Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2015 | Nov. 16, 2015 | |
Document And Entity Information | ||
Entity Registrant Name | Genius Brands International, Inc. | |
Entity Central Index Key | 1,355,848 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2015 | |
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 | 10,859,450 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,015 |
Consolidated Balance Sheets (un
Consolidated Balance Sheets (unaudited) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | |
Current Assets: | |||
Cash and Cash Equivalents | $ 2,147,931 | $ 4,301,099 | |
Accounts Receivable, net | 263,916 | 208,486 | |
Inventory, net | 14,046 | 11,691 | |
Prepaid and Other Assets | 191,565 | 217,622 | |
Total Current Assets | 2,617,458 | 4,738,898 | |
Property and Equipment, net | 166,773 | 32,420 | |
Film and Television Costs | 903,634 | 303,953 | |
Capitalized Product Development in Process | 0 | 7,500 | |
Intangible Assets, net | 1,937,337 | 1,876,438 | |
Goodwill | 10,365,805 | 10,365,805 | |
Investment in Stan Lee Comics, LLC | 0 | 0 | |
Total Assets | 15,991,007 | 17,325,014 | |
Current Liabilities: | |||
Accounts Payable | 346,320 | 312,728 | |
Accrued Expenses | 409,512 | 283,582 | |
Deferred Revenue and Advances | 290,999 | 242,160 | |
Accrued Salaries and Wages | 85,620 | 50,288 | |
Disputed Trade Payable | 925,000 | [1] | 925,000 |
Short Term Debt - Related Party | 411,521 | 411,008 | |
Total Current Liabilities | 2,468,972 | 2,224,766 | |
Long Term Liabilities: | |||
Deferred Revenue and Advances | 715,598 | 640,417 | |
Services Advance | 1,489,583 | 739,583 | |
Total Liabilities | 4,674,153 | 3,604,766 | |
Stockholders' Equity | |||
Preferred Stock, $0.001 par value, 10,000,000 share authorized, respectively; 5,690 and 6,000 shares issued and outstanding, respectively | 6 | 6 | |
Common Stock, $0.001 par value, 700,000,000 shares authorized, respectively; 6,529,450 and 6,374,450 shares issued and outstanding, respectively | 6,530 | 6,375 | |
Additional Paid in Capital | 34,884,910 | 34,866,521 | |
Accumulated Deficit | (23,574,592) | (21,152,654) | |
Total Equity | 11,316,854 | 13,720,248 | |
Total Liabilities and Stockholders' Equity | $ 15,991,007 | $ 17,325,014 | |
[1] | As part of the Merger, the Company assumed certain liabilities from a previous member of A Squared which has claimed certain liabilities totaling $925,000. The Company disputes the basis for this liability. |
Consolidated Balance Sheets (u3
Consolidated Balance Sheets (unaudited) (Parenthetical) - $ / shares | Sep. 30, 2015 | Dec. 31, 2014 |
Statement of Financial Position [Abstract] | ||
Preferred Stock, par value | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Stock, Shares Issued | 5,690 | 6,000 |
Preferred Stock, Shares Outstanding | 5,690 | 6,000 |
Common Stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 700,000,000 | 700,000,000 |
Common Stock, shares issued | 6,529,450 | 6,374,450 |
Common Stock, shares outstanding | 6,529,450 | 6,374,450 |
Consolidated Statements of Oper
Consolidated Statements of Operations (unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Revenues: | ||||
Licensing & Royalties | $ 98,035 | $ 53,774 | $ 372,022 | $ 155,341 |
Television & Home Entertainment | 182,715 | 25,635 | 323,804 | 112,910 |
Product Sales | 0 | 239,392 | 15,173 | 444,028 |
Total Revenues | 280,750 | 318,801 | 710,999 | 712,279 |
Cost of Sales | 23,127 | 172,870 | 45,699 | 414,017 |
Gross Profit | 257,622 | 145,931 | 665,300 | 298,262 |
Operating Expenses: | ||||
Professional Services | 244,803 | 202,154 | 549,702 | 822,997 |
Rent Expense | 34,136 | 34,863 | 106,271 | 105,207 |
Marketing & Sales | 91,258 | 109,592 | 342,318 | 234,286 |
Amortization of Film and TV Costs | 42,642 | 0 | 42,642 | 0 |
Depreciation & Amortization | 36,673 | 29,673 | 96,823 | 83,301 |
Salaries and Related Expenses | 429,348 | 442,760 | 1,414,746 | 1,003,234 |
Bad Debt Expense (Recovery) | 0 | 0 | (1,550) | 55,000 |
Other General & Administrative | 133,388 | 191,774 | 581,774 | 605,454 |
Total Operating Expenses | 1,012,247 | 1,010,816 | 3,132,726 | 2,909,479 |
Loss from Operations | (754,624) | (864,885) | (2,467,426) | (2,611,217) |
Other Income (Expense): | ||||
Other Income | 11,421 | 22,156 | 16,965 | 29,945 |
Interest Expense | (723) | 0 | (2,212) | (2,230) |
Interest Expense - Related Parties | (6,224) | (6,241) | (18,544) | (19,611) |
Gain (Loss) on Distribution Contracts | (47,650) | 0 | 102,350 | (47,229) |
Gain (Loss) on Impairment of Assets | 0 | 0 | (7,500) | 0 |
Gain (Loss) on Extinguishment of Debt | 0 | 0 | 0 | 52,447 |
Gain (Loss) on Disposition of Assets | 0 | 0 | 0 | (70,905) |
Gain (Loss) on Inventory | 0 | 0 | 0 | (174,963) |
Gain (Loss) on Deferred Financing Costs | 0 | 0 | (9,313) | 0 |
Gain (Loss) on Foreign Currency Translation | (20) | 0 | (36,258) | 0 |
Net Other Income (Expense) | (43,196) | 15,915 | 45,488 | (232,546) |
Loss before Income Tax Expense | (797,820) | (848,970) | (2,421,938) | (2,843,763) |
Income Tax Expense | 0 | 0 | 0 | 0 |
Net Loss | $ (797,820) | $ (848,970) | $ (2,421,938) | $ (2,843,763) |
Net Loss per common share | $ (.12) | $ (.13) | $ (.37) | $ (.46) |
Weighted average shares outstanding | 6,529,450 | 6,383,450 | 6,464,505 | 6,129,391 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Cash Flows from Operating Activities: | ||
Net Loss | $ (2,421,938) | $ (2,843,763) |
Adjustments to reconcile net loss to net cash provided in operating activities: | ||
Depreciation Expense | 46,501 | 37,774 |
Amortization Expense | 50,322 | 45,527 |
Imputed Interest Expense | 18,544 | 19,611 |
Bad Debt Expense | (1,550) | 55,000 |
Prepaid Consulting Services Expense | 0 | 280,482 |
(Gain) Loss on Distribution Contracts | (102,350) | 47,229 |
(Gain) Loss on Deferred Financing Costs | 9,313 | 0 |
(Gain) Loss on Impairment of Assets | 7,500 | 70,905 |
(Gain) Loss on Foreign Currency Translation | 36,258 | 0 |
(Gain) Loss on Settlement of Accounts Payable | 0 | (52,447) |
(Gain) Loss on Inventory | 0 | 174,963 |
Decrease (Increase) in Operating Assets: | ||
Accounts Receivable | 18,612 | 495,522 |
Inventory | (2,355) | 28,226 |
Prepaid Expenses & Other Assets | 16,744 | 138,295 |
Film and Television Costs, net | (599,681) | (156,592) |
Increase (Decrease) in Operating Liabilities: | ||
Accounts Payable | (14,059) | (448,708) |
Accrued Salaries | 35,332 | 59,800 |
Deferred Revenue and Advances | 165,270 | 432,648 |
Other Accrued Expenses | 125,930 | (9,392) |
Net Cash Used in Operating Activities | (2,611,607) | (1,624,920) |
Cash Flows from Investing Activities: | ||
Investment in Intangible Assets | (111,221) | (70,000) |
Investment in Fixed Assets | (180,853) | (3,151) |
Investment in Capitalized Product Development | 0 | (16,330) |
Net Cash Used in Investing Activities | (292,074) | (89,481) |
Cash Flows from Financing Activities: | ||
Sale of Preferred Stock, net of offering costs | 0 | 6,000,000 |
Sale of Common Stock, net of offering costs | 0 | 360,000 |
Proceeds from Services Advance | 750,000 | 750,000 |
Repayment of Services Advance | 0 | (10,117) |
Proceeds of Related Party Notes | 513 | 0 |
Payments of Related Party Notes | 0 | (105,017) |
Common Stock Offering Costs | 0 | (4,884) |
Preferred Stock Offering Costs | 0 | (620,085) |
Debt Issuance Cost | 0 | (15,000) |
Net Cash Provided by Financing Activities | 750,513 | 6,354,897 |
Net Increase (Decrease) in Cash and Cash Equivalents | (2,153,168) | 4,640,496 |
Beginning Cash and Cash Equivalents | 4,301,099 | 527,110 |
Ending Cash and Cash Equivalents | 2,147,931 | 5,167,606 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash Paid for Income Taxes | 0 | 0 |
Cash Paid for Interest | 1,076 | 2,230 |
Schedule of Non-Cash Financing and Investing Activities: | ||
Common Stock Issued as Settlement for Accounts Payable | 0 | 32,572 |
Common Stock Issued for Prepaid Services | $ 0 | $ 113,998 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - 9 months ended Sep. 30, 2015 - USD ($) | Common Stock | Preferred Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, shares at Dec. 31, 2014 | 6,374,450 | 6,000 | |||
Beginning balance, value at Dec. 31, 2014 | $ 6,375 | $ 6 | $ 34,866,520 | $ (21,152,654) | $ 13,720,248 |
Conversion of preferred shares, common stock issued | 155,000 | (310) | |||
Conversion of preferred, value of common stock issued | $ 155 | (155) | |||
Conversion of preferred shares, value converted | 18,544 | 18,544 | |||
Net Loss | (2,421,938) | (2,421,938) | |||
Ending balance, shares at Sep. 30, 2015 | 6,529,450 | 5,690 | |||
Ending balance, value at Sep. 30, 2015 | $ 6,530 | $ 6 | $ 34,884,910 | $ (23,574,592) | $ 11,316,854 |
1. Organization and Business
