Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 11, 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 | Sep. 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 | 3,990,349 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,016 |
Consolidated Balance Sheets (Un
Consolidated Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 | |
Current Assets: | |||
Cash and Cash Equivalents | $ 3,642,667 | $ 5,187,620 | |
Accounts Receivable, net | 199,337 | 171,867 | |
Inventory, net | 6,562 | 7,080 | |
Prepaid and Other Assets | 319,142 | 65,464 | |
Total Current Assets | 4,167,708 | 5,432,031 | |
Property and Equipment, net | 102,852 | 150,948 | |
Film and Television Costs, net | 1,602,236 | 1,003,546 | |
Intangible Assets, net | 1,864,242 | 1,918,206 | |
Goodwill | 10,365,805 | 10,365,805 | |
Total Assets | 18,102,843 | 18,870,536 | |
Current Liabilities: | |||
Accounts Payable | 425,678 | 359,433 | |
Accrued Expenses | 224,854 | 509,477 | |
Deferred Revenue | 369,894 | 305,850 | |
Accrued Salaries and Wages | 119,608 | 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 | 3,554,617 | 2,606,680 | |
Long Term Liabilities: | |||
Deferred Revenue | 2,748,836 | 652,689 | |
Production facility credit line | 239,655 | 0 | |
Services Advance | 0 | 1,489,583 | |
Total Liabilities | 6,543,108 | 4,748,952 | |
Stockholders' Equity: | |||
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, 233,333,334 shares authorized, respectively; 3,990,211 and 3,753,150 shares issued and outstanding, respectively | $ 3,991 | $ 3,753 | |
Common Stock to Be Issued | 24 | 24 | |
Additional Paid in Capital | $ 46,349,747 | $ 44,547,427 | |
Accumulated Deficit | (34,793,193) | (30,429,626) | |
Accumulated Other Comprehensive Income (Loss) | (839) | 0 | |
Total Equity | 11,559,735 | 14,121,584 | |
Total Liabilities & Stockholders' Equity | $ 18,102,843 | $ 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 September 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 | Sep. 30, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Common Stock, par value | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 233,333,334 | 233,333,334 |
Common Stock, shares issued | 3,990,211 | 3,753,150 |
Common Stock, shares outstanding | 3,990,211 | 3,753,150 |
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 | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenues: | ||||
Licensing & Royalties | $ 85,660 | $ 98,035 | $ 347,128 | $ 372,022 |
Television & Home Entertainment | 34,826 | 182,715 | 285,433 | 323,804 |
Product Sales | 0 | 0 | 16,150 | 15,173 |
Total Revenues | 120,486 | 280,750 | 648,711 | 710,999 |
Cost of Sales | 21,209 | 23,127 | 94,520 | 45,699 |
Gross Profit | 99,277 | 257,622 | 554,191 | 665,300 |
Operating Expenses: | ||||
Professional Services | 166,820 | 244,803 | 470,747 | 549,702 |
Rent Expense | 35,160 | 34,136 | 104,985 | 106,271 |
Marketing & Sales | 220,627 | 91,258 | 686,577 | 342,318 |
Amortization of Film & TV Costs | 23,011 | 42,642 | 158,168 | 42,642 |
Depreciation & Amortization | 36,022 | 36,673 | 107,400 | 96,823 |
Salaries and Related Expenses | 508,812 | 429,347 | 1,597,265 | 1,414,746 |
Stock Compensation Expense | 358,919 | 0 | 1,236,880 | 0 |
Bad Debt Expense (Recovery) | 0 | 0 | 0 | (1,550) |
Other General and Administrative | 283,627 | 133,388 | 806,576 | 581,774 |
Loss on Impairment of Assets | 0 | 0 | 1,850 | 7,500 |
Total Operating Expenses | 1,632,998 | 1,012,247 | 5,170,448 | 3,140,226 |
Loss from Operations | (1,533,721) | (754,624) | (4,616,257) | (2,474,926) |
Other Income (Expense): | ||||
Other Income | 3,238 | 11,421 | 3,298 | 16,965 |
Interest Expense | (417) | (723) | (2,570) | (2,212) |
Interest Expense - Related Parties | 0 | (6,224) | (6,141) | (18,544) |
Gain / (Loss) on Settlement of Distribution Contracts | 0 | (47,650) | 258,103 | 102,350 |
Gain / (Loss) on Deferred Financing Costs | 0 | 0 | 0 | (9,313) |
Unrealized Gain (Loss) on Foreign Currency Translation | 0 | (20) | 0 | (36,258) |
Net Other Income (Expense) | 2,821 | (43,196) | 252,690 | 52,988 |
Loss before Income Tax expense | (1,530,900) | (797,820) | (4,363,567) | (2,421,938) |
Income Tax expense | 0 | 0 | 0 | 0 |
Net Loss | $ (1,530,900) | $ (797,820) | $ (4,363,567) | $ (2,421,938) |
Net Loss per Common Share (Basic and Diluted) | $ (.38) | $ (.37) | $ (1.12) | $ (1.12) |
Weighted Average Shares Outstanding (Basic and Diluted) | 3,988,626 | 2,176,484 | 3,889,108 | 2,154,835 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Consolidated Statements Of Comprehensive Income | ||||
Net Loss | $ (1,530,900) | $ (797,820) | $ (4,363,567) | $ (2,421,938) |
Other Comprehensive Income (Loss), Net of Tax: | ||||
Unrealized Gain (Loss) on Foreign Currency Translation | (6) | 0 | (839) | 0 |
Other Comprehensive Income (Loss), Net of Tax: | (6) | 0 | (839) | 0 |
Comprehensive Income (Loss) | $ (1,530,906) | $ (797,820) | $ (4,364,406) | $ (2,421,938) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash Flows from Operating Activities: | ||
Net Loss | $ (4,363,567) | $ (2,421,938) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Amortization of Film and Television Costs | 158,168 | 0 |
Depreciation Expense | 49,637 | 46,501 |
Amortization Expense | 57,763 | 50,322 |
Imputed Interest Expense | 6,141 | 18,544 |
Bad Debt Expense / (Recovery) | 0 | (1,550) |
Stock Issued for Services | 39,000 | 0 |
Stock Compensation Expense | 1,236,880 | 0 |
(Gain) Loss on Distribution Contracts | (258,103) | (102,350) |
(Gain) Loss on Impairment of Assets | 1,850 | 7,500 |
(Gain) Loss on Deferred Financing Asset | 0 | 9,313 |
(Gain) Loss on Foreign Currency Translation | 0 | 36,258 |
Decrease (increase) in operating assets | ||
Accounts Receivable | 220,285 | 18,612 |
Inventory | 518 | (2,355) |
Prepaid Expenses & Other Assets | (253,678) | 16,744 |
Film and Television Costs, net | (754,770) | (599,681) |
Increase (decrease) in operating liabilities | ||
Accounts Payable | 66,247 | (14,059) |
Accrued Salaries | 23,223 | 35,332 |
Deferred Revenue and Advances | 2,159,120 | 165,270 |
Other Accrued Expenses | (274,042) | 125,930 |
Net cash used in operating activities | (1,885,328) | (2,611,607) |
Cash Flows from Investing Activities: | ||
Investment in Intangible Assets | (5,650) | (111,221) |
Investment in Fixed Assets | (1,542) | (180,853) |
Net cash used in investing activities | (7,192) | (292,074) |
Cash Flows from Financing Activities: | ||
Proceeds from Exercise of Warrants | 110,000 | 0 |
Proceeds from Production Facility, Net of Offering Costs | 237,567 | 0 |
Proceeds from Services Advance | 0 | 750,000 |
Proceeds of Related Party Notes | 0 | 513 |
Net cash provided by financing activities | 347,567 | 750,513 |
Net Decrease in Cash and Cash Equivalents | (1,544,953) | (2,153,168) |
Beginning Cash and Cash Equivalents | 5,187,620 | 4,301,099 |
Ending Cash and Cash Equivalents | 3,642,667 | 2,147,931 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash paid for interest | 1,450 | 1,076 |
Schedule of non-cash financing and investing activites: | ||
Issuance Of Common Stock In Satisfaction Of Short Term Advances | $ 410,535 | $ 0 |
1. Organization and Business
1. Organization and Business | 9 Months Ended |
