Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | 16-May-14 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'Genius Brands International, Inc. | ' |
Entity Central Index Key | '0001355848 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
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 | ' | 6,077,707 |
Document Fiscal Period Focus | 'Q1 | ' |
Document Fiscal Year Focus | '2014 | ' |
Consolidated_Balance_Sheets_un
Consolidated Balance Sheets (unaudited) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | ||
Current Assets: | ' | ' | ||
Cash and Cash Equivalents | $992,753 | $527,110 | ||
Accounts Receivable, net | 296,289 | 893,826 | ||
Inventory | 264,548 | 224,351 | ||
Prepaid and Other Assets | 605,750 | 582,056 | ||
Total Current Assets | 2,159,340 | 2,227,343 | ||
Property and Equipment, net | 66,278 | 78,748 | ||
Film and Television Costs | 89,819 | 0 | ||
Capitalized Product Development in Process | 67,030 | 54,575 | ||
Intangible Assets, net | 1,903,637 | 1,865,706 | ||
Goodwill | 10,365,806 | 10,365,806 | ||
Investment in Stan Lee Comics, LLC | 0 | 0 | ||
Total Assets | 14,651,910 | 14,592,177 | ||
Current Liabilities: | ' | ' | ||
Accounts Payable | 647,525 | 889,919 | ||
Accrued Expenses | 740,992 | 704,539 | ||
Accrued Salaries and Wages | 72,815 | 59,958 | ||
Disputed Trade Payable | 925,000 | [1] | 925,000 | [1] |
Short Term Debt - Related Party | 415,787 | 516,659 | ||
Total Current Liabilities | 2,802,119 | 3,096,075 | ||
Long Term Liabilities: | ' | ' | ||
Services Advance | 750,000 | [2] | 0 | |
Total Liabilities | 3,552,119 | 3,096,075 | ||
Stockholders' Equity (Deficit) | ' | ' | ||
Preferred Stock, $0.001 par value, 10,000,000 share authorized, 0 shares issued and outstanding | 0 | 0 | ||
Common Stock, $0.001 par value, 700,000,000 shares authorized, respectively; 6,047,707 and 5,918,704 shares issued and outstanding, respectively | 6,048 | 5,919 | ||
Additional Paid in Capital | 29,371,960 | 28,914,238 | ||
Accumulated Deficit | -18,278,217 | -17,424,055 | ||
Total Equity (Deficit) | 11,099,791 | 11,496,102 | ||
Total Liabilities & Stockholders' Equity (Deficit) | $14,651,910 | $14,592,177 | ||
[1] | As part of the Merger, the Company assumed certain liabilities from a previous member of A Squared Entertainment, LLC which has claimed certain liabilities totaling $925,000. The Company disputes the basis for this liability and has not heard from the claimant for two years. | |||
[2] | During the three months ended March 31, 2014, the Company entered into an exclusive long-term agreement with Sony DADC, the optical disc manufacturing and fulfillment arm of Sony, to provide all CD, DVD and BD replication, packaging and distribution to Genius Brands International's direct customers. Under the terms of the long-term, exclusive supply chain services agreement, the Company will order a minimum level of disc replication, packaging and distribution services for its content across all physical media, including DVD, CD, and Blu-ray from Sony DADC. As consideration for these minimum order levels, the Company will receive a total of $1,500,000, $750,000 of which was received during the first quarter of 2014 with the remaining $750,000 due by January 17, 2015. |
Consolidated_Balance_Sheets_un1
Consolidated Balance Sheets (unaudited) (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Exercise Price Per Share | ' | ' |
Preferred Sock, par value | $0.00 | $0.00 |
Preferred Sock, Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Sock, Shares Issued | 0 | 0 |
Preferred Sock, Shares Outstanding | 0 | 0 |
Common Stock, par value (in Dollars per share) | $0.00 | $0.00 |
Common Stock, shares authorized | 700,000,000 | 700,000,000 |
Common Stock, shares issued | 6,047,707 | 5,918,704 |
Common Stock, shares outstanding | 6,047,707 | 5,918,704 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Revenues: | ' | ' |
Product Sales | $86,141 | $702,812 |
Television & Home Entertainment | 50,462 | 0 |
Licensing & Royalties | 39,680 | 31,427 |
Total Revenues | 176,283 | 734,239 |
Cost of Sales (Excluding Depreciation) | 136,035 | 647,309 |
Gross Profit | 40,248 | 86,930 |
Operating Expenses: | ' | ' |
Product Development | 887 | 26,991 |
Professional Services | 319,870 | 64,506 |
Rent Expense | 35,815 | 6,947 |
Marketing & Sales | 37,768 | 54,719 |
Depreciation & Amortization | 24,539 | 39,172 |
Salaries and Related Expenses | 308,696 | 471,147 |
Stock Compensation Expense | 0 | 58,279 |
Other General & Administrative | 200,721 | 56,205 |
Total Operating Expenses | 928,296 | 777,966 |
Loss from Operations | -888,048 | -691,036 |
Other Income (Expense): | ' | ' |
Other Income | 633 | 16 |
Interest Expense | -2,209 | -155,259 |
Interest Expense - Related Parties | -7,163 | -6,724 |
Gain (loss) on distribution contracts | 2,771 | 0 |
Gain (loss) on extinguishment of debt | 39,854 | 0 |
Gain (loss) on derivative valuation | 0 | -92,862 |
Net Other Income (Expense) | 33,886 | -254,829 |
Loss before Income Tax Expense | -854,162 | -945,865 |
Income Tax Expense | 0 | 0 |
Net Loss | ($854,162) | ($945,865) |
Net Loss per common share | ($0.14) | ($1.31) |
Weighted average shares outstanding | 6,029,573 | 722,159 |
Consolidated_Statements_of_Sto
Consolidated Statements of Stockholders' Equity (Deficit) (USD $) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2013 | $5,919 | $28,914,238 | ($17,424,055) | $11,496,102 |
Beginning Balance, Shares at Dec. 31, 2013 | 5,918,704 | ' | ' | ' |
Common Stock Issued for Cash, Shares | 102,860 | ' | ' | ' |
Common Stock Issued for Cash, Amount | 103 | 355,013 | ' | 355,116 |
Common Stock Issued in exchange for repayment of Accounts Payable, Shares | 8,143 | ' | ' | ' |
Common Stock Issued in exchange for repayment of Accounts Payable, Amount | 8 | 32,564 | ' | 32,572 |
Common Stock Issued for Services, Shares | 18,000 | ' | ' | ' |
Common Stock Issued for Services, Amount | 18 | 62,982 | ' | 63,000 |
Imputed Interest for Member Advances | ' | 7,163 | ' | 7,163 |
Net Loss | ' | ' | -854,162 | -854,162 |
Ending Balance, Amount at Mar. 31, 2014 | $6,048 | $29,371,960 | ($18,278,217) | $11,099,791 |
Ending Balance, Shares at Mar. 31, 2014 | 6,047,707 | ' | ' | ' |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (unaudited) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Cash Flows from Operating Activities: | ' | ' |
Net Loss | ($854,162) | ($945,865) |
Adjustments to reconcile net loss to net cash provided in operating activities: | ' | ' |
Depreciation Expense | 12,470 | 2,595 |
Amortization Expense | 12,069 | 36,577 |
Imputed Interest Expense | 7,163 | 0 |
Accretion of Discount on Convertible Debentures | 0 | 81,121 |
Issuance of Common Stock for Interest Expense | 0 | 40,000 |
Stock Compensation Expense | 0 | 58,279 |
Prepaid Consulting Service Expense | 29,252 | 0 |
(Gain) Loss on Conversion of Accounts Payable | 4,072 | 0 |
(Gain) Loss on Settlement or Extinguishment of Debt | -43,926 | 0 |
(Gain) Loss on Derivative Valuation | 0 | 92,862 |
(Gain) Loss on Distribution Contracts | -2,771 | 0 |
Decrease (increase) in operating assets: | ' | ' |
Accounts Receivable | 597,537 | 526,901 |
Inventory | -40,197 | -18,874 |
Prepaid Expenses & Other Assets | 10,053 | 29,525 |
Film and Television Costs, net | -89,819 | 0 |
Increase (decrease) in operating liabilities: | ' | ' |
Accounts Payable | -169,968 | -87,674 |
Accrued Salaries | 12,857 | 98,908 |
Accrued Interest - Related Party | 0 | 6,724 |
Other Accrued Expenses | 39,224 | -147,242 |
Net cash provided/(used) in operating activities | -476,146 | -226,163 |
Cash Flows from Investing Activities: | ' | ' |
Investment in Intangible Assets | -50,000 | -73,689 |
Investment in Capitalized Product Development | -12,455 | 0 |
Net cash provided/(used) by investing activities | -62,455 | -73,689 |
Cash Flows from Financing Activities: | ' | ' |
Sale of Common Stock, net of offering costs | 355,116 | 0 |
Proceeds from Services Advance | 750,000 | 0 |
Issuance Costs on Debenture | 0 | 32,139 |
Payments of Related Party Notes | -100,872 | 0 |
Net cash provided/(used) by financing activities | 1,004,244 | 32,139 |
Net increase in Cash and Cash Equivalents | 465,643 | -267,713 |
Beginning Cash and Cash Equivalents | 527,110 | 447,548 |
Ending Cash and Cash Equivalents | 992,753 | 179,835 |
Supplemental disclosures of cash flow information: | ' | ' |
Cash paid for income taxes | 0 | 0 |
Cash paid for interest | 0 | 0 |
Schedule of non-cash financing and investing activites: | ' | ' |
Common Stock issued as Settlement for Accounts Payable | 32,572 | 0 |
Common Stock issued for Prepaid Services | $33,748 | $0 |
1_Organization_and_Business
1. Organization and Business | 3 Months Ended |
Mar. 31, 2014 | |
Accounting Policies [Abstract] | ' |
Organization and Business | ' |
Organization and Nature of Business | |
Genius Brands International, Inc. (“we”, “us”, “our” or the “Company”), creates, produces and distributes original “content with a purpose” for kids, meaning multi-media, multi-format content for kids that we believe is as entertaining as it is enriching. In most cases, the Company wholly owns the original content it produces, and works with a variety of partners who are experts in their respective categories, to develop and distribute it in multiple formats around the world. The Company owns and is developing a portfolio of original children’s entertainment to appeal to toddlers to teens. | |