1. Organization and Business | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Organization and Business | Organization and Nature of Business Genius Brands International, Inc. (we, us, our, GBI or the Company) is a global content and brand management company dedicated to providing entertaining and enriching content and products with a purpose for toddlers to tweens. Led by industry veterans Andrew Heyward (Chief Executive Officer) and Amy Moynihan Heyward (President), the Company produces original content and licenses the rights to that content to a variety of partners. Our licensees include (i) companies to which the audio-visual rights are licensed for exhibition in various formats, including but not limited to, Pay Television, Free or Broadcast Television, Video-on-Demand (VOD), subscription on demand (SVOD), DVDs/CDs and (ii) companies that develop and distribute products based on our content within different product categories, includimg but not limited to, toys, electronics, publishing, home goods, stationary, gifts. The Company owns a portfolio of original childrens entertainment that is targeted at children from toddlers to teens including the award-winning Baby Genius, Secret Millionaires Club, Thomas Edison's Secret Lab Stan Lee's Mighty 7 Stan Lee Comics, LLC In addition to the Companys wholly-owned brands, it also acts as licensing agent for certain brands, leveraging its existing licensing infrastructure to expand these brands into new product categories, new retailers, and new territories. These include the best-selling childrens book series, Llama Llama Psycho Bunny From Frank Celessence Technologies Consistent with the Companys strategy of securing widespread distribution for its content in a variety of formats and building awareness and engagement for its brands that in turn drives its consumer products business, the Company has expanded its successful relationship with Comcast beyond the already popular Baby Genius The Company commenced operations in January 2006, assuming all of the rights and obligations of its then Chief Executive Officer, 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. In October 2011, 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, the Company changed its trading symbol from PENT to GNUS. 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, its 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, the 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 April 2, 2014, the Company filed a certificate of amendment to its Articles of Incorporation to affect a reverse split of its 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 (the Reverse Split). All per share amounts referenced herein are reflective of the Reverse Split. Strategic Initiatives During 2014, the Company began a series of strategic initiatives to restructure certain areas of business in an effort to operate more profitably in the long run. This included product sales, content distribution, production, and product development: 1) During the second quarter of 2014, the Company began phasing out the direct production and sale of physical products including DVDs and CDs and shifted to a licensing model whereby these functions were outsourced to industry experts and category leaders in their respective industries. On July 14, 2014, the Company employed Stone Newman in the newly created position of President - Global Consumer Products to manage all consumer products, licensing and merchandising sales for the Companys brands. 2) Prior to the third quarter of 2014, the Company utilized an agency to license its content to international television broadcasters, home video, and digital distribution outlets. To exert greater control over the distribution of its expanding portfolio of content, during the second quarter of 2014, the Company formed a new global distribution division and appointed Andrew Berman to the newly created position of Senior Vice President - International Sales to oversee the division and the appointment of regional agents to represent the Company locally in key regions. 3) During the third and fourth quarter of 2014, the Company partnered with various pre-production, production, and animation companies to provide services to the Company for the production of Thomas Edisons Secret Lab 4) The infrastructure the Company has put in place enables it to efficiently exploit a growing portfolio of brands. The Company is actively developing a number of new brands to add to its growing portfolio and consistently looks for existing brands to acquire or act as licensing agent, as with the best-selling line of books, Llama Llama Liquidity Historically, the Company has incurred net losses. As of September 30, 2015, the Company had an accumulated deficit of $23,574,592 and a total stockholders equity of $11,316,854 At September 30, 2015, the Company had current assets of $2,617,458 including cash of $2,147,931 and current liabilities of $2,468,972, including short-term debt to related parties which bears no interest and has no stated maturity of $411,521 and certain trade payables of $925,000 to which the Company disputes the claim, resulting in working capital of $148,486. For the nine months ended September 30, 2015 and 2014, the Company reported a net loss of $2,421,938 and $2,843,763, respectively, and reported net cash used by operating activities during nine months ended September 30, 2015 of $2,611,607. During the nine months ended September 30, 2015, the Company received $750,000 in proceeds from the second payment of its long term supply chain services agreement. While the Company believes that these funds plus its working capital will be sufficient to fund operations for the next twelve months, there can be no assurance that cash flows from operations will continue to improve in the near future. If the Company is unable to attain profitable operations and positive operating cash flows in a reasonable period of time, it may need to (i) seek additional funding, (ii) scale back its development plans, or (iii) reduce certain operations. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Cash Equivalents The Company considers all highly liquid debt instruments with initial maturities of six months or less to be cash equivalents. Reverse Stock Split On April 2, 2014, we effected the Reverse Split which was deemed effective with FINRA on April 7, 2014. All common stock share and per share information in this Form 10-Q, including the accompanying consolidated financial statements and notes thereto, have been adjusted to reflect retrospective application of the Reverse Split, unless otherwise indicated. Business Combination On November 15, 2013, the Company entered into the Merger Agreement with A Squared, the Member, and the 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. The audited financial statements have been prepared using the acquisition method of accounting in accordance with FASB Accounting Standards Codification (ASC) 805 Business Combinations. See Note 3 - Business Combination for additional information. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Genius Brands International, Inc. and its wholly owned subsidiary A Squared. All significant inter-company balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Financial Statement Reclassification Certain account balances from prior periods have been reclassified in these unaudited consolidated financial statements so as to conform to current period classifications. Allowance for Sales Returns An Allowance for Sales Returns is estimated based on average sales during the previous year. Based on experience, sales growth, and our customer base, the Company concluded that the allowance for sales returns at September 30, 2015 and December 31, 2014 should be $44,108 and $45,582, 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 $53,338 and $54,673 established as of September, 2015 and December 31, 2014. 