Sep. 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, 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 Company’s 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 Crusaders 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 the rights and obligations of its then Chief Executive Officer, under an Asset Purchase Agreement between the Company and Genius Products, Inc., in which the Company obtained all rights, copyrights, and trademarks to the brands “Baby Genius,” “Little Genius,” “Kid Genius,” “123 Favorite Music” and “Wee Worship,” and all then existing productions under those titles. In October 2011, the Company (i) changed its domicile to Nevada from California, and (ii) changed its name to Genius Brands International, Inc. from Pacific Entertainment Corporation (the “Reincorporation”). In connection with the Reincorporation, the Company changed its trading symbol from “PENT” to “GNUS”. On November 15, 2013, the Company entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) with A Squared Entertainment LLC, a Delaware limited liability company (“A Squared”), A Squared Holdings LLC, a California limited liability company and sole member of A Squared (the “Parent Member”) and A2E Acquisition LLC, its newly formed, wholly-owned Delaware subsidiary (“Acquisition Sub”). Upon closing of the transactions contemplated under the Merger Agreement (the “Merger”), which occurred concurrently with entering into the Merger Agreement, the Acquisition Sub merged with and into A Squared, and A Squared, as the surviving entity, became a wholly-owned subsidiary of the Company. As a result of the Merger, the Company acquired the business and operations of A Squared. On November 4, 2016, the Company filed a certificate to change its Articles of Incorporation to effect a reverse split on a 1-for-3 basis (the “2016 Reverse Split”). The 2016 Reverse Split became effective on November 9, 2016. All common stock share and per share information in this Quarterly Report on Form 10-Q (“Form 10-Q”), including the accompanying consolidated financial statements and notes thereto, have been adjusted to reflect retrospective application of the 2016 Reverse Split, unless otherwise indicated. Liquidity Historically, the Company has incurred net losses. As of September 30, 2016, the Company had an accumulated deficit of $34,793,193 and total stockholders’ equity of $11,559,735. At September 30, 2016, the Company had current assets of $4,167,708, including cash of $3,642,667 and current liabilities of $3,554,617, including certain trade payables of $925,000 to which the Company disputes the claim, resulting in working capital of $613,091. For the three months ended September 30, 2016 and 2015, the Company reported a net loss of $1,530,900 and $797,820, respectively. For the nine months ended September 30, 2016 and 2015, the Company reported a net loss of $4,363,567 and $2,421,938, respectively, and reported net cash used by operating activities $1,885,328 and $2,611,607, respectively. During the nine months ended September 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. Additionally, on August 8, 2016, Llama Productions LLC (“Llama Productions”), a California limited liability company and wholly-owned subsidiary of the Company, closed a $5,275,000 multiple draw-down, secured, non-recourse, non-revolving credit 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 | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Basis of Presentation Our consolidated financial statements for the year ended December 31, 2015 and the three and nine months ended September 30, 2016, include an immaterial revision to additional paid in capital as well as retained earnings related to the beneficial conversion feature of certain preferred securities. The effect of the revision was to increase additional paid in capital by $3,383,850 and to reduce retained earnings by the same amount with no net effect to total stockholders’ equity. In accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin Nos. 99 and 108 (“SAB 99” and “SAB 108”), the Company has evaluated this error and, based on an analysis of quantitative and qualitative factors, has determined that it was not material to any of the reporting periods affected and no amendments to previously filed 10-Q or 10-K reports with the SEC are required. The following table summarizes impact of these errors on the Company’s consolidated financial statement, principally the consolidated balance sheet and the consolidated statement of operations as the errors and corrections are both non-cash items. All information has been adjusted for the 2016 Reverse Split. Impact of Errors on the Consolidated Balance Sheet As of 12/31/15 As of 12/31/15 in $ As Presented Adjustment As Adjusted % Variance Preferred Stock, $0.001 par value, 10,000,000 share authorized, respectively; 5,290 shares issued and outstanding $ 6 – $ 6 – Common Stock, $0.001 par value, 233,333,334 shares authorized, respectively; 3,753,150 shares issued and outstanding 3,753 – 3,753 – Common Stock to Be Issued 24 – 24 – Additional Paid in Capital 41,163,577 3,383,850 44,547,427 8% Accumulated Deficit (27,045,776 ) (3,383,850 ) (30,429,626 ) 13% Accumulated Other Comprehensive Income (Loss) – – – – Total Equity $ 14,121,584 – $ 14,121,584 – Impact of Errors on the Consolidated Statement of Operations For the twelve months ended 12/31/15 For the twelve months ended 12/31/15 in $ As Presented Adjustment As Adjusted % Variance Net Loss $ (3,483,122 ) – $ (3,483,122 ) 0% Beneficial Conversion Feature on Preferred Stock (400,000 ) (3,383,850 ) (3,783,850 ) -846% Net Loss Applicable to Common Shareholders (3,883,122 ) (3,383,850 ) (7,266,972 ) -87% Net Loss per Common Share $ (1.55 ) (1.35 ) $ (2.90 ) -87% Weighted Average Shares Outstanding 2,500,854 – 2,500,854 0% Impact of Errors on the Consolidated Statement of Operations For the nine months ended 9/30/16 For the nine months ended 9/30/16 in $ As Presented Adjustment As Adjusted % Variance Net Loss $ (4,363,567 ) – $ (4,363,567 ) 0% Beneficial Conversion Feature on Preferred Stock (335,000 ) 335,000 – 100% Net Loss Applicable to Common Shareholders $ (4,698,567 ) 335,000 (4,363,567 ) 7% Net Loss per Common Share $ (1.21 ) 0.09 $ (1.12 ) 7% Weighted Average Shares Outstanding 3,889,108 – 3,889,108 0% 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 as well as its interest in Stan Lee Comics, LLC (“Stan Lee Comics”). All significant inter-company balances and transactions have been eliminated in consolidation. 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. 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 to conform to current period classifications. Cash and Cash Equivalents The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents. Included in Cash and Cash Equivalents is $1,000,000 that the Company deposited into a cash account to be used solely for the production of its series Llama Llama 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 September 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 $26,097 and $28,813 at September 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 a customer exists, (ii) the film is complete and has been delivered or is available for delivery, (iii) the license period of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale, (iv) the arrangement fee is fixed or determinable, and (v) collection of the arrangement fee is reasonably assured. The Company’s 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 Company’s 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 seller’s price is substantially fixed, (ii) shipment has occurred causing the buyer to be obligated to pay for product, (iii) the buyer has economic substance apart from the seller, and (iv) there is no significant obligation for future performance to directly bring about the resale of the product by the buyer as required by ASC 605 Revenue Recognition. 