The Company commenced operations in January 2006, assuming all of the rights and obligations of its then Chief Executive Officer, Klaus Moeller, under an Asset Purchase Agreement between the Company and Genius Products, Inc., in which the Company 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, the Company 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 state of incorporation to Nevada from California, and (ii) changed its name to Genius Brands International, Inc. from Pacific Entertainment Corporation (the “Reincorporation”). 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 November 15, 2013, we entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) with A Squared Entertainment LLC, a Delaware limited liability company (“A Squared”), A Squared Holdings LLC, a California limited liability company and sole member of A Squared (the “Member”) and A2E Acquisition LLC, our newly formed, wholly-owned Delaware subsidiary (“Acquisition Sub”). Upon closing of the transactions contemplated under the Merger Agreement (the “Merger”), which occurred concurrently with entering into the Merger Agreement, our Acquisition Sub merged with and into A Squared, and A Squared, as the surviving entity, became a wholly-owned subsidiary of the Company. As a result of the Merger, the Company acquired the business and operations of A Squared. A Squared creates, produces and distributes original “content with a purpose” for kids 6-11, whereas Genius Brands previously focused on toddlers. Today the merged company is focused on providing “content with a purpose” for toddlers to tweens, in all media formats, relevant consumer products categories, in territories around the world. | |
On April 2, 2014, we filed a certificate of amendment to our Articles of Incorporation to affect a reverse split of our issued and outstanding common stock on a one-for-one hundred basis. The reverse stock split was effective with FINRA on April 7, 2014. All common stock share and per share information in this Quarterly Report, including the accompanying consolidated financial statements and notes thereto, have been adjusted to reflect retrospective application of the reverse split, unless otherwise indicated. | |
Liquidity | |
Historically, the Company has incurred net losses. As of March 31, 2014, the Company had an accumulated deficit of $18,278,217 and a total stockholders’ equity of $11,099,791. At March 31, 2014, the Company had current assets of $2,159,340, including cash of $992,753 and current liabilities of $2,802,119, including short-term debt to related parties which bears no interest and has no stated maturity of $415,787 and certain disputed trade payables of $925,000 to which the Company disputes the claim, resulting in a working capital deficit of $642,779. For the quarter ended March 31, 2014, the Company reported a net loss of $854,162 and net cash used by operating activities of $476,146. Management believes that its sales and cash provided by operations, funds from the issuance of common stock in the first quarter of 2014, and proceeds from a long-term, exclusive supply chain services agreement for which it received $750,000 during the first quarter of 2014 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, it may need to seek additional funding or be forced to scale back its development plans or to significantly reduce or terminate operations. Subsequent to March 31, 2014, the Company sold 6,000 Series A Convertible Preferred Shares to accredited investors at a price of $1,000 per share for which it received gross proceeds of $6,000,000 and paid offering costs of $535,000. Additionally, the Company entered into an agreement for musical composition administration services with a third party for which the Company received an advance of $250,000. | |
2_Summary_of_Significant_Accou
2. Summary of Significant Accounting Policies | 3 Months Ended | ||
Mar. 31, 2014 | |||
Accounting Policies [Abstract] | ' | ||
Summary of Significant Accounting Policies | ' | ||
Cash Equivalents | |||
The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents. | |||
Reverse Stock Split | |||
On April 2, 2014, we filed a certificate of amendment to our Articles of Incorporation to affect a reverse split of our issued and outstanding common stock on a one-for-one hundred basis. The reverse stock split was effective with FINRA on April 7, 2014. All common stock share and per share information in this Form 10-Q, including the accompanying consolidated financial statements and notes thereto, have been adjusted to reflect retrospective application of the reverse split, unless otherwise indicated. | |||
Business Combination | |||
On November 15, 2013, the Company entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) with A Squared Entertainment LLC, a Delaware limited liability company (“A Squared”), A Squared Holdings LLC, a California limited liability company and sole member of A Squared (the “Parent Member”) and A2E Acquisition LLC, our newly formed, wholly-owned Delaware subsidiary (“Acquisition Sub”). Upon closing of the transactions contemplated under the Merger Agreement (the “Merger”), which occurred concurrently with entering into the Merger Agreement, our Acquisition Sub merged with and into A Squared, and A Squared, as the surviving entity, became a wholly-owned subsidiary of the Company. As a result of the Merger, the Company acquired the business and operations of A Squared. | |||
The audited financial statements have been prepared using the acquisition method of accounting in accordance with FASB Accounting Standards Codification (“ASC”) 805, Business Combinations. | |||
See Note 3 - Business Combination for additional information. | |||
Principles of Consolidation | |||
The accompanying consolidated financial statements include the accounts of Genius Brands International, Inc. and its wholly owned subsidiary A Squared Entertainment, LLC. All significant inter-company balances and transactions have been eliminated in consolidation. | |||
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. | |||
Financial Statement Reclassification | |||
Certain account balances from prior periods have been reclassified in these unaudited consolidated financial statements so as to conform to current period classifications. | |||
Significant Accounting Policies | |||
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 March 31, 2014 and December 31, 2013 should be $43,000 and $43,000, respectively. | |||
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 $99,278 and $93,607 established as of March 31, 2014 and December 31, 2013, 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 2005 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. In the 2013 acquisition of the identifiable artistic-related assets from A Squared, fair value was determined through an independent appraisal. The Company determined that these assets are indefinite-lived. Additionally, the Merger transaction with A Squared gave rise to goodwill representing the future economic benefits arising from the assets of A Squared that could not be individually identified and recognized. | |||
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 following the guidance of ASC 350-20 - Goodwill and ASC 350-30 - General Intangibles Other Than Goodwill. | |||
Capitalized Production Cost - The Company capitalizes production costs for episodic series produced in accordance with ASC 926-20, Entertainment-Films - Other Assets - Film Costs. Accordingly, production costs are capitalized at actual cost and then charged against revenue based on the initial market revenue evidenced by a firm commitment over the period of commitment. The Company expenses all capitalized costs that exceed the initial market firm commitment revenue in the period of delivery of the episodes. | |||
The Company capitalizes production costs for films produced in accordance with ASC 926-20, Entertainment-Films - Other Assets - Film Costs. Accordingly, production costs are capitalized at actual cost and then charged against revenue quarterly as a cost of production based on the relative fair value of the film(s) delivered and recognized as revenue. The Company evaluates their capitalized production costs annually and limits recorded amounts by their ability to recover such costs through expected future sales. | |||
The Company also develops 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 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. | |||
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 ASC 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 recognizes revenue in accordance with ASC 926-605, Entertainment-Films - Revenue Recognition. Accordingly, the Company recognizes revenue when (i) persuasive evidence of a sale with customer exists, (ii) the film is complete and has been delivered or is available for delivery, (iii) the license period of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale, (iv) the arrangement fee is fixed or determinable, and (v) collection of the arrangement fee is reasonably assured. | |||
