Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2020 | |
Cover [Abstract] | |
Entity Registrant Name | Grom Social Enterprises, Inc. |
Entity Central Index Key | 0001662574 |
Document Type | S-1 |
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 ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Current Assets | |||
Cash and cash equivalents | $ 392,973 | $ 506,219 | $ 633,593 |
Accounts receivable, net | 446,477 | 545,662 | 1,123,493 |
Inventory, net | 30,340 | 29,562 | 9,018 |
Prepaid expenses and other current assets | 314,845 | 329,128 | 449,840 |
Total current assets | 1,184,635 | 1,410,571 | 2,215,944 |
Operating lease right of use assets | 670,621 | 874,159 | 0 |
Property and equipment, net | 1,090,235 | 852,145 | 1,036,313 |
Goodwill | 8,853,261 | 8,853,261 | 8,853,261 |
Intangible assets, net | 5,663,068 | 5,953,255 | 6,340,171 |
Deferred tax assets, net - noncurrent | 266,053 | 238,581 | 249,833 |
Other assets | 73,167 | 79,065 | 114,601 |
Total assets | 17,801,040 | 18,261,037 | 18,810,123 |
Current Liabilities | |||
Accounts payable | 1,350,911 | 808,520 | 682,285 |
Accrued liabilities | 1,736,185 | 1,651,482 | 1,433,037 |
Advanced payments and deferred revenues | 742,258 | 627,082 | 1,120,228 |
Convertible notes, net current | 1,908,168 | 4,828,656 | 676,223 |
Derivative liabilities | 68,753 | 77,584 | 0 |
Senior secured promissory notes, net - current | 0 | 3,828,818 | |
Related party payables | 213,233 | 462,137 | 1,181,645 |
Income taxes payable | 0 | 41,097 | |
Lease liabilities | 294,058 | 263,252 | 0 |
Total current liabilities | 6,313,566 | 8,718,713 | 8,963,333 |
Convertible debentures, net of loan discounts | 1,274,743 | 505,000 | 2,410,614 |
Lease liabilities - noncurrent | 404,853 | 633,098 | 0 |
Contingent purchase consideration | 0 | 429,000 | |
Other noncurrent liabilities | 189,758 | 227,229 | 224,797 |
Total liabilities | 8,436,832 | 10,084,040 | 12,027,744 |
Commitments and contingencies | |||
Stockholders' Equity | |||
Preferred stock | 5,310 | 925 | 0 |
Common stock | 186,445 | 167,383 | 138,554 |
Additional paid-in capital | 63,715,899 | 58,154,730 | 52,254,286 |
Accumulated deficit | (54,569,443) | (50,048,481) | (45,457,207) |
Accumulated other comprehensive loss | 25,997 | (97,560) | (153,254) |
Total stockholders' equity | 9,364,208 | 8,176,997 | 6,782,379 |
Total liabilities and equity | $ 17,801,040 | $ 18,261,037 | $ 18,810,123 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2020 | Aug. 04, 2020 | Dec. 31, 2019 | Feb. 22, 2019 | Dec. 31, 2018 |
Preferred stock, par value | $ 0.001 | $ 0.001 | |||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | |||
Preferred stock, shares issued | 925,000 | 0 | |||
Preferred stock, shares outstanding | 925,000 | 0 | |||
Common stock, par value | $ 0.001 | $ .001 | $ .001 | ||
Common stock, shares authorized | 500,000,000 | 200,000,000 | 200,000,000 | ||
Common stock, shares issued | 186,444,137 | 167,382,807 | 138,553,655 | ||
Common stock, shares outstanding | 186,444,137 | 167,382,807 | 138,553,655 | ||
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 | 8,000,000 | 10,000,000 | 8,000,000 | ||
Preferred stock, shares issued | 5,309,884 | 0 | |||
Preferred stock, shares outstanding | 5,309,884 | 0 |
Consolidated Statements of Oper
Consolidated Statements of Operations and Comprehensive Loss - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Income Statement [Abstract] | ||||||
Sales | $ 1,439,155 | $ 2,233,747 | $ 4,478,373 | $ 6,275,688 | $ 8,296,997 | $ 8,644,383 |
Cost of good sold | 573,455 | 1,028,892 | 1,846,728 | 2,893,766 | 4,610,961 | 4,378,658 |
Gross profit | 865,700 | 1,204,855 | 2,631,645 | 3,381,922 | 3,686,036 | 4,265,725 |
Operating expenses: | ||||||
Depreciation and amortization | 234,461 | 215,972 | 623,660 | 664,771 | 435,649 | 473,360 |
Selling and marketing | 35,420 | 19,407 | 91,697 | 80,440 | 116,291 | 216,548 |
General and administrative | 1,009,162 | 1,227,074 | 3,552,390 | 3,971,464 | 5,140,100 | 5,559,389 |
Professional fees | 311,813 | 180,911 | 419,291 | 814,573 | 908,093 | 1,522,881 |
Stock-based compensation | 0 | 16,200 | 62,600 | 48,600 | 64,800 | 369,318 |
Total operating expenses | 1,590,856 | 1,659,564 | 4,749,638 | 5,579,848 | 6,664,933 | 8,141,496 |
Income (loss) from operations | (725,156) | (454,709) | (2,117,993) | (2,197,926) | (2,978,897) | (3,875,771) |
Other income (expense) | ||||||
Interest income (expense), net | (330,006) | (391,802) | (1,220,148) | (1,081,584) | (1,705,123) | (1,021,801) |
Derivative expense | 0 | (42,140) | 0 | (42,140) | (42,140) | 0 |
Gain (loss) on settlement of debt | (1,191,089) | 0 | (1,191,089) | (363,468) | (363,468) | 0 |
Unrealized gain (loss) on change in fair value of derivative liabilities | 22,764 | (13,473) | 8,831 | (13,473) | 7,826 | 0 |
Other gains (losses) | 2,467 | 22,816 | (563) | 62,390 | 525,903 | 35,136 |
Total other income (expense) | (1,495,864) | (424,599) | (2,402,969) | (1,438,275) | (1,577,002) | (986,665) |
Income (loss) before income taxes | (2,221,020) | (879,308) | (4,520,962) | (3,636,201) | (4,555,899) | (4,862,436) |
Provision for income taxes (benefit) | 0 | 0 | 0 | 0 | 35,375 | 14,944 |
Net income (loss) | (2,221,020) | (879,308) | (4,520,962) | (3,636,201) | (4,591,274) | (4,877,380) |
Convertible preferred stock beneficial conversion feature and other discounts accreted as a deemed dividend | (277,500) | 0 | (277,500) | (740,899) | (740,899) | 0 |
Net loss attributable to common stockholders | $ (2,498,520) | $ (879,308) | $ (4,798,462) | $ (4,377,100) | $ (5,332,173) | $ (4,877,380) |
Basic and diluted earnings (loss) per common share | $ (0.01) | $ (0.01) | $ (0.03) | $ (0.03) | $ (0.04) | $ (0.04) |
Weighted average number of shares outstanding: Basic and Diluted | 177,287,469 | 144,780,176 | 176,897,958 | 143,739,573 | 147,441,651 | 128,081,259 |
Comprehensive loss: | ||||||
Net income (loss) | $ (2,221,020) | $ (879,308) | $ (4,520,962) | $ (3,636,201) | $ (4,591,274) | $ (4,877,380) |
Foreign currency translation adjustment | 60,721 | 4,669 | 123,557 | 25,739 | 55,694 | (75,910) |
Comprehensive income (loss) | $ (2,160,299) | $ (874,639) | $ (4,397,405) | $ (3,610,462) | $ (4,535,580) | $ (4,953,290) |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Preferred Stock | Common Stock | Additional Paid-In Capital | Retained Earnings / Accumulated Deficit | Accumulated Other Comprehensive Income | Total |
Beginning balance, shares at Dec. 31, 2017 | 124,273,548 | |||||
Beginning balance, value at Dec. 31, 2017 | $ 124,274 | $ 47,901,532 | $ (40,843,568) | $ (77,344) | $ 7,104,894 | |
Net income (loss) | (4,877,380) | (4,877,380) | ||||
Change in foreign currency translation | (75,910) | (75,910) | ||||
Adjustment due to the adoption of ASC 606 | 263,741 | 263,741 | ||||
Issuance of common stock in connection with sales made under private offerings, shares | 3,854,869 | |||||
Issuance of common stock in connection with sales made under private offerings, value | $ 3,855 | 604,863 | 608,718 | |||
Issuance of common stock in connection with the exercise of common stock purchase warrants, shares | 256,455 | |||||
Issuance of common stock in connection with the exercise of common stock purchase warrants, value | $ 256 | 61,244 | 61,500 | |||
Issuance of common stock as compensation to employees, officers and/or directors, shares | 1,200,321 | |||||
Issuance of common stock as compensation to employees, officers and/or directors, value | $ 1,200 | 457,618 | 458,818 | |||
Issuance of common stock in exchange for consulting, professional and other services, shares | 2,385,505 | |||||
Issuance of common stock in exchange for consulting, professional and other services, value | $ 2,386 | 822,784 | 825,170 | |||
Issuance of common stock in lieu of cash for accounts payable, loans payable and other accrued obligations, shares | 3,995,304 | |||||
Issuance of common stock in lieu of cash for accounts payable, loans payable and other accrued obligations, value | $ 3,995 | 1,317,381 | 1,321,376 | |||
Issuance of common stock in connection with the issuance of convertible note(s), shares | 1,432,653 | |||||
Issuance of common stock in connection with the issuance of convertible note(s), value | $ 1,433 | 522,168 | 523,601 | |||
Issuance of common stock in connection with the amendment of terms of promissory note(s), shares | 805,000 | |||||
Issuance of common stock in connection with the amendment of terms of promissory note(s), value | $ 805 | 481,445 | 482,250 | |||
Issuance of common stock in connection with the acquisition of a business, shares | 150,000 | |||||
Issuance of common stock in connection with the acquisition of a business, value | $ 150 | 52,350 | 52,500 | |||
Conversion of convertible debentures and accrued interest into common stock, shares | 200,000 | |||||
Conversion of convertible debentures and accrued interest into common stock, value | $ 200 | 29,800 | 30,000 | |||
Recognition of beneficial conversion features related to convertible notes | 801 | 801 | ||||
Stock-based compensation expense related to stock options | 2,300 | 2,300 | ||||
Ending balance, shares at Dec. 31, 2018 | 138,553,655 | |||||
Ending balance, value at Dec. 31, 2018 | $ 138,554 | 52,254,286 | (45,457,207) | (153,254) | 6,782,379 | |
Net income (loss) | (3,636,201) | (3,636,201) | ||||
Change in foreign currency translation | 25,739 | 25,739 | ||||
Issuance of Series A preferred stock in connection with sales made under private offerings, shares | ||||||
Issuance of Series A preferred stock in connection with sales made under private offerings, value | 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 exchange for consulting, professional and other services, shares | 2,664,058 | |||||
Issuance of common stock in exchange for consulting, professional and other services, value | $ 2,664 | 604,132 | 606,796 | |||
Issuance of common stock in lieu of cash for accounts payable, loans payable and other accrued obligations, shares | 564,833 | |||||
Issuance of common stock in connection with the amendment of terms of promissory note(s), shares | 800,000 | |||||
Issuance of common stock in connection with the amendment of terms of promissory note(s), value | $ 800 | 219,200 | 220,000 | |||
Recognition of beneficial conversion features related to convertible notes | 51,730 | 51,730 | ||||
Ending balance, shares at Sep. 30, 2019 | 152,317,806 | |||||
Ending balance, value at Sep. 30, 2019 | $ 152,318 | 54,959,981 | (49,093,408) | (127,515) | 5,892,301 | |
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 income (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 note(s), shares | 160,260 | |||||
Issuance of common stock in connection with the issuance of convertible note(s), value | $ 160 | 32,258 | 32,418 | |||
Issuance of common stock in connection with the amendment of terms of promissory note(s), shares | 800,000 | |||||
Issuance of common stock in connection with the amendment of terms of promissory note(s), value | $ 800 | 219,200 | 220,000 | |||
Conversion of convertible debentures and accrued interest into common stock, shares | 12,208,686 | |||||
Conversion of convertible debentures 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 income (loss) | (879,308) | (879,308) | ||||
Change in foreign currency translation | 4,669 | 4,669 | ||||
Issuance of common stock in exchange for consulting, professional and other services, shares | 787,276 | |||||
Issuance of common stock in exchange for consulting, professional and other services, value | $ 787 | 147,012 | 147,799 | |||
Issuance of common stock in lieu of cash for accounts payable, loans payable and other accrued obligations, shares | 465,113 | |||||
Recognition of beneficial conversion features related to convertible notes | 51,730 | 51,730 | ||||
Ending balance, shares at Sep. 30, 2019 | 152,317,806 | |||||
Ending balance, value at Sep. 30, 2019 | $ 152,318 | 54,959,981 | (49,093,408) | (127,515) | 5,892,301 | |
Beginning balance, shares at Dec. 31, 2019 | 925,000 | 167,382,807 | ||||
Beginning balance, value at Dec. 31, 2019 | $ 925 | $ 167,383 | 58,154,730 | (50,048,481) | (97,560) | 8,176,997 |
Net income (loss) | (4,520,962) | (4,520,962) | ||||
Change in foreign currency translation | 123,557 | 123,557 | ||||
Issuance of common stock in exchange for consulting, professional and other services, shares | 6,113,068 | |||||
Issuance of common stock in exchange for consulting, professional and other services, value | $ 6,113 | 549,327 | 555,440 | |||
Conversion of convertible debentures and accrued interest into common stock, shares | 1,158,585 | |||||
Conversion of convertible debentures and accrued interest into common stock, value | $ 1,159 | 54,890 | 56,049 | |||
Recognition of beneficial conversion features related to convertible notes | 44,129 | 44,129 | ||||
Ending balance, shares at Sep. 30, 2020 | 186,444,137 | |||||
Ending balance, value at Sep. 30, 2020 | $ 186,445 | 63,715,899 | (54,569,443) | 25,997 | 9,364,208 | |
Net income (loss) | (2,221,020) | (2,221,020) | ||||
Change in foreign currency translation | 60,721 | 60,721 | ||||
Issuance of common stock in exchange for consulting, professional and other services, shares | 1,709,501 | |||||
Issuance of common stock in exchange for consulting, professional and other services, value | $ 1,710 | 171,525 | 173,235 | |||
Conversion of convertible debentures and accrued interest into common stock, shares | 650,000 | |||||
Conversion of convertible debentures and accrued interest into common stock, value | $ 650 | 25,399 | 26,049 | |||
Ending balance, shares at Sep. 30, 2020 | 186,444,137 | |||||
Ending balance, value at Sep. 30, 2020 | $ 186,445 | $ 63,715,899 | $ (54,569,443) | $ 25,997 | $ 9,364,208 |
Consolidated Statements of Ch_2
Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Sept 2020) - USD ($) | Series A Preferred Stock [Member] | Series B Preferred Stock [Member] | Common Stock | Additional Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income | Total |
Beginning balance, shares at Dec. 31, 2017 | 124,273,548 | ||||||
Beginning balance, value at Dec. 31, 2017 | $ 124,274 | $ 47,901,532 | $ (40,843,568) | $ (77,344) | $ 7,104,894 | ||
Net income (loss) | (4,877,380) | (4,877,380) | |||||
Change in foreign currency translation | (75,910) | (75,910) | |||||
Issuance of common stock in exchange for consulting, professional and other services, shares | 2,385,505 | ||||||
Issuance of common stock in exchange for consulting, professional and other services, value | $ 2,386 | 822,784 | 825,170 | ||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, shares | 3,995,304 | ||||||
Conversion of convertible debentures and accrued interest into common stock, shares | 200,000 | ||||||
Conversion of convertible debentures and accrued interest into common stock, value | $ 200 | 29,800 | 30,000 | ||||
Recognition of beneficial conversion features related to convertible debentures | 801 | 801 | |||||
Issuance of common stock in connection with the amendment of terms of promissory note(s), shares | 805,000 | ||||||
Issuance of common stock in connection with the amendment of terms of promissory note(s), value | $ 805 | 481,445 | 482,250 | ||||
Ending balance, shares at Dec. 31, 2018 | 138,553,655 | ||||||
Ending balance, value at Dec. 31, 2018 | $ 138,554 | 52,254,286 | (45,457,207) | (153,254) | 6,782,379 | ||
Net income (loss) | (3,636,201) | (3,636,201) | |||||
Change in foreign currency translation | 25,739 | 25,739 | |||||
Issuance of Series A preferred stock with common stock in connection with sales made under private offerings, shares | 925,000 | ||||||
Issuance of Series A preferred stock with common 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 | 4,950,000 | ||||||
Issuance of common stock in connection with sales made under private offerings, value | $ 4,950 | 490,050 | 495,000 | ||||
Issuance of common stock in exchange for consulting, professional and other services, shares | 2,664,058 | ||||||
Issuance of common stock in exchange for consulting, professional and other services, value | $ 2,664 | 604,132 | 606,796 | ||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, shares | 564,833 | ||||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, amount | $ 565 | 388,875 | 389,440 | ||||
Issuance of common stock in connection with the issuance of convertible debenture(s), shares | 160,260 | ||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), value | $ 160 | 32,258 | 32,418 | ||||
Recognition of beneficial conversion features related to convertible debentures | 51,730 | 51,730 | |||||
Issuance of common stock in connection with the amendment of terms of promissory note(s), shares | 800,000 | ||||||
Issuance of common stock in connection with the amendment of terms of promissory note(s), value | $ 800 | 219,200 | 220,000 | ||||
Ending balance, shares at Sep. 30, 2019 | 925,000 | 152,317,806 | |||||
Ending balance, value at Sep. 30, 2019 | $ 925 | $ 152,318 | 54,959,981 | (49,093,408) | (127,515) | 5,892,301 | |
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 income (loss) | (4,591,274) | (4,591,274) | |||||
Change in foreign currency translation | 55,694 | 55,694 | |||||
Issuance of Series A preferred stock with common stock in connection with sales made under private offerings, shares | |||||||
Issuance of Series A preferred stock with common stock in connection with sales made under private offerings, value | 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 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 loans payable and other accrued obligations, shares | 1,707,690 | ||||||
Conversion of convertible debentures and accrued interest into common stock, shares | 12,208,686 | ||||||
Conversion of convertible debentures and accrued interest into common stock, value | $ 12,209 | 2,775,990 | 2,788,199 | ||||
Recognition of beneficial conversion features related to convertible debentures | 51,730 | 51,730 | |||||
Issuance of common stock in connection with the amendment of terms of promissory note(s), shares | 800,000 | ||||||
Issuance of common stock in connection with the amendment of terms of promissory note(s), value | $ 800 | 219,200 | 220,000 | ||||
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 | |
Beginning balance, shares at Jun. 30, 2019 | 925,000 | ||||||
Beginning balance, value at Jun. 30, 2019 | $ 925 | ||||||
Net income (loss) | (879,308) | (879,308) | |||||
Change in foreign currency translation | 4,669 | 4,669 | |||||
Issuance of common stock in connection with sales made under private offerings, shares | 3,716,667 | ||||||
Issuance of common stock in connection with sales made under private offerings, value | $ 3,717 | 306,283 | 310,000 | ||||
Issuance of common stock in exchange for consulting, professional and other services, shares | 787,276 | ||||||
Issuance of common stock in exchange for consulting, professional and other services, value | $ 787 | 147,012 | 147,799 | ||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, shares | 465,113 | ||||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, amount | $ 465 | 362,035 | 362,500 | ||||
Issuance of common stock in connection with the issuance of convertible debenture(s), shares | 80,130 | ||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), value | $ 80 | 13,406 | 13,486 | ||||
Recognition of beneficial conversion features related to convertible debentures | 51,730 | 51,730 | |||||
Ending balance, shares at Sep. 30, 2019 | 925,000 | 152,317,806 | |||||
Ending balance, value at Sep. 30, 2019 | $ 925 | $ 152,318 | 54,959,981 | (49,093,408) | (127,515) | 5,892,301 | |
Beginning balance, shares at Dec. 31, 2019 | 925,000 | 167,382,807 | |||||
Beginning balance, value at Dec. 31, 2019 | $ 925 | $ 167,383 | 58,154,730 | (50,048,481) | (97,560) | 8,176,997 | |
Net income (loss) | (4,520,962) | (4,520,962) | |||||
Change in foreign currency translation | 123,557 | 123,557 | |||||
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, amount | $ (925) | $ 1,202 | (277) | ||||
Exchange of convertible notes and accrued interest for Series B preferred stock, shares | 3,623,884 | ||||||