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 two to seven 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 any dispositions of property and equipment are reflected in the statement of operations. Goodwill and Intangible Assets Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired in business combinations accounted for by the purchase method. In accordance with ASC 350 Intangibles Goodwill and Other, goodwill and certain intangible assets are presumed to have indefinite useful lives and are thus not amortized, but subject to an impairment test annually or more frequently if indicators of impairment arise. The Company completes the annual goodwill and indefinite-lived intangible asset impairment tests at the end of each fiscal year. To test for goodwill impairment, we are required to estimate the fair market value of each of our reporting units, of which we have one. While we may use a variety of methods to estimate fair value for impairment testing, our primary methods are discounted cash flows. We estimate future cash flows and allocations of certain assets using estimates for future growth rates and our judgment regarding the applicable discount rates. Changes to our judgments and estimates could result in a significantly different estimate of the fair market value of the reporting units, which could result in an impairment of goodwill of indefinite lived intangible assets in future periods. Other intangible assets have been acquired, either individually or with a group of other assets, and were initially recognized and measured based on fair value. Additionally, the Company 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. Annual amortization of these intangible assets is computed based on the straight-line method over the remaining economic life of the asset. Films and Televisions Costs 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. Revenue Recognition The Company recognized revenue related to product sales when (i) the sellers price is substantially fixed, (ii) shipment has occurred causing the buyer to be obligated to pay for product, (iii) the buyer has economic substance apart from the seller, and (iv) there is no significant obligation for future performance to directly bring about the resale of the product by the buyer as required by ASC 605 Revenue Recognition. Revenues associated with the sale of products are recorded when shipped to customers pursuant to approved customer purchase orders resulting in the transfer of title and risk of loss. Cost of sales, rebates and discounts are recorded at the time of revenue recognition or at each financial reporting date. The Company recognizes revenue in accordance with ASC 926-605 Entertainment-Films - Revenue Recognition. Accordingly, the Company recognizes revenue when (i) persuasive evidence of a sale with customer exists, (ii) the film is complete and has been delivered or is available for delivery, (iii) the license period of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale, (iv) the arrangement fee is fixed or determinable, and (v) collection of the arrangement fee is reasonably assured. For its distribution, TV, and home entertainment income the Company generally enters in to flat fee arrangements to deliver multiple films or episodes. The Company allocates revenue to each film or episode based on their relative fair market values and recognizes revenue as each film or episode is complete and available for delivery. The Companys 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 Companys revenue is its gross billings to its customers less the amounts it pays to suppliers for their products and services. Earnings Per Share Basic earnings (loss) per common share (EPS) is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated by dividing net income (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. 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 managements best estimate of the amount of such deferred tax assets that more likely than not will be realized. 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. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In April 2014, the FASB issued Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08), which raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the new definition of a discontinued operation. It also allows an entity to present a discontinued operation even when it has continuing cash flows and significant continuing involvement with the disposed component. The amendments in ASU 2014-08 are effective prospectively for disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: identify the contract(s) with a customer; identify the performance obligations in the contract; determine the transaction price; allocate the transaction price to the performance obligations in the contract; and recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 supersedes the revenue recognition requirements in Accounting Standards Codification Topic No. 605, Revenue Recognition, most industry-specific guidance throughout the industry topics of the accounting standards codification, and some cost guidance related to construction-type and production-type contracts. ASU 2014-09 is effective for public entities for annual periods and interim periods within those annual periods beginning after December 15, 2016. Early adoption is not permitted. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In June 2014, the FASB issued Accounting Standards Update No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (ASU 2014-12). The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification Topic No. 718, Compensation - Stock Compensation (ASC 718), as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in ASU 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in ASU 2014-12 either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. Various other accounting pronouncements have been recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific industries, and are not expected to have a material effect on our financial position, results of operations, or cash flows. |
3. Business Combination
3. Business Combination | 9 Months Ended |
Sep. 30, 2015 | |
Business Combinations [Abstract] | |
Business Combination | Overview On November 15, 2013, the Company entered into the Merger Agreement with A Squared and Acquisition Sub. Upon closing of the Merger, which occurred concurrently with entering into the Merger Agreement, our Acquisition Sub merged with and into A Squared, and A Squared, as the surviving entity, became a wholly-owned subsidiary of the Company. As a result of the Merger, the Company acquired the business and operations of A Squared. Immediately following the Merger, the Companys pre-Merger shareholders and option holders owned approximately 50% of the Companys common stock on a fully-diluted basis, and former A Squared members directly and indirectly owned approximately 50% of the Companys common stock on a fully diluted basis. Pursuant to the terms and conditions of the Merger: · At the closing of the Merger, the membership interests of A Squared issued and outstanding immediately prior to the closing of the Merger were cancelled, and the Parent Member received 2,972,183 shares of our common stock. · Upon the closing of the Merger, Klaus Moeller resigned as the Companys Chief Executive Officer and Chairman, Larry Balaban resigned as the Companys Corporate Secretary, and Howard Balaban resigned as the Companys Vice President of Business Development. Simultaneously with the effectiveness of the Merger, Andrew Heyward was appointed as the Companys Chief Executive Officer, Amy Moynihan Heyward was appointed as the Companys President and Gregory Payne was appointed as the Companys Corporate Secretary. Mr. Moeller remained a director of the Company until his subsequent resignation on May 15, 2014. · Effective upon the Companys meeting its information obligations under the Securities Exchange Act of 1934, as amended (the Exchange Act), Michael Meader, Larry Balaban, Howard Balaban and Saul Hyatt resigned as directors of the Company, and Andrew Heyward, Amy Moynihan Heyward, Lynne Segall, Jeffrey Weiss, Joseph Gray Davis, William McDonough and Bernard Cahill were appointed as directors of the Company. On December 9, 2013, these changes to the Board of Directors were made effective. Accounting Treatment Although the transaction was structured as a merger of equals, the merger was 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 Companys equity as consideration for the merger, the relative size of the pre-merger assets and revenue bases with the Company holding a significantly larger asset and revenue base as compared to A Squared, and the fact that the Company paid a premium over the pre-combination fair value of A Squared. Purchase Price Allocation The following table summarizes the final purchase accounting for the fair value of the assets acquired and liabilities assumed at the date of the Merger: Allocated Fair Value Cash $ 283,199 Accounts Receivable 89,398 Prepaid Expenses and Other Assets 145,574 Property and equipment, net 75,385 Identifiable artistic-related intangible assets (a) 1,740,000 Total assets acquired 2,333,556 Accounts Payable (404,757 ) Accrued Expenses (450,000 ) Short Term Debt - Related Party (516,966 ) Disputed Trade Payable (925,000 ) Total liabilities assumed (2,296,723 ) Net assets acquired 36,833 Consideration (b) 10,402,638 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. (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. |
4. Investment in Stan Lee Comic
4. Investment in Stan Lee Comics, LLC | 9 Months Ended |
Sep. 30, 2015 | |