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. Income Taxes Deferred income tax assets and liabilities are recognized based on differences between the financial statement and tax basis of assets and liabilities using presently enacted tax rates. At each balance sheet date, the Company evaluates the available evidence about future taxable income and other possible sources of realization of deferred tax assets, and records a valuation allowance that reduces the deferred tax assets to an amount that represents management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized. Fair value of financial instruments The carrying amounts of cash, receivables and accrued liabilities approximate fair value due to the short-term maturity of the instruments. We adopted ASC 820 as of January 1, 2008 for financial instruments measured at fair value on a recurring basis. ASC Topic 820 defines fair value, establishes a framework for measuring fair value in accordance with 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 April 2015, the FASB issued Accounting Standards Update 2015 -3, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. We adopted this standard during the quarter ended September 30, 2016. 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 | 9 Months Ended |
Sep. 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 September 30, 2016 and December 31, 2015, the Company had recorded a total reserve of $26,097 and $28,813, respectively. |
4. Property and Equipment, Net
4. Property and Equipment, Net | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | The Company has property and equipment as follows as of September 30, 2016 and December 31, 2015: 9/30/2016 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 Property and Equipment, Gross 243,377 241,835 Less Accumulated Depreciation (140,525 ) (90,887 ) Property and Equipment, Net $ 102,852 $ 150,948 During the three months ended September 30, 2016 and 2015, the Company recorded depreciation expense of $16,574 and $16,674, respectively. During the nine months ended September 30, 2016 and 2015, the Company recorded depreciation expense of $49,637 and $46,501, respectively. |
5. Film and Television Costs, n
5. Film and Television Costs, net | 9 Months Ended |
Sep. 30, 2016 | |
Film And Television Costs Net | |
Film and Television Costs, net | As of September 30, 2016, the Company had net Film and Television Costs of $1,602,236 compared to $1,003,546 at December 31, 2015. The increase relates primarily to the production and development of SpacePop, Llama Llama, and Stan Lee’s Cosmic Crusaders Thomas Edison’s Secret Lab. During the three months ended September 30, 2016 and 2015, the Company recorded Film and Television Cost amortization expense of $23,011 and $42,642, respectively. During the nine months ended September 30, 2016 and 2015, the Company recorded Film and Television Cost amortization expense of $158,168 and $42,642, respectively. The Company recorded accumulated Film and Television Cost amortization of $285,719 and $127,551 as of September 30, 2016 and December 31, 2015, respectively. Included in the balance at September 30, 2016 is $9,786 in interest related to our production facility (See Note 10, herein) which has been capitalized to the cost of the Llama Llama |
6. Goodwill and Intangible Asse
6. Goodwill and Intangible Assets, Net | 9 Months Ended |
Sep. 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 September 30, 2016, the Company has not recognized any impairment to Goodwill. Intangible Assets, Net The Company had the following intangible assets as of September 30, 2016 and December 31, 2015: 9/30/2016 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 Intangible Assets, Gross 2,119,526 2,115,727 Less Accumulated Amortization (c) (255,284 ) (197,521 ) Intangible Assets, Net $ 1,864,242 $ 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 September 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 nine months ended September 30, 2016 and 2015, the Company did not recognize any impairment of these assets. (c) During the three months ended September 30, 2016 and 2015, the Company recognized $19,448 and $19,999, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. During the nine months ended September 30, 2016 and 2015, the Company recognized $57,763 and $50,322, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. Expected future intangible asset amortization as of September 30, 2016 is as follows: Fiscal Year: 2016 $ 18,593 2017 55,520 2018 26,119 2019 9,236 2020 8,655 Remaining 6,119 Total $ 124,242 |
7. Deferred Revenue
7. Deferred Revenue | 9 Months Ended |
Sep. 30, 2016 | |
Deferred Revenue Disclosure [Abstract] | |
Deferred Revenue | As of September 30, 2016 and December 31, 2015, the Company had total deferred revenue of $3,118,730 and 958,539, respectively. Deferred revenue includes both (i) variable fee contracts with licensees and customers in which the Company had collected advances and minimum guarantees against future royalties and (ii) 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 | 9 Months Ended |
Sep. 30, 2016 | |
Payables and Accruals [Abstract] | |
Accrued Liabilities | As of September 30, 2016 and December 31, 2015, the Company has the following accrued liabilities: 9/30/2016 12/31/2015 Accrued Salaries and Wages (a) $ 119,608 $ 96,385 Disputed Trade Payables (b) 925,000 925,000 Services Advance - Current Portion (c) 1,489,583 – Other Accrued Expenses 224,854 509,477 Total Accrued Liabilities $ 2,759,045 $ 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 September 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 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 Pa
9. Short-Term Debt - Related Parties | 9 Months Ended |
Sep. 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 Company’s current Chief Executive Officer, Andrew Heyward. As of December 31, 2015, these advances totaled $410,535. On May 4, 2016, the Company issued to Mr. Heyward 79,561 shares of common stock valued at $5.16 per share, the day’s closing stock price, in full payment and 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 September 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 nine months ended September 30, 2016 and 2015, the Company recognized imputed interest expense of $6,141 and $18,544 as a contribution to additional paid-in capital, respectively. |
10. Production Facility
10. Production Facility | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Secured, non-revolving line of credit | On August 8, 2016, Llama Productions LLC, a wholly-owned subsidiary of the Company, closed a $5,275,000 multiple draw-down, non-recourse, secured, non-revolving credit facility (the “Facility”) with Bank Leumi USA for the production of its animated series Llama Llama As of September 30, 2016, the Company had gross outstanding borrowing under the facility of $385,971 against which offering costs of $146,316 were applied resulting in net borrowings of $239,655. |
11. Stockholders' Equity
11. Stockholders' Equity | 9 Months Ended |
Sep. 30, 2016 | |
Equity [Abstract] | |