For its distribution, TV, and home entertainment income the Company generally enters in to flat fee arrangements to deliver multiple films or episodes. The Company allocates revenue to each film or episode based on their relative fair market values and recognizes revenue as each film or episode is complete and available for delivery. | |||
The Company’s licensing and royalty revenue represents both (a) 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 and (b) licensing income the Company recognizes revenue as an agent in accordance with ASC 605-45, Revenue Recognition - Principal Agent. Accordingly, the Company’s revenue is its gross billings to its customers less the amounts it pays to suppliers for their products and services. | |||
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. | |||
Stock Based Compensation - As required by ASC 718 - Stock Compensation, the Company recognizes an expense related to the fair value of our stock-based 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 three months ended March 31, 2014 and 2013 was $27,406 and $13,500, respectively. | |||
Earnings Per Share - Basic earnings (loss) per common share (“EPS”) is calculated by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated by dividing net loss by the weighted average number of common shares outstanding, plus the assumed exercise of all dilutive securities using the treasury stock or “as converted” method, as appropriate. During periods of net loss, all common stock equivalents are excluded from the diluted EPS calculation because they are antidilutive. Stock options to purchase 37,150 shares of common stock at March 31, 2014 have not been included as they would be anti-dilutive. | |||
Income Taxes- Deferred income tax assets and liabilities are recognized based on differences between the financial statement and tax basis of assets and liabilities using presently enacted tax rates. At each balance sheet date, the Company evaluates the available evidence about future taxable income and other possible sources of realization of deferred tax assets, and records a valuation allowance that reduces the deferred tax assets to an amount that represents management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized. | |||
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. | |||
We adopted ASC 820 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. | ||
Recent Accounting Pronouncements | |||
In July 2013, the FASB issued Accounting Standards Update No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU No. 2013-11”). ASU No. 2013-11 requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, with limited exceptions. ASU No. 2013-11 is effective for interim and annual periods beginning after December 15, 2013 and may be applied retrospectively. | |||
Management does not believe that any other recently issued, but not effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements. |
3_Business_Combination
3. Business Combination | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Business Combinations [Abstract] | ' | ||||||||
Business Combination | ' | ||||||||
Overview | |||||||||
On November 15, 2013, the Company entered into the Merger Agreement with A Squared and Acquisition Sub. Upon closing of the Merger, which occurred concurrently with entering into the Merger Agreement, our Acquisition Sub merged with and into A Squared, and A Squared, as the surviving entity, became a wholly-owned subsidiary of the Company. As a result of the Merger, the Company acquired the business and operations of A Squared. A Squared is a children’s entertainment production company that produces original content for children and families that provide entertaining and educational media experiences. A Squared also creates comprehensive consumer product programs in the forms of toys, books and electronics. A Squared works with broadcasters, digital and online distributors and retailers worldwide as well as major toy companies, video game companies and top licensees in the kids and family arena. | |||||||||
Immediately following the Merger, the Company’s pre-Merger shareholders and option holders owned approximately 50% of the Company’s common stock on a fully-diluted basis, and former A Squared members owned approximately 50% of the Company’s common stock on a fully diluted basis. | |||||||||
Pursuant to the terms and conditions of the Merger: | |||||||||
· | At the closing of the Merger, the membership interests of A Squared issued and outstanding immediately prior to the closing of the Merger were cancelled and the Member received shares of our common stock. Accordingly, an aggregate of 2,972,183 shares of our common stock were issued to the Parent Member. | ||||||||
· | Upon the closing of the Merger, Klaus Moeller resigned as the Company’s Chief Executive Officer and Chairman, Larry Balaban resigned as the Company’s Corporate Secretary, and Howard Balaban resigned as the Company’s Vice President of Business Development. Simultaneously with the effectiveness of the Merger, Andrew Heyward was appointed as the Company’s Chief Executive Officer, Amy Moynihan Heyward was appointed as the Company’s President and Gregory Payne was appointed as the Company’s Corporate Secretary. Mr. Moeller remains a director of the Company. | ||||||||
· | Effective upon the Company’s meeting its information obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Michael Meader, Larry Balaban, Howard Balaban and Saul Hyatt resigned as directors of the Company and Andrew Heyward, Amy Moynihan Heyward, Lynne Segall, Jeffrey Weiss, Joseph “Gray” Davis, William McDonough and Bernard Cahill were appointed as directors of the Company. On December 9, 2013, these changes to the Board of Directors were made effective. | ||||||||
Accounting Treatment | |||||||||
Although the transaction has been structured as a merger of equals, the merger will be treated as a business combination for accounting purposes. The audited financial statements have been prepared using the acquisition method of accounting in accordance with ASC 805, Business Combinations. Genius Brands is the deemed accounting acquirer, and A Squared is the deemed accounting acquiree based on the following factors: the transfer of the Company’s equity as consideration for the merger, the relative size of the pre-merger assets and revenue bases with the Company holding a significantly larger asset and revenue base as compared to A Squared, and the fact that the Company paid a premium over the pre-combination fair value of A Squared. | |||||||||
Purchase Price Allocation | |||||||||
The following table summarizes the final purchase accounting for the fair value of the assets acquired and liabilities assumed at the date of the Merger: | |||||||||
Allocated Fair Value | |||||||||
Cash | $ | 283,199 | |||||||
Accounts Receivable | 89,398 | ||||||||
Prepaid Expenses and Other Assets | 145,574 | ||||||||
Property and equipment, net | 75,385 | ||||||||
Identifiable artistic-related intangible assets (a) | 1,740,000 | ||||||||
Total assets acquired | 2,333,556 | ||||||||
Accounts Payable | (404,757 | ) | |||||||
Accrued Expenses | (450,000 | ) | |||||||
Short Term Debt - Related Party | (516,966 | ) | |||||||
Disputed Trade Payable | (925,000 | ) | |||||||
Total liabilities assumed | (2,296,723 | ) | |||||||
Net assets acquired | 36,833 | ||||||||
Consideration (b) | 10,402,639 | ||||||||
Goodwill | $ | 10,365,806 | |||||||
(a) | The value of the identifiable artistic-related intangible assets was determined by an independent Corporate Finance and Business Valuation firm. | ||||||||
(b) | As consideration for the net assets acquired in the Merger, the Company issued an aggregate of 2,972,183 shares of its common stock the Parent Member, valued at $3.50 per share. The acquisition-date fair value of the common stock was based on the common stock sold under the private placement on the date of the Merger. | ||||||||
Proforma | |||||||||
Included in the consolidated statement of operations for three months ended March 31, 2014 are revenues of $60,461 and net loss of $255,947 attributed to A Squared Entertainment LLC from the date of acquisition. | |||||||||
The table below presents the proforma revenue and net loss for the quarters ended March 31, 2014 and 2013, assuming the Merger had occurred on January 1, 2013, pursuant to ASC 805-10-50. This proforma information does not purport to represent what the actual results of operations of the Company would have been had Merger occurred on this date nor does it purport to predict the results of operations for future periods. | |||||||||
3/31/14 | 3/31/13 | ||||||||
Revenues | $ | 176,283 | $ | 745,011 | |||||
Net Loss (1) | $ | (854,162 | ) | $ | (1,836,673 | ) | |||
-1 | Net loss during the three months ended March 31, 2013 includes merger related costs of $339,180 as well as the elimination of interest expense of $153,261 and loss on derivative valuation of $92,862. | ||||||||
