Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2016 | Aug. 12, 2016 | |
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 | Jun. 30, 2016 | |
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 | 11,963,133 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,016 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 | |
Current Assets: | |||
Cash and Cash Equivalents | $ 4,938,720 | $ 5,187,620 | |
Accounts Receivable, net | 340,126 | 171,867 | |
Inventory, net | 6,562 | 7,080 | |
Prepaid and Other Assets | 211,098 | 65,464 | |
Total Current Assets | 5,496,506 | 5,432,031 | |
Property and Equipment, net | 119,426 | 150,948 | |
Film and Television Costs, net | 1,250,352 | 1,003,546 | |
Intangible Assets, net | 1,883,690 | 1,918,206 | |
Goodwill | 10,365,805 | 10,365,805 | |
Total Assets | 19,115,779 | 18,870,536 | |
Current Liabilities: | |||
Accounts Payable | 492,502 | 359,433 | |
Accrued Expenses | 303,110 | 509,477 | |
Deferred Revenue | 352,744 | 305,850 | |
Accrued Salaries and Wages | 116,385 | 96,385 | |
Disputed Trade Payable | [1] | 925,000 | 925,000 |
Service Advance - Current Portion | [2] | 1,489,583 | 0 |
Short Term Debt - Related Party | 0 | 410,535 | |
Total Current Liabilities | 3,679,324 | 2,606,680 | |
Long Term Liabilities: | |||
Deferred Revenue | 2,747,235 | 652,689 | |
Services Advance | [2] | 0 | 1,489,583 |
Total Liabilities | 6,426,559 | 4,748,952 | |
Stockholders' Equity: | |||
Series A Preferred Stock, $0.001 par value, 10,000,000 share authorized, respectively; 4,955 and 5,290 shares issued and outstanding, respectively | 5 | 6 | |
Common Stock, $0.001 par value, 700,000,000 shares authorized, respectively; 11,938,133 and 11,259,450 shares issued and outstanding, respectively | $ 11,939 | $ 11,260 | |
Common Stock to Be Issued | 71 | 71 | |
Additional Paid in Capital | $ 42,891,483 | $ 41,156,023 | |
Accumulated Deficit | (30,213,445) | (27,045,776) | |
Accumulated Other Comprehensive Income (Loss) | (833) | 0 | |
Total Stockholders' Equity | 12,689,220 | 14,121,584 | |
Total Liabilities & Stockholders' Equity | $ 19,115,779 | $ 18,870,536 | |
[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. As of June 30, 2016, the Company believes that the statute of limitations applicable to the assertion of any legal claim relating to the collection of these liabilities has expired and therefore believes this liability is uncollectible. The Company is working with the counterparty to extinguish 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 the Company’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. |
Consolidated Balance Sheets (U3
Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares | Jun. 30, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Common Stock, par value | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 700,000,000 | 700,000,000 |
Common Stock, shares issued | 11,938,133 | 11,259,450 |
Common Stock, shares outstanding | 11,938,133 | 11,259,450 |
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 10,000,000 | 10,000,000 |
Preferred stock shares issued | 4,955 | 5,290 |
Preferred stock shares outstanding | 4,955 | 5,290 |
Consolidated Statements of Oper
Consolidated Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Revenues: | ||||
Licensing & Royalties | $ 113,456 | $ 121,322 | $ 261,468 | $ 273,987 |
Television & Home Entertainment | 46,726 | 8,875 | 250,607 | 141,089 |
Product Sales | 16,150 | 3,418 | 16,150 | 15,173 |
Total Revenues | 176,332 | 133,615 | 528,225 | 430,249 |
Cost of Sales | 50,949 | 15,431 | 73,311 | 22,572 |
Gross Profit | 125,383 | 118,184 | 454,914 | 407,677 |
Operating Expenses: | ||||
Salaries and Related Expenses | 562,301 | 494,657 | 1,088,453 | 985,398 |
Professional Services | 131,235 | 131,071 | 303,927 | 304,898 |
Rent Expense | 34,818 | 34,555 | 69,825 | 72,136 |
Marketing & Sales | 204,318 | 162,885 | 465,950 | 251,060 |
Amortization of Film & TV Costs | 17,644 | 0 | 135,157 | 0 |
Depreciation & Amortization | 35,612 | 34,540 | 71,378 | 60,150 |
Stock Compensation Expense | 312,977 | 0 | 877,962 | 0 |
Bad Debt Expense (Recovery) | 0 | 0 | 0 | (1,550) |
Other General and Administrative | 255,449 | 212,677 | 522,950 | 448,388 |
Loss on Impairment of Assets | 1,850 | 0 | 1,850 | 7,500 |
Total Operating Expenses | 1,556,204 | 1,070,385 | 3,537,452 | 2,127,980 |
Loss from Operations | (1,430,821) | (952,201) | (3,082,538) | (1,720,303) |
Other Income (Expense): | ||||
Other Income | 0 | 2,548 | 60 | 5,545 |
Interest Expense | (724) | (1,077) | (2,153) | (10,803) |
Interest Expense - Related Parties | 0 | (6,229) | (6,141) | (12,319) |
Gain on Settlement of Distribution Contracts | 248,593 | 0 | 258,103 | 150,000 |
Unrealized Loss on Foreign Currency Translation | 0 | (30,896) | 0 | (36,237) |
Net Other Income (Expense) | 247,869 | (35,654) | 249,869 | 96,186 |
Loss before Income Taxes | (1,182,952) | (987,855) | (2,832,669) | (1,624,117) |
Income Taxes | 0 | 0 | 0 | 0 |
Net Loss | (1,182,952) | (987,855) | (2,832,669) | (1,624,117) |
Preferred Stock Beneficial Conversion Feature | (250,000) | 0 | (335,000) | 0 |
Net Loss applicable to common shareholders | $ (1,432,952) | $ (987,855) | $ (3,167,669) | $ (1,624,117) |
Net Loss per Common Share (Basic and Diluted) | $ (.12) | $ (.15) | $ (.28) | $ (.25) |
Weighted Average Shares Outstanding (Basic and Diluted) | 11,716,662 | 6,487,912 | 11,516,407 | 6,431,494 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Consolidated Statements Of Comprehensive Income | ||||
Net Loss applicable to common shareholders | $ (1,432,952) | $ (987,855) | $ (3,167,669) | $ (1,624,117) |
Other Comprehensive Income (Loss), Net of Tax: | ||||
Unrealized Gain (Loss) on Foreign Currency Translation | (1,238) | 0 | (833) | 0 |
Other Comprehensive Income (Loss), Net of Tax: | (1,238) | 0 | (833) | 0 |
Comprehensive Income (Loss) | $ (1,434,190) | $ (987,855) | $ (3,168,502) | $ (1,624,117) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Cash Flows from Operating Activities: | ||
Net Loss | $ (2,832,669) | $ (1,624,117) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Amortization of Film and Television Costs | 135,157 | 0 |
Depreciation Expense | 33,063 | 29,827 |
Amortization Expense | 38,315 | 30,323 |
Imputed Interest Expense | 6,141 | 12,319 |
Bad Debt Expense / (Recovery) | 0 | (1,550) |
Stock Issued for Services | 24,000 | 0 |
Stock Compensation Expense | 877,962 | 0 |
Gain on Distribution Contracts | (258,103) | (150,000) |
Loss on Impairment of Assets | 1,850 | 7,500 |
Loss on Foreign Currency Translation | 0 | 36,237 |
Decrease (increase) in operating assets | ||
Accounts Receivable | 79,503 | 137,368 |
Inventory | 518 | (2,354) |
Prepaid Expenses & Other Assets | (145,634) | 20,861 |
Film and Television Costs, net | (381,963) | (412,512) |
Increase (decrease) in operating liabilities | ||
Accounts Payable | 133,069 | (79,567) |
Accrued Salaries | 20,000 | 37,765 |
Deferred Revenue and Advances | 2,140,369 | 58,006 |
Other Accrued Expenses | (195,786) | 3,596 |
Net cash used in operating activities | (324,208) | (1,896,298) |
Cash Flows from Investing Activities: | ||
Investment in Intangible Assets | (5,650) | (102,220) |
Investment in Fixed Assets | (1,542) | (180,853) |
Net cash used in investing activities | (7,192) | (283,073) |
Cash Flows from Financing Activities: | ||
Proceeds from Exercise of Warrants | 82,500 | 0 |
Proceeds from Services Advance | 0 | 750,000 |
Proceeds of Related Party Notes | 0 | 525 |
Net cash provided by financing activities | 82,500 | 750,525 |
Net Decrease in Cash and Cash Equivalents | (248,900) | (1,428,846) |
Beginning Cash and Cash Equivalents | 5,187,620 | 4,301,099 |