Stockholders' Equity | Common Stock As of September 30, 2016, the total number of authorized shares of common stock was 233,333,334. On April 2, 2014, we filed a certificate of change to our Articles of Incorporation to effect a reverse split on a 1-for-100 basis (the “2014 Reverse Split.”). The 2014 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 application of the 2014 Reverse Split, unless otherwise indicated. The total number of authorized shares of common stock was not adjusted in conjunction with the 2014 Reverse Split. On October 29, 2015, the Company conducted a private placement with certain accredited investors pursuant to which it sold an aggregate of 1,443,334 shares of its common stock, par value $0.001 per share, and warrants to purchase up to an aggregate of 1,443,334 shares of common stock for a purchase price of $3.00 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 13 for additional information about these warrants.) On October 6, 2016, the Board of Directors of the Company authorized a reverse stock split in preparation for the Company’s anticipated uplisting on the NASDAQ Capital Market. On November 4, 2016, the Company filed a certificate of change to the Company’s Articles of Incorporation with the Secretary of State of the State of Nevada to effect a 1-for-3 reverse stock split of the Company’s issued and outstanding common stock. As a result of the reverse stock split, every three shares of the Company’s issued and outstanding common stock were automatically combined and reclassified into one share of the Company’s common stock. The reverse stock split affected all issued and outstanding shares of common stock, as well as common stock underlying stock options and warrants outstanding. No fractional shares will be issued in connection with the reverse stock split. Stockholders who would otherwise hold a fractional share of common stock will receive an increase to their common stock as the common stock will be rounded up to a full share. The total number of authorized shares of common stock was reduced from 700,000,000 to 233,333,334 in conjunction with the reverse stock split. The reverse stock split became effective on November 9, 2016. All disclosures of shares and per share data in these consolidated financial statements and related notes have been retroactively adjusted to reflect the reverse stock split for all periods presented. As of September 30, 2016 and December 31, 2015, there were 3,990,211 and 3,753,150 shares of common stock outstanding, respectively. Below are the changes to the Company’s common stock during the nine months ended September 30, 2016: · On various dates during the nine months ended September 30, 2016, the Company issued 111,667 shares of the Company’s common stock as a conversion of 335 shares of Series A Preferred Stock. · On various dates during the nine months ended September 30, 2016, the Company issued 33,334 shares of the Company’s common stock for the exercise of 33,334 warrants each with an exercise price of $3.30 for total cash proceeds of $110,000. · On March 12, 2016, the Company issued 10,000 shares of the Company’s common stock valued at $2.40 per share 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 79,561 shares of common stock valued at $5.16 per share, the day’s closing stock price, in satisfaction of certain short term advances. · On July 19, 2016, the Company issued 2,500 shares of common stock valued at $6.00 per share, the day’s closing stock price, to a vendor for services rendered. 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 September 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 Company’s common stock, par value $0.001 per share, based on a conversion calculation equal to the Base Amount divided by the conversion price. The Base Amount is defined as the sum of (i) the aggregate stated value of the Series A Preferred Stock to be converted and (ii) all unpaid dividends thereon. The stated value of each share of the Series A Preferred Stock is $1,000 and the initial conversion price is $6.00 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 Company’s common stock, calculated immediately after giving effect to the issuance of shares of common stock upon conversion of the Series A Preferred Stock. The shares of Series A Preferred Stock 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 fourth quarter of 2015, in connection with the 2015 Private Placement in which the Company’s common stock was sold at $3.00 per share, the conversion price of the Series A Preferred Stock decreased to $3.00. This decrease resulted in an additional beneficial conversion feature of $3,383,850 which has now been recognized as of the time of the 2015 Private Placement as opposed to at the time of each investor’s conversion of the Series A Preferred Stock into common stock. (See Basis of Presentation in Note 2, herein). |
12. Stock Options
12. Stock Options | 9 Months Ended |
Sep. 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 2008 Stock Option Plan (the “Plan”), which provides for the issuance of qualified and non-qualified stock options to officers, directors, employees and other qualified persons. The Plan is administered by the Board of Directors of the Company or a committee appointed by the Board of Directors. The number of shares of the Company’s common stock initially reserved for issuance under the Plan was 36,667. On September 2, 2011, the stockholders holding a majority of the Company’s outstanding common stock adopted an amendment to the Company’s 2008 Stock Option Plan to increase the number of shares of common stock issuable under the plan to 166,667. 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 150,000 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 1,293,334 from 150,000 shares to 1,443,334 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 Company’s stock option plan during the nine months ended September 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 1,407,736 $ 2.82 - 12.00 4.94 years $ 58,512 $ 8.10 Options Granted 85,086 Options Exercised – Options Cancelled 114,298 Options Expired – Balance at September 30, 2016 1,378,524 $ 2.82 - 12.00 4.24 years $ 432,848 $ 8.12 Exercisable December 31, 2015 100,021 $ 2.82 4.80 years $ 58,512 $ 2.82 Exercisable September 30, 2016 120,024 $ 2.82 - 6.00 4.20 years $ 336,068 $ 3.35 During the year ended December 31, 2015, the Company granted options to purchase 1,407,736 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 $2.82 – $12.00 Dividend Yield 0% Volatility 100% - 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. The expense recognized reflects revisions to (i) align with the graded vesting 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 and nine months ended September 30, 2016, the Company recognized $358,919 and $1,236,880 in stock compensation expense, respectively. During the three and nine months ended September 30, 2015, the Company did not recognize any stock based compensation expense. |
13. Warrants
13. Warrants | 9 Months Ended |
Sep. 30, 2016 | |
Warrants and Rights Note Disclosure [Abstract] | |
Warrants | The Company has warrants outstanding to purchase up to 1,651,666 and 1,685,000 at each of September 30, 2016 and December 31, 2015, respectively. In connection with the sale of the Company’s 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 100,000 shares of the Company’s common stock. These warrants are exercisable immediately, have an exercise price of $6.00 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 1,443,334 shares of its common stock, par value $0.001 per share, and warrants to purchase up to an aggregate of 1,443,334 shares of common stock for a purchase price of $3.00 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 $3.30 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 Company’s 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 141,667 shares of the Company’s common stock. These warrants are exercisable immediately, have an exercise price of $3.60 per share, and have a five-year term. The following table summarizes the changes in the Company’s outstanding warrants during the nine months ended September 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 1,685,000 $ 3.30 – 6.00 4.75 years $ 3.48 $ – Warrants Granted – – – – – Warrants Exercised 33,334 – – – – Warrants Expired – – – – – Balance at September 30, 2016 1,651,666 $ 3.30 – 6.00 4.00 years $ 3.48 $ 4,394,750 Exercisable December 31, 2015 1,685,000 $ 3.30 – 6.00 4.75 years $ 3.48 $ – Exercisable September 30, 2016 1,651,666 $ 3.30 – 6.00 4.00 years $ 3.48 $ 4,394,750 |