4_Investment_in_Stan_Lee_Comic
4. Investment in Stan Lee Comics LLC | 3 Months Ended |
Mar. 31, 2014 | |
Equity Method Investments and Joint Ventures [Abstract] | ' |
Investment in Stan Lee Comics LLC | ' |
In November 2009, A Squared formed a joint venture, Stan Lee Comics, LLC, with POW Entertainment Inc. (“POW”), a California corporation, and Archie Comic Publications, Inc. (“Archie”), a New York corporation, to create, distribute, and exploit comic books and other intellectual property based on exclusive properties created by Stan Lee and owned by POW Entertainment, Inc. Each of A Squared, POW, and Archie own one-third of Stan Lee Comics, LLC. | |
Upon formation, the parties agreed that POW would contribute certain properties to Stan Lee Comics, LLC as consideration for its ownership interest. Similarly, A Squared would contribute certain creative development functions and be entitled to the exercise of all audio-visual development, production and distribution rights in all media, as well as all merchandising rights, in and to the contributed properties as consideration for its ownership interest. Finally, Archie would be entitled to all comic book publication and distribution rights in and to the contributed properties as consideration for its ownership interest. Each party would be entitled to one-third of any net proceeds derived from the contributed properties or their derivative works after recoupment of production cost and fees. Stan Lee Comics, LLC is the owner of the Stan Lee and the Mighty 7 property. | |
Upon closing of the Merger, the Company assumed the rights to Stan Lee Comics, LLC held by A Squared. | |
Pursuant to ASC 323-30, as of March 31, 2014, the Company has recorded the Investment in Stan Lee Comics LLC at $0 as no monetary consideration was paid by A Squared, or assumed by the Company in the Merger, for the ownership interest in Stan Lee Comics, LLC. |
5_Property_and_Equipment_Net
5. Property and Equipment, Net | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Property, and Equipment, Net | ' | ||||||||
The Company has property and equipment as follows as of March 31, 2014 and December 31, 2013: | |||||||||
3/31/14 | 12/31/13 | ||||||||
Furniture and Equipment | $ | 12,385 | $ | 12,385 | |||||
Computer Equipment | 32,493 | 32,493 | |||||||
Leasehold Improvements | 99,778 | 99,778 | |||||||
Software | 15,737 | 15,737 | |||||||
Less Accumulated Depreciation | (94,115 | ) | (81,645 | ) | |||||
Property and Equipment, Net | $ | 66,278 | $ | 78,748 | |||||
During the three months ended March 31, 2014 and 2013, the Company recorded depreciation expense of $12,470 and $2,595, respectively. | |||||||||
6_Film_and_Television_Costs_an
6. Film and Television Costs and Capitalized Product Development in Process | 3 Months Ended |
Mar. 31, 2014 | |
Film And Television Costs And Capitalized Product Development In Process | ' |
Film and Television Costs and Capitalized Product Development in Process | ' |
As of March 31, 2014, the Company had Film and Television Costs of $89,819 compared to $0 at December 31, 2013. The increase relates to the commencement of production of the second installment of the feature film Stan Lee and the Mighty 7 and episodes of the Thomas Edison: Secret Lab. | |
As of March 31, 2014, the Company had Capitalized Product Development in Process of $67,030 compared to $54,575 as of December 31, 2013. These assets relate to the ongoing development of the Company’s e-commerce website and web-based streaming services. |
7_Goodwill_and_Intangible_Asse
7. Goodwill and Intangible Assets, Net | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||
Goodwill and Intangible Assets, Net | ' | ||||||||
Goodwill | |||||||||
In association with the Merger, the Company recognized $10,365,806 in Goodwill, representing the excess of the fair value of the consideration for the Merger over net identifiable assets acquired (See Note 3 - Business Combination for additional information). Pursuant to ASC 350-20, Goodwill is not subject to amortization but is subject to annual review to determine if certain events warrant impairment to the Goodwill asset. As of December 31, 2013, no impairment was warranted or recognized. | |||||||||
Intangible Assets, Net | |||||||||
The Company had following intangible assets as of March 31, 2014 and December 31, 2013: | |||||||||
3/31/14 | 12/31/13 | ||||||||
Identifiable artistic-related assets (a) | $ | 1,740,000 | $ | 1,740,000 | |||||
Trademarks (b) | 129,831 | 129,831 | |||||||
Product Masters (b) | 3,257,129 | 3,257,129 | |||||||
Other Intangible Assets | 50,000 | – | |||||||
Less Accumulated Amortization (c) | (3,273,323 | ) | (3,261,254 | ) | |||||
Intangible Assets, Net | $ | 1,903,637 | $ | 1,865,706 | |||||
(a) | In association with the Merger, the Company acquired $1,740,000 in identifiable artistic-related assets. These assets, related to certain properties owned by A Squared and assumed by the Company, were valued using an independent firm during the fourth quarter of 2013. Based on certain legal, regulatory, contractual, and economic factors, the Company has deemed these assets to be indefinite-lived. Hence, pursuant to ASC 350-30, these assets are not subject to amortization. They are tested annually for the recognition of impairment expense. | ||||||||
(b) | Pursuant to ASC 350-30-35, the Company reviews these intangible assets periodically to determine if the value should be retired or impaired due to recent events. At December 31, 2013, it was determined that certain “Other Intangible Assets” totaling $470,685 in gross asset value, with accumulated amortization of $228,961, were to be retired giving rise to an associated loss on disposition of assets totaling $241,723. During the period ended March 31, 2014, the Company did not recognize any similar impairment. | ||||||||
(c) | During the three months ended March 31, 2014 and 2013, the Company recognized $12,069 and $36,577, respectively, in amortization expense related to these intangible assets. | ||||||||
8_Accrued_Liabilities
8. Accrued Liabilities | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Payables and Accruals [Abstract] | ' | ||||||||
Accrued Liabilities | ' | ||||||||
As of March 31, 2014 and December 31, 2013, the Company has the following accrued liabilities: | |||||||||
3/31/14 | 12/31/13 | ||||||||
Accrued Salaries and Wages | |||||||||
Accrued Salaries and Wages | $ | 72,815 | $ | 59,958 | |||||
Disputed Trade Payables | |||||||||
Disputed Trade Payables (a) | 925,000 | 925,000 | |||||||
Services Advance | |||||||||
Services Advance (b) | 750,000 | – | |||||||
Accrued Expenses | |||||||||
Allowance for Sales Returns | 43,000 | 43,000 | |||||||
Distribution Arrangements Payable | 17,674 | 13,905 | |||||||
Deferred Revenue | 67,435 | – | |||||||
Royalties Payable | 4,953 | 9,638 | |||||||
Music Advances (c) | 450,000 | 450,000 | |||||||
Other Accrued Expenses | 157,930 | 187,996 | |||||||
Total Accrued Expenses | 740,992 | 704,539 | |||||||
Total Accrued Liabilities | $ | 2,488,807 | $ | 1,689,497 | |||||
(a) | As part of the Merger, the Company assumed certain liabilities from a previous member of A Squared Entertainment, LLC which has claimed certain liabilities totaling $925,000. The Company disputes the basis for this liability and has not heard from the claimant for two years. | ||||||||
(b) | During the three months ended March 31, 2014, the Company entered into an exclusive long-term agreement with Sony DADC, the optical disc manufacturing and fulfillment arm of Sony, to provide all CD, DVD and BD replication, packaging and distribution to Genius Brands International’s direct customers. Under the terms of the long-term, exclusive supply chain services agreement, the Company will order a minimum level of disc replication, packaging and distribution services for its content across all physical media, including DVD, CD, and Blu-ray from Sony DADC. As consideration for these minimum order levels, the Company will receive a total of $1,500,000, $750,000 of which was received during the first quarter of 2014 with the remaining $750,000 due by January 17, 2015. | ||||||||
(c) | The Company assumed these accrued expenses in association with the Merger. | ||||||||
9_Short_Term_Debt_Related_Part
9. Short Term Debt - Related Parties | 3 Months Ended |
Mar. 31, 2014 | |
Related Party Transactions [Abstract] | ' |
Short Term Debt - Related Parties | ' |
As part of the Merger, the Company acquired certain liabilities from A Squared. From time to time, A Squared required short-term advances to fund its operations and provide working capital from its founder, the Company’s current Chief Executive Officer, Andrew Heyward. As of March 31, 2014, these advances totaled $415,787, compared to $516,659 as of December 31, 2013. On March 3, 2014, the Company repaid a portion of the Member Advances to its Chief Executive Officer, Andrew Heyward, in the amount of $100,000. | |
These advances are interest free and have no stated maturity. The Company has applied an imputed interest rate of 6% in accordance with ASC 835-30-45. During the quarter ended March 31, 2014, the Company recognized imputed interest expense of $7,163. |
