Document_and_Entity_Informatio
Document and Entity Information (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | 16-May-14 | Jun. 28, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'Genius Brands International, Inc. | ' | ' |
Entity Central Index Key | '0001355848 | ' | ' |
Document Type | 'S-1 | ' | ' |
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 | ' | ' |
Entity Public Float | ' | ' | $19,066,488 |
Consolidated_Balance_Sheets_un
Consolidated Balance Sheets (unaudited) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | ||
Current Assets: | ' | ' | ' | ||
Cash and Cash Equivalents | $992,753 | $527,110 | $447,548 | ||
Accounts Receivable, net | 296,289 | 893,826 | 1,084,233 | ||
Inventory | 264,548 | 224,351 | 326,072 | ||
Prepaid and Other Assets | 605,750 | 582,056 | 139,983 | ||
Total Current Assets | 2,159,340 | 2,227,343 | 1,997,836 | ||
Property and Equipment, net | 66,278 | 78,748 | 23,736 | ||
Film and Television Costs | 89,819 | 0 | ' | ||
Capitalized Product Development in Process | 67,030 | 54,575 | 145,398 | ||
Net Assets from Discontinued Operations | ' | ' | 101,219 | ||
Intangible Assets, net | 1,903,637 | 1,865,706 | 356,070 | ||
Goodwill | 10,365,806 | 10,365,806 | 0 | ||
Investment in Stan Lee Comics, LLC | 0 | 0 | 0 | ||
Debenture Issuance Costs | ' | ' | 191,762 | ||
Total Assets | 14,651,910 | 14,592,177 | 2,816,021 | ||
Current Liabilities: | ' | ' | ' | ||
Accounts Payable | 647,525 | 889,919 | 971,097 | ||
Accrued Expenses | 740,992 | 704,539 | 496,662 | ||
Accrued Salaries and Wages | 72,815 | 59,958 | 516,083 | ||
Disputed Trade Payable | 925,000 | [1] | 925,000 | [1] | 0 |
Short Term Debt - Related Party | 415,787 | 516,659 | 0 | ||
Accrued Interest - Debentures | ' | ' | 45,716 | ||
Derivative Liability | ' | ' | 68,962 | ||
Total Current Liabilities | 2,802,119 | 3,096,075 | 2,098,520 | ||
Long Term Liabilities: | ' | ' | ' | ||
Notes Payable (Net of Discount of $0 and $485,147, respectively) | ' | ' | 514,853 | ||
Notes Payable and Accrued Interest - Related Parties | ' | ' | 447,891 | ||
Services Advance | 750,000 | [2] | 0 | ' | |
Total Liabilities | 3,552,119 | 3,096,075 | 3,061,264 | ||
Stockholders' Equity (Deficit) | ' | ' | ' | ||
Preferred Stock | 0 | 0 | 0 | ||
Common Stock | 6,048 | 5,919 | 719 | ||
Additional Paid in Capital | 29,371,960 | 28,914,238 | 9,962,062 | ||
Accumulated Deficit | -18,278,217 | -17,424,055 | -10,208,024 | ||
Total Equity (Deficit) | 11,099,791 | 11,496,102 | -245,243 | ||
Total Liabilities & Stockholders' Equity (Deficit) | $14,651,910 | $14,592,177 | $2,816,021 | ||
[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 | Dec. 31, 2012 |
Exercise Price Per Share | ' | ' | ' |
Preferred Sock, par value | $0.00 | $0.00 | $0.00 |
Preferred Sock, Shares Authorized | 10,000,000 | 10,000,000 | 10,000,000 |
Preferred Sock, Shares Issued | 0 | 0 | 0 |
Preferred Sock, Shares Outstanding | 0 | 0 | 0 |
Common Stock, par value (in Dollars per share) | $0.00 | $0.00 | $0.00 |
Common Stock, shares authorized | 700,000,000 | 700,000,000 | 250,000,000 |
Common Stock, shares issued | 6,047,707 | 5,918,704 | 719,127 |
Common Stock, shares outstanding | 6,047,707 | 5,918,704 | 719,127 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (unaudited) (USD $) | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | |
Revenues: | ' | ' | ' | ' |
Product Sales | $86,141 | $702,812 | $1,682,780 | $6,277,663 |
Television & Home Entertainment | 50,462 | 0 | 505,552 | 0 |
Licensing & Royalties | 39,680 | 31,427 | 368,206 | 292,536 |
Total Revenues | 176,283 | 734,239 | 2,556,538 | 6,570,199 |
Cost of Sales (Excluding Depreciation) | 136,035 | 647,309 | 1,504,138 | 4,836,321 |
Gross Profit | 40,248 | 86,930 | 1,052,400 | 1,733,878 |
Operating Expenses: | ' | ' | ' | ' |
Product Development | 887 | 26,991 | 139,082 | 32,792 |
Professional Services | 319,870 | 64,506 | 451,537 | 181,172 |
Rent Expense | 35,815 | 6,947 | 24,898 | 38,982 |
Marketing & Sales | 37,768 | 54,719 | 308,355 | 727,695 |
Depreciation & Amortization | 24,539 | 39,172 | 160,654 | 149,823 |
Salaries and Related Expenses | 308,696 | 471,147 | 1,329,715 | 1,689,064 |
Stock Compensation Expense | 0 | 58,279 | 539,185 | 264,122 |
Other General & Administrative | 200,721 | 56,205 | 460,818 | 612,513 |
Total Operating Expenses | 928,296 | 777,966 | 3,414,244 | 3,696,163 |
Loss from Operations | -888,048 | -691,036 | -2,361,844 | -1,962,285 |
Other Income (Expense): | ' | ' | ' | ' |
Other Income | 633 | 16 | 208 | 388 |
Interest Expense | -2,209 | -155,259 | -1,663,632 | -332,055 |
Interest Expense - Related Parties | -7,163 | -6,724 | -30,189 | -50,259 |
Gain (loss) on distribution contracts | 2,771 | 0 | 4,997 | 0 |
Gain (loss) on extinguishment of debt | 39,854 | 0 | -614,073 | 76,280 |
Gain (loss) on disposition of assets | ' | ' | -251,192 | 0 |
Gain (loss) on exchange of warrants | ' | ' | -312,144 | 0 |
Gain (loss) on derivative valuation | 0 | -92,862 | -1,886,943 | 200,322 |
Net Other Income (Expense) | 33,886 | -254,829 | -4,752,968 | -105,324 |
Loss before Income Tax Expense | -854,162 | -945,865 | -7,114,812 | -2,067,609 |
Income Tax Expense | 0 | 0 | 0 | 0 |
Net Loss from Continuing Operations | ' | ' | -7,114,812 | -2,067,609 |
Net Loss from Discontinued Operations | ' | ' | -101,219 | 0 |
Net Loss | ($854,162) | ($945,865) | ($7,114,812) | ($2,067,609) |
Net Loss per common share | ($0.14) | ($1.31) | ' | ' |
Net Loss per common share from continuing operations | ' | ' | ($5.03) | ($3) |
Net Loss per common share from discontinued operations | ' | ' | ($0.01) | $0 |
Weighted average shares outstanding | 6,029,573 | 722,159 | 1,413,631 | 689,286 |
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, 2012 | $719 | $9,962,062 | ($10,208,024) | ($245,243) |
Beginning Balance, Shares at Dec. 31, 2012 | 719,127 | ' | ' | ' |
Common Stock Issued for Cash, Shares | 296,429 | ' | ' | ' |
Common Stock Issued for Cash, Amount | 297 | 968,240 | ' | 968,537 |
Common Stock Issued in exchange for repayment of Accounts Payable, Shares | 10,020 | ' | ' | ' |
Common Stock Issued in exchange for repayment of Accounts Payable, Amount | 10 | 28,046 | ' | 28,056 |
Common Stock Issued in exchange for repayment of Note Payable, Shares | 1,685,236 | ' | ' | ' |
Common Stock Issued in exchange for repayment of Note Payable, Amount | 1,685 | 6,180,411 | ' | 6,182,096 |
Common Stock Issued in exchange for Warrants, net of costs, Shares | 53,810 | ' | ' | ' |
Common Stock Issued in exchange for Warrants, net of costs, Amount | 54 | 336,336 | ' | 336,390 |
Common Stock Issued for Bonuses to Officers and Directors, Shares | 55,000 | ' | ' | ' |
Common Stock Issued for Bonuses to Officers and Directors, Amount | 55 | 187,445 | ' | 187,500 |
Common Stock Issued for Merger with A Square Entertainment, Shares | 2,972,183 | ' | ' | ' |
Common Stock Issued for Merger with A Square Entertainment, Amount | 2,972 | 10,399,666 | ' | 10,402,638 |
Common Stock Issued for Services, Shares | 126,899 | ' | ' | ' |
Common Stock Issued for Services, Amount | 127 | 535,347 | ' | 535,474 |
Stock Compensation Expense | ' | 316,685 | ' | 316,685 |
Net Loss | ' | ' | -7,216,031 | -7,216,031 |
Ending Balance, Amount at Dec. 31, 2013 | 5,919 | 28,914,238 | -17,424,055 | 11,496,102 |
Ending 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 | 12 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | |
Cash Flows from Operating Activities: | ' | ' | ' | ' |
Net Loss | ($854,162) | ($945,865) | ($7,216,031) | ($2,067,609) |
Adjustments to reconcile net loss to net cash provided in operating activities: | ' | ' | ' | ' |
Depreciation Expense | 12,470 | 2,595 | 13,730 | 11,056 |
Amortization Expense | 12,069 | 36,577 | 146,924 | 138,767 |
Imputed Interest Expense | 7,163 | 0 | ' | ' |
Accretion of Discount on Convertible Debentures | 0 | 81,121 | 0 | 163,825 |
Accretion of Discount on Bridge Notes and Convertible Debentures | ' | ' | 1,294,350 | 0 |
Issuance of Common Stock for Interest Expense | 0 | 40,000 | 51,859 | 0 |
Issuance of Common Stock for Services | ' | ' | 167,260 | 324,714 |
Issuance of Common Stock on Bonuses to Officers and Directors | ' | ' | 222,500 | 0 |
Stock Compensation Expense | 0 | 58,279 | 316,685 | 264,122 |
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 | 614,073 | -76,280 |
(Gain) Loss on Derivative Valuation | 0 | 92,862 | 1,886,943 | -200,322 |
(Gain) Loss on Exchange of Warrants | ' | ' | 312,144 | 0 |
(Gain) Loss on Distribution Contracts | -2,771 | 0 | -4,997 | 0 |
(Gain) Loss on Disposition of Assets | ' | ' | 251,192 | 0 |
(Gain) Loss on Discontinued Operations | ' | ' | 101,219 | 0 |
Decrease (increase) in operating assets: | ' | ' | ' | ' |
Accounts Receivable | 597,537 | 526,901 | 279,804 | -63,194 |
Inventory | -40,197 | -18,874 | 101,721 | 14,710 |
Prepaid Expenses & Other Assets | 10,053 | 29,525 | 36,716 | 28,503 |
Other Receivables | ' | ' | 466,762 | 0 |
Film and Television Costs, net | -89,819 | 0 | ' | ' |
Increase (decrease) in operating liabilities: | ' | ' | ' | ' |
Accounts Payable | -169,968 | -87,674 | -354,498 | 38,917 |
Accrued Salaries | 12,857 | 98,908 | 196,318 | 322,564 |
Accrued Interest | ' | ' | 11,135 | 26,667 |
Accrued Interest - Related Party | 0 | 6,724 | 0 | 50,259 |
Other Accrued Expenses | 39,224 | -147,242 | -16,126 | 87,978 |
Net cash provided/(used) in operating activities | -476,146 | -226,163 | -1,120,317 | -935,323 |
Cash Flows from Investing Activities: | ' | ' | ' | ' |
Investment in Intangible Assets | -50,000 | -73,689 | -67,461 | -57,739 |
Purchase of Fixed Assets | ' | ' | -2,825 | -1,898 |
Merger with A Squared Entertainment | ' | ' | 283,199 | 0 |
Investment in Capitalized Product Development | -12,455 | 0 | ' | ' |
Net cash provided/(used) by investing activities | -62,455 | -73,689 | 212,913 | -59,637 |
Cash Flows from Financing Activities: | ' | ' | ' | ' |
Sale of Common Stock, net of offering costs | 355,116 | 0 | 968,537 | 200,000 |
Costs for Warrant Exchange | ' | ' | -15,264 | 0 |
Proceeds from Debenture | ' | ' | 0 | 1,000,000 |
Proceeds from Services Advance | 750,000 | 0 | ' | ' |
Issuance Costs on Debenture | 0 | 32,139 | -275,000 | -162,833 |
Proceeds from Bridge Notes | ' | ' | 309,000 | 0 |
Payments of Related Party Notes | -100,872 | 0 | -307 | 0 |
Net cash provided/(used) by financing activities | 1,004,244 | 32,139 | 986,966 | 1,037,167 |
Net increase in Cash and Cash Equivalents | 465,643 | -267,713 | 79,562 | 42,707 |
Beginning Cash and Cash Equivalents | 527,110 | 447,548 | 447,548 | 405,341 |
Ending Cash and Cash Equivalents | 992,753 | 179,835 | 527,110 | 447,548 |
Supplemental disclosures of cash flow information: | ' | ' | ' | ' |
Cash paid for income taxes | 0 | 0 | 0 | 0 |
Cash paid for interest | 0 | 0 | 0 | 4,012 |
Common Stock issued for Merger, net of cash | ' | ' | 10,119,439 | 0 |
Conversion of Debentures and Accrued Interest to Common Stock | ' | ' | 1,201,474 | 0 |
Conversion of Warrants to Common Stock | ' | ' | 312,144 | 0 |
Warrants granted for Debenture Issuance Costs | ' | ' | 0 | 28,929 |
Discount on Debentures attributed to Warrants | ' | ' | 0 | 379,688 |
Derivative Valuation on Debentures | ' | ' | 0 | 269,284 |
Conversion of Short Term Bridge Notes and Accrued Interest to Common Stock | ' | ' | 543,719 | 0 |
Conversion of Related Party Notes and Accrued Interest to Common Stock | ' | ' | 472,360 | 1,745,546 |
Conversion of Accrued Salaries to Common Stock | ' | ' | 612,443 | 0 |
Accrued Salaries converted to Short Term Note Payable | ' | ' | 221,000 | 0 |
Common Stock issued as Settlement for Accounts Payable | 32,572 | 0 | 50,100 | 0 |
Common Stock issued for Pre-Paid Services | 33,748 | 0 | 333,215 | 0 |
Common Stock issued for Issuance Costs | ' | ' | 15,264 | 0 |
Common Stock issued for Derivative Liabilities | ' | ' | 3,107,608 | 0 |
Common Stock issued for Debt Discount | ' | ' | $342,500 | $0 |
1_Organization_and_Business
1. Organization and Business | 3 Months Ended | 12 Months Ended |
Mar. 31, 2014 | Dec. 31, 2013 | |
Accounting Policies [Abstract] | ' | ' |
Organization and Business | ' | ' |
Organization and Nature of 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. | 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”. | 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 we obtained all rights, copyrights, and trademarks to the brands “Baby Genius,” “Little Genius,” “Kid Genius,” “123 Favorite Music” and “Wee Worship,” and all then existing productions under those titles. On October 17, 2011 and October 18, 2011, Genius Brands International, Inc., filed Articles of Merger with the Secretary of State of the State of Nevada and with the Secretary of State of the State of California, respectively. As previously described on the Company’s Schedule 14C Information Statement, filed with the Securities and Exchange Commission on September 21, 2011, by filing the Articles of Merger, the Company (i) changed its domicile to Nevada from California, and (ii) changed its name to Genius Brands International, Inc. from Pacific Entertainment Corporation (the “Reincorporation”). 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 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 “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. A Squared created, produced and distributed 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. | 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 Annual 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 | 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. | Historically, the Company has incurred net losses. As of December 31, 2013, the Company had an accumulated deficit of $17,424,055 and a total stockholders’ equity of $11,496,102. At December 31, 2013, the Company had current assets of $2,227,343, including cash of $527,110 and current liabilities of $3,096,075, including short-term debt to related parties which bears no interest and has no stated maturity of $516,659 and certain disputed trade payables of $925,000 to which the Company disputes the claim, resulting in a working capital deficit of $868,732. For the year ended December 31, 2013, the Company reported a net loss of $7,216,031 and net cash used by operating activities of $1,120,317. Management believes that its sales and cash provided by operations, the non-recurrence of certain legal and accounting expenses related to the Merger, and the funds from the issuance of common stock in the fourth quarter 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 December 31, 2013, the Company issued 102,858 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. Additionally, subsequent to December 31, 2013, the Company entered into a long-term, exclusive supply chain services agreement for which it received $750,000 during the first quarter of 2014 with the remaining $750,000 due by January 17, 2015. | |