14. Income Taxes
14. Income Taxes | 9 Months Ended |
Sep. 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 company’s financial statements. ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. At the adoption date of January 1, 2008, the Company had no unrecognized tax benefit which would affect the effective tax rate if recognized. The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operation in the provision for income taxes. As of September 30, 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. At September 30, 2016, the Company has net operating loss carry forwards of approximately $19,186,000 that may be offset against future taxable income from the year 2017 through 2036. |
15. Employment Agreements
15. Employment Agreements | 9 Months Ended |
Sep. 30, 2016 | |
Compensation and Retirement 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 was to receive an annual base salary of $200,000 and $180,000, respectively. Effective August 28, 2016, Amy Moynihan Heyward resigned from her position as President of the Company but will remain on the Board of Directors. 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 Company’s 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 Company’s Executive Vice President and an annual discretionary bonus based on her performance. |
16. Lease Commitments
16. Lease Commitments | 9 Months Ended |
Sep. 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 September 30, 2016 and 2015 were $35,160 and $34,136, respectively. Rental expenses incurred for operating leases during the nine months ended September 30, 2016 and 2015 were $104,985 and $106,271, 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 $ 35,160 2017 143,451 2018 36,214 $ 214,825 |
17. Commitment and Contingencie
17. Commitment and Contingencies | 9 Months Ended |
Sep. 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. |
18. Related Party
18. Related Party | 9 Months Ended |
Sep. 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 Company’s Chief Executive Officer. The Company entered into a customary merchandise license agreement with AHAA for the use of characters and logos related to Warren Buffet’s Secret Millionaires Club Stan Lee’s Mighty 7 On July 25, 2016, the Company entered into a consulting agreement with Foothill Entertainment, Inc. (“Foothill”), an entity whose Chairman is Gregory Payne, our corporate secretary. The Company has engaged Foothill Entertainment, Inc. for a term of six months to assist in the distribution and commercial exploitation of its audiovisual content as well as for the preparation and attendance on behalf of the Company at the MIPJR and MIPCOM markets in Cannes. Foothill receives $12,500 per month for these services. |
19. Subsequent Events
19. Subsequent Events | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Pursuant to FASB ASC 855, Management has evaluated all events and transactions that occurred from September 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 October 6, 2016, the Board of Directors of the Company authorized a reverse stock split in preparation for the Company’s anticipated uplisting on the NASDAQ Capital Market. · On November 4, 2016, the Company filed a certificate of change to the Company’s Articles of Incorporation with the Secretary of State of the State of Nevada to effect a 1-for-3 reverse stock split of the Company’s issued and outstanding common stock. As a result of the reverse stock split, every three shares of the Company’s issued and outstanding common stock were automatically combined and reclassified into one share of the Company’s common stock. The reverse stock split affected all issued and outstanding shares of common stock, as well as common stock underlying stock options and warrants outstanding. No fractional shares will be issued in connection with the reverse stock split. Stockholders who would otherwise hold a fractional share of common stock will receive an increase to their common stock as the common stock will be rounded up to a full share. The total number of authorized shares of common stock was reduced from 700,000,000 to 233,333,334 in conjunction with the reverse stock split. The reverse stock split became effective on November 9, 2016. All disclosures of shares and per share data in these consolidated financial statements and related notes have been retroactively adjusted to reflect the reverse stock split for all periods presented. |
2. Summary of Significant Acc26
2. Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation Our consolidated financial statements for the year ended December 31, 2015 and the three and nine months ended September 30, 2016, include an immaterial revision to additional paid in capital as well as retained earnings related to the beneficial conversion feature of certain preferred securities. The effect of the revision was to increase additional paid in capital by $3,383,850 and to reduce retained earnings by the same amount with no net effect to total stockholders’ equity. In accordance with Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin Nos. 99 and 108 (“SAB 99” and “SAB 108”), the Company has evaluated this error and, based on an analysis of quantitative and qualitative factors, has determined that it was not material to any of the reporting periods affected and no amendments to previously filed 10-Q or 10-K reports with the SEC are required. The following table summarizes impact of these errors on the Company’s consolidated financial statement, principally the consolidated balance sheet and the consolidated statement of operations as the errors and corrections are both non-cash items. All information has been adjusted for the 2016 Reverse Split. Impact of Errors on the Consolidated Balance Sheet As of 12/31/15 As of 12/31/15 in $ As Presented Adjustment As Adjusted % Variance Preferred Stock, $0.001 par value, 10,000,000 share authorized, respectively; 5,290 shares issued and outstanding $ 6 – $ 6 – Common Stock, $0.001 par value, 233,333,334 shares authorized, respectively; 3,753,150 shares issued and outstanding 3,753 – 3,753 – Common Stock to Be Issued 24 – 24 – Additional Paid in Capital 41,163,577 3,383,850 44,547,427 8% Accumulated Deficit (27,045,776 ) (3,383,850 ) (30,429,626 ) 13% Accumulated Other Comprehensive Income (Loss) – – – – Total Equity $ 14,121,584 – $ 14,121,584 – Impact of Errors on the Consolidated Statement of Operations For the twelve months ended 12/31/15 For the twelve months ended 12/31/15 in $ As Presented Adjustment As Adjusted % Variance Net Loss $ (3,483,122 ) – $ (3,483,122 ) 0% Beneficial Conversion Feature on Preferred Stock (400,000 ) (3,383,850 ) (3,783,850 ) -846% Net Loss Applicable to Common Shareholders (3,883,122 ) (3,383,850 ) (7,266,972 ) -87% Net Loss per Common Share $ (1.55 ) (1.35 ) $ (2.90 ) -87% Weighted Average Shares Outstanding 2,500,854 – 2,500,854 0% Impact of Errors on the Consolidated Statement of Operations For the nine months ended 9/30/16 For the nine months ended 9/30/16 in $ As Presented Adjustment As Adjusted % Variance Net Loss $ (4,363,567 ) – $ (4,363,567 ) 0% Beneficial Conversion Feature on Preferred Stock (335,000 ) 335,000 – 100% Net Loss Applicable to Common Shareholders $ (4,698,567 ) 335,000 (4,363,567 ) 7% Net Loss per Common Share $ (1.21 ) 0.09 $ (1.12 ) 7% Weighted Average Shares Outstanding 3,889,108 – 3,889,108 0% |
