Document and Entity Information
Document and Entity Information - USD ($) | 9 Months Ended | |||
Sep. 30, 2017 | Nov. 13, 2017 | Mar. 30, 2017 | Jun. 30, 2016 | |
Document And Entity Information | ||||
Entity Registrant Name | Genius Brands International, Inc. | |||
Entity Central Index Key | 1,355,848 | |||
Document Type | S-1/A | |||
Document Period End Date | Sep. 30, 2017 | |||
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 Public Float | $ 28,599,153 | |||
Entity Common Stock, Shares Outstanding | 7,610,794 | 5,652,091 | ||
Document Fiscal Period Focus | Q3 | |||
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | ||
Current Assets: | |||||
Cash and Cash Equivalents | $ 2,247,402 | $ 1,887,921 | $ 5,187,620 | ||
Restricted Cash | 1,000,000 | 1,000,000 | 0 | ||
Accounts Receivable, net | 130,179 | 122,910 | 171,867 | ||
Other receivables | 160,545 | ||||
Inventory, net | 18,502 | 6,562 | 7,080 | ||
Prepaid and Other Assets | 433,272 | 359,395 | 65,464 | ||
Total Current Assets | 3,989,900 | 3,376,788 | 5,432,031 | ||
Property and Equipment, net | 86,295 | 90,461 | 150,948 | ||
Other receivables | 96,327 | ||||
Film and Television Costs, net | 4,232,632 | 2,260,964 | 1,003,546 | ||
Intangible Assets, net | 1,801,878 | 1,845,650 | 1,918,206 | ||
Goodwill | 10,365,805 | 10,365,805 | 10,365,805 | ||
Total Assets | 20,572,837 | 17,939,668 | 18,870,536 | ||
Current Liabilities: | |||||
Accounts Payable | 336,122 | 648,638 | 359,433 | ||
Accrued Expenses | 225,178 | 249,482 | 509,477 | ||
Deferred Revenue | 489,394 | 410,662 | 305,850 | ||
Accrued Salaries and Wages | 151,150 | 132,827 | 96,385 | ||
Disputed Trade Payable | 925,000 | 925,000 | [1] | 925,000 | |
Service Advance | 0 | [2] | 1,489,583 | [3] | 0 |
Short Term Debt - Related Party | 0 | 410,535 | |||
Total Current Liabilities | 2,126,844 | 3,856,192 | 2,606,680 | ||
Long Term Liabilities: | |||||
Deferred Revenue | 4,583,455 | 2,695,946 | 652,689 | ||
Production Loan Facility | 3,495,524 | 1,332,004 | 0 | ||
Service Advance | 0 | 1,489,583 | |||
Total Liabilities | 10,205,823 | 7,884,142 | 4,748,952 | ||
Stockholders' Equity | |||||
Preferred Stock | 4 | 5 | 6 | ||
Common Stock | $ 5,939 | $ 4,011 | $ 3,753 | ||
Common Stock to Be Issued | 24 | 24 | 24 | ||
Additional Paid in Capital | $ 50,741,109 | $ 46,697,005 | $ 44,547,427 | ||
Accumulated Deficit | (40,374,944) | (36,642,761) | (30,429,626) | ||
Accumulated Other Comprehensive Income (Loss) | (5,118) | (2,758) | 0 | ||
Total Equity | 10,367,014 | 10,055,526 | 14,121,584 | ||
Total Liabilities & Stockholders' Equity | $ 20,572,837 | $ 17,939,668 | $ 18,870,536 | ||
[1] | As part of the Merger in 2013, 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 December 31, 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 DADC to provide all CD, DVD and Blu-ray 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 disk replication, packaging and distribution services for its content across all physical media, including DVD, CD, and Blu-ray from 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. On January 10, 2017, the Company entered into an amendment of our home entertainment Distribution Agreement with Sony pursuant to which, among other things, Sony paid DADC $1,489,583, which was the total sum owed and payable by us to DADC for the disk replication, packaging and distribution services. In connection with such transaction, we issued Sony 301,231 shares of our Common Stock at $4.945 per share, Sony's exclusive territory for exercising its home entertainment distribution rights under the Distribution Agreement was extended from the United States and Canada to worldwide, and the amount of advances subject to recoupment by Sony out of royalty payments that would otherwise be due to us under the Distribution Agreement was increased by the amount of the payment to DADC. | ||||
[3] | During the first quarter of 2014, the Company entered into an exclusive three-year agreement with DADC 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 disk replication, packaging and distribution services for its content across all physical media, including DVD, CD, and Blu-ray from 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. Subsequent to the end of the fiscal year, on January 10, 2017, the Company entered into an amendment of our home entertainment Distribution Agreement with Sony pursuant to which, among other things, Sony agreed to pay DADC $1,489,583, the amount which was owed and payable by us to DADC for the disk replication, packaging and distribution services. In connection with such transaction, we issued Sony 301,231 shares of our Common Stock at $4.945 per share, Sony's exclusive territory for exercising its home entertainment distribution rights under the Distribution Agreement was extended from the United States and Canada to worldwide, and the amount of advances subject to recoupment by Sony out of royalty payments that would otherwise be due to us under the Distribution Agreement was increased by the amount of the payment to DADC. (See Note 7 for additional information about the advance.) |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | |||
Common Stock, par value | $ 0.001 | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 233,333,334 | 233,333,334 | 700,000,000 |
Common Stock, shares issued | 5,938,103 | 4,010,649 | 3,753,179 |
Common Stock, shares outstanding | 5,938,103 | 4,010,649 | 3,753,179 |
Preferred stock par value | $ 0.001 | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 10,000,000 | 10,000,000 | 10,000,000 |
Preferred stock shares issued | 3,605 | 4,895 | 5,290 |
Preferred stock shares outstanding | 3,605 | 4,895 | 5,290 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Revenues: | ||||||
Licensing & Royalties | $ 94,430 | $ 85,660 | $ 365,993 | $ 347,128 | $ 469,527 | $ 492,134 |
Television & Home Entertainment | 155,003 | 34,826 | 263,142 | 285,433 | 356,150 | 400,676 |
Advertising Sales | 7,008 | 0 | 13,027 | 0 | 27,330 | 0 |
Product Sales | 60 | 0 | 8,561 | 16,150 | 13,868 | 15,173 |
Total Revenues | 256,501 | 120,486 | 650,723 | 648,711 | 866,875 | 907,983 |
Expenses: | ||||||
Marketing & Sales | 86,715 | 220,627 | 361,761 | 686,577 | 1,035,128 | 420,399 |
Direct Operating Costs | 186,226 | 44,220 | 254,243 | 252,688 | 279,217 | 200,418 |
General and Administrative | 1,150,147 | 1,389,360 | 3,772,643 | 4,325,703 | 6,017,391 | 3,823,510 |
Total Expenses | 1,423,088 | 1,654,207 | 4,388,647 | 5,264,968 | 7,331,736 | 4,444,327 |
Loss from Operations | (1,166,587) | (1,533,721) | (3,737,924) | (4,616,257) | (6,464,861) | (3,536,344) |
Other Income (Expense): | ||||||
Other Income | 2,975 | 3,238 | 8,568 | 3,298 | 6,651 | 18,870 |
Interest Expense | (794) | (417) | (2,827) | (2,570) | (2,675) | (2,576) |
Interest Expense - Related Parties | 0 | 0 | 0 | (6,141) | (8,503) | (24,757) |
Gain on Distribution Contracts | 0 | 0 | 0 | 258,103 | 258,103 | 115,811 |
Loss on Impairment of Assets | 0 | (1,850) | (1,850) | (7,500) | ||
Loss on Deferred Financing Costs | 0 | (9,313) | ||||
Unrealized Loss on Foreign Currency Translation | 0 | (37,313) | ||||
Other Income | 2,181 | 2,821 | 5,741 | 252,690 | 251,726 | 53,222 |
Loss before Income Tax Expense | (1,164,406) | (1,530,900) | (3,732,183) | (4,363,567) | (6,213,135) | (3,483,122) |
Income Tax Expense | 0 | 0 | 0 | 0 | 0 | 0 |
Net Loss | (1,164,406) | (1,530,900) | (3,732,183) | (4,363,567) | (6,213,135) | (3,483,122) |
Beneficial Conversion Feature on Preferred Stock | 0 | (3,783,850) | ||||
Net Loss Applicable to Common Shareholders | $ (1,164,406) | $ (1,530,900) | $ (3,732,183) | $ (4,363,567) | $ (6,213,135) | $ (7,266,972) |
Net Loss per Common Share (Basic And Diluted) | $ (0.20) | $ (0.38) | $ (0.67) | $ (1.12) | $ (1.59) | $ (2.91) |
Weighted Average Shares Outstanding (Basic and Diluted) | 5,923,838 | 3,988,626 | 5,591,492 | 3,889,108 | 3,915,178 | 2,500,854 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Statement of Comprehensive Income [Abstract] | ||||||
Net Loss Applicable to Common Shareholders | $ (1,164,406) | $ (1,530,900) | $ (3,732,183) | $ (4,363,567) | $ (6,213,135) | $ (7,266,972) |
Other Comprehensive Income (Loss), Net of Tax: | ||||||
Unrealized Loss on Foreign Currency Translation | 0 | (6) | (2,360) | (839) | (2,758) | 0 |
Other Comprehensive Loss | 0 | (6) | (2,360) | (839) | (2,758) | 0 |
Comprehensive Loss | $ (1,164,406) | $ (1,530,906) | $ (3,734,543) | $ (4,364,406) | $ (6,215,893) | $ (7,266,972) |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficit) - USD ($) | Common Stock | Preferred Stock [Member] | Common Stock To Be Issued [Member] | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning Balance, Shares at Dec. 31, 2014 | 2,124,817 | 6,000 | 0 | |||
Beginning Balance, Amount at Dec. 31, 2014 | $ 2,125 | $ 6 | $ 0 | $ 36,880,771 | $ (23,162,654) | $ 13,720,248 |
Common Stock Issued for Cash, Shares | 1,443,362 | |||||
Common Stock Issued for Cash, Amount | $ 1,443 | 3,826,339 | 3,827,782 | |||
Conversion of Preferred Shares, common stock issued | 185,000 | |||||
Conversion of Preferred Shares, common stock value | $ 185 | (185) | ||||
Conversion of Preferred Shares, preferred shares converted | (710) | |||||
Value of beneficial conversion feature upon conversion of preferred shares | 3,783,850 | (3,783,850) | ||||
Share-based compensation | 31,919 | 31,919 | ||||
Shares to be issued | $ 24 | (24) | ||||
Imputed Interest for Short Term Debt - Related Party | 24,757 | 24,757 | ||||
Net Loss | (3,483,122) | (3,483,122) | ||||
Other comprehensive loss | 0 | |||||
Ending Balance, Shares at Dec. 31, 2015 | 3,753,179 | 5,290 | 0 | |||
Ending Balance, Amount at Dec. 31, 2015 | $ 3,753 | $ 6 | $ 24 | 44,547,427 | (30,429,626) | 14,121,584 |
Exercise of warrants, shares issued | 33,334 | |||||
Exercise of warrants, value | $ 33 | 109,967 | 110,000 | |||
Conversion of Preferred Shares, common stock issued | 131,667 | |||||
Conversion of Preferred Shares, common stock value | $ 132 | (131) | ||||
Conversion of Preferred Shares, preferred shares converted | (395) | |||||
Conversion of Preferred Shares, preferred shares converted value | $ (1) | |||||
Conversion of debt, shares issued | 79,561 | |||||
Conversion of debt, value | $ 80 | 410,455 | 410,535 | |||
Issuance of common stock for services, shares | 12,500 | |||||
Issuance of common stock for services, value | $ 13 | 38,987 | 39,000 | |||
Share-based compensation | 1,581,797 | 1,581,797 | ||||
Imputed Interest for Short Term Debt - Related Party | 8,503 | 8,503 | ||||
Adjustment to reconcile shares outstanding due to Reverse Stock Split, shares | 408 | |||||
Net Loss | (6,213,135) | (6,213,135) | ||||
Other comprehensive loss | (2,758) | |||||
Ending Balance, Shares at Dec. 31, 2016 | 4,010,649 | 4,895 | 0 | |||
Ending Balance, Amount at Dec. 31, 2016 | $ 4,011 | $ 5 | $ 24 | $ 46,697,005 | $ (36,642,761) | 10,055,526 |
Net Loss | (3,732,183) | |||||
Other comprehensive loss | (2,360) | |||||
Ending Balance, Amount at Sep. 30, 2017 | $ 10,367,014 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Cash Flows from Operating Activities: | ||||
Net Loss | $ (3,732,183) | $ (4,363,567) | $ (6,213,135) | $ (3,483,122) |
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||||
Amortization of Film and Television Costs | 37,935 | 158,168 | 158,168 | 127,552 |
Depreciation Expense | 51,527 | 49,637 | 66,331 | 64,458 |
Amortization Expense | 43,771 | 57,763 | 76,356 | 69,453 |
Depreciation and Amortization Expense | 142,687 | 133,911 | ||
Imputed Interest Expense - Related Party | 0 | 6,141 | 8,503 | 24,757 |
Bad Debt Expense / (Recovery) | 0 | 42,739 | ||
Stock Issued for Services | 130,000 | 39,000 | 39,000 | 0 |
Share-based Compensation Expense | 514,108 | 1,236,880 | 1,581,797 | 31,919 |
(Gain) Loss on Distribution Contracts | 0 | (258,103) | (258,103) | (115,811) |
(Gain) Loss on Impairment of Assets | 0 | 1,850 | 1,850 | 7,500 |
(Gain) Loss on Deferred Financing Costs | 0 | 9,313 | ||
(Gain) Loss on Foreign Currency Translation | 0 | 37,313 | ||
Change in operating assets | ||||
Accounts Receivable | (9,626) | 220,285 | 294,792 | 65,317 |
Other receivables | (256,872) | 0 | ||
Inventory | (11,940) | 518 | 518 | 4,611 |
Prepaid Expenses & Other Assets | (73,877) | (253,678) | (314,754) | 142,846 |
Film and Television Costs | (1,880,811) | (754,770) | (1,390,450) | (827,145) |
Increase (decrease) in operating liabilities | ||||
Accounts Payable | (312,516) | 66,247 | 289,205 | (946) |
Accrued Salaries | 18,323 | 23,223 | 36,442 | 46,097 |
Deferred Revenue and Advances | 476,655 | 2,159,120 | 2,146,998 | 117,212 |
Other Accrued Expenses | (24,304) | (274,042) | (249,415) | 239,356 |
Net Cash Used in Operating Activities | (5,029,810) | (1,885,328) | (3,716,277) | (3,396,581) |
Cash Flows from Investing Activities: | ||||
Investment in Intangible Assets | 0 | (5,650) | (5,650) | (111,221) |
Investment in Fixed Assets | (47,361) | (1,542) | (5,844) | (182,986) |
Net Cash Used in Investing Activities | (47,361) | (7,192) | (11,494) | (294,207) |
Cash Flows from Financing Activities: | ||||
Proceeds from Exercise of Warrants | 0 | 110,000 | 110,000 | 0 |
Proceeds from Warrant Exchange, Net | 3,401,924 | 0 | ||
Proceeds from Production Loan Facility | 2,034,728 | 237,567 | 1,318,072 | 0 |
Sale of Common Stock | 0 | 3,827,782 | ||
Proceeds from Services Advance | 0 | 750,000 | ||
Proceeds of Short-Term Debt - Related Party | 0 | 1,661 | ||
Payments from Related Party Notes | 0 | (2,134) | ||
Net Cash Provided by Financing Activities | 5,436,652 | 347,567 | 1,428,072 | 4,577,309 |
Net Increase (Decrease) in Cash and Cash Equivalents | 359,481 | (1,544,953) | (2,299,699) | 886,521 |
Cash, Cash Equivalents, and Restricted Cash - Beginning of Period | 2,887,921 | 5,187,620 | 5,187,620 | 4,301,099 |
Cash, Cash Equivalents, and Restricted Cash - End of Period | 3,247,402 | 3,642,667 | 2,887,921 | 5,187,620 |
Supplemental disclosures of cash flow information: | ||||
Cash paid for interest | 2,827 | 1,450 | 2,675 | 2,576 |
Schedule of non-cash financing and investing activites: | ||||
Issuance of Common Stock in Satisfaction of Short Term Debt - Related Party | 1,489,583 | 0 | $ 410,535 | $ 0 |
Issuance of Common Stock in Satisfaction of Short Term Advances | $ 0 | $ 410,535 |
1. Organization and Business
1. Organization and Business | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 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 the award-winning Baby Genius Rainbow Rangers Llama Llama SpacePop Thomas Edison's Secret Lab® Secret Millionaires Club, Stan Lee's Cosmic Crusaders The Hollywood Reporter 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 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,” “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 one-for-three basis (the “2016 Reverse Split”). The 2016 Reverse Split became effective on November 9, 2016. All common stock (“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. For the three months ended September 30, 2017 and 2016, the Company reported net losses of $1,164,406 and $1,530,900, respectively. For the nine months ended September 30, 2017 and 2016, the Company reported net losses of $3,732,183 and $4,363,567, respectively. The Company reported net cash used in operating activities of $5,029,810 and $1,885,328 for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, the Company had an accumulated deficit of $40,374,944 and total stockholders’ equity of $10,367,014. At September 30, 2017, the Company had current assets of $3,989,900, including cash, cash equivalents, and restricted cash of $3,247,402 and current liabilities of $2,126,844, including certain trade payables of $925,000 to which the Company disputes the claim. The Company had working capital of $1,863,056 as of September 30, 2017, compared to a working capital deficit of $479,404 as of December 31, 2016. During the first quarter of 2017, the Company completed two key transactions that enhanced cash and working capital balances: · On January 10, 2017, the Company entered into an amendment of its home entertainment distribution agreement with Sony Pictures Home Entertainment Inc. (“SPHE”) pursuant to which, among other things, SPHE paid $1,489,583 which was owed and payable by the Company to SPHE’s sister company Sony DADC US Inc. (“DADC”) for certain disk manufacturing and replication services. In connection with such transaction, the Company issued SPHE 301,231 shares of its Common Stock at $4.945 per share, SPHE’s exclusive territory for exercising its home entertainment distribution rights under the Distribution Agreement was extended from the United States and Canada to worldwide, and the amount of advances subject to recoupment by SPHE out of royalty payments that would otherwise be due to the Company under the Distribution Agreement was increased by the amount of the payment to DADC. In connection with the above issuance of our shares, the Company entered into a subscription agreement with SPHE, effective as of January 17, 2017. Collectively, these transactions are referred to as the “January 2017 Sony Transactions.” · On February 9, 2017, the Company entered into a private transaction (the “Private