10_Stockholders_Equity
10. Stockholders' Equity | 3 Months Ended |
Mar. 31, 2014 | |
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, $0.001 par value per share. 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. The Company conducted a consent solicitation of its stockholders of record as of September 3, 2013 (the “Record Date”) to approve certain corporation actions. Stockholders, representing at least a majority of outstanding shares of the Company’s voting capital as of the Record Date voted by written consent to approve an amendment to the company’s Article of Incorporation in order to increase the number of common stock authorized to 700,000,000 from 250,000,000. As of March 31, 2014 and December 31, 2013, the total number of authorized shares of common stock was 700,000,000. | |
As part of the aforementioned consent solicitation, stockholders, representing at least a majority of outstanding shares of the Company’s voting capital as of the Record Date, also voted by written consent to approve a proposal to effect a reverse split of the Company’s common stock in a ratio to be determined by the Board which would not be less than One for Ten (1:10) and not more than One for One-Hundred (1:100), which was to be effective no later than September 30, 2014, at the sole discretion of the Board and in lieu of issuing any fractional shares resulting from the reverse split, to issue the next whole share (the “Reverse Split”). | |
On April 2, 2014, we filed a certificate of amendment to our Articles of Incorporation to affect a reverse split of our issued and outstanding common stock on a one-for-one hundred basis. The reverse stock split was effective with FINRA on April 7, 2014. All common stock share and per share information in this Form 10-Q, including the accompanying consolidated financial statements and notes thereto, have been adjusted to reflect retrospective application of the reverse split, unless otherwise indicated. The total number of authorized shares of common stock was not adjusted in conjunction with the reverse split. | |
As of March 31, 2014 and December 31, 2013, there were 6,047,707 and 5,918,704 shares of common stock outstanding, respectively. | |
The Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001 per share. 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 March 31, 2014 and December 31, 2013, no shares were outstanding, and the Board of Directors has not authorized issuance of preferred shares. | |
On January 10, 2014, the Company issued 102,860 shares of the Company’s common stock in a private placement to certain investors at $3.50 per share. The Company received gross proceeds of $360,000 and paid related offering costs of $4,884. | |
On January 10, 2014, the Company issued 8,143 shares of common stock as an extinguishment of a $28,500 accounts payable balance for services rendered in relation to the private placement. The shares were valued at the market price of $4.00 per share giving rise to a loss on the extinguishment of accounts payable of $4,072. | |
On January 29, 2014, the Company issued 18,000 shares of common stock to a third party for prepaid investor relations services at $3.50 per share for a six month period beginning in January 2014. |
11_Stock_Options
11. Stock Options | 3 Months Ended | ||||||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||||||
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 110,000. 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 500,000. | |||||||||||||||||||||
The following schedule summarizes the changes in the Company’s stock option plan during the three months ended March 31, 2014: | |||||||||||||||||||||
Options Outstanding | Exercise | Weighted Average Remaining | Aggregate | Weighted Average Exercise | |||||||||||||||||
Number of | Price | Contractual | Intrinsic | Price | |||||||||||||||||
Shares | per Share | Life | Value | per Share | |||||||||||||||||
Balance at December 31, 2013 | 37,150 | $6.00 - 55.00 | 3.55 years | $ | – | $ | 32 | ||||||||||||||
Options Granted | – | ||||||||||||||||||||
Options Exercised | – | ||||||||||||||||||||
Options Expired | – | ||||||||||||||||||||
Balance at March 31, 2014 | 37,150 | $6.00 - 55.00 | 3.31 years | $ | – | $ | 32 | ||||||||||||||
Exercisable March 31, 2014 | 37,150 | $6.00 - 55.00 | 3.31 years | $ | – | $ | 32 | ||||||||||||||
Exercisable December 31, 2013 | 37,150 | $6.00 - 55.00 | 3.41 years | $ | – | $ | 32 | ||||||||||||||
During the three months ended March 31, 2014 and 2013, the Company recognized stock based compensation expense of $0 and $58,279, respectively. | |||||||||||||||||||||
12_Income_Taxes
12. Income Taxes | 3 Months Ended |
Mar. 31, 2014 | |
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 March 31, 2014 and December 31, 2013, 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. |
13_Employment_Agreements
13. Employment Agreements | 3 Months Ended |
Mar. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
Employment Agreements | ' |
On November 15, 2013, as a closing condition to the Merger, the Company entered into five-year employment agreements with Andrew Heyward, to serve as Chief Executive Officer, and Amy Moynihan Heyward, to serve as President of the Company, for which each will receive an annual base salary of $200,000 and $180,000, respectively. |
14_Lease_Commitments
14. Lease Commitments | 3 Months Ended | ||||
Mar. 31, 2014 | |||||
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 March 31, 2014 and 2013 were $35,815 and $6,947, 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. | |||||
Currently, the Company leases approximately 2,807 square feet of office space at 9401 Wilshire Boulevard, Beverly Hills, California pursuant to a standard office lease dated February 3, 2012. The lease has a term of 3 years, from May 1, 2012 through April 30, 2015. The monthly rent is $10,807 which is to be adjusted upward 3% each year on the anniversary of the lease. | |||||
The following is a schedule of future minimum lease payments required by the non-cancelable operating lease agreement: | |||||
Year | Amount | ||||
2014 | $ | 102,852 | |||
2015 | 45,860 | ||||
$ | 148,712 | ||||
15_Commitment_and_Contingencie
15. Commitment and Contingencies | 3 Months Ended |
Mar. 31, 2014 | |
Commitments and Contingencies Disclosure [Abstract] | ' |
Commitment and Contingencies | ' |
In the normal course of the its business, the Company enters into agreements which call for the payment of royalties or “profit” participations for the use of third party intellectual property. For properties such as Gisele & The Green Team, Martha & Friends and Stan Lee and the Mighty 7, the Company is obligated to share net profits with the underlying rights holders on a certain basis, defined in the respective agreements. | |
In addition, the Company has also entered into an agreement with XingXing Digital Corporation, an animation company based in China pursuant to which in exchange for the investment of 100% of the costs of the animation, XingXing is entitled to receive a specified percentage of the net proceeds received by the Company from the exploitation of those series on which XingXing has provided animation services. The series covered by this arrangement are Secret Millionaires Club and Gisele & the Green Team. | |
The Company has also entered into a similar arrangement with another production vendor, BangZoom Entertainment, which calls for a payment of $120,000 from the net profits received by the Company from the exploitation of the series Secret Millionaires Club. The payment represents the deferral of certain costs and fees for audio/video post-production work performed by such vendor in connection with that series. | |
The Company is obligated to pay in cash to the investors from the fourth quarter 2013 private placement a fee of 1% per month of the investors’ investment for every thirty (30) day period up to a maximum of 6% upon the occurrence of certain events, including: (i) following the Filing Date that the registration statement has not been filed and (ii) following the Effectiveness Date that the registration statement has not been declared effective. |
16_Subsequent_Events
16. Subsequent Events | 3 Months Ended |
Mar. 31, 2014 | |
Subsequent Events [Abstract] | ' |
Subsequent Events | ' |
Pursuant to FASB ASC 855, Management has evaluated all events and transactions that occurred from March 31, 2014 through the date of issuance of these financial statements. During this period, we did not have any significant subsequent events, except as disclosed below: | |
On April 2, 2014, we filed a certificate of amendment to our Articles of Incorporation to affect a reverse split of our issued and outstanding common stock on a one-for-one hundred basis. The reverse stock split was effective with FINRA (Financial Industry Regulatory Authority) on April 7, 2014. All common stock share and per share information in this Form 10-Q, including the accompanying consolidated financial statements and notes thereto, have been adjusted to reflect retrospective application of the reverse split, unless otherwise indicated | |