Exchange of convertible notes and accrued interest for Series B preferred stock, amount | $ 3,624 | 3,620,260 | 3,623,884 | ||||
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, amount | $ 484 | 483,016 | 483,500 | ||||
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, amount | $ 420 | 35,180 | 35,600 | ||||
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 common stock in exchange for consulting, professional and other services, shares | 6,113,068 | ||||||
Issuance of common stock in exchange for consulting, professional and other services, value | $ 6,113 | 549,327 | 555,440 | ||||
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, amount | $ 500 | 49,500 | 50,000 | ||||
Issuance of common stock in connection with the issuance of convertible debenture(s), shares | 10,869,677 | ||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), value | $ 10,870 | 725,144 | 736,014 | ||||
Conversion of convertible debentures and accrued interest into common stock, shares | 1,158,585 | ||||||
Conversion of convertible debentures and accrued interest into common stock, value | $ 1,159 | 54,890 | 56,049 | ||||
Recognition of beneficial conversion features related to convertible debentures | 44,129 | 44,129 | |||||
Ending balance, shares at Sep. 30, 2020 | 5,309,884 | 186,444,137 | |||||
Ending balance, value at Sep. 30, 2020 | $ 5,310 | $ 186,445 | 63,715,899 | (54,569,443) | 25,997 | 9,364,208 | |
Beginning balance, shares at Jun. 30, 2020 | 925,000 | 250,000 | |||||
Beginning balance, value at Jun. 30, 2020 | $ 925 | $ 250 | |||||
Net income (loss) | (2,221,020) | (2,221,020) | |||||
Change in foreign currency translation | 60,721 | 60,721 | |||||
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, amount | $ (925) | $ 1,202 | (277) | ||||
Exchange of convertible notes and accrued interest for Series B preferred stock, shares | 3,623,884 | ||||||
Exchange of convertible notes and accrued interest for Series B preferred stock, amount | $ 3,624 | 3,620,260 | 3,623,884 | ||||
Issuance of Series B preferred stock with common stock in connection with sales made under private offerings, shares | 233,500 | ||||||
Issuance of Series B preferred stock with common stock in connection with sales made under private offerings, amount | $ 234 | 233,266 | 233,500 | ||||
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 common stock in exchange for consulting, professional and other services, shares | 1,709,501 | ||||||
Issuance of common stock in exchange for consulting, professional and other services, value | $ 1,710 | 171,525 | 173,235 | ||||
Conversion of convertible debentures and accrued interest into common stock, shares | 650,000 | ||||||
Conversion of convertible debentures and accrued interest into common stock, value | $ 650 | 25,399 | 26,049 | ||||
Ending balance, shares at Sep. 30, 2020 | 5,309,884 | 186,444,137 | |||||
Ending balance, value at Sep. 30, 2020 | $ 5,310 | $ 186,445 | $ 63,715,899 | $ (54,569,443) | $ 25,997 | $ 9,364,208 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Cash flows from operating activities of continuing operations: | ||||
Net income (loss) | $ (4,520,962) | $ (3,636,201) | $ (4,591,274) | $ (4,877,380) |
Adjustments to reconcile net loss to cash used in operating activities: | ||||
Depreciation and amortization | 623,660 | 664,771 | 863,994 | 824,241 |
Amortization of debt discount | 510,252 | 417,198 | 638,626 | 628,423 |
Provision for doubtful accounts | 0 | 41,985 | 0 | |
Common stock issued for financing costs | 167,614 | 32,418 | 32,418 | 2,250 |
Common stock issued in exchange for fees and services | 555,440 | 606,797 | 778,411 | 753,170 |
Deferred taxes | (27,472) | (26,752) | 11,252 | (48,544) |
Derivative expense | 0 | 42,140 | 42,140 | 0 |
Stock-based compensation | 62,600 | 48,600 | 64,800 | 461,118 |
Loss on extinguishment of debt | 1,191,089 | 363,468 | 363,468 | 0 |
Unrealized (gain) loss on change in fair value of contingent consideration | (429,000) | 0 | ||
Unrealized (gain) loss on change in fair value of derivative liabilities | (8,831) | 13,473 | (7,826) | 0 |
Changes in operating assets and liabilities: | ||||
Accounts receivable | 99,185 | 57,376 | 535,846 | (3,048) |
Inventory | (778) | (21,481) | (20,544) | (212,259) |
Prepaid expenses and other current assets | (12,717) | 8,594 | 55,912 | 657,538 |
Operating lease right of use assets | 28,233 | 16,802 | 22,406 | 0 |
Other assets | 5,899 | 33,745 | 35,536 | (33,256) |
Accounts payable | 542,321 | 434,854 | 153,075 | (28,742) |
Accrued liabilities | 288,891 | 266,809 | 762,909 | (230,081) |
Advanced payments and deferred revenues | 115,176 | (1,445) | (493,146) | 154,528 |
Income taxes payable and other noncurrent liabilities | (37,471) | (35,118) | (38,665) | (18,564) |
Related party payables | (248,904) | (409,095) | (519,508) | 105,005 |
Net cash provided by (used in) operating activities | (666,775) | (1,123,047) | (1,697,185) | (1,865,601) |
Cash flows from investing activities: | ||||
Purchase of fixed assets | (571,563) | (284,629) | (292,911) | (581,975) |
Net cash provided by (used in) investing activities | (571,563) | (284,629) | (292,911) | (581,975) |
Cash flows from financing activities: | ||||
Proceeds from issuance of preferred stock, net of issuance costs | 483,500 | 411,151 | 411,151 | 0 |
Proceeds from issuance of common stock, net of issuance costs | 0 | 1,008,849 | 1,058,849 | 608,717 |
Proceeds from exercise of common stock purchase warrants, net of issuance costs | 0 | 61,500 | ||
Proceeds from issuance of convertible notes | 3,655,000 | 95,000 | 600,000 | 1,914,702 |
Proceeds from loans payable | 253,912 | 0 | ||
Repayments of convertible notes | (3,368,812) | (184,000) | (262,857) | (75,000) |
Repayments of senior secured promissory notes | 0 | (10,000) | ||
Net cash provided by (used in) financing activities | 1,023,600 | 1,331,000 | 1,807,143 | 2,499,919 |
Effect of exchange rates on cash and cash equivalents | 101,492 | 25,680 | 55,579 | 144,381 |
Net increase (decrease) in cash and cash equivalents | (113,246) | (50,996) | (127,374) | 196,724 |
Cash and cash equivalents at beginning of period | 506,219 | 633,593 | 633,593 | 436,869 |
Cash and cash equivalents at end of period | 392,973 | 582,597 | 506,219 | 633,593 |
Supplemental disclosure of cash flow information: | ||||
Cash paid for interest | 0 | 521,408 | 521,408 | 277,149 |
Cash paid for income taxes | 0 | 0 | 0 | 0 |
Supplemental disclosure of non-cash investing and financing activities: | ||||
Common stock issued related to acquisition of business | 0 | 52,500 | ||
Common stock issued for financing costs incurred in connection with convertible and promissory notes | 568,400 | 0 | 0 | 1,003,621 |
Common stock issued in connection with long term service contracts | 0 | 72,000 | ||
Common stock issued to reduce convertible and promissory notes payable | 0 | 30,000 | ||
Common stock issued to reduce accounts payable and other accrued liabilities | 50,000 | 389,440 | 589,440 | 1,321,376 |
Conversion of convertible notes and accrued interest into common stock | 56,049 | 0 | 3,788,199 | 0 |
Discount for beneficial conversion features on convertible notes | 44,129 | 51,730 | 51,730 | 801 |
Discount related to fair value of derivative liabilities associated with convertible notes | $ 0 | $ 43,270 | $ 43,270 | $ 0 |
1. Nature of Operations
1. Nature of Operations | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
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. | 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. · Illumination America Lighting, Inc. (“IAL”) was incorporated in the State of Florida on August 21, 2017. IAL operated the Company’s lighting business which was its principal business prior to the Share Exchange. IAL has not generated any revenue since its inception. On December 23, 2019, IAL was voluntarily dissolved. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Accounting Policies [Abstract] | ||
Summary of Significant Accounting Policies | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Going Concern The accompanying unaudited condensed 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 notes 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. Impact of COVID-19 On January 30, 2020, the World Health Organization announced a global health emergency because of the spread of a new strain of the novel coronavirus (“COVID-19”). On March 11, 2020, the World Health Organization declared the outbreak of COVID-19, a global pandemic. COVID-19 has and continues to significantly affect the United States and global economies. The Company has experienced significant disruptions to its business and operations due to circumstances related to COVID-19, and as a result of delays caused government-imposed quarantines, office closings and travel restrictions, which affect both the Company’s and its service providers. The Company has significant operations in Manila, Philippines, which was locked down by the government on March 12, 2020 due to concerns related to the spread of COVID-19. As a result of the Philippines government’s call to contain COVID-19, the Company’s animation studio, located in Manila, Philippines, which accounts for approximately 90% of the Company’s total revenues on a consolidated basis, has been closed. In response to the outbreak and business disruption, the Company has instituted employee safety protocols to contain the spread, including domestic and international travel restrictions, work-from-home practices, extensive cleaning protocols, social distancing and various temporary closures of its administrative offices and production studio. The Company has implemented a range of actions aimed at temporarily reducing costs and preserving liquidity. The outbreak has and may continue to spread, which could materially impact the Company’s business. The full extent of potential impacts on the Company’s business, financing activities and the global economy will depend on future developments, which cannot be predicted due to the uncertain nature of the continued COVID-19 pandemic, government mandated shut downs, and its adverse effects, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. These effects could have a material adverse impact on the Company’s business, operations, financial condition and results of operations. Management’s Representation of Interim Financial Statements The accompanying unaudited condensed consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto at December 31, 2019, as presented in the Company’s Annual Report on Form 10-K filed on June 30, 2020 with the SEC. Basis of Presentation The condensed consolidated financial statements of the Company have been prepared in accordance with GAAP and are expressed in United States dollars. For the three and nine months ended September 30, 2020, the condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Grom Social, TD Holdings, GES, GNS, and IAL. All intercompany accounts and transactions are eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relate to revenue recognition, valuation of accounts receivable and inventories, purchase price allocation of acquired businesses, impairment of long-lived assets and goodwill, valuation of financial instruments, income taxes, and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. Revenue Recognition In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) Other Assets and Deferred Costs – Contracts with Customers Entities have the option of using either a full retrospective or a modified approach to adopt the guidance. The Company adopted this ASU in accordance with the modified retrospective method, effective January 1, 2018 for all contracts not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 while prior period amounts continue to be reported in accordance with legacy GAAP. Under the applicable revenue recognition guidance for fiscal 2017 and prior years, these transactions were recognized when the amounts were billed to the customer. As a result of the Company’s transition to ASC 606, the Company recorded a net change in beginning retained earnings of $263,741 on January 1, 2018 due to the cumulative effect of adopting ASC 606. Animation Revenue For the nine months ended September 30, 2020 and 2019, the Company recorded a total of $4,015,061 and $5,841,142, 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 aftereffects. 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 the nine months ended September 30, 2020 and 2019, the Company recorded a total of $460,984 and $428,644, 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 September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 Animation contract assets $ 393,448 $ 513,388 Web filtering contract assets 45,692 24,937 Other contract assets 7,337 7,337 Total contract assets $ 446,477 $ 545,662 Animation contract liabilities $ 137,120 $ 51,054 Web filtering contract liabilities 593,638 564,528 Other contract liabilities 11,500 11,500 Total contract liabilities $ 742,258 $ 627,082 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 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) Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is evaluating the impact of this guidance on its unaudited condensed consolidated financial statements. | 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, 2019 and 2018, the consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Grom Social, TD Holdings, GES, GNS, and IAL. 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 In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) Other Assets and Deferred Costs – Contracts with Customers Entities have the option of using either a full retrospective or a modified approach to adopt the guidance. The Company adopted this ASU in accordance with the modified retrospective method, effective January 1, 2018 for all contracts not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 while prior period amounts continue to be reported in accordance with legacy U.S. GAAP. Under the applicable revenue recognition guidance for fiscal 2017 and prior years, these transactions were recognized when the amounts were billed to the customer. As a result of the Company’s transition to ASC 606, the Company recorded a net change in beginning retained earnings of $263,741 on January 1, 2018 due to the cumulative effect of adopting ASC 606. Animation Revenue For years ended December 31, 2019 and 2018, the Company recorded a total of $7,565,672 and $7,801,157, 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, 2019 and 2018, the Company recorded a total of $723,800 and $811,623, respectively, of web filtering revenue from contracts with customers. 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, 2019 and 2018: December 31, 2019 December 31, 2018 Animation contract assets $ 513,388 $ 1,040,309 Web filtering contract assets 24,937 74,743 Other contract assets 7,337 8,441 Total contract assets $ 545,662 $ 1,123,493 Animation contract liabilities $ 51,054 $ 380,749 Web filtering contract liabilities 564,528 727,979 Other contract liabilities 11,500 11,500 Total contract liabilities $ 627,082 $ 1,120,228 For the years ended December 31, 2019 and 2018, the Company recorded $380,749 and $428,481, respectively, in animation revenue and $461,843 and $468,277, 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, 2019 and 2018. The Company uses the market approach to measure fair value for its Level 1 financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The respective carrying value of certain balance sheet financial instruments approximates its fair value. These financial instruments include cash, trade receivables, related party payables, accounts payable, accrued liabilities and short-term borrowings. Fair values were estimated to approximate carrying values for these financial instruments since they are short term in nature, and they are receivable or payable on demand. The estimated fair value of assets and liabilities acquired in business combinations and reporting units and long-lived assets used in the related asset impairment tests utilize inputs classified as Level 3 in the fair value hierarchy. The Company determines the fair value of contingent consideration based on a probability-weighted discounted cash flow analysis. The fair value remeasurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in the fair value hierarchy. In each period, the Company reassesses its current estimates of performance relative to the stated targets and adjusts the liability to fair value. Any such adjustments are included as a component of Other Income (Expense) in the Consolidated Statements of Operations and Comprehensive Loss. The following table summarizes the change in the Company’s financial assets and liabilities measured at fair value as of December 31, 2019 and 2018. Fair value, January 1, 2018 $ 429,000 Change in fair value – Fair value, December 31, 2018 $ 429,000 Change in fair value (429,000 ) Fair value, December 31, 2019 $ – 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. 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 during the fourth quarter of each year and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount. Goodwill impairment testing is a two-step process performed at the reporting unit level. Step one compares the fair value of the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows. For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s size and industry and other Company-specific risks. Other significant assumptions used in the income approach include the terminal value, growth rates, future capital expenditures and changes in future working capital requirements. The market approaches use key multiples from guideline businesses that are comparable and are traded on a public market. If the fair value of the reporting unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then the second step must be completed to measure the amount of impairment, if any. Step two calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit is allocated to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount equal to the excess. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, strategic plans, and future market conditions, among others. There can be no assurance that the Company’s estimates and assumptions made for purposes of the goodwill impairment testing will prove to be accurate predictions of the future. Changes in assumptions and estimates could cause the Company to perform an impairment test prior to scheduled annual impairment tests. The Company performed its annual fair value assessment at December 31, 2019, on its subsidiaries with material goodwill and intangible asset amounts on their respective balance sheets and determined that no impairment exists. Long-Lived Assets The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances have indicated that an asset may not be recoverable. The long-lived asset is grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows is less than the carrying value of the assets, the assets are written down to the estimated fair value. The Company evaluated the recoverability of its long-lived assets on December 31, 2019 and 2018, 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 In February 2016, the FASB issued ASU No. 2016-02, "Leases" (ASC 842). The standard 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. The standard became effective for the Company beginning January 1, 2019. The Company adopted ASC 842 using the modified retrospective approach, by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2019 are presented under ASC 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under ASC 840. The Company elected the package of practical expedients permitted under the standard, which also allowed the Company to carry forward historical lease classifications. The Company also elected the practical expedient related to treating lease and non-lease components as a single lease component for all equipment leases as well as electing a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the ROU assets and lease liabilities. 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. As a result of the adoption of ASC 842 on January 1, 2019, the Company recorded both operating lease ROU assets of $1,032,898 and operating lease liabilities of $1,032,898. The adoption did not impact the Company's beginning retained earnings, or prior year consolidated statements of income and statements of cash flows. 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 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) |