Transaction”) pursuant to a Warrant Exercise Agreement (the “Agreement”) with certain holders of the Company’s existing warrants (the “Original Warrants”) for which it received gross proceeds of $3,866,573 from the exercise of the Original Warrants and issued additional warrants to these holders (see Notes 9 and 11 for additional information about the Private Transaction). Subsequent to the end of the period, on October 3, 2017, the Company sold, in a registered direct offering, 1,647,691 shares of Common Stock at an offering price of $3.90 per share and, in a concurrent private placement, warrants to purchase an aggregate of 1,647,691 shares of Common Stock for gross proceeds of approximately $6,425,995 before deducting the placement agent fee and related offering expenses (See Note 15). While the Company believes that its anticipated cash balances and working capital combined with its production facility and deal pipeline will be sufficient to fund operations for the next twelve months, there can be no assurance that cash flows from operations will continue to improve in the near future. If the Company is unable to attain profitable operations and attain positive operating cash flows, it may need to (i) seek additional funding, (ii) scale back its development or production plans, or (iii) reduce certain operations. | 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 Rainbow Rangers Llama Llama Baby Genius Thomas Edison's Secret Lab® Secret Millionaires Club, Stan Lee's Cosmic Crusaders The Hollywood Reporter 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 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,” “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 one-for-three basis (the “2016 Reverse Split”). The 2016 Reverse Split became effective on November 9, 2016. All common stock (“Common Stock”) share and per share information in this Annual Report on Form 10-K (“Form 10-K”), 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. For the years ended December 31, 2016 and 2015, the Company reported a net loss of $6,213,135 and $3,483,122, respectively, and reported net cash used in operating activities $3,716,277 and $3,396,581, respectively. As of December 31, 2016, the Company had an accumulated deficit of $36,642,761 and total stockholders’ equity of $10,055,526. At December 31, 2016, the Company had current assets of $3,376,788, including cash, cash equivalents, and restricted cash of 2,887,921 and current liabilities of $3,856,192, including certain trade payables of $925,000 to which the Company disputes the claim and a service advance of $1,489,583, resulting in a working capital deficit of $479,404. During 2016 and subsequent to the end of the year, the Company completed several key transactions that enhanced cash and working capital balances: · During the first quarter of 2016, we entered into a home entertainment distribution agreement (“Distribution Agreement”) with Sony Pictures Home Entertainment Inc. (“Sony”), pursuant to which we agreed to grant Sony certain rights for the marketing and distribution of our animated feature-length motion pictures and animated television series in the United States and Canada, and potentially additional countries. In consideration for such rights, and subject to certain conditions, Sony has paid us an advance in the amount of $2,000,000, against future royalties. · Additionally, during the third quarter of 2016, Llama Productions LLC, a wholly-owned subsidiary of the Company (“Llama Productions”), 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. · Subsequent to the end of the period, on January 10, 2017, the Company entered into an amendment of our home entertainment Distribution Agreement with Sony pursuant to which, among other things, Sony agreed to pay Sony DADC US Inc. (“DADC”), its sister company, the service advance of $1,489,583, the amount which was owed and payable by us to DADC. In connection with the transaction, we issued to Sony 301,231 shares of our Common Stock at $4.945 per share (See Note 8 for additional information about this transaction). · Subsequent to the end of the period, on February 9, 2017, the Company entered into a private transaction (the “Private Transaction”) pursuant to a Warrant Exercise Agreement (the “Agreement”) with certain holders of the Company’s existing warrants (the “Original Warrants”) for which it received gross proceeds of $3,866,573 from the exercise of the Original Warrants and issued additional warrants to these holders (See Note 19 for additional information about the Private Transaction). While the Company believes that its proforma cash balances and working capital combined with its production facility and deal pipeline will be sufficient to fund operations for the next twelve months, there can be no assurance that cash flows from operations will continue to improve in the near future. If the Company is unable to attain profitable operations and attain positive operating cash flows, it may need to (i) seek additional funding, (ii) scale back its development or production plans, or (iii) reduce certain operations. |
2. Summary of Significant Accou
2. Summary of Significant Accounting Policies | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | ||
Summary of Significant Accounting Policies | Basis of Presentation The accompanying 2017 and 2016 consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. 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 Parent 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 Business Combinations. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“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, Cash Equivalents, and Restricted Cash The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents. Restricted Cash includes $1,000,000 that the Company deposited into a cash account to be used solely to produce 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 had an allowance for doubtful accounts of $110,658 at both September 30, 2017 and December 31, 2016. Inventories Inventories are stated at the lower of average cost 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 at both September 30, 2017 and December 31, 2016. 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 FASB 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 or 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 FASB 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 FASB 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 FASB 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, for both episodic series and films, from time to time, the Company develops additional content, improved animation and bonus songs/features for its existing content. 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 FASB 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 FASB 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 sells advertising on its Kid Genius Cartoon Channel in the form of either flat rate promotions or impressions served. For flat rate promotions with a fixed term, the Company recognizes revenue when all five revenue recognition criteria under FASB ASC 605 are met. For impressions served, the Company delivers a certain minimum number of impressions on the channel to the advertiser for which the advertiser pays a contractual CPM per impression. Impressions served are reported to the Company on a monthly basis, and revenue is reported in the month the impressions are served. 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 FASB ASC 605 Revenue Recognition. Share-Based Compensation As required by FASB ASC 718 - Stock Compensation, the Company recognizes an expense related to the fair value of our share-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, accounts payable, and accrued liabilities approximate fair value due to the short-term maturity of the instruments. The carrying amount of the Production Loan Facility approximates fair value since the debt carries a variable interest rate that is tied to either the current Prime or LIBOR rates plus an applicable spread. We previously adopted FASB ASC 820 for financial instruments measured at fair value on a recurring basis. FASB ASC 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. FASB 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. In the second and third quarters, the Company initiated and executed a project to evaluate the impact of these changes, which included a review of existing contracts with customers, an evaluation of the specific terms of those contracts and the appropriate treatment under the new standards, and a comparison of that new treatment to the Company’s existing accounting policies, to identify differences. The Company is currently evaluating the potential impact on the its internal controls to identify any necessary changes. The standard can be applied either retrospectively to each period presented or as a cumulative effect adjustment as of the date of adoption. The Company plans to implement these standards effective January 1, 2018 based on the modified retrospective method, but may opt for the full retrospective method depending on the final outcome of our evaluation. The Company believes that it is following an appropriate timeline to allow for proper adoption on the implementation date of January 1, 2018 and will continue to monitor new customer contracts through the remainder of 2017. 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 November 2016, the FASB issued Accounting Standards Update 2016-18, “Statement of Cash Flows - Restricted Cash a consensus of the FASB Emerging Issues Task Force.” This standard requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement of cash flows under a retrospective transition approach. The guidance will become effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We have prospectively adopted ASU 2016-18. The impact to our consolidated financial position, results of operations and cash flows is minimal. In January 2017, the FASB issued Accounting Standards Update 2017-04, “Simplifying the Test for Goodwill Impairment”, which requires an entity to perform a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). It eliminates Step 2 of the current two-step goodwill impairment test, under which a goodwill impairment loss is measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The standard is effective January 1, 2020, with early adoption as of January 1, 2017 permitted. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In May 2017, the FASB issued Accounting Standard Update 2017-09, “Compensation—Stock Compensation: Scope of Modification Accounting”, which clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Under the new guidance, modification accounting is required if the fair value, vesting conditions or classification (equity or liability) of the new award are different from the original award immediately before the original award is modified. The standard is effective beginning January 1, 2018, with early adoption permitted. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. Various other accounting pronouncements have been recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific industries/transactions or special circumstances, and are not expected to have a material effect on our financial position, results of operations, or cash flows. | Basis of Presentation The accompanying 2016 and 2015 consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Our consolidated financial statements for the year ended December 31, 2015, 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 December 31, 2015 As of December 31, 2015 As Presented Adjustment As Adjusted Preferred Stock, $0.001 par value, 10,000,000 shares authorized, respectively; 5,290 shares issued and outstanding $ 6 $ – $ 6 Common Stock, $0.001 par value, 233,333,334 shares authorized, respectively; 3,753,179 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 Accumulated Deficit (27,045,776 ) (3,383,850 ) (30,429,626 ) Total Equity $ 14,121,584 $ – $ 14,121,584 Impact of Errors on the Consolidated Statement of Operations For the Year Ended December 31, 2015 For the Year Ended December 31, 2015 As Presented Adjustment As Adjusted Net Loss $ (3,483,122 ) – $ (3,483,122 ) Beneficial Conversion Feature on Preferred Stock (400,000 ) (3,383,850 ) (3,783,850 ) Net Loss Applicable to Common Shareholders (3,883,122 ) (3,383,850 ) (7,266,972 ) Net Loss per Common Share $ (1.55 ) (1.36 ) $ (2.91 ) Weighted Average Shares Outstanding 2,500,854 – 2,500,854 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 Business Combinations. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“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, Cash Equivalents, and Restricted Cash The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents. Restricted Cash includes $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 December 31, 2016 and 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 December 31, 2016 and 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 FASB 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 or 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 FASB 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 FASB 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 FASB 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, for both episodic series and films, from time to time, the Company develops additional content, improved animation and bonus songs/features for its existing content. 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 FASB 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 FASB 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 sells advertising on its Kid Genius channel in the form of either flat rate promotions or impressions served. For flat rate promotions with a fixed term, the Company recognizes revenue when all five revenue recognition criteria under FASB ASC 606 are met. For impressions served, the Company delivers a certain minimum number of impressions on the channel to the advertiser for which the advertiser pays a contractual CPM per impression. Impressions served are reported to the Company on a monthly basis, and revenue will be reported in the month the impressions are served. 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 FASB ASC 605 Revenue Recognition. Share-Based Compensation As required by FASB ASC 718 - Stock Compensation, the Company recognizes an expense related to the fair value of our share-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. Concentration of Risk The Company’s cash is maintained at two financial institutions and from time to time the balances for this account exceed the Federal Deposit Insurance Corporation’s (“FDIC”) insured amount. Balances on interest bearing deposits at banks in the United States are insured by the FDIC up to $250,000 per account. As of December 31, 2016, the Company had one account with an uninsured balance of $789,318, another with an uninsured balance of $11,947, and a third with an uninsured balance of $335,418. As of December 31, 2015, the Company had one account with an uninsured balance of $4,900,000. For fiscal year 2016, the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue. This customer accounts for 19% of total revenue but represents 0% accounts receivable. For fiscal year 2015, the Company had three customers whose total revenue exceeded 10% of the total consolidated revenue. These customers account for 15%, 19%, and 16% of total revenue, respectively. Those three accounts made up 56%, 0%, and 0% of accounts receivable, respectively. The major customers for the year ended December 31, 2016 are not necessarily the same as the major customers at December 31, 2015. There is significant financial risk associated with a dependence upon a small number of customers. The Company periodically assesses the financial strength of these customers and establishes allowances for any anticipated bad debt. At December 31, 2016 and 2015, no allowance for bad debt has been established for the major customers as these amounts are believed to be fully collectible. Fair value of financial instruments The carrying amounts of cash, receivables, accounts payable, and accrued liabilities approximate fair value due to the short-term maturity of the instruments. The carrying amount of the Production Loan Facility approximates fair value since the debt carries a variable interest rate that is tied to either the current Prime or LIBOR rates plus an applicable spread. We adopted FASB ASC 820 as of January 1, 2008, for financial instruments measured at fair value on a recurring basis. FASB ASC 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. FASB 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 consolidated financial position, results of operations and cash flows. In February 2016, the FASB issued Accounting Standards Update 2016-02, “Leases”. The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2018. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In November 2016, the FASB issued Accounting Standards Update 2016-18, “Statement of Cash Flows - Restricted Cash a consensus of the FASB Emerging Issues Task Force.” This standard requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement of cash flows under a retrospective transition approach. The guidance will become effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted. We have prospectively adopted ASU 2016-18. The impact to our consolidated financial position, results of operations and cash flows is minimal. 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 | 12 Months Ended |
