Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2017 | Mar. 30, 2018 | Jun. 30, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | Genius Brands International, Inc. | ||
Entity Central Index Key | 1,355,848 | ||
Document Type | 10-K | ||
Trading Symbol | GNUS | ||
Document Period End Date | Dec. 31, 2017 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity a Well-known Seasoned Issuer | No | ||
Entity a Voluntary Filer | No | ||
Entity's Reporting Status Current | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 16,713,372 | ||
Entity Common Stock, Shares Outstanding | 8,202,794 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,017 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 | |
Current Assets: | |||
Cash and Cash Equivalents | $ 6,929,399 | $ 1,887,921 | |
Restricted Cash | 568,673 | 1,000,000 | |
Accounts Receivable, net | 2,893,902 | 122,910 | |
Other Receivable | 160,545 | 0 | |
Inventory, net | 17,589 | 6,562 | |
Prepaid and Other Assets | 264,818 | 359,395 | |
Total Current Assets | 10,834,926 | 3,376,788 | |
Property and Equipment, net | 94,666 | 90,461 | |
Accounts Receivable | 1,687,500 | 0 | |
Other Receivable | 96,327 | 0 | |
Film and Television Costs, net | 2,777,088 | 2,260,964 | |
Intangible Assets, net | 1,856,280 | 1,845,650 | |
Goodwill | 10,365,805 | 10,365,805 | |
Total Assets | 27,712,592 | 17,939,668 | |
Current Liabilities: | |||
Accounts Payable | 453,201 | 648,638 | |
Accrued Expenses | [1] | 1,717,970 | 249,482 |
Deferred Revenue | 453,927 | 410,662 | |
Accrued Salaries and Wages | 168,549 | 132,827 | |
Disputed Trade Payable | [2] | 925,000 | 925,000 |
Service Advance | [3] | 0 | 1,489,583 |
Total Current Liabilities | 3,718,647 | 3,856,192 | |
Long Term Liabilities: | |||
Deferred Revenue | 4,631,456 | 2,695,946 | |
Production Loan Facility, net | 4,322,643 | 1,332,004 | |
Total Liabilities | 12,672,746 | 7,884,142 | |
Commitments & Contingencies (Note 13) | |||
Stockholders' Equity | |||
Preferred Stock, $0.001 par value, 10,000,000 shares authorized, respectively; 3,530 and 4,895 shares issued and outstanding, respectively | 4 | 5 | |
Common Stock, $0.001 par value, 233,333,334 shares authorized, respectively; 7,610,794 and 4,010,649 shares issued and outstanding, respectively | 7,611 | 4,011 | |
Common Stock to Be Issued | 24 | 24 | |
Additional Paid in Capital | 56,588,822 | 46,697,005 | |
Accumulated Deficit | (41,551,497) | (36,642,761) | |
Accumulated Other Comprehensive Loss | (5,118) | (2,758) | |
Total Stockholders' Equity | 15,039,846 | 10,055,526 | |
Total Liabilities & Stockholders' Equity | $ 27,712,592 | $ 17,939,668 | |
[1] | Other Accrued Expenses include estimates of expenses incurred but not yet recorded. The increase in Other Accrued Expenses from the year ended December 31, 2016 to December 31, 2017 relates to estimates of final dubbing costs and participation expense related to our Llama Llama property. | ||
[2] | 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, 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. | ||
[3] | 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. |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Common Stock, par value | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 233,333,334 | 233,333,334 |
Common Stock, shares issued | 7,610,794 | 4,010,649 |
Common Stock, shares outstanding | 7,610,794 | 4,010,649 |
Preferred stock par value | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 10,000,000 | 10,000,000 |
Preferred stock shares issued | 3,530 | 4,895 |
Preferred stock shares outstanding | 3,530 | 4,895 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Revenues: | ||
Television & Home Entertainment | $ 4,815,491 | $ 356,150 |
Licensing & Merchandising | 472,134 | 463,213 |
Genius Brands Network | 38,779 | 33,644 |
Product Sales | 9,324 | 13,868 |
Total Revenues | 5,335,728 | 866,875 |
Operating Expenses: | ||
Marketing and Sales | 662,373 | 1,035,128 |
Direct Operating Costs | 4,257,427 | 279,217 |
General and Administrative | 5,329,718 | 6,017,391 |
Total Operating Expenses | 10,249,518 | 7,331,736 |
Loss from Operations | (4,913,790) | (6,464,861) |
Other Income (Expense): | ||
Other Income | 8,281 | 6,651 |
Interest Expense | (3,227) | (2,675) |
Interest Expense - Related Parties | 0 | (8,503) |
Gain on Distribution Contracts | 0 | 258,103 |
Loss on Impairment of Assets | 0 | (1,850) |
Net Other Income | 5,054 | 251,726 |
Loss before Income Taxes | (4,908,736) | (6,213,135) |
Income Tax Expense | 0 | 0 |
Net Loss | $ (4,908,736) | $ (6,213,135) |
Net Loss per Common Share (Basic And Diluted) | $ (0.81) | $ (1.59) |
Weighted Average Shares Outstanding (Basic and Diluted) | 6,084,732 | 3,915,178 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Statement of Comprehensive Income [Abstract] | ||
Net Loss Applicable to Common Shareholders | $ (4,908,736) | $ (6,213,135) |
Other Comprehensive Income (Loss), Net of Tax: | ||
Unrealized Loss on Foreign Currency Translation | (2,360) | (2,758) |
Other Comprehensive Loss, Net of Tax: | (2,360) | (2,758) |
Comprehensive Loss | $ (4,911,096) | $ (6,215,893) |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) | Common Stock [Member] | Preferred Stock [Member] | Common Stock To Be Issued [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Other Comprehensive Loss [Member] | Total |
Beginning balance, value at Dec. 31, 2015 | $ 3,753 | $ 6 | $ 24 | $ 44,547,427 | $ (30,429,626) | $ 14,121,584 | |
Beginning balance, shares at Dec. 31, 2015 | 3,753,179 | 5,290 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Exercise of Warrants | $ 33 | 109,967 | 110,000 | ||||
Exercise of Warrants (in shares) | 33,334 | ||||||
Conversion of Preferred Shares, amount converted | $ 132 | $ (1) | (131) | ||||
Conversion of Preferred Shares, Preferred shares converted | 131,667 | (395) | |||||
Conversion of Short Term Related Party Advances | $ 80 | 410,455 | 410,535 | ||||
Conversion of Short Term Related Party Advances (in shares) | 79,561 | ||||||
Issuance of Common Stock for Services | $ 13 | 38,987 | 39,000 | ||||
Issuance of Common Stock for Services (in shares) | 12,500 | ||||||
Adjustment to Reconcile Common Shares Outstanding Due to Reverse Stock Split (in shares) | 408 | ||||||
Share Based Compensation | 1,581,797 | 1,581,797 | |||||
Imputed Interest for Member Advances | 8,503 | 8,503 | |||||
Net Loss | (6,213,135) | (6,213,135) | |||||
Comprehensive Loss | $ (2,758) | (2,758) | |||||
Ending balance, shares at Dec. 31, 2016 | 4,010,649 | 4,895 | 0 | ||||
Ending balance, value at Dec. 31, 2016 | $ 4,011 | $ 5 | $ 24 | 46,697,005 | (36,642,761) | (2,758) | 10,055,526 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Issuance of Common Stock in Warrant Exchange, net | $ 1,172 | 3,400,752 | 3,401,924 | ||||
Issuance of Common Stock in Warrant Exchange, net (in shares) | 1,171,689 | ||||||
Issuance of Common Stock in Registered Direct Offering, net | $ 1,648 | 5,697,886 | 5,699,534 | ||||
Issuance of Common Stock in Registered Direct Offering, net (in shares) | 1,647,691 | ||||||
Conversion of Preferred Shares, amount converted | $ (1) | (454) | |||||
Conversion of Preferred shares, value issued | $ 455 | ||||||
Conversion of Preferred Shares, Preferred shares converted | (1,365) | ||||||
Conversion of Preferred Shares, Common shares issued | 455,000 | ||||||
Issuance of Common Stock for Services | $ 24 | 129,976 | 130,000 | ||||
Issuance of Common Stock for Services (in shares) | 24,534 | ||||||
Issuance of Common Shares for Debt Extinguishment | $ 301 | (301) | |||||
Issuance of Common Shares for Debt Extinguishment (in shares) | 301,231 | ||||||
Share Based Compensation | 663,958 | 663,958 | |||||
Net Loss | (4,908,736) | (4,908,736) | |||||
Comprehensive Loss | (2,360) | (2,360) | |||||
Ending balance, shares at Dec. 31, 2017 | 7,601,794 | 3,530 | 0 | ||||
Ending balance, value at Dec. 31, 2017 | $ 7,611 | $ 4 | $ 24 | $ 56,588,822 | $ (41,551,497) | $ (5,118) | $ 15,039,846 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Cash Flows from Operating Activities: | ||
Net Loss | $ (4,908,736) | $ (6,213,135) |
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||
Amortization of Film and Television Costs | 2,534,835 | 167,788 |
Depreciation and Amortization Expense | 125,918 | 142,687 |
Imputed Interest Expense | 0 | 8,503 |
Bad Debt Expense | 66,502 | 0 |