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 as well as its interest in Stan Lee Comics, LLC (“Stan Lee Comics”). All significant inter-company balances and transactions have been eliminated in consolidation. |
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. |
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 to conform to current period classifications. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents. Included in Cash and Cash Equivalents is $1,000,000 that the Company deposited into a cash account to be used solely for the production of its series Llama Llama |
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 September 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 $26,097 and $28,813 at September 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 a customer exists, (ii) the film is complete and has been delivered or is available for delivery, (iii) the license period of the arrangement has begun and the customer can begin its exploitation, exhibition, or sale, (iv) the arrangement fee is fixed or determinable, and (v) collection of the arrangement fee is reasonably assured. The Company’s 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 Company’s 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 seller’s price is substantially fixed, (ii) shipment has occurred causing the buyer to be obligated to pay for product, (iii) the buyer has economic substance apart from the seller, and (iv) there is no significant obligation for future performance to directly bring about the resale of the product by the buyer as required by ASC 605 Revenue Recognition. |
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. |
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 management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized. |
Fair value of financial instruments | 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 April 2015, the FASB issued Accounting Standards Update 2015 -3, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.” This update requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. We adopted this standard during the quarter ended September 30, 2016. 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. |
2. Summary of Significant Acc27
2. Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Impact of errors on financial statements | Impact of Errors on the Consolidated Balance Sheet As of 12/31/15 As of 12/31/15 in $ As Presented Adjustment As Adjusted % Variance Preferred Stock, $0.001 par value, 10,000,000 share authorized, respectively; 5,290 shares issued and outstanding $ 6 – $ 6 – Common Stock, $0.001 par value, 233,333,334 shares authorized, respectively; 3,753,150 shares issued and outstanding 3,753 – 3,753 – Common Stock to Be Issued 24 – 24 – Additional Paid in Capital 41,163,577 3,383,850 44,547,427 8% Accumulated Deficit (27,045,776 ) (3,383,850 ) (30,429,626 ) 13% Accumulated Other Comprehensive Income (Loss) – – – – Total Equity $ 14,121,584 – $ 14,121,584 – Impact of Errors on the Consolidated Statement of Operations For the twelve months ended 12/31/15 For the twelve months ended 12/31/15 in $ As Presented Adjustment As Adjusted % Variance Net Loss $ (3,483,122 ) – $ (3,483,122 ) 0% Beneficial Conversion Feature on Preferred Stock (400,000 ) (3,383,850 ) (3,783,850 ) -846% Net Loss Applicable to Common Shareholders (3,883,122 ) (3,383,850 ) (7,266,972 ) -87% Net Loss per Common Share $ (1.55 ) (1.35 ) $ (2.90 ) -87% Weighted Average Shares Outstanding 2,500,854 – 2,500,854 0% Impact of Errors on the Consolidated Statement of Operations For the nine months ended 9/30/16 For the nine months ended 9/30/16 in $ As Presented Adjustment As Adjusted % Variance Net Loss $ (4,363,567 ) – $ (4,363,567 ) 0% Beneficial Conversion Feature on Preferred Stock (335,000 ) 335,000 – 100% Net Loss Applicable to Common Shareholders $ (4,698,567 ) 335,000 (4,363,567 ) 7% Net Loss per Common Share $ (1.21 ) 0.09 $ (1.12 ) 7% Weighted Average Shares Outstanding 3,889,108 – 3,889,108 0% |
4. Property and Equipment, Net
4. Property and Equipment, Net (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | 9/30/2016 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 Property and Equipment, Gross 243,377 241,835 Less Accumulated Depreciation (140,525 ) (90,887 ) Property and Equipment, Net $ 102,852 $ 150,948 |
6. Goodwill and Intangible As29
6. Goodwill and Intangible Assets, Net (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill And Intangible Assets Net Tables | |
Schedule of Intangible Assets | 9/30/2016 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 Intangible Assets, Gross 2,119,526 2,115,727 Less Accumulated Amortization (c) (255,284 ) (197,521 ) Intangible Assets, Net $ 1,864,242 $ 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 September 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 nine months ended September 30, 2016 and 2015, the Company did not recognize any impairment of these assets. (c) During the three months ended September 30, 2016 and 2015, the Company recognized $19,448 and $19,999, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. During the nine months ended September 30, 2016 and 2015, the Company recognized $57,763 and $50,322, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. |
Expected Future Ingtangible Asset Amortization | Fiscal Year: 2016 $ 18,593 2017 55,520 2018 26,119 2019 9,236 2020 8,655 Remaining 6,119 Total $ 124,242 |
8. Accrued Liabilities (Tables)
8. Accrued Liabilities (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Payables and Accruals [Abstract] | |
Other accrued liabilities | 9/30/2016 12/31/2015 Accrued Salaries and Wages (a) $ 119,608 $ 96,385 Disputed Trade Payables (b) 925,000 925,000 Services Advance - Current Portion (c) 1,489,583 – Other Accrued Expenses 224,854 509,477 Total Accrued Liabilities $ 2,759,045 $ 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 September 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 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. |
12. Stock Options (Tables)
12. Stock Options (Tables) | 9 Months Ended |
Sep. 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 1,407,736 $ 2.82 - 12.00 4.94 years $ 58,512 $ 8.10 Options Granted 85,086 Options Exercised – Options Cancelled 114,298 Options Expired – Balance at September 30, 2016 1,378,524 $ 2.82 - 12.00 4.24 years $ 432,848 $ 8.12 Exercisable December 31, 2015 100,021 $ 2.82 4.80 years $ 58,512 $ 2.82 Exercisable September 30, 2016 120,024 $ 2.82 - 6.00 4.20 years $ 336,068 $ 3.35 |
Assumptions used | Exercise Price $2.82 – $12.00 Dividend Yield 0% Volatility 100% - 137% Risk-free interest rate 0.89% - 1.25% Expected life of options 2.5 - 3.5 years |
13. Warrants (Tables)
13. Warrants (Tables) | 9 Months Ended |
Sep. 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 1,685,000 $ 3.30 – 6.00 4.75 years $ 3.48 $ – Warrants Granted – – – – – Warrants Exercised 33,334 – – – – Warrants Expired – – – – – Balance at September 30, 2016 1,651,666 $ 3.30 – 6.00 4.00 years $ 3.48 $ 4,394,750 Exercisable December 31, 2015 1,685,000 $ 3.30 – 6.00 4.75 years $ 3.48 $ – Exercisable September 30, 2016 1,651,666 $ 3.30 – 6.00 4.00 years $ 3.48 $ 4,394,750 |
16. Lease Commitments (Tables)
16. Lease Commitments (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Lease Commitments Tables | |
Future minimum lease payments | Year Amount 2016 $ 35,160 2017 143,451 2018 36,214 $ 214,825 |
1. Organization and Business (D