Ending Cash and Cash Equivalents | 4,938,720 | 2,872,253 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid for interest | 0 | 1,076 |
Schedule of non-cash financing and investing activites: | ||
Imputed Dividend on Preferred Stock | 335,000 | 0 |
Issuance Of Common Stock In Satisfaction Of Short Term Advances | $ 410,535 | $ 0 |
1. Organization and Business
1. Organization and Business | 6 Months Ended |
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Organization and Business | Organization and Nature of Business Genius Brands International, Inc. (we, us, our, or the Company) is a global content and brand management company that creates and licenses multimedia content. Led by industry veterans, Andrew Heyward (Chief Executive Officer) and Amy Moynihan Heyward (President), the Company distributes its content in all formats as well as a broad range of consumer products based on its characters. In the children's media sector, the Companys portfolio features "content with a purpose" for toddlers to tweens, which provides enrichment as well as entertainment, including tween music-driven brand SpacePOP Llama Llama Baby Genius Thomas Edison's Secret Lab® Kid Genius Secret Millionaires Club, Stan Lee's Cosmic Crusader In addition, the Company 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 Llama Llama From Frank Celessence Technologies 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. Liquidity Historically, the Company has incurred net losses. As of June 30, 2016, the Company had an accumulated deficit of $30,213,445 and total stockholders equity of $12,689,220. At June 30, 2016, the Company had current assets of $5,496,506, including cash of $4,938,720 and current liabilities of $3,679,324, including certain trade payables of $925,000 to which the Company disputes the claim, resulting in working capital of $1,817,182. For the three months ended June 30, 2016 and 2015, the Company reported a net loss of $1,182,952 and $987,855, respectively. For the six months ended June 30, 2016 and 2015, the Company reported a net loss of $2,832,669 and $1,624,117, respectively, and reported net cash used by operating activities $324,208 and $1,896,298, respectively. During the six months ended June 30, 2016, the Company received gross proceeds of $2,000,000 pursuant to its distribution agreement with Sony Pictures Home Entertainment as well as $275,000 for the settlement of a distribution agreement. While the Company believes that its current cash balances 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 maintain positive operating cash flows, it may need to (i) seek additional funding, (ii) scale back its development plans, or (iii) reduce certain operations. Subsequent to the end of the period, on August 8, 2016, Llama Productions LLC, a wholly-owned subsidiary of the Company, closed a $5,275,000 multiple draw-down, secured, non-revolving credit facility (the Facility) with Bank Leumi USA for the production of its animated series Llama Llama |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Cash Equivalents The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents. Business Combination On November 15, 2013, the Company entered into a 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 financial statements have been prepared using the acquisition method of accounting in accordance with FASB Accounting Standards Codification (ASC) 805 Business Combinations. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Genius Brands International, Inc., its wholly-owned subsidiaries A Squared and Llama Productions LLC as well as its interest in Stan Lee Comics, LLC. All significant inter-company balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) 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 consolidated financial statements so as to conform to current period classifications. Allowance for Doubtful Accounts Accounts receivable are presented on the balance sheets net of estimated uncollectible amounts. The Company assesses its accounts receivable balances on a quarterly basis to determine collectability and records an allowance for estimated uncollectible accounts in an amount approximating anticipated losses based on historical experience and future expectations. Individual uncollectible accounts are written off against the allowance when collection of the individual accounts appears doubtful. The Company recorded an allowance for doubtful accounts of $110,658 as of each of June 30, 2016 and December 31, 2015. 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 $26,116 and $28,813 at June 30, 2016 and December 31, 2015, respectively. Property and Equipment Property and equipment are recorded at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from 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 method is 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. In accordance with ASC 350 Intangible Assets, 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. Film and Television 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 its capitalized production costs annually and limits recorded amounts by their ability to recover such costs through expected future sales. 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. After the initial release of the film or episodic series, the costs of significant improvement to existing products are capitalized while routine and periodic alterations to existing products are expensed as incurred. Revenue Recognition The Company recognizes revenue in accordance with ASC 926-605 Entertainment-Films - Revenue Recognition. Accordingly, the Company recognizes revenue when (i) persuasive evidence of a sale with customer exists, (ii) the film is complete and has been delivered or is available for delivery, (iii) the license period of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale, (iv) the arrangement fee is fixed or determinable, and (v) collection of the arrangement fee is reasonably assured. The Companys licensing and royalty revenue represents revenue generated from license agreements that 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. Licensing income the Company recognizes as an agent is 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. The Company recognizes 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. Stock Based Compensation As required by ASC 718 - Stock Compensation, the Company recognizes an expense related to the fair value of our stock-based compensation awards, including stock options, using the Black-Scholes calculation as of the date of grant. Earnings Per Share Basic earnings (loss) per common share (EPS) is calculated by dividing net income (loss) applicable to common shareholders by the weighted average number of shares of common stock outstanding for the period. Diluted EPS is calculated by dividing net income (loss) applicable to common shareholders by the weighted average number of shares of common stock 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. Net income (loss) applicable to common shareholders is calculated by deducting any dividend on preferred stock. As the conversion price of the Series A Preferred Stock on a converted basis was below the market price of the common stock on the closing date, an imputed dividend was calculated. 