On April 24, 2014, the Company entered into an agreement for musical composition administration services with a third party for which the Company received an advance of $250,000. | |
On April 25, 2014, the Company entered agreement with a Chardan Capital Markets LLC (“Chardan”) for placement agent and financial advisory services. As consideration for these services, the Company will pay the counterparty cash as well as a warrant to purchase shares of the Company’s common stock equal to 10% of securities sold in such capital raise. | |
On May 1, 2014, the Company authorized the issuance of 30,000 shares of common stock to a third party for creative design and development services. | |
On May 15, 2014, Klaus Moeller resigned from the Board of the Directors of the Company. Mr. Moeller did not resign due to any disagreement with the Company or its management regarding any matters relating to the Company's operations, policies or practices. | |
On May 15, 2014, the Company’s Board of Directors appointed P. Clark Hallren as a director of the Company. Mr. Hallren has no family relationship with any of the executive officers or directors of the Company. There are no arrangements or understandings between Mr. Hallren and any other person pursuant to which he was appointed as a director of the Company. | |
On May 14, 2014, the Company entered into securities purchase agreements (the “Purchase Agreements”) with certain accredited investors (the “Investors”) pursuant to which the Company sold an aggregate of 6,000 shares of its newly designated Series A Convertible Preferred Stock (the “Series A Preferred Stock”) at a price of $1,000 per share (the “Private Placement”) for gross proceeds to the Company of $6,000,000. The closing of the Private Placement was subject to certain customary closing conditions and closed on May 15, 2014. | |
Each share of Series A Preferred Stock is convertible into shares of the Company’s common stock, par value $0.001 per share based on a conversion calculation equal to the Base Amount divided by the conversion price. The Base Amount is defined as the sum of (i) the aggregate stated value of the Series A Preferred Stock to be converted and (ii) all unpaid dividends thereon. The stated value of each share of the Series A Preferred Stock is $1,000 and the initial conversion price is $2.00 per share, subject to adjustment in the event of stock splits, dividends and recapitalizations. Additionally, in the event the Company issues shares of its common stock or common stock equivalents at a per share price that is lower than the conversion price then in effect, the conversion price shall be adjusted to such lower price, subject to certain exceptions. The Company is prohibited from effecting a conversion of the Series A Preferred Stock to the extent that as a result of such conversion, the Investor would beneficially own more than 9.99% (subject to waiver) in the aggregate of the issued and outstanding shares of the Company’s common stock, calculated immediately after giving effect to the issuance of shares of common stock upon conversion of the Series A Preferred Stock. The shares of Series A Preferred Stock bear no interest and shall not possess any voting rights. | |
In connection with the Private Placement, investors holding a majority of the securities sold in the Company’s November 2013 and January 2014 private placement waived the Company’s registration rights obligations and any accrued liquidated damages associated therewith. | |
Chardan acted as sole placement agent in the Private Placement in consideration for which Chardan received a cash fee of $535,000 and a warrant to purchase up to 300,000 shares of the Company’s common stock at an exercise price of $2.00 per share. |
2_Summary_of_Significant_Accou1
2. Summary of Significant Accounting Policies (Policies) | 3 Months Ended | ||
Mar. 31, 2014 | |||
Accounting Policies [Abstract] | ' | ||
Cash Equivalents | ' | ||
The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents. | |||
Reverse Stock Split | ' | ||
On April 2, 2014, we filed a certificate of amendment to our Articles of Incorporation to affect a reverse split of our issued and outstanding common stock on a one-for-one hundred basis. The reverse stock split was effective with FINRA on April 7, 2014. All common stock share and per share information in this Form 10-Q, including the accompanying consolidated financial statements and notes thereto, have been adjusted to reflect retrospective application of the reverse split, unless otherwise indicated. | |||
Business Combination | ' | ||
On November 15, 2013, the Company entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) with A Squared Entertainment LLC, a Delaware limited liability company (“A Squared”), A Squared Holdings LLC, a California limited liability company and sole member of A Squared (the “Parent Member”) and A2E Acquisition LLC, our newly formed, wholly-owned Delaware subsidiary (“Acquisition Sub”). Upon closing of the transactions contemplated under the Merger Agreement (the “Merger”), which occurred concurrently with entering into the Merger Agreement, our Acquisition Sub merged with and into A Squared, and A Squared, as the surviving entity, became a wholly-owned subsidiary of the Company. As a result of the Merger, the Company acquired the business and operations of A Squared. | |||
The audited financial statements have been prepared using the acquisition method of accounting in accordance with FASB Accounting Standards Codification (“ASC”) 805, Business Combinations. | |||
See Note 3 - Business Combination for additional information. | |||
Principles of Consolidation | ' | ||
The accompanying consolidated financial statements include the accounts of Genius Brands International, Inc. and its wholly owned subsidiary A Squared Entertainment, LLC. All significant inter-company balances and transactions have been eliminated in consolidation. | |||
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. | |||
Financial Statement Reclassification | ' | ||
Certain account balances from prior periods have been reclassified in these unaudited consolidated financial statements so as to conform to current period classifications. | |||
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 March 31, 2014 and December 31, 2013 should be $43,000 and $43,000, respectively. | |||
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 $99,278 and $93,607 established as of March 31, 2014 and December 31, 2013, 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 2005 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. In the 2013 acquisition of the identifiable artistic-related assets from A Squared, fair value was determined through an independent appraisal. The Company determined that these assets are indefinite-lived. Additionally, the Merger transaction with A Squared gave rise to goodwill representing the future economic benefits arising from the assets of A Squared that could not be individually identified and recognized. | |||
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 following the guidance of ASC 350-20 - Goodwill and ASC 350-30 - General Intangibles Other Than Goodwill. | |||
Capitalized Production Cost | ' | ||
The Company capitalizes production costs for episodic series produced in accordance with ASC 926-20, Entertainment-Films - Other Assets - Film Costs. Accordingly, production costs are capitalized at actual cost and then charged against revenue based on the initial market revenue evidenced by a firm commitment over the period of commitment. The Company expenses all capitalized costs that exceed the initial market firm commitment revenue in the period of delivery of the episodes. | |||
The Company capitalizes production costs for films produced in accordance with ASC 926-20, Entertainment-Films - Other Assets - Film Costs. Accordingly, production costs are capitalized at actual cost and then charged against revenue quarterly as a cost of production based on the relative fair value of the film(s) delivered and recognized as revenue. The Company evaluates their capitalized production costs annually and limits recorded amounts by their ability to recover such costs through expected future sales. | |||
The Company also develops 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 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. | |||
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 ASC 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 recognizes revenue in accordance with ASC 926-605, Entertainment-Films - Revenue Recognition. Accordingly, the Company recognizes revenue when (i) persuasive evidence of a sale with customer exists, (ii) the film is complete and has been delivered or is available for delivery, (iii) the license period of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale, (iv) the arrangement fee is fixed or determinable, and (v) collection of the arrangement fee is reasonably assured. | |||
For its distribution, TV, and home entertainment income the Company generally enters in to flat fee arrangements to deliver multiple films or episodes. The Company allocates revenue to each film or episode based on their relative fair market values and recognizes revenue as each film or episode is complete and available for delivery. | |||
