Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2013 | Nov. 14, 2013 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'Genius Brands International, Inc. | ' |
Entity Central Index Key | '0001355848 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-13 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 99,715,566 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2013 | ' |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Current Assets: | ' | ' |
Cash | $234,211 | $447,548 |
Accounts Receivable, net | 249,297 | 1,084,233 |
Inventory | 271,421 | 326,072 |
Prepaid and Other Assets | 138,386 | 139,983 |
Total Current Assets | 893,315 | 1,997,836 |
Property and Equipment, net | 19,375 | 23,736 |
Capitalized Product Development in Process | 397,749 | 246,617 |
Intangible Assets, net | 247,011 | 356,070 |
Debenture Issuance Costs | 0 | 191,762 |
Total Assets | 1,557,450 | 2,816,021 |
Current Liabilities: | ' | ' |
Accounts Payable | 834,387 | 971,097 |
Accrued Expenses | 199,633 | 496,662 |
Accrued Salaries and Wages | 746,377 | 516,083 |
Accrued Interest - Debentures | 40,663 | 45,716 |
Derivative Liability | 2,040,240 | 68,962 |
Notes Payable - short term portion (Net of Discount of $979,500 and $0, respectively) | 638,834 | 0 |
Total Current Liabilities | 4,500,134 | 2,098,520 |
Long Term Liabilities: | ' | ' |
Notes Payable (Net of Discount of $0 and $485,147, respectively) | 0 | 514,853 |
Notes Payable and Accrued Interest - Related Parties | 469,389 | 447,891 |
Total Liabilities | 4,969,523 | 3,061,264 |
Stockholders' Equity (Deficit) | ' | ' |
Common Stock, $0.001 par value, 700,000,000 shares authorized; 87,512,007 and 71,912,617 shares issued and outstanding, respectively | 87,512 | 71,913 |
Additional Paid in Capital | 10,894,489 | 9,890,868 |
Stock Subscription Payable | 100,000 | 0 |
Accumulated Deficit | -14,494,074 | -10,208,024 |
Total Genius Brands International, Inc. Stockholders' Equity (Deficit) | -3,412,073 | -245,243 |
Total Liabilities & Stockholders' Equity (Deficit) | $1,557,450 | $2,816,021 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Exercise Price Per Share | ' | ' |
Common Stock, par value (in Dollars per share) | $0.00 | $0.00 |
Common Stock, shares authorized | 700,000,000 | 250,000,000 |
Common Stock, shares issued | 87,512,007 | 71,912,617 |
Common Stock, shares outstanding | 87,512,007 | 71,912,617 |
Statements_of_Operations_unaud
Statements of Operations (unaudited) (USD $) | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended |
Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2012 | |
Restated [Member] | Restated [Member] | |||
Revenues: | ' | ' | ' | ' |
Product Sales | $170,105 | $1,267,689 | $1,592,684 | $4,195,147 |
Licensing & Royalties | 42,905 | 301,884 | 39,394 | 109,676 |
Total Revenues | 213,010 | 1,569,573 | 1,632,078 | 4,304,823 |
Cost of Sales (Excluding Depreciation) | 208,362 | 1,188,339 | 1,389,564 | 3,414,440 |
Gross Profit | 4,648 | 381,234 | 242,514 | 890,383 |
Operating Expenses: | ' | ' | ' | ' |
Product Development | 60 | 29,899 | 12,442 | 20,744 |
Professional Services | -10,911 | 167,448 | 38,702 | 143,269 |
Rent Expense | 0 | 8,201 | 9,432 | 28,295 |
Marketing & Sales | 45,353 | 204,144 | 91,635 | 520,756 |
Depreciation & Amortization | 38,071 | 116,246 | 34,889 | 110,578 |
Salaries and Related Expenses | 333,346 | 1,164,436 | 438,514 | 1,285,851 |
Stock Compensation Expense | 52,122 | 212,390 | 68,670 | 192,049 |
Other General & Administrative | 158,316 | 265,807 | 140,327 | 398,758 |
Total Operating Expenses | 616,357 | 2,168,571 | 834,611 | 2,700,300 |
Loss from Operations | -611,709 | -1,787,337 | -592,097 | -1,809,917 |
Other Income (Expense): | ' | ' | ' | ' |
Other Income | 10 | 42 | 189 | 361 |
Interest Expense | -589,606 | -900,348 | -156,112 | -161,260 |
Interest Expense - Related Parties | -7,964 | -21,497 | -6,067 | -44,100 |
Gain (loss) on derivative valuation | -1,061,791 | -1,051,034 | 46,257 | 46,257 |
Gain (loss) on extinguishment of debt | -217,376 | -217,376 | 0 | 76,280 |
Loss on exchange of warrants | -308,500 | -308,500 | 0 | 0 |
Net Other Income (Expense) | -2,185,227 | -2,498,713 | -115,733 | -82,462 |
Loss before Income Tax Expense and Noncontrolling Interest | -2,796,936 | -4,286,050 | -707,830 | -1,892,379 |
Income Tax Expense | 0 | 0 | 0 | 0 |
Net Loss | -2,796,936 | -4,286,050 | -707,830 | -1,892,379 |
Acquisition of Noncontrolling Interest | 0 | 0 | 0 | -5,366 |
Net Loss attributable to Genius Brands International, Inc. | ($2,796,936) | ($4,286,050) | ($707,830) | ($1,897,745) |
Net Loss per common share | ($0.04) | ($0.06) | ($0.01) | ($0.03) |
Weighted average shares outstanding | 74,216,965 | 73,480,366 | 60,743,380 | 67,965,997 |
Statements_of_Stockholders_Equ
Statements of Stockholders' Equity (Deficit) (USD $) | Common Stock | Additional Paid-In Capital | Subscription Payable | Noncontrolling Interest | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2011 | $60,699 | $6,959,083 | ' | ($5,366) | ($8,135,049) | ($1,120,633) |
Beginning Balance, Shares at Dec. 31, 2011 | 60,698,815 | ' | ' | ' | ' | ' |
Common Stock Issued for Cash, Shares | 1,000,000 | ' | ' | ' | ' | ' |
Common Stock Issued for Cash, Amount | 1,000 | 199,000 | ' | ' | ' | 200,000 |
Common Stock Issued for Services, Shares | 1,486,070 | ' | ' | ' | ' | ' |
Common Stock Issued for Services, Amount | 1,486 | 323,228 | ' | ' | ' | 324,714 |
Common Stock Issued in exchange for repayment of Note Payable, Shares | 8,727,732 | ' | ' | ' | ' | ' |
Common Stock Issued in exchange for repayment of Note Payable, Amount | 8,728 | 1,736,818 | ' | ' | ' | 1,745,546 |
Warrants Granted for Debenture Issuance Costs | ' | 28,929 | ' | ' | ' | 28,929 |
Warrants Granted for Debt Discount | ' | 379,688 | ' | ' | ' | 379,688 |
Stock Compensation Expense | ' | 264,122 | ' | ' | ' | 264,122 |
Acquisition of Noncontrolling Interest | ' | ' | ' | 5,366 | -5,366 | ' |
Net Loss | ' | ' | ' | ' | -2,067,609 | -2,067,609 |
Ending Balance, Amount at Dec. 31, 2012 | 71,913 | 9,890,868 | ' | ' | -10,208,024 | -245,243 |
Ending Balance, Shares at Dec. 31, 2012 | 71,912,617 | ' | ' | ' | ' | ' |
Common Stock Issued for Services, Shares | 3,940,683 | ' | ' | ' | ' | ' |
Common Stock Issued for Services, Amount | 3,941 | 163,318 | ' | ' | ' | 167,259 |
Common Stock Issued for Interest, Shares | 470,588 | ' | ' | ' | ' | ' |
Common Stock Issued for Interest, Amount | 470 | 39,530 | ' | ' | ' | 40,000 |
Stock Issued in Exchange for Warrants, Shares | 5,000,000 | ' | ' | ' | ' | ' |
Stock Issued in Exchange for Warrants, Amount | 5,000 | 320,000 | ' | ' | ' | 325,000 |
Stock Issued in Exchange for Convertible Debenture, Shares | 6,188,119 | ' | ' | ' | ' | ' |
Stock Issued in Exchange for Convertible Debenture, Amount | 6,188 | 269,183 | ' | ' | ' | 275,371 |
Issuance cost | ' | -800 | ' | ' | ' | -800 |
Stock Compensation Expense | ' | 212,390 | ' | ' | ' | 212,390 |
Cash received for stock subscriptions payable | ' | ' | 100,000 | ' | ' | 100,000 |
Net Loss | ' | ' | ' | ' | -4,286,050 | -4,286,050 |
Ending Balance, Amount at Sep. 30, 2013 | $87,512 | $10,894,489 | $100,000 | $0 | ($14,494,074) | ($3,412,073) |
Ending Balance, Shares at Sep. 30, 2013 | 87,512,007 | ' | ' | ' | ' | ' |
Statements_of_Cash_Flows_unaud
Statements of Cash Flows (unaudited) (USD $) | 9 Months Ended | |
Sep. 30, 2013 | Sep. 30, 2012 | |
Restated [Member] | ||
Cash Flows from Operating Activities: | ' | ' |
Net Loss | ($4,286,050) | ($1,897,745) |
Adjustments to reconcile net loss to net cash provided in operating activities: | ' | ' |
Depreciation Expense | 7,186 | 8,388 |
Amortization Expense | 109,060 | 102,190 |
Issuance of Common Stock for Interest | 40,000 | 0 |
Issuance of Common Stock for Services | 167,259 | 324,714 |
Accretion of discount on Convertible Debenture | 278,577 | 116,999 |
Stock Compensation Expense | 212,390 | 192,049 |
(Gain) Loss on Derivative Valuation | 1,051,034 | -46,257 |
(Gain) Loss on Extinguishment of Debt | 217,376 | -76,280 |
Loss on Conversion of Warrants to Common Stock | 308,500 | 0 |
Interest expense recognized on debenture conversion | 488,572 | 0 |
Decrease (increase) in operating assets | ' | ' |
Accounts Receivable | 834,936 | 1,757 |
Inventory | 54,651 | -4,850 |
Prepaid Expenses & Other Assets | 1,597 | -125,886 |
Increase (decrease) in operating liabilities | ' | ' |
Accounts Payable | -136,710 | -116,043 |
Accrued Salaries | 451,294 | 243,332 |
Accrued Interest | 8,280 | 41,333 |
Accrued Interest - Related Party | 21,498 | 44,100 |
Other Accrued Expenses | -297,029 | 2,218 |
Net cash provided/(used) in operating activities | -467,579 | -1,189,981 |
Cash Flows from Investing Activities: | ' | ' |
Investment in Intangible Assets | -151,133 | -40,048 |
Purchase of Fixed Assets | -2,825 | -1,898 |
Net cash provided/(used) by investing activities | -153,958 | -41,946 |
Cash Flows from Financing Activities: | ' | ' |
Sale of Common Stock | 0 | 200,000 |
Common Stock Subscription Payable | 100,000 | 0 |
Common Stock Offering Costs | -800 | 0 |
Proceeds from Short Term Notes | 309,000 | 0 |
Proceeds from Long Term Debenture | 0 | 1,000,000 |
Issuance Costs on Debenture | 0 | -223,901 |
Net cash provided/(used) by financing activities | 408,200 | 976,099 |
Net increase/(decrease) in cash | -213,337 | -255,828 |
Beginning Cash Balance | 447,548 | 405,341 |
Ending Cash Balance | 234,211 | 149,513 |
Supplemental disclosures of cash flow information: | ' | ' |
Cash paid for income taxes | 0 | 0 |
Cash paid for interest | 40,000 | 4,012 |
Schedule of non-cash financing and investing activites: | ' | ' |
Related Party Note converted to Common Stock | 0 | 1,745,546 |
Warrants granted for debenture issuance costs | 0 | 28,929 |
Discount on long term debenture attributed to Warrants | 0 | 379,688 |
Accrued Salaries converted to Short Term Notes Payable | 221,000 | 0 |
Conversion of Debenture to Common Stock | 75,000 | 0 |
Conversion of Warrants to Common Stock | $216,871 | $0 |
1_The_Company_and_Significant_
1. The Company and Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2013 | |
Accounting Policies [Abstract] | ' |
The Company and Significant Accounting Policies | ' |
Organization and Nature of Business | |
Genius Brands International, Inc. (“we”, “us”, “our” or the “Company”), f/k/a Pacific Entertainment Corporation, creates and distributes music-based products which we believe are entertaining, educational and beneficial to the well-being of infants and young children, under our brands, including Baby Genius and Little Genius. We create, market and sell children’s videos, music, books and other products in the United States by distribution at wholesale to retail stores and distributors, direct to consumers through various “deal for a day” sites and through digital platforms using intellectual property developed and owned by us. We license the use of our intellectual property, both domestically and internationally, to others to manufacture, market and sell products based on our characters and brands, whereby we receive advances and royalties. The Company also obtains rights to the content of other studios for distribution through our warehouse facility to our customers, for which we either pay royalty fees or earn distribution fees. We have licensing agreements with other companies under which we produce music-based products using their characters and brands and for which we pay a royalty. | |
The Company commenced operations in January 2006, assuming all of the rights and obligations of its Chief Executive Officer, Klaus Moeller, under an Asset Purchase Agreement between the Company and Genius Products, Inc., in which we obtained all rights, copyrights, and trademarks to the brands “Baby Genius,” “Little Genius,” “Kid Genius,” “123 Favorite Music” and “Wee Worship,” and all then existing productions under those titles. On October 17, 2011 and October 18, 2011, Genius Brands International, Inc., filed Articles of Merger with the Secretary of State of the State of Nevada and with the Secretary of State of the State of California, respectively. As previously described on the Company’s Schedule 14C Information Statement, filed with the Securities and Exchange Commission on September 21, 2011, by filing the Articles of Merger, the Company (i) changed its domicile to Nevada from California, and (ii) changed its name to Genius Brands International, Inc. from Pacific Entertainment Corporation (the “Reincorporation”). Pursuant to the Articles of Merger, Pacific Entertainment Corporation, a California corporation, merged into Genius Brands International, Inc., a Nevada corporation that, prior to the Reincorporation, was the wholly owned subsidiary of Pacific Entertainment Corporation. Genius Brands International, the Nevada corporation, is the surviving corporation. In connection with the Reincorporation, on October 12, 2011, the Company filed an Issuer Company-Related Action Notification Form with the Financial Industry Regulatory Authority (“FINRA”) and on November 29, 2011 our trading symbol changed from “PENT” to “GNUS”. | |