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 Comics Publications, Inc. (Archie), a New York corporation, to create, produce, and distribute comic books and other intellectual property based on exclusive properties created by Stan Lee and owned by POW. 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 Upon closing of the Merger, the Company assumed the rights to Stan Lee Comics, LLC held by A Squared. Pursuant to ASC 323-30, as of September 30, 2015, the Company has recorded the Investment in Stan Lee Comics, LLC at $0 as no monetary consideration was paid by A Squared, or assumed by the Company in the Merger, for the ownership interest in Stan Lee Comics, LLC. |
5. Inventory
5. Inventory | 9 Months Ended |
Sep. 30, 2015 | |
Inventory | |
Inventory | During the second quarter of 2014, the Company began a strategic initiative to restructure its product sales business by phasing out the direct sale of physical products including DVDs and CDs and shifting to a licensing model. On July 14, 2014, the Company employed Stone Newman in the newly created position of President - Worldwide Consumer Products to manage all consumer products, licensing and merchandising sales and rights for the Companys brands and programming. As of September 30, 2015 and December 31, 2014, the Company had recorded a total reserve of $53,338 and $54,673, respectively. In addition to nominal changes to the reserve made during the normal course of business, during the second quarter of 2014, the Company determined that a portion of its inventory may not be saleable and recorded an additional reserve of $174,963 which was recorded as a loss on inventory. Finally, during the fourth quarter of 2014, the Company donated certain inventory that had already been reserved for at which time the inventory was written off. |
6. Property and Equipment, Net
6. Property and Equipment, Net | 9 Months Ended |
Sep. 30, 2015 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | The Company has property and equipment as follows as of September 30, 2015 and December 31, 2014: 9/30/2015 12/31/2014 Furniture and Equipment $ 12,385 $ 12,385 Computer Equipment 34,678 36,649 Leasehold Improvements 176,903 99,778 Software 15,737 15,737 Less Accumulated Depreciation (72,930 ) (132,129 ) Property and Equipment, Net $ 166,773 $ 32,420 During the nine months ended September 30, 2015 and 2014, the Company recorded depreciation expense of $46,500 and $37,774, respectively. |
7. Film and Television Costs an
7. Film and Television Costs and Capitalized Product Development in Process | 9 Months Ended |
Sep. 30, 2015 | |
Film And Television Costs And Capitalized Product Development In Process | |
Film and Television Costs and Capitalized Product Development in Process | As of September 30, 2015, the Company had Film and Television Costs of $903,634 compared to $303,953 at December 31, 2014. The increase relates to the development and production of episodes of Thomas Edisons Secret Lab Space Pop As of September 30, 2015, the Company had Capitalized Product Development in Process of $0 compared to $7,500 as of December 31, 2014. During the nine months ended September 30, 2015, the Company fully impaired these assets. |
8. Goodwill and Intangible Asse
8. Goodwill and Intangible Assets, Net | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets, Net | Goodwill 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. Through September 30, 2015, the Company has not recognized any impairment related to Goodwill. Intangible Assets, Net The Company had following intangible assets as of September 30, 2015 and December 31, 2014: 9/30/2015 12/31/2014 Identifiable artistic-related assets (a) $ 1,740,000 $ 1,740,000 Trademarks (b) 129,831 129,831 Product Masters (b) 64,676 3,257,129 Other Intangible Assets (b) 181,220 70,000 Less Accumulated Amortization (c) (178,390 ) (3,320,522 ) Intangible Assets, Net $ 1,937,337 $ 1,876,438 (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 and are tested annually for impairment. Through September 30, 2015, the Company has not recognized any impairment expense related to these assets. (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. During the six months ended September 30, 2015 and 2014, the Company did not recognize any impairment of these assets. (c) During the nine months ended September 30, 2015 and 2014, the Company recognized $50,322 and $45,527, respectively, in amortization expense related to these intangible assets. Expected future intangible asset amortization as of September 30, 2015 is as follows: Fiscal Year: 2015 $ 34,835 2016 38,596 2017 17,180 2018 8,655 2019 8,655 Total $ 107,921 |
9. Deferred Revenue and Advance
9. Deferred Revenue and Advances | 9 Months Ended |
Sep. 30, 2015 | |
Deferred Revenue Disclosure [Abstract] | |
Deferred Revenue and Advances | As of September 30, 2015 and December 31, 2014, the Company had deferred revenue and advances of $ |
10. Accrued Liabilities
10. Accrued Liabilities | 9 Months Ended |
Sep. 30, 2015 | |
Payables and Accruals [Abstract] | |
Accrued Liabilities | As of September 30, 2015 and December 31, 2014, the Company has the following accrued liabilities: 9/30/2015 12/31/2014 Accrued Salaries and Wages Accrued Salaries and Wages $ 85,620 $ 50,288 Disputed Trade Payables Disputed Trade Payables (a) 925,000 925,000 Services Advance Services Advance (b) 1,489,583 739,583 Accrued Expenses Other Accrued Expenses 409,512 283,582 Total Accrued Liabilities $ 2,909,715 $ 1,998,453 (a) As part of the Merger, the Company assumed certain liabilities from a previous member of A Squared which has claimed certain liabilities totaling $925,000. The Company disputes the basis for this liability. (b) During the first quarter of 2014, the Company entered into an exclusive three year 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 Internationals 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 received a total of $1,500,000, $750,000 during the first quarter of 2014 and $750,000 during the first quarter of 2015. At the end of the term, the Company is obligated to repay a pro-rata portion of the advance if it has not ordered a minimum number of DVD/CD units during the term. |
11. Short Term Debt - Related P
11. Short Term Debt - Related Parties | 9 Months Ended |
Sep. 30, 2015 | |
Debt Disclosure [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 Companys current Chief Executive Officer, Andrew Heyward. As of September 30, 2015, these advances totaled $411,521, compared to $411,008 as of December 31, 2014. 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 nine months ended September 30, 2015 and 2014, the Company recognized imputed interest expense of $18,544 and $19,611 as a contribution to additional paid-in capital, respectively. |
12. Stockholders' Equity
12. Stockholders' Equity | 9 Months Ended |
Sep. 30, 2015 | |
Equity [Abstract] | |
Stockholders' Equity | Common Stock 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 to approve certain corporate actions. Stockholders, representing at least a majority of outstanding shares of the Companys voting capital as of the record date voted by written consent to approve an amendment to the Companys Article of Incorporation in order to increase the number of common stock authorized to 700,000,000 from 250,000,000. As of September 30, 2015 and December 31, 2014, 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 Companys voting capital as of the record date, also voted by written consent to approve a proposal to effect the Reverse Split of the Companys 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 such ratio and at such time in 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. On April 2, 2014, we filed an amendment to our Articles of Incorporation to effect the Reverse Split on a one-for-one hundred basis. The Reverse Split was effective with FINRA on April 7, 2014. All common stock share and per share information in this Form 10-Q, including the accompanying consolidated financial statements and notes thereto, have been adjusted to reflect retrospective application of the Reverse Split, unless otherwise indicated. The total number of authorized shares of common stock was not adjusted in conjunction with the Reverse Split. As of September 30, 2015 and December 31, 2014, there were 6,529,450 and 6,374,450 shares of common stock issued and outstanding. Preferred Stock 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. On May 12, 2014, the Board of Directors authorized the designation of a class of preferred stock as Series A Convertible Preferred Stock. On May 14, 2014, the Company filed the Certificate of Designation, Preferences and Rights of the 0% Series A Convertible Preferred Stock with the Secretary of State of the State of Nevada. Each share of the newly designated Series A Preferred Stock is convertible into shares of the Companys 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% in the aggregate of the issued and outstanding shares of the Companys common stock, calculated immediately after giving effect to the issuance of shares of common stock upon conversion of the Series A Preferred Stock. Holders