1. Organization and Business (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | ||
Accumulated deficit | $ (34,793,193) | $ (34,793,193) | $ (30,429,626) | ||||
Stockholders equity | 11,559,735 | 11,559,735 | 14,121,584 | ||||
Current assets | 4,167,708 | 4,167,708 | 5,432,031 | ||||
Cash | 3,642,667 | $ 2,147,931 | 3,642,667 | $ 2,147,931 | 5,187,620 | $ 4,301,099 | |
Current liabilities | 3,554,617 | 3,554,617 | 2,606,680 | ||||
Short-term debt to related parties | 0 | 0 | 410,535 | ||||
Trade payables | [1] | 925,000 | 925,000 | 925,000 | |||
Working capital | 613,091 | 613,091 | |||||
Net loss | $ (1,530,900) | $ (797,820) | (4,363,567) | (2,421,938) | $ (3,483,122) | ||
Net cash used in operating activities | (1,885,328) | $ (2,611,607) | |||||
Sony Pictures Home Entertainment [Member] | |||||||
Proceeds from distribution agreement | 2,000,000 | ||||||
Proceeds from settlement agreement | $ 275,000 | ||||||
[1] | As part of the Merger, the Company assumed certain liabilities from a previous member of A Squared which has claimed certain liabilities totaling $925,000. The Company disputes the basis for this liability. As of September 30, 2016, the Company believes that the statute of limitations applicable to the assertion of any legal claim relating to the collection of these liabilities has expired and therefore believes this liability is uncollectible. The Company is working with the counterparty to extinguish this liability. |
2. Summary of Significant Acc35
2. Summary of Significant Accounting Policies (Details - Impact of Errors) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Preferred stock value | $ 5 | $ 5 | $ 6 | ||
Common stock value | $ 3,991 | $ 3,991 | $ 3,753 | ||
Common stock to be issued | 24 | 24 | 24 | ||
Additional Paid in Capital | $ 46,349,747 | $ 46,349,747 | $ 44,547,427 | ||
Accumulated Deficit | (34,793,193) | (34,793,193) | (30,429,626) | ||
Accumulated Other Comprehensive Income (Loss) | (839) | (839) | 0 | ||
Total Equity | 11,559,735 | 11,559,735 | 14,121,584 | ||
Net Loss | $ (1,530,900) | $ (797,820) | (4,363,567) | $ (2,421,938) | (3,483,122) |
Beneficial Conversion Feature on Preferred Stock | 0 | (3,383,850) | |||
Net Loss Applicable to Common Shareholders | $ (4,363,567) | $ (7,266,972) | |||
Net Loss per Common Share | $ (1.12) | $ (2.90) | |||
Weighted Average Shares Outstanding | 3,889,108 | 2,500,854 | |||
Scenario, Previously Reported [Member] | |||||
Preferred stock value | $ 6 | ||||
Common stock value | $ 3,753 | ||||
Common stock to be issued | 24 | ||||
Additional Paid in Capital | $ 41,163,577 | ||||
Accumulated Deficit | (27,045,776) | ||||
Accumulated Other Comprehensive Income (Loss) | 0 | ||||
Total Equity | 14,121,584 | ||||
Net Loss | $ (4,363,567) | (3,483,122) | |||
Beneficial Conversion Feature on Preferred Stock | (335,000) | (400,000) | |||
Net Loss Applicable to Common Shareholders | $ (4,698,567) | $ (3,883,122) | |||
Net Loss per Common Share | $ (1.21) | $ (1.55) | |||
Weighted Average Shares Outstanding | 3,889,108 | 2,500,854 | |||
Restatement Adjustment [Member] | |||||
Preferred stock value | $ 0 | ||||
Common stock value | $ 0 | ||||
Common stock to be issued | 0 | ||||
Additional Paid in Capital | $ 3,383,850 | ||||
Accumulated Deficit | (3,383,850) | ||||
Accumulated Other Comprehensive Income (Loss) | 0 | ||||
Total Equity | 0 | ||||
Net Loss | $ 0 | 0 | |||
Beneficial Conversion Feature on Preferred Stock | 335,000 | (3,383,850) | |||
Net Loss Applicable to Common Shareholders | $ 335,000 | $ (3,383,850) | |||
Net Loss per Common Share | $ .09 | $ (1.35) | |||
Weighted Average Shares Outstanding | 0 | 0 |
2. Significant Accounting Polic
2. Significant Accounting Policies (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Accounting Policies [Abstract] | ||
Allowance for doubtful accounts | $ 110,658 | $ 110,658 |
Reserve for obsolete inventory | $ 26,097 | $ 28,813 |
3. Inventory (Details Narrative
3. Inventory (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Inventory Disclosure [Abstract] | ||
Inventory reserve | $ 26,097 | $ 28,813 |
4. Property and Equipment, Ne38
4. Property and Equipment, Net (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Property and equipment, gross | $ 243,377 | $ 243,377 | $ 241,835 | ||
Less Accumulated Depreciation | (140,525) | (140,525) | (90,887) | ||
Property and Equipment, Net | 102,852 | 102,852 | 150,948 | ||
Depreciation expense | 16,574 | $ 16,674 | 49,637 | $ 46,501 | |
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 | 9 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | ||
Film and Television costs | $ 1,602,236 | $ 1,602,236 | $ 1,003,546 | |||
Amortization of film and television costs | 23,011 | $ 42,642 | 158,168 | $ 42,642 | ||
Accumulated amortization of film and television cost | [1] | 255,284 | 255,284 | 197,521 | ||
Interest expense debt | 9,786 | |||||
Film and Television Costs [Member] | ||||||
Amortization of film and television costs | 17,644 | $ 0 | 135,157 | $ 0 | ||
Accumulated amortization of film and television cost | $ 285,719 | $ 285,719 | $ 127,551 | |||
[1] | During the three months ended September 30, 2016 and 2015, the Company recognized $19,448 and $19,999, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. During the nine months ended September 30, 2016 and 2015, the Company recognized $57,763 and $50,322, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. |
6. Goodwill and Intangible As40
6. Goodwill and Intangible Assets, Net (Details - Intangibles) - USD ($) | 3 Months Ended | 9 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | ||
Intangible assets | $ 2,119,526 | $ 2,119,526 | $ 2,115,727 | |||
Less Accumulated Amortization | [1] | (255,284) | (255,284) | (197,521) | ||
Net Intangible Assets | 1,864,242 | 1,864,242 | 1,918,206 | |||
Amortization expense | 57,763 | $ 50,322 | ||||
Identifiable artistic-related assets [Member] | ||||||
Intangible assets | [2] | 1,740,000 | 1,740,000 | 1,740,000 | ||
Trademarks [Member] | ||||||
Intangible assets | [3] | 129,831 | 129,831 | 129,831 | ||
Product Masters [Member] | ||||||
Intangible assets | [3] | 64,676 | 64,676 | 64,676 | ||
Other Intangible Assets [Member] | ||||||
Intangible assets | [3] | 185,019 | 185,019 | $ 181,220 | ||
Trademarks, Product Masters and Other Intangible Assets [Member] | ||||||
Amortization expense | $ 19,448 | $ 19,999 | $ 57,763 | $ 50,322 | ||
[1] | During the three months ended September 30, 2016 and 2015, the Company recognized $19,448 and $19,999, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. During the nine months ended September 30, 2016 and 2015, the Company recognized $57,763 and $50,322, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. | |||||
[2] | In association with the Merger, the Company acquired $1,740,000 of Identifiable Artistic-Related Assets. These assets, related to certain properties owned by A Squared and assumed by the Company, were valued using an independent firm during the fourth quarter of 2013. Based on certain legal, regulatory, contractual, and economic factors, the Company has deemed these assets to be indefinite-lived. Hence, pursuant to ASC 350-30, these assets are not subject to amortization and are tested annually for impairment. Through September 30, 2016, the Company has not recognized any impairment expense related to these assets. | |||||
[3] | Pursuant to ASC 350-30-35, the Company reviews these intangible assets periodically to determine if the value should be retired or impaired due to recent events. During the three and nine months ended September 30, 2016 and 2015, the Company did not recognize any impairment of these assets. |