Dec. 31, 2016 | |
Inventory Disclosure [Abstract] | |
Inventory | During 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, 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 December 31, 2016, and 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 | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | ||
Property and Equipment, Net | The Company has property and equipment as follows as of September 30, 2017 and December 31, 2016: September 30, 2017 December 31, 2016 Furniture and Equipment $ 12,385 $ 12,385 Computer Equipment 90,015 42,654 Leasehold Improvements 176,903 176,903 Software 15,737 15,737 Property and Equipment, Gross 295,040 247,679 Less Accumulated Depreciation (208,745 ) (157,218 ) Property and Equipment, Net $ 86,295 $ 90,461 During the three months ended September 30, 2017 and 2016, the Company recorded depreciation expense of $17,661 and $16,574, respectively. During the nine months ended September 30, 2017 and 2016, the Company recorded depreciation expense of $51,527 and $49,637, respectively. | The Company has property and equipment as follows as of December 31, 2016, and 2015: December 31. 2016 December 31, 2015 Furniture and Equipment $ 12,385 $ 12,385 Computer Equipment 42,654 36,810 Leasehold Improvements 176,903 176,903 Software 15,737 15,737 Property and Equipment, Gross 247,679 241,835 Less Accumulated Depreciation (157,218 ) (90,887 ) Property and Equipment, Net $ 90,461 $ 150,948 During the years ended December 31, 2016 and 2015, the Company recorded depreciation expense of $66,331 and $64,458, respectively. |
5. Film and Television Costs, N
5. Film and Television Costs, Net | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Film And Television Costs Net | ||
Film and Television Costs, net | As of September 30, 2017, the Company had net Film and Television Costs of $4,232,632 compared to $2,260,964 at December 31, 2016. The increase relates primarily to the production and development of SpacePop, Llama Llama, Rainbow Rangers Thomas Edison’s Secret Lab SpacePop. During the three months ended September 30, 2017 and 2016, the Company recorded Film and Television Cost amortization expense of $29,849 and $23,011, respectively. During the nine months ended September 30, 2017, and 2016, the Company recorded Film and Television Cost amortization expense of $37,935 and $158,168, respectively. The following table highlights the activity in Film and Television Costs as of September 30, 2017 and December 31, 2016: Total Film and Television Costs, Net as of December 31, 2015 $ 1,003,546 Additions to Film and Television Costs 1,390,450 Capitalized Interest 34,756 Film Amortization Expense (167,788 ) Film and Television Costs, Net as of December 31, 2016 2,260,964 Additions to Film and Television Costs 1,880,811 Capitalized Interest 128,792 Film Amortization Expense (37,935 ) Film and Television Costs, Net as of September 30, 2017 $ 4,232,632 | As of December 31, 2016, the Company had net Film and Television Costs of $2,260,964 compared to $1,003,546 at December 31, 2015. The increase relates primarily to the production and development of SpacePop, Llama Llama, Rainbow Rangers, Stan Lee’s Cosmic Crusaders Thomas Edison’s Secret Lab SpacePop. During the years ended December 31, 2016 and 2015, the Company recorded Film and Television Cost amortization expense of $167,788 and $127,552, respectively. The following table highlights the activity in Film and Television Costs as during the years ended December 31, 2016 and 2015: Total Film and Television Costs, Net as of 12/31/2014 $ 303,953 Additions to Film and Television Costs 827,145 Film Amortization Expense (127,552 ) Film and Television Costs, Net as of 12/31/2015 1,003,546 Additions to Film and Television Costs 1,390,450 Capitalized Interest 34,756 Film Amortization Expense (167,788 ) Film and Television Costs, Net as of 12/31/2016 $ 2,260,964 |
6. Goodwill and Intangible Asse
6. Goodwill and Intangible Assets, Net | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill and Intangible Assets, Net | Goodwill In connection with the Merger in 2013, 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 FASB 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, 2017, the Company has not recognized any impairment to Goodwill. Intangible Assets, Net The Company had the following intangible assets as of September 30, 2017 and December 31, 2016: September 30, 2017 December 31, 2016 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) 185,020 185,020 Intangible Assets, Gross 2,119,527 2,119,527 Less Accumulated Amortization (c) (317,649 ) (273,877 ) Intangible Assets, Net $ 1,801,878 $ 1,845,650 (a) In connection with the Merger in 2013, 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. Based on certain legal, regulatory, contractual, and economic factors, the Company has deemed these assets to be indefinite-lived. Hence, pursuant to FASB ASC 350-30, these assets are not subject to amortization and are tested annually for impairment. Through September 30, 2017, the Company has not recognized any impairment expense related to these assets. (b) Pursuant to FASB 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. Through September 30, 2017, the Company has not recognized any impairment expense related to these assets. (c) During the three months ended September 30, 2017 and 2016, the Company recognized $12,756 and $19,448, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. During the nine months ended September 30, 2017 and 2016, the Company recognized $43,771 and $57,763, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. Expected future intangible asset amortization as of September 30, 2017 is as follows: Fiscal Year: 2017 (three months) $ 11,752 2018 26,119 2019 9,236 2020 8,655 2021 2,059 Remaining 4,057 Total $ 61,878 | Goodwill In connection with the Merger in 2013, 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 FASB 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 December 31, 2016, the Company has not recognized any impairment to Goodwill. Intangible Assets, Net The Company had the following intangible assets as of December 31, 2016, and 2015: 12/31/2016 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) 185,020 181,220 Intangible Assets, Gross 2,119,527 2,115,727 Less Accumulated Amortization (c) (273,877 ) (197,521 ) Intangible Assets, Net $ 1,845,650 $ 1,918,206 (a) In connection with the Merger in 2013, 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. Based on certain legal, regulatory, contractual, and economic factors, the Company has deemed these assets to be indefinite-lived. Hence, pursuant to FASB ASC 350-30, these assets are not subject to amortization and are tested annually for impairment. Through December 31, 2016, the Company has not recognized any impairment expense related to these assets. (b) Pursuant to FASB 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. Through December 31, 2016, the Company has not recognized any impairment expense related to these assets. (c) During the years ended December 31, 2016 and 2015, the Company recognized $76,356 and $69,453, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. Expected future intangible asset amortization as of December 31, 2016 is as follows: Fiscal Year: 2017 $ 55,520 2018 26,119 2019 9,236 2020 8,655 2021 2,059 Remaining 4,061 Total $ 105,650 |
7. Deferred Revenue
7. Deferred Revenue | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Deferred Revenue Disclosure [Abstract] | ||
Deferred Revenue | As of September 30, 2017 and December 31, 2016, the Company had total short term and long term deferred revenue of $5,072,849 and $3,106,608, 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. Included in the deferred revenue balance as of December 31, 2016 is the $2,000,000 advance against future royalty that Sony paid to the Company in the first quarter of 2016. Included in the deferred revenue balance as of September 30, 2017 is the $2,000,000 advance against future royalties that Sony paid to the Company in the first quarter of 2016 as well as $1,489,583 attributable to the expansion of distribution rights acquired by Sony through the January 2017 Sony Transactions. | As of December 31, 2016, and 2015, the Company had total short term and long term deferred revenue of $3,106,608 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. Included in the deferred revenue balance as of December 31, 2016 is the $2,000,000 advance against future royalty that Sony paid to the Company in the first quarter of 2016. |
8. Accrued Liabilities - Curren
8. Accrued Liabilities - Current | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Payables and Accruals [Abstract] | ||
Accrued Liabilities, Current | As of September 30, 2017 and December 31, 2016, the Company had the following current accrued liabilities: September 30, 2017 December 31, 2016 Accrued Salaries and Wages (a) $ 151,150 $ 132,827 Disputed Trade Payables (b) 925,000 925,000 Services Advance - Current Portion (c) – 1,489,583 Other Accrued Expenses 225,178 249,482 Total Accrued Liabilities - Current $ 1,301,328 $ 2,796,892 (a) Accrued Salaries and Wages represent accrued vacation payable to employees. (b) As part of the Merger in 2013, 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, 2017, 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 DADC to provide all CD, DVD and Blu-ray 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 disk replication, packaging and distribution services for its content across all physical media, including DVD, CD, and Blu-ray from 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. On January 10, 2017, the Company entered into an amendment of our home entertainment Distribution Agreement with Sony pursuant to which, among other things, Sony paid DADC $1,489,583, which was the total sum owed and payable by us to DADC for the disk replication, packaging and distribution services. In connection with such transaction, we issued Sony 301,231 shares of our Common Stock at $4.945 per share, Sony’s exclusive territory for exercising its home entertainment distribution rights under the Distribution Agreement was extended from the United States and Canada to worldwide, and the amount of advances subject to recoupment by Sony out of royalty payments that would otherwise be due to us under the Distribution Agreement was increased by the amount of the payment to DADC | As of December 31, 2016, and 2015, the Company has the following current accrued liabilities: December 31, 2016 December 31, 2015 Accrued Salaries and Wages (a) $ 132,827 $ 96,385 Disputed Trade Payables (b) 925,000 925,000 Services Advance - Current Portion (c) 1,489,583 – Other Accrued Expenses 249,482 509,477 Total Accrued Liabilities - Current $ 2,796,892 $ 1,530,862 (a) Accrued Salaries and Wages represent accrued vacation payable to employees. (b) As part of the Merger in 2013, 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 December 31, 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 DADC 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 disk replication, packaging and distribution services for its content across all physical media, including DVD, CD, and Blu-ray from 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. Subsequent to the end of the fiscal year, on January 10, 2017, the Company entered into an amendment of our home entertainment Distribution Agreement with Sony pursuant to which, among other things, Sony agreed to pay DADC $1,489,583, the amount which was owed and payable by us to DADC for the disk replication, packaging and distribution services. In connection with such transaction, we issued Sony 301,231 shares of our Common Stock at $4.945 per share, Sony’s exclusive territory for exercising its home entertainment distribution rights under the Distribution Agreement was extended from the United States and Canada to worldwide, and the amount of advances subject to recoupment by Sony out of royalty payments that would otherwise be due to us under the Distribution Agreement was increased by the amount of the payment to DADC. (See Note 7 for additional information about the advance.) |
9. Short-Term Debt - Related Pa
9. Short-Term Debt - Related Party | 12 Months Ended |
Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |
Short-Term Debt - Related Party | 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, Andy 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 FASB ASC 835-30-45. During years ended December 31, 2016 and 2015, the Company recognized imputed interest expense of $8,503 and $24,757 as a contribution to additional paid-in capital, respectively. |
10. Production Loan Facility
10. Production Loan Facility | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Debt Disclosure [Abstract] | ||
Secured, non-revolving line of credit | On August 8, 2016, Llama Productions closed a $5,275,000 multiple draw-down, secured, non-recourse, non-revolving credit facility (the “Facility”) with Bank Leumi USA to produce its animated series Llama Llama As of September 30, 2017, the Company had gross outstanding borrowing under the facility of $3,624,263 against which financing costs of $128,739 were applied resulting in net borrowings of $3,495,524. As of December 31, 2016, the Company had gross outstanding borrowing under the facility of $1,505,307 against which financing costs of $173,303 were applied resulting in net borrowings of $1,332,004. | On August 8, 2016, Llama Productions closed a $5,275,000 multiple draw-down, secured, non-recourse, non-revolving credit facility (the “Facility”) with Bank Leumi USA for the production of its animated series Llama Llama As of December 31, 2016, the Company had gross outstanding borrowing under the facility of $1,505,307 against which financing costs of $173,303 were applied resulting in net borrowings of $1,332,004. |
11. Stockholders' Equity
11. Stockholders' Equity | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Equity [Abstract] | ||
Stockholders' Equity | Common Stock As of September 30, 2017, the total number of authorized shares of Common Stock was 233,333,334. On October 29, 2015, the Company entered into securities purchase agreements with certain accredited investors pursuant to which the Company sold an aggregate of 1,443,362 shares of its Common Stock, par value $0.001 per share, and warrants to purchase up to an aggregate of 1,443,362 shares of Common Stock (the “Original Warrants”) for a purchase price of $3.00 per share and the associated warrants for gross proceeds to the Company of $4,330,000 (“2015 Private Placement”). The closing of the 2015 Private Placement occurred on November 3, 2015. Stock offering costs were $502,218. (See Note 11 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 one-for-three reverse stock split of the Company’s issued and outstanding Common Stock. As a result of the 2016 Reverse 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 2016 Reverse Split affected all issued and outstanding shares of Common Stock, as well as Common Stock underlying stock options and warrants outstanding. No fractional shares were issued in connection with the 2016 Reverse Split. Stockholders who would otherwise have held a fractional share of Common Stock received an increase to their Common Stock as the Common Stock was 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 2016 Reverse Split. The 2016 Reverse 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. On February 9, 2017, the Company entered into the Private Transaction pursuant to the Agreement with certain holders of the Original Warrants. Pursuant to the Agreement, the holders of the Original Warrants and the Company agreed that such Original Warrant holders would exercise their Original Warrants in full, and the Company would issue to each such holder new warrants. (See Note 11 for additional information about these warrants.) In association with the Private Transaction, the Company issued 1,171,689 shares of Common Stock upon exercise of a portion of the Original Warrants for which it received gross proceeds of $3,866,573 and recording offering costs of $464,649 for net proceeds of $3,401,924. As of September 30, 2017 and December 31, 2016, there were 5,938,103 and 4,010,649 shares of Common Stock outstanding, respectively. Below are the changes to the Company’s Common Stock during the nine months ended September 30, 2017: · In connection with the January 2017 Sony Transactions, we issued Sony 301,231 shares of our Common Stock at $4.945 per share. · On January 17, 2017, we issued to a consultant 10,112 shares of our Common Stock at $4.945 per share in connection with the January 2017 Sony Transactions. · On February 9, 2017, the Company issued 1,171,689 shares of Common Stock in connection with the Private Transaction. · On March 14, 2017, the Company issued 8,410 shares of Common Stock valued at $5.95 per share to a consultant for services rendered. · On August 1, 2017, the Company issued 6,012 shares of Common Stock valued at $4.99 per share to a consultant for services rendered. · On various dates during the nine months ended September 30, 2017, the Company issued 430,000 shares of the Company’s Common Stock pursuant to the conversion of 1,290 shares of Series A Convertible Preferred Stock at a conversion price of $3.00. 