of our outstanding shares of Series A Preferred Stock are entitled to vote on an as converted basis with the holders of common stock, equal to the number of shares of common stock into which such shares of Series A Preferred Stock are convertible, but not in excess of any applicable beneficial ownership limitations governing such shares. On May 14, 2014, we entered into securities purchase agreements with certain accredited investors pursuant to which we sold an aggregate of 6,000 shares of our newly designated Series A Convertible Preferred Stock at a price of $1,000 per share for gross proceeds to us of $6,000,000. Related to the sale, we incurred offering costs of $620,085 resulting in net proceeds of $5,379,915. The closing of the transaction was subject to certain customary closing conditions and closed on May 15, 2014. On various dates during the nine months ended September 30, 2015, the Company received notices of conversion from certain preferred stock holders to convert 310 shares of Series A Convertible Preferred Stock into 155,000 shares of the Companys common stock. On various dates subsequent to September 30, 2015, the Company received notices of conversion from certain preferred stock holders to convert 310 shares of Series A Convertible Preferred Stock into 155,000 shares of the Companys common stock. As of September 30, 2015 and December 31, 2014, 5,690 and 6,000 shares of preferred stock, designated as Series A Convertible Preferred Stock, were issued and outstanding. |
13. Stock Options
13. Stock Options | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Options | The Company has adopted the provisions of ASC 718 - Compensation which requires companies to measure the cost of employee services received in exchange for equity instruments based on the grant date fair value of those awards and to recognize the compensation expense over the requisite service period during which the awards are expected to vest. On December 29, 2008, the Company adopted the Pacific Entertainment Corporation 2008 Stock Option Plan (the 2008 Plan), which provides for the issuance of qualified and non-qualified stock options to officers, directors, employees and other qualified persons. The 2008 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 Companys common stock initially reserved for issuance under the 2008 Plan was 110,000. On September 2, 2011, the shareholders holding a majority of the Companys outstanding common stock adopted an amendment to the 2008 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 2008 Plan during the nine months ended September 30, 2015: Options Outstanding Exercise Weighted Average Remaining Aggregate Weighted Average Exercise Number of Price Contractual Intrinsic Price Shares per Share Life Value per Share Balance at December 31, 2014 350 $6.00 - 33.60 2.29 years $ $ 15.09 Options Granted Options Exercised Options Cancelled (350 ) Balance at September 30, 2015 $ $ Exercisable December 31, 2014 350 $6.00 - 33.60 2.29 years $ $ 15.09 Exercisable September 30, 2015 $ $ $ The Company did not recognize any stock based compensation expense during the nine months ended September 30, 2015 or 2014. |
14. Warrants
14. Warrants | 9 Months Ended |
Sep. 30, 2015 | |
Warrants and Rights Note Disclosure [Abstract] | |
Warrants | The Company has warrants outstanding to purchase up to 300,000 shares of our common stock at September 30, 2015 and December 31, 2014. In connection with the sale of the Companys newly designated Series A Convertible Preferred Stock in May 2014, Chardan Capital Markets LLC (Chardan) acted as sole placement agent in consideration for which Chardan received a cash fee of $535,000 and a warrant to purchase up to 300,000 shares of the Companys common stock. These warrants vested immediately, have an exercise price of $2.00 per share, and have a five year term. The following schedule summarizes the changes in the Companys outstanding warrants during the nine months ended September 30, 2015: Warrants Outstanding Exercise Weighted Average Remaining Aggregate Weighted Average Exercise Number of Price Contractual Intrinsic Price Shares per Share Life Value per Share Balance at December 31, 2014 300,000 $ 2.00 4.37 years $ 2.00 Warrants Granted Warrants Exercised Warrants Expired Balance at September 30, 2015 300,000 $ 2.00 3.88 years $ 0 $ 2.00 Exercisable December 31, 2014 300,000 $ 2.00 4.37 years $ 2.00 Exercisable September 30, 2015 300,000 $ 2.00 3.88 years $ 0 $ 2.00 |
15. Income Taxes
15. Income Taxes | 9 Months Ended |
Sep. 30, 2015 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | The Company accounts for income taxes in accordance with ASC 740 Income Taxes, 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. ASC 740 provides guidance on the accounting for uncertainty in income taxes recognized in a companys financial statements. ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. At the adoption date of January 1, 2008, the Company had no unrecognized tax benefit which would affect the effective tax rate if recognized. The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operation in the provision for income taxes. As of September 30, 2015 and December 31, 2014, 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. |
16. Employment Agreements
16. Employment Agreements | 9 Months Ended |
Sep. 30, 2015 | |
Employment Agreements | |
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 receives an annual base salary of $200,000 and $180,000, respectively. Effective May 26, 2014, the Company entered into an employment agreement with Andrew Berman for the newly created position of Senior Vice President - International Sales. The agreement has a one year term with an additional one year term renewal subject to approval of the Company and Mr. Berman. The agreement provides for an annual salary of $175,000. Effective July 14, 2014, the Company employed Stone Newman in the newly created operating position of President - Worldwide Consumer Products and executed a three-year employment agreement which either party may terminate on the 12th and 24th month anniversary upon thirty (30) days notice. Mr. Newman will have oversight over all consumer products, licensing and merchandising sales and rights for the Companys brands and programming as well as certain brands he previously managed prior to his employment by the Company. The agreement provides Mr. Newman with an annual salary of $275,000 plus an additional participation for certain customers. |
17. Lease Commitments
17. Lease Commitments | 9 Months Ended |
Sep. 30, 2015 | |
Leases [Abstract] | |
Lease Commitments | As of December 31, 2014, the Company leased 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 had a term of 3 years, from May 1, 2012 through April 30, 2015. The monthly rent was $10,807 which was to be adjusted upward 3% each year on the anniversary of the lease. The Company did not renew this lease. During the first quarter of 2015, the Company entered into an agreement for new office space to which it relocated its operations upon the expiration of its prior lease. Effective May 1, 2015, the Company began leasing approximately 3,251 square feet of general office space at 301 North Canon Drive, Suite 305, Beverly Hills, CA 90210 pursuant to a 35-month sub-lease that commenced on May 1, 2015. The Company will pay approximately $136,542 annually subject to annual escalations of 3%. Rental expenses incurred for operating leases during the nine months ended September 30, 2015 and 2014 were $106,271 and $105,207, respectively. The following is a schedule of future minimum lease payments required by the non-cancelable operating lease agreement: Year Amount 2015 $ 34,113 2016 139,273 2017 143,451 2018 36,214 $ 353,051 |
18. Commitment and Contingencie
18. Commitment and Contingencies | 9 Months Ended |
Sep. 30, 2015 | |
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 Stan Lee and the Mighty 7 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 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 In July 2014, the Company has partnered with Symbiosis Technologies (Symbiosis) in which Symbiosis will provide certain pre-production and production services to the Company for the production of Thomas Edisons Secret Lab In December 2014, the Company has partnered with Telegael Teoranta (Telegael) in which Telegael will provide certain production services to the Company for the production of Thomas Edisons Secret Lab |
19. Subsequent Events
19. Subsequent Events | 9 Months Ended |
Sep. 30, 2015 | |
Subsequent Events [Abstract] | |