3. Accounts Receivable, net
3. Accounts Receivable, net | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Receivables [Abstract] | ||
Accounts Receivable, net | 3. ACCOUNTS RECEIVABLE, NET The following table sets forth the components of the Company’s accounts receivable at September 30, 2020, and December 31, 2019: September 30, 2020 December 31, 2019 Billed accounts receivable $ 417,841 $ 353,778 Unbilled accounts receivable 72,539 233,869 Allowance for doubtful accounts (43,903 ) (41,985 ) Total accounts receivable, net $ 446,477 $ 545,662 As of December 31, 2019, the Company evaluated its outstanding trade receivables and established a provision for doubtful accounts of $41,985. As of September 30, 2020, the Company determined that no additional provision for doubtful accounts was necessary. During the nine months ended September 30, 2020, the Company had three customers that accounted for 72.3% of revenues and three customers that accounted for 56.4% of accounts receivable. During the year ended December 31, 2019, the Company had three customers that accounted for 42.3% of revenues and one customer that accounted for 38.7% of accounts receivable. | 3. ACCOUNTS RECEIVABLE, NET The following table sets forth the components of the Company’s accounts receivable at December 31, 2019 and 2018: December 31, 2019 December 31, 2018 Billed accounts receivable $ 353,778 $ 419,802 Unbilled accounts receivable 233,869 703,691 Allowance for doubtful accounts (41,985 ) – Total accounts receivable, net $ 545,662 $ 1,123,493 As of December 31, 2019, the Company evaluated its outstanding trade receivables and established a provision for doubtful accounts of $41,985. As of December 31, 2018, the Company evaluated its outstanding trade receivables and determined that no provision for doubtful accounts was necessary. During the year ended December 31, 2019, the Company had three customers that accounted for 42.3% of revenues and one customer that accounted for 38.7% of accounts receivable. During the year ended December 31, 2018, the Company had three customers that accounted for approximately 50.1% of revenues and one customer that accounted for 9.2% of accounts receivable. |
4. Prepaid Expenses and Other C
4. Prepaid Expenses and Other Current Assets | 12 Months Ended |
Dec. 31, 2019 | |
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, 2019 and 2018: December 31, 2019 December 31, 2018 Collaborative development agreement $ – $ 95,766 Prepaid rent 17,863 31,773 Vendor advances 6,221 7,867 Prepaid service agreements 172,602 174,920 Employee advance and other payroll related items 56,356 16,208 Other prepaid expenses and current assets 76,086 123,306 Total $ 329,128 $ 449,840 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 | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | ||
Property and Equipment | 4. PROPERTY AND EQUIPMENT The following table sets forth the components of the Company’s property and equipment at September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 Cost Accumulated Depreciation Net Book Value Cost Accumulated Depreciation Net Book Value Capital assets subject to depreciation: Computers, software and office equipment $ 2,805,657 $ (2,175,870 ) $ 629,787 $ 2,184,327 $ (1,882,567 ) $ 301,760 Machinery and equipment 185,909 (146,739 ) 39,170 175,761 (125,272 ) 50,489 Vehicles 163,525 (99,737 ) 63,788 158,849 (77,133 ) 81,716 Furniture and fixtures 422,234 (357,928 ) 64,306 399,512 (323,771 ) 75,741 Leasehold improvements 1,143,703 (877,113 ) 266,590 1,081,076 (764,070 ) 317,006 Total fixed assets 4,721,028 (3,657,387 ) 1,063,641 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 $ 4,747,622 $ (3,657,387 ) $ 1,090,235 $ 4,024,958 $ (3,172,813 ) $ 852,145 For the nine months ended September 30, 2020 and 2019, the Company recorded depreciation expense of $333,473 and $374,584, respectively. | 5. PROPERTY AND EQUIPMENT The following table sets forth the components of the Company’s property and equipment at December 31, 2019 and 2018: December 31, 2019 December 31, 2018 Cost Accumulated Depreciation Net Book Value Cost Accumulated Depreciation Net Book Value Capital assets subject to depreciation: Computers, software and office equipment $ 2,184,327 $ (1,882,567 ) $ 301,760 $ 1,937,987 $ (1,508,104 ) $ 429,883 Machinery and equipment 175,761 (125,272 ) 50,489 167,731 (99,900 ) 67,831 Vehicles 158,849 (77,133 ) 81,716 153,927 (120,728 ) 33,199 Furniture and fixtures 399,512 (323,771 ) 75,741 381,248 (284,410 ) 96,838 Leasehold improvements 1,081,076 (764,070 ) 317,006 1,031,687 (623,125 ) 408,562 Total fixed assets 3,999,525 (3,172,813 ) 826,712 3,672,580 (2,636,267 ) 1,036,313 Capital assets not subject to depreciation: Construction in progress 25,433 – 25,433 – – – Total fixed assets $ 4,024,958 $ (3,172,813 ) $ 852,145 $ 3,672,580 $ (2,636,267 ) $ 1,036,313 For the years ended December 31, 2019 and 2018, the Company recorded depreciation expense of $477,079 and $395,556 respectively. |
6. Leases
6. Leases | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Leases [Abstract] | ||
Leases | 5. 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. These operating leases are listed as separate line items on the Company's condensed consolidated financial statements 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 condensed consolidated financial statements. Operating lease right-of-use 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. For the nine months ended September 30, 2020, the Company recognized approximately $272,980 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 ROU assets and related lease liabilities are as follows: Three Months Ended Cash paid for operating lease liabilities $ 266,825 Weighted-average remaining lease term 2.6 Weighted-average discount rate 10 % Minimum future lease payments $ 817,946 The following table presents the amortization of the Company’s lease liabilities under ASC 842 for each of the following years ending December 31: 2020 $ 263,253 2021 304,326 2022 302,781 2023 25,990 2024 and thereafter — | 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. 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 $874,159 in assets, $263,253 in current liabilities and $633,097 in noncurrent liabilities as of December 31, 2019. During the year ended December 31, 2019, the Company recognized approximately $375,096 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 $ 352,693 Weighted-average remaining lease term (in years) 3.2 Weighted-average discount rate 10% Minimum future lease payments $ 1,084,771 The following table presents the amortization of the Company’s lease liabilities under ASC 842 as of December 31, 2019: 2020 $ 263,253 2021 $ 304,326 2022 $ 302,781 2023 $ 25,990 2024 $ – |
7. Goodwill and Intangible Asse
7. Goodwill and Intangible Assets | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill and Intangible Assets | 6. 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. At September 30, 2020, the carrying amount of the Company’s goodwill was $8,853,261. The following table sets forth the components of the Company’s intangible assets at September 30, 2020 and December 31, 2019: September 30, 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 $ (676,421 ) $ 923,865 $ 1,600,286 $ (556,400 ) $ 1,043,886 Web filtering software 5.00 1,134,435 (850,826 ) 283,609 1,134,435 (680,661 ) 453,774 Subtotal — 2,734,721 (1,527,248 ) 1,207,473 2,734,721 (1,237,061 ) 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 — $ 7,190,316 $ (1,527,248 ) $ 5,663,068 $ 7,190,316 $ (1,237,061 ) $ 5,953,255 For the nine months ended September 30, 2020 and 2019, the Company recorded amortization expense of $290,187 and $290,187, respectively, for intangible assets subject to amortization. The following table provides information regarding estimated amortization expense for intangible assets subject to amortization for each of the following years ending December 31: 2020 $ 386,916 2021 386,916 2022 160,029 2023 160,029 2024 160,029 Thereafter 243,742 $ 1,497,660 | 7. GOODWILL AND INTANGIBLE ASSETS The following table sets forth the changes in the carrying amount of the Company’s goodwill at December 31, 2019 and 2018: Balance, January 1, 2018 $ 8,800,761 Additions, impairments and other changes 52,500 Balance, December 31, 2018 8,853,261 Additions, impairments or other changes – Balance, December 31, 2019 $ 8,853,261 During the year ended December 31, 2019, the Company issued 150,000 shares valued at $52,000 to acquire the assets of Bonnie Boat & Friends, a preschool entertainment and consumer products brand. The following table sets forth the components of the Company’s intangible assets at December 31, 2019 and 2018: December 31, 2019 December 31, 2018 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 $ (556,400 ) $ 1,043,886 $ 1,600,286 $ (396,371 ) $ 1,203,915 Mobile software applications 2.00 282,500 (282,500 ) – 282,500 (282,500 ) – Web filtering software 5.00 1,134,435 (680,661 ) 453,774 1,134,435 (453,774 ) 680,661 Noncompete agreements 2.00 846,638 (846,638 ) – 846,638 (846,638 ) – Subtotal – 3,863,859 (1,979,283 ) 1,497,660 3,863,859 (1,979,283 1,884,576 Intangible assets not subject to amortization: Trade names – 4,455,595 – 4,455,595 4,455,595 – 4,455,595 Total intangible assets – $ 8,319,454 $ (1,979,283 ) $ 5,953,255 $ 8,319,454 $ (1,979,283 ) $ 6,340,171 The Company recorded amortization expense for intangible assets subject to amortization of $386,916 for the year ended December 31, 2019 and $428,686 during the year ended December 31, 2018. The following table provides information regarding estimated amortization expense for intangible assets subject to amortization for each of the following years ending December 31: 2020 $ 386,916 2021 386,916 2022 160,029 2023 160,029 2024 160,029 Thereafter 243,742 $ 1,497,660 |
8. Other Assets
8. Other Assets | 12 Months Ended |
Dec. 31, 2019 | |
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 | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Payables and Accruals [Abstract] | ||
Accounts Payable and Accrued Liabilities | 7. ACCRUED LIABILITIES The following table sets forth the components of the Company’s accrued liabilities at September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 Executive and employee compensation $ 1,581,802 $ 1,237,531 Interest on convertible notes and promissory notes 154,384 314,309 Other accrued expenses and liabilities — 99,641 Total accrued liabilities $ 1,736,185 $ 1,651,482 | 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, 2019 and 2018. December 31, 2019 December 31, 2018 Earnout consideration payable in connection with NetSpective acquisition $ – $ 362,500 Executive and employee compensation 1,237,531 792,402 Interest on convertible debentures and promissory notes 314,309 210,221 Other accrued expenses and liabilities 99,641 67,914 Total accrued liabilities $ 1,651,482 $ 1,433,037 On July 1, 2019, the Company issued 465,113 shares of its common stock in satisfaction of the $362,500 in accrued earnout consideration related to the NetSpective acquisition. |
10. Related Party Payables
10. Related Party Payables | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Related Party Transactions [Abstract] | ||
Related Party Payables | 8. RELATED PARTY PAYABLES 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. Mr. Marks’ wife Sarah, his sons Zachary (the founder of Grom), Luke, Jack, and Dawson, and his daughters Caroline and Victoria all work for the Company either as employees or contractors. · The amount paid to these related parties during the nine months ended September 30, 2020 were as follows: Zachary $21,000. · The amounts paid to these related parties during the nine months ended September 30, 2019 was as follows: Sarah $12,600, Zachary $33,750, Luke $14,400, 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 Executive and Other Officers Messrs. Darren Marks and Melvin Leiner, both officers of the Company, have made numerous loans to Grom to help fund operations. These loans are non-interest bearing and callable on demand. No such loans were made to the Company during the three months ended September 30, 2020. Neither Mr. Marks nor Mr. Leiner have any intention of calling these loans at present. The loan balances are classified as short-term obligations under Related Party Payables on the Company’s balance sheet. As of September 30, 2020 and December 31, 2019, the outstanding balances due to Mr. Marks were $74,529 and $215,122, respectively, and the outstanding balances due to Mr. Leiner were $90,475 and $210,929, respectively. On July 13, 2018, Dr. Thomas Rutherford, a director, loaned the Company $50,000 to help fund operations. The loan is non-interest bearing and callable on demand. Dr. Rutherford does not have any intention of calling the loan at present. The loan balance is classified as a short-term obligation under Related Party Payables on the Company’s balance sheet. As of September 30, 2020 and December 31, 2019, the aggregate related party payables were $213,233 and $462,137, respectively. | 10. RELATED PARTY PAYABLES AND ACTIVITY 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. Mr. Marks’ wife Sarah, his sons Zachary (the founder of Grom), Luke, Jack, and Dawson, and his daughters Caroline and Victoria all work for the Company either as employees or contractors. · The amounts they were paid during the year ended December 31, 2019 are as follows: Sarah $12,600, Zachary $40,593, Luke $17,659, Jack $1,800, Victoria $2,250 and Caroline $3,750. · The total annual compensation payable to these six individuals for the years ended December 31, 2019 and 2018, was $78,652 and $180,800, respectively, which the Company believes is below market rate for the value of the services performed. 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 Executive and Other Officers Messrs. Darren Marks and Melvin Leiner, both officers of the Company, have made numerous loans to Grom to help fund operations. These loans are non-interest bearing and callable on demand. No such loans were made to the Company during the years ended December 31, 2019 and 2018. Neither Mr. Marks nor Mr. Leiner have any intention of calling these loans at present. The loan balances are classified as short-term obligations under Related Party Payables on the Company’s balance sheet. During the years ended December 31, 2018 and 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 Loan Principal Converted to Equity Share Price Used for conversion Trading price of Grom stock on the date of conversion Shares issued Darren Marks 10/15/2018 333,333 $ 0.31 0.19 1,075,268 12/10/2019 100,000 $ 0.18 0.10 571,429 Melvin Leiner 10/15/2018 166,667 $ 0.31 0.19 537,635 12/10/2019 100,000 $ 0.18 0.10 571,428 As of December 31, 2019 and 2018, the outstanding balances due to Mr. Marks were $215,122 and $469,506, respectively, and the outstanding balances due to Mr. Leiner were $210,929 and $451,944, respectively. On July 13, 2018, our director, Dr. Thomas Rutherford loaned the Company $50,000 to help fund operations. The loan is non-interest bearing and callable on demand. Dr. Rutherford does not have any intention of calling the loan at present. The loan balance is classified as a short-term obligation under Related Party Payables on the Company’s balance sheet. During the first quarter of 2018, Wayne Dearing, Managing Director of TD Holdings, and Stella Dearing, Director of Operations of Top Draw, loaned an aggregate of $435,085 to Top Draw to help to finance working capital needs, capital expenditures, and leasehold improvements at its production facilities in Manila, Philippines. These loans bear interest at a rate of 5% per annum and are callable on demand. As of December 31, 2019, all amounts owed to Mr. and Mrs. Dearing as a result of these loans had been fully repaid. As of December 31, 2019 and 2018, the aggregate related party payables were $462,137 and $1,181,645, respectively. |
11. Other Noncurrent Liabilitie
11. Other Noncurrent Liabilities | 12 Months Ended |
Dec. 31, 2019 | |
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”. As of December 31, 2019 and 2018, accrued retirement benefit costs were $227,229 and $224,797, respectively. |
12. Debt
12. Debt | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Debt Disclosure [Abstract] | ||
Debt | 9. CONVERTIBLE NOTES The following tables set forth the components of the Company’s convertible notes as of September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 10% Unsecured Convertible Redeemable Notes – Variable Conversion Price $ 152,860 $ 100,000 10% Secured Convertible Notes with Original Issuance Discounts (OID Notes) 253,249 664,473 12% Senior Secured Convertible Notes (Newbridge) 131,428 289,143 12% Senior Secured Convertible Notes (Original TDH Notes) 933,678 4,000,000 12% Senior Secured Convertible Notes (TDH Secured Notes) 1,773,722 505,000 12% Senior Secured Convertible Notes (Additional Secured Notes) 265,208 — Loan discounts (327,234 ) (224,958 ) Total convertible notes, net 3,182,911 5,333,658 Less: current portion of convertible notes, net (1,908,168 ) (4,828,658 ) Convertible notes, net $ 1,274,743 $ 505,000 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, was 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 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. At September 30, 2020, the Company remeasured the fair value of its derivative liabilities at $68,753 and recorded an unrealized gain of $22,764 from change in fair value for the nine months ended September 30, 2020. The fair value of the embedded derivative was determined using a Black-Scholes option pricing model based on the following assumptions: (1) expected volatility of 237.3%, (2) risk-free interest rate of 0.10%, (3) an exercise price of $0.039, and (4) an expected life of 0.25 years. During the nine months ended September 30, 2020, the Company issued 1,158,585 shares of common stock upon the conversion of $56,049 in convertible note principal and accrued interest. At September 30, 2020, the remaining principal balance of $53,861 and accrued interest of $3,310 was in default of payment. On October 2, 2020, the lender converted all amounts outstanding on the note into 1,535,507 shares of common stock. Refer to “Note 12 – Subsequent Events” for additional information. 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. At September 30, 2020, the remaining principal balance of $100,000 and accrued interest of $5,837 was in default of payment. No formal notices of default or demands for payment have been received by the Company. 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. As of September 30, 2020, the principal balance of these notes was $100,000 and all associated loan discounts were fully amortized. No formal notices of default or demands for payment have been received by the Company. 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. As of September 30, 2020, the principal balance of these notes was $97,250 and all associated loan discounts were fully amortized. 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. As of September 30, 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, the Company continues to maintain a favorable relationships and work with the lenders. 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 noteholders 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. As of September 30, 2020, the remaining principal balance on the 12% Notes was $ 131,429 ,430 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 condensed 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 thereafter nine monthly installments of $6,667. 