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, 2017 and December 31, 2016, there were 3,605 and 4,895 shares of Series A Convertible 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 Convertible 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 Convertible Preferred Stock to be converted and (ii) all unpaid dividends thereon. The stated value of each share of the Series A Convertible 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 Convertible 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 Convertible Preferred Stock. The shares of Series A Convertible 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 Convertible Preferred Stock on a converted basis was below the market price of the Common Stock 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 Convertible Preferred Stock decreased to $3.00. This decrease resulted in an additional beneficial conversion feature of $3,383,850 recognized as of the time of the 2015 Private Placement. | Common Stock As of December 31, 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-K, 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 entered into securities purchase agreements with certain accredited investors pursuant to which the Company sold an aggregate of 1,443,362 shares of its common stock, par value $0.001 per share, and warrants to purchase up to an aggregate of 1,443,362 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 (“2015 Private Placement”). The closing of the 2015 Private Placement occurred 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 one-for-three reverse stock split of the Company’s issued and outstanding common stock. As a result of the 2016 Reverse 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 2016 Reverse Split affected all issued and outstanding shares of common stock, as well as common stock underlying stock options and warrants outstanding. No fractional shares were issued in connection with the 2016 Reverse 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 2016 Reverse Split. The 2016 Reverse 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 December 31, 2016, and 2015, there were 4,010,649 and 3,753,179 shares of common stock outstanding, respectively. Below are the changes to the Company’s common stock during the year ended December 31, 2016: · On various dates during the year ended December 31, 2016, the Company issued 131,668 shares of the Company’s common stock as a conversion of 395 shares of Series A Convertible Preferred Stock at a conversion price of $3.00. · On various dates during the year ended December 31, 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 December 31, 2016, and 2015, there were 4,895 and 5,290 shares of Series A Convertible 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 Convertible 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 Convertible Preferred Stock to be converted and (ii) all unpaid dividends thereon. The stated value of each share of the Series A Convertible 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 Convertible 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 Convertible Preferred Stock. The shares of Series A Convertible 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 Convertible 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 Convertible 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 Convertible Preferred Stock into common stock. (See Basis of Presentation in Note 2, herein). |
12. Stock Options
12. Stock Options | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Stock Options | 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. On May 18, 2017, 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 223,333 shares from 1,443,334 shares to an aggregate of 1,666,667 shares. The increase in shares available for issuance under the 2015 Plan was approved by the stockholders on July 25, 2017. The following table summarizes the changes in the Company’s stock option plan during the nine months ended September 30, 2017: 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, 2016 1,373,554 $ 2.82 - 12.00 3.99 years $ 280,642 $ 8.14 Options Granted – Options Exercised – Options Cancelled 70,339 Options Expired – Balance at September 30, 2017 1,303,215 $ 2.82 - 12.00 3.24 years $ 127,860 $ 8.11 Exercisable December 31, 2016 452,535 $ 2.82 - 6.00 3.95 years $ 263,375 $ 5.29 Exercisable September 30, 2017 466,700 $ 2.82 - 6.00 3.23 years $ 127,860 $ 5.33 During the year ended December 31, 2015, the Company granted options to purchase 1,407,775 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 $2,402,460 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 and nine months ended September 30, 2016, the Company recognized share-based compensation expense of $358,919 and $1,236,880, respectively. During the first quarter of 2016, the Company recognized $220,564 of true-up expenses from prior periods which reflected certain revisions meant 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. The Company has assessed these adjustments individually and in aggregate and considers them immaterial to the current and prior periods. During the three and nine months ended September 30, 2017, the Company recognized $108,476 and $514,108, respectively, in share-based compensation expense. The unvested share-based compensation as of September 30, 2017 was $278,819 which will be recognized through the second quarter of 2019 assuming the underlying grants are not cancelled or forfeited. | The Company has adopted the provisions of FASB 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 year ended December 31, 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 1,407,775 $ 2.82 - 12.00 4.94 years $ 58,512 $ 8.10 Options Granted 85,088 Options Exercised – Options Cancelled 119,309 Options Expired – Balance at December 31, 2016 1,373,554 $ 2.82 - 12.00 3.99 years $ 280,642 $ 8.14 Exercisable December 31, 2015 100,021 $ 2.82 4.80 years $ 58,512 $ 2.82 Exercisable December 31, 2016 452,535 $ 2.82 - 6.00 3.95 years $ 263,375 $ 5.29 During the year ended December 31, 2015, the Company granted options to purchase 1,407,775 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 $2,402,460 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 share-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 share-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 years ended December 31, 2016 and 2015, the Company recognized $1,581,797 and $31,919 in share-based compensation expense, respectively. The unvested share-based compensation as of December 31, 2016 was $1,111,629 which will be recognized through the second quarter of 2019 assuming the underlying grants are not cancelled or forfeited. |
13. Warrants
13. Warrants | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Warrants and Rights Note Disclosure [Abstract] | ||
Warrants | The Company has warrants outstanding to purchase up to 1,766,698 and 1,651,698 at September 30, 2017 and December 31, 2016, 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 it received a cash fee of $535,000 and a warrant to purchase up to 100,002 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. In connection with the 2015 Private Placement, the Company issued to accredited investors the Original Warrants to purchase up to an aggregate of 1,443,362 shares of Common Stock for a purchase price of $3.00 per share. The Original 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 Original 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 2015 Private Placement, Chardan acted as sole placement agent in consideration for which it received a cash fee of $300,000 and a warrant to purchase up to 141,668 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. On February 9, 2017, the Company entered into the Private Transaction pursuant to the Agreement with certain holders of the Original Warrants. Pursuant to the Agreement, the holders of the Original Warrants and the Company agreed that such Original Warrant holders would exercise their Original Warrants in full, and the Company would issue to each such holder new warrants, with the new warrants being identical to the Original Warrants except that the termination date of such new warrants is February 10, 2022 (the “Reload Warrants”). In addition, depending on the number of Original Warrants exercised by all holders of the Original Warrants, the Company also agreed to issue to the holders another new warrant, identical to the Original Warrant except that the exercise price of such warrant is $5.30 and such warrant is not exercisable until August 10, 2017 (the “Market Price Warrants” and together with the Reload Warrants, the “New Warrants”). The Company received gross proceeds of $3,866,573 from the exercise of the Original Warrants and issued Reload Warrants to purchase an aggregate of 799,991 shares of the Company’s Common Stock and Market Price Warrants to purchase an aggregate of 371,699 shares of the Company’s Common Stock. In association with the Private Transaction, the Company recorded $1,402,174, representing the difference in the fair market value of the Original Warrants and the New Warrants, as an adjustment to additional paid-in capital. Chardan acted as financial advisor on the Private Transaction in consideration for which Chardan received $363,617 and was issued New Warrants for 115,000 shares of the Company’s Common Stock. The following table summarizes the changes in the Company’s outstanding warrants during the nine months ended September 30, 2017: 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, 2016 1,651,698 $ 3.30 - 6.00 3.75 years $ 3.49 $ 3,301,913 Warrants Granted 1,286,690 3.30 - 5.30 – – ؘ– Warrants Exercised 1,171,690 3.30 – – – Warrants Expired – Balance at September 30, 2017 1,766,698 $ 3.30 - 6.00 3.94 years $ 4.03 $ 925,097 Exercisable December 31, 2016 1,651,698 $ 3.30 - 6.00 3.75 years $ 3.49 $ 3,301,913 Exercisable September 30, 2017 1,766,698 $ 3.30 - 6.00 3.94 years $ 4.03 $ 925,097 | The Company has warrants outstanding to purchase up to 1,651,698 and 1,685,032 at each of December 31, 2016 and 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 it received a cash fee of $535,000 and a warrant to purchase up to 100,002 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. In connection with the 2015 Private Placement, the Company issued to accredited investors warrants to purchase up to an aggregate of 1,443,362 shares of common stock for a purchase price of $3.00 per share. 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 2015 Private Placement, Chardan acted as sole placement agent in consideration for which it received a cash fee of $300,000 and a warrant to purchase up to 141,668 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 year ended December 31, 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 1,685,032 $ 3.30 - 6.00 4.75 years $ 3.48 $ – Warrants Granted – – – – – Warrants Exercised 33,334 – – – – Warrants Expired – – – – – Balance at December 31, 2016 1,651,698 $ 3.30 - 6.00 3.75 years $ 3.49 $ 3,301,913 Exercisable December 31, 2015 1,685,032 $ 3.30 - 6.00 4.75 years $ 3.48 $ – Exercisable December 31, 2016 1,651,698 $ 3.30 - 6.00 3.75 years $ 3.49 $ 3,301,913 |
14. Income Taxes
14. Income Taxes | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 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, 2017 and December 31, 2016, 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 and Massachusetts. 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. | Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Net deferred tax liabilities consist of the following components as of December 31, 2016 and 2015: 2016 2015 Deferred tax assets: NOL Carryover $ 7,544,300 $ 5,808,100 Bad Debt Reserve 44,100 – Inventory Reserve 10,400 11,200 Amortization 61,500 – Accrued Compensated Absences 52,900 37,600 Charitable Contributions 5,000 400 Subtotal 7,718,200 5,857,300 Valuation Allowance (7,647,300 ) (5,857,300 ) Deferred tax liabilities: Depreciation (42,700 ) – Prepaid Expenses (28,200 ) – Net Deferred Tax Asset $ – $ – The income tax provision differs from the amount of income tax determined by applying the U.S. federal tax rate to pretax income from continuing operations for the years ended December 31, 2016 and 2015 due to the following: 2016 2015 Book Loss $ (2,113,000 ) $ (1,184,300 ) Meals and Entertainment 10,300 5,400 Stock Options 537,800 10,900 Stock Issued for Debt Extinguishment – 14,300 Other 4,700 – Valuation Allowance 1,560,200 1,153,700 $ – $ – At December 31, 2016, the Company had net operating loss carry forwards of approximately $19,209,000 that may be offset against future taxable income from the year 2017 through 2036. No tax benefit has been reported in the December 31, 2016 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years. The Company accounts for income taxes in accordance with Accounting Standards Codification Topic 740, Income Taxes (“Topic 740”), which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns. A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized. Topic 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company’s financial statements. Topic 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operation in the provision for income taxes. As of December 31, 2016, 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. |
15. Employment Agreements
15. Employment Agreements | 12 Months Ended |
Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Employment Agreements | On November 15, 2013, as a closing condition to the Merger, the Company entered into five-year employment agreements with Andy 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. 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 received a grant of stock options commensurate with those given to the Company’s Executive Vice President and is entitled to receive an annual discretionary bonus based on her performance. |
16. Lease Commitments
16. Lease Commitments | 12 Months Ended |
Dec. 31, 2016 | |
Leases [Abstract] | |
Lease Commitments | Rental expenses incurred for operating leases during the years ended December 31, 2016 and 2015 were $140,144 and $140,407, 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 $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 2017 $ 143,451 2018 36,214 $ 179,665 |
17. Commitment and Contingencie
17. Commitment and Contingencies | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Commitment and Contingencies | The Company has various contractual obligations, which are recorded as liabilities in our consolidated financial statements. Other items, such as certain purchase commitments and other executory contracts are not recognized as liabilities in our consolidated financial statements but are required to be disclosed in the footnotes to the financial statements. For example, the Company is contractually committed to make certain minimum lease payments for the use of property under its operating lease. In addition, the Company has contractual commitments for employment agreements of certain employees. 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 $136,542 annually subject to annual escalations of 3%. Rental expenses incurred for operating leases during the three months ended September 30, 2017 and 2016 were $35,862 and $34,818, respectively. Rental expenses incurred for operating leases during the nine months ended September 30, 2017 and 2016 were $71,022 and $69,825, respectively. The following is a schedule of future minimum contractual obligations as of September 30, 2017, under the Company’s operating leases and employment agreements: 2017 2018 2019 2020 2021 Thereafter Operating Leases $ 36,214 $ 36,214 $ – $ – $ – $ – Employment Contracts 258,360 580,413 – – – – Total $ 294,574 $ 616,627 $ – $ – $ – $ – In addition to employment agreements and operating leases, in the normal course of its business, the Company enters into various agreements associated with its individual properties. Some of these agreements call for the potential future payment of royalties or “profit” participations for either (i) the use of third party intellectual property, such as the case with Stan Lee and the Mighty 7 Llama Llama | 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. Pursuant to these agreements, the Company is obligated to share with these service providers a portion of the net profits of the properties on which they have rendered services, as defined in each respective agreement. |
18. Related Party
18. Related Party | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Related Party Transactions [Abstract] | ||
