferred A Stock 1,000,000 1,000,000 1,000,000 1,000,000
Convertible Preferred B Stock 13,784,201 13,784,201 13,784,201 13,784,201
Warrants 4,985,998 4,975,558 4,985,998 4,975,558
Stock options 10,944,266 9,787,381 10,944,266 9,787,381 Reclassifications Certain reclassifications have been made
to the prior period financial statements to conform to the current period financial statement presentation. These reclassifications
had no effect on net earnings or cash flows as previously reported. Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-.02,
Leases (Topic 842) The Company adopted the new standard on
January 1, 2019 and used the modified retrospective approach with the effective date as the date of initial application. Consequently,
prior period balances and disclosures have not been restated. The Company elected certain practical expedients, which among other
things, allowed us to carry forward prior conclusions about lease identification and classification. Adoption of the standard resulted in the
balance sheet recognition of additional lease assets and lease liabilities of approximately $1,500,000. The new standard also
provides practical expedients for an entity's ongoing accounting. The Company currently has elected the short-term lease
recognition exemption for all leases that qualify. This means, for those leases that qualify, the Company will not recognize ROU
assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases
of those assets in separate lease and non-lease components for all our leases. For additional information regarding the Company's
leases, see Note 18 in the notes to condensed consolidated financial statements. In July 2017, the FASB issued ASU 2017-11, Earnings Per
Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815): I. Accounting for
Certain Financial Instruments with Down Round Features; II. Replacement of the Indefinite Deferral for Mandatorily Redeemable
Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception In February 2018, the FASB issued ASU 2018-02,
Income Statement – Reporting Comprehensive Income (Topic 220); Reclassification of Certain Tax Effects from Accumulated
Other Comprehensive Income In June 2018, the FASB issued ASU 2018-07,
Compensation-Stock Compensation (ASC 718): Improvements to Nonemployee Share-Based Payment Accounting In August 2018, the FASB issued ASU 2018-13,
Fair Value Measurement (ASC 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement Management has evaluated other recently
issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on the Company's
consolidated financial statements and related disclosures. |