On January 11, 2011, the Company signed a five-year, world-wide license agreement with Tollytots® for a new toy line. The agreement included a broad range of exclusive categories including learning and developmental toys, most plush toys, and musical toys which Tollytots® had the sole right to manufacture, market and distribute on a world-wide basis. It also allowed Tollytots® a non-exclusive right to manufacture, market and distribute products in several non-exclusive categories, including board games, puzzles, electronic learning aids and amusement plush toys. The agreement was subject to early termination by the Company in specified territories in the event minimum sales requirements in those territories were not met in any contract year. On June 6, 2013, the Company and Tollytots® agreed to terminate the agreement in its entirety. The Company will receive no further payments for this license beyond September 30, 2013. | |
The Company also obtains licenses for other select brands we feel we can market and sell through our distribution channels. | |
On September 20, 2010, the Company entered into a joint venture agreement with Dr. Shulamit Ritblatt to form Circle of Education, LLC (“COE”), a California limited liability company, for the purpose of creation and distribution of a music-based curriculum to promote school readiness for children ages 2-5 years. The Company actively participated in a research study into the use of the curriculum through a major university for three years based on certain unregistered copyrights and trademarks, confidential information, designs, ideas, discoveries, inventions, processes, research results and work product it had developed. In March 2012, the Company and Dr. Ritblatt agreed to terminate the joint venture agreement. COE transferred equal right of ownership in the intellectual property developed as of the date of termination (“IP”) to each of the Company and Dr. Ritblatt, and in exchange for the rights to the IP, Dr. Ritblatt transferred her units of COE to the Company. Each party will have the right to continue development of the IP and products based on the IP with no further obligation to the other party. Subject to certain limitations for specific channels of distribution reserved for each party for a period of twelve months from the execution of the agreements, both parties have non-exclusive and non-restrictive rights to the use, sublicense or sale of the IP and products created based on the IP. | |
The Company has developed the Ready!Play!Learn!™ program based partially on the intellectual property discussed above, which we anticipate will be available for distribution in 2014. The program includes a curriculum book and music aimed at parents and caregivers of preschool aged children to assist them in preparing their children for kindergarten. | |
In 2012, the Company began development of an application based on our content and characters. The initial application includes digital video and music delivery, with games and puzzles based on our characters, which is scheduled to be available in the fourth quarter of 2013. Future enhancements include a variety of tools, including lesson plans, curriculum and songs designed to assist parents teach academic subjects and socialization skills to their children ages 2-5 years in preparation for attending kindergarten. | |
The Company believes that the distribution of products is changing from the traditional brick and mortar retail store to an increasing emphasis on digital delivery whereby the owners of content will be able to reach customers directly through a digital delivery platform. In 2013, we began creation of a digital streaming application that will be available at www.babygenius.com and the conversion of all our content to digital format. We anticipate the initial completion date in the fourth quarter of 2013. | |
The Company’s Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America. These require the use of estimates and assumptions that affect the assets, liabilities, revenues and expenses reported in the financial statements, as well as amounts included in the notes thereto, including discussion and disclosure of contingent liabilities. Although the Company uses its best estimates and judgments, actual results could differ from these estimates as future confirming events occur. | |
Liquidity | |
Historically, the Company has incurred net losses. As of September 30, 2013, the Company had an accumulated deficit of $14,494,074 and a total stockholders’ deficit of $3,412,073. At September 30, 2013, the Company had current assets of $893,315, including cash of $234,211, and current liabilities of $4,500,134, resulting in a working capital deficit of $3,606,819. For the nine months ended September 30, 2013, the Company reported a net loss of $4,286,050 and net cash used by operating activities of $467,579. Management believes that its sales, cash provided by operations, together with funds available from deferred and reduced officers’ salaries and short term financing, will be sufficient to fund planned operations for the next twelve months. However, there can be no assurance that operations and operating cash flows will continue at the current levels or improve in the near future. If the Company is unable to obtain profitable operations and positive operating cash flows sufficient to meet scheduled debt obligations, it may need to seek additional funding or be forced to scale back its development plans or to significantly reduce or terminate operations. | |
Use of Estimates | |
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. | |
Cash Equivalents | |
The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents. | |
Significant Accounting Policies | |
Revenue Recognition - The Company recognized revenue related to product sales when (i) the seller’s price is substantially fixed, (ii) shipment has occurred causing the buyer to be obligated to pay for product, (iii) the buyer has economic substance apart from the seller, and (iv) there is no significant obligation for future performance to directly bring about the resale of the product by the buyer as required by FASB Accounting Standards Codification (“ASC”) Topic 605 - Revenue Recognition. | |
Revenues associated with the sale of products, are recorded when shipped to customers pursuant to approved customer purchase orders resulting in the transfer of title and risk of loss. Cost of sales, rebates and discounts are recorded at the time of revenue recognition or at each financial reporting date. | |
The Company’s licensing and royalty revenue represent variable payments based on net sales from brand licensees for content distribution rights. These license agreements are held in conjunction with third parties that are responsible for collecting fees due and remitting to the Company its share after expenses. Revenue from licensed products is recognized when realized or realizable based on royalty reporting received from licensees. | |
Shipping and Handling - The Company records shipping and handling expenses in the period in which they are incurred and are included in the Cost of Goods Sold. | |
Inventories - Inventories are stated at the lower of cost (average) or market and consist of finished goods such as DVDs, CDs and other products. A reserve for slow-moving and obsolete inventory is established for all inventory deemed potentially non-saleable by management in the period in which it is determined to be potentially non-saleable. The current inventory is considered properly valued and saleable. The Company concluded that there was an appropriate reserve for slow moving and obsolete inventory of $84,671 and $57,305 established as of September 30, 2013 and December 31, 2012, respectively. | |
Property and Equipment - Property and equipment are recorded at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from 5 to 39 years. Maintenance, repairs, and renewals, which neither materially add to the value of the assets nor appreciably prolong their lives, are charged to expense as incurred. Gains and losses from dispositions of property and equipment are reflected in the statement of operations. | |
Intangible Assets –Intangible Assets acquired, either individually or with a group of other assets, are initially recognized and measured based on fair value. In the acquisition of the assets from Genius Products, fair value was calculated using a discounted cash flow analysis of the revenue streams for the estimated life of the assets. | |
The Company develops new video, music, books and digital applications, in addition to adding content, improved animation and songs/features to their existing productions. The costs of new product development and significant improvement to existing products are capitalized while routine and periodic alterations to existing products are expensed as incurred. The Company begins amortization of new products when it is available for general release. Annual amortization cost of intangible assets are computed based on the straight-line method over the remaining economic life of the product, generally such deferred costs are amortized over five years. | |
The Company reviews all intangible assets periodically to determine if the value has been impaired by recent financial transactions using the discounted cash flow analysis of revenue stream for the estimated life of the assets. | |
Stock Based Compensation - As required ASC 718 - Stock Compensation, the Company recognizes an expense related to the fair value of our stock-compensation awards, including stock options, using the Black-Scholes calculation as of the date of grant. | |
Advertising Costs - The Company’s marketing and sales costs are primarily related to advertising, trade shows, public relation fees and production and distribution of collateral materials. In accordance with ASC 720 regarding Advertising Costs, the Company expenses advertising costs in the period in which the expense is incurred. Marketing and Sales costs incurred by licensees are borne fully by the licensee and are not the responsibility of the Company. Advertising expense for the nine months ended September 30, 2013 and September 30, 2012 was $14,915 and $32,412, respectively. | |
Allowance for Sales Returns - An Allowance for Sales Returns is estimated based on average sales during the previous year. Based on experience, sales growth, and our customer base, the Company concluded that the allowance for sales returns at September 30, 2013 and December 31, 2012 should be $43,000 and $53,000, respectively. | |
Fair value of financial instruments - The carrying amounts of cash, receivables and accrued liabilities approximate fair value due to the short-term maturity of the instruments. |
2_Plant_Property_and_Equipment
2. Plant, Property, and Equipment and Intangible Assets | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Plant, Property, and Equipment and Intangible Assets | ' | ||||||||
The Company has plant, property and equipment and other intangible assets used in the creation of revenue as follows as of September 30, 2013 and December 31, 2012: | |||||||||
9/30/13 | 12/31/12 | ||||||||
Furniture and Equipment | $ | 91,984 | $ | 89,159 | |||||
Less Accumulated Depreciation | (72,609 | ) | (65,423 | ) | |||||
Net Fixed Assets | $ | 19,375 | $ | 23,736 | |||||
Trademarks | $ | 129,831 | $ | 129,831 | |||||
Product Masters | 3,279,369 | 3,279,369 | |||||||
Other Intangible Assets | 290,161 | 290,161 | |||||||
Less Accumulated Amortization | (3,452,350 | ) | (3,343,291 | ) | |||||
Net Intangible Assets | $ | 247,011 | $ | 356,070 | |||||
Pursuant to FASB Accounting Standards Codification regarding Topic 350, Intangible Assets, intangible asset(s) acquired, either individually or with a group of other assets shall be initially recognized and measured based on fair value. In the acquisition of the assets from Genius Products, fair value was calculated using a discounted cash flow analysis of the revenue streams for the estimated life of the assets. As this resulted in a fair market value in excess of the purchase price, the assets were recorded at $2,489,082, the total purchase price discounted with the imputed interest rate of 10%. | |||||||||
The Company reviews all intangible assets periodically to determine if the value has been impaired by recent financial transactions using the discounted cash flow analysis of revenue stream for the estimated life of the assets. At September 30, 2013 and December 31, 2012, it was determined that no impairment existed. | |||||||||
The Company continues to develop new videos, music, books and digital applications in addition to adding content, improved animation and bonus songs/features to its existing product catalog. In accordance with FASB Accounting Standards Codification regarding ASC 350 - Intangible Assets and ASC 730 - Research and Development, the costs of new product development and significant improvement to existing products are capitalized while routine and periodic alterations to existing products are expensed as incurred. As of September 30, 2013, the Company has $397,749 in Capitalized Product Development in Process representing video, music, website, digital application and preschool preparation program development projects not yet completed. |
3_Accrued_Liabilities
3. Accrued Liabilities | 9 Months Ended | ||||||||||||
Sep. 30, 2013 | |||||||||||||
Payables and Accruals [Abstract] | ' | ||||||||||||
Accrued Liabilities | ' | ||||||||||||