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. As of September 30, 2020, the principal balance of the Original TDH Notes was $933,678. 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. As of September 30, 2020, the principal balance of these notes was $1,773,722 and the remaining balance on the associated loan discounts was $229,984. 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. As of September 30, 2020, the principal balance of these notes was $256,208 and the remaining balance on the associated loan discounts ,820. 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: 2020 $ 707,917 2021 $ 1,365,570 2022 $ 544,701 2023 $ 613,782 2024 $ 210,666 | 12. DEBT Convertible Notes The following tables set forth the components of the Company’s convertible notes as of December 31, 2019 and 2018: December 31, December 31, 0.68% Unsecured Convertible Redeemable Note (TeleMate) $ – $ 1,000,000 10% Unsecured Convertible Redeemable Note – Variable Conversion Price 100,000 – 10% Senior Secured Convertible Notes 4,000,000 – 12% Senior Secured Convertible Notes (TDH Secured Notes) 505,000 – 12% Senior Secured Convertible Notes (Newbridge) 289,143 552,000 10% Secured Convertible Notes with Original Issuance Discounts 664,473 2,270,708 Loan discounts (224,958 ) (735,871 ) Less: current portion (4,828,658 ) (676,223 ) Total convertible notes, net $ 505,000 $ 2,410,614 0.68% Unsecured Convertible Redeemable Note (TeleMate) On January 1, 2017, the Company issued a three-year 0.68% convertible redeemable note in the principal amount of $1,000,000 (the “TeleMate Note”) to Telemate.Net Software LLC (“TeleMate”) in connection with the acquisition of the assets of NetSpective WebFilter (“NetSpective”). All TeleMate Note principal and accrued interest is payable January 1, 2020. The TeleMate Note is convertible at the election of the noteholders into the Company’s’ common stock at a conversion rate of $0.78 per share. Furthermore, if not previously converted by the noteholders, the TeleMate Note may be converted by the Company into shares of the Company’s common stock at a rate of $0.48 per share commencing on November 1, 2019. Under the terms of the asset purchase agreement, dated January 1, 2017, between TeleMate and the Company, in which TeleMate had the obligation to collect certain monies on behalf of the Company, TeleMate failed to remit $146,882 it had collected on the Company’s behalf from NetSpective customers. As a result of TeleMate’s non-payment, and to avoid litigation, on January 12, 2018, TeleMate and the Company entered into a First Modification to the asset purchase agreement (the “Modification”). Under the terms of the Modification, TeleMate agreed: · to pay the Company $10,000 per month against their outstanding balance of $146,822. · not to exercise the conversion feature of the TeleMate Note, and that 464,744 earnout shares, valued at $362,500 provided for in the asset purchase agreement will not be issued until all payments are paid in full. · to extend the January 1, 2020 maturity date until such time that all payments are paid in full. · and that all interest payments due from the Company to TeleMate be suspended indefinitely until all payments are paid in full. In April 2019, TeleMate completed repaying its obligation to the Company. On December 4, 2019, the Company elected to convert the TeleMate Note principal balance and accrued interest into 2,113,428 shares of its common stock. 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. At December 31, 2019, the Company remeasured the fair value of its derivative liability at $77,584 and recorded an unrealized gain of $7,826 from change in fair value for the year ended December 31, 2019. The fair value of the embedded derivative was determined using a Black-Scholes option pricing model based on the following assumptions: (1) expected volatility of 138.9%, (2) risk-free interest rate of 1.59%, (3) an exercise price of $0.063, and (4) an expected life of 0.52 years. 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. As of December 31, 2019 and 2018, the remaining principal balance on the 12% Notes was $289,143 and $552,000, respectively, and the remaining unamortized discounts were $161,864 and $338,443, respectively. 12% Senior Secured Convertible Notes (TDH Secured Notes Offering) As of December 31, 2019, the Company received $505,000 from investors that purchased the Company’s 12% senior secured convertible notes payable monthly on an amortized basis over 48 months. See Note 16 – Subsequent Events for more information. 10% Secured Convertible Notes with Original Issuance Discounts 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. As of December 31, 2019 and 2018, the principal balance of these notes was $336,223 and $601,223, respectively, and the remaining balance on the associated loan discounts was $0 and 69,122, respectively. 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. As of December 31, 2019 and 2018, the principal balance of these notes was $272,250 and $ , respectively, and the remaining balance on the associated loan discounts was $6,500 and $202,216, respectively. 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. As of December 31, 2019 and 2018, the principal balance of these notes was $56,000 and $ , respectively, and the remaining balance on the associated loan discounts was $6,594 and $112,475, respectively. Senior Secured Promissory Notes The following tables set forth the components of the Company’s senior, secured promissory notes at December 31, 2019 and 2018: December 31, December 31, Principal value of promissory notes $ – $ 4,000,000 Loan discounts – (171,182 ) Total promissory notes, net $ – $ 3,828,818 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 Balance Sheets as of December 31, 2019. 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: 2020 $ 4,827,643 2021 $ 417,663 2022 $ 128,924 2023 $ 145,275 2024 and thereafter $ 39,111 |
13. Income Taxes
13. Income Taxes | 12 Months Ended |
Dec. 31, 2019 | |
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, 2019 and 2018: December 31, 2019 December 31, 2018 Current: Federal $ – $ – State and local – – Foreign – 74,356 Total current – 74,356 Deferred: Federal – – State and local – – Foreign 35,375 (59,412 ) Total deferred 35,375 (59,412 ) Total $ 35,375 $ 14,944 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, 2019 and 2018: December 31, December 31, 2018 Tax benefit at the statutory federal rate – % – % Increase (decrease) in rate(s) resulting from: Foreign operations, net (0.8 ) (0.3 ) Change in deferred taxes 21.8 21.3 Change in valuation allowance (21.8 ) (21.3 ) Total (0.8 )% (0.3 )% The following tables set forth the components of income taxes payable as of December 31, 2019 and 2018: December 31, 2019 December 31, 2018 Federal $ – $ – State and local – – Foreign – 41,907 Total $ – $ 41,907 The following tables set forth the components of deferred income taxes as of December 31, 2019 and 2018: December 31, 2019 December 31, 2018 Non-current deferred tax assets: Retirement benefits $ 68,169 $ 67,439 Write down of investment(s) 65,420 62,421 Deferred revenue net 59,016 96,090 Other 45,976 23,833 Net operating loss carryforwards 4,661,804 4,150,813 Less: valuation allowance (4,661,804 ) (4,150,813 ) Total non-current deferred tax asset 238,581 249,783 Total deferred tax asset $ 238,581 $ 249,783 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, 2019, the Company had federal, state and foreign net operating loss carryforwards of approximately $21.2 million that are available to offset future liabilities for income taxes. The Company has generally established a valuation allowance against these carryforwards based on an assessment that it is more likely than not that these benefits will not be realized in future years. The federal and state net operating loss carryforwards expire at various dates through 2038. 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 2014 through 2018. 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 | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Equity [Abstract] | ||
Stockholders' Equity | 10. 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. As of September 30, 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 one 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. As of September 30, 2020 and December 31, 2019, the Company had 5,309,884 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 186,444,137 and 167,382,807 shares of common stock issued and outstanding as of September 30, 2020 and December 31, 2019, respectively. Common Stock Issued in Private Placements During the nine months ended September 30, 2019, the Company issued 4,950,000 shares of common stock and warrants to purchase 4,950,000 shares of common stock at an exercise price of $0.25 in private placements for proceeds of $495,000. Common Stock Issued as Compensation to Employees, Officers and/or Directors During the nine months ended September 30, 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 nine months ended September 30, 2020, the Company issued 6,113,068 shares of common stock with a fair market value of $555,440 to contractors for services rendered. During the nine months ended September 30, 2019, the Company issued 2,664,058 shares of common stock with a fair market value of $606,796 to contractors for services rendered. Common Stock Issued in lieu of Cash for Loans Payable and Other Accrued Obligations During the nine months ended September 30, 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 nine months ended September 30, 2019, the Company issued 564,833 shares of common stock with a fair market value of $389,440 to satisfy loans payable and other accrued obligations. Common Stock Issued in Connection with the Conversion of Convertible Note Principal and Accrued Interest During the nine months ended September 30, 2020, the Company issued 1,158,585 shares of common stock upon the conversion of $56,049 in convertible note principal and accrued interest. Common Stock Issued in Connection with the Issuance of Convertible Promissory Notes During the nine months ended September 30, 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 TDH Secured Notes and Additional Secured Notes under “Note 9 – Convertible Debt” for additional information. During the nine months ended September 30, 2019, the Company issued 160,260 shares of common stock valued at $32,418 in connection with the issuance of convertible notes. 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 September 30, 2020 and December 31, 2019. All warrants are exercisable for a period of five years from the date of issuance: Number of Warrants Outstanding Weighted Average Exercise Price Weighted Average 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 500,000 $ 0.10 Warrants exercised — $ — Warrants forfeited — $ — Balance September 30, 2020 6,164,744 $ 0.26 1.34 Stock Options The following table represents all outstanding and exercisable stock options as of September 30, 2020. Year Issued Options Options Options Vested Strike Price Weighted Average Remaining Life (Yrs.) 2013 7,735,350 (834,000 ) 6,901,350 6,901,350 $ 0.24 2.97 2015 11,467,500 (11,467,500 ) — — $ 0.36 — 2016 5,421,000 — 5,421,000 5,421,000 $ 0.78 0.44 2018 60,000 — 60,000 60,000 $ 0.78 2.58 Total 24,683,850 (12,301,500 ) 12,382,348 12,382,348 $ 0.48 1.51 During the nine months ended September 30, 2020 and 2019, the Company did not record any stock-based compensation expense related to stock options. | 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 and had 925,000 shares of preferred stock issued and outstanding as of December 31, 2019. No shares of preferred stock were issued and outstanding as of December 31, 2018. Preferred Stock Issued in Private Placements 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”). The 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, or a total of $800,000, in proceeds from the sale of 400,000 shares of Series A to an accredited investor in a private offering pursuant to Section 4(a)(2) and Rule 506(b) of Regulation D, as promulgated under the Securities Act. As an inducement to purchase the Series A Stock, each investor also received 2,000,000 restricted shares of the Company’s common stock. On April 2, 2019, the Company received an additional $125,000 in proceeds from the sale of 125,000 shares of Series A to one of the same accredited investors described above. As an inducement to purchase the Series A Stock, the investor also received 625,000 restricted shares of the Company’s common stock. Common stock The Company is authorized to issue 500,000,000 shares of common stock, par value of $0.001 per share and had 167,382,807 and 138,553,655 shares of common stock issued and outstanding as of December 31, 2019 and 2018, 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 During the year ended December 31, 2018, the Company issued 3,854,869 shares of common stock for proceeds of $608,718 under private offerings with accredited investors. Common Stock Issued in Connection with the Exercise of Warrants There was no common stock issued in connection with the exercise of stock warrants during the year ended December 31, 2019. During the year ended December 31, 2018, the Company issued 256,455 shares of common stock for proceeds of $61,500 under a series of stock warrant exercises at an average share price of $0.24 per share. Common Stock Issued as Compensation to Employees, Officers, Directors and/or Contractors 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. During the year ended December 31, 2018, the Company issued 1,200,321 shares of common stock with a fair market value of $458,918 to employees, officers and directors in lieu of cash payment. Additionally, the Company issued 2,385,505 shares of common stock with a fair value of $825,170 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, 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. During the year ended December 31, 2018, the Company issued 3,995,304 shares of common stock with a fair market value of $1,321,376 to satisfy loans payable and other accrued obligations. 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. During the year ended December 31, 2018, the Company issued 805,000 shares of common stock valued at $482,250 to amend the terms of a promissory note. Common Stock Issued in Connection with the Issuance of Convertible Promissory Notes 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. During the year ended December 31, 2018, the Company issued 1,432,653 shares of common stock valued at $523,601 in connection with the issuance of convertible notes. Common Stock Issued in the Acquisition of a Business There was no common stock issued in the acquisition of a business during the year ended December 31, 2019. During the year ended December 31, 2018, the Company issued 150,000 shares of common stock valued at $52,500 in connection with the acquisition of a business. Conversion of Convertible Notes and Accrued Interest into Common stock During the year ended December 31, 2019, the Company issued 12,202,686 shares of common stock valued at $2,788,199 in connection with the conversion of convertible notes and accrued interest into common stock. During the year ended December 31, 2018, the Company issued 200,000 shares of common stock valued at $30,000 in connection with the conversion of convertible notes and accrued interest into common stock. Common Stock Issued in Connection with Secured Convertible Notes with Original Issuance Discounts There was no common stock issued in connection with the issuance of secured convertible notes with original issuance discounts during the year ended December 31, 2019. During the year ended December 31, 2018, the Company issued 531,371 shares of common stock valued at $260,528 in connection with the issuance of secured convertible notes with original issuance discounts. 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, 2019 and 2018. All stock warrants are exercisable for a period of approximately five years from the date of issuance. Number of Warrants Outstanding Weighted Avg. Exercise Price Weighted Avg. Contractual Life (Yrs.) Balance January 1, 2018 1,038,365 $ 1.36 2.38 Warrants issued – $ – Warrants exercised (– ) $ – Warrants forfeited (256,455 ) $ – December 31, 2018 781,910 $ 1.36 1.38 Warrants issued 5,450,000 $ 0.25 Warrants exercised (– ) $ – Warrants forfeited (567,166 ) $ – Balance 31, 2019 5,664,744 $ 0.28 1.79 Stock Options The following table represents all outstanding and exercisable stock options as of December 31, 2019. Year Issued Options Options Options Vested Strike Price Weighted Average Remaining Life (Yrs.) 2013 7,735,350 (834,000 ) 6,901,350 6,901,350 $ 0.24 3.72 2015 11,467,500 – 11,467,500 11,467,500 $ 0.36 0.31 2016 5,421,000 – 5,421,000 5,421,000 $ 0.78 1.19 2018 60,000 – 60,000 60,000 $ 0.78 3.33 Total 24,683,850 (834,000 ) 23,849,850 23,849,850 $ 0.59 2.09 During the years ended December 31, 2019 and 2018, the Company recorded $0 and $2,300 in stock-based compensation expense related to stock options. |
15. Commitments and Contingenci
15. Commitments and Contingencies | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Commitments and Contingencies | 11. COMMITMENTS AND CONTINGENCIES 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. | 15. COMMITMENTS AND CONTINGENCIES 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 as of December 31, 2019, for operating leases are as follows: 2020 $ 352,888 2021 $ 367,636 2022 $ 335,659 2023 $ 28,588 2024 $ – |
16. Subsequent Events
16. Subsequent Events | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Subsequent Events [Abstract] | ||
Subsequent Events | 12. SUBSEQUENT EVENTS In accordance with FASB ASC 855-10, Subsequent Events On October 2, 2020, the Company issued an aggregate of 1,535,509 shares of common stock upon the conversion of an aggregate of $56,049 of outstanding principal and accrued interest on one of its 10% unsecured convertible redeemable notes. | 16. SUBSEQUENT EVENTS In accordance with FASB ASC 855-10, Subsequent Events TDH Secured Notes Offering On March 16, 2020, the Company sold (the “TDH Secured Notes Offering”) of an aggregate of $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, the Company shall cause TD Holdings to pay amounts due under the TDH Secured Notes. If the Company prepays the amounts due under TDH Secured Notes, it shall pay 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, however, 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’ right, title and interest in and to all of the shares of stock of TDH, and of the shares 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) those secured promissory notes (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 on the date 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. 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. Additional Secured Notes Offering On March 16, 2020, the Company also issued to two accredited investors (the “Additional Secured Note Lenders”) an aggregate of $365,000 of its 12% senior secured convertible notes (the “Additional Secured Notes”) with substantially the same terms and provisions as provided in the TDH Secured Notes; provided, however, 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 the terms and conditions of a security agreement by and among the Company and the Additional Secured Note Lenders (the “Security Agreement”). These Additional Secured Notes were offered and sold in a private offering (the “Additional Secured Notes Offering”), pursuant to the terms of a subscription agreement by and among the Company and the Additional Secured Notes Lenders (the “Additional Secured Notes Subscription Agreement”). Prior to this closing, an additional $695,000 of Additional Secured Notes had been sold by the Company in the Additional Secured Notes Offering. 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. If the Company prepays the amounts due under the Additional Secured Notes, it shall pay a prepayment penalty in an amount equal to 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, however, 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 730,000 shares of common stock were issued. |