2_Summary_of_Significant_Accou
2. Summary of Significant Accounting Policies | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||
Accounting Policies [Abstract] | ' | ' | ||||
Summary of Significant Accounting Policies | ' | ' | ||||
Cash Equivalents | Cash Equivalents | |||||
The Company considers all highly liquid debt instruments with initial maturities of three months or less to be 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 | 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. | 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 10K, 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 | 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. | 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. | 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. | See Note 3 – Business Combination for additional information. | |||||
Principles of Consolidation | ||||||
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. | ||||||
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 | ||||||
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. | ||||||
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 | ||||||
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. | ||||||
Certain account balances from prior periods have been reclassified in these consolidated financial statements so as to conform with current year classifications. | ||||||
Significant Accounting Policies | ||||||
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. | ||||||
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 December 31, 2013 and 2012 should be $43,000 and $53,000, 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. | ||||||
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 $93,607 and $57,305 established as of December 31, 2013 and 2012, respectively. | ||||||
Property and Equipment - Property and equipment are recorded at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from 5 to 39 years. Maintenance, repairs, and renewals, which neither materially add to the value of the assets nor appreciably prolong their lives, are charged to expense as incurred. Gains and losses from dispositions of property and equipment are reflected in the statement of operations. | ||||||
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. | ||||||
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. Additional, 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 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. | ||||||
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. | ||||||
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 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. | ||||||
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. | ||||||
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. | ||||||
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. | ||||||
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. | ||||||
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. | ||||||
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. | ||||||
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. | ||||||
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. | ||||||
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 years ended December 31, 2013 and 2012 was $113,879 and $54,454, 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. | ||||||
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 December 31, 2013 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. | ||||||
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. | ||||||
Concentration of Risk - The Company’s cash is maintained at one financial institution and from time to time the balances for this account exceed the Federal Deposit Insurance Corporation’s (“FDIC’s”) insured amount. Balances on interest bearing deposits at banks in the United States are insured by the FDIC up to $250,000 per account. As of December 31, 2013, the Company had one account with an uninsured balance of $123,053. As of December 31, 2012, the Company had one account with an uninsured balance of $135,971. | ||||||
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. | ||||||
For fiscal year 2013, the Company had three customers whose total revenue exceeded 10% of the total consolidated revenue. These customers account for 21.5%, 19.8%, and 13.7% of total revenue, respectively. Those three accounts made up 0%, 6.3%, and 39.2% of accounts receivable, respectively. For fiscal year 2012, the revenue from two customers comprised 43.8% and 17.7% of the Company’s total revenue. Those two accounts made up 0%, and 28.5% of the total accounts receivable balance at December 31, 2012, respectively. The major customers for the year ending December 31, 2013 are not necessarily the same as the major customers at December 31, 2012. There is significant financial risk associated with a dependence upon a small number of customers. The Company periodically assesses the financial strength of these customers and establishes allowances for any anticipated bad debt. At December 31, 2013 and 2012, no allowance for bad debt has been established for the major customers as these amounts are believed to be fully collectible. | ||||||
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: | ||||||
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. | ||||||
· | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; | |||||
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. | ||||||
· | 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 | |||||
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 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. | |||||
· | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; | |||||
Recent Accounting Pronouncements | · | 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. | |||||
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. | ||||||
Recent Accounting Pronouncements | ||||||
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. | ||||||
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 | 12 Months Ended | ||||||||||||||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
Business Combinations [Abstract] | ' | ' | ||||||||||||||||
Business Combination | ' | ' | ||||||||||||||||
Overview | 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. | 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. 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. | 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 shareholders owned approximately 50% of the Company’s common stock on a fully diluted basis. | |||||||||||||||||
Pursuant to the terms and conditions of the Merger: | 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. | · | 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 Parent 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. | |||||||||||||||||
· | 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 were to resign as directors of the Company and Andrew Heyward, Amy Moynihan Heyward, Lynne Segall, Jeffrey Weiss, Joseph “Gray” Davis, William McDonough and Bernard Cahill were to be appointed as directors of the Company. On December 9, 2013, these changes to the Board of Directors were made effective. | |||||||||||||||
· | 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 | ||||||||||||||||
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. | |||||||||||||||||
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 | |||||||||||||||||
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: | |||||||||||||||||
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: | 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 | Allocated Fair Value | |||||||||||||||||
Cash | $ | 283,199 | Cash | $ | 283,199 | |||||||||||||
Accounts Receivable | 89,398 | Accounts Receivable | 89,398 | |||||||||||||||
Prepaid Expenses and Other Assets | 145,574 | Prepaid Expenses and Other Assets | 145,574 | |||||||||||||||
Property and equipment, net | 75,385 | Property and equipment, net | 75,385 | |||||||||||||||
Identifiable artistic-related intangible assets (a) | 1,740,000 | Identifiable artistic-related intangible assets (a) | 1,740,000 | |||||||||||||||
Total assets acquired | 2,333,556 | Total assets acquired | 2,333,556 | |||||||||||||||
Accounts Payable | (404,757 | ) | Accounts Payable | (404,757 | ) | |||||||||||||
Accrued Expenses | (450,000 | ) | Accrued Expenses | (450,000 | ) | |||||||||||||
Short Term Debt - Related Party | (516,966 | ) | Short Term Debt – Related Party | (516,966 | ) | |||||||||||||
Disputed Trade Payable | (925,000 | ) | Disputed Trade Payable | (925,000 | ) | |||||||||||||
Total liabilities assumed | (2,296,723 | ) | Total liabilities assumed | (2,296,723 | ) | |||||||||||||
Net assets acquired | 36,833 | Net assets acquired | 36,833 | |||||||||||||||
Consideration (b) | 10,402,639 | Consideration (b) | 10,402,638 | |||||||||||||||
Goodwill | $ | 10,365,806 | Goodwill | $ | 10,365,805 | |||||||||||||
(a) | The value of the identifiable artistic-related intangible assets was determined by an independent Corporate Finance and Business Valuation firm. | (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. | (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 | 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. | Included in the consolidated statement of operations for the period ended December 31, 2013 are revenues of $555,866 and net income of $168,936 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. | The table below presents the proforma revenue and net loss for the years ended December 31, 2013 and December 31, 2012, assuming the Merger had occurred on January 1, 2012, pursuant to ASC 805-10-50. | |||||||||||||||||
3/31/14 | 3/31/13 | 2013 | 2012 | |||||||||||||||
Revenues | $ | 176,283 | $ | 745,011 | Revenues | $ | 2,752,830 | $ | 7,538,926 | |||||||||
Net Loss (1) | $ | (854,162 | ) | $ | (1,836,673 | ) | Net Loss (1) | $ | (5,855,925 | ) | $ | (1,772,236 | ) | |||||
-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. | -1 | Net loss during the twelve months ended December 31, 2013 includes merger related costs of $339,180 as well as the elimination of interest expense of $1,693,821 and loss on derivative valuation of $1,886,943. Net loss during the twelve months ended December 31, 2012 includes merger related costs of $339,180 as well as the elimination of interest expense of $50,259 and gain on derivative valuation of $200,322. | |||||||||||||||
4_Investment_in_Stan_Lee_Comic
4. Investment in Stan Lee Comics LLC | 3 Months Ended | 12 Months Ended |
Mar. 31, 2014 | Dec. 31, 2013 | |
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. | In November 2009, A Squared Entertainment LLC (“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 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. | Upon closing of the Merger, the Company assumed the rights to Stan Lee Comics, LLC held by A Squared Entertainment, LLC. | |
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. | Pursuant to ASC 323-30, as of December 31, 2013, the Company has recorded the Investment in Stan Lee Comics LLC at $0 as no monetary consideration was paid by A Squared Entertainment LLC, 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 | 12 Months Ended | ||||||||||||||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
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: | The Company has property and equipment as follows as of December 31, 2013 and 2012: | |||||||||||||||||
3/31/14 | 12/31/13 | 12/31/13 | 12/31/12 | |||||||||||||||
Furniture and Equipment | $ | 12,385 | $ | 12,385 | Furniture and Equipment | $ | 12,385 | $ | 13,288 | |||||||||
Computer Equipment | 32,493 | 32,493 | Computer Equipment | 32,493 | 68,216 | |||||||||||||
Leasehold Improvements | 99,778 | 99,778 | Leasehold Improvements | 99,778 | 7,655 | |||||||||||||
Software | 15,737 | 15,737 | Software | 15,737 | – | |||||||||||||
Less Accumulated Depreciation | (94,115 | ) | (81,645 | ) | Less Accumulated Depreciation | (81,645 | ) | (65,423 | ) | |||||||||
Property and Equipment, Net | $ | 66,278 | $ | 78,748 | Property and Equipment, Net | $ | 78,748 | $ | 23,736 | |||||||||
During the three months ended March 31, 2014 and 2013, the Company recorded depreciation expense of $12,470 and $2,595, respectively. | The increase in property and equipment is primarily the result of the assumption of $75,385 in net assets due to the Merger. These increases were offset by certain non-Merger related dispositions of $70,481 in gross assets which gave rise to a loss on disposition of assets of $9,469. | |||||||||||||||||
During the years ended December 31, 2013 and 2012, the Company recorded depreciation expense of $13,730 and $11,056, 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 | 12 Months Ended | ||||||||||||||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | ' | ' | ||||||||||||||||
Goodwill and Intangible Assets, Net | ' | ' | ||||||||||||||||
Goodwill | 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. | In association with the Merger, the Company recognized $10,365,805 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 | Intangible Assets, Net | |||||||||||||||||