18. Related Party | On April 21, 2016, the Company entered into a merchandising and licensing agreement with Andy Heyward Animation Art (“AHAA”), whose principal is Andy 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 Buffett’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. The agreement continues on a month-to-month basis following the initial term. Foothill receives $12,500 per month for these services. On October 1, 2016, Llama Productions LLC entered into an animation production services agreement with Mr. Heyward for services as a producer for which he is to receive $186,000 through the course of production of the Company’s animated series Llama Llama. | On April 21, 2016, the Company entered into a merchandising and licensing agreement with Andy Heyward Animation Art (“AHAA”), whose principal is Andy 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 Buffett’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 | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Subsequent Events [Abstract] | ||
Subsequent Events | Pursuant to FASB ASC 855, Management has evaluated all events and transactions that occurred from September 30, 2017 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 3, 2017, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors named therein (the “Investors”), pursuant to which the Company agreed to issue and sell, in a registered direct offering by the Company directly to the Investors (the “Registered Offering”), an aggregate of 1,647,691 shares Common Stock, at an offering price of $3.90 per share for gross proceeds of approximately $6,425,995 before deducting the placement agent fee and related offering expenses. The Shares were offered by the Company pursuant to a registration statement on Form S-3 (File No. 333-214805), which was filed with the Securities and Exchange Commission (the “Commission”) on November 25, 2016 and was declared effective by the Commission on December 19, 2016 (the “Registration Statement”). · In a concurrent private placement (the “October 2017 Private Placement” and together with the Registered Offering, the “Offerings”), the Company agreed to issue to the Investors who participated in the Registered Offering warrants (the “Offering Warrants” and collectively with the Shares, the “Securities”) exercisable for one share of Common Stock for each Share purchased in the Registered Offering for an aggregate of 1,647,691 shares of Common Stock at an exercise price of $3.90 per share. Each Offering Warrant will be immediately exercisable on the date of its issuance and will expire five years from the date it becomes exercisable. Subject to limited exceptions, a holder of an Offering Warrant will not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however, that upon 61 days’ prior notice to the Company, the holder may increase or decrease the Beneficial Ownership Limitation, provided further that in no event shall the Beneficial Ownership Limitation exceed 9.99%. The Offering Warrants and the shares of our Common Stock issuable upon the exercise of the Offering Warrants are not being registered under the Securities Act of 1933, as amended (the “Securities Act”), were not offered pursuant to the Registration Statement and were offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act, and Rule 506(b) promulgated thereunder. · On October 2, 2017, the Company entered into an Engagement Letter (the “Engagement Letter”) with Chardan (the “Placement Agent”) pursuant to which the Company engaged Chardan as its placement agent in connection with the Offerings. The Placement Agent agreed to use its reasonable best efforts to arrange for the sale of the Securities. The Company agreed to pay the Placement Agent a placement agent fee in cash equal to 9.0% of the gross proceeds from the sale of the Securities and to reimburse certain out-of-pocket expenses of up to $35,000. The Engagement Letter also contains representations, warranties, indemnification and other provisions customary for transactions of this nature. · Subsequent to September 30, 2017, the Company issued 25,000 shares of Common Stock upon conversion of 75 shares of Series A Convertible Preferred Stock as a conversion prices of $3.00 per share. | Pursuant to FASB ASC 855, Management has evaluated all events and transactions that occurred from December 31, 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: · Subsequent to the end of the fiscal year, on January 10, 2017, the Company entered into an amendment of our home entertainment Distribution Agreement with Sony pursuant to which, among other things, Sony agreed to pay DADC $1,489,583, the amount which was owed and payable by us to DADC for the disk replication, packaging and distribution services. In connection with such transaction, we issued Sony 301,231 shares of our common stock at $4.945 per share, Sony’s exclusive territory for exercising its home entertainment distribution rights under the Distribution Agreement was extended from the United States and Canada to worldwide, and the amount of advances subject to recoupment by Sony out of royalty payments that would otherwise be due to us under the Distribution Agreement was increased by the amount of the payment to DADC. (See Notes 7 and 8 for additional information about this transaction.) · On February 9, 2017, the Company entered into the Private Transaction pursuant to the Agreement with certain holders of the Company’s Original Warrants. The Original Warrants were originally issued on November 3, 2015, to purchase an aggregate of 1,443,362 shares of the Company’s common stock at an exercise price of $3.30 per share and were to expire on November 3, 2020. Pursuant to the Agreement, the holders of the Original Warrants and the Company agreed that such Original Warrant holders would exercise their Original Warrants in full and the Company would issue to each such holder new warrants, with the new warrants being identical to the Original Warrants except that the termination date of such new warrants is February 10, 2022 (the “Reload Warrants”). In addition, depending on the number of Original Warrants exercised by all holders of the Original Warrants, the Company also agreed to issue to the holders another new warrant, identical to the Original Warrant except that the exercise price of such warrant is $5.30 and such warrant is not exercisable until August 10, 2017 (the “Market Price Warrants” and together with the Reload Warrants, the “New Warrants”). The Company received gross proceeds of $3,866,573 from the exercise of the Original Warrants and issued Reload Warrants to purchase an aggregate of 799,991 shares of the Company’s common stock and Market Price Warrants to purchase an aggregate of 371,699 shares of the Company’s common stock. Chardan acted as financial advisor on the Private Transaction in consideration for which Chardan received $363,617 and will be issued New Warrants for 115,000 shares of the Company’s common stock. · On various dates subsequent to December 31, 2016, an investor converted 450 shares of Series A Convertible Preferred Stock into 150,000 shares of the Company’s common stock at a conversion price of $3.00. · On various dates subsequent to December 31, 2016, the Company issued 18,522 shares of Common Stock to certain consultants for services rendered totaling $100,000. |
2. Summary of Significant Acc27
2. Summary of Significant Accounting Policies (Policies) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Accounting Policies [Abstract] | ||
Basis of Presentation | Basis of Presentation The accompanying 2017 and 2016 consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. | Basis of Presentation The accompanying 2016 and 2015 consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Our consolidated financial statements for the year ended December 31, 2015, 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 December 31, 2015 As of December 31, 2015 As Presented Adjustment As Adjusted Preferred Stock, $0.001 par value, 10,000,000 shares authorized, respectively; 5,290 shares issued and outstanding $ 6 $ – $ 6 Common Stock, $0.001 par value, 233,333,334 shares authorized, respectively; 3,753,179 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 Accumulated Deficit (27,045,776 ) (3,383,850 ) (30,429,626 ) Total Equity $ 14,121,584 $ – $ 14,121,584 Impact of Errors on the Consolidated Statement of Operations For the Year Ended December 31, 2015 For the Year Ended December 31, 2015 As Presented Adjustment As Adjusted Net Loss $ (3,483,122 ) – $ (3,483,122 ) Beneficial Conversion Feature on Preferred Stock (400,000 ) (3,383,850 ) (3,783,850 ) Net Loss Applicable to Common Shareholders (3,883,122 ) (3,383,850 ) (7,266,972 ) Net Loss per Common Share $ (1.55 ) (1.36 ) $ (2.91 ) Weighted Average Shares Outstanding 2,500,854 – 2,500,854 |
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. | 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 Parent 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 Business Combinations. | 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 Business Combinations. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“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. | Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“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. | Financial Statement Reclassification Certain account balances from prior periods have been reclassified in these consolidated financial statements to conform to current period classifications. |
Cash, Cash Equivalents, and Restricted Cash | Cash, Cash Equivalents, and Restricted Cash The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents. Restricted Cash includes $1,000,000 that the Company deposited into a cash account to be used solely to produce its series Llama Llama | Cash, Cash Equivalents, and Restricted Cash The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents. Restricted Cash includes $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 had an allowance for doubtful accounts of $110,658 at both September 30, 2017 and December 31, 2016. | 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 December 31, 2016 and 2015. |
Inventories | Inventories Inventories are stated at the lower of average cost 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 at both September 30, 2017 and December 31, 2016. | 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 December 31, 2016 and 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. | 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 FASB 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 or 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 FASB 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. | 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 FASB 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 or 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 FASB 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 FASB 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 FASB 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, for both episodic series and films, from time to time, the Company develops additional content, improved animation and bonus songs/features for its existing content. 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. | Film and Television Costs The Company capitalizes production costs for episodic series produced in accordance with FASB 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 FASB 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, for both episodic series and films, from time to time, the Company develops additional content, improved animation and bonus songs/features for its existing content. 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 FASB 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 FASB 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 sells advertising on its Kid Genius Cartoon Channel in the form of either flat rate promotions or impressions served. For flat rate promotions with a fixed term, the Company recognizes revenue when all five revenue recognition criteria under FASB ASC 605 are met. For impressions served, the Company delivers a certain minimum number of impressions on the channel to the advertiser for which the advertiser pays a contractual CPM per impression. Impressions served are reported to the Company on a monthly basis, and revenue is reported in the month the impressions are served. 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 FASB ASC 605 Revenue Recognition. | Revenue Recognition The Company recognizes revenue in accordance with FASB 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 FASB 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 sells advertising on its Kid Genius channel in the form of either flat rate promotions or impressions served. For flat rate promotions with a fixed term, the Company recognizes revenue when all five revenue recognition criteria under FASB ASC 606 are met. For impressions served, the Company delivers a certain minimum number of impressions on the channel to the advertiser for which the advertiser pays a contractual CPM per impression. Impressions served are reported to the Company on a monthly basis, and revenue will be reported in the month the impressions are served. 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 FASB ASC 605 Revenue Recognition. |
Stock Based Compensation | Share-Based Compensation As required by FASB ASC 718 - Stock Compensation, the Company recognizes an expense related to the fair value of our share-based compensation awards, including stock options, using the Black-Scholes calculation as of the date of grant. | Share-Based Compensation As required by FASB ASC 718 - Stock Compensation, the Company recognizes an expense related to the fair value of our share-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. | 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. | 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. |
Concentration of Risk | Concentration of Risk The Company’s cash is maintained at two financial institutions and from time to time the balances for this account exceed the Federal Deposit Insurance Corporation’s (“FDIC”) insured amount. Balances on interest bearing deposits at banks in the United States are insured by the FDIC up to $250,000 per account. As of December 31, 2016, the Company had one account with an uninsured balance of $789,318, another with an uninsured balance of $11,947, and a third with an uninsured balance of $335,418. As of December 31, 2015, the Company had one account with an uninsured balance of $4,900,000. For fiscal year 2016, the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue. This customer accounts for 19% of total revenue but represents 0% accounts receivable. For fiscal year 2015, the Company had three customers whose total revenue exceeded 10% of the total consolidated revenue. These customers account for 15%, 19%, and 16% of total revenue, respectively. Those three accounts made up 56%, 0%, and 0% of accounts receivable, respectively. The major customers for the year ended December 31, 2016 are not necessarily the same as the major customers at December 31, 2015. There is significant financial risk associated with a dependence upon a small number of customers. The Company periodically assesses the financial strength of these customers and establishes allowances for any anticipated bad debt. At December 31, 2016 and 2015, no allowance for bad debt has been established for the major customers as these amounts are believed to be fully collectible. | |