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. Fair value of financial instruments The carrying amounts of cash, receivables and accrued liabilities approximate fair value due to the short-term maturity of the instruments. We adopted ASC 820 as of January 1, 2008 for financial instruments measured at fair value on a recurring basis. ASC Topic 820 defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP and expands disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include: · Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; · Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and · Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASU 2014-09). ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets unless those contracts are within the scope of other standards (e.g. insurance contracts). This ASU will supersede all revenue recognition requirements in Topic 605, Revenue Recognition, and industry-specific guidance throughout the industry topics of the codification. The guidance's core principle 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. In applying the revenue principles, an entity will identify the contract(s) with a customer, identify the performance obligations, determine the transaction price, allocate the transaction price to the performance obligations and recognize revenue when the performance obligation is satisfied (either over time or at a point in time). The ASU further states that an entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which approved a one-year deferral of the effective date of the ASU from the original effective date of annual reporting periods beginning after December 15, 2016, to annual reporting periods (including interim reporting periods) beginning after December 15, 2017, with an option for early adoption of the standard on the original effective date. Additionally, in March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarified the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, that amended the revenue guidance on identifying performance obligations and accounting for licenses of intellectual property. In May 2016, the FASB issued ASU 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 805): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, which rescinded from the FASB Accounting Standards Codification certain SEC paragraphs as a result of two SEC Staff Announcements. The FASB also issued ASU 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which clarified guidance on assessment of collectability, presentation of sale taxes, measurement of noncash consideration, and certain transition matters. The Company is still evaluating the impact that the provisions of ASU 2014-09 and related subsequent updates will have on the Company's condensed consolidated financial position, results of operations and cash flows. In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases. The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2018. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In March 2016, the FASB issued Accounting Standards Update 2016-09, Compensation - Stock Compensation ( 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. Inventory
3. Inventory | 6 Months Ended |
Jun. 30, 2016 | |
Inventory Disclosure [Abstract] | |
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. 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. As of June 30, 2016 and December 31, 2015, the Company had recorded a total reserve of $26,116 and $28,813, respectively. |
4. Property and Equipment, Net
4. Property and Equipment, Net | 6 Months Ended |
Jun. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | The Company has property and equipment as follows as of June 30, 2016 and December 31, 2015: 6/30/2016 12/31/2015 Furniture and Equipment $ 12,385 $ 12,385 Computer Equipment 38,352 36,810 Leasehold Improvements 176,903 176,903 Software 15,737 15,737 Less Accumulated Depreciation (123,951 ) (90,887 ) Property and Equipment, Net $ 119,426 $ 150,948 During the three months ended June 30, 2016 and 2015, the Company recorded depreciation expense of $16,428 and $17,958, respectively. During the six months ended June 30, 2016 and 2015, the Company recorded depreciation expense of $33,063 and $29,827, respectively. |
5. Film and Television Costs, n
5. Film and Television Costs, net | 6 Months Ended |
Jun. 30, 2016 | |
Film And Television Costs Net | |
Film and Television Costs, net | As of June 30, 2016, the Company had Film and Television Costs, net of $1,250,352 compared to $1,003,546 at December 31, 2015. The increase relates primarily to the production and development of SpacePop, Llama Llama, and Stan Lees Cosmic Crusaders Thomas Edisons Secret Lab. |
6. Goodwill and Intangible Asse
6. Goodwill and Intangible Assets, Net | 6 Months Ended |
Jun. 30, 2016 | |
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. 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 June 30, 2016, the Company has not recognized any impairment to Goodwill. Intangible Assets, Net The Company had following intangible assets as of June 30, 2016 and December 31, 2015: 6/30/2016 12/31/2015 Identifiable Artistic-Related Assets (a) $ 1,740,000 $ 1,740,000 Trademarks (b) 129,831 129,831 Product Masters (b) 64,676 64,676 Other Intangible Assets (b) 185,019 181,220 Less Accumulated Amortization (c) (235,836 ) (197,521 ) Intangible Assets, Net $ 1,883,690 $ 1,918,206 (a) In association with the Merger, the Company acquired $1,740,000 of 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 June 30, 2016, 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 three and six months ended June 30, 2016 and 2015, the Company did not recognize any impairment of these assets. (c) During the three months ended June 30, 2016 and 2015, the Company recognized $19,184 and $16,580, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. During the six months ended June 30, 2016 and 2015, the Company recognized $38,315 and $30,323, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. Expected future intangible asset amortization as of June 30, 2016 is as follows: Fiscal Year: 2016 $ 35,862 2017 53,534 2018 26,119 2019 9,236 2020 8,655 Remaining 10,284 Total $ 143,690 |
7. Deferred Revenue
7. Deferred Revenue | 6 Months Ended |
Jun. 30, 2016 | |
Deferred Revenue Disclosure [Abstract] | |
Deferred Revenue | As of June 30, 2016 and December 31, 2015, the Company had total deferred revenue of $3,099,979 and 958,539, respectively. Deferred revenue includes both variable fee contracts with licensees and customers in which the Company had collected advances and minimum guarantees against future royalties as well as fixed fee contracts. The Company recognizes revenue related to these contracts when all revenue recognition criteria have been met. |
8. Accrued Liabilities
8. Accrued Liabilities | 6 Months Ended |
Jun. 30, 2016 | |
Payables and Accruals [Abstract] | |
Accrued Liabilities | As of June 30, 2016 and December 31, 2015, the Company has the following accrued liabilities: 6/30/2016 12/31/2015 Accrued Salaries and Wages (a) $ 116,385 $ 96,385 Disputed Trade Payables (b) 925,000 925,000 Services Advance - Current Portion (c) 1,489,583 Other Accrued Expenses 303,110 509,477 Total Accrued Liabilities $ 2,834,078 $ 1,530,862 (a) Accrued Salaries and Wages represent accrued vacation payable to employees. (b) 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. As of June 30, 2016, the Company believes that the statute of limitations applicable to the assertion of any legal claim relating to the collection of these liabilities has expired and therefore believes this liability is uncollectible. The Company is working with the counterparty to extinguish this liability. (c) 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 the Companys 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. |
9. Short-Term Debt - Related Pa
9. Short-Term Debt - Related Parties | 6 Months Ended |
Jun. 30, 2016 | |