The Company had following intangible assets as of March 31, 2014 and December 31, 2013: | The Company had following intangible assets as of December 31, 2013 and 2012: | |||||||||||||||||
3/31/14 | 12/31/13 | 12/31/13 | 12/31/12 | |||||||||||||||
Identifiable artistic-related assets (a) | $ | 1,740,000 | $ | 1,740,000 | Identifiable artistic-related assets (a) | $ | 1,740,000 | $ | – | |||||||||
Trademarks (b) | 129,831 | 129,831 | Trademarks (b) | 129,831 | 129,831 | |||||||||||||
Product Masters (b) | 3,257,129 | 3,257,129 | Product Masters (b) | 3,257,129 | 3,279,369 | |||||||||||||
Other Intangible Assets | 50,000 | – | Other Intangible Assets (b) | – | 290,161 | |||||||||||||
Less Accumulated Amortization (c) | (3,273,323 | ) | (3,261,254 | ) | Less Accumulated Amortization (c) | (3,261,254 | ) | (3,343,291 | ) | |||||||||
Intangible Assets, Net | $ | 1,903,637 | $ | 1,865,706 | Intangible Assets, Net | $ | 1,865,706 | $ | 356,070 | |||||||||
(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. | (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. As of December 31, 2013, no impairment was warranted or recognized. | |||||||||||||||
(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. | (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 prior period, 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. | (c) | During the years ended December 31, 2013 and 2012, the Company recognized $146,924 and $138,767, respectively, in amortization expense related to these intangible assets. | |||||||||||||||
8_Accrued_Liabilities
8. Accrued Liabilities | 3 Months Ended | 12 Months Ended | ||||||||||||||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
Payables and Accruals [Abstract] | ' | ' | ||||||||||||||||
Accrued Liabilities | ' | ' | ||||||||||||||||
As of March 31, 2014 and December 31, 2013, the Company has the following accrued liabilities: | ||||||||||||||||||
As of December 31, 2013 and 2012, the Company has the following accrued liabilities: | ||||||||||||||||||
3/31/14 | 12/31/13 | |||||||||||||||||
Accrued Salaries and Wages | 12/31/13 | 12/31/12 | ||||||||||||||||
Accrued Salaries and Wages | $ | 72,815 | $ | 59,958 | Accrued Salaries and Wages | |||||||||||||
Accrued Salaries and Wages (a) | $ | 59,958 | $ | 516,083 | ||||||||||||||
Disputed Trade Payables | ||||||||||||||||||
Disputed Trade Payables (a) | 925,000 | 925,000 | Disputed Trade Payables | |||||||||||||||
Disputed Trade Payables (b) | 925,000 | – | ||||||||||||||||
Services Advance | ||||||||||||||||||
Services Advance (b) | 750,000 | – | Accrued Expenses | |||||||||||||||
Allowance for Sales Returns | 43,000 | 53,000 | ||||||||||||||||
Accrued Expenses | Distribution Arrangements Payable | 13,905 | 217,858 | |||||||||||||||
Allowance for Sales Returns | 43,000 | 43,000 | Deferred Revenue | – | 110,177 | |||||||||||||
Distribution Arrangements Payable | 17,674 | 13,905 | Royalties Payable | 9,638 | 59,033 | |||||||||||||
Deferred Revenue | 67,435 | – | Music Advances (c) | 450,000 | – | |||||||||||||
Royalties Payable | 4,953 | 9,638 | Other Accrued Expenses | 187,996 | 56,594 | |||||||||||||
Music Advances (c) | 450,000 | 450,000 | Total Accrued Expenses | 704,539 | 496,662 | |||||||||||||
Other Accrued Expenses | 157,930 | 187,996 | ||||||||||||||||
Total Accrued Expenses | 740,992 | 704,539 | Total Accrued Liabilities | $ | 1,689,497 | $ | 1,012,745 | |||||||||||
Total Accrued Liabilities | $ | 2,488,807 | $ | 1,689,497 | (a) | Accrued but unpaid salaries and vacation benefits total $59,958 and $516,083 as of December 31, 2013 and 2012, respectively. On August 30, 2013, the Company issued 12% convertible notes to several parties with a maturity date of October 21, 2013 for an aggregate of $530,000 (“Bridge Notes”). Cash was received in the aggregate of $309,000. Four officers and directors of the Company converted outstanding salaries payable to the new notes in the aggregate of $221,000. | ||||||||||||
(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. | On November 15, 2013, in association with the Merger, the Company issued 124,146 shares of common stock were to members of the Pre-Merger management team as well as the Company’s Chief Financial Officer as consideration for the cancellation of accrued, but unpaid, salary and benefits in the amount of $612,443. The Company recognized a gain on the settlement of debt in the amount of $190,349. | ||||||||||||||||
(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. | (b) | 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. | |||||||||||||||
(c) | The Company assumed these accrued expenses in association with the Merger. | (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 | 12 Months Ended | ||||||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||||||
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. | ||||||||||
As of December 31, 2013 and 2012, the Company had the following short-term debt, notes payable and accrued interest balances outstanding to related parties: | ||||||||||
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. | ||||||||||
12/31/13 | 12/31/12 | |||||||||
Short-Term Debt and Notes Payable – Related Parties | ||||||||||
Member Advances (a) | $ | 516,659 | $ | – | ||||||
Officer Loans to Company (b) | – | 194,163 | ||||||||
Subordinated Officer Loans to Company (c) | – | 159,753 | ||||||||
Bridge Notes 12% Convertible (d) | – | – | ||||||||
Total Short-Term Debt and Notes Payable | 516,659 | 353,916 | ||||||||
Less: Current Portion | (516,659 | ) | – | |||||||
Long Term Portion | $ | – | $ | 353,916 | ||||||
Accrued Interest – Related Parties | ||||||||||
Officer Loans to Company (b) | $ | – | $ | 49,087 | ||||||
Subordinated Officer Loans (c) | – | 44,888 | ||||||||
Accrued Interest | $ | – | $ | 93,975 | ||||||
(a) | As part of the Merger, the Company acquired certain liabilities from A Squared Entertainment, LLC. From time to time, A Squared Entertainment, LLC 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 December 31, 2013, these advances totaled $516,659. These advances are interest free, and these advances have no stated maturity. The Company has applied an imputed interest rate of 6% in accordance with ASC 835-30-45. On February 24, 2014, the Company repaid a portion of the Member Advances to its Chief Executive Officer, Andrew Heyward, in the amount of $100,000. | |||||||||
(b) | Throughout 2009, 2008 and 2007, the Company borrowed funds from Messrs. Moeller, Meader, Larry Balaban and Howard Balaban. On December 31, 2009, the Officers agreed to issue new note agreements for the outstanding balances, including accrued but unpaid interest, with a maturity date of December 31, 2010 (the “Officer Loans”). Subsequent agreements amended the stated interest rate to 6% per annum and extended the maturity to January 15, 2015. | |||||||||
On November 15, 2013, in connection with the Merger, the Company issued an aggregate of 73,238 shares of common stock to members of the pre-merger management team as consideration for the cancellation of an aggregate of $194,163 in principal and $62,167 in accrued but unpaid interest thereon made to the Company by such individuals in connection with the Merger. The Company recognized a gain on the settlement of debt in the amount of $7,324. | ||||||||||
For the year ended December 31, 2013 compared to the same period of 2012, interest expense for these Officer Loans were recorded in amounts of $13,080 and $14,132, respectively. | ||||||||||
On February 1, 2008, Isabel Moeller, sister of our former Chief Executive Officer, Klaus Moeller, loaned $310,000 to the Company at an interest rate equal to 8% per annum. The funds were borrowed from Ms. Moeller in order to reduce outstanding obligations due to Genius Products, Inc. at that time. Subsequent agreements extended the maturity date to January 15, 2015 and reduced the stated interest rate to six (6%) percent per annum. Repayments on the principle balance were made in the aggregate of $24,000 during February and April 2011. On April 1, 2011, Ms. Moeller agreed to convert $200,000 of the outstanding balance to shares of common stock of the Company. On March 31 2012, Ms. Moeller agreed to convert the remaining balance of outstanding principal and interest, in the amount of $173,385, to shares of common stock of the Company. Interest expense for the twelve months ended December 31, 2013 and 2012 was $0 and $2,562, respectively, as the note was paid in full in 2012. | ||||||||||
(c) | On March 31, 2011, four of the Company’s officers agreed to convert accrued but unpaid salaries through December 31, 2010 to subordinated long term notes payable (the “Subordinated Officer Loans”). In February 2011, as a result of an agreement by each of the four officers to retroactively decrease the amount of the annual salary for 2010 from $125,000 per annum per officer to $80,000, the amount of the Subordinated Officer Loans was reduced to an aggregate of $1,620,137. In March 2012, the officers agreed to convert the aggregate sum of $1,572,161 to shares of common stock of the Company. As of March 2012, the remaining note, with a principal balance of $159,753, had a maturity of January 15, 2015 and a stated interest rate of six percent (6%) per annum. | |||||||||
On October 31, 2013, 43,207 shares of restricted common stock were issued in full payment of the remaining Subordinated Officer Loan with a principal amount of $159,753 and accrued but unpaid interest in the amount of $56,278. The Company recognized a gain on the settlement of debt of $90,733. | ||||||||||
For the years ended December 31, 2013 and 2012, the interest recorded for these Subordinated Officer Loans was $11,390 and $33,565, respectively. | ||||||||||
(d) | On August 30, 2013, the Company issued 12% convertible notes to several parties with a maturity date of October 21, 2013 for an aggregate of $530,000 (“Bridge Notes”). The Bridge Notes have a stated conversion rate of $1.212 and can be voluntarily converted at any time by the holder and mandatorily by the Company upon certain conditions. Cash was received in the aggregate of $309,000. Four officers and directors of the Company converted outstanding salaries payable to the new notes in the aggregate of $221,000. At issuance, a debt discount of $530,000 was recorded. Costs related to the issuance of the Bridge Notes were recognized in 2013 totaling $30,715. | |||||||||
On November 15, 2013, the Company issued an aggregate of 448,613 shares of common stock to holders of the Company’s 12% convertible promissory notes in aggregate principal amount of $530,000 and accrued, but unpaid, interest of $13,719 in connection with the automatic conversion of the Bridge Notes upon consummation of the Merger. During 2013, total accretion of the debt discount was $530,000 resulting in a debt discount balance of $0. During 2013, interest expense associated with the related party holders of these notes totaled $5,720. |
10_Stockholders_Equity
10. Stockholders' Equity | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2014 | Dec. 31, 2013 | |||
Equity [Abstract] | ' | ' | ||
Stockholders' Equity | ' | ' | ||
As part of the Reincorporation, the total number of authorized shares of common stock was changed to 250,000,000 shares, $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 Reincorporation, the total number of authorized shares of common stock was changed to 250,000,000 shares of $0.001 par value. The common stock and additional paid in capital accounts were restated as of December 31, 2012, and for the years then ended, to recognize the change from no par common stock to a par value of $0.001 per share. The Company conducted a consent solicitation of its stockholders (“Stockholders”) of record as of September 3, 2013 (the “Record Date”) to approve certain corporation actions. The 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 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”). | As part of the aforementioned consent solicitation, the 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. | 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 10K, 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. | As of December 31, 2013 and 2012, there were 5,918,704 and 719,127 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. | The Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001. The Board of Directors is authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders, to issue from time to time shares of preferred stock in one or more series. Each series of preferred stock will have such number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by our board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights. As of December 31, 2013 and 2012, 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. | 2012 Activity | |||
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 March 31, 2012, the Company issued 87,278 shares of common stock in exchange for outstanding notes payable, including principal and interest, in the cumulative amount of $1,745,546, or $20.00 per share, for certain related parties and officers of the Company. | |||
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. | On April 11, 2012, the Company agreed to issue 10,000 shares of common stock in exchange for investor relations services valued at $235,000, or $23.00 per share. | |||
On May 2, 2012, the Company issued 1,111 shares of common stock in exchange for marketing services valued at $22,214, or $20.00 per share. | ||||
On May 10, 2012, the Company issued 2,500 shares of restricted common stock to one service provider for investor relations services valued at approximately $42,500, or $17.00 per share. | ||||
On May 10, 2012, the Company issued 10,000 shares of common stock for cash to an accredited investors in the amount of $200,000, or $20.00 per share. | ||||
On June 20, 2012, the Company issued 1,250 shares of common stock in exchange for legal services valued at $25,000, or $20.00 per share. | ||||
2013 Activity | ||||
On February 1, 2013, the Company issued 4,706 shares of common stock in exchange for interest payable on the Debenture due on that date in the amount of $40,000, or $8.50 per share. | ||||