Stock Issued for Services | 130,000 | 39,000 |
Stock Compensation Expense | 663,958 | 1,581,797 |
Gain on Distribution Contracts | 0 | (258,103) |
Loss on Impairment of Assets | 0 | 1,850 |
Decrease (Increase) in Operating Assets: | ||
Accounts Receivable, net | (4,527,354) | 294,792 |
Other Receivables | (256,872) | 0 |
Inventory | (11,027) | 518 |
Prepaid Expenses & Other Assets | 94,577 | (314,754) |
Film and Television Costs, net | (2,825,426) | (1,390,450) |
Increase (Decrease) in Operating Liabilities: | ||
Accounts Payable | (266,645) | 289,205 |
Accrued Salaries | 35,722 | 36,442 |
Deferred Revenue and Advances | 489,189 | 2,146,998 |
Other Accrued Expenses | 1,468,489 | (249,415) |
Net Cash Used in Operating Activities | (7,186,870) | (3,716,277) |
Cash Flows from Investing Activities: | ||
Investment in Intangible Assets | (44,793) | (5,650) |
Investment in Fixed Assets | (62,400) | (5,844) |
Net Cash Used in Investing Activities | (107,193) | (11,494) |
Cash Flows from Financing Activities: | ||
Proceeds from Warrant Exchange, net | 3,401,924 | 0 |
Proceeds from Sale of Common Stock, net | 5,699,534 | 0 |
Proceeds from Production Loan Facility, net | 2,802,756 | 1,318,072 |
Proceeds from Exercise of Warrants | 0 | 110,000 |
Net Cash Provided by Financing Activities | 11,904,214 | 1,428,072 |
Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash | 4,610,151 | (2,299,699) |
Beginning Cash, Cash Equivalents, and Restricted Cash | 2,887,921 | 5,187,620 |
Ending Cash, Cash Equivalents, and Restricted Cash | 7,498,072 | 2,887,921 |
Supplemental Disclosures of Cash Flow Information: | ||
Cash Paid for Interest | 3,227 | 2,675 |
Schedule of Non-Cash Financing and Investing Activities | ||
Issuance of Common Stock in Relation to Sony Transaction | 1,489,583 | 0 |
Issuance of Common Stock in Satisfaction of Short Term Advances | $ 0 | $ 410,535 |
1. Organization and Business
1. Organization and Business | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Organization and Business | Note 1: 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 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 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, 2017 and 2016, the Company reported net losses of $4,908,736 and $6,213,135, respectively. The Company reported net cash used in operating activities of $7,186,870 and $3,716,277 for the years ended December 31, 2017 and 2016, respectively. As of December 31, 2017, the Company had an accumulated deficit of $41,551,497 and total stockholders’ equity of $15,039,846. As of December 31, 2017, the Company had current assets of $10,834,926, including cash, cash equivalents, and restricted cash of $7,498,072 and current liabilities of $3,718,647, including certain trade payables of $925,000 to which the Company disputes the claim. The Company had working capital of $7,116,279 as of December 31, 2017, compared to a working capital deficit of $479,404 as of December 31, 2016. During 2017, the Company completed three 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). · 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. Subsequent to the end of the year, on January 8, 2018, the Company entered into a Securities Purchase Agreement with certain accredited investors pursuant to which the Company sold approximately $1,800,000 of common stock and warrants to such investors (the “January 2018 Private Placement”). The Company issued and sold warrants to purchase 592,000 shares of common stock at an exercise price of $3.00 per share. While the Company believes that its anticipated cash balances, working capital, 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 or will not deteriorate during that period. 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 | 12 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Note 2: 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. As of December 31, 2017 and 2016, restricted cash totaled $568,673 and $1,000,000 which represented funds held in a cash account to be used solely for the production of 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 as of December 31, 2017 and December 31, 2016. Inventories Inventories are stated at the lower of average cost or net realizable value 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 as of December 31, 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. 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 Genius Brands Network 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. Direct Operating Costs Direct operating costs include costs of our product sales, non-capitalizable film costs, film and television cost amortization expense, and participation expense related to agreements with various animation studios, post-production studios, writers, directors, musicians or other creative talent with which we are obligated to share net profits of the properties on which they have rendered services. 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. The Company has elected to use the graded attribution method for awards which are in-substance, multiple awards based on the vesting schedule. 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, 2017, the Company had four accounts with a combined uninsured balance of $6,471,928. As of December 31, 2016, the Company had three accounts with a combined uninsured balance of $1,136,683. For fiscal year 2017, the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue. This customer accounted for 84% of total revenue and represented 98% of accounts receivable. For fiscal year 2016, the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue. That customer accounted for 19% of total revenue but represented 0% accounts receivable. The major customer for the year ended December 31, 2017 is not necessarily the same as the major customer at December 31, 2016. 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, 2017 and 2016, no allowance for bad debt has been established for the major customers as these amounts are expected 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 long term receivables approximate fair value due to the contractual nature of the obligation, payment schedule, and the current interest and inflation rate environments. 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. During 2017, 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 standard will be applied using the modified retrospective approach where the Company will record a cumulative effect adjustment as of the date of adoption, January 1, 2018. The Company performed its analysis of its existing revenue contracts and has substantially completed its new revenue accounting policy documentation under the new standard. The Company has identified the following six material and distinct performance obligations: · License rights to exploit Functional Intellectual Property (Functional Intellectual Property or “functional IP” is defined as intellectual property that has significant standalone functionality for example ability be played or aired. Functional intellectual property derives a substantial portion of its utility from its significant standalone functionality.) · License rights to exploit Symbolic Intellectual Property (Symbolic Intellectual Property or “symbolic IP” is intellectual property that is not functional as it does not have significant standalone use and substantially all of the utility of symbolic IP is derived from its association with the entity’s past or ongoing activities, including its ordinary business activities for example the Company’s licensing and merchandising programs associated with its animated content.) · Options to renew or extend a contract at fixed terms. (While this performance obligation is not significant for the Company’s current contracts, it could become significant in the future.) · Options on future seasons of content at fixed terms. (While this performance obligation is not significant for the Company’s current contracts, it could become significant in the future.) · Fixed fee advertising revenue generated from the Genius Brands Network · Variable fee advertising revenue generated from the Genius Brands Network As a result of the change, beginning January 1, 2018, the Company will begin recognizing revenue related to licensed rights to exploit functional IP in two ways. For minimum guarantees, the