2. Summary of Significant Acc_2
2. Summary of Significant Accounting Policies (Policies) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Accounting Policies [Abstract] | ||
Going Concern | Going Concern The accompanying unaudited condensed 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 notes 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. | 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. |
Impact of COVID-19 | Impact of COVID-19 On January 30, 2020, the World Health Organization announced a global health emergency because of the spread of a new strain of the novel coronavirus (“COVID-19”). On March 11, 2020, the World Health Organization declared the outbreak of COVID-19, a global pandemic. COVID-19 has and continues to significantly affect the United States and global economies. The Company has experienced significant disruptions to its business and operations due to circumstances related to COVID-19, and as a result of delays caused government-imposed quarantines, office closings and travel restrictions, which affect both the Company’s and its service providers. The Company has significant operations in Manila, Philippines, which was locked down by the government on March 12, 2020 due to concerns related to the spread of COVID-19. As a result of the Philippines government’s call to contain COVID-19, the Company’s animation studio, located in Manila, Philippines, which accounts for approximately 90% of the Company’s total revenues on a consolidated basis, has been closed. In response to the outbreak and business disruption, the Company has instituted employee safety protocols to contain the spread, including domestic and international travel restrictions, work-from-home practices, extensive cleaning protocols, social distancing and various temporary closures of its administrative offices and production studio. The Company has implemented a range of actions aimed at temporarily reducing costs and preserving liquidity. The outbreak has and may continue to spread, which could materially impact the Company’s business. The full extent of potential impacts on the Company’s business, financing activities and the global economy will depend on future developments, which cannot be predicted due to the uncertain nature of the continued COVID-19 pandemic, government mandated shut downs, and its adverse effects, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. These effects could have a material adverse impact on the Company’s business, operations, financial condition and results of operations. | |
Management's Representation of Interim Financial Statements | Management’s Representation of Interim Financial Statements The accompanying unaudited condensed consolidated financial statements have been prepared by the Company without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The Company uses the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto at December 31, 2019, as presented in the Company’s Annual Report on Form 10-K filed on June 30, 2020 with the SEC. | |
Basis of Presentation | Basis of Presentation The condensed consolidated financial statements of the Company have been prepared in accordance with GAAP and are expressed in United States dollars. For the three and nine months ended September 30, 2020, the condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Grom Social, TD Holdings, GES, GNS, and IAL. All intercompany accounts and transactions are eliminated in consolidation. | 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, 2019 and 2018, the consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Grom Social, TD Holdings, GES, GNS, and IAL. All intercompany accounts and transactions are eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with 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. | 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 In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) Other Assets and Deferred Costs – Contracts with Customers Entities have the option of using either a full retrospective or a modified approach to adopt the guidance. The Company adopted this ASU in accordance with the modified retrospective method, effective January 1, 2018 for all contracts not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 while prior period amounts continue to be reported in accordance with legacy GAAP. Under the applicable revenue recognition guidance for fiscal 2017 and prior years, these transactions were recognized when the amounts were billed to the customer. As a result of the Company’s transition to ASC 606, the Company recorded a net change in beginning retained earnings of $263,741 on January 1, 2018 due to the cumulative effect of adopting ASC 606. | Revenue Recognition In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) Other Assets and Deferred Costs – Contracts with Customers Entities have the option of using either a full retrospective or a modified approach to adopt the guidance. The Company adopted this ASU in accordance with the modified retrospective method, effective January 1, 2018 for all contracts not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 while prior period amounts continue to be reported in accordance with legacy U.S. GAAP. Under the applicable revenue recognition guidance for fiscal 2017 and prior years, these transactions were recognized when the amounts were billed to the customer. As a result of the Company’s transition to ASC 606, the Company recorded a net change in beginning retained earnings of $263,741 on January 1, 2018 due to the cumulative effect of adopting ASC 606. |
Animation Revenue | Animation Revenue For the nine months ended September 30, 2020 and 2019, the Company recorded a total of $4,015,061 and $5,841,142, 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 aftereffects. 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. | Animation Revenue For years ended December 31, 2019 and 2018, the Company recorded a total of $7,565,672 and $7,801,157, 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 the nine months ended September 30, 2020 and 2019, the Company recorded a total of $460,984 and $428,644, 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. | Web Filtering Revenue For years ended December 31, 2019 and 2018, the Company recorded a total of $723,800 and $811,623, respectively, of web filtering revenue from contracts with customers. |
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 September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 Animation contract assets $ 393,448 $ 513,388 Web filtering contract assets 45,692 24,937 Other contract assets 7,337 7,337 Total contract assets $ 446,477 $ 545,662 Animation contract liabilities $ 137,120 $ 51,054 Web filtering contract liabilities 593,638 564,528 Other contract liabilities 11,500 11,500 Total contract liabilities $ 742,258 $ 627,082 | 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, 2019 and 2018: December 31, 2019 December 31, 2018 Animation contract assets $ 513,388 $ 1,040,309 Web filtering contract assets 24,937 74,743 Other contract assets 7,337 8,441 Total contract assets $ 545,662 $ 1,123,493 Animation contract liabilities $ 51,054 $ 380,749 Web filtering contract liabilities 564,528 727,979 Other contract liabilities 11,500 11,500 Total contract liabilities $ 627,082 $ 1,120,228 For the years ended December 31, 2019 and 2018, the Company recorded $380,749 and $428,481, respectively, in animation revenue and $461,843 and $468,277, 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, 2019 and 2018. The Company uses the market approach to measure fair value for its Level 1 financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The respective carrying value of certain balance sheet financial instruments approximates its fair value. These financial instruments include cash, trade receivables, related party payables, accounts payable, accrued liabilities and short-term borrowings. Fair values were estimated to approximate carrying values for these financial instruments since they are short term in nature, and they are receivable or payable on demand. The estimated fair value of assets and liabilities acquired in business combinations and reporting units and long-lived assets used in the related asset impairment tests utilize inputs classified as Level 3 in the fair value hierarchy. The Company determines the fair value of contingent consideration based on a probability-weighted discounted cash flow analysis. The fair value remeasurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in the fair value hierarchy. In each period, the Company reassesses its current estimates of performance relative to the stated targets and adjusts the liability to fair value. Any such adjustments are included as a component of Other Income (Expense) in the Consolidated Statements of Operations and Comprehensive Loss. The following table summarizes the change in the Company’s financial assets and liabilities measured at fair value as of December 31, 2019 and 2018. Fair value, January 1, 2018 $ 429,000 Change in fair value – Fair value, December 31, 2018 $ 429,000 Change in fair value (429,000 ) Fair value, December 31, 2019 $ – | |
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. | |
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 during the fourth quarter of each year and more frequently whenever events or changes in circumstances indicate that the fair value of the asset may be less than the carrying amount. Goodwill impairment testing is a two-step process performed at the reporting unit level. Step one compares the fair value of the reporting unit to its carrying amount. The fair value of the reporting unit is determined by considering both the income approach and market approaches. The fair values calculated under the income approach and market approaches are weighted based on circumstances surrounding the reporting unit. Under the income approach, the Company determines fair value based on estimated future cash flows of the reporting unit, which are discounted to the present value using discount factors that consider the timing and risk of cash flows. For the discount rate, the Company relies on the capital asset pricing model approach, which includes an assessment of the risk-free interest rate, the rate of return from publicly traded stocks, the Company’s risk relative to the overall market, the Company’s size and industry and other Company-specific risks. Other significant assumptions used in the income approach include the terminal value, growth rates, future capital expenditures and changes in future working capital requirements. The market approaches use key multiples from guideline businesses that are comparable and are traded on a public market. If the fair value of the reporting unit is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount exceeds its fair value, then the second step must be completed to measure the amount of impairment, if any. Step two calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets of the reporting unit from the fair value of the reporting unit as calculated in step one. In this step, the fair value of the reporting unit is allocated to all of the reporting unit’s assets and liabilities in a hypothetical purchase price allocation as if the reporting unit had been acquired on that date. If the carrying amount of goodwill exceeds the implied fair value of goodwill, an impairment loss is recognized in an amount equal to the excess. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates, strategic plans, and future market conditions, among others. There can be no assurance that the Company’s estimates and assumptions made for purposes of the goodwill impairment testing will prove to be accurate predictions of the future. Changes in assumptions and estimates could cause the Company to perform an impairment test prior to scheduled annual impairment tests. The Company performed its annual fair value assessment at December 31, 2019, on its subsidiaries with material goodwill and intangible asset amounts on their respective balance sheets and determined that no impairment exists. | |
Long-Lived Assets | Long-Lived Assets The Company evaluates the recoverability of its long-lived assets whenever events or changes in circumstances have indicated that an asset may not be recoverable. The long-lived asset is grouped with other assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows is less than the carrying value of the assets, the assets are written down to the estimated fair value. The Company evaluated the recoverability of its long-lived assets on December 31, 2019 and 2018, 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 In February 2016, the FASB issued ASU No. 2016-02, "Leases" (ASC 842). The standard 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. The standard became effective for the Company beginning January 1, 2019. The Company adopted ASC 842 using the modified retrospective approach, by applying the new standard to all leases existing at the date of initial application. Results and disclosure requirements for reporting periods beginning after January 1, 2019 are presented under ASC 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under ASC 840. The Company elected the package of practical expedients permitted under the standard, which also allowed the Company to carry forward historical lease classifications. The Company also elected the practical expedient related to treating lease and non-lease components as a single lease component for all equipment leases as well as electing a policy exclusion permitting leases with an original lease term of less than one year to be excluded from the ROU assets and lease liabilities. 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. As a result of the adoption of ASC 842 on January 1, 2019, the Company recorded both operating lease ROU assets of $1,032,898 and operating lease liabilities of $1,032,898. The adoption did not impact the Company's beginning retained earnings, or prior year consolidated statements of income and statements of cash flows. | |
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 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) Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is evaluating the impact of this guidance on its unaudited condensed consolidated financial statements. | 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 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) |
2. Summary of Significant Acc_3
2. Summary of Significant Accounting Policies (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Accounting Policies [Abstract] | ||
Schedule of contract assets and liabilities | The following table depicts the composition of our contract assets and liabilities as of September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 Animation contract assets $ 393,448 $ 513,388 Web filtering contract assets 45,692 24,937 Other contract assets 7,337 7,337 Total contract assets $ 446,477 $ 545,662 Animation contract liabilities $ 137,120 $ 51,054 Web filtering contract liabilities 593,638 564,528 Other contract liabilities 11,500 11,500 Total contract liabilities $ 742,258 $ 627,082 | The following table depicts the composition of our contract assets and liabilities as of December 31, 2019 and 2018: December 31, 2019 December 31, 2018 Animation contract assets $ 513,388 $ 1,040,309 Web filtering contract assets 24,937 74,743 Other contract assets 7,337 8,441 Total contract assets $ 545,662 $ 1,123,493 Animation contract liabilities $ 51,054 $ 380,749 Web filtering contract liabilities 564,528 727,979 Other contract liabilities 11,500 11,500 Total contract liabilities $ 627,082 $ 1,120,228 |
Schedule of financial assets and liabilities on a recurring basis | The following table summarizes the change in the Company’s financial assets and liabilities measured at fair value as of December 31, 2019 and 2018. Fair value, January 1, 2018 $ 429,000 Change in fair value – Fair value, December 31, 2018 $ 429,000 Change in fair value (429,000 ) Fair value, December 31, 2019 $ – | |
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) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Receivables [Abstract] | ||
Schedule of accounts receivable | The following table sets forth the components of the Company’s accounts receivable at September 30, 2020, and December 31, 2019: September 30, 2020 December 31, 2019 Billed accounts receivable $ 417,841 $ 353,778 Unbilled accounts receivable 72,539 233,869 Allowance for doubtful accounts (43,903 ) (41,985 ) Total accounts receivable, net $ 446,477 $ 545,662 | The following table sets forth the components of the Company’s accounts receivable at December 31, 2019 and 2018: December 31, 2019 December 31, 2018 Billed accounts receivable $ 353,778 $ 419,802 Unbilled accounts receivable 233,869 703,691 Allowance for doubtful accounts (41,985 ) – Total accounts receivable, net $ 545,662 $ 1,123,493 |
4. Prepaid Expenses and Other_2
4. Prepaid Expenses and Other Current Assets (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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, 2019 and 2018: December 31, 2019 December 31, 2018 Collaborative development agreement $ – $ 95,766 Prepaid rent 17,863 31,773 Vendor advances 6,221 7,867 Prepaid service agreements 172,602 174,920 Employee advance and other payroll related items 56,356 16,208 Other prepaid expenses and current assets 76,086 123,306 Total $ 329,128 $ 449,840 |
5. Property and Equipment (Tabl
5. Property and Equipment (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
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 September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 Cost Accumulated Depreciation Net Book Value Cost Accumulated Depreciation Net Book Value Capital assets subject to depreciation: Computers, software and office equipment $ 2,805,657 $ (2,175,870 ) $ 629,787 $ 2,184,327 $ (1,882,567 ) $ 301,760 Machinery and equipment 185,909 (146,739 ) 39,170 175,761 (125,272 ) 50,489 Vehicles 163,525 (99,737 ) 63,788 158,849 (77,133 ) 81,716 Furniture and fixtures 422,234 (357,928 ) 64,306 399,512 (323,771 ) 75,741 Leasehold improvements 1,143,703 (877,113 ) 266,590 1,081,076 (764,070 ) 317,006 Total fixed assets 4,721,028 (3,657,387 ) 1,063,641 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 $ 4,747,622 $ (3,657,387 ) $ 1,090,235 $ 4,024,958 $ (3,172,813 ) $ 852,145 | The following table sets forth the components of the Company’s property and equipment at December 31, 2019 and 2018: December 31, 2019 December 31, 2018 Cost Accumulated Depreciation Net Book Value Cost Accumulated Depreciation Net Book Value Capital assets subject to depreciation: Computers, software and office equipment $ 2,184,327 $ (1,882,567 ) $ 301,760 $ 1,937,987 $ (1,508,104 ) $ 429,883 Machinery and equipment 175,761 (125,272 ) 50,489 167,731 (99,900 ) 67,831 Vehicles 158,849 (77,133 ) 81,716 153,927 (120,728 ) 33,199 Furniture and fixtures 399,512 (323,771 ) 75,741 381,248 (284,410 ) 96,838 Leasehold improvements 1,081,076 (764,070 ) 317,006 1,031,687 (623,125 ) 408,562 Total fixed assets 3,999,525 (3,172,813 ) 826,712 3,672,580 (2,636,267 ) 1,036,313 Capital assets not subject to depreciation: Construction in progress 25,433 – 25,433 – – – Total fixed assets $ 4,024,958 $ (3,172,813 ) $ 852,145 $ 3,672,580 $ (2,636,267 ) $ 1,036,313 |
6. Leases (Tables)
6. Leases (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Leases [Abstract] | ||
Schedule of operating lease liabilities | Information related to the Company's operating ROU assets and related lease liabilities are as follows: Three Months Ended Cash paid for operating lease liabilities $ 266,825 Weighted-average remaining lease term 2.6 Weighted-average discount rate 10 % Minimum future lease payments $ 817,946 The following table presents the amortization of the Company’s lease liabilities under ASC 842 for each of the following years ending December 31: 2020 $ 263,253 2021 304,326 2022 302,781 2023 25,990 2024 and thereafter — | 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 $ 352,693 Weighted-average remaining lease term (in years) 3.2 Weighted-average discount rate 10% Minimum future lease payments $ 1,084,771 The following table presents the amortization of the Company’s lease liabilities under ASC 842 as of December 31, 2019: 2020 $ 263,253 2021 $ 304,326 2022 $ 302,781 2023 $ 25,990 2024 $ – |