On May 1, 2013, the Company issued 2,782 shares of common stock in exchange for services valued at $16,135, or $6.00 per share. | ||||
On May 1, 2013, the Company issued 625 shares of common stock in exchange for services valued at $3,125, or $5.00 per share. | ||||
On May 26, 2013, the Company issued 4,000 shares of common stock in exchange for services valued at $20,000, or $5.00 per share. | ||||
On August 29, 2013, 50,000 warrants to purchase the Company’s common stock were exchanged on a one for one basis with no receipt of cash and the warrants were cancelled. In association with this transaction, there was a reduction in a derivative liability of $30,964, a reduction in debt issuance cost of $14,464, and a loss on the exchange of warrants recognized in the amount of $308,500. | ||||
On September 6, 2013, a holder of the Reissued Debenture issued notice of voluntary conversion for $75,000 of the issuance price reducing the aggregate amount of the outstanding debentures to $1,088,333. The Company issued 61,882 shares of common stock. In conjunction with this issuance there was a reduction in the derivative liability of $200,495, a reduction in the debt discount of $67,500, and a loss on the conversion was recorded in the amount of $67,376. | ||||
On September 13, 2013, 28,000 shares of common stock were issued in exchange for services valued $112,000, or $4.00 per share. | ||||
On September 19, 2013, pursuant to an agreement to cancel a consulting agreement, 4,000 shares of common stock were issued valued at $16,000, or $4.00 per share. | ||||
On October 8, 2013, the board of directors granted one director 5,000 shares as a bonus for service to the Company. The shares were valued at $17,500, or $3.40 per share. | ||||
On October 18, 2013, the Company exchanged 3,810 warrants to purchase common stock issued to the placements agent, and its designees, of the July 2012 Debenture issuance for shares of restricted common stock of the Company on a one for one basis with no exchange of cash. There was a reduction in the derivative liability of $8,547 and a loss on the exchange of warrants recognized in the amount of $3,644. | ||||
On October 30, 2013, the Company issued 10,020 shares of restricted common stock to two parties in exchange for services valued at $50,100, or $2.80 per share. The Company recognized a gain on the settlement of account payable in the amount of $22,044. | ||||
On October 31, 2013, 43,206 shares of restricted common stock were issued in full payment of the Subordinated Officer Loan with a principal amount of $159,753 and accrued but unpaid interest in the amount of $56,278. The Company recognized a gain on the conversion of debt in the amount of $90,733. | ||||
On November 8, 2013, the Company issued 10,000 shares restricted common stock to a director as a bonus for service to the Company valued at $35,000, or $3.50 per share. | ||||
On November 15, 2013, the board of directors granted five officers and employees 10,000 shares each as a bonus for service to the Company. The shares were valued at valued at $170,000, or $3.50 per share. | ||||
On November 15, 2013, in association with the Merger, the Company issued the following shares of common stock: | ||||
· | 2,972,183 shares of common stock, valued at $10,402,638 or $3.50 per share, were issued to the Parent Member in exchange for the member interests of A Squared issued and outstanding immediately prior to the Merger. | |||
· | 448,613 shares of common stock were issued to holders of the Company’s 12% convertible promissory notes in aggregate principal amount of $530,000 and accrued, but unpaid, interest of $13,719 in connection with the automatic conversion of the Bridge Notes upon consummation of the Merger. | |||
· | 73,238 shares of common stock were issued to members of the pre-merger management team as consideration for the cancellation of an aggregate of $194,163 in principal and $62,167 in accrued but unpaid interest thereon made to the Company by such individuals in connection with the Merger. The Company recognized a gain on the settlement of debt in the amount of $7,324. | |||
· | 929,444 shares of common stock were issued to holders of its 16% senior secured convertible debentures, in the aggregate principal amount of $1,088,333, plus accrued but unpaid interest in the aggregate amount of $38,141, in connection with the automatic conversion of the Debentures upon consummation of the Merger. The association with the conversion, the Company recognized a loss on the settlement of debt in the amount of $807,532, a reduction of the debt discount of $805,000, and a reduction of the derivative liability of $2,867,602. | |||
· | 77,492 shares of common stock were issued to two parties in exchange for strategic digital marketing and business development services. These shares were valued at $333,215, or $4.30 per share. | |||
· | 124,146 shares of common stock were issued to members of the Pre-Merger management team as well as the Company’s Chief Financial Officer as consideration for the cancellation of accrued, but unpaid, salary and benefits in the amount of $612,443. The Company recognized a gain on the settlement of debt in the amount of $190,349. | |||
Additionally, through December 31, 2013, the Company sold 296,429 shares of its common stock in a private placement to certain investors at $3.50 per share. Through December 31, 2013, the Company received gross proceeds of $1,037,500 and recognized offering costs of $68,962. | ||||
11_Stock_Options
11. Stock Options | 3 Months Ended | 12 Months Ended | ||||||||||||||||||||||||||||||||||||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ' | ||||||||||||||||||||||||||||||||||||||
Stock Options | ' | ' | ||||||||||||||||||||||||||||||||||||||
The Company has adopted the provisions of ASC 718 - Compensation which requires companies to measure the cost of employee services received in exchange for equity instruments based on the grant date fair value of those awards and to recognize the compensation expense over the requisite service period during which the awards are expected to vest. | 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. | 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: | 2012 Activity | |||||||||||||||||||||||||||||||||||||||
Options Outstanding | Exercise | Weighted Average Remaining | Aggregate | Weighted Average Exercise | On January 1, 2012 and April 1, 2012, the Company issued two Stock Option Grants to an employee for the purchase of up to 250 shares of common stock each, which were fully vested as of March 31, 2012 and June 30, 2012, respectively, with a life of five years and an exercise price of $50.00. The Company’s calculation of the fair market value of the stock-based award that was granted was $1,265 for all of the options granted. The full value of the options was expensed in 2012. | |||||||||||||||||||||||||||||||||||
Number of | Price | Contractual | Intrinsic | Price | ||||||||||||||||||||||||||||||||||||
Shares | per Share | Life | Value | per Share | On May 2, 2012, pursuant to an employment agreement with the Chief Financial Officer, the Company issued an option to purchase up to 2,000 shares of common stock. The option fully vests on December 31, 2014, has a five year term and an exercise price of $44.00. The Company’s calculation of the fair market value of the stock-based award that was granted was $11,588 for all of the options granted. The amount expensed in 2012 was $2,897. | |||||||||||||||||||||||||||||||||||
Balance at December 31, 2013 | 37,150 | $6.00 - 55.00 | 3.55 years | $ | – | $ | 32 | On July 6, 2012, the Company issued an option to purchase 1,000 shares of common stock pursuant to a services agreement with a consultant. The option is fully vested as of July 6, 2012, has a five year term and an exercise price of $44.00. The Company’s calculation of the fair market value of the stock-based award that was granted was $6,889 for all of the options granted. The full value of the options was expensed in 2012. | ||||||||||||||||||||||||||||||||
Options Granted | – | |||||||||||||||||||||||||||||||||||||||
Options Exercised | – | On December 31, 2012 the Company issued Stock Option Grant notices to nineteen employees and service providers under the 2008 Stock Option Plan, as amended. Options to purchase 7,550 shares of common stock at an average exercise price of $15.00 per share were granted with a 5 year life, fully vesting on December 31, 2012. The Company’s calculation of the average fair market value of the stock-based award that was granted was $13,794 for all of the options granted. The full value of the options was expensed in 2012. | ||||||||||||||||||||||||||||||||||||||
Options Expired | – | |||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2014 | 37,150 | $6.00 - 55.00 | 3.31 years | $ | – | $ | 32 | As of December 31, 2012, options to purchase up to 2,550 shares of the Company’s common stock previously issued in 2009 through 2012 expired due to the termination of employees. | ||||||||||||||||||||||||||||||||
Exercisable March 31, 2014 | 37,150 | $6.00 - 55.00 | 3.31 years | $ | – | $ | 32 | The Company used the Black-Scholes valuation model to estimate the grant date fair value of the options granted in 2012. The Company used the following assumptions for the 2012 valuations: | ||||||||||||||||||||||||||||||||
Exercisable December 31, 2013 | 37,150 | $6.00 - 55.00 | 3.41 years | $ | – | $ | 32 | |||||||||||||||||||||||||||||||||
Risk-free interest rate | .64% - .89% | |||||||||||||||||||||||||||||||||||||||
Expected life in years | 5 | |||||||||||||||||||||||||||||||||||||||
During the three months ended March 31, 2014 and 2013, the Company recognized stock based compensation expense of $0 and $58,279, respectively. | Dividend yield | 0.00% | ||||||||||||||||||||||||||||||||||||||
Expected volatility | 59.15% - 67.62% | |||||||||||||||||||||||||||||||||||||||
2013 Activity | ||||||||||||||||||||||||||||||||||||||||
On May 15, 2013, Stock Option Grant Notices were issued to each of five officers to purchase up to 7,500 shares of common stock, vesting on the grant date, at an exercise price of $20.00 per share. The options have expiration dates five years from the grant date. | ||||||||||||||||||||||||||||||||||||||||
On May 15, 2013, options to purchase up to 2,500 shares of common stock were issued to an employee, vesting on the date of grant, at an exercise price of $20.00 per share. The options have an expiration date five years from the date of the grant notice. | ||||||||||||||||||||||||||||||||||||||||
On May 15, 2013, pursuant to amendments to employment agreements with Messrs. Moeller, Meader, Larry Balaban and Howard Balaban, Stock Option Grant Notices previously granted to each employee to purchase up to 20,000 shares of common stock expiring on January 20, 2014 were cancelled effective immediately. | ||||||||||||||||||||||||||||||||||||||||
On September 10, 2013 Stock Option Grant Notice was issued to an employee to purchase up to 1,000 shares of common stock, vesting on the grant date, at an exercise price of $44.00. The options have an expiration date five years from the date of the grant notice. | ||||||||||||||||||||||||||||||||||||||||
On November 15, 2013, in connection with the Merger, the Company and Klaus Moeller entered into an agreement to terminate Mr. Moeller’s employment agreement dated as of October 29, 2013. Under the terms of the Moeller Employment Termination Agreement, Mr. Moeller agreed to cancel options to purchase an aggregate of up to 19,500 shares of the Common Stock. | ||||||||||||||||||||||||||||||||||||||||
Also, on November 15, 2013, in connection with the Merger, the Company and certain of our pre-Merger officers agreed to cancel outstanding options to purchase up to an aggregate of 58,500 shares of Common Stock. | ||||||||||||||||||||||||||||||||||||||||
As of December 31, 2013, options to purchase up to 4,300 shares of the Company’s common stock previously issued in 2009 through 2013 expired due to the termination of employees. | ||||||||||||||||||||||||||||||||||||||||
The Company used the Black-Scholes valuation model to estimate the grant date fair value of the options granted in 2013. The Company used the following assumptions for the 2013 valuations: | ||||||||||||||||||||||||||||||||||||||||
Risk-free interest rate | 0.84% | |||||||||||||||||||||||||||||||||||||||
Expected life in years | 5 | |||||||||||||||||||||||||||||||||||||||
Dividend yield | 0.00% | |||||||||||||||||||||||||||||||||||||||
Expected volatility | 69.09% | |||||||||||||||||||||||||||||||||||||||
The following schedule summarizes the changes in the Company’s stock option plan during 2013 and 2012: | ||||||||||||||||||||||||||||||||||||||||
Options Outstanding Number | Exercise | Weighted Average Remaining | Aggregate | Weighted Average Exercise | ||||||||||||||||||||||||||||||||||||
of | Price | Contractual | Intrinsic | Price | ||||||||||||||||||||||||||||||||||||
Shares | per Share | Life | Value | per Share | ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2011 | 149,950 | $18.00 - 55.00 | 4.47 years | $ | – | $ | 43 | |||||||||||||||||||||||||||||||||
Options Granted | 11,050 | $6.00 – 50.00 | 5.18 years | 26 | ||||||||||||||||||||||||||||||||||||
Options Exercised | – | – | - | – | ||||||||||||||||||||||||||||||||||||
Options Expired | (2,550 | ) | $18.00 – 55.00 | - | – | |||||||||||||||||||||||||||||||||||
Balance at December 31, 2012 | 158,450 | $6.00 – 55.00 | 3.55 years | $ | – | $ | 42 | |||||||||||||||||||||||||||||||||
Options Granted | 41,000 | $20.00 – 44.00 | 4.35 years | 21 | ||||||||||||||||||||||||||||||||||||
Options Exercised | – | – | - | – | ||||||||||||||||||||||||||||||||||||
Options Expired | (162,300 | ) | $6.00 – 55.00 | - | – | |||||||||||||||||||||||||||||||||||
Balance at December 31, 2013 | 37,150 | $6.00 – 55.00 | 3.55 years | $ | – | $ | 32 | |||||||||||||||||||||||||||||||||