Company will recognize fixed revenue upon delivery of content and the start of the license period. For functional IP contracts with a variable component, the Company will estimate revenue such that it is probable there will not be a material reversal of revenue in future periods. Revenue under these types of contracts was previously recognized when royalty statements were received. The Company will begin recognizing revenue related to licensed rights to exploit symbolic IP substantially similarly to functional IP. Although it has a different recognition pattern from functional IP, the valuation method is substantially the same, depending on the nature of the license. The Company is in the process of preparing the transition adjustment that will be reflected in its March 31, 2018 quarterly financial statements. The Company expects that disclosure contained in the notes to the consolidated financial statements relating to revenue recognition will expand under the new standard. The Company is evaluating the new disclosure requirements, including any necessary changes to business processes, systems, and controls to support the additional required disclosures. The Company is also currently evaluating the potential impact on the Company’s internal control over financial reporting to identify any necessary changes. 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 in our 2017 financial statements. Our 2016 financial statements have been reclassified to reflect the current year adoption. 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. |
3. Property and Equipment, Net
3. Property and Equipment, Net | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment, Net | Note 3: Property and Equipment, Net The Company has property and equipment as follows as of December 31, 2017 and 2016: December 31, 2017 December 31, 2016 Furniture and Equipment $ 12,385 $ 12,385 Computer Equipment 117,256 42,654 Leasehold Improvements 176,903 176,903 Software 15,737 15,737 Property and Equipment, Gross 322,281 247,679 Less Accumulated Depreciation (227,615 ) (157,218 ) Property and Equipment, Net $ 94,666 $ 90,461 During the years ended December 31, 2017 and 2016, the Company recorded depreciation expense of $70,397 and $66,331, respectively. |
4. Film and Television Costs, N
4. Film and Television Costs, Net | 12 Months Ended |
Dec. 31, 2017 | |
Film And Television Costs Net | |
Film and Television Costs, net | Note 4: Film and Television Costs, Net As of December 31, 2017, the Company had net Film and Television Costs of $2,777,088 compared to $2,260,964 at December 31, 2016. The increase relates primarily to the production and development of SpacePop, Llama Llama, Rainbow Rangers Llama Llama, Thomas Edison’s Secret Lab SpacePop. During the years ended December 31, 2017 and 2016, the Company recorded Film and Television Cost amortization expense of $2,534,835 and $167,788, respectively. The following table highlights the activity in Film and Television Costs as of December 31, 2017 and 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 2,863,076 Capitalized Interest 187,883 Film Amortization Expense (2,534,835 ) Film and Television Costs, Net as of December 31, 2017 $ 2,777,088 |
5. Goodwill and Intangible Asse
5. Goodwill and Intangible Assets, Net | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets, Net | Note 5: 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 December 31, 2017, the Company has not recognized any impairment to Goodwill. Intangible Assets, Net The Company had the following intangible assets as of December 31, 2017 and 2016: December 31, 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) 251,171 185,020 Intangible Assets, Gross 2,185,678 2,119,527 Less Accumulated Amortization (c) (329,398 ) (273,877 ) Intangible Assets, Net $ 1,856,280 $ 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 December 31, 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 December 31, 2017, the Company has not recognized any impairment expense related to these assets. (c) During the years ended December 31, 2017 and 2016, the Company recognized $55,521 and $76,356, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. Expected future intangible asset amortization as of December 31, 2017 is as follows: Fiscal Year: 2018 $ 42,137 2019 30,593 2020 30,013 2021 7,399 2022 1,861 Remaining 4,277 Total $ 116,280 |
6. Deferred Revenue
6. Deferred Revenue | 12 Months Ended |
Dec. 31, 2017 | |
Deferred Revenue Disclosure [Abstract] | |
Deferred Revenue | Note 6: Deferred Revenue As of December 31, 2017 and 2016, the Company had total short term and long term deferred revenue of $5,085,383 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 December 31, 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. |
7. Accrued Liabilities - Curren
7. Accrued Liabilities - Current | 12 Months Ended |
Dec. 31, 2017 | |
Payables and Accruals [Abstract] | |
Accrued Liabilities, Current | As of December 31, 2017 and 2016, the Company had the following current accrued liabilities: December 31, 2017 December 31, 2016 Accrued Salaries and Wages (a) $ 168,549 $ 132,827 Disputed Trade Payables (b) 925,000 925,000 Services Advance - Current Portion (c) – 1,489,583 Other Accrued Expenses (d) 1,717,970 249,482 Total Accrued Liabilities - Current $ 2,811,519 $ 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 December 31, 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. (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. (d) Other Accrued Expenses include estimates of expenses incurred but not yet recorded. The increase in Other Accrued Expenses from the year ended December 31, 2016 to December 31, 2017 relates to estimates of final dubbing costs and participation expense related to our Llama Llama |
8. Production Loan Facility
8. Production Loan Facility | 12 Months Ended |
Dec. 31, 2017 | |
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 December 31, 2017, the Company had gross outstanding borrowing under the facility of $4,436,528 against which financing costs of $113,885 were applied resulting in net borrowings of $4,322,643. 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. |
9. Stockholders' Equity
9. Stockholders' Equity | 12 Months Ended |
Dec. 31, 2017 | |
Equity [Abstract] | |
Stockholders' Equity | Common Stock As of December 31, 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 December 31, 2017 and 2016, there were 7,610,794 and 4,010,649 shares of common stock outstanding, respectively. Below are the changes to the Company’s common stock during the year ended December 31, 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 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. · On various dates during the year ended December 31, 2017, the Company issued 455,000 shares of the Company’s common stock pursuant to the conversion of 1,365 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 December 31, 2017 and 2016, there were 3,530 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. In the future, issuance of common stock or the grant of any rights to purchase our common stock or other securities convertible into our common stock for a per share price less than the then existing conversion price of the Series A Convertible Preferred Stock would result in an adjustment to the then current conversion price of the Series A Convertible Preferred Stock. This reduction would give rise to a beneficial conversion feature recorded as an “imputed” dividend. |
10. Stock Options
10. Stock Options | 12 Months Ended |
Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Options | Note 10: Stock Options 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 year ended December 31, 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 79,509 Options Expired - Balance at December 31, 2017 1,294,045 $ 2.82 - 12.00 2.99 years $ - $ 8.14 Exercisable December 31, 2016 452,535 $ 2.82 - 6.00 3.95 years $ 263,375 $ 5.29 Exercisable December 31, 2017 1,070,869 $ 2.82 - 9.00 2.96 years $ - $ 7.44 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 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 assessed these adjustments individually and in aggregate and considers them immaterial to the prior periods. During the years ended December 31, 2017 and 2016, the Company recognized $663,958 and $1,581,797 in share-based compensation expense, respectively. The unvested share-based compensation as of December 31, 2017 was $128,269 which will be recognized through the second quarter of 2019 assuming the underlying grants are not cancelled or forfeited. |