7. Goodwill and Intangible As_2
7. Goodwill and Intangible Assets (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Schedule of goodwill | The following table sets forth the changes in the carrying amount of the Company’s goodwill at December 31, 2019 and 2018: Balance, January 1, 2018 $ 8,800,761 Additions, impairments and other changes 52,500 Balance, December 31, 2018 8,853,261 Additions, impairments or other changes – Balance, December 31, 2019 $ 8,853,261 | |
Schedule of intangible assets | The following table sets forth the components of the Company’s intangible assets at September 30, 2020 and December 31, 2019: September 30, 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 $ (676,421 ) $ 923,865 $ 1,600,286 $ (556,400 ) $ 1,043,886 Web filtering software 5.00 1,134,435 (850,826 ) 283,609 1,134,435 (680,661 ) 453,774 Subtotal — 2,734,721 (1,527,248 ) 1,207,473 2,734,721 (1,237,061 ) 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 — $ 7,190,316 $ (1,527,248 ) $ 5,663,068 $ 7,190,316 $ (1,237,061 ) $ 5,953,255 | The following table sets forth the components of the Company’s intangible assets at December 31, 2019 and 2018: December 31, 2019 December 31, 2018 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 $ (556,400 ) $ 1,043,886 $ 1,600,286 $ (396,371 ) $ 1,203,915 Mobile software applications 2.00 282,500 (282,500 ) – 282,500 (282,500 ) – Web filtering software 5.00 1,134,435 (680,661 ) 453,774 1,134,435 (453,774 ) 680,661 Noncompete agreements 2.00 846,638 (846,638 ) – 846,638 (846,638 ) – Subtotal – 3,863,859 (1,979,283 ) 1,497,660 3,863,859 (1,979,283 1,884,576 Intangible assets not subject to amortization: Trade names – 4,455,595 – 4,455,595 4,455,595 – 4,455,595 Total intangible assets – $ 8,319,454 $ (1,979,283 ) $ 5,953,255 $ 8,319,454 $ (1,979,283 ) $ 6,340,171 |
Schedule of amortization | The following table provides information regarding estimated amortization expense for intangible assets subject to amortization for each of the following years ending December 31: 2020 $ 386,916 2021 386,916 2022 160,029 2023 160,029 2024 160,029 Thereafter 243,742 $ 1,497,660 | The following table provides information regarding estimated amortization expense for intangible assets subject to amortization for each of the following years ending December 31: 2020 $ 386,916 2021 386,916 2022 160,029 2023 160,029 2024 160,029 Thereafter 243,742 $ 1,497,660 |
9. Accounts Payable and Accru_2
9. Accounts Payable and Accrued Liabilities (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
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 September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 Executive and employee compensation $ 1,581,802 $ 1,237,531 Interest on convertible notes and promissory notes 154,384 314,309 Other accrued expenses and liabilities — 99,641 Total accrued liabilities $ 1,736,185 $ 1,651,482 | The following table sets forth the components of the Company’s accrued liabilities at December 31, 2019 and 2018. December 31, 2019 December 31, 2018 Earnout consideration payable in connection with NetSpective acquisition $ – $ 362,500 Executive and employee compensation 1,237,531 792,402 Interest on convertible debentures and promissory notes 314,309 210,221 Other accrued expenses and liabilities 99,641 67,914 Total accrued liabilities $ 1,651,482 $ 1,433,037 |
10. Related Party Payables (Tab
10. Related Party Payables (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Related Party Transactions [Abstract] | |
Related party transactions | During the years ended December 31, 2018 and 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 Loan Principal Converted to Equity Share Price Used for conversion Trading price of Grom stock on the date of conversion Shares issued Darren Marks 10/15/2018 333,333 $ 0.31 0.19 1,075,268 12/10/2019 100,000 $ 0.18 0.10 571,429 Melvin Leiner 10/15/2018 166,667 $ 0.31 0.19 537,635 12/10/2019 100,000 $ 0.18 0.10 571,428 |
12. Debt (Tables)
12. Debt (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Debt Disclosure [Abstract] | ||
Schedule of convertible debt | The following tables set forth the components of the Company’s convertible notes as of September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 10% Unsecured Convertible Redeemable Notes – Variable Conversion Price $ 152,860 $ 100,000 10% Secured Convertible Notes with Original Issuance Discounts (OID Notes) 253,249 664,473 12% Senior Secured Convertible Notes (Newbridge) 131,428 289,143 12% Senior Secured Convertible Notes (Original TDH Notes) 933,678 4,000,000 12% Senior Secured Convertible Notes (TDH Secured Notes) 1,773,722 505,000 12% Senior Secured Convertible Notes (Additional Secured Notes) 265,208 — Loan discounts (327,234 ) (224,958 ) Total convertible notes, net 3,182,911 5,333,658 Less: current portion of convertible notes, net (1,908,168 ) (4,828,658 ) Convertible notes, net $ 1,274,743 $ 505,000 | The following tables set forth the components of the Company’s convertible notes as of December 31, 2019 and 2018: December 31, December 31, 0.68% Unsecured Convertible Redeemable Note (TeleMate) $ – $ 1,000,000 10% Unsecured Convertible Redeemable Note – Variable Conversion Price 100,000 – 10% Senior Secured Convertible Notes 4,000,000 – 12% Senior Secured Convertible Notes (TDH Secured Notes) 505,000 – 12% Senior Secured Convertible Notes (Newbridge) 289,143 552,000 10% Secured Convertible Notes with Original Issuance Discounts 664,473 2,270,708 Loan discounts (224,958 ) (735,871 ) Less: current portion (4,828,658 ) (676,223 ) Total convertible notes, net $ 505,000 $ 2,410,614 |
Schedule of secured promissory notes | The following tables set forth the components of the Company’s senior, secured promissory notes at December 31, 2019 and 2018: December 31, December 31, Principal value of promissory notes $ – $ 4,000,000 Loan discounts – (171,182 ) Total promissory notes, net $ – $ 3,828,818 | |
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: 2020 $ 707,917 2021 $ 1,365,570 2022 $ 544,701 2023 $ 613,782 2024 $ 210,666 | The principal repayments based upon the maturity dates of the Company’s borrowings for each of the next five years are as follows: 2020 $ 4,827,643 2021 $ 417,663 2022 $ 128,924 2023 $ 145,275 2024 and thereafter $ 39,111 |
13. Income Taxes (Tables)
13. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
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, 2019 and 2018: December 31, 2019 December 31, 2018 Current: Federal $ – $ – State and local – – Foreign – 74,356 Total current – 74,356 Deferred: Federal – – State and local – – Foreign 35,375 (59,412 ) Total deferred 35,375 (59,412 ) Total $ 35,375 $ 14,944 |
Schedule of reconciliation of effective income tax rate | 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, 2019 and 2018: December 31, December 31, 2018 Tax benefit at the statutory federal rate – % – % Increase (decrease) in rate(s) resulting from: Foreign operations, net (0.8 ) (0.3 ) Change in deferred taxes 21.8 21.3 Change in valuation allowance (21.8 ) (21.3 ) Total (0.8 )% (0.3 )% |
Schedule of income tax payable | The following tables set forth the components of income taxes payable as of December 31, 2019 and 2018: December 31, 2019 December 31, 2018 Federal $ – $ – State and local – – Foreign – 41,907 Total $ – $ 41,907 |
Schedule of deferred income taxes | The following tables set forth the components of deferred income taxes as of December 31, 2019 and 2018: December 31, 2019 December 31, 2018 Non-current deferred tax assets: Retirement benefits $ 68,169 $ 67,439 Write down of investment(s) 65,420 62,421 Deferred revenue net 59,016 96,090 Other 45,976 23,833 Net operating loss carryforwards 4,661,804 4,150,813 Less: valuation allowance (4,661,804 ) (4,150,813 ) Total non-current deferred tax asset 238,581 249,783 Total deferred tax asset $ 238,581 $ 249,783 |
14. Stockholders' Equity (Table
14. Stockholders' Equity (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Equity [Abstract] | ||
Schedule of warrants | The following table reflects all outstanding and exercisable warrants at September 30, 2020 and December 31, 2019. All warrants are exercisable for a period of five years from the date of issuance: Number of Warrants Outstanding Weighted Average Exercise Price Weighted Average 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 500,000 $ 0.10 Warrants exercised — $ — Warrants forfeited — $ — Balance September 30, 2020 6,164,744 $ 0.26 1.34 | The following table reflects all outstanding and exercisable warrants at December 31, 2019 and 2018. All stock warrants are exercisable for a period of approximately five years from the date of issuance. Number of Warrants Outstanding Weighted Avg. Exercise Price Weighted Avg. Contractual Life (Yrs.) Balance January 1, 2018 1,038,365 $ 1.36 2.38 Warrants issued – $ – Warrants exercised (– ) $ – Warrants forfeited (256,455 ) $ – December 31, 2018 781,910 $ 1.36 1.38 Warrants issued 5,450,000 $ 0.25 Warrants exercised (– ) $ – Warrants forfeited (567,166 ) $ – Balance 31, 2019 5,664,744 $ 0.28 1.79 |
Schedule of options | The following table represents all outstanding and exercisable stock options as of September 30, 2020. Year Issued Options Options Options Vested Strike Price Weighted Average Remaining Life (Yrs.) 2013 7,735,350 (834,000 ) 6,901,350 6,901,350 $ 0.24 2.97 2015 11,467,500 (11,467,500 ) — — $ 0.36 — 2016 5,421,000 — 5,421,000 5,421,000 $ 0.78 0.44 2018 60,000 — 60,000 60,000 $ 0.78 2.58 Total 24,683,850 (12,301,500 ) 12,382,348 12,382,348 $ 0.48 1.51 | The following table represents all outstanding and exercisable stock options as of December 31, 2019. Year Issued Options Options Options Vested Strike Price Weighted Average Remaining Life (Yrs.) 2013 7,735,350 (834,000 ) 6,901,350 6,901,350 $ 0.24 3.72 2015 11,467,500 – 11,467,500 11,467,500 $ 0.36 0.31 2016 5,421,000 – 5,421,000 5,421,000 $ 0.78 1.19 2018 60,000 – 60,000 60,000 $ 0.78 3.33 Total 24,683,850 (834,000 ) 23,849,850 23,849,850 $ 0.59 2.09 |
15. Commitments and Contingen_2
15. Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum payments | The future minimum payment obligations as of December 31, 2019, for operating leases are as follows: 2020 $ 352,888 2021 $ 367,636 2022 $ 335,659 2023 $ 28,588 2024 $ – |
2. Summary of Significant Acc_4
2. Summary of Significant Accounting Policies (Details - Contract Assets and Liabilities) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Contract assets | $ 446,477 | $ 545,662 | $ 1,123,493 |
Contract liabilities | 742,258 | 627,082 | 1,120,228 |
Animation Contracts [Member] | |||
Contract assets | 393,448 | 513,388 | 1,040,309 |
Contract liabilities | 137,120 | 51,054 | 380,749 |
Web Filtering Contract [Member] | |||
Contract assets | 45,692 | 24,937 | 74,743 |
Contract liabilities | 593,638 | 564,528 | 727,979 |
Other Contracts [Member] | |||
Contract assets | 7,337 | 7,337 | 8,441 |
Contract liabilities | $ 11,500 | $ 11,500 | $ 11,500 |
2. Summary of Significant Acc_5
2. Summary of Significant Accounting Policies (Details - Change in fair value) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||
Derivative fair value, beginning balance | $ 429,000 | $ 429,000 |
Change in fair value | (429,000) | 0 |
Derivative fair value, ending balance | $ 0 | $ 429,000 |
2. Summary of Significant Acc_6
2. Summary of Significant Accounting Policies (Details - Property useful lives) | 12 Months Ended |
Dec. 31, 2019 | |
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_7
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Jan. 02, 2019 | |
Righ-of-use asset | $ 670,621 | $ 670,621 | $ 874,159 | $ 0 | $ 1,032,898 | ||
Operating lease liability | $ 1,032,898 | ||||||
Impairment of intangible assets | 0 | 0 | |||||
Revenue | $ 1,439,155 | $ 2,233,747 | 4,478,373 | $ 6,275,688 | 8,296,997 | 8,644,383 | |
Animation Revenue [Member] | |||||||
Revenue | 4,015,061 | 5,841,142 | 380,749 | 428,481 | |||
Web Filtering Revenue [Member] | |||||||
Revenue | $ 460,984 | $ 428,644 | $ 461,843 | $ 468,277 | |||
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 ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Receivables [Abstract] | |||
Billed accounts receivable | $ 417,841 | $ 353,778 | $ 419,802 |
Unbilled accounts receivable | 72,539 | 233,869 | 703,691 |
Allowance for doubtful accounts | (43,903) | (41,985) | 0 |
Total accounts receivable, net | $ 446,477 | $ 545,662 | $ 1,123,493 |
3. Accounts Receivable (Detai_2
3. Accounts Receivable (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Provision for doubtful accounts | $ 0 | $ 41,985 | $ 0 |
Sales Revenue, Net [Member] | Three Customers [Member] | |||
Concentration percentage | 72.30% | 42.30% | 50.10% |
Accounts Receivable [Member] | Three Customers [Member] | |||
Concentration percentage | 56.40% | ||
Accounts Receivable [Member] | One Customer [Member] | |||
Concentration percentage | 38.70% | 9.20% |
4. Prepaid Expenses and Other_3
4. Prepaid Expenses and Other Current Assets (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Prepaid expenses and other current assets | $ 314,845 | $ 329,128 | $ 449,840 |
Collaborative Development Agreement [Member] | |||
Prepaid expenses and other current assets | 0 | 95,766 | |
Prepaid Rent [Member] | |||
Prepaid expenses and other current assets | 17,863 | 31,773 | |
Vendor Advances [Member] | |||
Prepaid expenses and other current assets | 6,221 | 7,867 | |
Prepaid Service Agreements [Member] | |||
Prepaid expenses and other current assets | 172,602 | 174,920 | |
Employee Advance and Other Payroll Related Items [Member] | |||
Prepaid expenses and other current assets | 56,356 | 16,208 | |
Other Prepaid Expenses and Current Assets [Member] | |||
Prepaid expenses and other current assets | $ 76,086 | $ 123,306 |
5. Property and Equipment (Deta
5. Property and Equipment (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Property and equipment, gross | $ 4,747,622 | $ 4,024,958 | $ 3,672,580 |
Accumulated depreciation | (3,657,387) | (3,172,813) | (2,636,267) |
Property and equipment, net | 1,090,235 | 852,145 | 1,036,313 |
Computers, Software and Office Equipment [Member] | |||
Property and equipment, gross | 2,805,657 | 2,184,327 | 1,937,987 |
Accumulated depreciation | (2,175,870) | (1,882,567) | (1,508,104) |
Property and equipment, net | 629,787 | 301,760 | 429,883 |
Machinery and Equipment [Member] | |||
Property and equipment, gross | 185,909 | 175,761 | 167,731 |
Accumulated depreciation | (146,739) | (125,272) | (99,900) |
Property and equipment, net | 39,170 | 50,489 | 67,831 |
Vehicles [Member] | |||
Property and equipment, gross | 163,525 | 158,849 | 153,927 |
Accumulated depreciation | (99,737) | (77,133) | (120,728) |
Property and equipment, net | 63,788 | 81,716 | 33,199 |
Furniture and Fixtures [Member] | |||
Property and equipment, gross | 422,234 | 399,512 | 381,248 |
Accumulated depreciation | (357,928) | (323,771) | (284,410) |
Property and equipment, net | 64,306 | 75,741 | 96,838 |
Leasehold Improvements [Member] | |||
Property and equipment, gross | 1,143,703 | 1,081,076 | 1,031,687 |
Accumulated depreciation | (877,113) | (764,070) | (623,125) |
Property and equipment, net | 266,590 | 317,006 | 408,562 |
Construction in Progress [Member] | |||
Property and equipment, gross | 26,594 | 25,433 | 0 |
Accumulated depreciation | 0 | 0 | 0 |
Property and equipment, net | $ 26,594 | $ 25,433 | $ 0 |
5. Property and Equipment (De_2
5. Property and Equipment (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 333,473 | $ 374,584 | $ 477,079 | $ 395,556 |
6. Leases (Details)
6. Leases (Details) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Leases [Abstract] | ||
Cash paid for operting lease liabilities | $ 266,825 | $ 352,693 |
Weighted-average remaining lease term | 2 years 7 months 6 days | 3 years 2 months 12 days |
Weighted average discount rate | 10.00% | 10.00% |
Minimum future lease payments | $ 817,946 | $ 1,084,771 |
Future lease payment 2020 | 263,253 | 263,253 |
Future lease payment 2021 | 304,326 | 304,326 |
Future lease payment 2022 | 302,781 | 302,781 |
Future lease payment 2023 | 25,990 | 25,990 |
Future lease payment 2024 | 0 | 0 |
Total | $ 817,946 | $ 1,084,771 |
6. Leases (Details Narrative)
6. Leases (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Dec. 31, 2019 | Jan. 02, 2019 | Dec. 31, 2018 | |
Leases [Abstract] | ||||
Righ-of-use asset | $ 670,621 | $ 874,159 | $ 1,032,898 | $ 0 |
Operating lease liability current | 294,058 | 263,252 | 0 | |
Operating lease liability noncurrent | 404,853 | 633,098 | $ 0 | |
Lease costs | $ 272,980 | $ 375,096 |
7. Goodwill and Intangible As_3
7. Goodwill and Intangible Assets (Details - Goodwill) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill, beginning balance | $ 8,853,261 | $ 8,800,761 |
Goodwill additions | 0 | 52,500 |
Goodwill, ending balance | $ 8,853,261 | $ 8,853,261 |
7. Goodwill and Intangible As_4
7. Goodwill and Intangible Assets (Details - Intangibles) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Finite intangible assets, gross | $ 2,734,721 | $ 3,863,859 | $ 3,863,859 |
Accumulated amortization | (1,527,248) | (1,979,283) | (1,979,283) |
Finite intangible assets, net | 1,207,473 | 1,497,660 | 1,884,576 |
Indefinite lived intangible asset | 8,319,454 | 8,319,454 | |
Total intangible assets | 5,663,068 | 5,953,255 | 6,340,171 |
Trade Names [Member] | |||
Indefinite lived intangible asset | 4,455,595 | 4,455,595 | 4,455,595 |
Customer Relationships [Member] | |||
Finite intangible assets, gross | 1,600,286 | 1,600,286 | 1,600,286 |
Accumulated amortization | (676,421) | (556,400) | (396,371) |
Finite intangible assets, net | $ 923,865 | $ 1,043,886 | 1,203,915 |
Amortization period | 10 years | 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 | 1,134,435 |
Accumulated amortization | (850,826) | (680,661) | (453,774) |
Finite intangible assets, net | $ 283,609 | $ 453,774 | 680,661 |
Amortization period | 5 years | 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 ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Future amortization 2020 | $ 386,916 | ||
Future amortization 2021 | 386,916 | ||
Future amortization 2022 | 160,029 | ||
Future amortization 2023 | 160,029 | ||
Future amortization 2024 | 160,029 | ||
Future amortization Thereafter | 243,742 | ||
Future amortization total | $ 1,207,473 | $ 1,497,660 | $ 1,884,576 |
7. Goodwill and Intangible As_6
7. Goodwill and Intangible Assets (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Amortization expense | $ 290,187 | $ 290,187 | $ 386,916 | $ 428,686 |
Stock issued for acquisition, value | $ 52,500 | |||
Bonnie Boat & Friends [Member] | ||||
Stock issued for acquisition, shares | 150,000 | |||
Stock issued for acquisition, value | $ 52,000 |
9. Accounts Payable and Accru_3
9. Accounts Payable and Accrued Liabilities (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Payables and Accruals [Abstract] | |||
Earnout consideration payable in connection with Netspective acquisition | $ 0 | $ 362,500 | |
Executive and employee compensation | $ 1,581,802 | 1,237,531 | 792,402 |
Interest on convertible debentures and promissory notes | 154,384 | 314,309 | 210,221 |
Other accrued expenses and liabilities | 0 | 99,641 | 67,914 |
Total accrued liabilities | $ 1,736,185 | $ 1,651,482 | $ 1,433,037 |
9. Accounts Payable and Accru_4
9. Accounts Payable and Accrued Liabilities (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Stock issued for earnout consideration, value | $ 52,500 | |
NetSpective [Member] | ||
Stock issued for earnout consideration, shares | 465,113 | |
Stock issued for earnout consideration, value | $ 362,500 |
10. Related Party Payables (Det
10. Related Party Payables (Details) - USD ($) | 12 Months Ended | |||
Dec. 31, 2019 | Dec. 31, 2018 | Dec. 10, 2019 | Oct. 15, 2018 | |