Exercisable December 31, 2012 | 130,450 | $6.00 – 55.00 | 2.81 years | $ | – | $ | 41 | |||||||||||||||||||||||||||||||||
Exercisable December 31, 2013 | 37,150 | $6.00 – 55.00 | 3.41 years | $ | – | $ | 32 | |||||||||||||||||||||||||||||||||
During the year ended December 31, 2013 and 2012, the Company recognized stock based compensation expense of $316,685 and $264,122, respectively. | ||||||||||||||||||||||||||||||||||||||||
12_Income_Taxes
12. Income Taxes | 3 Months Ended | 12 Months Ended | ||||||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ' | ||||||||
Income Taxes | ' | ' | ||||||||
The Company accounts for income taxes in accordance with Accounting Standards Codification Topic 740, Income Taxes (“Topic 740”), which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns. A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized. | Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. | |||||||||
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. | Net deferred tax liabilities consist of the following components as of December 31, 2013 and 2012: | |||||||||
At the adoption date of January 1, 2008, the Company had no unrecognized tax benefit which would affect the effective tax rate if recognized. | 2013 | 2012 | ||||||||
Deferred tax assets: | ||||||||||
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. | NOL Carryover | $ | 3,252,200 | $ | 2,531,500 | |||||
Returns Reserve | 16,800 | 20,700 | ||||||||
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. | Inventory Reserve | 36,500 | 22,300 | |||||||
Accrued Related Party Interest | – | 36,700 | ||||||||
Accrued Officer Compensation | – | 158,600 | ||||||||
Accrued Compensated Absences | 14,800 | 38,100 | ||||||||
Charitable Contributions | 1,300 | 1,900 | ||||||||
Deferred tax liabilities: | ||||||||||
Depreciation and Amortization | 80,100 | (58,700 | ) | |||||||
Valuation Allowance | (3,401,700 | ) | (2,751,100 | ) | ||||||
Net deferred tax asset | $ | – | $ | – | ||||||
The income tax provision differs from the amount of income tax determined by applying the U.S. federal tax rate to pretax income from continuing operations for the years ended December 31, 2013 and 2012 due to the following: | ||||||||||
2013 | 2012 | |||||||||
Book Loss | $ | (2,813,900 | ) | $ | (806,400 | ) | ||||
Meals and Entertainment | 5,900 | 2,800 | ||||||||
Stock Compensation for Services | 525,900 | 229,600 | ||||||||
Stock issued for debt extinguishment | 1,762,000 | (66,800 | ) | |||||||
Related Party Interest | (12,500 | ) | (45,700 | ) | ||||||
Accrued Compensated Absences | (23,300 | ) | 11,200 | |||||||
Accrued Officer Compensation | (158,600 | ) | 116,800 | |||||||
Returns Reserve | (3,900 | ) | (12,100 | ) | ||||||
Inventory Reserve | 14,200 | 5,800 | ||||||||
Depreciation and Amortization | 10,200 | 33,300 | ||||||||
Valuation Allowance | 694,000 | 531,500 | ||||||||
$ | – | $ | – | |||||||
At December 31, 2013, the Company had net operating loss carry forwards of approximately $8,339,000 that may be offset against future taxable income from the year 2014 through 2033. No tax benefit has been reported in the December 31, 2012 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. | ||||||||||
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years. | ||||||||||
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 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 | 12 Months Ended |
Mar. 31, 2014 | Dec. 31, 2013 | |
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. | On April 26, 2011, the Company and each of Messrs. Moeller, Meader, Larry Balaban and Howard Balaban (the “Pre-Merger Executives”) agreed to terminate all then existing employment agreements for the Pre-Merger Executives and enter into new five-year employment agreements unless written termination is provided by either party. Each employment agreement provides for a graduated base salary beginning at $165,000 per annum retroactive to March 20, 2011, continuing to December 31, 2011, increasing to $195,000 for 2012 and $225,000 for 2013. After 2013, the agreement provided for base salary increases at the discretion of the Board of Directors, with a minimum 5% increase. In addition to base salary, each Pre-Merger Executive was to receive an annual car allowance of $11,400, and four weeks paid vacation per annum. | |
On January 10, 2013, Messrs. Moeller, Meader and Howard Balaban agreed to reduce the amount of payments for salary effective January 1, 2013 through January 19, 2013 to $165,000 and a further reduction to $140,000 commencing January 20, 2013, continuing until further notice by each one to the Board of Directors. The agreements with each of Messrs. Moeller, Meader and Howard Balaban included the accrual of unpaid salary, the right to convert any or all of the accrued but unpaid salary to common stock of the Company at a conversion price of $21.00 per share and an amendment to all outstanding stock option grant notices to allow each to retain all rights until the expiration date upon termination unless for cause, as defined in the employment agreement. | ||
On March 28, 2013, Mr. Meader voluntarily resigned his position as President effective April 1, 2013. The Company agreed to the retention of all stock options granted to Mr. Meader as of the date of termination, vesting and expiration dates in accordance with the original grant notices in exchange for a general release of all claims against the Company. The Company entered into a consulting agreement with Mr. Meader to provide continued services for an initial period of twelve months. | ||
On May 2, 2012, the Company entered into a five-year “at will” employment agreement with Jeanene Morgan to serve as the Company’s Chief Financial Officer. The agreement provided a base salary of $165,000 per annum from January 1, 2012 to December 31, 2012, increasing to $190,000 on January 1, 2013 and $215,000 on January 1, 2014. After 2014, the agreement provided for base salary increases at the discretion of the Board of Directors with a minimum 5% increase. The Board of Directors, in its sole discretion, may grant Ms. Morgan a year-end bonus with a value of no less than 2% of EBITDA of the Company (assuming a positive figure) and up to 100% of Ms. Morgan’s base salary. Ms. Morgan was granted an option to purchase 2,000 shares of the Company’s common stock. Ms. Morgan was permitted to participate in all benefit plans of the Company and received four weeks paid vacation. | ||
On January 10, 2013, Ms. Morgan agreed to defer the payment of the salary increase which would have become effective January 1, 2013. The deferral would continue until further notice by Ms. Morgan to the Board of Directors. The agreement included the accrual of unpaid salary, the right to convert any or all of the accrued but unpaid salary to common stock of the Company at a conversion price of $21.00 per share and an amendment to all outstanding stock option grant notices to allow Ms. Morgan to retain all rights until the expiration date upon termination unless for cause, as defined in the employment agreement. | ||
On October 29, 2013, the Company executed new two year employment agreements with Messrs. Klaus Moeller, Howard Balaban and Larry Balaban, with an effective date of October 1, 2013, whereby the employees agreed to a reduction of salary. Each was to was receive (i) an annual salary of $20,800 (except that if the Company generates cash flow from operations of at least $300,000 on an annual basis, the annual salary shall be $100,000 plus an additional payment of $75,000 per annum, payable in cash or shares of the Company’s common stock in quarterly installments of $18,750 each, and (ii) the acceleration of vesting of all previously issued option grants to Mr. Moeller under the Company’s 2008 Stock Option Plan as well as participation in other Company benefit plans and the ability to receive a year-end performance bonus, at the discretion of the Company’s Board of Directors. In the event employment is terminated by the Company without “Cause” as defined in the agreement, the employee shall be entitled to severance payments for twelve months, based on the annual salary rate of $100,000. | ||
On October 29, 2013, the Company and Ms. Morgan agreed to execute a new employment agreement, effective October 1, 2013, whereby Ms. Morgan agreed to continue to serve as the Company’s Chief Financial Officer for a period of two years in consideration for (i) a reduction in annual salary to $175,000 and (ii) the acceleration of vesting of all previously issued option grants to Ms. Morgan under the Company’s 2008 Stock Option Plan as well as participation in other Company benefit plans and the ability to receive a year-end performance bonus, at the discretion of the Company’s Board of Directors. In the event Ms. Morgan’s employment is terminated by the Company without “Cause” (as defined in the Morgan Employment Agreement), Ms. Morgan shall be entitled to severance payments for twelve months. Additional information regarding Ms. Morgan’s agreement is available on the Form 8-K filed on October 30, 2013. | ||
On November 15, 2013, as a closing condition to the Merger, each of Messrs. Moeller, Larry Balaban and Howard Balaban resigned their executive positions with the Company. Accrued but unpaid salaries and benefits payable to these individuals were converted into the Company’s common stock. | ||
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. | ||
Subsequent to December 31, 2013, Jeanene Morgan resigned from her position as Chief Financial Officer of the Company. |
14_Lease_Commitments
14. Lease Commitments | 3 Months Ended | 12 Months Ended | ||||||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||||||
Leases [Abstract] | ' | ' | ||||||||
Lease Commitments | ' | ' | ||||||||
The Company has no capital leases subject to the Capital Lease guidelines in the FASB Accounting Standards Codification. | 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. | Rental expenses incurred for operating leases during the years ended December 31, 2013 and 2012 were $24,898 and $38,982, 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. | 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. | 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: | The following is a schedule of future minimum lease payments required by the non-cancelable operating lease agreement: | |||||||||
Year | Amount | Year | Amount | |||||||
2014 | $ | 102,852 | 2014 | $ | 136,245 | |||||
2015 | 45,860 | 2015 | 45,860 | |||||||
$ | 148,712 | $ | 182,105 | |||||||
15_Commitment_and_Contingencie
15. Commitment and Contingencies | 3 Months Ended | 12 Months Ended |
Mar. 31, 2014 | Dec. 31, 2013 | |
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 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 & Friendsand 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. | 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 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. | 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 | 12 Months Ended |
Mar. 31, 2014 | Dec. 31, 2013 | |
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: | Pursuant to FASB ASC 855, Management has evaluated all events and transactions that occurred from December 31, 2013 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 January 17, 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. | |
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 February 24, 2014, the Company repaid a portion of the Member Advances to its Chief Executive Officer, Andrew Heyward, in the amount of $100,000. | |
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 February 27, 2014, William McDonough resigned from his position as a director of the Company. Mr. McDonough 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 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 February 27, 2014, the Company’s Board of Directors appointed Anthony Thomopoulos as a director of the Company. Mr. Thomopoulos has no family relationship with any of the executive officers or directors of the Company. There are no arrangements or understandings between Mr. Thomopoulos and any other person pursuant to which he was appointed as a director of the Company. | |
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 March 7, 2014, Jeanene Morgan resigned from her position as Chief Financial Officer of the Company. | |
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 March 12, 2014, the Company appointed Richard Staves as its interim Chief Financial Officer. Mr. Staves previously served as the Chief Financial Officer of A Squared Entertainment LLC, which was acquired by the Company on November 15, 2013, from January 2011 to November 2011 and from June 2012 and November 2013. Mr. Staves has no family relationship with any of the executive officers or directors of the Company. There are no arrangements or understandings between Mr. Staves and any other person pursuant to which he was appointed as an officer 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. | 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 10K, including the accompanying consolidated financial statements and notes thereto, have been adjusted to reflect retrospective application of the reverse split, unless otherwise indicated | |
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. | Subsequent to December 31, 2013, the Company issued 102,858 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. Additionally, the Company issued 8,143 shares of common stock valued at $28,500, or $3.50 per share, as an extinguishment of an accounts payable balance for services rendered in relation to the private placement. | |
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. |
8_Notes_Payable_and_Accrued_In
8. Notes Payable and Accrued Intererst (December 2013 Note) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
Notes Payable and Accrued Intererst | ' | ||||||||
As of December 31, 2013 and 2012, the Company had the following notes payable and accrued interest balances outstanding: | |||||||||