Accrued but unpaid salaries and vacation benefits total $746,377 and $516,083 as of September 30, 2013 and December 31, 2012, respectively. Debenture Interest accrued and unpaid is $40,663 and $45,716 at September 30, 2013 and December 31, 2012, respectively. Other accrued liabilities totaling $199,633 and $496,662 as of September 30, 2013 and December 31, 2102 are as follows: | |||||||||||||
9/30/13 | 12/31/12 | ||||||||||||
Allowance for Sales Returns | $ | 43,000 | $ | 53,000 | |||||||||
Distribution Arrangements Payable | 105,064 | 217,858 | |||||||||||
Deferred Revenue | 41,581 | 110,177 | |||||||||||
Royalties Payable | 3,817 | 59,033 | |||||||||||
Other Accrued Expenses | 6,171 | 56,594 | |||||||||||
Total Accrued Expenses | $ | 199,633 | $ | 496,662 | |||||||||
The Company recognized a derivative liability for the conversion feature and warrants for the $1.0 million senior secured debenture issued to Hillair on June 27, 2012 as an embedded derivative. It was valued on the respective transaction dates of June 27, 2012 for issuance of the debentures and August 30, 2013, the date on which it was assigned to other holders, using a Black-Scholes pricing model. Warrants to purchase 5,000,000 shares of common stock were issued to Hillair as part of the debenture, and were exchanged pursuant to an agreement between Hillair and the Company on August 29, 2013 on a one for one basis with no receipt of cash. 380,952 warrants to purchase shares of common stock were issued to National Securities Corporation and several of its employees, who acted as placement agent to the Company in connection with the Debenture. These warrants have a cashless exercise provision effective six months after the issuance date. In accordance with ASC 815-10-25, we measured the subsequent derivative valuation using a Black-Scholes pricing model on December 31, 2012 and recorded the additional derivative liability as of that date. See Note 6: Stockholders’ Equity for additional information on the warrants issued. | |||||||||||||
On August 29, 2013, pursuant to an agreement between the Company, Hillair and four new holders, the original debenture was assigned and exchanged for an aggregate of $1,163,333 in new notes with the same provisions. The additional value represented an increase of $150,000 in prepayment fees and $13,333 in accrued but unpaid interest. The interest rate and maturity date were not changed. | |||||||||||||
On September 6, 2013, a holder of the reissued debenture issued a notice of voluntary conversion for $75,000 of the issuance price reducing the aggregate amount of the outstanding debentures to $1,088,333. 6,188,119 shares of common stock were issued. A loss on the conversion was recorded in the amount of $67,376. | |||||||||||||
At the end of each quarterly reporting date the values are evaluated and adjusted to current market value. The amount recorded as of September 30, 2013 and December 31, 2012 was $2,040,240 and $68,962, respectively. | |||||||||||||
Derivative liability activity for the nine months ending September 30, 2013 was as follows: | |||||||||||||
30-Sep-13 | 31-Dec-12 | (Gain) Loss on Derivative, | |||||||||||
9 Months Ending | |||||||||||||
30-Sep-13 | |||||||||||||
Conversion feature of the June 27, 2012 $1,000,000 Securities Purchase Agreement (see note 4) | $ | – | $ | 15,743 | $ | (4,113 | ) | ||||||
Conversion feature of the June 27, 2012 reissued 1,163,333 Securities Purchase Agreement (see note 4) | 2,030,636 | – | 1,067,798 | ||||||||||
5,000,000 Warrants | – | 49,491 | (18,527 | ) | |||||||||
380,952 Warrants | 9,604 | 3,728 | 5,876 | ||||||||||
Total | $ | 2,040,240 | $ | 68,962 | $ | (1,051,034 | ) | ||||||
Fair market values of the Company's derivatives as of September 30, 2013 were based on the Black Scholes valuation using the following assumptions: | |||||||||||||
Conversion Feature | Warrants | ||||||||||||
Risk-free interest rate | 0.14% | 0.79% | |||||||||||
Expected life in years | 0.83 | 3.83 | |||||||||||
Dividend yield | 0 | 0 | |||||||||||
Expected volatility | 63.00% | 60.54% | |||||||||||
The conversion feature may be exercised at any time and are thus reported as current liabilities. | |||||||||||||
The Company recorded a loss on the derivative valuation for the debenture in the amount of $1,051,034 for the nine months ended September 30, 2013 and a gain on the derivative valuation in the amount of $46,257 for the nine months ended September 30, 2012. |
4_Notes_Payable
4. Notes Payable | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
Notes Payable | ' | ||||||||
On June 27, 2012, the Company entered into a Securities Purchase Agreement with Hillair Capital Investments L.P. ("Hillair") whereby the Company issued and sold (i) a $1,000,000 16% senior secured convertible debenture due June 27, 2014 (the “Debenture”), and (ii) a common stock purchase warrant (the “Debenture Warrant”) to purchase up to 5,000,000 shares of the Company’s common stock. The initial closing of the Debenture and Warrant Transaction occurred on June 27, 2012 (“Original Issue Date”). The Company issued to Hillair the Debenture and the Debenture Warrant for the purchase price of $1,000,000. The Debenture is convertible, in whole or in part, into shares of Common Stock upon notice by the holder to the Company, subject to certain conversion limitations set forth in the Debenture. The conversion price for the Debenture is $0.21 per share, subject to adjustments. Interest on the Debenture accrues at the rate of 16% annually and is payable quarterly on February 1, May 1, August 1 and November 1, beginning on November 1, 2012, on any redemption, conversion and at maturity. Interest is payable in cash or at the Company’s option in shares of the Company’s common stock; provided certain conditions are met. On August 29, 2013, pursuant to an agreement between the Company, Hillair and four new holders, the original debenture was assigned and exchanged for an aggregate of $1,163,333 in new notes with the same provisions. The additional value is due to an increase of $150,000 in prepayment fees and $13,333 in accrued but unpaid interest at the time of the exchange. The interest rate and maturity date were not changed. Commencing on December 27, 2013, the Company will be obligated to redeem a certain amount under the reissued Debentures on a quarterly basis, in an amount equal to $300,000 on each of December 27, 2013 and March 27, 2014 and $488,033 on June 27, 2014. On September 6, 2013, a holder of the reissued debenture issued notice of voluntary conversion for $75,000 of the issuance price reducing the aggregate amount of the outstanding debentures to $1,088,333. | |||||||||
Accrued interest was recorded as of September 30, 2013 and December 31, 2012 in the amounts of $40,663 and $45,716, respectively. | |||||||||
Debt Discount was recorded in the aggregate amount of $648,972 for the issuance of warrants and the derivative value of the convertible feature of the debenture at inception of the issuance to Hillair. The unamortized discount amount of $322,903 for the Hillair debenture was recorded as interest expense in the period ended September 30, 2013. | |||||||||
The warrants were valued in the amount of $379,688, based on the Black-Scholes valuation using the following assumptions: | |||||||||
Risk-free interest rate | 0.73% | ||||||||
Expected life in years | 5 | ||||||||
Dividend yield | 0 | ||||||||
Expected volatility | 63.65% | ||||||||
Debt Discount for the convertible feature of the debenture was valued in the amount of $269,284 using the Black-Scholes calculation with the following assumptions: | |||||||||
Risk-free interest rate | 0.31% | ||||||||
Expected life in years | 2 | ||||||||
Dividend yield | 0 | ||||||||
Expected volatility | 60.01% | ||||||||
Debt Discount was recorded in the aggregate amount of $1,163,333 for the derivative value of the convertible feature of the reissued debenture on the exchange date using the Black-Scholes calculation with the following assumptions: | |||||||||
Risk-free interest rate | 0.14% | ||||||||
Expected life in years | 0.83 | ||||||||
Dividend yield | 0 | ||||||||
Expected volatility | 63.22% | ||||||||
Interest expense for the amortization of the debt discount for the warrants and convertible feature of the debenture is calculated on a straight-line basis over the remaining life of the debenture. For the periods ended September 30, 2013 and December 31, 2012, amortization of the debt discount was recorded in the amounts of $278,577 and $163,825, respectively, for a debt discount balance of $979,499 and $485,147, respectively. | |||||||||
To secure the Company’s obligations under the Debenture, the Company granted a security interest in certain of its property to secure the prompt payment, performance and discharge in full of all of the Company’s obligations under the Debenture. | |||||||||
National Securities Corporation acted as placement agent to the Company in connection with the Debenture and Warrant Transaction and received commissions of 8% of the gross proceeds and a five year warrant to purchase up to 380,952 shares of the company’s common stock at a price of $0.33 per share, which warrant contained terms substantially similar to the Debenture Warrants. | |||||||||
Additional information regarding the Debenture may be found in the Form 8-K filed by the Company on July 2, 2012. | |||||||||
On August 30, 2013, the Company issued 12% convertible notes to several parties with a maturity date of October 21, 2013 for an aggregate of $530,000. The notes have a stated conversion rate of $0.01212 and can be voluntarily converted at any time by the holder and mandatorily by the Company upon certain conditions. Cash was received in the aggregate of $309,000. Four officers and directors of the Company converted outstanding salaries payable to the new notes in the aggregate of $221,000. Additional information regarding the notes payable may be found on the Form 8-K filed by the Company on September 4, 2013. | |||||||||
Debenture Interest accrued and unpaid for the 2006 issuance of $2.5 million is $19,049 as of September 30, 2013 and December 31, 2012. Interest on this series of debentures was terminated effective July 24, 2009 in accordance with the conversion agreement upon establishment of a secondary trading market for our common stock. | |||||||||
As of September 30, 2013 and December 31, 2012, the Company had the following notes payable and accrued interest balances outstanding: | |||||||||
9/30/13 | 12/31/12 | ||||||||
Debenture - $1,000,000 16% senior secured convertible | $ | – | $ | 1,000,000 | |||||
Debt Discount - $1,000,000 16% senior secured convertible | – | (485,147 | ) | ||||||
Debenture - $1,163,333 16% senior secured convertible | 1,088,333 | – | |||||||
Debt Discount - $1,163,333 16% senior secured convertible | (979,499 | ) | – | ||||||
Notes Payable - 12% convertible | 530,000 | – | |||||||
Total Notes Payable | 638,834 | 514,853 | |||||||
Less: Current Portion | 638,834 | – | |||||||
Long Term Portion | $ | – | $ | 514,853 | |||||
Accrued Interest | |||||||||
Debenture - $1,000,000 16% senior secured convertible Issued June 27,2012 | $ | 15,957 | $ | 26,667 | |||||
Debenture - $2,500,000 Terminated June 2009 | 19,049 | 19,049 | |||||||
Notes Payable - $530,000 12% convertible Issued August 30, 2013 | 5,657 | – | |||||||
Accrued Interest - Current Portion | $ | 40,663 | $ | 45,716 | |||||
Maturities requirements on notes payable subject to mandatory redemption at September 30, 2013, are as follow: | |||||||||
2013 | $ | 830,000 | |||||||
2014 | 788,333 | ||||||||
2015 | – | ||||||||
2016 | – | ||||||||
2017 | – | ||||||||
Total | $ | 1,618,333 |
5_Notes_Payable_and_Accrued_In
5. Notes Payable and Accrued Interest - Related Parties | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Related Party Transactions [Abstract] | ' | ||||||||
Notes Payable and Accrued Interest - Related Parties | ' | ||||||||
As of September 30, 2013 and December 31, 2012, the Company had the following notes payable and accrued interest balances outstanding: | |||||||||
9/30/13 | 12/31/12 | ||||||||
Officer Loans to Company | $ | 194,163 | $ | 194,163 | |||||
Accrued Interest on Officer Loans to Company | 60,256 | 49,087 | |||||||
Subordinated Officer Loans to Company | 159,753 | 159,753 | |||||||
Accrued Interest on Subordinated Loans | 55,217 | 44,888 | |||||||
Total Notes Payable and Accrued Interest | 469,389 | 447,891 | |||||||
Less: Current Portion | – | – | |||||||
Long Term Portion | $ | 469,389 | $ | 447,891 | |||||
Throughout 2009, 2008 and 2007, the Company borrowed funds from Messrs. Moeller, Meader, Larry Balaban and Howard Balaban in the aggregate principal amounts of $4,000, $280,000 and $444,500, respectively. The proceeds from all officer loans were used to pay operating obligations of the Company. Subsequent agreements amended the stated interest rate to 6% per annum and extended the maturity to January 15, 2015. Repayments were made on February 2, 2011 and April 27, 2011 in the aggregate amounts of $66,000 and $30,000, respectively. For the three months ended September 30, 2013 compared to the same period of 2012, interest expenses for these loans were recorded in amounts of $3,779 and $3,559, respectively. For the nine months ended September 30, 2013 and 2012, the interest expenses for these loans were $11,166 and $10,519, respectively. | |||||||||