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 June 30, 2016 and December 31, 2015, these advances totaled $0 and $410,535, respectively. On May 4, 2016, the Company issued to Mr. Heyward 238,683 shares of common stock valued at $1.72 per share, the days closing stock price, in satisfaction of these advances. These advances were interest free and had no stated maturity. The Company applied an imputed interest rate of 6% in accordance with ASC 835-30-45. During three months ended June 30, 2016 and 2015, the Company recognized imputed interest expense of $0 and $6,229 as a contribution to additional paid-in capital, respectively. During six months ended June 30, 2016 and 2015, the Company recognized imputed interest expense of $6,141 and $12,319 as a contribution to additional paid-in capital, respectively. |
10. Stockholders' Equity
10. Stockholders' Equity | 6 Months Ended |
Jun. 30, 2016 | |
Equity [Abstract] | |
Stockholders' Equity | Common Stock As of each of June 30, 2016 and December 31, 2015, the total number of authorized shares of common stock was 700,000,000. On April 2, 2014, we filed an amendment to our Articles of Incorporation to affect the Reverse Split on a 1-for-100 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. On September 18, 2015, stockholders, representing at least of majority of outstanding shares of the Companys voting capital, approved an amendment to the Companys Articles of Incorporation, as amended, to effect a reverse split of its issued and outstanding common stock, par value $0.001 per share, by a ratio of not less than 1-for-2 and not more than 1-for-5 at any time prior to August 31, 2016, with the exact ratio to be set at a whole number within this range as determined by the Companys Board of Directors. On October 29, 2015, the Company conducted a private placement with certain accredited investors pursuant to which it sold an aggregate of 4,330,000 shares of its common stock, par value $0.001 per share, 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 associated warrant for gross proceeds of $4,330,000 (the 2015 Private Placement). The 2015 Private Placement closed on November 3, 2015. Stock offering costs were $502,218. (See Note 12 for additional information about these warrants.) As of June 30, 2016 and December 31, 2015, there were 11,938,133 and 11,259,450 shares of common stock outstanding, respectively. Below are the changes to the Companys common stock during the six months ended June 30, 2016: · On various dates during the six months ended June 30, 2016, the Company issued 335,000 shares of the Companys common stock as a conversion of 335 shares of Series A Preferred Stock. · On various dates during the six months ended June 30, 2016, the Company issued 75,000 shares of the Companys common stock for the exercise of 75,000 warrants each with an exercise price of $1.10 for total cash proceeds of $82,500. · On March 12, 2016, the Company issued 30,000 shares of the Companys common stock as part of a settlement agreement with an entity that had provided music production services to the Company. · On May 4, 2016, the Company issued to Mr. Heyward 238,683 shares of common stock valued at $1.72 per share, the days closing stock price, in satisfaction of certain short term advances. 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. As of June 30, 2016 and December 31, 2015, there were 4,955 and 5,290 shares of Series A Preferred Stock outstanding, respectively. 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 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. The shares of Series A Preferred Stock possess no voting rights. 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 then 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 transaction closed on May 15, 2014. As the conversion price of the Series A Preferred Stock on a converted basis was below the market price of the common shares on the closing date, this resulted in a beneficial conversion feature recorded as an imputed dividend of $2,010,000. In addition, during the first quarter of 2016, upon the conversion of the 85 preferred shares into 85,000 common shares as described above, the conversion price adjustment related to the 2015 Private Placement was deemed a contingency and resulted in additional imputed dividend of $85,000. During the second quarter of 2016, upon the conversion of the 250 preferred shares into 250,000 common shares as described above, the conversion price adjustment related to the 2015 Private Placement was deemed a contingency and resulted in additional imputed dividend of $250,000. During the year ended December 31, 2015, 400 preferred shares converted into 400,000 common shares at the conversion price adjustment related to the 2015 Private Placement and resulted in an additional imputed dividend of $400,000. |
11. Stock Options
11. Stock Options | 6 Months Ended |
Jun. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Options | The Company has adopted the provisions of ASC 718 - Compensation which requires companies to measure the cost of employee services received in exchange for equity instruments based on the grant date fair value of those awards and to recognize the compensation expense over the requisite service period during which the awards are expected to vest. On December 29, 2008, the Company adopted the Pacific Entertainment Corporation 2008 Stock Option Plan (the Plan), which provides for the issuance of qualified and non-qualified stock options to officers, directors, employees and other qualified persons. The Plan is administered by the Board of Directors of the Company or a committee appointed by the Board of Directors. The number of shares of the Companys common stock initially reserved for issuance under the Plan was 110,000. On September 2, 2011, the stockholders holding a majority of the Companys outstanding common stock adopted an amendment to the Companys 2008 Stock Option Plan to increase the number of shares of common stock issuable under the plan to 500,000. On September 18, 2015, the Company adopted the Genius Brands International, Inc. 2015 Incentive Plan (the 2015 Plan). The 2015 Plan was approved by our stockholders in September 2015. The 2015 Plan as approved by the stockholders authorized the issuance up to an aggregate of 450,000 shares of common stock. On December 14, 2015, the Board of Directors voted to amend the 2015 Plan to increase the total number of shares that can be issued under the 2015 Plan by 3,880,000 from 450,000 shares to 4,330,000 shares. The increase in shares available for issuance under the 2015 Plan was approved by stockholders on February 3, 2016. The following table summarizes the changes in the Companys stock option plan during the six months ended June 30, 2016: Options Outstanding Number of Shares Exercise Price per Share Weighted Average Remaining Contractual Life Aggregate Intrinsic Value Weighted Average Exercise Price per Share Balance at December 31, 2015 4,223,208 $0.94 - $4.00 4.94 years $ 58,512 $ 2.70 Options Granted Options Exercised Options Cancelled 165,879 $0.94 - $4.00 Options Expired Balance at June 30, 2016 4,057,329 4.44 years $ 636,872 $ 2.70 Exercisable December 31, 2015 300,061 $0.94 4.80 years $ 58,512 $ 0.94 Exercisable June 30, 2016 300,061 $0.94 4.30 years $ 369,074 $ 0.94 During the year ended December 31, 2015, the Company granted options to purchase 4,223,208 shares of common stock to officers, directors, employees, and consultants. These stock options generally vest between one and three years, while a portion vested upon grant. The fair value of these options was determined to be $2,402,395 using the