11. Warrants
11. Warrants | 12 Months Ended |
Dec. 31, 2017 | |
Warrants and Rights Note Disclosure [Abstract] | |
Warrants | Note 11: Warrants The Company has warrants outstanding to purchase up to 3,414,389 and 1,651,698 at December 31, 2017 and 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, Chardan and its designees were issued New Warrants for 115,000 shares of the Company’s common stock. 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. The following table summarizes the changes in the Company’s outstanding warrants during the year ended December 31, 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 2,934,381 3.30 - 5.30 - - ؘ- Warrants Exercised 1,171,690 3.30 - - - Warrants Expired - Balance at December 31, 2017 3,414,389 $ 3.30 - 6.00 4.21 years $ 3.92 $ - Exercisable December 31, 2016 1,651,698 $ 3.30 - 6.00 3.75 years $ 3.49 $ 3,301,913 Exercisable December 31, 2017 3,414,389 $ 3.30 - 6.00 4.21 years $ 3.92 $ - |
12. Income Taxes
12. Income Taxes | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 12: Income Taxes 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, 2017 and 2016: 2017 2016 Deferred tax assets: NOL Carryover $ 6,406,000 $ 7,544,300 Bad Debt Reserve 31,000 44,100 Inventory Reserve 7,300 10,400 Amortization (20,200 ) 61,500 Accrued Compensated Absences 46,100 52,900 Charitable Contributions 3,500 5,000 Subtotal 6,473,700 7,718,200 Valuation Allowance (6,458,800 ) (7,647,300 ) Deferred tax liabilities: Depreciation 3,700 (42,700 ) Prepaid Expenses (18,600 ) (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, 2017 and 2016 due to the following: 2017 2016 Book Loss $ (1,669,000 ) $ (2,113,000 ) Meals and Entertainment 10,600 10,300 Stock Options 225,700 537,800 Tax Rate Change 2,809,700 – Other 1,600 4,700 Valuation Allowance (1,378,600 ) 1,560,200 $ – $ – At December 31, 2017, the Company had net operating loss carry forwards of approximately $23,363,000 that may be offset against future taxable income from the year 2018 through 2037. No tax benefit has been reported in the December 31, 2017 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, 2017, the Company had no accrued interest or penalties related to uncertain tax positions. On December 22, 2017, the United States federal government enacted the Tax Cuts and Jobs Act (the “2017 Act”). The 2017 Act will have pervasive financial reporting implications for all companies with U.S. operations, including reduction of the U.S. federal corporate tax rate from 35 percent to 21 percent. We reviewed and incorporated the new tax bill implications through 2017 financial statements. We remeasured the deferred taxes at new corporation rate of 21%, which reduced the net deferred tax assets, before valuation allowance, by approximately $2,809,700. Due to full valuation allowance, the change in deferred taxes was fully offset by the change in valuation allowance. The 2017 Act has no significant impact on the 2017 financial statements. Due to the complexities of the 2017 Act, the SEC issued Staff Accounting Bulletin No. 118 to address the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Act. During the measurement period, impacts of the law are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared, or analyzed. Any subsequent adjustment to these amounts will be recorded to current tax expense in 2018 when the analysis is complete. The Company files income tax returns in the U.S. federal jurisdiction and in the state of California. The Company is currently subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities since inception of the Company. |
13. Commitment and Contingencie
13. Commitment and Contingencies | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitment and Contingencies | Note 13: Commitments 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 years ended December 31, 2017 and 2016 were $143,451 and $140,144, respectively. The following is a schedule of future minimum contractual obligations as of December 31, 2017, under the Company’s operating leases and employment agreements: 2018 Operating Leases $ 36,214 Employment Contracts 580,413 Total $ 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 Additionally, other agreements contain options to acquire rights to intellectual property and would require payment to the rights holders contingent upon the Company securing minimum production, broadcast, or other financing commitments from third parties. Lastly, for its Genius Brands Network, the Company licenses content for exhibition for which the Company is obligated to pay between 35% and 100% of revenues from the channel allocated to the aforementioned content after the deduction of certain direct operating expenses. |
14. Related Party Transactions
14. Related Party Transactions | 12 Months Ended |
Dec. 31, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 14: Related Party Transactions 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 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. As of December 31, 2017, Mr. Heyward owed the Company a total of $1,504 which was comprised of $2,136 owed to Mr. Heyward for the sales of certain AHAA products facilitated by the Company offset by $3,640 owed to the Company by Mr. Heyward for personal expenses paid by the Company requiring reimbursement. Mr. Heyward reimbursed the Company $1,504 subsequent to the end of the period. As of December 31, 2016, Mr. Heyward owed the Company a total of $1,248 for personal expenses paid by the Company requiring reimbursement. Mr. Heyward reimbursed the Company $1,248 during the first quarter of 2017. 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. Subsequent to the end of the period, the consulting agreement with Foothill was terminated effective January 31, 2018. As of December 31, 2017, Gregory B. Payne, individually and via his ownership position in Foothill, owed to the Company $5,558 for expenditures made during the fourth quarter of 2017 related to the Brand Licensing Europe (“BLE”) and MIPCOM tradeshows. In addition, during the fourth quarter of 2017, Foothill acted as an agent on the Company’s behalf in licensing certain of our animated programs to certain broadcast networks for which Foothill owed to the Company $7,517 in license fees to be paid by the broadcaster to Foothill. Subsequent to the end of the period, the Company received a payment of $7,517 from Foothill as satisfaction of the open licensing invoice. Additionally, on February 28, 2018, Mr. Payne and the Company entered into an agreement whereby, among other things, Mr. Payne was entitled to be reimbursed for 100% of his expenses incurred at the BLE and MIPCOM tradeshows resulting in the Company owning to Mr. Payne $827. |
15. Subsequent Events
15. Subsequent Events | 12 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | Pursuant to FASB ASC 855, Management has evaluated all events and transactions that occurred from December 31, 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 January 8, 2018, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”) pursuant to which the Company sold approximately $1.8 million of its common stock, par value $0.001 per share (the “Common Stock”) and warrants (the “Warrants” and, together with the common stock, the “Securities”) to the Investors (the “Offering”). Pursuant to the Purchase Agreement, the Company issued to the Investors approximately 592,000 shares of common stock at a per share price of $3.00 and Warrants to purchase approximately 592,000 shares of common stock. The Warrants were immediately exercisable, will be exercisable for a period of five years from the closing date and have an exercise price of $3.00 per share. The closing of the sale of these securities under the Purchase Agreement occurred on January 10, 2018. On January 6, 2018, the Company entered into an Engagement Letter (the “Engagement Letter”) with Chardan Capital Markets, LLC (“Chardan” or the “Placement Agent”) pursuant to which the Company engaged Chardan as its placement agent in connection with the Offering. 