| Summary of Significant Accounting Policies | Note
2. Summary of Significant Accounting Policies Foreign
Currency Translation The
reporting currency of the Company is the United States dollar. Assets and liabilities other than those denominated in U.S. dollars,
primarily in Hong Kong, the United Kingdom and China, are translated into United States dollars at the rate of exchange at the
balance sheet date. Revenues and expenses are translated at the average rate of exchange throughout the period. Gains or losses
from these translations are reported as a separate component of other comprehensive income (loss) until all or a part of the investment
in the subsidiaries is sold or liquidated. The translation adjustments do not recognize the effect of income tax because the Company
expects to reinvest the amounts indefinitely in operations. Transaction
gains and losses that arise from exchange-rate fluctuations on transactions denominated in a currency other than the functional
currency are included in general and administrative expenses. Liquidity
and Capital Resources Historically,
the Company has incurred net losses and negative cash flows from operations. The Company has principally financed these losses
from the sale of equity securities and the issuance of debt instruments. During
the three months ended March 31, 2018 the Company issued an additional $200,000 of convertible notes, which together with the
$200,000 of similar notes issued in 2017, were converted into common stock. The
Company may be required to raise additional funds through various sources, such as equity and debt financings. While the Company
believes it is probable that such financings could be secured, there can be no assurance the Company will be able to secure additional
sources of funds to support its operations, or if such funds are available, that such additional financing will be sufficient
to meet the Company’s needs or on terms acceptable to us. At March
31, 2018 the Company had cash of $788,000. In addition, the Company expects to receive further
investment from the exercise of additional common stock warrants in the second quarter of 2018 for net proceeds of approximately
$723,000. Together with the cash on hand as a result of these transactions and based on the Company’s current operational
plan and budget, the Company believes that it is probable that it will have sufficient cash to fund its operations into at
least the second quarter of 2019. Accounts
receivable, revenue recognition and concentrations New
Accounting Standard Other
Assets and Deferred Costs- Contracts with Customers Performance
Obligations Revenue
Recognition
1. Digital secure messaging revenue involves the
sale of user licenses, at a fixed price per license, to the customers, which is our sole performance obligation under the
existing licensing agreements. The Company recognizes the revenue from the sale of the user licenses when the valid licenses
have been delivered to the customer’s server in useable form.
2. 123Wish derives income from user subscriptions,
sale of merchandise, sale of tickets for experiences with social media influencers and artists, and the sale of corporate
sponsorships, each of which is a separate performance obligation. User subscriptions cover a defined period of time (typically
one month) and the revenue is recognized as the Company satisfies the requisite performance obligation (over the defined subscription
period). Sale of merchandise and tickets are recognized when the customer has paid for the item and when the merchandise and/or
ticket has been delivered to the customer. Corporate sponsorship packages are non-refundable and relate to brand association.
The Company has no further service deliverable to the sponsor and the revenue is recognized when the agreement is entered
into by both parties and the required marketing materials have been delivered to the corporate sponsor for their use.
3. C-Rod derives income from recording and video services. Income is recognized when the recording and video services are performed and the final customer product is delivered. These revenues are non-refundable. The
Company does not have off-balance sheet credit exposure related to its customers. As of March 31, 2018 two customers accounted
for 73.5% of the accounts receivable balance and as of December 31, 2017, one customer accounted for 100% of the accounts receivable
balance. Two customers accounted for 73.0% of the revenue for the quarter ended March 31, 2018 and one customer accounted for
100% of the revenue for the quarter ended March 31, 2017. Income
taxes The
Company continually evaluates its uncertain income tax positions and may record a liability for any unrecognized tax benefits
resulting from uncertain income tax positions taken or expected to be taken in an income tax return. Estimated interest and penalties
are recorded as a component of interest expense and other expense, respectively. Because
tax laws are complex and subject to different interpretations, significant judgment is required. As a result, the Company makes
certain estimates and assumptions in: (1) calculating its income tax expense, deferred tax assets, and deferred tax liabilities;
(2) determining any valuation allowance recorded against deferred tax assets; and (3) evaluating the amount of unrecognized tax
benefits, as well as the interest and penalties related to such uncertain tax positions. The Company’s estimates and assumptions
may differ significantly from tax benefits ultimately realized. Historically the Company has not filed income tax returns and
the related required informational filings in the US. Certain informational filings if not filed contain penalties. The Company
is currently addressing this issue with advisors to determine the amount, if any, of potential payments due. Given the complexity
of the issue the Company is unable to quantify a range of potential loss, if any. Accordingly no liability has been recorded in
the accompanying consolidated balance sheets in respect of this matter Net
Loss per Share Basic
net loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted average number
of common shares outstanding in the period. Diluted loss per share takes into consideration common shares outstanding
(computed under basic loss per share) and potentially dilutive securities. For the three month periods ended March 31, 2018
and 2017 all outstanding warrants and shares underlying convertible debt are antidilutive because of net losses, and as such, their effect has
not been included in the calculation of diluted net loss per share. Common shares issuable are considered outstanding as of
the original approval date for purposes of earnings per share computations. 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 assets and liabilities and disclosures of contingent assets and liabilities at the date of
the consolidated financial statements and the reported amounts of revenues and expenses during the fiscal year. The
Company makes estimates for, among other items, useful lives for depreciation and amortization, determination of future cash flows
associated with impairment testing for long-lived assets, determination of the fair value of stock options and warrants, determining
fair values of assets acquired and liabilities assumed in business combinations, valuation allowance for deferred tax assets,
allowances for doubtful accounts, and potential income tax assessments and other contingencies. The Company bases its
estimates on historical experience, current conditions, and other assumptions that it believes to be reasonable under the circumstances. Actual
results could differ from those estimates and assumptions. Share-Based
Compensation The
Company accounts for stock-based awards at fair value on date of grant and recognition of compensation over the service period
for awards expected to vest. The fair value of stock options is determined using the Black-Scholes option pricing model,
which includes subjective judgements about the expected life of the awards, forfeiture rates and stock price volatility. Fair
Value Measurements GAAP
establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three
broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical
assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair value hierarchy defined by GAAP
are described below:
● Level 1 - Quoted market prices available in
active markets for identical assets or liabilities as of the reporting date.
● Level 2 - Pricing inputs other than quoted prices
in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
● Level 3 - Pricing inputs that are generally
observable inputs and not corroborated by market data. The
fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities
and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within
more than one level described above, the categorization is based on the lowest level input that is significant to the fair value
measurement of the instrument. The Company’s Level 3 financial
liabilities consist of contingent consideration relating to the acquisition of 123Wish and C-Rod which requires significant judgment or
estimation (see Note 3). |