Subsequent Events | Pursuant to FASB ASC 855, Management has evaluated all events and transactions that occurred through the date of issuance of these financial statements. On October 19, 2015, we entered into a Memorandum Regarding Services with Michael Handelman, our current Chief Financial Officer, effective as of November 1, 2015, which supersedes our previous agreement with Mr. Handelman and pursuant to which Mr. Handelman shall continue his engagement as our Chief Financial Officer for a period of one year from the effective date thereof, subject to renewal, in consideration for a fee of $10,000 per month plus reimbursement of certain out-of-pocket expenses. On October 29, 2015, the Company entered into securities purchase agreements (the Purchase Agreement) with certain accredited investors pursuant to which the Company sold an aggregate of 4,330,000 shares of its common stock, par value $0.001 per and warrants to purchase up to an aggregate of 4,330,000 shares of common stock for a purchase price of $1.00 per share and gross proceeds to the Company of $4,330,000 (the 2015 Private Placement). The closing of the 2015 Private Placement was subject to certain customary closing conditions and closed on November 3, 2015. The warrants are exercisable into shares of common stock for a period of five (5) years from issuance at an initial exercise price of $1.10 per share, subject to adjustment in the event of stock splits, dividends and recapitalizations. The Company is prohibited from effecting an exercise of the warrants to the extent that as a result of such exercise, the holder would beneficially own more than 4.99% (subject to increase up to 9.99% upon 61 days notice) in the aggregate of the issued and outstanding shares of common stock, calculated immediately after giving effect to the issuance of shares of common stock upon exercise of the warrant. Pursuant to the terms of the Purchase Agreements, beginning on the closing date of the 2015 Private Placement and ending sixty (60) days after the Effective Date (as defined in the Purchase Agreements), the Company shall not issue any securities, subject to certain exceptions. Additionally, until the later of (i) such time as the investors in the 2015 Private Placement, in the aggregate, hold less than 50% of the common stock originally purchased by them in the Private Placement and the average daily trading volume of the common stock for a period of ten (10) consecutive trading days is greater than $75,000 and (ii) the one year anniversary of the closing of the 2015 Private Placement, the Company has agreed to not sell any securities, subject to certain exceptions, at an effective per share price of common stock less than the purchase price of the common stock sold in the 2015 Private Placement then in effect. The Company has agreed to file a resale registration statement with the Securities and Exchange Commission (the SEC) covering all shares of common stock and shares of common stock underlying the warrants issued or issuable in the 2015 Private Placement within 45 days of the closing of the 2015 Private Placement and to maintain the effectiveness of the registration statement until all securities have been sold or are otherwise able to be sold pursuant to Rule 144. The Company has agreed to use its reasonable best efforts to have the registration statement declared effective within 90 days of the closing of the 2015 Private Placement (or 120 days after such closing if the registration statement is subject to review by the SEC. The Company is obligated to pay to investors a fee of 1% per month in cash for every thirty day period up to a maximum of six (6%) percent, (i) that the registration statement has not been filed after the required filing date, (ii) following the required effectiveness date that the registration statement has not been declared effective; and (iii) as otherwise set forth in the Registration Rights Agreement. Chardan acted as sole placement agent in the 2015 Private Placement in consideration for which Chardan received a cash fee of $300,000 and a five-year warrant to purchase up to 425,000 shares of common stock (the Placement Agent Warrant) at an initial exercise price of $1.20 per share. The terms of the Placement Agent warrant are identical to the warrants issued in the 2015 Private Placement except with respect to the exercise price thereof. |
2. Summary of Significant Acc26
2. Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2015 | |
Accounting Policies [Abstract] | |
Cash Equivalents | Cash Equivalents The Company considers all highly liquid debt instruments with initial maturities of six months or less to be cash equivalents. |
Reverse Stock Split | Reverse Stock Split On April 2, 2014, we effected the Reverse Split which was deemed effective with FINRA on April 7, 2014. All common stock share and per share information in this Form 10-Q, including the accompanying consolidated financial statements and notes thereto, have been adjusted to reflect retrospective application of the Reverse Split, unless otherwise indicated. |
Business Combination | Business Combination On November 15, 2013, the Company entered into the Merger Agreement with A Squared, the Member, and the 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. The audited financial statements have been prepared using the acquisition method of accounting in accordance with FASB Accounting Standards Codification (ASC) 805 Business Combinations. See Note 3 - Business Combination for additional information. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of Genius Brands International, Inc. and its wholly owned subsidiary A Squared. 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. |
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. |
Allowance for Sales Returns | Allowance for Sales Returns An Allowance for Sales Returns is estimated based on average sales during the previous year. Based on experience, sales growth, and our customer base, the Company concluded that the allowance for sales returns at September 30, 2015 and December 31, 2014 should be $44,108 and $45,582, respectively. |
Inventories | 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 $53,338 and $54,673 established as of September 30, 2015 and December 31, 2014. |
Property and Equipment | 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 two to seven 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 any dispositions of property and equipment are reflected in the statement of operations. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired in business combinations accounted for by the purchase method. In accordance with ASC 350 Intangibles Goodwill and Other, goodwill and certain intangible assets are presumed to have indefinite useful lives and are thus not amortized, but subject to an impairment test annually or more frequently if indicators of impairment arise. The Company completes the annual goodwill and indefinite-lived intangible asset impairment tests at the end of each fiscal year. To test for goodwill impairment, we are required to estimate the fair market value of each of our reporting units, of which we have one. While we may use a variety of methods to estimate fair value for impairment testing, our primary methods are discounted cash flows. We estimate future cash flows and allocations of certain assets using estimates for future growth rates and our judgment regarding the applicable discount rates. Changes to our judgments and estimates could result in a significantly different estimate of the fair market value of the reporting units, which could result in an impairment of goodwill of indefinite lived intangible assets in future periods. Other intangible assets have been acquired, either individually or with a group of other assets, and were initially recognized and measured based on fair value. Additionally, the Company 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. Annual amortization of these intangible assets is computed based on the straight-line method over the remaining economic life of the asset. |
Films and Televisions Costs | Films and Televisions Costs 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. |
Revenue Recognition | Revenue Recognition The Company recognized revenue related to product sales when (i) the sellers price is substantially fixed, (ii) shipment has occurred causing the buyer to be obligated to pay for product, (iii) the buyer has economic substance apart from the seller, and (iv) there is no significant obligation for future performance to directly bring about the resale of the product by the buyer as required by ASC 605 Revenue Recognition. Revenues associated with the sale of products are recorded when shipped to customers pursuant to approved customer purchase orders resulting in the transfer of title and risk of loss. Cost of sales, rebates and discounts are recorded at the time of revenue recognition or at each financial reporting date. The Company recognizes revenue in accordance with ASC 926-605 Entertainment-Films - Revenue Recognition. Accordingly, the Company recognizes revenue when (i) persuasive evidence of a sale with customer exists, (ii) the film is complete and has been delivered or is available for delivery, (iii) the license period of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale, (iv) the arrangement fee is fixed or determinable, and (v) collection of the arrangement fee is reasonably assured. For its distribution, TV, and home entertainment income the Company generally enters in to flat fee arrangements to deliver multiple films or episodes. The Company allocates revenue to each film or episode based on their relative fair market values and recognizes revenue as each film or episode is complete and available for delivery. The Companys 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 Companys revenue is its gross billings to its customers less the amounts it pays to suppliers for their products and services. |