12/31/13 | 12/31/12 | ||||||||
Notes Payable | |||||||||
Debenture - $1,000,000 16% senior secured convertible (a) | $ | – | $ | 1,000,000 | |||||
Debt Discount - $1,000,000 16% senior secured convertible (a) | – | (485,147 | ) | ||||||
Reissued Debenture - $1,163,333 16% senior secured convertible (a) | – | – | |||||||
Debt Discount - $1,163,333 16% senior secured convertible (a) | – | – | |||||||
Bridge Notes - 12% convertible (b) | – | – | |||||||
Total Notes Payable | – | 514,853 | |||||||
Less: Current Portion | – | – | |||||||
Long Term Portion | $ | – | $ | 514,853 | |||||
Accrued Interest | |||||||||
Debenture - $1,000,000 16% senior secured convertible issued June 27,2012 (a) | $ | – | $ | 26,667 | |||||
2006 Debenture - $2,500,000 Terminated July 2009 (c) | – | 19,049 | |||||||
Bridge Notes - $530,000 12% convertible issued August 30, 2013 (b) | – | – | |||||||
Accrued Interest | $ | – | $ | 45,716 | |||||
(a) | On June 27, 2012, the Company entered into a Securities Purchase Agreement whereby the Company issued and sold (i) a $1,000,000 16% senior secured convertible debenture due June 27, 2014 (the “Debenture”), and (ii) a common stock purchase warrant (the “Debenture Warrant”) to purchase up to 50,000 shares of the Company’s common stock. The initial closing of the Debenture and Warrant Transaction occurred on June 27, 2012 (“Original Issue Date”). The Company issued the Debenture and the Debenture Warrant for the purchase price of $1,000,000. The Debenture is convertible, in whole or in part, into shares of Common Stock upon notice by the holder to the Company, subject to certain conversion limitations set forth in the Debenture. The conversion price for the Debenture is $21.00 per share, subject to adjustments. Interest on the Debenture accrues at the rate of 16% annually and is payable quarterly on February 1, May 1, August 1 and November 1, beginning on November 1, 2012, on any redemption, conversion and at maturity. Interest is payable in cash or at the Company’s option in shares of the Company’s common stock; provided certain conditions are met. | ||||||||
On August 29, 2013, pursuant to an agreement between the Company and certain holders, the original Debenture was assigned and exchanged for an aggregate of $1,163,333 in new notes with the same provisions (the “Reissued Debenture”). The Reissued Debenture was recorded as a modification of debt in accordance with ASC 470-50-40-6 wherein $150,000 in prepayment fees and $13,333 in accrued but unpaid interest at the time of the exchange was added to the principal. The interest rate and maturity date were not changed. Commencing on December 27, 2013, the Company was to be obligated to redeem a certain amount under the Reissued Debentures on a quarterly basis, in an amount equal to $300,000 on each of December 27, 2013 and March 27, 2014 and $488,033 on June 27, 2014. At the assignment to new note holders, the conversion rate of the Reissued Debentures was changed to $1.212 per share. | |||||||||
On September 6, 2013, a holder of the Reissued Debenture issued notice of voluntary conversion for $75,000 of the issuance price reducing the aggregate amount of the outstanding debentures to $1,088,333. The Company issued 61,882 shares of common stock. In conjunction with this issuance there was a reduction in the derivative liability of $200,495, a reduction in the debt discount of $67,500, and a loss on the conversion was recorded in the amount of $67,376. | |||||||||
On November 15, 2013, the Company issued 929,444 shares of common stock to holders of its Reissued Debentures, in the aggregate principal amount of $1,088,333, plus accrued but unpaid interest in the aggregate amount of $38,141, in connection with the automatic conversion of the Debentures upon consummation of the Merger. In association with the conversion, the Company recognized a loss on the settlement of debt in the amount of $807,532, a reduction of the debt discount of $805,000, and a reduction of the derivative liability of $2,867,602. | |||||||||
For year ended December 31, 2013 compared to the same period of 2012, interest expense for the Debenture and Reissued Debenture was recorded in amounts of $144,808 and $81,333, respectively. | |||||||||
As of the date of issuance on June 27, 2012, a debt discount was recorded in the aggregate amount of $648,972 for the issuance of warrants and the derivative value of the convertible feature of the Debenture at inception. | |||||||||
As of June 27, 2012, the warrants were valued in the amount of $379,688, based on the Black-Scholes valuation using the following assumptions: | |||||||||
Risk-free interest rate | 0.73% | ||||||||
Expected life in years | 5 | ||||||||
Dividend yield | 0 | ||||||||
Expected volatility | 63.65% | ||||||||
As of June 27, 2012, the debt discount for the convertible feature of the debenture was valued in the amount of $269,284 using the Black-Scholes calculation with the following assumptions: | |||||||||
Risk-free interest rate | 0.31% | ||||||||
Expected life in years | 2 | ||||||||
Dividend yield | 0 | ||||||||
Expected volatility | 60.01% | ||||||||
On August 29, 2013, the date of assignment of the Debentures, a debt discount was recorded in the aggregate amount of $1,163,333 for the derivative value of the convertible feature of the Reissued Debenture upon the exchange date using the Black-Scholes calculation with the following assumptions: | |||||||||
Risk-free interest rate | 0.14% | ||||||||
Expected life in years | 0.83 | ||||||||
Dividend yield | 0 | ||||||||
Expected volatility | 63.22% | ||||||||
Interest expense for the amortization of the debt discount for the convertible feature of the Debenture and Reissued Debenture is calculated on a straight-line basis over the remaining life of the debenture. For the year ended December 31, 2013, total accretion expense of the debt discount of the debentures was $983,607, resulting in a debt discount balance of $0. For the year December 31, 2012, accretion expense was recorded in the amount of $163,825 for a debt discount balance of $485,147. | |||||||||
(b) | On August 30, 2013, the Company issued 12% convertible notes to several parties with a maturity date of October 21, 2013 for an aggregate of $530,000 (“Bridge Notes”). The Bridge Notes have a stated conversion rate of $1.212 and can be voluntarily converted at any time by the holder and mandatorily by the Company upon certain conditions. Cash was received in the aggregate of $309,000. Four officers and directors of the Company converted outstanding salaries payable to the new notes in the aggregate of $221,000. At issuance, a debt discount of $530,000 was recorded. Costs related to the issuance of the Bridge Notes were recognized in 2013 totaling $30,715. | ||||||||
On November 15, 2013, the Company issued an aggregate of 448,613 shares of common stock to holders of the Company’s 12% convertible promissory notes in aggregate principal amount of $530,000 and accrued, but unpaid, interest of $13,719 in connection with the automatic conversion of the Bridge Notes upon consummation of the Merger. During 2013, total accretion of the debt discount was $530,000 resulting in a debt discount balance of $0. During 2013, interest expense associated with the non-related party holders of these notes totaled $7,999. | |||||||||
(c) | Debenture Interest accrued and unpaid for the 2006 issuance of $2.5 million in debentures (the “2006 Debentures”) is $0 as of December 31, 2013 and $19,049 as of December 31, 2012. Accrual of interest on this series of debentures was terminated effective July 24, 2009 in accordance with the conversion agreement upon establishment of a secondary trading market for our common stock. Subsequent to the conversion, additional interest on the debenture was erroneously accrued. Therefore, in 2013, in conjunction with the Merger, the Company discovered the error, and a $19,049 gain on settlement of debt was recorded to reduce the accrued interest balance to $0. | ||||||||
10_Derivative_Valuation_Decemb
10. Derivative Valuation (December 2013 Note) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Notes to Financial Statements | ' | ||||||||||||
10. Derivative Valuation | ' | ||||||||||||
The Company recognized a derivative liability for the conversion feature and warrants for the $1.0 million senior secured debenture (the “Debenture”) issued on June 27, 2012 as an embedded derivative. It was valued on the respective transaction dates of June 27, 2012 for issuance of the debentures and August 30, 2013, the date on which it was assigned to other holders, using a Black-Scholes pricing model. Warrants to purchase 50,000 shares of common stock were issued as part of the Debenture and were exchanged pursuant to an agreement between the holder and the Company on August 29, 2013 on a one for one basis with no receipt of cash. 3,810 warrants to purchase shares of common stock were issued to a placement agent and several of its designees in connection with the Debenture. These warrants have a cashless exercise provision effective six months after the issuance date. In accordance with ASC 815-10-25, we measured the subsequent derivative valuation using a Black-Scholes pricing model on December 31, 2012 and recorded the additional derivative liability as of that date. | |||||||||||||
On August 29, 2013, pursuant to an agreement between the Company and certain holders, the original Debenture was assigned and exchanged for an aggregate of $1,163,333 in new notes with the same provisions (the “Reissued Debentures”). The additional value represented an increase of $150,000 in prepayment fees and $13,333 in accrued but unpaid interest. The interest rate and maturity date were not changed. | |||||||||||||
At the end of each quarterly reporting date the values are evaluated and adjusted to current market value. The amount recorded as of December 31, 2013 and 2012 was $0 and $68,962, respectively. For the year ended December 31, 2013, a loss on the derivative valuation was recorded in the amount of $1,886,943. For the year ended December 31, 2012, a gain on the derivative valuation in the amount of $200,322 was recognized. | |||||||||||||
Derivative liability activity for the years ended December 31, 2013 and 2012 was as follows: | |||||||||||||
Warrants | Conversion Feature | Total | |||||||||||
Derivative Liability at December 31, 2011 | $ | – | $ | – | $ | – | |||||||
Liability on June 27, 2012 related to Issuances of Debt and Warrants | – | 269,284 | 269,284 | ||||||||||
Change in Fair Value at the End of the Year | 53,219 | (253,541 | ) | (200,322 | ) | ||||||||
Derivative Liability at December 31, 2012 | 53,219 | 15,743 | 68,962 | ||||||||||
Change in Fair Value related to Original Debenture prior to Cancellation of Warrants and Assignment of Debenture on August 29, 2013 | (13,708 | ) | (4,113 | ) | (17,821 | ) | |||||||
Elimination of Liability Due to Cancellation of Warrants and Reassignment of Debt on August 29, 2013 | (39,511 | ) | (11,630 | ) | (51,141 | ) | |||||||
Liability on August 29, 2013 related to Assignment of Debt | – | 5,077,705 | 5,077,705 | ||||||||||
Decrease in Liability on September 9, 2013 due to $75,000 Note Payable Conversion | – | (200,495 | ) | (200,495 | ) | ||||||||
Change in Fair Value Conversion date | – | (2,009,608 | ) | (2,009,608 | ) | ||||||||
Elimination of Liability on November 11, 2013 due to Full Conversion of Remaining Balance of $1,088,333 | – | (2,867,602 | ) | (2,867,602 | ) | ||||||||
Derivative Liability at December 31, 2013 | $ | – | $ | – | $ | – | |||||||
13_Warrants_December_2013_Note
13. Warrants (December 2013 Note) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Warrants and Rights Note Disclosure [Abstract] | ' | ||||||||||||
Warrants | ' | ||||||||||||
In connection with the sale of shares of its common stock in 2010, the Company issued warrants to purchase a total of 4,712 shares of its common stock at $40.00 per share exercisable for a three-year period. As of December 31 2013, all of these warrants have expired. In June 2012, the Company issued warrants to purchase up to 53,810 shares of the Company’s common stock. In August 2013, 50,000 of these warrants were exchanged for common stock on a one for one basis with no receipt of cash and the warrants were cancelled. In October 2013, the Company exchanged the remaining 3,810 warrants for shares of restricted common stock of the Company on a one for one basis with no exchange of cash. | |||||||||||||
The following schedule summarizes the changes in the Company’s warrants during 2013 and 2012: | |||||||||||||
Number of Warrants | Exercise Price per Share | Weighted Average Exercise Price per Share | |||||||||||
Balance at December 31, 2011 | 4,712 | $ | 40 | $ | 40 | ||||||||
Warrants Granted | 53,810 | $ | 33 | $ | 33 | ||||||||
Warrants Exercised | – | ||||||||||||
Warrants Expired or Cancelled | – | ||||||||||||
Balance at December 31, 2012 | 58,522 | $ | 33.00 – 40.00 | $ | 34 | ||||||||
Warrants Granted | – | – | – | ||||||||||
Warrants Exercised | – | – | – | ||||||||||
Warrants Expired or Cancelled | (58,522 | ) | $ | 33.00 – 40.00 | $ | 34 | |||||||
Balance at December 31, 2013 | – | – | $ | – | |||||||||
Exercisable at December 31, 2012 | 58,522 | $ | 33.00 – 40.00 | $ | 34 | ||||||||
Exercisable at December 31, 2013 | – | $ | – | $ | – | ||||||||
18_Discontinued_Operations_Dec
18. Discontinued Operations (December 2013 Note) | 12 Months Ended |
Dec. 31, 2013 | |
Discontinued Operations and Disposal Groups [Abstract] | ' |
18. Discontinued Operations | ' |
On September 20, 2010, the Company entered into a joint venture agreement between the Company and Dr. Shulamit Ritblatt to form Circle of Education, LLC, a California limited liability company, for the purpose of creation and distribution of a curriculum to promote school readiness for children ages 0-5 years (“COE”). The Company obtained an initial voting and economic interest of seventy-five percent of the outstanding units of the newly formed company in exchange for the contribution of all intellectual property rights the Company had in the Circle of Education program. | |