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 $100,000 and Warrants to purchase 93,000 shares of common stock. The Engagement Letter also contains representations, warranties, indemnification and other provisions customary for transactions of this nature. The Offering is exempt from registration pursuant to the exemption for transactions by an issuer not involving any public offering under Section 4(a)(2) the Securities Act of 1933, as amended (the “Securities Act”) and Regulation D under the Securities Act. The Securities sold and issued in connection with the Purchase Agreement are not registered under the Securities Act or any state securities laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from the registration requirements. · On February 6, 2018, the Company entered into lease for approximately 6,969 square feet of general office space at 131 South Rodeo Drive, Suite 250, Beverly Hills, CA 90212 pursuant to a 91-month leave that commences on May 25, 2018. The Company will pay rent of approximately $364,130 annually, subject to annual escalations of 3.5%. · On February 28, 2018, the Company entered into an agreement (the “Agreement”) with Gregory B. Payne, the Company’s Chief Operating Officer, Executive Vice President - Legal/ Business Affairs and Corporate Secretary, pursuant to which Mr. Payne and the Company agreed to the cessation of Mr. Payne’s employment with the Company upon the earlier to occur of the following: (1) once Mr. Payne’s replacement has been found, after a two week transition period (the “Transition Period”) or (2) May 31, 2018 (the “End Date”). The Agreement provides that until the end of the Transition Period, Mr. Payne shall receive his full salary and benefits and that upon the End Date, Mr. Payne shall be entitled to receive a payment equal to the greater of (1) 50% of his remaining current salary or (2) three months of his current salary, plus, in either case, payment of accrued vacation and California employee entitlements. · On March 26, 2018, the Company entered into an agreement with Michael Jaffa in which Mr. Jaffa will assume the role of General Counsel and Senior Vice President of Business Affairs commencing on April 16, 2018. Mr. Jaffa will be entitled to be paid a salary at the annual rate of $225,000 per year. The term of the agreement is one year with a mutual option for two additional one-year periods. In addition, Mr. Jaffa will be entitled to receive a grant of stock options and an annual discretionary bonus based on his performance. · On March 30, 2018, the Company entered into an agreement with Robert Denton in which Mr. Denton will assume the role of Chief Financial Officer commencing on April 18, 2018. Mr. Denton will be entitled to be paid a salary at the annual rate of $225,000 per year. The term of the agreement is two years with a mutual option for an additional one-year period. Mr. Denton will be entitled to the reimbursement of relocation expenses to the Los Angeles area from Salt Lake City, UT up to $15,000 plus the reimbursement of travel and other pre-relocation expenses up to $5,000 and up to a maximum of $5,000 per month of reasonable living expenses incurred once relocated to Los Angeles and prior to moving into permanent accommodations. In addition, Mr. Denton will be entitled to receive a grant of stock options and an annual discretionary bonus based on his performance. |
2. Summary of Significant Acc23
2. Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2017 | |
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. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of Genius Brands International, Inc., its wholly-owned subsidiaries A Squared and Llama Productions as well as its interest in Stan Lee Comics, LLC (“Stan Lee Comics”). All significant inter-company balances and transactions have been eliminated in consolidation. |
Business Combination | Business Combination On November 15, 2013, the Company entered into a Merger Agreement with A Squared, the 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 | 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. |
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. As of December 31, 2017 and 2016, restricted cash totaled $568,673 and $1,000,000 which represented funds held in a cash account to be used solely for the production of 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 as of December 31, 2017 and December 31, 2016. |
Inventories | Inventories Inventories are stated at the lower of average cost or net realizable value 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 as of December 31, 2017 and December 31, 2016. |
Property and Equipment | Property and Equipment Property and equipment are recorded at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from two to seven years. Maintenance, repairs, and renewals, which neither materially add to the value of the assets nor appreciably prolong their lives, are charged to expense as incurred. Gains and losses from any dispositions of property and equipment are reflected in the statement of operations. |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired in business combinations accounted for by the purchase method. In accordance with 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. 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. |
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 Genius Brands Network 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. |
Direct Operating Costs | Direct Operating Costs Direct operating costs include costs of our product sales, non-capitalizable film costs, film and television cost amortization expense, and participation expense related to agreements with various animation studios, post-production studios, writers, directors, musicians or other creative talent with which we are obligated to share net profits of the properties on which they have rendered services. |
Share-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. The Company has elected to use the graded attribution method for awards which are in-substance, multiple awards based on the vesting schedule. |
Earnings Per Share | Earnings Per Share Basic earnings (loss) per common share (“EPS”) is calculated by dividing net income (loss) applicable to common shareholders by the weighted average number of shares of common stock outstanding for the period. Diluted EPS is calculated by dividing net income (loss) applicable to common shareholders by the weighted average number of shares of common stock outstanding, plus the assumed exercise of all dilutive securities using the treasury stock or “as converted” method, as appropriate. During periods of net loss, all common stock equivalents are excluded from the diluted EPS calculation because they are antidilutive. |
Income Taxes | Income Taxes Deferred income tax assets and liabilities are recognized based on differences between the financial statement and tax basis of assets and liabilities using presently enacted tax rates. At each balance sheet date, the Company evaluates the available evidence about future taxable income and other possible sources of realization of deferred tax assets, and records a valuation allowance that reduces the deferred tax assets to an amount that represents management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized. |