Earnings Per Share | Earnings Per Share Basic earnings (loss) per common share (EPS) is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted EPS is calculated by dividing net income (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. |
Income Taxes | 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 managements best estimate of the amount of such deferred tax assets that more likely than not will be realized. |
Recent Accounting Pronouncements | 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. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In April 2014, the FASB issued Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (ASU 2014-08), which raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the new definition of a discontinued operation. It also allows an entity to present a discontinued operation even when it has continuing cash flows and significant continuing involvement with the disposed component. The amendments in ASU 2014-08 are effective prospectively for disposals (or classifications as held for sale) of components of an entity that occur within annual periods beginning on or after December 15, 2014, and interim periods within those years. Early adoption is permitted but only for disposals (or classifications as held for sale) that have not been reported in financial statements previously issued or available for issuance. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09). The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: identify the contract(s) with a customer; identify the performance obligations in the contract; determine the transaction price; allocate the transaction price to the performance obligations in the contract; and recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 supersedes the revenue recognition requirements in Accounting Standards Codification Topic No. 605, Revenue Recognition, most industry-specific guidance throughout the industry topics of the accounting standards codification, and some cost guidance related to construction-type and production-type contracts. ASU 2014-09 is effective for public entities for annual periods and interim periods within those annual periods beginning after December 15, 2016. Early adoption is not permitted. Companies may use either a full retrospective or a modified retrospective approach to adopt ASU 2014-09. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In June 2014, the FASB issued Accounting Standards Update No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (ASU 2014-12). The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Accounting Standards Codification Topic No. 718, Compensation - Stock Compensation (ASC 718), as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in ASU 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in ASU 2014-12 either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. Various other accounting pronouncements have been recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific industries, and are not expected to have a material effect on our financial position, results of operations, or cash flows. |
3. Business Combination (Tables
3. Business Combination (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Business Combinations [Abstract] | |
Purchase Price Allocation | Allocated Fair Value Cash $ 283,199 Accounts Receivable 89,398 Prepaid Expenses and Other Assets 145,574 Property and equipment, net 75,385 Identifiable artistic-related intangible assets (a) 1,740,000 Total assets acquired 2,333,556 Accounts Payable (404,757 ) Accrued Expenses (450,000 ) Short Term Debt - Related Party (516,966 ) Disputed Trade Payable (925,000 ) Total liabilities assumed (2,296,723 ) Net assets acquired 36,833 Consideration (b) 10,402,638 Goodwill $ 10,365,805 |
6. Property and Equipment, Net
6. Property and Equipment, Net (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property Plant And Equipment | 9/30/2015 12/31/2014 Furniture and Equipment $ 12,385 $ 12,385 Computer Equipment 34,678 36,649 Leasehold Improvements 176,903 99,778 Software 15,737 15,737 Less Accumulated Depreciation (72,930 ) (132,129 ) Property and Equipment, Net $ 166,773 $ 32,420 |
8. Goodwill and Intangible As29
8. Goodwill and Intangible Assets, Net (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Asset | 9/30/2015 12/31/2014 Identifiable artistic-related assets (a) $ 1,740,000 $ 1,740,000 Trademarks (b) 129,831 129,831 Product Masters (b) 64,676 3,257,129 Other Intangible Assets (b) 181,220 70,000 Less Accumulated Amortization (c) (178,390 ) (3,320,522 ) Intangible Assets, Net $ 1,937,337 $ 1,876,438 |
Schedule of expected future intangible asset amortization | Fiscal Year: 2015 $ 34,835 2016 38,596 2017 17,180 2018 8,655 2019 8,655 Total $ 107,921 |
10. Accrued Liabilities (Tables
10. Accrued Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Payables and Accruals [Abstract] | |
Accrued liabilities | 9/30/2015 12/31/2014 Accrued Salaries and Wages Accrued Salaries and Wages $ 85,620 $ 50,288 Disputed Trade Payables Disputed Trade Payables (a) 925,000 925,000 Services Advance Services Advance (b) 1,489,583 739,583 Accrued Expenses Other Accrued Expenses 409,512 283,582 Total Accrued Liabilities $ 2,909,715 $ 1,998,453 |
13. Stock Options (Tables)
13. Stock Options (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Option Plan | Options Outstanding Exercise Weighted Average Remaining Aggregate Weighted Average Exercise Number of Price Contractual Intrinsic Price Shares per Share Life Value per Share Balance at December 31, 2014 350 $6.00 - 33.60 2.29 years $ $ 15.09 Options Granted Options Exercised Options Cancelled (350 ) Balance at September 30, 2015 $ $ Exercisable December 31, 2014 350 $6.00 - 33.60 2.29 years $ $ 15.09 Exercisable September 30, 2015 $ $ $ |
14. Warrants (Tables)
14. Warrants (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Warrants and Rights Note Disclosure [Abstract] | |
Schedule of warrant activity | Warrants Outstanding Exercise Weighted Average Remaining Aggregate Weighted Average Exercise Number of Price Contractual Intrinsic Price Shares per Share Life Value per Share Balance at December 31, 2014 300,000 $ 2.00 4.37 years $ 2.00 Warrants Granted Warrants Exercised Warrants Expired Balance at September 30, 2015 300,000 $ 2.00 3.88 years $ 0 $ 2.00 Exercisable December 31, 2014 300,000 $ 2.00 4.37 years $ 2.00 Exercisable September 30, 2015 300,000 $ 2.00 3.88 years $ 0 $ 2.00 |
17. Lease Commitments (Tables)
17. Lease Commitments (Tables) | 9 Months Ended |
Sep. 30, 2015 | |
Leases [Abstract] | |
Schedule of future minimum lease payments | Year Amount 2015 $ 34,113 2016 139,273 2017 143,451 2018 36,214 $ 353,051 |
1. Organization and Business (D
1. Organization and Business (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | Dec. 31, 2013 | |
Accounting Policies [Abstract] | ||||||
Accumulated deficit | $ 23,574,592 | $ 23,574,592 | $ 21,152,654 | |||
Total stockholders' equity | 11,316,854 | 11,316,854 | 13,720,248 | |||
Current assets | 2,617,458 | 2,617,458 | 4,738,898 | |||
Cash | 2,147,931 | $ 5,167,606 | 2,147,931 | $ 5,167,606 | 4,301,099 | $ 527,110 |
Current liabilities | 2,468,972 | 2,468,972 | 2,224,766 | |||
Short term debt | 411,521 | 411,521 | $ 411,008 | |||
Trade payables | 925,000 | 925,000 | ||||
Working capital | 148,486 | 148,486 | ||||
Net loss | $ 797,820 | $ 848,970 | 2,421,938 | 2,843,763 | ||
Net cash used by operating activities | 2,611,607 | $ 1,624,920 | ||||
Proceeds from services agreement | $ 750,000 |
2. Summary of Significant Acc35
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Accounting Policies [Abstract] | ||
Allowance for sales returns | $ 44,108 | $ 45,582 |
Reserve for obsolete inventory | $ 53,338 | $ 54,673 |
3. Business Combination (Detail
3. Business Combination (Details-Assets and liabilities assumed) - USD ($) | 1 Months Ended | ||
Nov. 15, 2013 | Sep. 30, 2015 | Dec. 31, 2014 | |
Goodwill | $ 10,365,805 | $ 10,365,805 | |
A Squared | |||
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 | ||