Darren Marks [Member] | ||||
Debt converted, amount converted | $ 100,000 | $ 333,333 | ||
Debt converted, shares issued | 571,429 | 1,075,268 | ||
Share price used for conversion | $ 0.18 | $ 0.31 | ||
Trading price of Grom stock on date of conversion | .10 | 0.19 | ||
Melvin Leiner [Member] | ||||
Debt converted, amount converted | $ 100,000 | $ 166,667 | ||
Debt converted, shares issued | 571,428 | 537,635 | ||
Share price used for conversion | 0.18 | 0.31 | ||
Trading price of Grom stock on date of conversion | $ 0.10 | $ 0.19 |
10. Related Party Payables (D_2
10. Related Party Payables (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2020 | |
Accounts payable, related parties | $ 462,137 | $ 1,181,645 | $ 213,233 |
Mark Family [Member] | |||
Wages and salaries | 78,652 | 180,800 | |
Marks LLC [Member] | |||
Accounts payable, related parties | 215,122 | 469,506 | 74,529 |
Leiner LLC [Member] | |||
Accounts payable, related parties | 210,929 | 451,944 | $ 90,475 |
Rutherford [Member] | |||
Accounts payable, related parties | $ 50,000 | 50,000 | |
Dearings [Member] | |||
Accounts payable, related parties | $ 435,085 |
11. Other Noncurrent Liabilit_2
11. Other Noncurrent Liabilities (Details Narrative) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Other Liabilities Disclosure [Abstract] | ||
Accrued retirement benefit | $ 227,229 | $ 224,797 |
12. Debt (Details - Convertible
12. Debt (Details - Convertible debentures) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Convertible debt, current | $ (1,908,168) | $ (4,828,656) | $ (676,223) |
Convertible debt, net | 1,274,743 | 505,000 | 2,410,614 |
Convertible Debentures [Member] | |||
Unamortized discount | (327,234) | (224,958) | (735,871) |
Convertible Debentures [Member] | Redeemable unsecured Telemate [Member] | |||
Convertible debt, gross | 0 | 1,000,000 | |
Convertible Debentures [Member] | Unsecured Convertible Redeemable Note [Member] | |||
Convertible debt, gross | 152,860 | 100,000 | 0 |
Convertible Debentures [Member] | Secured Convertible notes [Member] | |||
Convertible debt, gross | 4,000,000 | 0 | |
Convertible Debentures [Member] | Senior Secured Convertible TDH Notes [Member] | |||
Convertible debt, gross | 1,773,722 | 0 | 0 |
Convertible Debentures [Member] | Senior Secured Convertible Newbridge [Member] | |||
Convertible debt, gross | 131,428 | 289,143 | 552,000 |
Convertible Debentures [Member] | Secured Convertible Notes OID [Member] | |||
Convertible debt, gross | $ 253,249 | $ 664,473 | $ 2,270,708 |
12. Debt (Details - Secured deb
12. Debt (Details - Secured debt) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Principal value of promissory notes | $ 0 | $ 4,000,000 |
Promissory notes, net | 0 | 3,828,818 |
Secured Debt [Member] | ||
Loan discounts | $ 0 | $ (171,182) |
12. Debt (Details - Debt maturi
12. Debt (Details - Debt maturities) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Debt Disclosure [Abstract] | ||
2020 | $ 707,917 | $ 4,827,643 |
2021 | 1,365,570 | 417,663 |
2022 | 544,701 | 128,924 |
2023 | 613,782 | 145,275 |
2024 and thereafter | $ 210,666 | $ 39,111 |
12. Debt (Details Narrative)
12. Debt (Details Narrative) - USD ($) | Aug. 06, 2020 | Jan. 15, 2019 | Jan. 03, 2018 | Mar. 01, 2020 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Proceeds from convertible debt | $ 3,655,000 | $ 95,000 | $ 600,000 | $ 1,914,702 | |||||||
Stock issued with convertible debt, value | 545,000 | 608,718 | |||||||||
Amortization of loan discount | 510,252 | 417,198 | 638,626 | 628,423 | |||||||
Derivative liability | $ 68,753 | 68,753 | 77,584 | 0 | |||||||
Derivative expense | 0 | $ 42,140 | 0 | 42,140 | 42,140 | 0 | |||||
Gain (loss) on extinguishment of debt | (1,191,089) | $ 0 | (1,191,089) | $ (363,468) | $ (363,468) | 0 | |||||
Unsecured Convertible Redeemable Note [Member] | |||||||||||
Convertible debt, gross | 53,861 | $ 53,861 | |||||||||
Debt initial date | Jul. 9, 2019 | Jul. 9, 2019 | |||||||||
Debt face amount | 100,000 | $ 100,000 | $ 100,000 | ||||||||
Debt maturity date | Aug. 31, 2020 | Jul. 9, 2020 | Jul. 9, 2020 | ||||||||
Proceeds from convertible debt | $ 100,000 | $ 95,000 | $ 95,000 | ||||||||
Debt Instrument, Fee | $ 5,000 | $ 5,000 | $ 5,000 | ||||||||
Debt interest rate | 10.00% | 10.00% | 10.00% | 10.00% | |||||||
Beneficial conversion feature | $ 44,129 | $ 51,730 | $ 51,730 | ||||||||
Derivative liability | $ 85,410 | 85,410 | 85,410 | ||||||||
Debt discount | 43,270 | 43,270 | 43,270 | ||||||||
Derivative expense | 42,140 | 42,140 | |||||||||
Gain on Derivative | 22,764 | $ 7,826 | |||||||||
Debt converted, amount converted | $ 56,049 | ||||||||||
Debt converted, shares issued | 1,158,585 | ||||||||||
TeleMate [Member] | |||||||||||
Debt initial date | Jan. 1, 2017 | ||||||||||
Debt face amount | $ 1,000,000 | ||||||||||
Debt maturity date | Jan. 1, 2020 | ||||||||||
Stock issued with convertible debt, shares | 2,113,428 | ||||||||||
Convertible Notes Payable [Member] | Newbridge Offering [Member] | |||||||||||
Convertible debt, gross | 131,429 | $ 131,429 | $ 289,143 | 552,000 | |||||||
Debt initial date | Nov. 30, 2018 | ||||||||||
Debt face amount | $ 552,000 | $ 552,000 | $ 552,000 | ||||||||
Debt interest rate | 12.00% | 12.00% | 12.00% | ||||||||
Stock issued with convertible debt, shares | 730,974 | 730,974 | |||||||||
Unamortized discount | $ 29,430 | $ 29,430 | $ 161,864 | 338,443 | |||||||
Convertible Notes Payable [Member] | TDH Secured Notes Offering [Member] | |||||||||||
Convertible debt, gross | 505,000 | ||||||||||
Convertible Notes Payable [Member] | OID Notes 2 [Member] | |||||||||||
Convertible debt, gross | 97,250 | 97,250 | 272,250 | 1,313,485 | |||||||
Proceeds from convertible debt | $ 1,313,485 | ||||||||||
Debt interest rate | 10.00% | ||||||||||
Original issue discount | $ 131,348 | ||||||||||
Unamortized discount | 6,500 | $ 202,216 | |||||||||
Debt converted, amount converted | $ 200,000 | ||||||||||
Debt converted, shares issued | 316,000 | ||||||||||
Convertible Notes Payable [Member] | OID Notes 2 [Member] | Inducement to lend [Member] | |||||||||||
Stock issued with convertible debt, shares | 328,371 | 328,371 | |||||||||
Stock issued with convertible debt, value | $ 198,259 | $ 198,259 | |||||||||
Convertible Notes Payable [Member] | OID Notes 1 [Member] | |||||||||||
Convertible debt, gross | 100,000 | 100,000 | 336,223 | 601,223 | |||||||
Proceeds from convertible debt | $ 601,223 | ||||||||||
Debt interest rate | 10.00% | ||||||||||
Original issue discount | $ 60,122 | ||||||||||
Unamortized discount | 0 | 69,122 | |||||||||
Debt converted, amount converted | $ 211,223 | ||||||||||
Debt converted, shares issued | 331,954 | ||||||||||
Convertible Notes Payable [Member] | OID Notes 1 [Member] | Inducement to lend [Member] | |||||||||||
Stock issued with convertible debt, shares | 150,305 | ||||||||||
Stock issued with convertible debt, value | $ 78,321 | ||||||||||
Convertible Notes Payable [Member] | OID Notes 3 [Member] | |||||||||||
Convertible debt, gross | $ 56,000 | 56,000 | 356,000 | 56,000 | |||||||
Proceeds from convertible debt | $ 356,000 | ||||||||||
Debt interest rate | 10.00% | ||||||||||
Original issue discount | $ 71,200 | ||||||||||
Unamortized discount | 112,475 | $ 6,594 | |||||||||
Convertible Notes Payable [Member] | OID Notes 3 [Member] | Inducement to lend [Member] | |||||||||||
Stock issued with convertible debt, shares | 203,000 | 203,000 | |||||||||
Stock issued with convertible debt, value | $ 62,269 | $ 62,269 | |||||||||
TDH Acquisition Agreement [Member] | First Amendment [Member] | |||||||||||
Debt maturity date | Jul. 1, 2019 | ||||||||||
Debt interest rate | 10.00% | ||||||||||
Earnout period maturity date | Dec. 31, 2019 | ||||||||||
TDH Acquisition Agreement [Member] | First Amendment [Member] | TDA Sellers [Member] | |||||||||||
Stock issued with convertible debt, shares | 800,000 | 800,000 | |||||||||
Stock issued with convertible debt, value | $ 220,000 | $ 480,000 | |||||||||
TDH Acquisition Agreement [Member] | Second Amendment [Member] | |||||||||||
Debt maturity date | Apr. 2, 2020 | ||||||||||
Debt conversion price per share | $ 0.27 | ||||||||||
Gain (loss) on extinguishment of debt | $ (363,468) | $ (363,468) |
13. Income Taxes - (Details -
13. Income Taxes - (Details - Schedule of income tax expense (benefit)) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Current: | ||||||
Federal | $ 0 | $ 0 | ||||
State and local | 0 | 0 | ||||
Foreign | 0 | 74,356 | ||||
Total current | 0 | 74,356 | ||||
Deferred: | ||||||
Federal | 0 | 0 | ||||
State and local | 0 | 0 | ||||
Foreign | 35,375 | (59,412) | ||||
Total deferred | 35,375 | (59,412) | ||||
Total | $ 0 | $ 0 | $ 0 | $ 0 | $ 35,375 | $ 14,944 |
13. Income Taxes - (Details _2
13. Income Taxes - (Details - Reconciliation of income tax expense (benefit)) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Tax benefit at statutory federal rate | 0.00% | 0.00% |
Increase (decrease) in rate(s) resulting from: | ||
Foreign operations, net | (0.80%) | (0.30%) |
Change in deferred taxes | 21.80% | 21.30% |
Change in valuation allowance | (21.30%) | (21.30%) |
Total | (0.30%) | (0.30%) |
13. Income Taxes - (Details _3
13. Income Taxes - (Details - Schedule of income taxes payable) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Income taxes payable | $ 0 | $ 41,097 |
Federal [Member] | ||
Income taxes payable | 0 | 0 |
State and Local [Member] | ||
Income taxes payable | 0 | 0 |
Foreign [Member] | ||
Income taxes payable | $ 0 | $ 41,907 |
13. Income Taxes - (Details- S
13. Income Taxes - (Details- Schedule of deferred income taxes) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Non-current deferred tax assets: | ||
Retirement benefits | $ 68,169 | $ 67,439 |
Write down of investment(s) | 65,420 | 62,421 |
Deferred revenue net | 59,016 | 96,090 |
Other | 45,976 | 23,833 |
Net operating loss carryforwards | 4,661,804 | 4,150,813 |
Less: valuation allowance | (4,661,804) | (4,150,813) |
Total non-current deferred tax asset | 238,581 | 249,783 |
Total deferred tax asset | $ 238,581 | $ 249,783 |
13. Income Taxes (Details Narra
13. Income Taxes (Details Narrative) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Income Tax Disclosure [Abstract] | |
Operating loss carryforward | $ 21,200,000 |
Operating loss carryforward expiration date | Dec. 31, 2038 |
14. Stockholders' Equity (Detai
14. Stockholders' Equity (Details - Warrant activity) - $ / shares | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Number of warrants | ||||
Warrants outstanding, beginning balance | 5,664,744 | 781,910 | 1,038,365 | |
Warrants issued | 500,000 | 5,450,000 | 0 | |
Warrants exercised | 0 | 0 | 0 | |
Warrants forfeited | 0 | (567,166) | 256,455 | |
Warrants outstanding, ending balance | 6,164,744 | 5,664,744 | 781,910 | 1,038,365 |
Weighted Average Exercise Price | ||||
Weighted Average Exercise Price, Warrants outstanding, beginning balance | $ 0.28 | $ 1.36 | $ 1.36 | |
Weighted Average Exercise Price, Warrants issued | 0.1 | 0.25 | ||
Weighted Average Exercise Price, Warrants exercised | ||||
Weighted Average Exercise Price, Warrants forfeited | ||||
Weighted Average Exercise Price, Warrants outstanding, ending balance | $ 0.26 | $ 0.28 | $ 1.36 | $ 1.36 |
Average Remaining Contractual Term, Warrants outstanding | 1 year 4 months 2 days | 1 year 9 months 14 days | 1 year 4 months 17 days | 2 years 4 months 17 days |
14. Stockholders' Equity (Det_2
14. Stockholders' Equity (Details - Option Activity) - Options [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Options issued | 24,683,850 | 24,683,850 |
Options forfeited | (12,301,500) | (834,000) |
Options outstanding | 12,382,348 | 23,849,850 |
Vested options | 12,382,348 | 23,849,850 |
Strike price | $ 0.48 | $ 0.59 |
Weighted average remaining life | 1 year 6 months 3 days | 2 years 1 month 2 days |
Option 1 [Member] | ||
Options issued | 7,735,350 | 7,735,350 |
Options forfeited | (834,000) | (834,000) |
Options outstanding | 6,901,350 | 6,901,350 |
Vested options | 6,901,350 | 6,901,350 |
Strike price | $ 0.24 | $ 0.24 |
Weighted average remaining life | 2 years 11 months 19 days | 3 years 8 months 19 days |
Option 2 [Member] | ||
Options issued | 11,467,500 | 11,467,500 |
Options forfeited | (11,467,500) | 0 |
Options outstanding | 0 | 11,467,500 |
Vested options | 0 | 11,467,500 |
Strike price | $ 0.36 | $ 0.36 |
Weighted average remaining life | 3 months 22 days | |
Option 3 [Member] | ||
Options issued | 5,421,000 | 5,421,000 |
Options forfeited | 0 | 0 |
Options outstanding | 5,421,000 | 5,421,000 |
Vested options | 5,421,000 | 5,421,000 |
Strike price | $ 0.78 | $ 0.78 |
Weighted average remaining life | 5 months 9 days | 1 year 2 months 8 days |
Option 4 [Member] | ||
Options issued | 60,000 | 60,000 |
Options forfeited | 0 | 0 |
Options outstanding | 60,000 | 60,000 |
Vested options | 60,000 | 60,000 |
Strike price | $ 0.78 | $ 0.78 |
Weighted average remaining life | 2 years 6 months 29 days | 3 years 3 months 29 days |
14. Stockholders' Equity (Det_3
14. Stockholders' Equity (Details Narrative) - USD ($) | 2 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||
Mar. 11, 2019 | Feb. 27, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Apr. 02, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Feb. 22, 2019 | |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | ||||||||
Preferred stock, par value | $ 0.001 | $ 0.001 | ||||||||
Proceeds from the issuance of preferred stock | $ 483,500 | $ 411,151 | $ 411,151 | $ 0 | ||||||
Proceeds from issuance of common stock | 0 | 1,008,849 | 1,058,849 | 608,717 | ||||||
Proceeds from warrant exercises | 0 | 61,500 | ||||||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, value | 589,440 | 1,321,376 | ||||||||
Issuance of common stock in connection with the amendment of terms of promissory note(s), value | 220,000 | 220,000 | 482,250 | |||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), value | $ 13,486 | 736,014 | 32,418 | |||||||
Issuance of common stock in connection with the acquisition of a business, value | 52,500 | |||||||||
Stock issued for conversion of securities, value | 32,418 | 523,601 | ||||||||
Stock based compensation | $ 0 | $ 16,200 | $ 62,600 | 48,600 | $ 64,800 | 369,318 | ||||
Series A Preferred Stock [Member] | ||||||||||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | 10,000,000 | 2,000,000 | ||||||
Preferred stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | ||||||
Proceeds from the issuance of preferred stock | $ 400,000 | $ 400,000 | $ 125,000 | |||||||
Stock issued new, shares | 400,000 | 400,000 | 125,000 | |||||||
Restricted Stock [Member] | ||||||||||
Stock issued new, shares | 2,000,000 | 2,000,000 | 625,000 | |||||||
Options [Member] | ||||||||||
Stock based compensation | $ 0 | $ 0 | $ 0 | $ 2,300 | ||||||
Convertible debt and interest [Member] | ||||||||||
Stock issued for conversion of securities, shares | 1,158,585 | 12,202,686 | 200,000 | |||||||
Stock issued for conversion of securities, value | $ 56,049 | $ 2,788,199 | $ 30,000 | |||||||
Business Acquisition [Member] | ||||||||||
Issuance of common stock in connection with the acquisition of a business, shares | 150,000 | |||||||||
Issuance of common stock in connection with the acquisition of a business, value | $ 52,500 | |||||||||
Amended Promissory Note [Member] | ||||||||||
Issuance of common stock in connection with the amendment of terms of promissory note(s), shares | 800,000 | 805,000 | ||||||||
Issuance of common stock in connection with the amendment of terms of promissory note(s), value | $ 220,000 | $ 482,500 | ||||||||
Convertible Debentures [Member] | ||||||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), shares | 10,869,677 | 160,260 | 160,260 | 1,432,653 | ||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), value | $ 736,014 | $ 32,418 | $ 32,418 | $ 523,601 | ||||||
OID Notes [Member] | ||||||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), shares | 531,371 | |||||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), value | $ 260,528 | |||||||||
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 | 564,833 | 1,707,690 | 3,995,304 | ||||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, value | $ 50,000 | $ 389,440 | $ 589,440 | $ 1,321,376 | ||||||
Consultants and Other Professionals [Member] | ||||||||||
Stock issued for compensation, shares | 3,877,516 | 2,385,505 | ||||||||
Stock issued for compensation, value | $ 778,411 | $ 825,170 | ||||||||
Employees, Officers and Directors [Member] | ||||||||||
Stock issued for compensation, shares | 1,200,321 | |||||||||
Stock issued for compensation, value | $ 458,918 | |||||||||
Warrant Exercises [Member] | ||||||||||
Stock issued for warrant exercises | 256,455 | |||||||||
Proceeds from warrant exercises | $ 61,500 | |||||||||
Private Placement [Member] | ||||||||||
Stock issued new, shares | 5,450,000 | 3,854,869 | ||||||||
Proceeds from issuance of common stock | $ 545,000 | $ 608,718 | ||||||||
Number of warrants issued | 5,450,000 |
15. Commitments and Contingen_3
15. Commitments and Contingencies (Details) | Dec. 31, 2019USD ($) |
Commitments and Contingencies Disclosure [Abstract] | |
2020 | $ 352,888 |
2021 | 367,636 |
2022 | 335,659 |
2023 | 28,588 |
2024 | $ 0 |
15. Commitments and Contingen_4
15. Commitments and Contingencies (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
NetSpective Division [Member] | ||
Operating lease payment frequency | Monthly | monthly |
Operating lease payment | $ 2,100 | $ 2,100 |
Boca Raton, Florida [Member] | ||
Operating lease payment frequency | Monthly | monthly |
Operating lease payment | $ 4,000 | $ 4,000 |
Manila, Philippines [Member] | ||
Operating lease payment frequency | Monthly | monthly |
Operating lease payment | $ 24,000 | $ 24,000 |
2. Summary of Significant Acc_8
2. Summary of Significant Accounting Policies (Details - Contract Assets and Liabilities) (Sept 2020 Note) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Contract assets | $ 446,477 | $ 545,662 | $ 1,123,493 |
Contract liabilities | 742,258 | 627,082 | 1,120,228 |
Animation Contracts [Member] | |||
Contract assets | 393,448 | 513,388 | 1,040,309 |
Contract liabilities | 137,120 | 51,054 | 380,749 |
Web Filtering Contract [Member] | |||
Contract assets | 45,692 | 24,937 | 74,743 |
Contract liabilities | 593,638 | 564,528 | 727,979 |
Other Contracts [Member] | |||
Contract assets | 7,337 | 7,337 | 8,441 |
Contract liabilities | $ 11,500 | $ 11,500 | $ 11,500 |
2. Summary of Significant Acc_9
2. Summary of Significant Accounting Policies (Details Narrative) (Sept 2020 Note) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Revenue | $ 1,439,155 | $ 2,233,747 | $ 4,478,373 | $ 6,275,688 | $ 8,296,997 | $ 8,644,383 |
Animation Revenue [Member] | ||||||
Revenue | 4,015,061 | 5,841,142 | 380,749 | 428,481 | ||
Web Filtering Revenue [Member] | ||||||
Revenue | $ 460,984 | $ 428,644 | $ 461,843 | $ 468,277 |
3. Accounts Receivable (Detai_3
3. Accounts Receivable (Details Narrative) (Sept 2020 Note) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Provision for doubtful accounts | $ 0 | $ 41,985 | $ 0 |
Sales Revenue, Net [Member] | Three Customers [Member] | |||
Concentration percentage | 72.30% | 42.30% | 50.10% |
Accounts Receivable [Member] | Three Customers [Member] | |||
Concentration percentage | 56.40% | ||
Accounts Receivable [Member] | One Customer [Member] | |||
Concentration percentage | 38.70% | 9.20% |
4. Property and Equipment (Deta
4. Property and Equipment (Details) (Sept 2020 Note) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Property and equipment, gross | $ 4,747,622 | $ 4,024,958 | $ 3,672,580 |
Accumulated depreciation | (3,657,387) | (3,172,813) | (2,636,267) |
Property and equipment, net | 1,090,235 | 852,145 | 1,036,313 |
Computers, Software and Office Equipment [Member] | |||
Property and equipment, gross | 2,805,657 | 2,184,327 | 1,937,987 |
Accumulated depreciation | (2,175,870) | (1,882,567) | (1,508,104) |
Property and equipment, net | 629,787 | 301,760 | 429,883 |
Machinery and Equipment [Member] | |||