In March 2012, the Company and Dr. Ritblatt agreed to terminate the joint venture agreement. COE transferred equal right of ownership in the intellectual property developed as of the date of termination (“IP”) to each of the Company and Dr. Ritblatt, and in exchange for the rights to the IP, Dr. Ritblatt transferred her units of COE to the Company. Each party will have the right to continue development of the IP and products based on the IP with no further obligation to the other party. Subject to certain limitations for specific channels of distribution reserved for each party for a period of twelve months from the execution of the agreements, both parties have non-exclusive and non-restrictive rights to the use, sublicense or sale of the IP and products created based on the IP. | |
The Company consolidated the results for the twelve month period ended December 31, 2012 and December 31, 2011 with the results of COE. There were no sales or cost of sales in the twelve month period ended December 31, 2012 and December 31, 2011. COE had general and administrative costs of $0 and $21,461 for the twelve month period ended December 31, 2012 and 2011, respectively. Costs in 2011 included legal costs related to the creation of the agreements and registration of the entity in the aggregate of $18,068, sales and marketing costs of $1,181 and product development costs of $2,212 for a total loss of $21,461. As the Company has an economic interest of 100 percent of the total subsidiary as a result of the agreement to terminate COE, the Company recognized 100 percent of the loss, or $5,366, as noncontrolling interest on the financial statements for the twelve months ended December 31, 2011. | |
On December 31, 2013, given no activity during the years ended December 31, 2013 and 2012, the Company discontinued all activities related to COE. Net Assets of Discontinued Operations on the Consolidated Balance Sheet at December 31, 2012 totaled $101,219, which gave rise to a loss on discontinued operations in 2013 of $101,219. | |
19_Fair_Value_Measurements_Dec
19. Fair Value Measurements (December 2013 Note) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||
Fair Value Measurements | ' | ||||||||||||||||
We adopted ASC Topic 820 (originally issued as SFAS 157, “Fair Value Measurements”) as of January 1, 2008 for financial instruments measured at fair value on a recurring basis. ASC Topic 820 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States and expands disclosures about fair value measurements. | |||||||||||||||||
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include: | |||||||||||||||||
· | Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; | ||||||||||||||||
· | Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and | ||||||||||||||||
· | Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. | ||||||||||||||||
We measure certain financial instruments at fair value on a recurring basis. As of December 31, 2013, there were no assets or liabilities measured at fair value on a recurring basis. As of December 31, 2012, assets and liabilities measured at fair value on a recurring basis were as: | |||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets | $ | – | $ | – | $ | – | $ | – | |||||||||
Total assets measured at fair value | – | – | – | – | |||||||||||||
Liabilities | |||||||||||||||||
Derivative Liability | 68,962 | – | – | 68,962 | |||||||||||||
Convertible Debenture, net of discount | 514,853 | – | – | 514,853 | |||||||||||||
Total liabilities measured at fair value | $ | 583,815 | $ | – | $ | – | $ | 583,815 |
2_Summary_of_Significant_Accou1
2. Summary of Significant Accounting Policies (Policies) | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||
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. | 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. | 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 10K, 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. | 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. | 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. | 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. | 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. | 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. | Certain account balances from prior periods have been reclassified in these consolidated financial statements so as to conform with current year 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. | 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 December 31, 2013 and 2012 should be $43,000 and $53,000, 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. | 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 $93,607 and $57,305 established as of December 31, 2013 and 2012, respectively. | |||||
Property and Equipment | ' | ' | ||||
Property and equipment are recorded at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from 5 to 39 years. Maintenance, repairs, and renewals, which neither materially add to the value of the assets nor appreciably prolong their lives, are charged to expense as incurred. Gains and losses from dispositions of property and equipment are reflected in the statement of operations. | 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. | 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. Additional, 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 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. | 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 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 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. | 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. | 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. | 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. | 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. | 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. | 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. | 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. | 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. | 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 years ended December 31, 2013 and 2012 was $113,879 and $54,454, 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. | 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 December 31, 2013 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. | 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. | |||||
Concentration of Risk | ' | ' | ||||
The Company’s cash is maintained at one financial institution and from time to time the balances for this account exceed the Federal Deposit Insurance Corporation’s (“FDIC’s”) insured amount. Balances on interest bearing deposits at banks in the United States are insured by the FDIC up to $250,000 per account. As of December 31, 2013, the Company had one account with an uninsured balance of $123,053. As of December 31, 2012, the Company had one account with an uninsured balance of $135,971. | ||||||
For fiscal year 2013, the Company had three customers whose total revenue exceeded 10% of the total consolidated revenue. These customers account for 21.5%, 19.8%, and 13.7% of total revenue, respectively. Those three accounts made up 0%, 6.3%, and 39.2% of accounts receivable, respectively. For fiscal year 2012, the revenue from two customers comprised 43.8% and 17.7% of the Company’s total revenue. Those two accounts made up 0%, and 28.5% of the total accounts receivable balance at December 31, 2012, respectively. The major customers for the year ending December 31, 2013 are not necessarily the same as the major customers at December 31, 2012. There is significant financial risk associated with a dependence upon a small number of customers. The Company periodically assesses the financial strength of these customers and establishes allowances for any anticipated bad debt. At December 31, 2013 and 2012, no allowance for bad debt has been established for the major customers as these amounts are believed to be fully collectible. | ||||||
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. | 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. | 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: | 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 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 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. | |||
· | 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. | 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. | 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 | 12 Months Ended | ||||||||||||||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
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 | ||||||||||||||||
Allocated Fair Value | Accounts Receivable | 89,398 | ||||||||||||||||
Cash | $ | 283,199 | Prepaid Expenses and Other Assets | 145,574 | ||||||||||||||
Accounts Receivable | 89,398 | Property and equipment, net | 75,385 | |||||||||||||||
Prepaid Expenses and Other Assets | 145,574 | Identifiable artistic-related intangible assets (a) | 1,740,000 | |||||||||||||||
Property and equipment, net | 75,385 | Total assets acquired | 2,333,556 | |||||||||||||||
Identifiable artistic-related intangible assets (a) | 1,740,000 | |||||||||||||||||
Total assets acquired | 2,333,556 | Accounts Payable | (404,757 | ) | ||||||||||||||
Accrued Expenses | (450,000 | ) | ||||||||||||||||
Accounts Payable | (404,757 | ) | Short Term Debt – Related Party | (516,966 | ) | |||||||||||||
Accrued Expenses | (450,000 | ) | Disputed Trade Payable | (925,000 | ) | |||||||||||||
Short Term Debt - Related Party | (516,966 | ) | Total liabilities assumed | (2,296,723 | ) | |||||||||||||
Disputed Trade Payable | (925,000 | ) | ||||||||||||||||
Total liabilities assumed | (2,296,723 | ) | Net assets acquired | 36,833 | ||||||||||||||
Net assets acquired | 36,833 | Consideration (b) | 10,402,638 | |||||||||||||||
Consideration (b) | 10,402,639 | Goodwill | $ | 10,365,805 | ||||||||||||||
Goodwill | $ | 10,365,806 | ||||||||||||||||
Proforma information | ' | ' | ||||||||||||||||
2013 | 2012 | |||||||||||||||||
3/31/14 | 3/31/13 | Revenues | $ | 2,752,830 | $ | 7,538,926 | ||||||||||||
Revenues | $ | 176,283 | $ | 745,011 | Net Loss (1) | $ | (5,855,925 | ) | $ | (1,772,236 | ) | |||||||
Net Loss (1) | $ | (854,162 | ) | $ | (1,836,673 | ) | ||||||||||||
-1 | Net loss during the twelve months ended December 31, 2013 includes merger related costs of $339,180 as well as the elimination of interest expense of $1,693,821 and loss on derivative valuation of $1,886,943. Net loss during the twelve months ended December 31, 2012 includes merger related costs of $339,180 as well as the elimination of interest expense of $50,259 and gain on derivative valuation of $200,322. | |||||||||||||||||
-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 | 12 Months Ended | ||||||||||||||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
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: | 12/31/13 | 12/31/12 | ||||||||||||||||
Furniture and Equipment | $ | 12,385 | $ | 13,288 | ||||||||||||||
3/31/14 | 12/31/13 | Computer Equipment | 32,493 | 68,216 | ||||||||||||||
Furniture and Equipment | $ | 12,385 | $ | 12,385 | Leasehold Improvements | 99,778 | 7,655 | |||||||||||
Computer Equipment | 32,493 | 32,493 | Software | 15,737 | – | |||||||||||||
Leasehold Improvements | 99,778 | 99,778 | Less Accumulated Depreciation | (81,645 | ) | (65,423 | ) | |||||||||||
Software | 15,737 | 15,737 | Property and Equipment, Net | $ | 78,748 | $ | 23,736 | |||||||||||
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 | 12 Months Ended | ||||||||||||||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
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: | 12/31/13 | 12/31/12 | ||||||||||||||||
Identifiable artistic-related assets (a) | $ | 1,740,000 | $ | – | ||||||||||||||
3/31/14 | 12/31/13 | Trademarks (b) | 129,831 | 129,831 | ||||||||||||||
Identifiable artistic-related assets (a) | $ | 1,740,000 | $ | 1,740,000 | Product Masters (b) | 3,257,129 | 3,279,369 | |||||||||||
Trademarks (b) | 129,831 | 129,831 | Other Intangible Assets (b) | – | 290,161 | |||||||||||||
Product Masters (b) | 3,257,129 | 3,257,129 | Less Accumulated Amortization (c) | (3,261,254 | ) | (3,343,291 | ) | |||||||||||
Other Intangible Assets | 50,000 | – | Intangible Assets, Net | $ | 1,865,706 | $ | 356,070 | |||||||||||
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 | 12 Months Ended | ||||||||||||||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||
Payables and Accruals [Abstract] | ' | ' | ||||||||||||||||
Accrued liabilities | ' | ' | ||||||||||||||||
As of March 31, 2014 and December 31, 2013, the Company has the following accrued liabilities: | 12/31/13 | 12/31/12 | ||||||||||||||||
Accrued Salaries and Wages | ||||||||||||||||||
3/31/14 | 12/31/13 | Accrued Salaries and Wages (a) | $ | 59,958 | $ | 516,083 | ||||||||||||
Accrued Salaries and Wages | ||||||||||||||||||
Accrued Salaries and Wages | $ | 72,815 | $ | 59,958 | Disputed Trade Payables | |||||||||||||
Disputed Trade Payables (b) | 925,000 | – | ||||||||||||||||
Disputed Trade Payables | ||||||||||||||||||
Disputed Trade Payables (a) | 925,000 | 925,000 | Accrued Expenses | |||||||||||||||
Allowance for Sales Returns | 43,000 | 53,000 | ||||||||||||||||
Services Advance | Distribution Arrangements Payable | 13,905 | 217,858 | |||||||||||||||
Services Advance (b) | 750,000 | – | Deferred Revenue | – | 110,177 | |||||||||||||
Royalties Payable | 9,638 | 59,033 | ||||||||||||||||
Accrued Expenses | Music Advances (c) | 450,000 | – | |||||||||||||||
Allowance for Sales Returns | 43,000 | 43,000 | Other Accrued Expenses | 187,996 | 56,594 | |||||||||||||
Distribution Arrangements Payable | 17,674 | 13,905 | Total Accrued Expenses | 704,539 | 496,662 | |||||||||||||
Deferred Revenue | 67,435 | – | ||||||||||||||||