Fair value of financial instruments | Fair value of financial instruments The carrying amounts of cash, receivables, accounts payable, and accrued liabilities approximate fair value due to the short-term maturity of the instruments. The carrying amount of the Production Loan Facility approximates fair value since the debt carries a variable interest rate that is tied to either the current Prime or LIBOR rates plus an applicable spread. We previously adopted FASB ASC 820 for financial instruments measured at fair value on a recurring basis. FASB ASC 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. FASB 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. | Fair value of financial instruments The carrying amounts of cash, receivables, accounts payable, and accrued liabilities approximate fair value due to the short-term maturity of the instruments. The carrying amount of the Production Loan Facility approximates fair value since the debt carries a variable interest rate that is tied to either the current Prime or LIBOR rates plus an applicable spread. We adopted FASB ASC 820 as of January 1, 2008, for financial instruments measured at fair value on a recurring basis. FASB ASC 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. FASB 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. In the second and third quarters, the Company initiated and executed a project to evaluate the impact of these changes, which included a review of existing contracts with customers, an evaluation of the specific terms of those contracts and the appropriate treatment under the new standards, and a comparison of that new treatment to the Company’s existing accounting policies, to identify differences. The Company is currently evaluating the potential impact on the its internal controls to identify any necessary changes. The standard can be applied either retrospectively to each period presented or as a cumulative effect adjustment as of the date of adoption. The Company plans to implement these standards effective January 1, 2018 based on the modified retrospective method, but may opt for the full retrospective method depending on the final outcome of our evaluation. The Company believes that it is following an appropriate timeline to allow for proper adoption on the implementation date of January 1, 2018 and will continue to monitor new customer contracts through the remainder of 2017. 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 November 2016, the FASB issued Accounting Standards Update 2016-18, “Statement of Cash Flows - Restricted Cash a consensus of the FASB Emerging Issues Task Force.” This standard requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement of cash flows under a retrospective transition approach. The guidance will become effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We have prospectively adopted ASU 2016-18. The impact to our consolidated financial position, results of operations and cash flows is minimal. In January 2017, the FASB issued Accounting Standards Update 2017-04, “Simplifying the Test for Goodwill Impairment”, which requires an entity to perform a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). It eliminates Step 2 of the current two-step goodwill impairment test, under which a goodwill impairment loss is measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The standard is effective January 1, 2020, with early adoption as of January 1, 2017 permitted. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In May 2017, the FASB issued Accounting Standard Update 2017-09, “Compensation—Stock Compensation: Scope of Modification Accounting”, which clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Under the new guidance, modification accounting is required if the fair value, vesting conditions or classification (equity or liability) of the new award are different from the original award immediately before the original award is modified. The standard is effective beginning January 1, 2018, with early adoption permitted. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. Various other accounting pronouncements have been recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific industries/transactions or special circumstances, and are not expected to have a material effect on our financial position, results of operations, or cash flows. | 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 consolidated financial position, results of operations and cash flows. In February 2016, the FASB issued Accounting Standards Update 2016-02, “Leases”. The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2018. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In November 2016, the FASB issued Accounting Standards Update 2016-18, “Statement of Cash Flows - Restricted Cash a consensus of the FASB Emerging Issues Task Force.” This standard requires restricted cash and cash equivalents to be included with cash and cash equivalents on the statement of cash flows under a retrospective transition approach. The guidance will become effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is permitted. We have prospectively adopted ASU 2016-18. The impact to our consolidated financial position, results of operations and cash flows is minimal. 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 Acc28
2. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Accounting Policies [Abstract] | |
Impact of errors on financial statements | Impact of Errors on the Consolidated Balance Sheet As of December 31, 2015 As of December 31, 2015 As Presented Adjustment As Adjusted Preferred Stock, $0.001 par value, 10,000,000 shares authorized, respectively; 5,290 shares issued and outstanding $ 6 $ – $ 6 Common Stock, $0.001 par value, 233,333,334 shares authorized, respectively; 3,753,179 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 Accumulated Deficit (27,045,776 ) (3,383,850 ) (30,429,626 ) Total Equity $ 14,121,584 $ – $ 14,121,584 Impact of Errors on the Consolidated Statement of Operations For the Year Ended December 31, 2015 For the Year Ended December 31, 2015 As Presented Adjustment As Adjusted Net Loss $ (3,483,122 ) – $ (3,483,122 ) Beneficial Conversion Feature on Preferred Stock (400,000 ) (3,383,850 ) (3,783,850 ) Net Loss Applicable to Common Shareholders (3,883,122 ) (3,383,850 ) (7,266,972 ) Net Loss per Common Share $ (1.55 ) (1.36 ) $ (2.91 ) Weighted Average Shares Outstanding 2,500,854 – 2,500,854 |
4. Property and Equipment, Net
4. Property and Equipment, Net (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | ||
Property and Equipment, Net | September 30, 2017 December 31, 2016 Furniture and Equipment $ 12,385 $ 12,385 Computer Equipment 90,015 42,654 Leasehold Improvements 176,903 176,903 Software 15,737 15,737 Property and Equipment, Gross 295,040 247,679 Less Accumulated Depreciation (208,745 ) (157,218 ) Property and Equipment, Net $ 86,295 $ 90,461 | December 31. 2016 December 31, 2015 Furniture and Equipment $ 12,385 $ 12,385 Computer Equipment 42,654 36,810 Leasehold Improvements 176,903 176,903 Software 15,737 15,737 Property and Equipment, Gross 247,679 241,835 Less Accumulated Depreciation (157,218 ) (90,887 ) Property and Equipment, Net $ 90,461 $ 150,948 |
5. Film and Television Costs,30
5. Film and Television Costs, Net (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Film And Television Costs Net | ||
Film and Television Costs Activity | Total Film and Television Costs, Net as of December 31, 2015 $ 1,003,546 Additions to Film and Television Costs 1,390,450 Capitalized Interest 34,756 Film Amortization Expense (167,788 ) Film and Television Costs, Net as of December 31, 2016 2,260,964 Additions to Film and Television Costs 1,880,811 Capitalized Interest 128,792 Film Amortization Expense (37,935 ) Film and Television Costs, Net as of September 30, 2017 $ 4,232,632 | Total Film and Television Costs, Net as of 12/31/2014 $ 303,953 Additions to Film and Television Costs 827,145 Film Amortization Expense (127,552 ) Film and Television Costs, Net as of 12/31/2015 1,003,546 Additions to Film and Television Costs 1,390,450 Capitalized Interest 34,756 Film Amortization Expense (167,788 ) Film and Television Costs, Net as of 12/31/2016 $ 2,260,964 |
6. Goodwill and Intangible As31
6. Goodwill and Intangible Assets, Net (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Goodwill And Intangible Assets Net Tables | ||
Schedule of Intangible Asset | September 30, 2017 December 31, 2016 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) 185,020 185,020 Intangible Assets, Gross 2,119,527 2,119,527 Less Accumulated Amortization (c) (317,649 ) (273,877 ) Intangible Assets, Net $ 1,801,878 $ 1,845,650 (a) In connection with the Merger in 2013, 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. Based on certain legal, regulatory, contractual, and economic factors, the Company has deemed these assets to be indefinite-lived. Hence, pursuant to FASB ASC 350-30, these assets are not subject to amortization and are tested annually for impairment. Through September 30, 2017, the Company has not recognized any impairment expense related to these assets. (b) Pursuant to FASB 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. Through September 30, 2017, the Company has not recognized any impairment expense related to these assets. (c) During the three months ended September 30, 2017 and 2016, the Company recognized $12,756 and $19,448, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. During the nine months ended September 30, 2017 and 2016, the Company recognized $43,771 and $57,763, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. | 12/31/2016 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) 185,020 181,220 Intangible Assets, Gross 2,119,527 2,115,727 Less Accumulated Amortization (c) (273,877 ) (197,521 ) Intangible Assets, Net $ 1,845,650 $ 1,918,206 (a) In connection with the Merger in 2013, 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. Based on certain legal, regulatory, contractual, and economic factors, the Company has deemed these assets to be indefinite-lived. Hence, pursuant to FASB ASC 350-30, these assets are not subject to amortization and are tested annually for impairment. Through December 31, 2016, the Company has not recognized any impairment expense related to these assets. (b) Pursuant to FASB 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. Through December 31, 2016, the Company has not recognized any impairment expense related to these assets. (c) During the years ended December 31, 2016 and 2015, the Company recognized $76,356 and $69,453, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. |
Expected Future Ingtangible Asset Amortization | Fiscal Year: 2017 (three months) $ 11,752 2018 26,119 2019 9,236 2020 8,655 2021 2,059 Remaining 4,057 Total $ 61,878 | Fiscal Year: 2017 $ 55,520 2018 26,119 2019 9,236 2020 8,655 2021 2,059 Remaining 4,061 Total $ 105,650 |
8. Accrued Liabilities - Curr32
8. Accrued Liabilities - Current (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Payables and Accruals [Abstract] | ||
Other accrued liabilities | September 30, 2017 December 31, 2016 Accrued Salaries and Wages (a) $ 151,150 $ 132,827 Disputed Trade Payables (b) 925,000 925,000 Services Advance - Current Portion (c) – 1,489,583 Other Accrued Expenses 225,178 249,482 Total Accrued Liabilities - Current $ 1,301,328 $ 2,796,892 (a) Accrued Salaries and Wages represent accrued vacation payable to employees. (b) As part of the Merger in 2013, 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, 2017, 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 DADC to provide all CD, DVD and Blu-ray 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 disk replication, packaging and distribution services for its content across all physical media, including DVD, CD, and Blu-ray from 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. On January 10, 2017, the Company entered into an amendment of our home entertainment Distribution Agreement with Sony pursuant to which, among other things, Sony paid DADC $1,489,583, which was the total sum owed and payable by us to DADC for the disk replication, packaging and distribution services. In connection with such transaction, we issued Sony 301,231 shares of our Common Stock at $4.945 per share, Sony’s exclusive territory for exercising its home entertainment distribution rights under the Distribution Agreement was extended from the United States and Canada to worldwide, and the amount of advances subject to recoupment by Sony out of royalty payments that would otherwise be due to us under the Distribution Agreement was increased by the amount of the payment to DADC | December 31, 2016 December 31, 2015 Accrued Salaries and Wages (a) $ 132,827 $ 96,385 Disputed Trade Payables (b) 925,000 925,000 Services Advance - Current Portion (c) 1,489,583 – Other Accrued Expenses 249,482 509,477 Total Accrued Liabilities - Current $ 2,796,892 $ 1,530,862 (a) Accrued Salaries and Wages represent accrued vacation payable to employees. (b) As part of the Merger in 2013, 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 December 31, 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 DADC 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 disk replication, packaging and distribution services for its content across all physical media, including DVD, CD, and Blu-ray from 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. Subsequent to the end of the fiscal year, on January 10, 2017, the Company entered into an amendment of our home entertainment Distribution Agreement with Sony pursuant to which, among other things, Sony agreed to pay DADC $1,489,583, the amount which was owed and payable by us to DADC for the disk replication, packaging and distribution services. In connection with such transaction, we issued Sony 301,231 shares of our Common Stock at $4.945 per share, Sony’s exclusive territory for exercising its home entertainment distribution rights under the Distribution Agreement was extended from the United States and Canada to worldwide, and the amount of advances subject to recoupment by Sony out of royalty payments that would otherwise be due to us under the Distribution Agreement was increased by the amount of the payment to DADC. (See Note 7 for additional information about the advance.) |
12. Stock Options (Tables)
12. Stock Options (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 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, 2016 1,373,554 $ 2.82 - 12.00 3.99 years $ 280,642 $ 8.14 Options Granted – Options Exercised – Options Cancelled 70,339 Options Expired – Balance at September 30, 2017 1,303,215 $ 2.82 - 12.00 3.24 years $ 127,860 $ 8.11 Exercisable December 31, 2016 452,535 $ 2.82 - 6.00 3.95 years $ 263,375 $ 5.29 Exercisable September 30, 2017 466,700 $ 2.82 - 6.00 3.23 years $ 127,860 $ 5.33 | 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 1,407,775 $ 2.82 - 12.00 4.94 years $ 58,512 $ 8.10 Options Granted 85,088 Options Exercised – Options Cancelled 119,309 Options Expired – Balance at December 31, 2016 1,373,554 $ 2.82 - 12.00 3.99 years $ 280,642 $ 8.14 Exercisable December 31, 2015 100,021 $ 2.82 4.80 years $ 58,512 $ 2.82 Exercisable December 31, 2016 452,535 $ 2.82 - 6.00 3.95 years $ 263,375 $ 5.29 |
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 | 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 | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 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, 2016 1,651,698 $ 3.30 - 6.00 3.75 years $ 3.49 $ 3,301,913 Warrants Granted 1,286,690 3.30 - 5.30 – – ؘ– Warrants Exercised 1,171,690 3.30 – – – Warrants Expired – Balance at September 30, 2017 1,766,698 $ 3.30 - 6.00 3.94 years $ 4.03 $ 925,097 Exercisable December 31, 2016 1,651,698 $ 3.30 - 6.00 3.75 years $ 3.49 $ 3,301,913 Exercisable September 30, 2017 1,766,698 $ 3.30 - 6.00 3.94 years $ 4.03 $ 925,097 | 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 1,685,032 $ 3.30 - 6.00 4.75 years $ 3.48 $ – Warrants Granted – – – – – Warrants Exercised 33,334 – – – – Warrants Expired – – – – – Balance at December 31, 2016 1,651,698 $ 3.30 - 6.00 3.75 years $ 3.49 $ 3,301,913 Exercisable December 31, 2015 1,685,032 $ 3.30 - 6.00 4.75 years $ 3.48 $ – Exercisable December 31, 2016 1,651,698 $ 3.30 - 6.00 3.75 years $ 3.49 $ 3,301,913 |
14. Income Taxes (Tables)
14. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Schedule of Deferred Tax Assets and Liabilities | 2016 2015 Deferred tax assets: NOL Carryover $ 7,544,300 $ 5,808,100 Bad Debt Reserve 44,100 – Inventory Reserve 10,400 11,200 Amortization 61,500 – Accrued Compensated Absences 52,900 37,600 Charitable Contributions 5,000 400 Subtotal 7,718,200 5,857,300 Valuation Allowance (7,647,300 ) (5,857,300 ) Deferred tax liabilities: Depreciation (42,700 ) – Prepaid Expenses (28,200 ) – Net Deferred Tax Asset $ – $ – |
Schedule of Effective Income Tax Rate Reconciliation | 2016 2015 Book Loss $ (2,113,000 ) $ (1,184,300 ) Meals and Entertainment 10,300 5,400 Stock Options 537,800 10,900 Stock Issued for Debt Extinguishment – 14,300 Other 4,700 – Valuation Allowance 1,560,200 1,153,700 $ – $ – |
16. Lease Commitments (Tables)
16. Lease Commitments (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
Lease Commitments Tables | ||
Future minimum lease payments | 2017 2018 2019 2020 2021 Thereafter Operating Leases $ 36,214 $ 36,214 $ – $ – $ – $ – Employment Contracts 258,360 580,413 – – – – Total $ 294,574 $ 616,627 $ – $ – $ – $ – | Year Amount 2017 $ 143,451 2018 36,214 $ 179,665 |
1. Organization and Business (D
1. Organization and Business (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | ||||
Accounting Policies [Abstract] | ||||||||||
Net loss | $ (1,164,406) | $ (1,530,900) | $ (3,732,183) | $ (4,363,567) | $ (6,213,135) | $ (3,483,122) | ||||
Net cash used in operating activities | (5,029,810) | (1,885,328) | (3,716,277) | (3,396,581) | ||||||
Accumulated deficit | (40,374,944) | (40,374,944) | (36,642,761) | (30,429,626) | ||||||
Stockholders equity | 10,367,014 | 10,367,014 | 10,055,526 | 14,121,584 | $ 13,720,248 | |||||
Current assets | 3,989,900 | 3,989,900 | 3,376,788 | 5,432,031 | ||||||
Cash, cash equivalents and restricted cash | 3,247,402 | $ 3,642,667 | 3,247,402 | $ 3,642,667 | 2,887,921 | 5,187,620 | $ 4,301,099 | |||
Current liabilities | 2,126,844 | 2,126,844 | 3,856,192 | 2,606,680 | ||||||
Trade payables | 925,000 | 925,000 | 925,000 | [1] | 925,000 | |||||
Service advance | 0 | [2] | 0 | [2] | 1,489,583 | [3] | $ 0 | |||
Working capital | $ 1,863,056 | $ 1,863,056 | $ (479,404) | |||||||