Property and equipment, gross | 185,909 | 175,761 | 167,731 |
Accumulated depreciation | (146,739) | (125,272) | (99,900) |
Property and equipment, net | 39,170 | 50,489 | 67,831 |
Vehicles [Member] | |||
Property and equipment, gross | 163,525 | 158,849 | 153,927 |
Accumulated depreciation | (99,737) | (77,133) | (120,728) |
Property and equipment, net | 63,788 | 81,716 | 33,199 |
Furniture and Fixtures [Member] | |||
Property and equipment, gross | 422,234 | 399,512 | 381,248 |
Accumulated depreciation | (357,928) | (323,771) | (284,410) |
Property and equipment, net | 64,306 | 75,741 | 96,838 |
Leasehold Improvements [Member] | |||
Property and equipment, gross | 1,143,703 | 1,081,076 | 1,031,687 |
Accumulated depreciation | (877,113) | (764,070) | (623,125) |
Property and equipment, net | 266,590 | 317,006 | 408,562 |
Construction in Progress [Member] | |||
Property and equipment, gross | 26,594 | 25,433 | 0 |
Accumulated depreciation | 0 | 0 | 0 |
Property and equipment, net | $ 26,594 | $ 25,433 | $ 0 |
6. Goodwill and Intangible Asse
6. Goodwill and Intangible Assets (Details - Intangibles) (Sept 2020 Note) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Finite intangible assets, gross | $ 2,734,721 | $ 3,863,859 | $ 3,863,859 |
Accumulated amortization | (1,527,248) | (1,979,283) | (1,979,283) |
Finite intangible assets, net | 1,207,473 | 1,497,660 | 1,884,576 |
Indefinite lived intangible asset | 8,319,454 | 8,319,454 | |
Total intangible assets, gross | 7,190,316 | 7,190,316 | |
Total intangible assets | 5,663,068 | 5,953,255 | 6,340,171 |
Trade Names [Member] | |||
Indefinite lived intangible asset | 4,455,595 | 4,455,595 | 4,455,595 |
Customer Relationships [Member] | |||
Finite intangible assets, gross | 1,600,286 | 1,600,286 | 1,600,286 |
Accumulated amortization | (676,421) | (556,400) | (396,371) |
Finite intangible assets, net | $ 923,865 | $ 1,043,886 | 1,203,915 |
Amortization period | 10 years | 10 years | |
NetSpective Webfiltering Software [Member] | |||
Finite intangible assets, gross | $ 1,134,435 | $ 1,134,435 | 1,134,435 |
Accumulated amortization | (850,826) | (680,661) | (453,774) |
Finite intangible assets, net | $ 283,609 | $ 453,774 | $ 680,661 |
Amortization period | 5 years | 5 years |
8. Related Party Payables (Deta
8. Related Party Payables (Details Narrative) (Sept 2020 Note) - USD ($) | 9 Months Ended | |||
Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Accounts payable, related parties | $ 213,233 | $ 462,137 | $ 1,181,645 | |
Marks LLC [Member] | ||||
Accounts payable, related parties | 74,529 | 215,122 | 469,506 | |
Leiner LLC [Member] | ||||
Accounts payable, related parties | 90,475 | 210,929 | 451,944 | |
Rutherford [Member] | ||||
Accounts payable, related parties | $ 50,000 | $ 50,000 | ||
Zachary [Member] | ||||
Wages and salaries | $ 21,000 | $ 33,750 | ||
Sarah [Member] | ||||
Wages and salaries | 12,600 | |||
Luke [Member] | ||||
Wages and salaries | 14,400 | |||
Jack [Member] | ||||
Wages and salaries | 1,800 | |||
Victoria [Member] | ||||
Wages and salaries | 2,250 | |||
Caroline [Member] | ||||
Wages and salaries | $ 3,750 |
9. Convertible Notes (Details -
9. Convertible Notes (Details - Convertible debentures) (Sept 2020 Note) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Total convertible notes, net | $ 3,182,911 | $ 5,333,658 | |
Convertible debt, current | (1,908,168) | (4,828,656) | $ (676,223) |
Convertible debt, net | 1,274,743 | 505,000 | 2,410,614 |
Convertible Debentures [Member] | |||
Unamortized discount | (327,234) | (224,958) | (735,871) |
Convertible Debentures [Member] | Unsecured Convertible Redeemable Note [Member] | |||
Convertible debt, gross | 152,860 | 100,000 | 0 |
Convertible Debentures [Member] | Secured Convertible Notes OID [Member] | |||
Convertible debt, gross | 253,249 | 664,473 | 2,270,708 |
Convertible Debentures [Member] | Senior Secured Convertible Newbridge [Member] | |||
Convertible debt, gross | 131,428 | 289,143 | 552,000 |
Convertible Debentures [Member] | Senior Secured Convertible Original TDH Notes [Member] | |||
Convertible debt, gross | 933,678 | 4,000,000 | |
Convertible Debentures [Member] | Senior Secured Convertible TDH Notes [Member] | |||
Convertible debt, gross | 1,773,722 | 0 | $ 0 |
Convertible Debentures [Member] | Senior Secured Convertible Additional Secured Notes [Member] | |||
Convertible debt, gross | $ 265,208 | $ 0 |
9. Convertible Notes (Details N
9. Convertible Notes (Details Narrative) (Sept 2020 Note) - USD ($) | Aug. 06, 2020 | Jan. 15, 2019 | Jan. 03, 2018 | Oct. 02, 2020 | Mar. 01, 2020 | Sep. 30, 2020 | Mar. 16, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Proceeds from convertible debt | $ 3,655,000 | $ 95,000 | $ 600,000 | $ 1,914,702 | |||||||||
Stock issued with convertible debt, value | 545,000 | 608,718 | |||||||||||
Derivative liability | $ 68,753 | 68,753 | 77,584 | 0 | |||||||||
Derivative expense | 0 | $ 42,140 | 0 | 42,140 | 42,140 | 0 | |||||||
Gain (loss) on extinguishment of debt | (1,191,089) | $ 0 | (1,191,089) | $ (363,468) | $ (363,468) | 0 | |||||||
Unsecured Convertible Redeemable Note [Member] | |||||||||||||
Convertible debt, gross | 53,861 | $ 53,861 | |||||||||||
Debt initial date | Jul. 9, 2019 | Jul. 9, 2019 | |||||||||||
Debt face amount | 100,000 | $ 100,000 | $ 100,000 | ||||||||||
Debt maturity date | Aug. 31, 2020 | Jul. 9, 2020 | Jul. 9, 2020 | ||||||||||
Proceeds from convertible debt | $ 100,000 | $ 95,000 | $ 95,000 | ||||||||||
Debt Instrument, Fee | $ 5,000 | $ 5,000 | $ 5,000 | ||||||||||
Debt interest rate | 10.00% | 10.00% | 10.00% | 10.00% | |||||||||
Beneficial conversion feature | $ 44,129 | $ 51,730 | $ 51,730 | ||||||||||
Derivative liability | $ 85,410 | 85,410 | 85,410 | ||||||||||
Debt discount | 43,270 | 43,270 | 43,270 | ||||||||||
Derivative expense | 42,140 | 42,140 | |||||||||||
Gain on Derivative | 22,764 | 7,826 | |||||||||||
Debt converted, amount converted | $ 56,049 | ||||||||||||
Debt converted, shares issued | 1,158,585 | ||||||||||||
Debt default, amount | 3,310 | $ 3,310 | |||||||||||
Unsecured Convertible Redeemable Note [Member] | Subsequent Event [Member] | |||||||||||||
Debt converted, shares issued | 1,535,507 | ||||||||||||
Unsecured Convertible Redeemable Note [Member] | |||||||||||||
Debt default, amount | 100,000 | 100,000 | |||||||||||
Debt default, interest | 5,837 | 5,837 | |||||||||||
Convertible Notes Payable [Member] | OID Notes 1 [Member] | |||||||||||||
Convertible debt, gross | 100,000 | 100,000 | 336,223 | 601,223 | |||||||||
Proceeds from convertible debt | $ 601,223 | ||||||||||||
Debt interest rate | 10.00% | ||||||||||||
Original issue discount | $ 60,122 | ||||||||||||
Unamortized discount | 0 | 69,122 | |||||||||||
Debt converted, amount converted | $ 211,223 | ||||||||||||
Debt converted, shares issued | 331,954 | ||||||||||||
Convertible Notes Payable [Member] | OID Notes 1 [Member] | Inducement to lend [Member] | |||||||||||||
Stock issued with convertible debt, shares | 150,305 | ||||||||||||
Stock issued with convertible debt, value | $ 78,321 | ||||||||||||
Convertible Notes Payable [Member] | OID Notes 2 [Member] | |||||||||||||
Convertible debt, gross | 97,250 | 97,250 | 272,250 | 1,313,485 | |||||||||
Proceeds from convertible debt | $ 1,313,485 | ||||||||||||
Debt interest rate | 10.00% | ||||||||||||
Original issue discount | $ 131,348 | ||||||||||||
Unamortized discount | 6,500 | $ 202,216 | |||||||||||
Debt converted, amount converted | $ 200,000 | ||||||||||||
Debt converted, shares issued | 316,000 | ||||||||||||
Convertible Notes Payable [Member] | OID Notes 2 [Member] | Inducement to lend [Member] | |||||||||||||
Stock issued with convertible debt, shares | 328,371 | 328,371 | |||||||||||
Stock issued with convertible debt, value | $ 198,259 | $ 198,259 | |||||||||||
Convertible Notes Payable [Member] | OID Notes 3 [Member] | |||||||||||||
Convertible debt, gross | 56,000 | 56,000 | 356,000 | 56,000 | |||||||||
Proceeds from convertible debt | $ 356,000 | ||||||||||||
Debt interest rate | 10.00% | ||||||||||||
Original issue discount | $ 71,200 | ||||||||||||
Unamortized discount | 112,475 | $ 6,594 | |||||||||||
Convertible Notes Payable [Member] | OID Notes 3 [Member] | Inducement to lend [Member] | |||||||||||||
Stock issued with convertible debt, shares | 203,000 | 203,000 | |||||||||||
Stock issued with convertible debt, value | $ 62,269 | $ 62,269 | |||||||||||
Convertible Notes Payable [Member] | Newbridge Offering [Member] | |||||||||||||
Convertible debt, gross | 131,429 | $ 131,429 | 289,143 | 552,000 | |||||||||
Debt initial date | Nov. 30, 2018 | ||||||||||||
Debt face amount | $ 552,000 | $ 552,000 | $ 552,000 | ||||||||||
Debt interest rate | 12.00% | 12.00% | 12.00% | ||||||||||
Stock issued with convertible debt, shares | 730,974 | 730,974 | |||||||||||
Unamortized discount | $ 29,430 | $ 29,430 | $ 161,864 | 338,443 | |||||||||
TDH Acquisition Agreement [Member] | First Amendment [Member] | |||||||||||||
Debt maturity date | Jul. 1, 2019 | ||||||||||||
Debt interest rate | 10.00% | ||||||||||||
TDH Acquisition Agreement [Member] | First Amendment [Member] | TDH Sellers [Member] | |||||||||||||
Stock issued with convertible debt, shares | 800,000 | 800,000 | |||||||||||
Stock issued with convertible debt, value | $ 220,000 | $ 480,000 | |||||||||||
TDH Acquisition Agreement [Member] | Second Amendment [Member] | |||||||||||||
Debt maturity date | Apr. 2, 2020 | ||||||||||||
Debt conversion price per share | $ 0.27 | ||||||||||||
Gain (loss) on extinguishment of debt | (363,468) | (363,468) | |||||||||||
TDH Acquisition Agreement [Member] | ThirdAmendment [Member] | |||||||||||||
Debt maturity date | Jun. 30, 2021 | ||||||||||||
Debt interest rate | 12.00% | ||||||||||||
Debt converted, amount converted | $ 361,767 | ||||||||||||
Convertible Debentures [Member] | |||||||||||||
Unamortized discount | 327,234 | 327,234 | 224,958 | 735,871 | |||||||||
Convertible Debentures [Member] | Senior Secured Convertible TDH Notes [Member] | |||||||||||||
Convertible debt, gross | 1,773,722 | $ 1,773,722 | 0 | $ 0 | |||||||||
Debt initial date | Mar. 16, 2020 | ||||||||||||
Debt maturity date | Mar. 16, 2024 | ||||||||||||
Proceeds from convertible debt | $ 3,000,000 | ||||||||||||
Debt converted, amount converted | $ 420,000 | ||||||||||||
Debt converted, shares issued | 6,000,000 | ||||||||||||
Convertible Debentures [Member] | Senior Secured Convertible Additional Secured Notes [Member] | |||||||||||||
Convertible debt, gross | $ 265,208 | $ 265,208 | $ 0 | ||||||||||
Debt initial date | Mar. 16, 2020 | ||||||||||||
Debt maturity date | Mar. 16, 2024 | ||||||||||||
Debt interest rate | 12.00% | 12.00% | |||||||||||
Debt discount | $ 229,984 | $ 229,984 | |||||||||||
Debt converted, amount converted | $ 1,101,000 | $ 148,000 | |||||||||||
Debt converted, shares issued | 1,739,580 | 2,120,000 | |||||||||||
Debt conversion price per share | $ 0.07 | $ 0.07 | |||||||||||
Convertible Debentures [Member] | Senior Secured Convertible Additional Secured Notes [Member] | |||||||||||||
Convertible debt, gross | $ 256,208 | $ 256,208 | |||||||||||
Debt face amount | $ 1,060,000 | $ 1,060,000 | |||||||||||
Debt interest rate | 12.00% | 12.00% | |||||||||||
Debt discount | $ 67,820 | $ 67,820 | |||||||||||
Debt converted, amount converted | $ 782,500 | ||||||||||||
Debt converted, shares issued | 1,236,350 | ||||||||||||
Debt conversion price per share | $ 0.07 | $ 0.07 |
10. Stockholders' Equity (Detai
10. Stockholders' Equity (Details - Warrant activity) (Sept 2020 Note) - $ / shares | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Number of warrants | ||||
Warrants outstanding, beginning balance | 5,664,744 | 781,910 | 1,038,365 | |
Warrants issued | 500,000 | 5,450,000 | 0 | |
Warrants exercised | 0 | 0 | 0 | |
Warrants forfeited | 0 | (567,166) | 256,455 | |
Warrants outstanding, ending balance | 6,164,744 | 5,664,744 | 781,910 | 1,038,365 |
Weighted Average Exercise Price | ||||
Weighted Average Exercise Price, Warrants outstanding, beginning balance | $ 0.28 | $ 1.36 | $ 1.36 | |
Weighted Average Exercise Price, Warrants issued | 0.1 | 0.25 | ||
Weighted Average Exercise Price, Warrants exercised | ||||
Weighted Average Exercise Price, Warrants forfeited | ||||
Weighted Average Exercise Price, Warrants outstanding, ending balance | $ 0.26 | $ 0.28 | $ 1.36 | $ 1.36 |
Average Remaining Contractual Term, Warrants outstanding | 1 year 4 months 2 days | 1 year 9 months 14 days | 1 year 4 months 17 days | 2 years 4 months 17 days |
10. Stockholders' Equity (Det_2
10. Stockholders' Equity (Details - Option Activity) (Sept 2020 Note) - Options [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
Options issued | 24,683,850 | 24,683,850 |
Options forfeited | (12,301,500) | (834,000) |
Options outstanding | 12,382,348 | 23,849,850 |
Vested options | 12,382,348 | 23,849,850 |
Strike price | $ 0.48 | $ 0.59 |
Weighted average remaining life | 1 year 6 months 3 days | 2 years 1 month 2 days |
Option 1 [Member] | ||
Options issued | 7,735,350 | 7,735,350 |
Options forfeited | (834,000) | (834,000) |
Options outstanding | 6,901,350 | 6,901,350 |
Vested options | 6,901,350 | 6,901,350 |
Strike price | $ 0.24 | $ 0.24 |
Weighted average remaining life | 2 years 11 months 19 days | 3 years 8 months 19 days |
Option 2 [Member] | ||
Options issued | 11,467,500 | 11,467,500 |
Options forfeited | (11,467,500) | 0 |
Options outstanding | 0 | 11,467,500 |
Vested options | 0 | 11,467,500 |
Strike price | $ 0.36 | $ 0.36 |
Weighted average remaining life | 3 months 22 days | |
Option 3 [Member] | ||
Options issued | 5,421,000 | 5,421,000 |
Options forfeited | 0 | 0 |
Options outstanding | 5,421,000 | 5,421,000 |
Vested options | 5,421,000 | 5,421,000 |
Strike price | $ 0.78 | $ 0.78 |
Weighted average remaining life | 5 months 9 days | 1 year 2 months 8 days |
Option 4 [Member] | ||
Options issued | 60,000 | 60,000 |
Options forfeited | 0 | 0 |
Options outstanding | 60,000 | 60,000 |
Vested options | 60,000 | 60,000 |
Strike price | $ 0.78 | $ 0.78 |
Weighted average remaining life | 2 years 6 months 29 days | 3 years 3 months 29 days |
10. Stockholders' Equity (Det_3
10. Stockholders' Equity (Details Narrative) (Sept 2020 Note) - USD ($) | Aug. 06, 2020 | Aug. 04, 2020 | Apr. 02, 2019 | Mar. 11, 2019 | Jun. 19, 2020 | Feb. 27, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | Feb. 22, 2019 | Dec. 31, 2017 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | ||||||||||||
Preferred stock, par value | $ 0.001 | $ 0.001 | ||||||||||||
Stock issued for services, value | $ 173,235 | $ 147,799 | $ 555,440 | $ 606,796 | $ 778,411 | $ 825,170 | ||||||||
Preferred stock, shares issued | 925,000 | 0 | ||||||||||||
Preferred stock, shares outstanding | 925,000 | 0 | ||||||||||||
Common stock, par value | $ 0.001 | $ 0.001 | $ .001 | $ .001 | ||||||||||
Common stock, shares authorized | 500,000,000 | 500,000,000 | 200,000,000 | 200,000,000 | ||||||||||
Common stock, shares outstanding | 186,444,137 | 186,444,137 | 167,382,807 | 138,553,655 | ||||||||||
Common stock, shares issued | 186,444,137 | 186,444,137 | 167,382,807 | 138,553,655 | ||||||||||
Warrant exercise price | $ 0.26 | $ 0.26 | $ 0.28 | $ 1.36 | $ 1.36 | |||||||||
Stock issued for compensation, value | $ 458,818 | |||||||||||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, value | $ 589,440 | 1,321,376 | ||||||||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), value | 13,486 | $ 736,014 | 32,418 | |||||||||||
Stock issued for conversion of securities, value | 32,418 | 523,601 | ||||||||||||
Stock based compensation | $ 0 | $ 16,200 | 62,600 | 48,600 | 64,800 | 369,318 | ||||||||
Options [Member] | ||||||||||||||
Stock based compensation | $ 0 | $ 0 | $ 0 | $ 2,300 | ||||||||||
Convertible debt and interest [Member] | ||||||||||||||
Stock issued for conversion of securities, shares | 1,158,585 | 12,202,686 | 200,000 | |||||||||||
Stock issued for conversion of securities, value | $ 56,049 | $ 2,788,199 | $ 30,000 | |||||||||||
Convertible Debentures [Member] | ||||||||||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), shares | 10,869,677 | 160,260 | 160,260 | 1,432,653 | ||||||||||
Issuance of common stock in connection with the issuance of convertible debenture(s), value | $ 736,014 | $ 32,418 | $ 32,418 | $ 523,601 | ||||||||||
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 | 564,833 | 1,707,690 | 3,995,304 | ||||||||||
Issuance of common stock in lieu of cash for loans payable and other accrued obligations, value | $ 50,000 | $ 389,440 | $ 589,440 | $ 1,321,376 | ||||||||||
Holder [Member] | ||||||||||||||
Stock converted, shares converted | 1,202,500 | |||||||||||||
Stock converted, shares issued | 925,000 | |||||||||||||
Accredited Investors [Member] | ||||||||||||||
Restricted shares issued during period | 625,000 | 2,000,000 | ||||||||||||
Private Placement [Member] | ||||||||||||||
Common stock, shares issued | 4,950,000 | 4,950,000 | ||||||||||||
Warrants issued, shares | 4,950,000 | 4,950,000 | ||||||||||||
Warrant exercise price | $ 0.25 | $ 0.25 | ||||||||||||
Proceeds from private placement | $ 495,000 | |||||||||||||
Employees, Officers and Director [Member] | ||||||||||||||
Stock issued for compensation, shares | 420,000 | |||||||||||||
Stock issued for compensation, value | $ 35,600 | |||||||||||||
Consultants and Other Professionals [Member] | ||||||||||||||
Stock issued for services, shares | 6,113,068 | 2,664,058 | ||||||||||||
Stock issued for services, value | $ 555,440 | $ 606,796 | ||||||||||||
Series A Preferred Stock [Member] | ||||||||||||||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | 10,000,000 | 2,000,000 | ||||||||||
Preferred stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | $ 0.001 | ||||||||||
Deemed dividend | $ 740,899 | |||||||||||||
Preferred stock, shares issued | 0 | 0 | 925,000 | |||||||||||
Preferred stock, shares outstanding | 0 | 0 | 925,000 | |||||||||||
Series A Preferred Stock [Member] | Accredited Investors [Member] | ||||||||||||||
Stock issued for services, shares | 125,000 | 400,000 | 400,000 | |||||||||||
Stock issued for services, value | $ 125,000 | $ 400,000 | $ 400,000 | |||||||||||
Series B Preferred Stock [Member] | ||||||||||||||
Preferred stock, shares authorized | 10,000,000 | 8,000,000 | 8,000,000 | 8,000,000 | ||||||||||
Preferred stock, par value | $ 0.001 | $ 0.001 | $ 0.001 | |||||||||||
Preferred stock, shares issued | 5,309,884 | 5,309,884 | 0 | |||||||||||
Preferred stock, shares outstanding | 5,309,884 | 5,309,884 | 0 | |||||||||||
Dividend Rate, Percentage | 8.00% | |||||||||||||
Series B Preferred Stock [Member] | Accredited Investors [Member] | ||||||||||||||
Stock issued for services, shares | 250,000 | |||||||||||||
Stock issued for services, value | $ 250,000 | |||||||||||||
Series B Preferred Stock [Member] | OID Notes [Member] | ||||||||||||||
Debt conversion, amount | $ 411,223 | |||||||||||||
Series B Preferred Stock [Member] | TDH Sellers [Member] | ||||||||||||||
Debt conversion, amount | 1,101,000 | |||||||||||||
Series B Preferred Stock [Member] | Senior Secured Convertible Additional Secured Notes [Member] | ||||||||||||||
Debt conversion, amount | $ 782,500 | |||||||||||||
Series B Preferred Stock [Member] | Holders [Member] | ||||||||||||||
Stock converted, shares issued | 1,202,500 | |||||||||||||
Debt conversion, shares issued | 3,623,884 |
11. Commitments and Contingenci
11. Commitments and Contingencies (Details Narrative) (Sept 2020 Note) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2020 | Dec. 31, 2019 | |
NetSpective Division [Member] | ||
Operating lease payment frequency | Monthly | monthly |
Operating lease payment | $ 2,100 | $ 2,100 |
Lease expiration date | Dec. 31, 2023 | |
Boca Raton, Florida [Member] | ||
Operating lease payment frequency | Monthly | monthly |
Operating lease payment | $ 4,000 | $ 4,000 |
Lease expiration date | Oct. 31, 2021 | |
Manila, Philippines [Member] | ||
Operating lease payment frequency | Monthly | monthly |
Operating lease payment | $ 24,000 | $ 24,000 |
Lease expiration date | Dec. 31, 2022 |