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, 2017, the Company had four accounts with a combined uninsured balance of $6,471,928. As of December 31, 2016, the Company had three accounts with a combined uninsured balance of $1,136,683. For fiscal year 2017, the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue. This customer accounted for 84% of total revenue and represented 98% of accounts receivable. For fiscal year 2016, the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue. That customer accounted for 19% of total revenue but represented 0% accounts receivable. The major customer for the year ended December 31, 2017 is not necessarily the same as the major customer at December 31, 2016. 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, 2017 and 2016, no allowance for bad debt has been established for the major customers as these amounts are expected 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 long term receivables approximate fair value due to the contractual nature of the obligation, payment schedule, and the current interest and inflation rate environments. 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 | 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. During 2017, 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 standard will be applied using the modified retrospective approach where the Company will record a cumulative effect adjustment as of the date of adoption, January 1, 2018. The Company performed its analysis of its existing revenue contracts and has substantially completed its new revenue accounting policy documentation under the new standard. The Company has identified the following six material and distinct performance obligations: · License rights to exploit Functional Intellectual Property (Functional Intellectual Property or “functional IP” is defined as intellectual property that has significant standalone functionality for example ability be played or aired. Functional intellectual property derives a substantial portion of its utility from its significant standalone functionality.) · License rights to exploit Symbolic Intellectual Property (Symbolic Intellectual Property or “symbolic IP” is intellectual property that is not functional as it does not have significant standalone use and substantially all of the utility of symbolic IP is derived from its association with the entity’s past or ongoing activities, including its ordinary business activities for example the Company’s licensing and merchandising programs associated with its animated content.) · Options to renew or extend a contract at fixed terms. (While this performance obligation is not significant for the Company’s current contracts, it could become significant in the future.) · Options on future seasons of content at fixed terms. (While this performance obligation is not significant for the Company’s current contracts, it could become significant in the future.) · Fixed fee advertising revenue generated from the Genius Brands Network · Variable fee advertising revenue generated from the Genius Brands Network As a result of the change, beginning January 1, 2018, the Company will begin recognizing revenue related to licensed rights to exploit functional IP in two ways. For minimum guarantees, the Company will recognize fixed revenue upon delivery of content and the start of the license period. For functional IP contracts with a variable component, the Company will estimate revenue such that it is probable there will not be a material reversal of revenue in future periods. Revenue under these types of contracts was previously recognized when royalty statements were received. The Company will begin recognizing revenue related to licensed rights to exploit symbolic IP substantially similarly to functional IP. Although it has a different recognition pattern from functional IP, the valuation method is substantially the same, depending on the nature of the license. The Company is in the process of preparing the transition adjustment that will be reflected in its March 31, 2018 quarterly financial statements. The Company expects that disclosure contained in the notes to the consolidated financial statements relating to revenue recognition will expand under the new standard. The Company is evaluating the new disclosure requirements, including any necessary changes to business processes, systems, and controls to support the additional required disclosures. The Company is also currently evaluating the potential impact on the Company’s internal control over financial reporting to identify any necessary changes. 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 in our 2017 financial statements. Our 2016 financial statements have been reclassified to reflect the current year adoption. 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. |
3. Property and Equipment, Net
3. Property and Equipment, Net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment, net | December 31, 2017 December 31, 2016 Furniture and Equipment $ 12,385 $ 12,385 Computer Equipment 117,256 42,654 Leasehold Improvements 176,903 176,903 Software 15,737 15,737 Property and Equipment, Gross 322,281 247,679 Less Accumulated Depreciation (227,615 ) (157,218 ) Property and Equipment, Net $ 94,666 $ 90,461 |
4. Film and Television Costs,25
4. Film and Television Costs, Net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Film And Television Costs Net | |
Schedule of 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 2,863,076 Capitalized Interest 187,883 Film Amortization Expense (2,534,835 ) Film and Television Costs, Net as of December 31, 2017 $ 2,777,088 |
5. Goodwill and Intangible As26
5. Goodwill and Intangible Assets, Net (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Goodwill And Intangible Assets Net Tables | |
Schedule of Intangible Asset | December 31, 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) 251,171 185,020 Intangible Assets, Gross 2,185,678 2,119,527 Less Accumulated Amortization (c) (329,398 ) (273,877 ) Intangible Assets, Net $ 1,856,280 $ 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 December 31, 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 December 31, 2017, the Company has not recognized any impairment expense related to these assets. (c) During the years ended December 31, 2017 and 2016, the Company recognized $55,521 and $76,356, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. |
Schedule of expected future ingtangible asset amortization | Fiscal Year: 2018 $ 42,137 2019 30,593 2020 30,013 2021 7,399 2022 1,861 Remaining 4,277 Total $ 116,280 |
7. Accrued Liabilities - Curr27
7. Accrued Liabilities - Current (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Payables and Accruals [Abstract] | |
Schedule of other accrued liabilities | As of December 31, 2017 and 2016, the Company had the following current accrued liabilities: December 31, 2017 December 31, 2016 Accrued Salaries and Wages (a) $ 168,549 $ 132,827 Disputed Trade Payables (b) 925,000 925,000 Services Advance - Current Portion (c) – 1,489,583 Other Accrued Expenses (d) 1,717,970 249,482 Total Accrued Liabilities - Current $ 2,811,519 $ 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 December 31, 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. (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. (d) Other Accrued Expenses include estimates of expenses incurred but not yet recorded. The increase in Other Accrued Expenses from the year ended December 31, 2016 to December 31, 2017 relates to estimates of final dubbing costs and participation expense related to our Llama Llama |
10. Stock Options (Tables)
10. Stock Options (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
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 79,509 Options Expired - Balance at December 31, 2017 1,294,045 $ 2.82 - 12.00 2.99 years $ - $ 8.14 Exercisable December 31, 2016 452,535 $ 2.82 - 6.00 3.95 years $ 263,375 $ 5.29 Exercisable December 31, 2017 1,070,869 $ 2.82 - 9.00 2.96 years $ - $ 7.44 |
Schedule of 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 |
11. Warrants (Tables)
11. Warrants (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
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 2,934,381 3.30 - 5.30 - - ؘ- Warrants Exercised 1,171,690 3.30 - - - Warrants Expired - Balance at December 31, 2017 3,414,389 $ 3.30 - 6.00 4.21 years $ 3.92 $ - Exercisable December 31, 2016 1,651,698 $ 3.30 - 6.00 3.75 years $ 3.49 $ 3,301,913 Exercisable December 31, 2017 3,414,389 $ 3.30 - 6.00 4.21 years $ 3.92 $ - |
12. Income Taxes (Tables)
12. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of deferred tax assets and liabilities | 2017 2016 Deferred tax assets: NOL Carryover $ 6,406,000 $ 7,544,300 Bad Debt Reserve 31,000 44,100 Inventory Reserve 7,300 10,400 Amortization (20,200 ) 61,500 Accrued Compensated Absences 46,100 52,900 Charitable Contributions 3,500 5,000 Subtotal 6,473,700 7,718,200 Valuation Allowance (6,458,800 ) (7,647,300 ) Deferred tax liabilities: Depreciation 3,700 (42,700 ) Prepaid Expenses (18,600 ) (28,200 ) Net Deferred Tax Asset $ – $ – |
Schedule of effective income tax rate reconciliation | 2017 2016 Book Loss $ (1,669,000 ) $ (2,113,000 ) Meals and Entertainment 10,600 10,300 Stock Options 225,700 537,800 Tax Rate Change 2,809,700 – Other 1,600 4,700 Valuation Allowance (1,378,600 ) 1,560,200 $ – $ – |
13. Commitment and Contingenc31