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 | (2,295,723) | ||
Net assets acquired | 36,833 | ||
Consideration | 10,402,638 | ||
Goodwill | $ 10,365,805 |
5. Inventory (Details Narrative
5. Inventory (Details Narrative) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Inventory Disclosure [Abstract] | ||
Inventory Reserve | $ 53,338 | $ 54,673 |
5. Property and Equipment, Net
5. Property and Equipment, Net (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Less Accumulated Depreciation | $ (72,930) | $ (132,129) | |
Property and Equipment, Net | 166,773 | 32,420 | |
Depreciation expense | 46,501 | $ 37,774 | |
Furniture and Fixtures [Member] | |||
Property and equipment gross | 12,385 | 12,385 | |
Computer Equipment [Member] | |||
Property and equipment gross | 34,678 | 36,649 | |
Leasehold Improvements [Member] | |||
Property and equipment gross | 176,903 | 99,778 | |
Software [Member] | |||
Property and equipment gross | $ 15,737 | $ 15,737 |
7. Film and Television Costs 39
7. Film and Television Costs and Capitalized Product Development in Process (Details Narrative) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Film And Television Costs And Capitalized Product Development In Process | ||
Film and Television Costs | $ 903,634 | $ 303,953 |
Capitalized Product Development in Process | $ 0 | $ 7,500 |
8. Goodwill and Intangible As40
8. Goodwill and Intangible Assets, Net (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | |
Less Accumulated Amortization | [1] | $ (178,390) | $ (3,320,522) |
Net Intangible Assets | 1,937,337 | 1,876,438 | |
Identifiable artistic-related assets | |||
Intangible assets | [2] | 1,740,000 | 1,740,000 |
Trademarks [Member] | |||
Intangible assets | [3] | 129,831 | 129,831 |
Product Masters | |||
Intangible assets | [3] | 3,257,129 | 3,257,129 |
Other Intangible Assets | |||
Intangible assets | $ 181,220 | $ 70,000 | |
[1] | During the nine months ended September 30, 2015 and 2014, the Company recognized $50,322 and $45,527, respectively, in amortization expense related to these intangible assets. | ||
[2] | In association with the Merger, the Company acquired $1,740,000 in identifiable artistic-related assets. These assets, related to certain properties owned by A Squared and assumed by the Company, were valued using an independent firm during the fourth quarter of 2013. Based on certain legal, regulatory, contractual, and economic factors, the Company has deemed these assets to be indefinite-lived. Hence, pursuant to ASC 350-30, these assets are not subject to amortization and are tested annually for impairment. Through September 30, 2015, the Company has not recognized any impairment expense related to these assets. | ||
[3] | Pursuant to ASC 350-30-35, the Company reviews these intangible assets periodically to determine if the value should be retired or impaired due to recent events. During the six months ended September 30, 2015 and 2014, the Company did not recognize any impairment of these assets. |
8. Goodwill and Intangible As41
8. Goodwill and Intangible Assets, Net (Details - Future amortization) | Sep. 30, 2015USD ($) |
Goodwill and Intangible Assets Disclosure [Abstract] | |
2,015 | $ 34,835 |
2,016 | 38,596 |
2,017 | 17,180 |
2,018 | 8,655 |
2,019 | 8,655 |
Total | $ 107,921 |
8. Goodwill and Intangible As42
8. Goodwill and Intangible Assets, Net (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | |
Amortization expense | $ 42,642 | $ 0 | $ 42,642 | $ 0 |
Intangible Assets | ||||
Amortization expense | $ 50,322 | $ 45,527 |
9. Deferred Revenue and Advan43
9. Deferred Revenue and Advances (Details Narrative) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 |
Deferred Revenue Disclosure [Abstract] | ||
Deferred revenue and advances | $ 1,006,597 | $ 882,577 |
10. Accrued Liabilities (Detail
10. Accrued Liabilities (Details) - USD ($) | Sep. 30, 2015 | Dec. 31, 2014 | ||
Payables and Accruals [Abstract] | ||||
Accrued Salaries and Wages | $ 85,620 | $ 50,288 | ||
Disputed trade payables | 925,000 | [1] | 925,000 | |
Services Advance | [2] | 1,489,583 | 739,583 | |
Other Accrued Expenses | 409,512 | 283,582 | ||
Total accrued liabilities | $ 2,909,715 | $ 1,998,453 | ||
[1] | As part of the Merger, the Company assumed certain liabilities from a previous member of A Squared which has claimed certain liabilities totaling $925,000. The Company disputes the basis for this liability. | |||
[2] | During the first quarter of 2014, the Company entered into an exclusive three year 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 received a total of $1,500,000, $750,000 during the first quarter of 2014 and $750,000 during the first quarter of 2015. At the end of the term, the Company is obligated to repay a pro-rata portion of the advance if it has not ordered a minimum number of DVD/CD units during the term. |
11. Short Term Debt - Related45
11. Short Term Debt - Related Parties (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2015 | Sep. 30, 2014 | Sep. 30, 2015 | Sep. 30, 2014 | Dec. 31, 2014 | |
Debt Disclosure [Abstract] | |||||
Short Term Debt - Related Party | $ 411,521 | $ 411,521 | $ 411,008 | ||
Interest expense | $ 6,224 | $ 6,241 | $ 18,544 | $ 19,611 |
12. Stockholders' Equity (Detai
12. Stockholders' Equity (Details Narrative) - $ / shares | Sep. 30, 2015 | Dec. 31, 2014 |
Equity [Abstract] | ||
Common Stock, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
Common Stock, shares Authorized | 700,000,000 | 700,000,000 |
Common Stock, shares issued | 6,529,450 | 6,374,450 |
Common Stock, shares outstanding | 6,529,450 | 6,374,450 |
Preferred stock authorized | 10,000,000 | 10,000,000 |
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred Sock, Shares Issued | 5,690 | 6,000 |
Preferred Sock, Shares Outstanding | 5,690 | 6,000 |
13 Stock Options (Details)
13 Stock Options (Details) - Stock Options [Member] - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Options Outstanding Number of Shares | ||
Number of Options outstanding beginning balance | 350 | |
Number of Shares, Options Granted | 0 | |
Number of Shares, Options Exercised | 0 | |
Number of Shares, Options Cancelled | (350) | |
Number of Options outstanding ending balance | 0 | 350 |
Number of Shares exercisable ending balance | 0 | |
Exercise Price Per Share | ||
Exercise price per share beginning balance | $6.00 - $33.60 | |
Exercise price per share, exercisable | $6.00 - $33.60 | |
Weighted Average Remaining Contractual Life | 2 years 3 months 14 days | |
Weighted Average Remaining Contractual Life exercisable | 2 years 3 months 14 days | |
Aggregate Intrinsic Value | ||
Aggregate Intrinsic Value beginning balance | $ 0 | $ 0 |
Aggregate Intrinsic Value ending balance | 0 | 0 |
Aggregate Intrinsic Value Exercisable ending balance | $ 0 | $ 0 |
Weighted Average Exercise Price Per Share | ||
Weighted Average Exercise Price per Share beginning balance | $ 15.09 | |
Weighted Average Exercise Price per Share ending balance | $ 15.09 | |
Weighted Average Exercise Price per Share Exercisable | $ 15.09 |
13. Stock Options (Details Narr
13. Stock Options (Details Narrative) | 9 Months Ended |
Sep. 30, 2015USD ($)shares | |
Share based compensation | $ 0 |
2008 Plan | |
Shares authorized under plan | shares | 500,000 |
14. Warrants (Details)
14. Warrants (Details) - Warrant - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2015 | Dec. 31, 2014 | |
Warrants Outstanding Number of Shares | ||
Number outstanding beginning balance | 300,000 | 0 |
Number outstanding ending balance | 300,000 | 300,000 |
Number of Shares exercisable ending balance | 300,000 | 300,000 |
Exercise Price per Share | ||
Exercise Price per Share, beginning price | $ 2 | $ 0 |
Exercise Price per Share ending balance | 2 | 2 |
Exercise Price per Share exercisable | $ 2 | $ 2 |
Weighted average remaining contractual life, outstanding | 3 years 10 months 17 days | 4 years 4 months 13 days |
Weighted average remaining contractual life, exercisable | 3 years 10 months 17 days | 4 years 4 months 13 days |
16. Employment Agreements (Deta
16. Employment Agreements (Details Narrative) | 9 Months Ended |
Sep. 30, 2015USD ($) | |
Chief Executive Officer [Member] | |
Officer salaries | $ 200,000 |
President [Member] | |
Officer salaries | 180,000 |
Senior Vice President - International Sales [Member] | |
Officer salaries | 175,000 |
President - Worldwide Consumer Products [Member] | |
Officer salaries | $ 275,000 |
17. Lease Commitments (Details)
17. Lease Commitments (Details) | Sep. 30, 2015USD ($) |
Leases [Abstract] | |
2,015 | $ 34,113 |
2,016 | 139,273 |
2,017 | 143,451 |
2,018 | 36,214 |
Total | $ 353,051 |
17. Lease Commitments (Details
17. Lease Commitments (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2015 | Sep. 30, 2014 | |
Leases [Abstract] | ||
Rental expense | $ 106,271 | $ 105,207 |