On February 1, 2008, Isabel Moeller, sister of our Chief Executive Officer, Klaus Moeller, loaned $310,000 to the Company at an interest rate equal to 8% per annum. The funds were borrowed from Ms. Moeller in order to reduce outstanding obligations due to Genius Products, Inc. at that time. Subsequent agreements extended the maturity date to January 15, 2015 and reduced the stated interest rate to six (6%) percent per annum. Repayments on the principal balance were made in the aggregate of $24,000 during February and April 2011. On April 1, 2011, Ms. Moeller agreed to convert $200,000 of the outstanding balance to shares of common stock of the Company. On March 31, 2012, Ms. Moeller agreed to convert the remaining balance of outstanding principal and interest, in the amount of $173,385, to shares of common stock of the Company. There was no interest expense recorded for the three months ended September 30, 2013 or 2012. Interest expense nine months ended September 30, 2013 and September 30, 2012 was $0 and $2,562, respectively. The note is paid in full. | |||||||||
On March 31, 2011, four of the Company’s officers agreed to convert accrued but unpaid salaries through December 31, 2010 to subordinated long term notes payable. In February 2011, as a result of an agreement by each of the four officers to retroactively decrease the amount of the annual salary for 2010 from $125,000 per annum per officer to $80,000, the amount of the notes were reduced to an aggregate of $1,620,137. In March 2012, the officers agreed to convert the aggregate sum of $1,572,161 to shares of common stock of the Company. The remaining note, with a principal balance of $159,753, has a maturity of January 15, 2015 and a stated interest rate of six percent (6%) per annum. For the three months ended September 30, 2013 and 2012, the interest recorded for this notes was $4,185 and $2,508, respectively. For the nine month periods ended September 30, 2013 and 2012, interest expense was recorded in the amounts $10,331 and $31,019, respectively. The decrease in expense was due to conversion of a majority of the outstanding balance to common stock on March 31, 2012. | |||||||||
Maturities requirements on notes payable - related party subject to mandatory redemption at September 30, 2013, are as follow: | |||||||||
2013 | $ | – | |||||||
2014 | – | ||||||||
2015 | 353,919 | ||||||||
2016 | – | ||||||||
2017 | – | ||||||||
Total | $ | 353,919 | |||||||
6_Stockholders_Equity
6. Stockholders' Equity | 9 Months Ended |
Sep. 30, 2013 | |
Equity [Abstract] | ' |
Stockholders' Equity | ' |
As part of the Reincorporation, the total number of authorized shares of common stock was changed to 250,000,000 shares of $0.001 par value. The common stock and additional paid in capital accounts were restated as of December 31, 2012, and for the years then ended, to recognize the change from no par common stock to a par value of $0.001 per share. As of September 30, 2013 and December 31, 2012, there were 87,512,007 and 71,912,617 shares of common stock outstanding, respectively. | |
The Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001. The Board of Directors is authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders, to issue from time to time shares of preferred stock in one or more series. Each series of preferred stock will have such number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by our board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights. As of September 30, 2013 and December 31, 2012, no shares were outstanding and the Board of Directors has not authorized issuance of preferred shares. | |
On February 1, 2013, the Company issued 470,588 shares of common stock in exchange for interest payable on the debenture due on that date in the amount of $40,000, or $0.085 per share. Hillair agreed to waive any anti-dilutive provisions contained in the debenture for this transaction. | |
On May 1, 2013, the Company issued 278,183 shares of common stock in exchange for services valued at $16,134 to Pacific Media Digital Services, LLC, or $0.06 per share. | |
On May 1, 2013, the Company issued 62,500 shares of common stock to Direct Action Group, LLC in exchange for services valued at $3,125, or $0.05 per share. | |
On May 26, 2013, the Company issued 400,000 shares of common stock to ROAR, LLC in exchange for services valued at $20,000, or $0.05 per share. | |
On August 30, 2013, 5,000,000 warrants to purchase the Company’s common stock held by Hillair were exchanged on a one for one basis with no receipt of cash and the warrants were cancelled. The shares were valued at market price of $0.05 and there was a reduction in a derivative liability of $30,964, a reduction in debt issuance cost of $14,464, and a loss on the exchange of warrants recognized in the amount of $308,500. | |
On September 6, 2013, a holder of the reissued debenture issued notice of voluntary conversion for $75,000 of the issuance price reducing the aggregate amount of the outstanding debentures to $1,088,333. 6,188,119 shares were issued and were valued at a market price of $0.05. In conjunction with this issuance there was a reduction in the derivative liability of $200,495, a reduction in the debt discount of $67,500, and a loss on the conversion was recorded in the amount of $67,376. | |
On September 13, 2013, 2,800,000 shares of common stock were issued in exchange for services valued $112,000 to New Castle LLC, or $0.04 per share. | |
On September 19, 2013, pursuant to an agreement to cancel a consulting agreement, 400,000 shares of common stock were issued to ROAR, LLC. The shares were valued at $0.04 per share, or $16,000. | |
On September 23, 2013, pursuant to a private placement memorandum, the Company received $100,000 for purchase of common stock. The subscription documents were not received and no shares were issued. | |
On June 27, 2012, a senior secured convertible debenture was issued in the face value of $1,000,000 with a stated conversion price of $0.21, subject to certain adjustments, and 5,000,000 warrants, which is equal to the total face value divided by the stated warrant conversion price of $0.20. The debenture warrants may be exercised at any time on or after June 27, 2012 and on or prior to the close of business on June 27, 2017, at an exercise price of $0.33 per share, subject to adjustments upon certain events. The warrants contain full anti-dilution protection and do not limit the amount the Company would be required to pay or the number of shares the Company could be required to issue. The Company is required to reserve shares equal to the total outstanding debentures divided by seventy-five percent (75%) of the conversion price plus the outstanding warrants. | |
On August 29, 2013, pursuant to an agreement between the Company, Hillair and four new holders, the original debenture was assigned and exchanged for an aggregate of $1,163,333 in new notes with the same provisions. The additional value represented an increase of $150,000 in prepayment fees and $13,333 in accrued but unpaid interest. The interest rate and maturity date were not changed. On September 6, 2013, a holder of the reissued debenture issued notice of voluntary conversion for $75,000 of the issuance price reducing the aggregate amount of the outstanding debentures to $1,088,333. As of September 30, 2013, we have reserved 119,728,603 shares of common stock for the debenture conversion provision issued to the holders. | |
On August 30, 2013, the Company issued 12% convertible notes to several parties with a maturity date of October 21, 2013 for an aggregate of $530,000. The notes have a stated conversion rate of $0.01212 and can be voluntarily converted at any time by the holder and mandatorily by the Company upon certain conditions. Cash was received in the aggregate of $309,000. Four officers and directors of the Company converted outstanding salaries payable to the new notes in the aggregate of $221,000. As of September 30, 2013, we have reserved 43,729,373 shares of common stock for the conversion provision issued to the holders. See Note 4: Notes Payable for additional information. |
7_Income_Taxes
7. Income Taxes | 9 Months Ended |
Sep. 30, 2013 | |
Income Tax Disclosure [Abstract] | ' |
Income Taxes | ' |
The Company accounts for income taxes in accordance with Accounting Standards Codification Topic 740, Income Taxes (“Topic 740”), which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns. A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized. | |
Topic 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company’s financial statements. Topic 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. | |
At the adoption date of January 1, 2008, the Company had no unrecognized tax benefit which would affect the effective tax rate if recognized. | |
The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operation in the provision for income taxes. As of September 30, 2013 and December 31, 2012, the Company had no accrued interest or penalties related to uncertain tax positions. | |
The Company files income tax returns in the U.S. federal jurisdiction and in the state of California. The Company is currently subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities since inception of the Company. |
8_Lease_Commitments
8. Lease Commitments | 9 Months Ended |
Sep. 30, 2013 | |
Leases [Abstract] | ' |
Lease Commitments | ' |
The Company has no capital leases subject to the Capital Lease guidelines in the FASB Accounting Standards Codification. Rental expenses incurred for operating leases during the three months ended September 30, 2013 and 2012 were $0 and $9,432, respectively, and for the nine months ended September 30, 2013 and September 30, 2012 were $8,201 and $28,295, respectively. Warehouse space of approximately 2,000 square feet in Rogers, Minnesota was rented on a month to month basis and was vacated as of October 31, 2013. In November 2012, the Company signed a nine month lease to occupy three offices in San Diego, California, which terminated as of April 30, 2013. |
9_Recent_Accounting_Pronouncem
9. Recent Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2013 | |
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | ' |
Recent Accounting Pronouncements | ' |
The Company reviews all of the Financial Accounting Standard Board’s updates periodically to ensure the Company’s compliance of its accounting policies and disclosure requirements to the Codification Topics. The Company has determined there were no new accounting pronouncements issued during the nine months ended September 30, 2013 that the Company believes are applicable or would have a material impact on the financial statements of the Company. |
10_Stock_Options
10. Stock Options | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||||||||||||||
Stock Options | ' | ||||||||||||||||||||
The Company has adopted the provisions of ASC 718 – Compensation which requires companies to measure the cost of employee services received in exchange for equity instruments based on the grant date fair value of those awards and to recognize the compensation expense over the requisite service period during which the awards are expected to vest. | |||||||||||||||||||||
On December 29, 2008, the Company adopted the Pacific Entertainment Corporation 2008 Stock Option Plan (the “Plan”), which provides for the issuance of qualified and non-qualified stock options to officers, directors, employees and other qualified persons. The Plan is administered by the Board of Directors of the Company or a committee appointed by the Board of Directors. The number of shares of the Company’s common stock initially reserved for issuance under the Plan was 11 million. On September 2, 2011, the shareholders holding a majority of the Company’s outstanding common stock adopted an amendment to the Company’s 2008 Stock Option Plan to increase the number of shares of common stock issuable under the plan to 50 million. | |||||||||||||||||||||
As of September 30, 2013, options to purchase up to 8,390,000 shares of the Company’s common stock previously issued in 2009 through 2012 expired or were cancelled. | |||||||||||||||||||||
On May 15, 2013, Stock Option Grant Notices were issued to each of five officers to purchase up to 750,000 shares of common stock, vesting on the grant date, at an exercise price of $0.20 per share. The options have expiration dates five years from the grant date. | |||||||||||||||||||||
On May 15, 2013, options to purchase up to 250,000 shares of common stock were issued to an employee, vesting on the date of grant, at an exercise price of $0.20 per share. The options have an expiration date five years from the date of the grant notice. | |||||||||||||||||||||
On May 15, 2013, pursuant to amendments to employment agreements with Messrs. Moeller, Meader, Larry Balaban and Howard Balaban, Stock Option Grant Notices previously granted to each employee to purchase up to two million shares of common stock expiring on January 20, 2014 were cancelled effective immediately. | |||||||||||||||||||||
On September 10, 2013 Stock Option Grant Notice was issued to an employee to purchase up to 100,000 shares of common stock, vesting on the grant date, at an exercise price of $0.44. The options have an expiration date five years from the date of the grant notice. | |||||||||||||||||||||