[1] | As part of the Merger in 2013, 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 December 31, 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 DADC to provide all CD, DVD and Blu-ray 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 disk replication, packaging and distribution services for its content across all physical media, including DVD, CD, and Blu-ray from 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. On January 10, 2017, the Company entered into an amendment of our home entertainment Distribution Agreement with Sony pursuant to which, among other things, Sony paid DADC $1,489,583, which was the total sum owed and payable by us to DADC for the disk replication, packaging and distribution services. In connection with such transaction, we issued Sony 301,231 shares of our Common Stock at $4.945 per share, Sony's exclusive territory for exercising its home entertainment distribution rights under the Distribution Agreement was extended from the United States and Canada to worldwide, and the amount of advances subject to recoupment by Sony out of royalty payments that would otherwise be due to us under the Distribution Agreement was increased by the amount of the payment to DADC. | |||||||||
[3] | During the first quarter of 2014, the Company entered into an exclusive three-year agreement with DADC 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 disk replication, packaging and distribution services for its content across all physical media, including DVD, CD, and Blu-ray from 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. Subsequent to the end of the fiscal year, on January 10, 2017, the Company entered into an amendment of our home entertainment Distribution Agreement with Sony pursuant to which, among other things, Sony agreed to pay DADC $1,489,583, the amount which was owed and payable by us to DADC for the disk replication, packaging and distribution services. In connection with such transaction, we issued Sony 301,231 shares of our Common Stock at $4.945 per share, Sony's exclusive territory for exercising its home entertainment distribution rights under the Distribution Agreement was extended from the United States and Canada to worldwide, and the amount of advances subject to recoupment by Sony out of royalty payments that would otherwise be due to us under the Distribution Agreement was increased by the amount of the payment to DADC. (See Note 7 for additional information about the advance.) |
2. Summary of Significant Acc38
2. Summary of Significant Accounting Policies (Details - Impact of Errors) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Preferred stock value | $ 4 | $ 4 | $ 5 | $ 6 | |||
Common stock value | $ 5,939 | $ 5,939 | $ 4,011 | $ 3,753 | |||
Common stock to be issued | 24 | 24 | 24 | 24 | |||
Additional Paid in Capital | $ 50,741,109 | $ 50,741,109 | $ 46,697,005 | $ 44,547,427 | |||
Accumulated Deficit | (40,374,944) | (40,374,944) | (36,642,761) | (30,429,626) | |||
Accumulated Other Comprehensive Income (Loss) | (5,118) | (5,118) | (2,758) | 0 | |||
Total Equity | 10,367,014 | 10,367,014 | 10,055,526 | 14,121,584 | $ 13,720,248 | ||
Net Loss | (1,164,406) | $ (1,530,900) | (3,732,183) | $ (4,363,567) | (6,213,135) | (3,483,122) | |
Beneficial Conversion Feature on Preferred Stock | 0 | (3,783,850) | |||||
Net Loss Applicable to Common Shareholders | $ (1,164,406) | $ (1,530,900) | $ (3,732,183) | $ (4,363,567) | $ (6,213,135) | $ (7,266,972) | |
Net Loss per Common Share | $ (2.91) | ||||||
Weighted Average Shares Outstanding | 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) | ||||||
Total Equity | 14,121,584 | ||||||
Net Loss | (3,483,122) | ||||||
Beneficial Conversion Feature on Preferred Stock | (400,000) | ||||||
Net Loss Applicable to Common Shareholders | $ (3,883,122) | ||||||
Net Loss per Common Share | $ (1.55) | ||||||
Weighted Average Shares Outstanding | 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) | ||||||
Total Equity | 0 | ||||||
Net Loss | 0 | ||||||
Beneficial Conversion Feature on Preferred Stock | (3,383,850) | ||||||
Net Loss Applicable to Common Shareholders | $ (3,383,850) | ||||||
Net Loss per Common Share | $ (1.36) | ||||||
Weighted Average Shares Outstanding | 0 |
2. Significant Accounting Polic
2. Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Dec. 31, 2015 | Sep. 30, 2017 | |
Allowance for doubtful accounts | $ 110,658 | $ 110,658 | $ 110,658 |
Reserve for obsolete inventory | 26,097 | 28,813 | $ 26,097 |
Uninsured cash balances | $ 4,900,000 | ||
Bank 1 [Member] | |||
Uninsured cash balances | 789,318 | ||
Bank 2 [Member] | |||
Uninsured cash balances | 11,947 | ||
Bank 3 [Member] | |||
Uninsured cash balances | $ 335,418 | ||
Sales Revenue, Net [Member] | One Customer | |||
Concentration risk percentage | 19.00% | 15.00% | |
Sales Revenue, Net [Member] | Customer Two | |||
Concentration risk percentage | 19.00% | ||
Sales Revenue, Net [Member] | Customer Three | |||
Concentration risk percentage | 16.00% | ||
Accounts Receivable [Member] | One Customer | |||
Concentration risk percentage | 0.00% | 56.00% | |
Accounts Receivable [Member] | Customer Two | |||
Concentration risk percentage | 0.00% | ||
Accounts Receivable [Member] | Customer Three | |||
Concentration risk percentage | 0.00% |
3. Inventory (Details Narrative
3. Inventory (Details Narrative) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Inventory Disclosure [Abstract] | |||
Inventory reserve | $ 26,097 | $ 26,097 | $ 28,813 |
4. Property and Equipment, Ne41
4. Property and Equipment, Net (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Property and equipment, gross | $ 295,040 | $ 295,040 | $ 247,679 | $ 241,835 | ||
Less Accumulated Depreciation | (208,745) | (208,745) | (157,218) | (90,887) | ||
Property and Equipment, Net | 86,295 | 86,295 | 90,461 | 150,948 | ||
Depreciation expense | 17,661 | $ 16,574 | 51,527 | $ 49,637 | 66,331 | 64,458 |
Furniture and Fixtures [Member] | ||||||
Property and equipment, gross | 12,385 | 12,385 | 12,385 | 12,385 | ||
Computer Equipment [Member] | ||||||
Property and equipment, gross | 90,015 | 90,015 | 42,654 | 36,810 | ||
Leasehold Improvements [Member] | ||||||
Property and equipment, gross | 176,903 | 176,903 | 176,903 | 176,903 | ||
Software [Member] | ||||||
Property and equipment, gross | $ 15,737 | $ 15,737 | $ 15,737 | $ 15,737 |
5. Film and Television Costs,42
5. Film and Television Costs, Net (Details) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Film And Television Costs Net | ||||
Film and Television costs, beginning balance | $ 2,260,964 | $ 1,003,546 | $ 1,003,546 | $ 303,953 |
Additions to Film and Television Costs | 1,880,811 | 754,770 | 1,390,450 | 827,145 |
Capitalized interest | 128,792 | 34,756 | ||
Film Amortization Expense | (37,935) | $ (158,168) | (158,168) | (127,552) |
Film and Television Costs, ending balance | $ 4,232,632 | $ 2,260,964 | $ 1,003,546 |
6. Goodwill and Intangible As43
6. Goodwill and Intangible Assets, Net (Details - Intangibles) - USD ($) | 9 Months Ended | 12 Months Ended | ||||||
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |||||
Intangible assets | $ 2,119,527 | $ 2,119,527 | $ 2,115,727 | |||||
Less Accumulated Amortization | (317,649) | [1] | (273,877) | [1] | (197,521) | [2] | ||
Net Intangible Assets | 1,801,878 | 1,845,650 | 1,918,206 | |||||
Amortization expense | $ 43,771 | $ 57,763 | 76,356 | 69,453 | ||||
Identifiable artistic-related assets | ||||||||
Intangible assets | [3] | 1,740,000 | 1,740,000 | |||||
Trademarks [Member] | ||||||||
Intangible assets | [4] | 129,831 | 129,831 | |||||
Product Masters | ||||||||
Intangible assets | 64,676 | 64,676 | ||||||
Other Intangible Assets | ||||||||
Intangible assets | $ 185,020 | $ 181,220 | ||||||
[1] | Accrued Salaries and Wages represent accrued vacation payable to employees. | |||||||
[2] | During the years ended December 31, 2016 and 2015, the Company recognized $76,356 and $69,453, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. | |||||||
[3] | In connection with the Merger in 2013, the Company acquired $1,740,000 of Identifiable Artistic-Related Assets. These assets, related to certain properties owned by A Squared and assumed by the Company, were valued using an independent firm. Based on certain legal, regulatory, contractual, and economic factors, the Company has deemed these assets to be indefinite-lived. Hence, pursuant to FASB ASC 350-30, these assets are not subject to amortization and are tested annually for impairment. Through December 31, 2016, the Company has not recognized any impairment expense related to these assets. | |||||||
[4] | Pursuant to FASB ASC 350-30-35, the Company reviews these intangible assets periodically to determine if the value should be retired or impaired due to recent events. Through December 31, 2016, the Company has not recognized any impairment expense related to these assets. |
6. Goodwill and Intangible As44
6. Goodwill and Intangible Assets (Details - future amortization) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Future intangible asset amortization | ||
2,017 | $ 55,520 | |
2,018 | $ 26,119 | 26,119 |
2,019 | 9,236 | 9,236 |
2,020 | 8,655 | 8,655 |
2,021 | 2,059 | 2,059 |
Remaining | 4,057 | 4,061 |
Total | $ 61,878 | $ 105,650 |
7. Deferred Revenue (Details Na
7. Deferred Revenue (Details Narrative) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Deferred revenue | $ 5,072,849 | $ 3,106,608 | $ 958,539 |
Royalty Advance [Member] | |||
Deferred revenue | $ 2,000,000 |
8. Accrued Liabilities - Curr46
8. Accrued Liabilities - Current (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |||
Payables and Accruals [Abstract] | ||||||
Accrued Salaries and Wages | $ 151,150 | [1] | $ 132,827 | [1] | $ 96,385 | [2] |
Disputed trade payables | 925,000 | 925,000 | [3] | 925,000 | ||
Services Advance - Current Portion | 0 | [4] | 1,489,583 | [5] | 0 | |
Other accrued expenses | 225,178 | 249,482 | 509,477 | |||
Total accrued liabilities | $ 1,301,328 | $ 2,796,892 | $ 1,530,862 | |||
[1] | As part of the Merger in 2013, 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, 2017, 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] | Accrued Salaries and Wages represent accrued vacation payable to employees. | |||||
[3] | As part of the Merger in 2013, 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 December 31, 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. | |||||
[4] | During the first quarter of 2014, the Company entered into an exclusive three-year agreement with DADC to provide all CD, DVD and Blu-ray 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 disk replication, packaging and distribution services for its content across all physical media, including DVD, CD, and Blu-ray from 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. On January 10, 2017, the Company entered into an amendment of our home entertainment Distribution Agreement with Sony pursuant to which, among other things, Sony paid DADC $1,489,583, which was the total sum owed and payable by us to DADC for the disk replication, packaging and distribution services. In connection with such transaction, we issued Sony 301,231 shares of our Common Stock at $4.945 per share, Sony's exclusive territory for exercising its home entertainment distribution rights under the Distribution Agreement was extended from the United States and Canada to worldwide, and the amount of advances subject to recoupment by Sony out of royalty payments that would otherwise be due to us under the Distribution Agreement was increased by the amount of the payment to DADC. | |||||
[5] | During the first quarter of 2014, the Company entered into an exclusive three-year agreement with DADC 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 disk replication, packaging and distribution services for its content across all physical media, including DVD, CD, and Blu-ray from 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. Subsequent to the end of the fiscal year, on January 10, 2017, the Company entered into an amendment of our home entertainment Distribution Agreement with Sony pursuant to which, among other things, Sony agreed to pay DADC $1,489,583, the amount which was owed and payable by us to DADC for the disk replication, packaging and distribution services. In connection with such transaction, we issued Sony 301,231 shares of our Common Stock at $4.945 per share, Sony's exclusive territory for exercising its home entertainment distribution rights under the Distribution Agreement was extended from the United States and Canada to worldwide, and the amount of advances subject to recoupment by Sony out of royalty payments that would otherwise be due to us under the Distribution Agreement was increased by the amount of the payment to DADC. (See Note 7 for additional information about the advance.) |
9. Short-Term Debt - Related 47
9. Short-Term Debt - Related Parties (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2016 | Dec. 31, 2015 | |
Short term debt, related party | $ 0 | $ 410,535 |
Imputed Interest for Short Term Debt - Related Party | 8,503 | 24,757 |
Andrew Heyward [Member] | ||
Short term debt, related party | 410,535 | |
Imputed Interest for Short Term Debt - Related Party | $ 8,503 | $ 24,757 |
Conversion of debt, shares issued | 79,561 |
10. Production Loan Facility (D
10. Production Loan Facility (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2016 | Sep. 30, 2017 | 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 | $ 1,332,004 | $ 3,495,524 | $ 0 |
Line of credit borrowings | 1,505,307 | ||
Offering costs | $ 173,303 |
11. Stockholders' Equity (Detai
11. Stockholders' Equity (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Reverse stock split | As a result of the 2016 Reverse 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. | |||
Shares authorized | 233,333,334 | 233,333,334 | 700,000,000 | |
Proceeds from warrant exercises | $ 0 | $ 110,000 | $ 110,000 | $ 0 |
Common shares outstanding | 5,938,103 | 4,010,649 | 3,753,179 | |
Preferred stock issued | 3,605 | 4,895 | 5,290 | |
Preferred stock outstanding | 3,605 | 4,895 | 5,290 | |
Beneficial conversion amount | $ 0 | $ (3,783,850) | ||
Settlement Agreement [Member] | ||||
Stock issued for services, shares | 10,000 | |||
Short Term Advances [Member] | ||||
Stock issued for advances, shares issued | 79,561 | |||
Accredited Investors [Member] | ||||
Stock issued in private placement, shares | 1,443,362 | |||
Proceeds from sale of stock | $ 4,330,000 | |||
Stock offering costs | $ 502,218 | |||
Vendor [Member] | ||||
Stock issued for services, shares | 2,500 | |||
Conversion of Preferred [Member] | ||||
Conversion of stock, shares issued | 131,668 | |||
Conversion of stock, shares converted | 395 | |||
Warrants Exercised [Member] | ||||
Stock issued for exercise of warrants | 33,334 | |||
Proceeds from warrant exercises | $ 110,000 |
12. Stock Options (Details-Opti
12. Stock Options (Details-Option activity) - Stock Options [Member] - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Stock Options | |||
Number of Options outstanding beginning balance | 1,373,554 | 1,407,775 | |
Number of Shares, Options Granted | 0 | 85,088 | |
Number of Shares, Options Exercised | 0 | 0 | |
Number of Shares, Options Cancelled | 70,339 | 119,309 | |
Number of Shares, Options Expired | 0 | 0 | |
Number of Options outstanding ending balance | 1,303,215 | 1,373,554 | 1,407,775 |
Number of Shares exercisable ending balance | 466,700 | 452,535 | 100,021 |
Exercise Price Per Share | |||
Exercise price per share beginning balance | $2.82-$12.00 | $2.82-12.00 | |
Exercise price per share, exercisable | $ 2.82 | ||
Exercise price per share, exercisable range | $2.82-$6.00 | $2.82 - 6.00 | |
Weighted Average Remaining Contractual Life | 3 years 2 months 26 days | 3 years 11 months 27 days | 4 years 11 months 9 days |
Weighted average remaining contractual life, exercisable | 3 years 2 months 23 days | 3 years 11 months 12 days | 4 years 9 months 18 days |
Aggregate Intrinsic Value | |||
Aggregate Intrinsic Value beginning balance | $ 280,642 | $ 58,512 | |
Aggregate Intrinsic Value, options granted | 0 | ||
Aggregate Intrinsic Value ending balance | 127,860 | 280,642 | $ 58,512 |
Aggregate Intrinsic Value Exercisable | $ 127,860 | $ 263,375 | $ 58,512 |
Weighted Average Exercise Price Per Share | |||
Weighted Average Exercise Price per Share beginning balance | $ 8.14 | $ 8.10 | |
Weighted Average Exercise Price per Share ending balance | 8.11 | 8.14 | $ 8.10 |
Weighted Average Exercise Price per Share Exercisable | $ 5.33 | $ 5.29 | $ 2.82 |
12. Stock Options (Details Narr
12. Stock Options (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Share-based compensation | $ 108,476 | $ 358,919 | $ 514,108 | $ 1,236,880 | $ 1,581,797 | $ 31,919 |
Unvested share based compensation | 1,111,629 | |||||
Adjustment of options granted in 2015 [Member] | ||||||
Share-based compensation | 564,985 | |||||
True-up expenses from prior periods [Member] | ||||||
Share-based compensation | $ 220,564 | |||||
2008 Stock Option Plan [Member] | ||||||
Shares authorized under plan | 166,667 | |||||
2015 Plan [Member] | ||||||
Shares authorized under plan | 1,666,667 | 1,666,667 | 1,443,334 | |||
Shares authorized increase | 1,293,334 |
13. Warrants (Details)
13. Warrants (Details) - Warrant - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Warrant | |||
Number of Warrants outstanding beginning balance | 1,651,698 | 1,685,032 | |