Black-Scholes option pricing model based on the following assumptions: Exercise Price $0.94 - $4.00 Dividend Yield 0% Volatility 134% - 137% Risk-free interest rate 0.89% - 1.25% Expected life of options 2.5 - 3.5 years During the three months ended March 31, 2016, the Company recognized stock based compensation expense of $564,985. During the three months ended March 31, 2016, the Company adjusted the calculation of stock based compensation expense to (i) align with the graded vested of the majority of the options granted in 2015, (ii) make adjustments in certain accounting estimates utilized in the Black Scholes model, and (iii) reflect the accurate number of options granted in 2015. As such, included in the total stock based compensation expense recognized in this first quarter of 2016 is $220,564 of true-up expenses from prior periods. The Company has assessed these adjustments individually and in aggregate and considers them immaterial to the current and prior periods. During the three months ended June 30, 2016, the Company recognized $312,977 in stock compensation expense. During the three and six months ended June 30, 2015, the Company did not recognize any stock based compensation expense. |
12. Warrants
12. Warrants | 6 Months Ended |
Jun. 30, 2016 | |
Warrants and Rights Note Disclosure [Abstract] | |
Warrants | The Company has warrants outstanding to purchase up to 4,980,000 and 5,055,000 at each of June 30, 2016 and December 31, 2015, respectively. In connection with the sale of the Companys 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 are exercisable immediately, have an exercise price of $2.00 per share, and have a five-year term. On October 29, 2015, the Company entered into securities purchase agreements 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 share, 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 the associated warrants for gross proceeds to the Company of $4,330,000 (the 2015 Private Placement). The closing of the 2015 Private Placement occurred 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 warrants are exercisable immediately. 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. In connection with the sale of the Companys common stock in October 2015, Chardan acted as sole placement agent in consideration for which Chardan received a cash fee of $300,000 and a warrant to purchase up to 425,000 shares of the Companys common stock. These warrants are exercisable immediately, have an exercise price of $1.20 per share, and have a five-year term. The following table summarizes the changes in the Companys outstanding warrants during the six months ended June 30, 2016: Warrants Outstanding Number of Shares Exercise Price per Share Weighted Average Remaining Contractual Life Weighted Average Exercise Price per Share Aggregate Intrinsic Value Balance at December 31, 2015 5,055,000 $ 1.10-2.00 4.75 years $ 1.16 $ Warrants Granted Warrants Exercised 75,000 Warrants Expired Balance at June 30, 2016 4,980,000 $ 1.10-2.00 4.25 years $ 1.16 $ 5,016,000 Exercisable December 31, 2015 5,055,000 $ 1.10-2.00 4.75 years $ 1.16 $ - Exercisable June 30, 2016 4,980,000 $ 1.10-2.00 4.25 years $ 1.16 $ 5,016,100 |
13. Income Taxes
13. Income Taxes | 6 Months Ended |
Jun. 30, 2016 | |
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 June 30, 2016 and December 31, 2015, 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. |
14. Employment Agreements
14. Employment Agreements | 6 Months Ended |
Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Employment Agreements | On November 15, 2013, as a closing condition to the Merger, the Company entered into five-year employment agreements with Andrew Heyward, to serve as Chief Executive Officer, and Amy Moynihan Heyward, to serve as President of the Company, for which each receives an annual base salary of $200,000 and $180,000, respectively. 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 twelfth and twenty-fourth month anniversary upon thirty (30) days notice. Mr. Newman has 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. Effective April 18, 2016, the Company entered into an employment agreement with Rebecca Hershinger for the position of Chief Financial Officer. Ms. Hershinger will be entitled to be paid a salary at the annual rate of $175,000 per year, which salary will be increased to $190,000 per year not later than October 1, 2016. The term of the agreement is one year with a mutual option for an additional one-year period. Ms. Hershinger was reimbursed for certain moving and related expenses associated with her relocation from Park City, Utah to Los Angeles, California. In addition, Ms. Hershinger is entitled to receive a grant of stock options commensurate with those given to the Companys Executive Vice President and an annual discretionary bonus based on her performance. |
15. Lease Commitments
15. Lease Commitments | 6 Months Ended |
Jun. 30, 2016 | |
Leases [Abstract] | |
Lease Commitments | The Company has no capital leases subject to the Capital Lease guidelines in the FASB Accounting Standards Codification. Rental expenses incurred for operating leases during the three months ended June 30, 2016 and 2015 were $34,818 and $34,555, respectively. Rental expenses incurred for operating leases during the six months ended June 30, 2016 and 2015 were $69,825 and $72,136, respectively. 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, California 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%. The following is a schedule of future minimum lease payments required by the non-cancelable operating lease agreement: Year Amount 2016 $ 69,448 2017 143,451 2018 36,214 $ 249,113 |
16. Commitment and Contingencie
16. Commitment and Contingencies | 6 Months Ended |
Jun. 30, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitment and Contingencies | In the normal course of its business, the Company enters into various agreements which call for the potential future payment of royalties or profit participations associated with its individual properties. These profit participations can be for the use of third party intellectual property, such as the case with Stan Lee and the Mighty 7 Llama Llama In addition, in the normal course of its business, the Company enters into agreements with various service providers such as animation studios, post-production studios, writers, directors, musicians or other creative talent in which the Company is obligated to share with these service providers net profits of the properties on which they have rendered services, on a certain basis as defined in each respective agreement. |
17. Related Party
17. Related Party | 6 Months Ended |
Jun. 30, 2016 | |
Related Party Transactions [Abstract] | |
Related Party | On April 21, 2016, the Company entered into a merchandising and licensing agreement with Andy Heyward Animation Art (AHAA), whose principal is Andrew Heyward, the Companys Chief Executive Officer. The Company entered into a customary merchandise license agreement with AHAA for the use of characters and logos related to Warren Buffets Secret Millionaires Club Stan Lees Mighty 7 |
18. Subsequent Events
18. Subsequent Events | 6 Months Ended |
Jun. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Pursuant to FASB ASC 855, Management has evaluated all events and transactions that occurred from June 30, 2016 through the date of issuance of these financial statements. During this period, we did not have any significant subsequent events, except as disclosed below: · On various dates subsequent to the end of the quarter, the Company issued 25,000 shares of the Companys common stock for the exercise of 25,000 warrants each with an exercise price of $1.10 for total cash proceeds of $27,500. · On August 8, 2016, Llama Productions LLC, a wholly-owned subsidiary of the Company, closed a $5,275,000 multiple draw-down, secured, non-revolving credit facility (the Facility) with Bank Leumi USA for the production of its animated series Llama Llama |