The following schedule summarizes the changes in the Company’s stock option plan for the nine months ended September 30, 2013: | |||||||||||||||||||||
Weighted | Weighted | ||||||||||||||||||||
Options Outstanding | Average | Average | |||||||||||||||||||
Number | Exercise | Remaining | Aggregate | Exercise | |||||||||||||||||
of | Price | Contractual | Intrinsic | Price | |||||||||||||||||
Shares | per Share | Life | Value | per Share | |||||||||||||||||
Balance at December 31, 2012 | 15,845,000 | $ | 0.06-0.55 | 3.55 years | – | $ | 0.42 | ||||||||||||||
Options Granted | 4,100,000 | 0.20-0.44 | 4.63 years | – | 0.20-0.44 | ||||||||||||||||
Options Exercised | – | – | – | – | – | ||||||||||||||||
Options Expired | -8,390,000 | 0.34-.055 | – | – | 0.44 | ||||||||||||||||
Balance at September 30, 2013 | 11,555,000 | $ | 0.06-0.55 | 4.99 years | – | $ | 0.32 | ||||||||||||||
Exercisable September 30, 2013 | 10,255,000 | $ | 0.06-0.55 | 5.06 years | – | $ | 0.31 |
11_Warrants
11. Warrants | 9 Months Ended | ||||||||||||
Sep. 30, 2013 | |||||||||||||
Warrants and Rights Note Disclosure [Abstract] | ' | ||||||||||||
Warrants | ' | ||||||||||||
The Company has warrants outstanding to purchase up to 543,452 and 5,852,060 shares of our common stock at September 30, 2013 and December 31, 2012, respectively. | |||||||||||||
In connection with the sale of shares of its common stock in 2010 the Company issued warrants to purchase a total of 471,108 shares of its common stock at $0.40 per share exercisable for a three-year period. As of September 30, 2013, 5,308,608 of these warrants have expired or were cancelled, 5,000,000 of which were cancelled in exchange for 5,000,000 shares of the Company’s common stock (See Note 6). | |||||||||||||
Either the exercise price or the number of shares purchasable under the warrant may be adjusted in the event of any split of the common stock, reclassification, capital reorganization or change in the outstanding common stock, or declaration of a common stock dividend. In the event of any such adjustment, the Company will notify the holders of the warrants of the exercise price and number of shares purchasable under the warrant following adjustment, the facts requiring the adjustment and the method of calculation of any increase or decrease in price or purchasable shares. No adjustment will be required, however, unless the adjustment would require an increase or decrease in the exercise price of at least 1%. | |||||||||||||
The following schedule summarizes the changes in the Company’s warrants during the nine months ended September 30, 2013: | |||||||||||||
Number of Warrants | Exercise Price per Share | Weighted Average Exercise Price per Share | |||||||||||
Balance at December 31, 2012 | 5,852,060 | $ | 0.33 - 0.40 | $ | 0.34 | ||||||||
Warrants Granted | – | – | – | ||||||||||
Warrants Exercised | – | – | – | ||||||||||
Warrants Expired or Cancelled | -5,308,608 | 0.4 | 0.33 | ||||||||||
Balance at September 30, 2013 | 543,452 | $ | 0.33 - 0.40 | $ | 0.35 | ||||||||
Exercisable at September 30, 2013 | 543,452 | $ | 0.33 - 0.40 | $ | 0.35 | ||||||||
The following schedule summarizes the outstanding warrants at September 30, 2013: | |||||||||||||
Number of Warrants Outstanding at | Number of Warrants Exercisable at | Expiration Date | Exercise Price | ||||||||||
30-Sep-13 | 30-Sep-13 | ||||||||||||
162,500 | 162,500 | 2013 | $ | 0.4 | |||||||||
380,952 | 380,952 | 2017 | $ | 0.33 |
12_Fair_Value_Measurements
12. Fair Value Measurements | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||
Fair Value Measurements | ' | ||||||||||||||||
We adopted ASC Topic 820 (originally issued as SFAS 157, “Fair Value Measurements”) as of January 1, 2008 for financial instruments measured at fair value on a recurring basis. ASC Topic 820 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements. | |||||||||||||||||
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include: | |||||||||||||||||
· | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; | ||||||||||||||||
· | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | ||||||||||||||||
· | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. | ||||||||||||||||
We measure certain financial instruments at fair value on a recurring basis. Assets and liabilities measured at fair value on a recurring basis are as follows at September 30, 2013: | |||||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||
Assets | $ | – | $ | – | $ | – | $ | – | |||||||||
Total assets measured at fair value | – | – | – | – | |||||||||||||
Liabilities | |||||||||||||||||
Derivative Liability | 2,040,240 | – | – | 2,040,240 | |||||||||||||
Convertible Debenture, net of discount | 108,834 | – | – | 108,834 | |||||||||||||
Total liabilities measured at fair value | $ | 2,149,074 | $ | – | $ | – | $ | 2,149,074 |
13_Employment_Agreements
13. Employment Agreements | 9 Months Ended | ||||||
Sep. 30, 2013 | |||||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||||
Employment Agreements | ' | ||||||
On April 26, 2011, the Company and each of Messrs. Moeller, Meader, Larry Balaban and Howard Balaban (the “Executives”) agreed to terminate all then existing employment agreements for the Executives and enter into new five-year employment agreements unless written termination is provided by either party. Each employment agreement provides for a graduated base salary beginning at $165,000 per annum retroactive to March 20, 2011, continuing to December 31, 2011, increasing to $195,000 for 2012 and $225,000 for 2013. After 2013, the agreement provides for base salary increases at the discretion of the Board of Directors, with a minimum 5% increase. In addition to base salary, each Executive will receive an annual car allowance of $11,400, and four weeks paid vacation per annum. | |||||||
On January 10, 2013, Messrs. Moeller, Meader and Howard Balaban agreed to reduce the amount of payments for salary effective January 1, 2013 through January 19, 2013 to $165,000 and a further reduction to $140,000 commencing January 20, 2013, continuing until further notice by each one to the Board of Directors. The agreements with each of Messrs. Moeller, Meader and Howard Balaban include the accrual of unpaid salary, the right to convert any or all of the accrued but unpaid salary to common stock of the Company at a conversion price of $0.21 per share and an amendment to all outstanding stock option grant notices to allow each to retain all rights until the expiration date upon termination unless for cause, as defined in the employment agreement. | |||||||
On March 28, 2013, Mr. Meader voluntarily resigned his position as President effective April 1, 2013. The Company agreed to the retention of all stock options granted to Mr. Meader as of the date of termination, vesting and expiration dates in accordance with the original grant notices in exchange for a general release of all claims against the Company. The Company has entered into a consulting agreement with Mr. Meader to provide continued services for an initial period of twelve months. | |||||||
On May 2, 2012, the Company entered into a five-year “at will” employment agreement with Jeanene Morgan to serve as the Company’s Chief Financial Officer. The agreement provides a base salary of $165,000 per annum from January 1, 2012 to December 31, 2012, increasing to $190,000 on January 1, 2013 and $215,000 on January 1, 2014. After 2014, the agreement provides for base salary increases at the discretion of the Board of Directors with a minimum 5% increase. The board of directors, in its sole discretion, may grant Ms. Morgan a year-end bonus with a value of no less than 2% of EBITDA of the Company (assuming a positive figure) and up to 100% of Ms. Morgan’s base salary. Ms. Morgan shall be granted an option to purchase 200,000 shares of the Company’s common stock. Ms. Morgan shall be permitted to participate in all benefit plans of the Company and receive 4 weeks paid vacation. | |||||||
On January 10, 2013, Ms. Morgan agreed to defer the payment of the salary increase which would have become effective January 1, 2013. The deferral will continue until further notice by Ms. Morgan to the Board of Directors. The agreement includes the accrual of unpaid salary, the right to convert any or all of the accrued but unpaid salary to common stock of the Company at a conversion price of $0.21 per share and an amendment to all outstanding stock option grant notices to allow Ms. Morgan to retain all rights until the expiration date upon termination unless for cause, as defined in the employment agreement. | |||||||
The following is a schedule by year of the future minimum salary payments related to these employment agreements: | |||||||
2013 | $ | 595,865 | |||||
2014 | 700,000 | ||||||
2015 | – | ||||||
2016 | – | ||||||
Total | $ | 1,295,865 |
14_Restatement
14. Restatement | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||
Restatement | ' | ||||||||||||||||||||||||
14. Restatement | ' | ||||||||||||||||||||||||
The Company has restated its financial statements for the three and nine month periods ended September 30, 2012. The Company determined that a derivative liability should have been recognized for the conversion feature and warrants for the $1.0 million senior secured debenture issued to Hillair on June 27, 2012 as an embedded derivative. All of the issues were non-cash items. The audited financial statements as of December 31, 2012 correctly recorded and presented the derivative liability. | |||||||||||||||||||||||||
The impact of the restatements of the Statement of Operations accounts for the periods ended September 30, 2012 are as follows: | |||||||||||||||||||||||||
Three Months Ending | Nine Months Ending | ||||||||||||||||||||||||
9/30/12 | 9/30/12 | Change | 9/30/12 | 9/30/12 | Change | ||||||||||||||||||||
Previously | Restated | Previously Reported | Restated | ||||||||||||||||||||||
Reported | |||||||||||||||||||||||||
Interest Expense | (112,452 | ) | (156,112 | ) | (43,660 | ) | (127,599 | ) | (161,260 | ) | (33,661 | ) | |||||||||||||
Gain (loss) on derivative valuation | – | 46,257 | 46,257 | – | 46,257 | 46,257 | |||||||||||||||||||
Net Loss | (720,427 | ) | (707,830 | ) | 12,597 | (1,910,341 | ) | (1,897,745 | ) | 12,596 |
15_Subsequent_Events
15. Subsequent Events | 9 Months Ended |
Sep. 30, 2013 | |
Subsequent Events [Abstract] | ' |
Subsequent Events | ' |
On October 16, 2013, pursuant to a vote of the shareholders on record as of September 3, 2013, the number of authorized shares of common stock was increased to 700,000,000. | |
On October 18, 2013, the Company exchanged 380,952 warrants to purchase common stock issued to various parties associated with National Securities as part of the Hillair debenture issuance for shares of restricted common stock of the Company on a one for one basis with no exchange of cash. | |
On October 25, 2013, the board of directors granted five officers and employees 1,000,000 shares each and one director 500,000 shares of restricted common stock as a bonus for service to the Company. | |
On October 29, 2013, the Company executed new two year employment agreements with Messrs. Klaus Moeller, Howard Balaban and Larry Balaban, with an effective date of October 1, 2013, whereby the employees agreed to a reduction of salary. Each named employee will receive (i) an annual salary of $20,800 (except that if the Company generates cash flow from operations of at least $300,000 on an annual basis, the annual salary shall be $100,000 plus an additional payment of $75,000 per annum, payable in cash or shares of the Company’s common stock in quarterly installments of $18,750 each, and (ii) the acceleration of vesting of all previously issued option grants to Mr. Moeller under the Company’s 2008 Stock Option Plan as well as participation in other Company benefit plans and the ability to receive a year-end performance bonus, at the discretion of the Company’s Board of Directors. In the event employment is terminated by the Company without “Cause” as defined in the agreement, the employee shall be entitled to severance payments for twelve months, based on the annual salary rate of $100,000. Mr. Moeller shall be employed as Chief Executive Officer and each of Messrs. Balaban will have the title Vice-President. Additional information regarding Mr. Moeller’s agreement is available on the Form 8-K filed on October 30, 2013. | |
On October 29, 2013, the Company and Ms. Morgan’s agreed to execute a new employment agreement, effective October 1, 2013, whereby Ms. Morgan shall continue to serve as the Company’s Chief Financial Officer for a period of two years in consideration for (i) a reduction in annual salary to $175,000 and (ii) the acceleration of vesting of all previously issued option grants to Ms. Morgan under the Company’s 2008 Stock Option Plan as well as participation in other Company benefit plans and the ability to receive a year-end performance bonus, at the discretion of the Company’s Board of Directors. In the event Ms. Morgan’s employment is terminated by the Company without “Cause” (as defined in the Morgan Employment Agreement), Ms. Morgan shall be entitled to severance payments for twelve months. Additional information regarding Mr. Moeller’s agreement is available on the Form 8-K filed on October 30, 2013. | |