Warrants Granted | 1,286,690 | 0 | |
Warrants Exercised | 1,171,690 | 33,334 | |
Warrants Expired | 0 | 0 | |
Number of Warrants outstanding ending balance | 1,766,698 | 1,651,698 | 1,685,032 |
Number of Warrants exercisable | 1,766,698 | 1,651,898 | 1,685,032 |
Exercise Price Per Share | |||
Exercise price per share, beginning balance | $ 3.49 | $ 3.48 | |
Exericse price per share, granted | |||
Exercise price per share, ending balance | $ 4.03 | $ 3.49 | $ 3.48 |
Exercise price per share range | $3.30-6.00 | ||
Exercise price per share, exercisable | $ 3.49 | $ 3.48 | |
Weighted average remaining contractual life, warrants outstanding | 3 years 11 months 8 days | 3 years 9 months | 4 years 9 months |
Weighted average remaining contractual life, exercisable | 3 years 11 months 8 days | 3 years 9 months | 4 years 9 months |
Aggregate Intrinsic Value | |||
Aggregate intrinsic value, outstanding | $ 925,097 | $ 3,301,913 | |
Aggregate intrinsic value, exercisable | $ 925,097 | $ 3,301,913 |
13. Warrants (Details Narrative
13. Warrants (Details Narrative) - Warrant - shares | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Warrants Granted | 1,286,690 | 0 | |
Accredited Investors [Member] | |||
Warrants Granted | 1,443,362 | ||
Placement Agent [Member] | |||
Warrants Granted | 141,668 |
14. Income Taxes (Details-Defer
14. Income Taxes (Details-Deferred income taxes) - USD ($) | Dec. 31, 2016 | Dec. 31, 2015 |
Deferred tax assets: | ||
NOL Carryover | $ 7,544,300 | $ 5,808,100 |
Bad Debt Reserve | 44,100 | 0 |
Inventory Reserve | 10,400 | 11,200 |
Amortization | 61,500 | 0 |
Accrued Compensated Absences | 52,900 | 37,600 |
Charitable Contributions | 5,000 | 400 |
Deferred tax assets | 7,718,200 | 5,857,300 |
Valuation Allowance | (7,647,300) | (5,857,300) |
Deferred tax liabilities: | ||
Depreciation | (42,700) | 0 |
Prepaid Expenses | (28,200) | 0 |
Net deferred tax asset | $ 0 | $ 0 |
14. Income Taxes (Details-Incom
14. Income Taxes (Details-Income tax provision) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | ||||||
Book Loss | $ (2,113,000) | $ (1,184,300) | ||||
Meals and Entertainment | 10,300 | 5,400 | ||||
Stock Options | 537,800 | 10,900 | ||||
Stock issued for debt extinguishment | 0 | 14,300 | ||||
Other | 4,700 | 0 | ||||
Valuation Allowance | 1,560,200 | 1,153,700 | ||||
Income Tax Expense | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 |
14. Income Taxes (Details Narra
14. Income Taxes (Details Narrative) | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Income Tax Disclosure [Abstract] | |
Net operating loss carryforward | $ 19,209,000 |
Operating loss carryforward expiration date | Dec. 31, 2036 |
15. Employment Agreements (Deta
15. Employment Agreements (Details Narrative) - Annual Salary [Member] | Dec. 31, 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 | $ 190,000 |
16. Lease Commitments (Details)
16. Lease Commitments (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Lease Commitments Tables | ||
2,017 | $ 143,451 | |
2,018 | $ 616,627 | 36,214 |
Operating Leases, Future Minimum Payments Due | $ 179,665 |
16. Lease Commitments (Details
16. Lease Commitments (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Leases [Abstract] | ||||||
Rental expenses | $ 35,862 | $ 34,818 | $ 71,022 | $ 69,825 | $ 140,144 | $ 140,407 |
18. Related Party (Details Narr
18. Related Party (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Related Party Transactions [Abstract] | |||||
Royalty revenue | $ 0 | $ 247 | $ 0 | $ 247 | $ 247 |
1. Organization and Business (S
1. Organization and Business (Sept. 2017) (Details Narrative) - USD ($) | Oct. 03, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2014 | |
Net loss | $ (1,164,406) | $ (1,530,900) | $ (3,732,183) | $ (4,363,567) | $ (6,213,135) | $ (3,483,122) | |||
Net cash used in operating activities | (5,029,810) | (1,885,328) | |||||||
Accumulated deficit | (40,374,944) | (40,374,944) | (36,642,761) | (30,429,626) | |||||
Stockholders equity | 10,367,014 | 10,367,014 | 10,055,526 | 14,121,584 | $ 13,720,248 | ||||
Current assets | 3,989,900 | 3,989,900 | 3,376,788 | 5,432,031 | |||||
Cash, Cash Equivalents, and Restricted Cash | 3,247,402 | $ 3,642,667 | 3,247,402 | $ 3,642,667 | 2,887,921 | 5,187,620 | $ 4,301,099 | ||
Current liabilities | 2,126,844 | 2,126,844 | 3,856,192 | 2,606,680 | |||||
Trade payables | 925,000 | 925,000 | 925,000 | [1] | 925,000 | ||||
Working capital | $ 1,863,056 | 1,863,056 | (479,404) | ||||||
Proceeds from Warrant Exchange | 3,866,573 | ||||||||
Proceeds from issuance of equity | $ 0 | $ 3,827,782 | |||||||
Subsequent Event [Member] | Direct Offering [Member] | |||||||||
Stock issued new, shares | 1,647,691 | ||||||||
Warrants issued, shares | 1,647,691 | ||||||||
Proceeds from issuance of equity | $ 6,425,995 | ||||||||
Sony Pictures Home Entertainment [Member] | |||||||||
Proceeds from license agreement | $ 1,489,583 | ||||||||
Stock issued for licensing rights, shares | 301,231 | ||||||||
[1] | As part of the Merger in 2013, the Company assumed certain liabilities from a previous member of A Squared which has claimed certain liabilities totaling $925,000. The Company disputes the basis for this liability. As of December 31, 2016, the Company believes that the statute of limitations applicable to the assertion of any legal claim relating to the collection of these liabilities has expired and therefore believes this liability is uncollectible. The Company is working with the counterparty to extinguish this liability. |
2. Significant Accounting Pol62
2. Significant Accounting Policies (Sept. 2017) (Details Narrative) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Accounting Policies [Abstract] | |||
Restricted Cash | $ 1,000,000 | $ 1,000,000 | $ 0 |
Allowance for doubtful accounts | 110,658 | 110,658 | 110,658 |
Reserve for obsolete inventory | $ 26,097 | $ 26,097 | $ 28,813 |
3. Property and Equipment, Net
3. Property and Equipment, Net (Sept. 2017) (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Property and equipment, gross | $ 295,040 | $ 247,679 | $ 241,835 |
Less Accumulated Depreciation | (208,745) | (157,218) | (90,887) |
Property and Equipment, Net | 86,295 | 90,461 | 150,948 |
Furniture and Fixtures [Member] | |||
Property and equipment, gross | 12,385 | 12,385 | 12,385 |
Computer Equipment [Member] | |||
Property and equipment, gross | 90,015 | 42,654 | 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 |
3. Property and Equipment, Ne64
3. Property and Equipment, Net (Sept. 2017) (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Property, Plant and Equipment [Abstract] | ||||||
Depreciation expense | $ 17,661 | $ 16,574 | $ 51,527 | $ 49,637 | $ 66,331 | $ 64,458 |
5. Goodwill and Intangible Asse
5. Goodwill and Intangible Assets, Net (Sept. 2017) (Details - Intangibles) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | ||||
Intangible assets | $ 2,119,527 | $ 2,119,527 | $ 2,115,727 | ||||
Less Accumulated Amortization | (317,649) | [1] | (273,877) | [1] | (197,521) | [2] | |
Net Intangible Assets | 1,801,878 | 1,845,650 | $ 1,918,206 | ||||
Identifiable artistic-related assets [Member] | |||||||
Intangible assets | 1,740,000 | [3] | 1,740,000 | [4] | |||
Trademarks [Member] | |||||||
Intangible assets | [5] | 129,831 | 129,831 | ||||
Product Masters [Member] | |||||||
Intangible assets | [5] | 64,676 | 64,676 | ||||
Other Intangible Assets [Member] | |||||||
Intangible assets | [5] | $ 185,020 | $ 185,020 | ||||
[1] | Accrued Salaries and Wages represent accrued vacation payable to employees. | ||||||
[2] | During the years ended December 31, 2016 and 2015, the Company recognized $76,356 and $69,453, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. | ||||||
[3] | In connection with the Merger in 2013, 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. Based on certain legal, regulatory, contractual, and economic factors, the Company has deemed these assets to be indefinite-lived. Hence, pursuant to FASB ASC 350-30, these assets are not subject to amortization and are tested annually for impairment. Through September 30, 2017, the Company has not recognized any impairment expense related to these assets. | ||||||
[4] | During the three months ended September 30, 2017 and 2016, the Company recognized $12,756 and $19,448, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. During the nine months ended September 30, 2017 and 2016, the Company recognized $43,771 and $57,763, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. | ||||||
[5] | Pursuant to FASB ASC 350-30-35, the Company reviews these intangible assets periodically to determine if the value should be retired or impaired due to recent events. Through September 30, 2017, the Company has not recognized any impairment expense related to these assets. |
5. Goodwill and Intangible As66
5. Goodwill and Intangible Assets, Net (Sept. 2017) (Details - Amortization expense) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Amortization expense | $ 43,771 | $ 57,763 | $ 76,356 | $ 69,453 | ||
Trademarks, Product Masters and Other Intangible Assets [Member] | ||||||
Amortization expense | $ 12,756 | $ 19,448 | $ 43,771 | $ 57,763 |
5. Goodwill and Intangible As67
5. Goodwill and Intangible Assets (Sept. 2017) (Details - future amortization) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Future intangible asset amortization | ||
2,017 | $ 11,752 | |
2,018 | 26,119 | $ 26,119 |
2,019 | 9,236 | 9,236 |
2,020 | 8,655 | 8,655 |
2,021 | 2,059 | 2,059 |
Remaining | 4,057 | 4,061 |
Total | $ 61,878 | $ 105,650 |
6. Deferred Revenue (Sept. 2017
6. Deferred Revenue (Sept. 2017) (Details Narrative) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Deferred revenue | $ 5,072,849 | $ 3,106,608 | $ 958,539 |
Distribution Rights [Member] | |||
Deferred revenue | 1,489,583 | ||
Future Royalty [Member] | |||
Deferred revenue | $ 2,000,000 | $ 2,000,000 |
7. Accrued Liabilities (Sept. 2
7. Accrued Liabilities (Sept. 2017) (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |||
Payables and Accruals [Abstract] | ||||||
Accrued Salaries and Wages | $ 151,150 | [1] | $ 132,827 | [1] | $ 96,385 | [2] |
Disputed trade payables | 925,000 | 925,000 | [3] | 925,000 | ||
Services Advance - Current Portion | 0 | [4] | 1,489,583 | [5] | 0 | |
Other Accrued Expenses | 225,178 | 249,482 | 509,477 | |||
Total accrued liabilities | $ 1,301,328 | $ 2,796,892 | $ 1,530,862 | |||
[1] | As part of the Merger in 2013, 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, 2017, 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] | Accrued Salaries and Wages represent accrued vacation payable to employees. | |||||
[3] | As part of the Merger in 2013, 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 December 31, 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. | |||||
[4] | During the first quarter of 2014, the Company entered into an exclusive three-year agreement with DADC to provide all CD, DVD and Blu-ray 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 disk replication, packaging and distribution services for its content across all physical media, including DVD, CD, and Blu-ray from 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. On January 10, 2017, the Company entered into an amendment of our home entertainment Distribution Agreement with Sony pursuant to which, among other things, Sony paid DADC $1,489,583, which was the total sum owed and payable by us to DADC for the disk replication, packaging and distribution services. In connection with such transaction, we issued Sony 301,231 shares of our Common Stock at $4.945 per share, Sony's exclusive territory for exercising its home entertainment distribution rights under the Distribution Agreement was extended from the United States and Canada to worldwide, and the amount of advances subject to recoupment by Sony out of royalty payments that would otherwise be due to us under the Distribution Agreement was increased by the amount of the payment to DADC. | |||||
[5] | During the first quarter of 2014, the Company entered into an exclusive three-year agreement with DADC 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 disk replication, packaging and distribution services for its content across all physical media, including DVD, CD, and Blu-ray from 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. Subsequent to the end of the fiscal year, on January 10, 2017, the Company entered into an amendment of our home entertainment Distribution Agreement with Sony pursuant to which, among other things, Sony agreed to pay DADC $1,489,583, the amount which was owed and payable by us to DADC for the disk replication, packaging and distribution services. In connection with such transaction, we issued Sony 301,231 shares of our Common Stock at $4.945 per share, Sony's exclusive territory for exercising its home entertainment distribution rights under the Distribution Agreement was extended from the United States and Canada to worldwide, and the amount of advances subject to recoupment by Sony out of royalty payments that would otherwise be due to us under the Distribution Agreement was increased by the amount of the payment to DADC. (See Note 7 for additional information about the advance.) |
8. Production Loan Facility (Se
8. Production Loan Facility (Sept. 2017) (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2017 | Dec. 31, 2016 | |
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 borrowings during period | $ 1,505,307 | |
Llama Productions [Member] | ||
Credit line initiation date | Aug. 8, 2016 | |
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 borrowings during period | $ 3,624,263 | 1,505,307 |
Payment of financing costs | 128,739 | 173,303 |
Credit line net borrowings | $ 3,495,524 | $ 1,332,004 |
9. Stockholders' Equity (Sept.
9. Stockholders' Equity (Sept. 2017) (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
Proceeds from Warrant Exchange | $ 3,866,573 | |
Proceeds from Warrant Exchange, Net of Offering Costs | $ 3,401,924 | $ 0 |
Common Stock [Member] | ||
Conversion of preferred stock, common shares issued | 430,000 | |
Series A Preferred Stock [Member] | ||
Conversion of stock, shares converted | 1,290 | |
Sony Pictures Home Entertainment [Member] | ||
Stock issued for licensing rights, shares | 301,231 | |
Consultant [Member] | ||
Stock issued for services, shares | 10,112 | |
Consultant 2 [Member] | ||
Stock issued for services, shares | 8,410 | |
Consultant 3 [Member] | ||
Stock issued for services, shares | 6,012 | |
Private Transaction [Member] | ||
Stock issued upon conversion of warrants, shares | 1,171,689 | |
Proceeds from Warrant Exchange | $ 3,866,573 | |
Payment of offering costs | 464,649 | |
Proceeds from Warrant Exchange, Net of Offering Costs | $ 3,401,924 |
10. Stock Options (Sept. 2017)
10. Stock Options (Sept. 2017) (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Share-based compensation expense | $ 108,476 | $ 358,919 | $ 514,108 | $ 1,236,880 | $ 1,581,797 | $ 31,919 |
Additional Share-based compensation expenses, true-up | $ 220,564 | |||||
Unvested share-based compensation | $ 1,111,629 | |||||
2015 Plan [Member] | ||||||
Shares authorized under plan | 1,666,667 | 1,666,667 | 1,443,334 | |||
Stock Options [Member] | ||||||
Unvested share-based compensation | $ 278,819 | $ 278,819 |
11. Warrants (Sept. 2017) (Deta
11. Warrants (Sept. 2017) (Details Narrative) - USD ($) | 9 Months Ended | ||
Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Proceeds from Warrant Exchange | $ 3,866,573 | ||
Warrant [Member] | |||
Warrants outstanding | 1,766,698 | 1,651,698 | 1,685,032 |
Proceeds from Warrant Exchange | $ 3,866,573 | ||
Fair value of warrants issued | $ 1,402,174 | ||
Reload Warrants [Member] | |||
Warrants issued | 799,991 | ||
Reload Warrants [Member] | Chardan [Member] | |||
Warrants issued | 115,000 | ||
Payment of stock issuance costs | $ 363,617 | ||
Market Price Warrants [Member] | |||
Warrants issued | 371,699 |
12. Income Taxes (Sept. 2017) (
12. Income Taxes (Sept. 2017) (Details Narrative) | Sep. 30, 2017USD ($) |
Income Tax Disclosure [Abstract] | |
Uncertain tax positions | $ 0 |
13. Commitment and Contingencie
13. Commitment and Contingencies (Sept. 2017) (Details) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
2,017 | $ 294,574 | |
2,018 | 616,627 | $ 36,214 |
2,019 | 0 | |
2,020 | 0 | |
2,021 | 0 | |
Thereafter | 0 | |
Operating Leases | ||
2,017 | 36,214 | |
2,018 | 36,214 | |
2,019 | 0 | |
2,020 | 0 | |
2,021 | 0 | |
Thereafter | 0 | |
Employment Agreements | ||
2,017 | 258,360 | |
2,018 | 580,413 | |
2,019 | 0 | |
2,020 | 0 | |
2,021 | 0 | |
Thereafter | $ 0 |
13. Commitment and Contingenc76
13. Commitment and Contingencies (Sept. 2017) (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | Dec. 31, 2015 | |
Leases [Abstract] | ||||||
Rental expenses | $ 35,862 | $ 34,818 | $ 71,022 | $ 69,825 | $ 140,144 | $ 140,407 |
14. Related Party (Sept. 2017)
14. Related Party (Sept. 2017) (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | |
Royalty payments received | $ 0 | $ 247 | $ 0 | $ 247 | $ 247 |
Andy Heyward [Member] | |||||
Consulting fees | $ 120,000 |