2. Summary of Significant Acc25
2. Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2016 | |
Accounting Policies [Abstract] | |
Cash Equivalents | Cash Equivalents The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents. |
Business Combination | Business Combination On November 15, 2013, the Company entered into a 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 financial statements have been prepared using the acquisition method of accounting in accordance with FASB Accounting Standards Codification (ASC) 805 Business Combinations. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of Genius Brands International, Inc., its wholly-owned subsidiaries A Squared and Llama Productions LLC as well as its interest in Stan Lee Comics, LLC. All significant inter-company balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) 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 consolidated financial statements so as to conform to current period classifications. |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts Accounts receivable are presented on the balance sheets net of estimated uncollectible amounts. The Company assesses its accounts receivable balances on a quarterly basis to determine collectability and records an allowance for estimated uncollectible accounts in an amount approximating anticipated losses based on historical experience and future expectations. Individual uncollectible accounts are written off against the allowance when collection of the individual accounts appears doubtful. The Company recorded an allowance for doubtful accounts of $110,658 as of each of June 30, 2016 and December 31, 2015. |
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 $26,116 and $28,813 at June 30, 2016 and December 31, 2015, respectively. |
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 method is 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. In accordance with ASC 350 Intangible Assets, 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 Television Costs | Film and Television 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 its capitalized production costs annually and limits recorded amounts by their ability to recover such costs through expected future sales. 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. After the initial release of the film or episodic series, the costs of significant improvement to existing products are capitalized while routine and periodic alterations to existing products are expensed as incurred. |
Revenue Recognition | Revenue Recognition The Company recognizes revenue in accordance with ASC 926-605 Entertainment-Films - Revenue Recognition. Accordingly, the Company recognizes revenue when (i) persuasive evidence of a sale with customer exists, (ii) the film is complete and has been delivered or is available for delivery, (iii) the license period of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale, (iv) the arrangement fee is fixed or determinable, and (v) collection of the arrangement fee is reasonably assured. The Companys licensing and royalty revenue represents revenue generated from license agreements that 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. Licensing income the Company recognizes as an agent is 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. The Company recognizes 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. |
Stock Based Compensation | Stock Based Compensation As required by ASC 718 - Stock Compensation, the Company recognizes an expense related to the fair value of our stock-based compensation awards, including stock options, using the Black-Scholes calculation as of the date of grant. |
Earnings Per Share | Earnings Per Share Basic earnings (loss) per common share (EPS) is calculated by dividing net income (loss) applicable to common shareholders by the weighted average number of shares of common stock outstanding for the period. Diluted EPS is calculated by dividing net income (loss) applicable to common shareholders by the weighted average number of shares of common stock 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. Net income (loss) applicable to common shareholders is calculated by deducting any dividend on preferred stock. As the conversion price of the Series A Preferred Stock on a converted basis was below the market price of the common stock on the closing date, an imputed dividend was calculated. |
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. |
Fair value of financial instruments | Fair value of financial instruments The carrying amounts of cash, receivables and accrued liabilities approximate fair value due to the short-term maturity of the instruments. We adopted ASC 820 as of January 1, 2008 for financial instruments measured at fair value on a recurring basis. ASC Topic 820 defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP and expands disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include: · Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; · Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and · Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (ASU 2014-09). ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of non-financial assets unless those contracts are within the scope of other standards (e.g. insurance contracts). This ASU will supersede all revenue recognition requirements in Topic 605, Revenue Recognition, and industry-specific guidance throughout the industry topics of the codification. The guidance's core principle 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. In applying the revenue principles, an entity will identify the contract(s) with a customer, identify the performance obligations, determine the transaction price, allocate the transaction price to the performance obligations and recognize revenue when the performance obligation is satisfied (either over time or at a point in time). The ASU further states that an entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which approved a one-year deferral of the effective date of the ASU from the original effective date of annual reporting periods beginning after December 15, 2016, to annual reporting periods (including interim reporting periods) beginning after December 15, 2017, with an option for early adoption of the standard on the original effective date. Additionally, in March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarified the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, that amended the revenue guidance on identifying performance obligations and accounting for licenses of intellectual property. In May 2016, the FASB issued ASU 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 805): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting, which rescinded from the FASB Accounting Standards Codification certain SEC paragraphs as a result of two SEC Staff Announcements. The FASB also issued ASU 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which clarified guidance on assessment of collectability, presentation of sale taxes, measurement of noncash consideration, and certain transition matters. The Company is still evaluating the impact that the provisions of ASU 2014-09 and related subsequent updates will have on the Company's condensed consolidated financial position, results of operations and cash flows. In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases. The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2018. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In March 2016, the FASB issued Accounting Standards Update 2016-09, Compensation - Stock Compensation ( 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. |