On October 30, 2013, the Company issued 1,002,000 shares of restricted common stock in exchange for services valued at $50,100, or $0.05 per share. | |
On November 8, 4,320,607 shares of restricted common stock were issued in full payment of a note payable, originally issued on March 31, 2011, with a principal amount of $159,752.54 and accrued but unpaid interest in the amount of $56,277.79. See Note 5: Notes Payable – Related Parties for additional information. | |
On November 8, 2013, the Company issued 1,000,000 shares restricted common stock to a director as a bonus for service to the Company. |
1_The_Company_and_Significant_1
1. The Company and Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2013 | |
Accounting Policies [Abstract] | ' |
Organization and Nature of Business | ' |
Genius Brands International, Inc. (“we”, “us”, “our” or the “Company”), f/k/a Pacific Entertainment Corporation, creates and distributes music-based products which we believe are entertaining, educational and beneficial to the well-being of infants and young children, under our brands, including Baby Genius and Little Genius. We create, market and sell children’s videos, music, books and other products in the United States by distribution at wholesale to retail stores and distributors, direct to consumers through various “deal for a day” sites and through digital platforms using intellectual property developed and owned by us. We license the use of our intellectual property, both domestically and internationally, to others to manufacture, market and sell products based on our characters and brands, whereby we receive advances and royalties. The Company also obtains rights to the content of other studios for distribution through our warehouse facility to our customers, for which we either pay royalty fees or earn distribution fees. We have licensing agreements with other companies under which we produce music-based products using their characters and brands and for which we pay a royalty. | |
The Company commenced operations in January 2006, assuming all of the rights and obligations of its Chief Executive Officer, Klaus Moeller, under an Asset Purchase Agreement between the Company and Genius Products, Inc., in which we obtained all rights, copyrights, and trademarks to the brands “Baby Genius,” “Little Genius,” “Kid Genius,” “123 Favorite Music” and “Wee Worship,” and all then existing productions under those titles. On October 17, 2011 and October 18, 2011, Genius Brands International, Inc., filed Articles of Merger with the Secretary of State of the State of Nevada and with the Secretary of State of the State of California, respectively. As previously described on the Company’s Schedule 14C Information Statement, filed with the Securities and Exchange Commission on September 21, 2011, by filing the Articles of Merger, the Company (i) changed its domicile to Nevada from California, and (ii) changed its name to Genius Brands International, Inc. from Pacific Entertainment Corporation (the “Reincorporation”). Pursuant to the Articles of Merger, Pacific Entertainment Corporation, a California corporation, merged into Genius Brands International, Inc., a Nevada corporation that, prior to the Reincorporation, was the wholly owned subsidiary of Pacific Entertainment Corporation. Genius Brands International, the Nevada corporation, is the surviving corporation. In connection with the Reincorporation, on October 12, 2011, the Company filed an Issuer Company-Related Action Notification Form with the Financial Industry Regulatory Authority (“FINRA”) and on November 29, 2011 our trading symbol changed from “PENT” to “GNUS”. | |
On January 11, 2011, the Company signed a five-year, world-wide license agreement with Tollytots® for a new toy line. The agreement included a broad range of exclusive categories including learning and developmental toys, most plush toys, and musical toys which Tollytots® had the sole right to manufacture, market and distribute on a world-wide basis. It also allowed Tollytots® a non-exclusive right to manufacture, market and distribute products in several non-exclusive categories, including board games, puzzles, electronic learning aids and amusement plush toys. The agreement was subject to early termination by the Company in specified territories in the event minimum sales requirements in those territories were not met in any contract year. On June 6, 2013, the Company and Tollytots® agreed to terminate the agreement in its entirety. The Company will receive no further payments for this license beyond September 30, 2013. | |
The Company also obtains licenses for other select brands we feel we can market and sell through our distribution channels. | |
On September 20, 2010, the Company entered into a joint venture agreement with Dr. Shulamit Ritblatt to form Circle of Education, LLC (“COE”), a California limited liability company, for the purpose of creation and distribution of a music-based curriculum to promote school readiness for children ages 2-5 years. The Company actively participated in a research study into the use of the curriculum through a major university for three years based on certain unregistered copyrights and trademarks, confidential information, designs, ideas, discoveries, inventions, processes, research results and work product it had developed. In March 2012, the Company and Dr. Ritblatt agreed to terminate the joint venture agreement. COE transferred equal right of ownership in the intellectual property developed as of the date of termination (“IP”) to each of the Company and Dr. Ritblatt, and in exchange for the rights to the IP, Dr. Ritblatt transferred her units of COE to the Company. Each party will have the right to continue development of the IP and products based on the IP with no further obligation to the other party. Subject to certain limitations for specific channels of distribution reserved for each party for a period of twelve months from the execution of the agreements, both parties have non-exclusive and non-restrictive rights to the use, sublicense or sale of the IP and products created based on the IP. | |
The Company has developed the Ready!Play!Learn!™ program based partially on the intellectual property discussed above, which we anticipate will be available for distribution in 2014. The program includes a curriculum book and music aimed at parents and caregivers of preschool aged children to assist them in preparing their children for kindergarten. | |
In 2012, the Company began development of an application based on our content and characters. The initial application includes digital video and music delivery, with games and puzzles based on our characters, which is scheduled to be available in the fourth quarter of 2013. Future enhancements include a variety of tools, including lesson plans, curriculum and songs designed to assist parents teach academic subjects and socialization skills to their children ages 2-5 years in preparation for attending kindergarten. | |
The Company believes that the distribution of products is changing from the traditional brick and mortar retail store to an increasing emphasis on digital delivery whereby the owners of content will be able to reach customers directly through a digital delivery platform. In 2013, we began creation of a digital streaming application that will be available at www.babygenius.com and the conversion of all our content to digital format. We anticipate the initial completion date in the fourth quarter of 2013. | |
The Company’s Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America. These require the use of estimates and assumptions that affect the assets, liabilities, revenues and expenses reported in the financial statements, as well as amounts included in the notes thereto, including discussion and disclosure of contingent liabilities. Although the Company uses its best estimates and judgments, actual results could differ from these estimates as future confirming events occur. | |
Liquidity | ' |
Historically, the Company has incurred net losses. As of September 30, 2013, the Company had an accumulated deficit of $14,494,074 and a total stockholders’ deficit of $3,412,073. At September 30, 2013, the Company had current assets of $893,315, including cash of $234,211, and current liabilities of $4,500,134, resulting in a working capital deficit of $3,606,819. For the nine months ended September 30, 2013, the Company reported a net loss of $4,286,050 and net cash used by operating activities of $467,579. Management believes that its sales, cash provided by operations, together with funds available from deferred and reduced officers’ salaries and short term financing, will be sufficient to fund planned operations for the next twelve months. However, there can be no assurance that operations and operating cash flows will continue at the current levels or improve in the near future. If the Company is unable to obtain profitable operations and positive operating cash flows sufficient to meet scheduled debt obligations, it may need to seek additional funding or be forced to scale back its development plans or to significantly reduce or terminate operations. | |
Use of Estimates | ' |
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. | |
Cash Equivalents | ' |
The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents. | |
Revenue Recognition | ' |
The Company recognized revenue related to product sales when (i) the seller’s price is substantially fixed, (ii) shipment has occurred causing the buyer to be obligated to pay for product, (iii) the buyer has economic substance apart from the seller, and (iv) there is no significant obligation for future performance to directly bring about the resale of the product by the buyer as required by FASB Accounting Standards Codification (“ASC”) Topic 605 - Revenue Recognition. | |
Revenues associated with the sale of products, are recorded when shipped to customers pursuant to approved customer purchase orders resulting in the transfer of title and risk of loss. Cost of sales, rebates and discounts are recorded at the time of revenue recognition or at each financial reporting date. | |
The Company’s licensing and royalty revenue represent variable payments based on net sales from brand licensees for content distribution rights. These license agreements are held in conjunction with third parties that are responsible for collecting fees due and remitting to the Company its share after expenses. Revenue from licensed products is recognized when realized or realizable based on royalty reporting received from licensees. | |
Shipping and Handling | ' |
The Company records shipping and handling expenses in the period in which they are incurred and are included in the Cost of Goods Sold. | |
Inventories | ' |
Inventories are stated at the lower of cost (average) or market and consist of finished goods such as DVDs, CDs and other products. A reserve for slow-moving and obsolete inventory is established for all inventory deemed potentially non-saleable by management in the period in which it is determined to be potentially non-saleable. The current inventory is considered properly valued and saleable. The Company concluded that there was an appropriate reserve for slow moving and obsolete inventory of $84,671 and $57,305 established as of September 30, 2013 and December 31, 2012, respectively. | |
Property and Equipment | ' |
Property and equipment are recorded at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from 5 to 39 years. Maintenance, repairs, and renewals, which neither materially add to the value of the assets nor appreciably prolong their lives, are charged to expense as incurred. Gains and losses from dispositions of property and equipment are reflected in the statement of operations. | |
Intangible Assets | ' |
Intangible Assets acquired, either individually or with a group of other assets, are initially recognized and measured based on fair value. In the acquisition of the assets from Genius Products, fair value was calculated using a discounted cash flow analysis of the revenue streams for the estimated life of the assets. | |
The Company develops new video, music, books and digital applications, in addition to adding content, improved animation and songs/features to their existing productions. The costs of new product development and significant improvement to existing products are capitalized while routine and periodic alterations to existing products are expensed as incurred. The Company begins amortization of new products when it is available for general release. Annual amortization cost of intangible assets are computed based on the straight-line method over the remaining economic life of the product, generally such deferred costs are amortized over five years. | |
The Company reviews all intangible assets periodically to determine if the value has been impaired by recent financial transactions using the discounted cash flow analysis of revenue stream for the estimated life of the assets. | |
Stock Based Compensation | ' |
As required ASC 718 - Stock Compensation, the Company recognizes an expense related to the fair value of our stock-compensation awards, including stock options, using the Black-Scholes calculation as of the date of grant. | |