13. Commitment and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of future minimum lease payments | 2018 Operating Leases $ 36,214 Employment Contracts 580,413 Total $ 616,627 |
1. Organization and Business (D
1. Organization and Business (Details Narrative) - USD ($) | Jan. 08, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Net loss | $ (4,908,736) | $ (6,213,135) | |||
Net Cash Used in Operating Activities | (7,186,870) | (3,716,277) | |||
Accumulated deficit | (41,551,497) | (36,642,761) | |||
Stockholders equity | 15,039,846 | 10,055,526 | $ 14,121,584 | ||
Current assets | 10,834,926 | 3,376,788 | |||
Working capital | 7,116,279 | (479,404) | |||
Cash, cash equivalents and restricted cash | 7,498,072 | ||||
Current liabilities | 3,718,647 | 3,856,192 | |||
Trade payables | [1] | 925,000 | 925,000 | ||
Service advance | [2] | 0 | $ 1,489,583 | ||
Gross proceeds from exercise of warrants | $ 3,866,573 | ||||
Direct Offering [Member] | |||||
Issuance of Common Stock in Registered Direct Offering, net (in shares) | 1,647,691 | ||||
Gross proceeds from sale of equity | $ 6,425,995 | ||||
Warrants issued | 1,647,691 | ||||
January 2018 Private Placement [Member] | |||||
Issuance of Common Stock in Registered Direct Offering, net (in shares) | 1,647,691 | ||||
January 2018 Private Placement [Member] | Subsequent Event [Member] | Securities Purchase Agreement [Member] | Accredited Investors [Member] | |||||
Gross proceeds from sale of equity | $ 1,800,000 | ||||
Warrants issued | 592,000 | ||||
Private Transaction [Member] | |||||
Gross proceeds from exercise of warrants | $ 3,866,573 | ||||
Issuance of Common Stock in Registered Direct Offering, net (in shares) | 1,171,689 | ||||
SPHE [Member] | |||||
Issuance of Common Shares for Debt Extinguishment (in shares) | 301,231 | ||||
Issuance of Common Shares for Debt Extinguishment, debt extinguished | $ 1,489,583 | ||||
[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, 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. | ||||
[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 $750,000 during the first quarter of 2015. At the end of the term, the Company is obligated to repay a pro-rata portion of the advance if it has not ordered a minimum number of DVD/CD units during the term. |
2. Significant Accounting Polic
2. Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Restricted Cash | $ 568,673 | $ 1,000,000 |
Allowance for doubtful accounts | 110,658 | 110,658 |
Reserve for obsolete inventory | 26,097 | 26,097 |
Uninsured cash balances | $ 6,471,928 | $ 1,136,683 |
Sales Revenue, Net [Member] | One Customer | ||
Concentration risk percentage | 84.00% | 19.00% |
Accounts Receivable [Member] | One Customer | ||
Concentration risk percentage | 98.00% | 0.00% |
3. Property and Equipment, Ne34
3. Property and Equipment, Net (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Property and equipment, gross | $ 322,281 | $ 247,679 |
Less Accumulated Depreciation | (227,615) | (157,218) |
Property and Equipment, Net | 94,666 | 90,461 |
Furniture and Fixtures [Member] | ||
Property and equipment, gross | 12,385 | 12,385 |
Computer Equipment [Member] | ||
Property and equipment, gross | 117,256 | 42,654 |
Leasehold Improvements [Member] | ||
Property and equipment, gross | 176,903 | 176,903 |
Software [Member] | ||
Property and equipment, gross | $ 15,737 | $ 15,737 |
3. Property and Equipment, Ne35
3. Property and Equipment, Net (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 70,397 | $ 66,331 |
4. Film and Television Costs,36
4. Film and Television Costs, Net (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Film And Television Costs Net | ||
Film and Television costs, beginning balance | $ 2,260,964 | $ 1,003,546 |
Additions to Film and Television Costs | 2,863,076 | 1,390,450 |
Capitalized interest | 187,883 | 34,756 |
Film Amortization Expense | (2,534,835) | (167,788) |
Film and Television Costs, ending balance | $ 2,777,088 | $ 2,260,964 |
5. Goodwill and Intangible As37
5. Goodwill and Intangible Assets, Net (Details - Intangibles) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 | |
Intangible assets | $ 2,185,678 | $ 2,119,527 | |
Less Accumulated Amortization | [1] | (329,398) | (273,877) |
Net Intangible Assets | 1,856,280 | 1,845,650 | |
Identifiable artistic-related assets [Member] | |||
Intangible assets | [2] | 1,740,000 | 1,740,000 |
Trademarks [Member] | |||
Intangible assets | [3] | 129,831 | 129,831 |
Product Masters [Member] | |||
Intangible assets | [3] | 64,676 | 64,676 |
Other Intangible Assets [Member] | |||
Intangible assets | [3] | $ 251,171 | $ 185,020 |
[1] | During the years ended December 31, 2017 and 2016, the Company recognized $55,521 and $76,356, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. | ||
[2] | In connection with the Merger in 2013, the Company acquired $1,740,000 of Identifiable Artistic-Related Assets. These assets, related to certain properties owned by A Squared and assumed by the Company, were valued using an independent firm. Based on certain legal, regulatory, contractual, and economic factors, the Company has deemed these assets to be indefinite-lived. Hence, pursuant to FASB ASC 350-30, these assets are not subject to amortization and are tested annually for impairment. Through December 31, 2017, the Company has not recognized any impairment expense related to these assets. | ||
[3] | Pursuant to FASB ASC 350-30-35, the Company reviews these intangible assets periodically to determine if the value should be retired or impaired due to recent events. Through December 31, 2017, the Company has not recognized any impairment expense related to these assets. |
6. Goodwill and Intangible Asse
6. Goodwill and Intangible Assets (Details - future amortization) | Dec. 31, 2017USD ($) |
Future intangible asset amortization | |
2,018 | $ 42,137 |
2,019 | 30,593 |
2,020 | 30,013 |
2,021 | 7,399 |
2,022 | 1,861 |
Remaining | 4,277 |
Total | $ 116,280 |
5. Goodwill and Intangible As39
5. Goodwill and Intangible Assets, Net (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Trademarks, Product Masters, and Other Intangible Assets [Member] | ||
Amortization expense | $ 55,521 | $ 76,356 |
6. Deferred Revenue (Details Na
6. Deferred Revenue (Details Narrative) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Deferred revenue | $ 5,085,383 | $ 3,106,608 |
Royalty Advance [Member] | ||
Deferred revenue | 2,000,000 | $ 2,000,000 |
Distribution Rights [Member] | ||
Deferred revenue | $ 1,489,583 |
7. Accrued Liabilities - Curr41
7. Accrued Liabilities - Current (Details) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 | |
Payables and Accruals [Abstract] | |||
Accrued Salaries and Wages | [1] | $ 168,549 | $ 132,827 |
Disputed trade payables | [2] | 925,000 | 925,000 |
Services Advance - Current Portion | [3] | 0 | 1,489,583 |
Other accrued expenses | [4] | 1,717,970 | 249,482 |
Total accrued liabilities | $ 2,811,519 | $ 2,796,892 | |
[1] | Accrued Salaries and Wages represent accrued vacation payable to employees. | ||
[2] | 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, 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. | ||
[3] | 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 $750,000 during the first quarter of 2015. At the end of the term, the Company is obligated to repay a pro-rata portion of the advance if it has not ordered a minimum number of DVD/CD units during the term. | ||
[4] | Other Accrued Expenses include estimates of expenses incurred but not yet recorded. The increase in Other Accrued Expenses from the year ended December 31, 2016 to December 31, 2017 relates to estimates of final dubbing costs and participation expense related to our Llama Llama property. |
8. Production Loan Facility (De
8. Production Loan Facility (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Restricted cash | $ 568,673 | $ 1,000,000 |
Llama Productions [Member] | ||
Credit line initiation date | Aug. 8, 2016 | |
Credit line maximum | $ 4,843,416 | |
Credit line term | 40 months | |
Credit line expiration date | Dec. 31, 2019 | |
Credit line interest rate | Either Prime plus 1% or one, three, or six month LIBOR plus 3.25% | |
Restricted cash | $ 568,673 | |
Gross borrowings under the facility | 4,436,528 | 1,505,307 |
Payment of financing costs | 113,885 | 173,303 |