4. Property and Equipment, Net
4. Property and Equipment, Net (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | 6/30/2016 12/31/2015 Furniture and Equipment $ 12,385 $ 12,385 Computer Equipment 38,352 36,810 Leasehold Improvements 176,903 176,903 Software 15,737 15,737 Less Accumulated Depreciation (123,951 ) (90,887 ) Property and Equipment, Net $ 119,426 $ 150,948 |
6. Goodwill and Intangible As27
6. Goodwill and Intangible Assets, Net (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Goodwill And Intangible Assets Net Tables | |
Schedule of Intangible Assets | 6/30/2016 12/31/2015 Identifiable Artistic-Related Assets (a) $ 1,740,000 $ 1,740,000 Trademarks (b) 129,831 129,831 Product Masters (b) 64,676 64,676 Other Intangible Assets (b) 185,019 181,220 Less Accumulated Amortization (c) (235,836 ) (197,521 ) Intangible Assets, Net $ 1,883,690 $ 1,918,206 |
Expected Future Ingtangible Asset Amortization | Fiscal Year: 2016 $ 35,862 2017 53,534 2018 26,119 2019 9,236 2020 8,655 Remaining 10,284 Total $ 143,690 |
8. Accrued Liabilities (Tables)
8. Accrued Liabilities (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Payables and Accruals [Abstract] | |
Other accrued liabilities | 6/30/2016 12/31/2015 Accrued Salaries and Wages (a) $ 116,385 $ 96,385 Disputed Trade Payables (b) 925,000 925,000 Services Advance - Current Portion (c) 1,489,583 Other Accrued Expenses 303,110 509,477 Total Accrued Liabilities $ 2,834,078 $ 1,530,862 |
11. Stock Options (Tables)
11. Stock Options (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of stock option activity | Options Outstanding Number of Shares Exercise Price per Share Weighted Average Remaining Contractual Life Aggregate Intrinsic Value Weighted Average Exercise Price per Share Balance at December 31, 2015 4,223,208 $0.94 - $4.00 4.94 years $ 58,512 $ 2.70 Options Granted Options Exercised Options Cancelled 165,879 $0.94 - $4.00 Options Expired Balance at June 30, 2016 4,057,329 4.44 years $ 636,872 $ 2.70 Exercisable December 31, 2015 300,061 $0.94 4.80 years $ 58,512 $ 0.94 Exercisable June 30, 2016 300,061 $0.94 4.30 years $ 369,074 $ 0.94 |
Assumptions used | Exercise Price $0.94 - $4.00 Dividend Yield 0% Volatility 134% - 137% Risk-free interest rate 0.89% - 1.25% Expected life of options 2.5 - 3.5 years |
12. Warrants (Tables)
12. Warrants (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Warrants and Rights Note Disclosure [Abstract] | |
Schedule of warrant activity | Warrants Outstanding Number of Shares Exercise Price per Share Weighted Average Remaining Contractual Life Weighted Average Exercise Price per Share Aggregate Intrinsic Value Balance at December 31, 2015 5,055,000 $ 1.10-2.00 4.75 years $ 1.16 $ Warrants Granted Warrants Exercised 75,000 Warrants Expired Balance at June 30, 2016 4,980,000 $ 1.10-2.00 4.25 years $ 1.16 $ 5,016,000 Exercisable December 31, 2015 5,055,000 $ 1.10-2.00 4.75 years $ 1.16 $ - Exercisable June 30, 2016 4,980,000 $ 1.10-2.00 4.25 years $ 1.16 $ 5,016,100 |
15. Lease Commitments (Tables)
15. Lease Commitments (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Lease Commitments Tables | |
Future minimum lease payments | Year Amount 2016 $ 69,448 2017 143,451 2018 36,214 $ 249,113 |
1. Organization and Business (D
1. Organization and Business (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | ||
Accumulated deficit | $ (30,213,445) | $ (30,213,445) | $ (27,045,776) | ||||
Stockholders equity | 12,689,220 | 12,689,220 | 14,121,584 | ||||
Current assets | 5,496,506 | 5,496,506 | 5,432,031 | ||||
Cash | 4,938,720 | $ 2,872,253 | 4,938,720 | $ 2,872,253 | 5,187,620 | $ 4,301,099 | |
Current liabilities | 3,679,324 | 3,679,324 | 2,606,680 | ||||
Short-term debt to related parties | 0 | 0 | 410,535 | ||||
Trade payables | [1] | 925,000 | 925,000 | $ 925,000 | |||
Working capital | 1,817,182 | 1,817,182 | |||||
Net loss | $ (1,182,952) | $ (987,855) | (2,832,669) | (1,624,117) | |||
Net cash used in operating activities | (324,208) | $ (1,896,298) | |||||
Sony Pictures Home Entertainment [Member] | |||||||
Proceeds from distribution agreement | $ 2,000,000 | ||||||
[1] | As part of the Merger, the Company assumed certain liabilities from a previous member of A Squared which has claimed certain liabilities totaling $925,000. The Company disputes the basis for this liability. As of June 30, 2016, the Company believes that the statute of limitations applicable to the assertion of any legal claim relating to the collection of these liabilities has expired and therefore believes this liability is uncollectible. The Company is working with the counterparty to extinguish this liability. |
2. Significant Accounting Polic
2. Significant Accounting Policies (Details Narrative) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Accounting Policies [Abstract] | ||
Allowance for doubtful accounts | $ 110,658 | $ 110,658 |
Reserve for obsolete inventory | $ 26,116 | $ 28,813 |
3. Inventory (Details Narrative
3. Inventory (Details Narrative) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Inventory Disclosure [Abstract] | ||
Inventory reserve | $ 26,116 | $ 28,813 |
4. Property and Equipment, Ne35
4. Property and Equipment, Net (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Less Accumulated Depreciation | $ (123,951) | $ (123,951) | $ (90,887) | ||
Property and Equipment, Net | 119,426 | 119,426 | 150,948 | ||
Depreciation expense | 16,428 | $ 17,958 | 33,063 | $ 29,827 | |
Furniture and Fixtures [Member] | |||||
Property and equipment, gross | 12,385 | 12,385 | 12,385 | ||
Computer Equipment [Member] | |||||
Property and equipment, gross | 38,352 | 38,352 | 36,810 | ||
Leasehold Improvements [Member] | |||||
Property and equipment, gross | 176,903 | 176,903 | 176,903 | ||
Software [Member] | |||||
Property and equipment, gross | $ 15,737 | $ 15,737 | $ 15,737 |
5. Film and Television Costs an
5. Film and Television Costs and Capitalized Product Development in Process (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Film and Television costs | $ 1,250,352 | $ 1,250,352 | $ 1,003,546 | ||
Amortization of film and television costs | 17,644 | $ 0 | 135,157 | $ 0 | |
Film and Television Costs [Member] | |||||
Amortization of film and television costs | 17,644 | $ 0 | 135,157 | $ 0 | |
Accumulated amortization of film and television cost | $ 262,708 | $ 262,708 | $ 127,551 |
6. Goodwill and Intangible As37
6. Goodwill and Intangible Assets, Net (Details - Intangibles) - USD ($) | 6 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | ||
Net Intangible Assets | $ 1,883,690 | $ 1,918,206 | ||
Amortization expense | 38,315 | $ 30,323 | ||
Identifiable artistic-related assets [Member] | ||||
Intangible assets | [1] | 1,740,000 | 1,740,000 | |
Trademarks [Member] | ||||
Intangible assets | [2] | 129,831 | 129,831 | |
Product Masters [Member] | ||||
Intangible assets | 64,676 | 64,676 | ||
Other Intangible Assets [Member] | ||||
Intangible assets | 185,019 | 181,220 | ||
Trademarks, Product Masters and Other Intangible Assets [Member] | ||||
Less Accumulated Amortization | [3] | $ (235,836) | $ (197,521) | |
[1] | In association with the Merger, the Company acquired $1,740,000 of 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 June 30, 2016, the Company has not recognized any impairment expense related to these assets. | |||