Advertising Costs | ' |
The Company’s marketing and sales costs are primarily related to advertising, trade shows, public relation fees and production and distribution of collateral materials. In accordance with ASC 720 regarding Advertising Costs, the Company expenses advertising costs in the period in which the expense is incurred. Marketing and Sales costs incurred by licensees are borne fully by the licensee and are not the responsibility of the Company. Advertising expense for the nine months ended September 30, 2013 and September 30, 2012 was $14,915 and $32,412, respectively. | |
Allowance for Sales Returns | ' |
An Allowance for Sales Returns is estimated based on average sales during the previous year. Based on experience, sales growth, and our customer base, the Company concluded that the allowance for sales returns at September 30, 2013 and December 31, 2012 should be $43,000 and $53,000, respectively. | |
Fair value of financial instruments | ' |
The carrying amounts of cash, receivables and accrued liabilities approximate fair value due to the short-term maturity of the instruments. |
2_Plant_Property_and_Equipment1
2. Plant, Property, and Equipment and Intangible Assets (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Schedule of Property Plant And Equipment | ' | ||||||||
The Company has plant, property and equipment and other intangible assets used in the creation of revenue as follows as of September 30, 2013 and December 31, 2012: | |||||||||
9/30/13 | 12/31/12 | ||||||||
Furniture and Equipment | $ | 91,984 | $ | 89,159 | |||||
Less Accumulated Depreciation | (72,609 | ) | (65,423 | ) | |||||
Net Fixed Assets | $ | 19,375 | $ | 23,736 | |||||
Trademarks | $ | 129,831 | $ | 129,831 | |||||
Product Masters | 3,279,369 | 3,279,369 | |||||||
Other Intangible Assets | 290,161 | 290,161 | |||||||
Less Accumulated Amortization | (3,452,350 | ) | (3,343,291 | ) | |||||
Net Intangible Assets | $ | 247,011 | $ | 356,070 |
3_Accrued_Liabilities_Tables
3. Accrued Liabilities (Tables) | 9 Months Ended | ||||||||||||
Sep. 30, 2013 | |||||||||||||
Payables and Accruals [Abstract] | ' | ||||||||||||
Other accrued liabilities | ' | ||||||||||||
9/30/13 | 12/31/12 | ||||||||||||
Allowance for Sales Returns | $ | 43,000 | $ | 53,000 | |||||||||
Distribution Arrangements Payable | 105,064 | 217,858 | |||||||||||
Deferred Revenue | 41,581 | 110,177 | |||||||||||
Royalties Payable | 3,817 | 59,033 | |||||||||||
Other Accrued Expenses | 6,171 | 56,594 | |||||||||||
Total Accrued Expenses | $ | 199,633 | $ | 496,662 | |||||||||
Derivative liability activity | ' | ||||||||||||
Derivative liability activity for the nine months ending September 30, 2013 was as follows: | |||||||||||||
30-Sep-13 | 31-Dec-12 | (Gain) Loss on Derivative, | |||||||||||
9 Months Ending | |||||||||||||
30-Sep-13 | |||||||||||||
Conversion feature of the June 27, 2012 $1,000,000 Securities Purchase Agreement (see note 4) | $ | – | $ | 15,743 | $ | (4,113 | ) | ||||||
Conversion feature of the June 27, 2012 reissued 1,163,333 Securities Purchase Agreement (see note 4) | 2,030,636 | – | 1,067,798 | ||||||||||
5,000,000 Warrants | – | 49,491 | (18,527 | ) | |||||||||
380,952 Warrants | 9,604 | 3,728 | 5,876 | ||||||||||
Total | $ | 2,040,240 | $ | 68,962 | $ | (1,051,034 | ) | ||||||
Fair market values of the Company's derivatives | ' | ||||||||||||
Fair market values of the Company's derivatives as of September 30, 2013 were based on the Black Scholes valuation using the following assumptions: | |||||||||||||
Conversion Feature | Warrants | ||||||||||||
Risk-free interest rate | 0.14% | 0.79% | |||||||||||
Expected life in years | 0.83 | 3.83 | |||||||||||
Dividend yield | 0 | 0 | |||||||||||
Expected volatility | 63.00% | 60.54% |
4_Notes_Payable_Tables
4. Notes Payable (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
Black-Scholes valuation for the warrants | ' | ||||||||
The warrants were valued in the amount of $379,688, based on the Black-Scholes valuation using the following assumptions: | |||||||||
Risk-free interest rate | 0.73% | ||||||||
Expected life in years | 5 | ||||||||
Dividend yield | 0 | ||||||||
Expected volatility | 63.65% | ||||||||
Debt Discount for the convertible feature of the debenture was valued in the amount of $269,284 using the Black-Scholes calculation with the following assumptions: | |||||||||
Risk-free interest rate | 0.31% | ||||||||
Expected life in years | 2 | ||||||||
Dividend yield | 0 | ||||||||
Expected volatility | 60.01% | ||||||||
Debt Discount was recorded in the aggregate amount of $1,163,333 for the derivative value of the convertible feature of the reissued debenture on the exchange date using the Black-Scholes calculation with the following assumptions: | |||||||||
Risk-free interest rate | 0.14% | ||||||||
Expected life in years | 0.83 | ||||||||
Dividend yield | 0 | ||||||||
Expected volatility | 63.22% | ||||||||
Notes payable and accrued interest | ' | ||||||||
As of September 30, 2013 and December 31, 2012, the Company had the following notes payable and accrued interest balances outstanding: | |||||||||
9/30/13 | 12/31/12 | ||||||||
Debenture - $1,000,000 16% senior secured convertible | $ | – | $ | 1,000,000 | |||||
Debt Discount - $1,000,000 16% senior secured convertible | – | (485,147 | ) | ||||||
Debenture - $1,163,333 16% senior secured convertible | 1,088,333 | – | |||||||
Debt Discount - $1,163,333 16% senior secured convertible | (979,499 | ) | – | ||||||
Notes Payable - 12% convertible | 530,000 | – | |||||||
Total Notes Payable | 638,834 | 514,853 | |||||||
Less: Current Portion | 638,834 | – | |||||||
Long Term Portion | $ | – | $ | 514,853 | |||||
Accrued Interest | |||||||||
Debenture - $1,000,000 16% senior secured convertible Issued June 27,2012 | $ | 15,957 | $ | 26,667 | |||||
Debenture - $2,500,000 Terminated June 2009 | 19,049 | 19,049 | |||||||
Notes Payable - $530,000 12% convertible Issued August 30, 2013 | 5,657 | – | |||||||
Accrued Interest - Current Portion | $ | 40,663 | $ | 45,716 | |||||
Schedule of Maturities of long-term debt | ' | ||||||||
Maturities requirements on notes payable subject to mandatory redemption at September 30, 2013, are as follow: | |||||||||
2013 | $ | 830,000 | |||||||
2014 | 788,333 | ||||||||
2015 | – | ||||||||
2016 | – | ||||||||
2017 | – | ||||||||
Total | $ | 1,618,333 |
5_Notes_Payable_and_Accrued_In1
5. Notes Payable and Accrued Interest - Related Parties (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2013 | |||||||||
Related Party Transactions [Abstract] | ' | ||||||||
Notes payable and accrued interest | ' | ||||||||
As of September 30, 2013 and December 31, 2012, the Company had the following notes payable and accrued interest balances outstanding: | |||||||||
9/30/13 | 12/31/12 | ||||||||
Officer Loans to Company | $ | 194,163 | $ | 194,163 | |||||
Accrued Interest on Officer Loans to Company | 60,256 | 49,087 | |||||||
Subordinated Officer Loans to Company | 159,753 | 159,753 | |||||||
Accrued Interest on Subordinated Loans | 55,217 | 44,888 | |||||||
Total Notes Payable and Accrued Interest | 469,389 | 447,891 | |||||||
Less: Current Portion | – | – | |||||||
Long Term Portion | $ | 469,389 | $ | 447,891 | |||||
Schedule of Maturities requirements on long-term | ' | ||||||||
Maturities requirements on notes payable - related party subject to mandatory redemption at September 30, 2013, are as follow: | |||||||||
2013 | $ | – | |||||||
2014 | – | ||||||||
2015 | 353,919 | ||||||||
2016 | – | ||||||||
2017 | – | ||||||||
Total | $ | 353,919 | |||||||
10_Stock_Options_Tables
10. Stock Options (Tables) | 9 Months Ended | ||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ||||||||||||||||||||
Stock Option Plan | ' | ||||||||||||||||||||
The following schedule summarizes the changes in the Company’s stock option plan for the nine months ended September 30, 2013: | |||||||||||||||||||||
Weighted | Weighted | ||||||||||||||||||||
Options Outstanding | Average | Average | |||||||||||||||||||
Number | Exercise | Remaining | Aggregate | Exercise | |||||||||||||||||
of | Price | Contractual | Intrinsic | Price | |||||||||||||||||
Shares | per Share | Life | Value | per Share | |||||||||||||||||
Balance at December 31, 2012 | 15,845,000 | $ | 0.06-0.55 | 3.55 years | – | $ | 0.42 | ||||||||||||||
Options Granted | 4,100,000 | 0.20-0.44 | 4.63 years | – | 0.20-0.44 | ||||||||||||||||
Options Exercised | – | – | – | – | – | ||||||||||||||||
Options Expired | -8,390,000 | 0.34-.055 | – | – | 0.44 | ||||||||||||||||
Balance at September 30, 2013 | 11,555,000 | $ | 0.06-0.55 | 4.99 years | – | $ | 0.32 | ||||||||||||||
Exercisable September 30, 2013 | 10,255,000 | $ | 0.06-0.55 | 5.06 years | – | $ | 0.31 |
11_Warrants_Tables
11. Warrants (Tables) | 9 Months Ended | ||||||||||||
Sep. 30, 2013 | |||||||||||||
Warrants and Rights Note Disclosure [Abstract] | ' | ||||||||||||
Schedule Of Stockholders Equity Warrants | ' | ||||||||||||
The following schedule summarizes the changes in the Company’s warrants during the nine months ended September 30, 2013: | |||||||||||||
Number of Warrants | Exercise Price per Share | Weighted Average Exercise Price per Share | |||||||||||
Balance at December 31, 2012 | 5,852,060 | $ | 0.33 - 0.40 | $ | 0.34 | ||||||||
Warrants Granted | – | – | – | ||||||||||
Warrants Exercised | – | – | – | ||||||||||
Warrants Expired or Cancelled | -5,308,608 | 0.4 | 0.33 | ||||||||||
Balance at September 30, 2013 | 543,452 | $ | 0.33 - 0.40 | $ | 0.35 | ||||||||
Exercisable at September 30, 2013 | 543,452 | $ | 0.33 - 0.40 | $ | 0.35 | ||||||||
Schedule Of Outstanding Warrants | ' | ||||||||||||
The following schedule summarizes the outstanding warrants at September 30, 2013: | |||||||||||||
Number of Warrants Outstanding at | Number of Warrants Exercisable at | Expiration Date | Exercise Price | ||||||||||
30-Sep-13 | 30-Sep-13 | ||||||||||||
162,500 | 162,500 | 2013 | $ | 0.4 | |||||||||
380,952 | 380,952 | 2017 | $ | 0.33 |
12_Fair_Value_Measurements_Tab
12. Fair Value Measurements (Tables) | 9 Months Ended | ||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||
Assets and liabilities measured at fair value on a recurring basis | ' | ||||||||||||||||
Assets and liabilities measured at fair value on a recurring basis are as follows at September 30, 2013: | |||||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||||
Assets | $ | – | $ | – | $ | – | $ | – | |||||||||
Total assets measured at fair value | – | – | – | – | |||||||||||||
Liabilities | |||||||||||||||||
Derivative Liability | 2,040,240 | – | – | 2,040,240 | |||||||||||||
Convertible Debenture, net of discount | 108,834 | – | – | 108,834 | |||||||||||||
Total liabilities measured at fair value | $ | 2,149,074 | $ | – | $ | – | $ | 2,149,074 |
13_Employment_Agreements_Table
13. Employment Agreements (Tables) | 9 Months Ended | ||||||
Sep. 30, 2013 | |||||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||||
Schedule Of Future Minimum Salary Payments | ' | ||||||
The following is a schedule by year of the future minimum salary payments related to these employment agreements: | |||||||
2013 | $ | 595,865 | |||||
2014 | 700,000 | ||||||
2015 | – | ||||||
2016 | – | ||||||
Total | $ | 1,295,865 | |||||
14_Restatement_Tables
14. Restatement (Tables) | 9 Months Ended | ||||||||||||||||||||||||
Sep. 30, 2013 | |||||||||||||||||||||||||
Restatement | ' | ||||||||||||||||||||||||
Restatements of the Statement of Operations | ' | ||||||||||||||||||||||||
The impact of the restatements of the Statement of Operations accounts for the periods ended September 30, 2012 are as follows: | |||||||||||||||||||||||||
Three Months Ending | Nine Months Ending | ||||||||||||||||||||||||
9/30/12 | 9/30/12 | Change | 9/30/12 | 9/30/12 | Change | ||||||||||||||||||||
Previously | Restated | Previously Reported | Restated | ||||||||||||||||||||||
Reported | |||||||||||||||||||||||||
Interest Expense | (112,452 | ) | (156,112 | ) | (43,660 | ) | (127,599 | ) | (161,260 | ) | (33,661 | ) | |||||||||||||
Gain (loss) on derivative valuation | – | 46,257 | 46,257 | – | 46,257 | 46,257 | |||||||||||||||||||
Net Loss | (720,427 | ) | (707,830 | ) | 12,597 | (1,910,341 | ) | (1,897,745 | ) | 12,596 |
1_The_Company_and_Significant_2
1. The Company and Significant Accounting Policies (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | Dec. 31, 2011 | |
Accounting Policies [Abstract] | ' | ' | ' | ' | ' |
Consolidated accumulated deficit | $14,494,074 | $14,494,074 | ' | $10,208,024 | ' |
Stockholders' deficit | 3,412,073 | 3,412,073 | ' | 245,243 | 1,120,633 |
Consolidated current assets | 893,315 | 893,315 | ' | 1,997,836 | ' |
Cash | 234,211 | 234,211 | ' | 447,548 | ' |
Consolidated current liabilities | 4,500,134 | 4,500,134 | ' | 2,098,520 | ' |
Working capital | -3,606,819 | -3,606,819 | ' | ' | ' |
Net loss | -2,796,936 | -4,286,050 | ' | -2,067,609 | ' |
Cash used by operating activities | ' | 467,579 | ' | ' | ' |
Reserve for obsolete inventory | 84,671 | 84,671 | ' | 57,305 | ' |
Advertising expense | ' | 14,915 | 32,412 | ' | ' |
Allowance for sales returns | $43,000 | $43,000 | ' | $53,000 | ' |
2_Plant_Property_and_Equipment2
2. Plant, Property, and Equipment and Intangible Assets (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Furniture and Equipment | $91,984 | $89,159 |