6. Goodwill and Intangible As41
6. Goodwill and Intangible Assets (Details - future amortization) | Sep. 30, 2016USD ($) |
Future intangible asset amortization | |
2,016 | $ 18,593 |
2,017 | 55,520 |
2,018 | 26,119 |
2,019 | 9,236 |
2,020 | 8,655 |
Remaining | 6,119 |
Total | $ 124,242 |
7. Deferred Revenue (Details Na
7. Deferred Revenue (Details Narrative) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Deferred Revenue Details Narrative | ||
Deferred revenue | $ 3,118,730 | $ 958,539 |
8. Accrued Liabilities (Details
8. Accrued Liabilities (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 | |
Payables and Accruals [Abstract] | |||
Accrued Salaries and Wages | [1] | $ 119,608 | $ 96,385 |
Disputed trade payables | [2] | 925,000 | 925,000 |
Services Advance - Current Portion | [3] | 1,489,583 | 0 |
Total Accrued expenses | 224,854 | 509,477 | |
Total accrued liabilities | $ 2,759,045 | $ 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 September 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 $750,000 during the first quarter of 2015. At the end of the term, the Company is obligated to repay a pro-rata portion of the advance if it has not ordered a minimum number of DVD/CD units during the term. |
9. Short-Term Debt - Related 44
9. Short-Term Debt - Related Parties (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 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 | $ 18,544 |
10. Production Facility (Detail
10. Production Facility (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Dec. 31, 2015 | |
Debt Disclosure [Abstract] | ||
Credit line maximum | $ 5,275,000 | |
Credit line term | 40 months | |
Credit line interest rate | Either Prime plus 1% or one, three, or six month LIBOR plus 3.25% | |
Credit line outstanding | $ 239,655 | $ 0 |
Line of credit borrowings | 385,971 | |
Offering costs | $ 146,316 |
11. Stockholders' Equity (Detai
11. Stockholders' Equity (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | Jul. 19, 2016 | May 04, 2016 | Mar. 12, 2016 | |
Common shares outstanding | 3,990,211 | 3,753,150 | ||||
Proceeds from warrants exercised | $ 110,000 | $ 0 | ||||
Preferred stock issued | 4,955 | 5,290 | ||||
Preferred stock outstanding | 4,955 | 5,290 | ||||
Settlement Agreement [Member] | ||||||
Stock issued in settlement agreement, shares | 10,000 | |||||
Stock price | $ 2.40 | |||||
Conversion of Preferred [Member] | Various Dates [Member] | ||||||
Common stock issued in conversion stock, common stock issued | 111,667 | |||||
Stock converted, shares converted | 335 | |||||
Warrants [Member] | Various Dates [Member] | ||||||
Common stock issued in conversion stock, common stock issued | 33,334 | |||||
Stock converted, shares converted | 33,334 | |||||
Proceeds from warrants exercised | $ 110,000 | |||||
Investors [Member] | ||||||
Stock issued in private placement, shares | 1,443,334 | |||||
Proceeds from sale of stock | $ 4,330,000 | |||||
Stock offering costs | $ 502,218 | |||||
Andrew Heyward [Member] | ||||||
Stock issued for satisfaction of advances, shares issued | 79,561 | |||||
Stock price | $ 5.16 | |||||
Vendor [Member] | ||||||
Stock issued for services, shares | 2,500 | |||||
Stock price | $ 6 |
12. Stock Options (Details-Opti
12. Stock Options (Details-Option activity) - Stock Options [Member] - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Stock Options | ||
Number of Options outstanding beginning balance | 1,407,736 | |
Number of Options Granted | 85,086 | 1,407,736 |
Number of Options Exercised | 0 | |
Number of Options Cancelled | 114,298 | |
Number of Options Expired | 0 | |
Number of Options outstanding ending balance | 1,378,524 | 1,407,736 |
Number of Options exercisable | 120,024 | 100,021 |
Exercise Price Per Share | ||
Exercise price per share beginning balance | $2.82-$12.00 | |
Exercise price per share ending balance | $2.82-$12.00 | |
Exercise price per share, exercisable | $ 2.82 | |
Exercise prices at period end | $2.82-$6.00 | |
Weighted Average Remaining Contractual Life | ||
Weighted Average Remaining Contractual Life | 4 years 2 months 27 days | 4 years 11 months 9 days |
Weighted average remaining contractual life, exercisable | 4 years 2 months 12 days | 4 years 9 months 18 days |
Aggregate Intrinsic Value | ||
Aggregate intrinsic value, options outstanding | $ 432,848 | $ 58,512 |
Aggregate intrinsic value, exercisable | $ 336,068 | $ 58,512 |
Weighted Average Exercise Price Per Share | ||
Weighted Average Exercise Price per Share beginning balance | $ 8.10 | |
Weighted Average Exercise Price per Share ending balance | 8.12 | $ 8.10 |
Weighted Average Exercise Price per Share Exercisable | $ 3.35 | $ 2.82 |
12. Stock Options (Details Narr
12. Stock Options (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2016 | Mar. 31, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Recognized stock based compensation expense | $ 358,919 | $ 564,985 | $ 0 | $ 1,236,880 | $ 0 | |
Stock based compensation expense from true-up from prior periods | $ 220,564 | $ 220,564 | $ 0 | |||
Stock Options [Member] | ||||||
Options granted during period | 85,086 | 1,407,736 | ||||
Fair value of options granted | $ 2,402,395 | |||||
2015 Plan [Member] | ||||||
Shares authorized under plan | 1,443,334 | 1,443,334 |
13. Warrants (Details)
13. Warrants (Details) - Warrant [Member] - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2016 | Dec. 31, 2015 | |
Warrant | ||
Number of Warrants outstanding beginning balance | 1,685,000 | |
Warrants Granted | 0 | |
Warrants Exercised | 33,334 | |
Warrants Expired | 0 | |
Number of Warrants outstanding ending balance | 1,651,666 | 1,685,000 |
Number of Warrants exercisable | 1,651,666 | 1,685,000 |
Exercise Price Per Share | ||
Warrant exercise price per share, beginning balance | $3.30-$6.00 | |
Warrant exercise price per share, ending balance | $3.30-$6.00 | |
Warrant exercise price per share, exercisable | $3.60-$6.00 | $3.30-$6.00 |
Weighted average remaining contractual life, warrants outstanding | 4 years | 4 years 9 months |
Weighted average remaining contractual life, exercisable | 4 years | 4 years 9 months |
Weighted Average Exercise Price per Share | ||
Warrant weighted average exercise price per share, beginning balance | $ 3.48 | |
Warrant weighted average exercise price per share, ending balance | 3.48 | $ 3.48 |
Warrant weighted average exercise price per share, exercisable | $ 3.48 | $ 3.48 |
Aggregate Intrinsic Value | ||
Aggregate intrinsic value, outstanding | $ 4,394,750 | |
Aggregate instrinsic value, exercisable | $ 4,394,750 |
14. Income Taxes (Details Narra
14. Income Taxes (Details Narrative) | 9 Months Ended |
Sep. 30, 2016USD ($) | |
Income Tax Disclosure [Abstract] | |
Operating loss carryforward | $ 19,186,000 |
Operating loss carryforward expiration date | Dec. 31, 2036 |
15. Employment Agreements (Deta
15. Employment Agreements (Details Narrative) - Annual Salary [Member] | Sep. 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 |
16. Lease Commitments (Details)
16. Lease Commitments (Details) | Sep. 30, 2016USD ($) |
Lease Commitments Tables | |
2,016 | $ 35,160 |
2,017 | 143,451 |
2,018 | 36,214 |
Operating Leases, Future Minimum Payments Due | $ 214,825 |
16. Lease Commitments (Details
16. Lease Commitments (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Leases [Abstract] | ||||
Rental expenses | $ 35,160 | $ 34,136 | $ 104,985 | $ 106,271 |
18. Related Party (Details Narr
18. Related Party (Details Narrative) - USD ($) | 3 Months Ended | |
Sep. 30, 2016 | Jun. 30, 2016 | |
Related Party Transactions [Abstract] | ||
Royalty payments received | $ 0 | $ 247 |