The Company’s licensing and royalty revenue represents both (a) 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 and (b) licensing income the Company recognizes revenue as an agent in accordance with ASC 605-45, Revenue Recognition - Principal Agent. Accordingly, the Company’s revenue is its gross billings to its customers less the amounts it pays to suppliers for their products and services. | |||
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. | |||
Stock Based Compensation | ' | ||
- As required by ASC 718 - Stock Compensation, the Company recognizes an expense related to the fair value of our stock-based 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 three months ended March 31, 2014 and 2013 was $27,406 and $13,500, respectively. | |||
Earnings Per Share | ' | ||
Basic earnings (loss) per common share (“EPS”) is calculated by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated by dividing net loss by the weighted average number of common shares outstanding, plus the assumed exercise of all dilutive securities using the treasury stock or “as converted” method, as appropriate. During periods of net loss, all common stock equivalents are excluded from the diluted EPS calculation because they are antidilutive. Stock options to purchase 37,150 shares of common stock at March 31, 2014 have not been included as they would be anti-dilutive. | |||
Income Taxes | ' | ||
Deferred income tax assets and liabilities are recognized based on differences between the financial statement and tax basis of assets and liabilities using presently enacted tax rates. At each balance sheet date, the Company evaluates the available evidence about future taxable income and other possible sources of realization of deferred tax assets, and records a valuation allowance that reduces the deferred tax assets to an amount that represents management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized. | |||
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. | |||
We adopted ASC 820 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. | ||
Recent Accounting Pronouncements | ' | ||
In July 2013, the FASB issued Accounting Standards Update No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists” (“ASU No. 2013-11”). ASU No. 2013-11 requires an entity to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, with limited exceptions. ASU No. 2013-11 is effective for interim and annual periods beginning after December 15, 2013 and may be applied retrospectively. | |||
Management does not believe that any other recently issued, but not effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements. |
3_Business_Combination_Tables
3. Business Combination (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Business Combinations [Abstract] | ' | ||||||||
Purchase Price Allocation | ' | ||||||||
The following table summarizes the final purchase accounting for the fair value of the assets acquired and liabilities assumed at the date of the Merger: | |||||||||
Allocated Fair Value | |||||||||
Cash | $ | 283,199 | |||||||
Accounts Receivable | 89,398 | ||||||||
Prepaid Expenses and Other Assets | 145,574 | ||||||||
Property and equipment, net | 75,385 | ||||||||
Identifiable artistic-related intangible assets (a) | 1,740,000 | ||||||||
Total assets acquired | 2,333,556 | ||||||||
Accounts Payable | (404,757 | ) | |||||||
Accrued Expenses | (450,000 | ) | |||||||
Short Term Debt - Related Party | (516,966 | ) | |||||||
Disputed Trade Payable | (925,000 | ) | |||||||
Total liabilities assumed | (2,296,723 | ) | |||||||
Net assets acquired | 36,833 | ||||||||
Consideration (b) | 10,402,639 | ||||||||
Goodwill | $ | 10,365,806 | |||||||
Proforma information | ' | ||||||||
3/31/14 | 3/31/13 | ||||||||
Revenues | $ | 176,283 | $ | 745,011 | |||||
Net Loss (1) | $ | (854,162 | ) | $ | (1,836,673 | ) | |||
-1 | Net loss during the three months ended March 31, 2013 includes merger related costs of $339,180 as well as the elimination of interest expense of $153,261 and loss on derivative valuation of $92,862. | ||||||||
5_Property_and_Equipment_Net_T
5. Property and Equipment, Net (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Schedule of Property Plant And Equipment | ' | ||||||||
The Company has property and equipment as follows as of March 31, 2014 and December 31, 2013: | |||||||||
3/31/14 | 12/31/13 | ||||||||
Furniture and Equipment | $ | 12,385 | $ | 12,385 | |||||
Computer Equipment | 32,493 | 32,493 | |||||||
Leasehold Improvements | 99,778 | 99,778 | |||||||
Software | 15,737 | 15,737 | |||||||
Less Accumulated Depreciation | (94,115 | ) | (81,645 | ) | |||||
Property and Equipment, Net | $ | 66,278 | $ | 78,748 | |||||
7_Goodwill_and_Intangible_Asse1
7. Goodwill and Intangible Assets, Net (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ||||||||
Schedule of Intangible Asset | ' | ||||||||
The Company had following intangible assets as of March 31, 2014 and December 31, 2013: | |||||||||
3/31/14 | 12/31/13 | ||||||||
Identifiable artistic-related assets (a) | $ | 1,740,000 | $ | 1,740,000 | |||||
Trademarks (b) | 129,831 | 129,831 | |||||||
Product Masters (b) | 3,257,129 | 3,257,129 | |||||||
Other Intangible Assets | 50,000 | – | |||||||
Less Accumulated Amortization (c) | (3,273,323 | ) | (3,261,254 | ) | |||||
Intangible Assets, Net | $ | 1,903,637 | $ | 1,865,706 | |||||
8_Accrued_Liabilities_Tables
8. Accrued Liabilities (Tables) | 3 Months Ended | ||||||||
Mar. 31, 2014 | |||||||||
Payables and Accruals [Abstract] | ' | ||||||||
Accrued liabilities | ' | ||||||||
As of March 31, 2014 and December 31, 2013, the Company has the following accrued liabilities: | |||||||||
3/31/14 | 12/31/13 | ||||||||
Accrued Salaries and Wages | |||||||||
Accrued Salaries and Wages | $ | 72,815 | $ | 59,958 | |||||
Disputed Trade Payables | |||||||||
Disputed Trade Payables (a) | 925,000 | 925,000 | |||||||
Services Advance | |||||||||
Services Advance (b) | 750,000 | – | |||||||
Accrued Expenses | |||||||||
Allowance for Sales Returns | 43,000 | 43,000 | |||||||
Distribution Arrangements Payable | 17,674 | 13,905 | |||||||
Deferred Revenue | 67,435 | – | |||||||
Royalties Payable | 4,953 | 9,638 | |||||||
Music Advances (c) | 450,000 | 450,000 | |||||||
Other Accrued Expenses | 157,930 | 187,996 | |||||||
Total Accrued Expenses | 740,992 | 704,539 | |||||||
Total Accrued Liabilities | $ | 2,488,807 | $ | 1,689,497 | |||||
11_Stock_Options_Tables
11. Stock Options (Tables) | 3 Months Ended | ||||||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||||||
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 during the three months ended March 31, 2014: | |||||||||||||||||||||
Options Outstanding | Exercise | Weighted Average Remaining | Aggregate | Weighted Average Exercise | |||||||||||||||||
Number of | Price | Contractual | Intrinsic | Price | |||||||||||||||||
Shares | per Share | Life | Value | per Share | |||||||||||||||||
Balance at December 31, 2013 | 37,150 | $6.00 - 55.00 | 3.55 years | $ | – | $ | 32 | ||||||||||||||
Options Granted | – | ||||||||||||||||||||
Options Exercised | – | ||||||||||||||||||||
Options Expired | – | ||||||||||||||||||||
Balance at March 31, 2014 | 37,150 | $6.00 - 55.00 | 3.31 years | $ | – | $ | 32 | ||||||||||||||
Exercisable March 31, 2014 | 37,150 | $6.00 - 55.00 | 3.31 years | $ | – | $ | 32 | ||||||||||||||
Exercisable December 31, 2013 | 37,150 | $6.00 - 55.00 | 3.41 years | $ | – | $ | 32 | ||||||||||||||
14_Lease_Commitments_Tables
14. Lease Commitments (Tables) | 3 Months Ended | ||||
Mar. 31, 2014 | |||||
Leases [Abstract] | ' | ||||
Schedule of future minimum lease payments | ' | ||||
The following is a schedule of future minimum lease payments required by the non-cancelable operating lease agreement: | |||||
Year | Amount | ||||
2014 | $ | 102,852 | |||
2015 | 45,860 | ||||
$ | 148,712 | ||||
1_Organization_and_Business_De
1. Organization and Business (Details Narrative) (USD $) | Mar. 31, 2014 |
Accounting Policies [Abstract] | ' |
Working capital | ($642,779) |
2_Summary_of_Significant_Accou2
2. Summary of Significant Accounting Policies (Details Narrative) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Accounting Policies [Abstract] | ' | ' | ' |
Allowance for sales returns | $43,000 | $43,000 | ' |
Reserve for obsolete inventory | 99,278 | ' | 93,607 |
Property and equipment estimated useful lives | '5 to 39 years | ' | ' |
Advertising expense | $27,406 | $13,500 | ' |
Antidilutive shares- stock options | 37,150 | ' | ' |
3_Business_Combination_Details
3. Business Combination (Details-Assets and liabilities assumed) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Dec. 31, 2013 | ||
Business Combinations [Abstract] | ' | ' | |
Cash | $283,199 | ' | |
Accounts Receivable | 89,398 | ' | |
Prepaid Expenses and Other Assets | 145,574 | ' | |
Property and equipment, net | 75,385 | ' | |
Identifiable artistic-related intangible assets | 1,740,000 | [1] | ' |
Total assets acquired | 2,333,556 | ' | |