[2] | 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 three and six months ended June 30, 2016 and 2015, the Company did not recognize any impairment of these assets. | |||
[3] | During the three months ended June 30, 2016 and 2015, the Company recognized $19,184 and $16,580, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. During the six months ended June 30, 2016 and 2015, the Company recognized $38,315 and $30,323, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. |
6. Goodwill and Intangible As38
6. Goodwill and Intangible Assets (Details - future amortization) | Jun. 30, 2016USD ($) |
Future intangible asset amortization | |
2,016 | $ 35,862 |
2,017 | 53,534 |
2,018 | 26,119 |
2,019 | 9,236 |
2,020 | 8,655 |
Remaining | 10,284 |
Total | $ 143,690 |
7. Deferred Revenue and Advance
7. Deferred Revenue and Advances (Details Narrative) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Deferred Revenue And Advances Details Narrative | ||
Deferred revenue | $ 3,099,979 | $ 958,539 |
8. Accrued Liabilities (Details
8. Accrued Liabilities (Details) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 | |
Payables and Accruals [Abstract] | |||
Accrued Salaries and Wages | [1] | $ 116,385 | $ 96,385 |
Disputed trade payables | [2] | 925,000 | 925,000 |
Services Advance - Current Portion | [3] | 1,489,583 | 0 |
Total Accrued expenses | 303,110 | 509,477 | |
Total accrued liabilities | $ 2,834,078 | $ 1,530,862 | |
[1] | Accrued Salaries and Wages represent accrued vacation payable to employees. | ||
[2] | 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. As of June 30, 2016, the Company believes that the statute of limitations applicable to the assertion of any legal claim relating to the collection of these liabilities has expired and therefore believes this liability is uncollectible. The Company is working with the counterparty to extinguish this liability. | ||
[3] | 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 the Company’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 $750,000 during the first quarter of 2015. At the end of the term, the Company is obligated to repay a pro-rata portion of the advance if it has not ordered a minimum number of DVD/CD units during the term. |
9. Short-Term Debt - Related 41
9. Short-Term Debt - Related Parties (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Short term debt, related party | $ 0 | $ 0 | $ 410,535 | ||
Andrew Heyward [Member] | |||||
Short term debt, related party | 0 | $ 0 | $ 410,535 | ||
Stock issued to settle debt, shares issued | 238,683 | ||||
Imputed interest on related party debt | $ 0 | $ 6,229 | $ 6,141 | $ 12,319 |
10. Stockholders' Equity (Detai
10. Stockholders' Equity (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2016 | Mar. 31, 2016 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Common shares outstanding | 11,938,133 | 11,938,133 | 11,259,450 | ||
Proceeds from warrants exercised | $ 82,500 | $ 0 | |||
Stock issued in settlement agreement, shares | 30,000 | ||||
Preferred stock issued | 4,955 | 4,955 | 5,290 | ||
Preferred stock outstanding | 4,955 | 4,955 | 5,290 | ||
Conversion of Preferred [Member] | Various Dates [Member] | |||||
Common stock issued in conversion stock, common stock issued | 335,000 | ||||
Stock converted, shares converted | 335 | ||||
Imputed dividend | $ 250,000 | $ 85,000 | |||
Warrants [Member] | Various Dates [Member] | |||||
Common stock issued in conversion stock, common stock issued | 75,000 | ||||
Stock converted, shares converted | 75,000 | ||||
Proceeds from warrants exercised | $ 82,500 | ||||
Investors [Member] | |||||
Stock issued in private placement, shares | 4,330,000 | ||||
Proceeds from sale of stock | $ 4,330,000 | ||||
Stock offering costs | $ 502,218 | ||||
Andrew Heyward [Member] | |||||
Stock issued for satisfaction of advances, shares issued | 238,683 |
11. Stock Options (Details-Opti
11. Stock Options (Details-Option activity) - Stock Options [Member] - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2016 | Dec. 31, 2015 | |
Stock Options | ||
Number of Options outstanding beginning balance | 4,223,208 | |
Number of Options Granted | 0 | |
Number of Options Exercised | 0 | |
Number of Options Cancelled | 165,879 | |
Number of Options Expired | 0 | |
Number of Options outstanding ending balance | 4,057,329 | 4,223,208 |
Number of Options exercisable | 300,061 | 300,061 |
Exercise Price Per Share | ||
Exercise price per share beginning balance | $0.94-$4.00 | |
Exercise price per share, exercisable | $ 0.94 | $ 0.94 |
Weighted Average Remaining Contractual Life | ||
Weighted Average Remaining Contractual Life | 4 years 5 months 9 days | 4 years 11 months 9 days |
Weighted average remaining contractual life, exercisable | 4 years 3 months 18 days | 4 years 9 months 18 days |
Aggregate Intrinsic Value | ||
Aggregate intrinsic value, options outstanding | $ 636,872 | $ 58,512 |
Aggregate intrinsic value, exercisable | $ 369,074 | $ 58,512 |
Weighted Average Exercise Price Per Share | ||
Weighted Average Exercise Price per Share beginning balance | $ 2.70 | |
Weighted Average Exercise Price per Share ending balance | 2.70 | $ 2.70 |
Weighted Average Exercise Price per Share Exercisable | $ 0.94 | $ 0.94 |
11. Stock Options (Details Narr
11. Stock Options (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2016 | Mar. 31, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Recognized stock based compensation expense | $ 312,977 | $ 564,985 | $ 0 | $ 564,985 | $ 0 |
Stock based compensation expense from true-up from prior periods | $ 220,564 | $ 220,564 | $ 0 | ||
2015 Plan [Member] | |||||
Shares authorized under plan | 4,330,000 | 4,330,000 |
12. Warrants (Details)
12. Warrants (Details) - Warrant [Member] - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2016 | Dec. 31, 2015 | |
Warrant | ||
Number of Warrants outstanding beginning balance | 5,055,000 | |
Warrants Granted | 0 | |
Warrants Exercised | 75,000 | |
Warrants Expired | 0 | |
Number of Warrants outstanding ending balance | 4,980,000 | 5,055,000 |
Number of Warrants exercisable | 4,980,000 | 5,055,000 |
Exercise Price Per Share | ||
Exercise price per share, beginning balance | $ 1.16 | |
Exercise price per share, ending balance | $ 1.16 | $ 1.16 |
Exercise price per share range | $1.10-2.00 | $1.10-2.00 |
Exercise price per share, exercisable | $1.10-2.00 | $1.10-2.00 |
Weighted average remaining contractual life, warrants outstanding | 4 years 6 months | 4 years 9 months |
Weighted average remaining contractual life, exercisable | 4 years 6 months | 4 years 9 months |
Aggregate Intrinsic Value | ||
Aggregate intrinsic value, outstanding | $ 5,016,100 | |
Aggregate instrinsic value, exercisable | $ 5,016,100 |
14. Employment Agreements (Deta
14. Employment Agreements (Details Narrative) - Annual Salary [Member] | Jun. 30, 2016USD ($) |
Andrew Heyward [Member] | |
Officer annual salaries | $ 200,000 |
Amy Moynihan Heyward [Member] | |
Officer annual salaries | 180,000 |
Stone Newman [Member] | |
Officer annual salaries | 275,000 |
Rebecca Hershinger [Member] | |
Officer annual salaries | $ 175,000 |
15. Lease Commitments (Details)
15. Lease Commitments (Details) | Jun. 30, 2016USD ($) |
Lease Commitments Tables | |
2,016 | $ 69,448 |
2,017 | 143,451 |
2,018 | 36,214 |
Operating Leases, Future Minimum Payments Due | $ 249,113 |
15. Lease Commitments (Details
15. Lease Commitments (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Leases [Abstract] | ||||
Rental expenses | $ 34,818 | $ 34,555 | $ 69,825 | $ 72,136 |