Net borrowings under the facility | $ 4,322,643 | $ 1,332,004 |
9. Stockholders' Equity (Detail
9. Stockholders' Equity (Details Narrative) - USD ($) | 12 Months Ended | ||||||
Dec. 31, 2017 | Dec. 31, 2016 | Oct. 03, 2017 | Aug. 01, 2017 | Mar. 14, 2017 | Jan. 17, 2017 | Jan. 10, 2017 | |
Shares authorized | 233,333,334 | 233,333,334 | |||||
Reverse stock split | 1-for-3 reverse stock split on November 4, 2016 | ||||||
Common shares outstanding | 7,610,794 | 4,010,649 | |||||
Preferred stock issued | 3,530 | 4,895 | |||||
Preferred stock outstanding | 3,530 | 4,895 | |||||
Proceeds from Warrant Exchange, Net | $ 3,401,924 | $ 0 | |||||
Common Stock [Member] | |||||||
Conversion of preferred stock, common stock issued | 455,000 | ||||||
Series A Convertible Preferred Stock [Member] | |||||||
Conversion of preferred stock, preferred stock converted | 1,365 | ||||||
Convertible Preferred [Member] | |||||||
Conversion price | $ 3 | ||||||
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 | $ 3,401,924 | ||||||
Stock issued new, shares | 1,171,689 | ||||||
Direct Offering [Member] | |||||||
Stock price | $ 3.90 | ||||||
Stock issued new, shares | 1,647,691 | ||||||
Private Placement [Member] | |||||||
Stock issued new, shares | 1,647,691 | ||||||
Direct Offering and Private Placement [Member] | |||||||
Gross proceeds from sale of stock | $ 6,425,995 | ||||||
Consultant 2 [Member] | |||||||
Stock price | $ 5.95 | ||||||
Stock issued for services, shares | 8,410 | ||||||
Consultant [Member] | |||||||
Stock price | $ 4.99 | ||||||
Stock issued for services, shares | 6,012 | ||||||
SPHE [Member] | |||||||
Issuance of Common Shares for Debt Extinguishment (in shares) | 301,231 | ||||||
Stock price | $ 4.945 | ||||||
SPHE [Member] | Consultant [Member] | |||||||
Stock price | $ 4.945 | ||||||
Stock issued for services, shares | 10,112 |
10. Stock Options (Details-Opti
10. Stock Options (Details-Option activity) - Stock Options [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Stock Options | ||
Number of Options outstanding beginning balance | 1,373,554 | |
Number of Options Granted | 0 | |
Number of Options Exercised | 0 | |
Number of Options Cancelled | 79,509 | |
Number of Options Expired | 0 | |
Number of Options outstanding ending balance | 1,294,045 | 1,373,554 |
Number of Options exercisable | 1,070,869 | 452,535 |
Exercise Price Per Share | ||
Exercise price per share, range | $2.82-$12-00 | $2.82-$12-00 |
Exercise price per share, exercisable | $2.82-$6.00 | |
Exercise prices at period end | $2.82-$6.00 | |
Weighted Average Remaining Contractual Life | ||
Weighted Average Remaining Contractual Life | 2 years 11 months 26 days | 3 years 11 months 26 days |
Weighted average remaining contractual life, exercisable | 2 years 11 months 16 days | 3 years 11 months 12 days |
Aggregate Intrinsic Value | ||
Aggregate intrinsic value, options outstanding | $ 0 | $ 280,642 |
Aggregate intrinsic value, exercisable | $ 0 | $ 263,375 |
Weighted Average Exercise Price Per Share | ||
Weighted Average Exercise Price per Share beginning balance | $ 8.14 | |
Weighted Average Exercise Price per Share ending balance | 8.14 | $ 8.14 |
Weighted Average Exercise Price per Share Exercisable | $ 7.44 | $ 5.29 |
10. Stock Options (Details Narr
10. Stock Options (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2016 | Dec. 31, 2017 | Dec. 31, 2016 | |
Share-based compensation | $ 663,958 | $ 1,581,797 | |
Unvested share based compensation | $ 128,269 | ||
True-up expenses from prior periods [Member] | |||
Share-based compensation | $ 220,564 | ||
2015 Plan [Member] | |||
Shares authorized under plan | 1,666,667 |
11. Warrants (Details)
11. Warrants (Details) - Warrant [Member] - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Warrant | ||
Number of Warrants outstanding beginning balance | 1,651,698 | |
Warrants Granted | 2,934,381 | |
Warrants Exercised | 1,171,690 | |
Warrants Expired | 0 | |
Number of Warrants outstanding ending balance | 3,414,389 | 1,651,698 |
Number of Warrants exercisable | 3,414,389 | 1,651,698 |
Exercise Price Per Share | ||
Warrant exercise price per share, beginning balance | $3.30-$6.00 | |
Warrant exericse price per share, granted | $3.30-$5.30 | |
Warrant exercise price per share, exercised | 3.30 | |
Warrant exercise price per share, ending balance | $3.30-$6.00 | $3.30-$6.00 |
Warrant exercise price per share, exercisable | $3.60-$6.00 | $3.60-$6.00 |
Weighted Average Remaining Contractual Life | ||
Weighted average remaining contractual life, warrants outstanding | 4 years 2 months 16 days | 3 years 9 months |
Weighted average remaining contractual life, exercisable | 4 years 2 months 16 days | 3 years 9 months |
Weighted Average Exercise Price per Share | ||
Warrant weighted average exercise price per share, beginning balance | $ 3.49 | |
Warrant weighted average exercise price per share, ending balance | 3.92 | $ 3.49 |
Warrant weighted average exercise price per share, exercisable | $ 3.92 | $ 3.49 |
Aggregate Intrinsic Value | ||
Aggregate intrinsic value, outstanding | $ 0 | $ 3,301,913 |
Aggregate instrinsic value, exercisable | $ 0 | $ 3,301,913 |
11. Warrants (Details Narrative
11. Warrants (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Gross proceeds from exercise of warrants | $ 3,866,573 | |
Warrant [Member] | ||
Warrants outstanding | 3,414,389 | 1,651,698 |
Reload Warrants [Member] | ||
Warrants issued | 799,991 | |
Market Price Warrants [Member] | ||
Warrants issued | 371,699 | |
Private Transaction [Member] | ||
Gross proceeds from exercise of warrants | $ 3,866,573 | |
Fair value of warrants issued | $ 1,402,174 | |
Stock issued new, shares | 1,171,689 | |
Private Transaction [Member] | Chardan [Member] | ||
Payment of stock issuance costs | $ 363,617 | |
Private Transaction [Member] | New Warrants [Member] | Chardan [Member] | ||
Warrants issued | 115,000 | |
Direct Offering [Member] | ||
Warrants issued | 1,647,691 | |
Stock issued new, shares | 1,647,691 | |
Gross proceeds from sale of equity | $ 6,425,995 |
12. Income Taxes (Details-Defer
12. Income Taxes (Details-Deferred income taxes) - USD ($) | Dec. 31, 2017 | Dec. 31, 2016 |
Deferred tax assets: | ||
NOL Carryover | $ 6,406,000 | $ 7,544,300 |
Bad Debt Reserve | 31,000 | 44,100 |
Inventory Reserve | 7,300 | 10,400 |
Amortization | (20,200) | 61,500 |
Accrued Compensated Absences | 46,100 | 52,900 |
Charitable Contributions | 3,500 | 5,000 |
Deferred tax assets | 6,473,700 | 7,718,200 |
Valuation Allowance | (6,458,800) | (7,647,300) |
Deferred tax liabilities: | ||
Depreciation | 3,700 | (42,700) |
Prepaid Expenses | (18,600) | (28,200) |
Net deferred tax asset | $ 0 | $ 0 |
12. Income Taxes (Details-Incom
12. Income Taxes (Details-Income tax provision) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Income Tax Disclosure [Abstract] | ||
Book Loss | $ (1,669,000) | $ (2,113,000) |
Meals and Entertainment | 10,600 | 10,300 |
Stock Options | 225,700 | 537,800 |
Stock issued for debt extinguishment | 2,809,700 | 0 |
Other | 1,600 | 4,700 |
Valuation Allowance | (1,378,600) | 1,560,200 |
Income Tax Expense | $ 0 | $ 0 |
12. Income Taxes (Details Narra
12. Income Taxes (Details Narrative) | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Income Tax Disclosure [Abstract] | |
Net operating loss carryforward | $ 23,363,000 |
Operating loss carryforward expiration date | Dec. 31, 2037 |
Net deferred tax assets before valuation allowance | $ 2,809,700 |
Statutory tax rate | 21.00% |
13. Commitments and Contingenci
13. Commitments and Contingencies (Details) | Dec. 31, 2017USD ($) |
Total | $ 616,627 |
Operating Leases [Member] | |
Total | 36,214 |
Employment Contracts [Member] | |
Total | $ 580,413 |
13. Commitments and Contingen52
13. Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Rental expenses | $ 143,451 | $ 140,144 |
14. Related Party (Details Narr
14. Related Party (Details Narrative) - USD ($) | 12 Months Ended | 15 Months Ended | |
Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2017 | |
Andy Heyward Animation Art [Member] | |||
Royalty revenue | $ 96 | $ 247 | |
Andy Heyward [Member] | |||
Production cost | $ 186,000 | ||
Due from related party | 1,504 | $ 1,248 | 1,504 |
Gregory Payne [Member] | |||
Due from related party | 5,558 | 5,558 | |
Foothill Entertainment [Member] | |||
Due from related party | $ 7,517 | $ 7,517 |