Less Accumulated Depreciation | -72,609 | -65,423 |
Net Fixed Assets | 19,375 | 23,736 |
Less Accumulated Amortization | -3,452,350 | -3,343,291 |
Net Intangible Assets | 247,011 | 356,070 |
Trademarks [Member] | ' | ' |
Intangible assets | 129,831 | 129,831 |
Product Masters | ' | ' |
Intangible assets | 3,279,369 | 3,279,369 |
Other Intangible Assets | ' | ' |
Intangible assets | $290,161 | $290,161 |
2_Plant_Property_and_Equipment3
2. Plant, Property, and Equipment and Intangible Assets (Details Narrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Property, Plant and Equipment [Abstract] | ' | ' |
Capitalized Product Development in Process | $397,749 | $246,617 |
3_Accrued_Liabilities_Details
3. Accrued Liabilities (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Payables and Accruals [Abstract] | ' | ' |
Allowance for Sales Returns | $43,000 | $53,000 |
Distribution Arrangements Payable | 105,064 | 217,858 |
Deferred Revenue | 41,581 | 110,177 |
Royalties Payable | 3,817 | 59,033 |
Other Accrued Expenses | 6,171 | 56,594 |
Total Accrued Expenses | $199,633 | $496,662 |
3_Accrued_Liabilities_Details_
3. Accrued Liabilities (Details 1) (USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Derivative liability Beginning Balance | $68,962 |
(Gain) Loss on Derivative | -1,051,034 |
Derivative liability Ending Balance | 2,040,240 |
Securities Purchase Agreement | ' |
Derivative liability Beginning Balance | 15,743 |
(Gain) Loss on Derivative | -4,113 |
Derivative liability Ending Balance | 0 |
Securities Purchase Agreement One | ' |
Derivative liability Beginning Balance | 0 |
(Gain) Loss on Derivative | 1,067,798 |
Derivative liability Ending Balance | 2,030,636 |
5,000,000 Warrants | ' |
Derivative liability Beginning Balance | 49,491 |
(Gain) Loss on Derivative | -18,527 |
Derivative liability Ending Balance | 0 |
380,952 Warrants | ' |
Derivative liability Beginning Balance | 3,728 |
(Gain) Loss on Derivative | 5,876 |
Derivative liability Ending Balance | $9,604 |
3_Accrued_Liabilities_Details_1
3. Accrued Liabilities (Details 2) (Derivatives) | 9 Months Ended |
Sep. 30, 2013 | |
Conversion Feature | ' |
Risk-free interest rate | 0.14% |
Expected life in years | '9 months 29 days |
Dividend yield | 0.00% |
Expected volatility | 63.00% |
Warrant | ' |
Risk-free interest rate | 0.79% |
Expected life in years | '3 years 9 months 29 days |
Dividend yield | 0.00% |
Expected volatility | 60.54% |
3_Accrued_Liabilities_Narrativ
3. Accrued Liabilities (Narrative) (USD $) | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Dec. 31, 2012 | |
Payables and Accruals [Abstract] | ' | ' | ' |
Accrued but unpaid salaries and vacation benefits | $746,377 | ' | $516,083 |
Debenture interest accrued and unpaid | 40,663 | ' | 45,716 |
Gain Loss on derivative valuation | $1,051,034 | $46,257 | ' |
4_Notes_Payable_Details
4. Notes Payable (Details) | 9 Months Ended |
Sep. 30, 2013 | |
Warrant | ' |
Risk-free interest rate | 0.73% |
Expected life in years | '5 years |
Dividend yield | 0.00% |
Expected volatility | 63.65% |
Debt Discount | ' |
Risk-free interest rate | 0.31% |
Expected life in years | '2 years |
Dividend yield | 0.00% |
Expected volatility | 60.01% |
Debt Discount One | ' |
Risk-free interest rate | 0.14% |
Expected life in years | '9 months 29 days |
Dividend yield | 0.00% |
Expected volatility | 63.22% |
4_Notes_Payable_Details_1
4. Notes Payable (Details 1) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Total Notes Payable | $638,834 | $514,853 |
Less: Current Portion | 638,834 | 0 |
Long Term Portion | 0 | 514,853 |
Debenture $1,000,000 | ' | ' |
Total Notes Payable | 0 | 1,000,000 |
Debt Discount $1,000,000 | ' | ' |
Total Notes Payable | 0 | -485,147 |
Debenture $1,163,333 | ' | ' |
Total Notes Payable | 1,088,333 | 0 |
Debt Discount $1,163,333 | ' | ' |
Total Notes Payable | ($979,499) | $0 |
4_Notes_Payable_Details_2
4. Notes Payable (Details 2) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Accrued interest | $40,663 | $45,716 |
Debenture $1,000,000 | ' | ' |
Accrued interest | 15,957 | 26,667 |
Debenture $2,500,000 | ' | ' |
Accrued interest | 19,049 | 19,049 |
Notes Payable $530,000 | ' | ' |
Accrued interest | $5,657 | $0 |
4_Notes_Payable_Details_3
4. Notes Payable (Details 3) (USD $) | Sep. 30, 2013 |
Debt Disclosure [Abstract] | ' |
2013 | $830,000 |
2014 | 788,333 |
2015 | 0 |
2016 | 0 |
2017 | 0 |
Long Term Debt Maturities, Net | $1,618,333 |
4_Notes_Payable_Details_Narrat
4. Notes Payable (Details Narrative) (USD $) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2013 | Dec. 31, 2012 | |
Amortization of debt discount | $278,577 | $163,825 |
Accrued interest | 40,663 | 45,716 |
Debt discount balance | 979,499 | 485,147 |
Hillair Debenture | ' | ' |
Debt discount balance | $322,903 | ' |
5_Notes_Payable_and_Accrued_In2
5. Notes Payable and Accrued Interest - Related Parties (Details) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Related Party Transactions [Abstract] | ' | ' |
Officer Loans to Company | $194,163 | $194,163 |
Accrued Interest on Officer Loans to Company | 60,256 | 49,087 |
Subordinated Officer Loans to Company | 159,753 | 159,753 |
Accrued Interest on Subordinated Loans | 55,217 | 44,888 |
Total Notes Payable and Accrued Interest | 469,389 | 447,891 |
Less: Current Portion | 0 | 0 |
Long Term Portion | $469,389 | $447,891 |
5_Notes_Payable_and_Accrued_In3
5. Notes Payable and Accrued Interest - Related Parties (Details 1) (USD $) | Sep. 30, 2013 |
2013 | $830,000 |
2014 | 788,333 |
2015 | 0 |
2016 | 0 |
2017 | 0 |
Messrs, Moeller, Meader, Larry Balaban And Howard Balaban | ' |
2013 | 0 |
2014 | 0 |
2015 | 353,919 |
2016 | 0 |
2017 | 0 |
Long Term Debt Maturities, Net | $353,919 |
5_Notes_Payable_and_Accrued_In4
5. Notes Payable and Accrued Interest - Related Parties (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Interest expense related party | $7,964 | ' | $21,497 | ' |
Officer Loans | ' | ' | ' | ' |
Interest expense related party | 3,779 | 3,559 | 11,166 | 10,519 |
Isabel Moeller | ' | ' | ' | ' |
Interest expense related party | 0 | 0 | 0 | 2,562 |
Four Officers | ' | ' | ' | ' |
Interest expense related party | $4,185 | $2,508 | $10,331 | $31,019 |
6_Stockholders_Equity_Details_
6. Stockholders' Equity (Details Narrative) (USD $) | Sep. 30, 2013 | Dec. 31, 2012 |
Common Stock, shares outstanding | 87,512,007 | 71,912,617 |
Preferred stock authorized | 10,000,000 | ' |
Preferred stock par value | $0.00 | ' |
Warrants outstanding | 543,452 | 5,852,060 |
On August 29, 2013 | ' | ' |
Shares reserved for debenture conversion and warrants issuance | 119,728,603 | ' |
On August 30, 2013 | ' | ' |
Shares reserved for debenture conversion and warrants issuance | 43,729,373 | ' |
8_Lease_Commitments_Details_Na
8. Lease Commitments (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2013 | Sep. 30, 2012 | Sep. 30, 2013 | Sep. 30, 2012 | |
Leases [Abstract] | ' | ' | ' | ' |
Rental expenses | $0 | $9,432 | $8,201 | $28,295 |
10_Stock_Options_Details
10 Stock Options (Details) (Stock Options [Member], USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Stock Options [Member] | ' |
Stock Options | ' |
Number of Warrants outstanding beginning balance | 15,845,000 |
Number of Shares, Options Granted | 4,100,000 |
Number of Shares, Options Exercised | 0 |
Number of Shares, Options Expired | -8,390,000 |
Number of Warrants outstanding ending balance | 11,555,000 |
Number of Shares exercisable ending balance | 10,255,000 |
Exercise Price Per Share | ' |
Exercise Price per Share beginning balance minimum | $0.06 |
Exercise Price per Share beginning balance maximum | $0.55 |
Exercise Price per Share, Options Granted, Minimum | $0.20 |
Exercise Price per Share, Options Granted, Maximum | $0.44 |
Exercise Price per Share, Options Exercised | ' |
Exercise Price per Share, Options Expired minimum | $0.34 |
Exercise Price per Share, Options Expired maximum | $0.06 |
Exercise Price per Share ending balance minimum | $0.06 |
Exercise Price per Share ending balance maximum | $0.55 |
Exercise Price per Share exercisable minimum ending balance | $0.06 |
Exercise price per share exercisable maximum ending balance | $0.55 |
Weighted Average Remaining Contractual Life | ' |
Weighted Average Remaining Contractual Life beginning balance | '3 years 6 months 18 days |
Weighted Average Remaining Contractual Life Options Granted | '4 years 7 months 17 days |
Weighted Average Remaining Contractual Life ending balance | '4 years 11 months 27 days |
Weighted Average Remaining Contractual Life exercisable ending balance | '5 years 22 days |
Aggregate Intrinsic Value | ' |
Aggregate Intrinsic Value beginning balance | ' |
Aggregate Intrinsic Value Options Granted | ' |
Aggregate Intrinsic Value Options Exercised | ' |
Aggregate Intrinsic Value Options Expired | ' |
Aggregate Intrinsic Value ending balance | ' |
Aggregate Intrinsic Value Exercisable ending balance | ' |
Weighted Average Exercise Price Per Share | ' |
WeightedAverage Exercise Price per Share beginning balance | $0.42 |
Weighted Average Exercise Price per Share Options Granted, Minimum | $0.20 |
Weighted Average Exercise Price per Share Options Granted, Maximum | $0.44 |
Weighted Average Exercise Price per Share Options Exercised | ' |
Weighted Average Exercise Price per Share Options Expired | $0.44 |
Weighted Average Exercise Price per Share ending balance | $0.32 |
Weighted Average Exercise Price per Share Exercisable ending balance | $0.31 |
11_Warrants_Details
11. Warrants (Details) (Warrant [Member], USD $) | 9 Months Ended | |
Sep. 30, 2013 | Dec. 31, 2012 | |
Warrant [Member] | ' | ' |
Warrant | ' | ' |
Number of Warrants outstanding beginning balance | 5,852,060 | ' |
Warrants Granted | 0 | ' |
Warrants Exercised | 0 | ' |
Warrants Expired or Cancelled | -5,308,608 | ' |
Number of Warrants outstanding ending balance | 543,452 | ' |
Number of Warrants exercisable ending balance | ' | 543,452 |
Exercise Price Per Share | ' | ' |
Exercise Price per Share beginning balance minimum | $0.33 | ' |
Exercise Price per Share beginning balance maximum | $0.40 | ' |
Exercise Price per Share, Warrants Granted | ' | ' |
Exercise Price per Share, Warrants Exercised | ' | ' |
Exercise Price per Share, Warrants Expired or Cancelled | $0.40 | ' |
Exercise Price per Share ending balance minimum | $0.33 | ' |
Exercise Price per Share ending balance maximum | $0.40 | ' |
Exercise Price per Share exercisable minimum ending balance | $0.33 | ' |
Exercise price per share exercisable maximum ending balance | $0.40 | ' |
Weighted Average Exercise Price Per Share | ' | ' |
WeightedAverage Exercise Price per Share beginning balance | $0.34 | ' |
Weighted Average Exercise Price per Share Warrants Granted | ' | ' |
Weighted Average Exercise Price per Share Warrants Exercised | ' | ' |
Weighted Average Exercise Price per Share Warrants Expired | $0.33 | ' |
Weighted Average Exercise Price per Share ending balance | $0.35 | ' |
Weighted Average Exercise Price per Share Exercisable ending balance | $0.35 | ' |
11_Warrants_Details_1
11. Warrants (Details 1) (USD $) | Sep. 30, 2013 |
$0.40 | ' |
Number of Warrants Outstanding | 162,500 |
Number of Warrants Exercisable | 162,500 |
Expiration Date | '2013 |
Warrant exercise price | $0.40 |
$0.33 | ' |
Number of Warrants Outstanding | 380,952 |
Number of Warrants Exercisable | 380,952 |
Expiration Date | '2017 |
Warrant exercise price | $0.33 |
12_Fair_Value_Measurements_Det
12. Fair Value Measurements (Details) (USD $) | Sep. 30, 2013 |
Assets | $0 |
Total assets measured at fair value | 0 |
Derivative Liability | 2,040,240 |
Convertible Debenture, net of discount | 108,834 |
Total liabilities measured at fair value | 2,149,074 |
Fair Value, Inputs, Level 1 [Member] | ' |
Assets | 0 |
Total assets measured at fair value | 0 |
Derivative Liability | 0 |
Convertible Debenture, net of discount | 0 |
Total liabilities measured at fair value | 0 |
Fair Value, Inputs, Level 2 [Member] | ' |
Assets | 0 |
Total assets measured at fair value | 0 |
Derivative Liability | 0 |
Convertible Debenture, net of discount | 0 |
Total liabilities measured at fair value | 0 |
Fair Value, Inputs, Level 3 [Member] | ' |
Assets | 0 |
Total assets measured at fair value | 0 |
Derivative Liability | 2,040,240 |
Convertible Debenture, net of discount | 108,834 |
Total liabilities measured at fair value | $2,149,074 |
13_Employment_Agreements_Detai
13. Employment Agreements (Details) (USD $) | Sep. 30, 2013 |
Commitments and Contingencies Disclosure [Abstract] | ' |
2013 | $595,865 |
2014 | 700,000 |
2015 | 0 |
2016 | 0 |
Total | $1,295,865 |
14_Restatement_Details
14. Restatement (Details) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended |
Sep. 30, 2013 | Sep. 30, 2013 | Dec. 31, 2012 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2012 | Sep. 30, 2012 | |
Previously Reported | Previously Reported | Restated [Member] | Restated [Member] | Change | Change | ||||
Interest Expense | ($589,606) | ($900,348) | ' | ($112,452) | ($127,599) | ($156,112) | ($161,260) | $43,660 | ($33,661) |
Gain (loss) on derivative valuation | -1,061,791 | -1,051,034 | ' | 0 | 0 | 46,257 | 46,257 | 46,257 | 46,257 |
Net Loss | ($2,796,936) | ($4,286,050) | ($2,067,609) | ($720,427) | ($1,910,341) | ($707,830) | ($1,897,745) | $12,597 | $12,596 |