Royalties Payable | 4,953 | 9,638 | Total Accrued Liabilities | $ | 1,689,497 | $ | 1,012,745 | |||||||||||
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 | 12 Months Ended | ||||||||||||||||||||||||||||||||||||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ' | ||||||||||||||||||||||||||||||||||||||
Stock Option Plan | ' | ' | ||||||||||||||||||||||||||||||||||||||
The following schedule summarizes the changes in the Company’s stock option plan during the three months ended March 31, 2014: | Options Outstanding Number | Exercise | Weighted Average Remaining | Aggregate | Weighted Average Exercise | |||||||||||||||||||||||||||||||||||
of | Price | Contractual | Intrinsic | Price | ||||||||||||||||||||||||||||||||||||
Options Outstanding | Exercise | Weighted Average Remaining | Aggregate | Weighted Average Exercise | Shares | per Share | Life | Value | per Share | |||||||||||||||||||||||||||||||
Number of | Price | Contractual | Intrinsic | Price | ||||||||||||||||||||||||||||||||||||
Shares | per Share | Life | Value | per Share | Balance at December 31, 2011 | 149,950 | $18.00 - 55.00 | 4.47 years | $ | – | $ | 43 | ||||||||||||||||||||||||||||
Options Granted | 11,050 | $6.00 – 50.00 | 5.18 years | 26 | ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2013 | 37,150 | $6.00 - 55.00 | 3.55 years | $ | – | $ | 32 | Options Exercised | – | – | - | – | ||||||||||||||||||||||||||||
Options Granted | – | Options Expired | (2,550 | ) | $18.00 – 55.00 | - | – | |||||||||||||||||||||||||||||||||
Options Exercised | – | Balance at December 31, 2012 | 158,450 | $6.00 – 55.00 | 3.55 years | $ | – | $ | 42 | |||||||||||||||||||||||||||||||
Options Expired | – | Options Granted | 41,000 | $20.00 – 44.00 | 4.35 years | 21 | ||||||||||||||||||||||||||||||||||
Balance at March 31, 2014 | 37,150 | $6.00 - 55.00 | 3.31 years | $ | – | $ | 32 | Options Exercised | – | – | - | – | ||||||||||||||||||||||||||||
Options Expired | (162,300 | ) | $6.00 – 55.00 | - | – | |||||||||||||||||||||||||||||||||||
Exercisable March 31, 2014 | 37,150 | $6.00 - 55.00 | 3.31 years | $ | – | $ | 32 | Balance at December 31, 2013 | 37,150 | $6.00 – 55.00 | 3.55 years | $ | – | $ | 32 | |||||||||||||||||||||||||
Exercisable December 31, 2013 | 37,150 | $6.00 - 55.00 | 3.41 years | $ | – | $ | 32 | |||||||||||||||||||||||||||||||||
Exercisable December 31, 2012 | 130,450 | $6.00 – 55.00 | 2.81 years | $ | – | $ | 41 | |||||||||||||||||||||||||||||||||
Exercisable December 31, 2013 | 37,150 | $6.00 – 55.00 | 3.41 years | $ | – | $ | 32 | |||||||||||||||||||||||||||||||||
Stock Options, Valuation Assumptions | ' | ' | ||||||||||||||||||||||||||||||||||||||
Risk-free interest rate | .64% - .89% | |||||||||||||||||||||||||||||||||||||||
Expected life in years | 5 | |||||||||||||||||||||||||||||||||||||||
Dividend yield | 0.00% | |||||||||||||||||||||||||||||||||||||||
Expected volatility | 59.15% - 67.62% | |||||||||||||||||||||||||||||||||||||||
Risk-free interest rate | 0.84% | |||||||||||||||||||||||||||||||||||||||
Expected life in years | 5 | |||||||||||||||||||||||||||||||||||||||
Dividend yield | 0.00% | |||||||||||||||||||||||||||||||||||||||
Expected volatility | 69.09% |
14_Lease_Commitments_Tables
14. Lease Commitments (Tables) | 3 Months Ended | 12 Months Ended | ||||||||
Mar. 31, 2014 | Dec. 31, 2013 | |||||||||
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 | $ | 136,245 | ||||||||
Year | Amount | 2015 | 45,860 | |||||||
2014 | $ | 102,852 | $ | 182,105 | ||||||
2015 | 45,860 | |||||||||
$ | 148,712 | |||||||||
8_Notes_Payable_December_2013_
8. Notes Payable (December 2013 Note) (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Debt Disclosure [Abstract] | ' | ||||||||
Black-Scholes valuation for the warrants | ' | ||||||||
As of June 27, 2012, the warrants were valued in the amount of $379,688, based on the Black-Scholes valuation using the following assumptions: | |||||||||
Risk-free interest rate | 0.73% | ||||||||
Expected life in years | 5 | ||||||||
Dividend yield | 0 | ||||||||
Expected volatility | 63.65% | ||||||||
As of June 27, 2012, the debt discount for the convertible feature of the debenture was valued in the amount of $269,284 using the Black-Scholes calculation with the following assumptions: | |||||||||
Risk-free interest rate | 0.31% | ||||||||
Expected life in years | 2 | ||||||||
Dividend yield | 0 | ||||||||
Expected volatility | 60.01% | ||||||||
On August 29, 2013, the date of assignment of the Debentures, a debt discount was recorded in the aggregate amount of $1,163,333 for the derivative value of the convertible feature of the Reissued Debenture upon the exchange date using the Black-Scholes calculation with the following assumptions: | |||||||||
Risk-free interest rate | 0.14% | ||||||||
Expected life in years | 0.83 | ||||||||
Dividend yield | 0 | ||||||||
Expected volatility | 63.22% | ||||||||
Notes payable and accrued interest | ' | ||||||||
12/31/13 | 12/31/12 | ||||||||
Notes Payable | |||||||||
Debenture - $1,000,000 16% senior secured convertible (a) | $ | – | $ | 1,000,000 | |||||
Debt Discount - $1,000,000 16% senior secured convertible (a) | – | (485,147 | ) | ||||||
Reissued Debenture - $1,163,333 16% senior secured convertible (a) | – | – | |||||||
Debt Discount - $1,163,333 16% senior secured convertible (a) | – | – | |||||||
Bridge Notes - 12% convertible (b) | – | – | |||||||
Total Notes Payable | – | 514,853 | |||||||
Less: Current Portion | – | – | |||||||
Long Term Portion | $ | – | $ | 514,853 | |||||
Accrued Interest | |||||||||
Debenture - $1,000,000 16% senior secured convertible issued June 27,2012 (a) | $ | – | $ | 26,667 | |||||
2006 Debenture - $2,500,000 Terminated July 2009 (c) | – | 19,049 | |||||||
Bridge Notes - $530,000 12% convertible issued August 30, 2013 (b) | – | – | |||||||
Accrued Interest | $ | – | $ | 45,716 |
9_Notes_Payable_and_Accrued_In
9. Notes Payable and Accrued Interest - Related Parties (December 2013 Note) (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Related Party Transactions [Abstract] | ' | ||||||||
Notes payable and accrued interest | ' | ||||||||
12/31/13 | 12/31/12 | ||||||||
Short-Term Debt and Notes Payable – Related Parties | |||||||||
Member Advances (a) | $ | 516,659 | $ | – | |||||
Officer Loans to Company (b) | – | 194,163 | |||||||
Subordinated Officer Loans to Company (c) | – | 159,753 | |||||||
Bridge Notes 12% Convertible (d) | – | – | |||||||
Total Short-Term Debt and Notes Payable | 516,659 | 353,916 | |||||||
Less: Current Portion | (516,659 | ) | – | ||||||
Long Term Portion | $ | – | $ | 353,916 | |||||
Accrued Interest – Related Parties | |||||||||
Officer Loans to Company (b) | $ | – | $ | 49,087 | |||||
Subordinated Officer Loans (c) | – | 44,888 | |||||||
Accrued Interest | $ | – | $ | 93,975 | |||||
10_Derivative_Valuation_Decemb1
10. Derivative Valuation (December 2013 Note) (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Derivative Valuation December 2013 Note Tables | ' | ||||||||||||
Derivative liability activity | ' | ||||||||||||
Warrants | Conversion Feature | Total | |||||||||||
Derivative Liability at December 31, 2011 | $ | – | $ | – | $ | – | |||||||
Liability on June 27, 2012 related to Issuances of Debt and Warrants | – | 269,284 | 269,284 | ||||||||||
Change in Fair Value at the End of the Year | 53,219 | (253,541 | ) | (200,322 | ) | ||||||||
Derivative Liability at December 31, 2012 | 53,219 | 15,743 | 68,962 | ||||||||||
Change in Fair Value related to Original Debenture prior to Cancellation of Warrants and Assignment of Debenture on August 29, 2013 | (13,708 | ) | (4,113 | ) | (17,821 | ) | |||||||
Elimination of Liability Due to Cancellation of Warrants and Reassignment of Debt on August 29, 2013 | (39,511 | ) | (11,630 | ) | (51,141 | ) | |||||||
Liability on August 29, 2013 related to Assignment of Debt | – | 5,077,705 | 5,077,705 | ||||||||||
Decrease in Liability on September 9, 2013 due to $75,000 Note Payable Conversion | – | (200,495 | ) | (200,495 | ) | ||||||||
Change in Fair Value Conversion date | – | (2,009,608 | ) | (2,009,608 | ) | ||||||||
Elimination of Liability on November 11, 2013 due to Full Conversion of Remaining Balance of $1,088,333 | – | (2,867,602 | ) | (2,867,602 | ) | ||||||||
Derivative Liability at December 31, 2013 | $ | – | $ | – | $ | – |
13_Warrants_December_2013_Note1
13. Warrants (December 2013 Note) (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Warrants and Rights Note Disclosure [Abstract] | ' | ||||||||||||
Schedule Of Stockholders Equity Warrants | ' | ||||||||||||
Number of Warrants | Exercise Price per Share | Weighted Average Exercise Price per Share | |||||||||||
Balance at December 31, 2011 | 4,712 | $ | 40 | $ | 40 | ||||||||
Warrants Granted | 53,810 | $ | 33 | $ | 33 | ||||||||
Warrants Exercised | – | ||||||||||||
Warrants Expired or Cancelled | – | ||||||||||||
Balance at December 31, 2012 | 58,522 | $ | 33.00 – 40.00 | $ | 34 | ||||||||
Warrants Granted | – | – | – | ||||||||||
Warrants Exercised | – | – | – | ||||||||||
Warrants Expired or Cancelled | (58,522 | ) | $ | 33.00 – 40.00 | $ | 34 | |||||||
Balance at December 31, 2013 | – | – | $ | – | |||||||||
Exercisable at December 31, 2012 | 58,522 | $ | 33.00 – 40.00 | $ | 34 | ||||||||
Exercisable at December 31, 2013 | – | $ | – | $ | – |
14_Income_Taxes_December_2013_
14. Income Taxes (December 2013 Note) (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||
Schedule of Deferred Tax Assets and Liabilities | ' | ||||||||
2013 | 2012 | ||||||||
Deferred tax assets: | |||||||||
NOL Carryover | $ | 3,252,200 | $ | 2,531,500 | |||||
Returns Reserve | 16,800 | 20,700 | |||||||
Inventory Reserve | 36,500 | 22,300 | |||||||
Accrued Related Party Interest | – | 36,700 | |||||||
Accrued Officer Compensation | – | 158,600 | |||||||
Accrued Compensated Absences | 14,800 | 38,100 | |||||||
Charitable Contributions | 1,300 | 1,900 | |||||||
Deferred tax liabilities: | |||||||||
Depreciation and Amortization | 80,100 | (58,700 | ) | ||||||
Valuation Allowance | (3,401,700 | ) | (2,751,100 | ) | |||||
Net deferred tax asset | $ | – | $ | – | |||||
Schedule of Effective Income Tax Rate Reconciliation | ' | ||||||||
2013 | 2012 | ||||||||
Book Loss | $ | (2,813,900 | ) | $ | (806,400 | ) | |||
Meals and Entertainment | 5,900 | 2,800 | |||||||
Stock Compensation for Services | 525,900 | 229,600 | |||||||
Stock issued for debt extinguishment | 1,762,000 | (66,800 | ) | ||||||
Related Party Interest | (12,500 | ) | (45,700 | ) | |||||
Accrued Compensated Absences | (23,300 | ) | 11,200 | ||||||
Accrued Officer Compensation | (158,600 | ) | 116,800 | ||||||
Returns Reserve | (3,900 | ) | (12,100 | ) | |||||
Inventory Reserve | 14,200 | 5,800 | |||||||
Depreciation and Amortization | 10,200 | 33,300 | |||||||
Valuation Allowance | 694,000 | 531,500 | |||||||
$ | – | $ | – |
19_Fair_Value_Measurements_Dec1
19. Fair Value Measurements (December 2013 Note) (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Fair Value Disclosures [Abstract] | ' | ||||||||||||||||
Assets and liabilities measured at fair value on a recurring basis | ' | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||||
Assets | $ | – | $ | – | $ | – | $ | – | |||||||||
Total assets measured at fair value | – | – | – | – | |||||||||||||
Liabilities | |||||||||||||||||
Derivative Liability | 68,962 | – | – | 68,962 | |||||||||||||
Convertible Debenture, net of discount | 514,853 | – | – | 514,853 | |||||||||||||
Total liabilities measured at fair value | $ | 583,815 | $ | – | $ | – | $ | 583,815 |
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 | Dec. 31, 2012 | ||
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 | $0 | |
[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 | 12 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | |
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 | 23,736 |
Depreciation expense | $12,470 | $2,595 | $13,730 | $11,056 |
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 | Dec. 31, 2012 |
Film And Television Costs And Capitalized Product Development In Process | ' | ' | ' |
Capitalized Product Development in Process | $67,030 | $54,575 | $145,398 |
Film and Television Costs | $89,819 | $0 | ' |
7_Goodwill_and_Intangible_Asse2
7. Goodwill and Intangible Assets, Net (Details) (USD $) | 3 Months Ended | 12 Months Ended | ||||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | |||
Less Accumulated Amortization | ($3,273,323) | [1] | ' | ($3,261,254) | [1] | ' |
Net Intangible Assets | 1,903,637 | ' | 1,865,706 | 356,070 | ||
Amortization expense | 12,069 | 36,577 | 146,924 | 138,767 | ||
Goodwill | 10,365,806 | ' | 10,365,806 | 0 | ||
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 | Dec. 31, 2012 | ||
Accrued Salaries and Wages | ' | ' | ' | ||
Accrued Salaries and Wages | $72,815 | $59,958 | ' | ||
Disputed Trade Payables | ' | ' | ' | ||
Disputed Trade Payables | 925,000 | [1] | 925,000 | [1] | 0 |
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 | 496,662 | ||
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 | Dec. 31, 2012 | |
Related Party Transactions [Abstract] | ' | ' | ' | ' |
Short Term Debt - Related Party | $415,787 | ' | $516,659 | $0 |
Imputed interest expense | $7,163 | $0 | ' | ' |
10_Stockholders_Equity_Details
10. Stockholders' Equity (Details Narrative) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 |
Common Stock, shares Authorized | 700,000,000 | 700,000,000 | 250,000,000 |
Common Stock, shares outstanding | 6,047,707 | 5,918,704 | 719,127 |
Preferred stock authorized | 10,000,000 | 10,000,000 | 10,000,000 |
Preferred stock par value | $0.00 | $0.00 | $0.00 |
Preferred Sock, Shares Issued | 0 | 0 | 0 |
Preferred Sock, Shares Outstanding | 0 | 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 | 12 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2012 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' | ' | ' | ' |
Stock Compensation Expense | $0 | $58,279 | $316,685 | $264,122 |
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 |