Accounts Payable | -404,757 | ' | |
Accrued Expenses | -450,000 | ' | |
Short Term Debt - Related Party | -516,966 | ' | |
Disputed Trade Payable | -925,000 | ' | |
Total liabilities assumed | -2,296,723 | ' | |
Net assets acquired | 36,833 | ' | |
Consideration | 10,402,639 | [2] | ' |
Goodwill | $10,365,806 | $10,365,806 | |
[1] | The value of the identifiable artistic-related intangible assets was determined by an independent Corporate Finance and Business Valuation firm. | ||
[2] | As consideration for the net assets acquired in the Merger, the Company issued an aggregate of 2,972,183 shares of its common stock the Parent Member, valued at $3.50 per share. The acquisition-date fair value of the common stock was based on the common stock sold under the private placement on the date of the Merger. |
3_Business_Combination_Details1
3. Business Combination (Details-proforma revenue) (USD $) | 3 Months Ended | |||
Mar. 31, 2014 | Mar. 31, 2013 | |||
Revenues | $176,283 | $745,011 | ||
Net Loss | -854,162 | [1] | -1,836,673 | [1] |
Squared Entertainment LLC | ' | ' | ||
Revenues | 60,461 | ' | ||
Net Loss | ($255,947) | ' | ||
[1] | Net loss during the three months ended March 31, 2013 includes merger related costs of $339,180 as well as the elimination of interest expense of $153,261 and loss on derivative valuation of $92,862. |
5_Property_and_Equipment_Net_D
5. Property and Equipment, Net (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Property, Plant and Equipment [Abstract] | ' | ' | ' |
Furniture and Equipment | $12,385 | ' | $12,385 |
Computer Equipment | 32,493 | ' | 32,493 |
Leasehold Improvements | 99,778 | ' | 99,778 |
Software | 15,737 | ' | 15,737 |
Less Accumulated Depreciation | -94,115 | ' | -81,645 |
Property and Equipment, Net | 66,278 | ' | 78,748 |
Depreciation expense | $12,470 | $2,595 | ' |
6_Film_and_Television_Costs_an1
6. Film and Television Costs and Capitalized Product Development in Process (Details Narrative) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Film And Television Costs And Capitalized Product Development In Process | ' | ' |
Capitalized Product Development in Process | $67,030 | $54,575 |
Film and Television Costs | $89,819 | $0 |
7_Goodwill_and_Intangible_Asse2
7. Goodwill and Intangible Assets, Net (Details) (USD $) | 3 Months Ended | ||||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |||
Less Accumulated Amortization | ($3,273,323) | [1] | ' | ($3,261,254) | [1] |
Net Intangible Assets | 1,903,637 | ' | 1,865,706 | ||
Amortization expense | 12,069 | 36,577 | ' | ||
Goodwill | 10,365,806 | ' | 10,365,806 | ||
Identifiable artistic-related assets | ' | ' | ' | ||
Intangible assets | 1,740,000 | [2] | ' | 1,740,000 | [2] |
Trademarks [Member] | ' | ' | ' | ||
Intangible assets | 129,831 | [3] | ' | 129,831 | [3] |
Product Masters | ' | ' | ' | ||
Intangible assets | 3,257,129 | [3] | ' | 3,257,129 | [3] |
Other Intangible Assets | ' | ' | ' | ||
Intangible assets | $50,000 | ' | $0 | ||
[1] | During the three months ended March 31, 2014 and 2013, the Company recognized $12,069 and $36,577, respectively, in amortization expense related to these intangible assets. | ||||
[2] | In association with the Merger, the Company acquired $1,740,000 in identifiable artistic-related assets. These assets, related to certain properties owned by A Squared and assumed by the Company, were valued using an independent firm during the fourth quarter of 2013. Based on certain legal, regulatory, contractual, and economic factors, the Company has deemed these assets to be indefinite-lived. Hence, pursuant to ASC 350-30, these assets are not subject to amortization. They are tested annually for the recognition of impairment expense. | ||||
[3] | Pursuant to ASC 350-30-35, the Company reviews these intangible assets periodically to determine if the value should be retired or impaired due to recent events. At December 31, 2013, it was determined that certain "Other Intangible Assets" totaling $470,685 in gross asset value, with accumulated amortization of $228,961, were to be retired giving rise to an associated loss on disposition of assets totaling $241,723. During the period ended March 31, 2014, the Company did not recognize any similar impairment. |
8_Accrued_Liabilities_Details
8. Accrued Liabilities (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | ||
Accrued Salaries and Wages | ' | ' | ||
Accrued Salaries and Wages | $72,815 | $59,958 | ||
Disputed Trade Payables | ' | ' | ||
Disputed Trade Payables | 925,000 | [1] | 925,000 | [1] |
Services Advance | ' | ' | ||
Services Advance | 750,000 | [2] | 0 | |
Accrued Expenses | ' | ' | ||
Allowance for Sales Returns | 43,000 | 43,000 | ||
Distribution Arrangements Payable | 17,674 | 13,905 | ||
Deferred Revenue | 67,435 | 0 | ||
Royalties Payable | 4,953 | 9,638 | ||
Music Advances | 450,000 | [3] | 450,000 | [3] |
Other Accrued Expenses | 157,930 | 187,996 | ||
Total Accrued Expenses | 740,992 | 704,539 | ||
Total Accrued Liabilities | $2,488,807 | $1,689,497 | ||
[1] | As part of the Merger, the Company assumed certain liabilities from a previous member of A Squared Entertainment, LLC which has claimed certain liabilities totaling $925,000. The Company disputes the basis for this liability and has not heard from the claimant for two years. | |||
[2] | During the three months ended March 31, 2014, the Company entered into an exclusive long-term agreement with Sony DADC, the optical disc manufacturing and fulfillment arm of Sony, to provide all CD, DVD and BD replication, packaging and distribution to Genius Brands International's direct customers. Under the terms of the long-term, exclusive supply chain services agreement, the Company will order a minimum level of disc replication, packaging and distribution services for its content across all physical media, including DVD, CD, and Blu-ray from Sony DADC. As consideration for these minimum order levels, the Company will receive a total of $1,500,000, $750,000 of which was received during the first quarter of 2014 with the remaining $750,000 due by January 17, 2015. | |||
[3] | The Company assumed these accrued expenses in association with the Merger. |
9_Short_Term_Debt_Related_Part1
9. Short Term Debt - Related Parties (Details Narrative) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | |
Related Party Transactions [Abstract] | ' | ' | ' |
Short Term Debt - Related Party | $415,787 | ' | $516,659 |
Imputed interest expense | $7,163 | $0 | ' |
10_Stockholders_Equity_Details
10. Stockholders' Equity (Details Narrative) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Common Stock, shares Authorized | 700,000,000 | 700,000,000 |
Common Stock, shares outstanding | 6,047,707 | 5,918,704 |
Preferred stock authorized | 10,000,000 | 10,000,000 |
Preferred stock par value | $0.00 | $0.00 |
Preferred Sock, Shares Issued | 0 | 0 |
Preferred Sock, Shares Outstanding | 0 | 0 |
11_Stock_Options_Details
11 Stock Options (Details) (Stock Options [Member], USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2014 | Dec. 31, 2013 | |
Stock Options [Member] | ' | ' |
Options Outstanding Number of Shares | ' | ' |
Number of Options outstanding beginning balance | 37,150 | ' |
Number of Shares, Options Granted | ' | ' |
Number of Shares, Options Exercised | ' | ' |
Number of Shares, Options Expired | ' | ' |
Number of Options outstanding ending balance | 37,150 | 37,150 |
Number of Shares exercisable ending balance | 37,150 | 37,150 |
Exercise Price per Share | ' | ' |
Exercise Price per Share beginning balance minimum | $6 | ' |
Exercise Price per Share beginning balance maximum | $55 | ' |
Exercise Price per Share ending balance minimum | $6 | $6 |
Exercise Price per Share ending balance maximum | $55 | $55 |
Exercise Price per Share exercisable minimum ending balance | $6 | $6 |
Exercise price per share exercisable maximum ending balance | $55 | $55 |
Weighted Average Remaining Contractual Life | ' | ' |
Weighted Average Remaining Contractual Life ending balance | '3 years 3 months 22 days | '3 years 6 months 18 days |
Weighted Average Remaining Contractual Life exercisable ending balance | '3 years 3 months 22 days | '3 years 4 months 28 days |
Aggregate Intrinsic Value | ' | ' |
Aggregate Intrinsic Value beginning balance | $0 | ' |
Aggregate Intrinsic Value ending balance | 0 | 0 |
Aggregate Intrinsic Value Exercisable ending balance | $0 | $0 |
Weighted Average Exercise Price per Share | ' | ' |
WeightedAverage Exercise Price per Share beginning balance | $32 | ' |
Weighted Average Exercise Price per Share ending balance | $32 | $32 |
Weighted Average Exercise Price per Share Exercisable ending balance | $32 | $32 |
11_Stock_Options_Details_Narra
11. Stock Options (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ' |
Stock Compensation Expense | $0 | $58,279 |
14_Lease_Commitments_Details
14. Lease Commitments (Details) (USD $) | Mar. 31, 2014 |
Leases [Abstract] | ' |
2014 | $102,852 |
2015 | 45,860 |
Total | $148,712 |
14_Lease_Commitments_Details_N
14. Lease Commitments (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Leases [Abstract] | ' | ' |
Rental expenses | $35,815 | $6,947 |