Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2019 | |
Document And Entity Information | |
Entity Registrant Name | Genius Brands International, Inc. |
Entity Central Index Key | 0001355848 |
Document Type | S-1/A |
Amendment Flag | false |
Entity Filer Category | Non-accelerated Filer |
Entity Small Business | true |
Entity Emerging Growth | false |
Document Fiscal Period Focus | Q3 |
Document Fiscal Year Focus | 2019 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Current Assets: | |||||
Cash and Cash Equivalents | $ 633,561 | $ 2,684,483 | $ 6,929,399 | ||
Restricted Cash | 0 | 400,543 | 568,673 | ||
Accounts Receivable, net | 3,921,433 | 2,160,296 | 2,893,902 | ||
Other Receivable | 2,310 | 20,902 | 160,545 | ||
Inventory, net | 12,518 | 15,816 | 17,589 | ||
Prepaid and Other Assets | 441,474 | 297,542 | 264,818 | ||
Total Current Assets | 5,011,296 | 5,579,582 | 10,834,926 | ||
Property and Equipment, net | 74,387 | 75,634 | 94,666 | ||
Right Of Use Assets, net | 4,115,532 | 0 | |||
Accounts Receivable | 0 | 1,687,500 | |||
Other Receivable | 0 | 96,327 | |||
Film and Television Costs, net | 9,450,233 | 8,166,131 | 2,777,088 | ||
Lease Deposits | 368,001 | 325,000 | 0 | ||
Intangible Assets, net | 61,039 | 89,988 | 1,856,280 | ||
Goodwill | 10,365,806 | 10,365,806 | 10,365,805 | ||
Total Assets | 29,446,294 | 24,602,141 | 27,712,592 | ||
Current Liabilities: | |||||
Accounts Payable | 1,214,756 | 694,740 | 453,201 | ||
Accrued Expenses | 150,956 | [1] | 52,865 | [1] | 1,020,457 |
Participations Payable | 2,010,439 | 669,380 | 697,513 | ||
Deferred Revenue | 737,783 | 874,503 | 453,927 | ||
Senior Secured Convertible Notes, net | 3,050,312 | 1,831,847 | 0 | ||
Lease Liability | 518,314 | ||||
Due To Related Parties | 933,596 | 346,759 | 0 | ||
Accrued Salaries and Wages | 242,419 | [2] | 137,825 | [2] | 168,549 |
Total Current Liabilities | 8,858,575 | 4,607,919 | 2,793,647 | ||
Long Term Liabilities: | |||||
Deferred Revenue | 4,193,832 | 4,051,253 | 4,631,456 | ||
Lease Liability | 3,683,115 | ||||
Production Facility, net | 3,050,416 | 2,178,198 | 4,322,643 | ||
Disputed Trade Payable | 925,000 | 925,000 | 925,000 | ||
Total Liabilities | 20,710,938 | 11,762,370 | 12,672,746 | ||
Stockholders' Equity | |||||
Preferred Stock | 2 | 2 | 4 | ||
Common Stock | 11,934 | 9,458 | 7,611 | ||
Additional Paid in Capital | 70,903,988 | 63,537,915 | 56,588,846 | ||
Accumulated Deficit | (62,175,450) | (50,702,486) | (41,551,497) | ||
Accumulated Other Comprehensive Loss | (5,118) | (5,118) | (5,118) | ||
Total Equity | 8,735,356 | 12,839,771 | 15,039,846 | ||
Total Liabilities and Stockholders' Equity | $ 29,446,294 | $ 24,602,141 | $ 27,712,592 | ||
[1] | Represents accrued interest, insurance liability and lease deposit on sub-lease. | ||||
[2] | Represents accrued salaries and wages and accrued vacation payable to employees for 2019 and accrued vacation payable to employees in 2018 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | |||
Common Stock, par value | $ 0.001 | $ 0.001 | $ 0.001 |
Common Stock, shares authorized | 233,333,334 | 233,333,334 | 233,333,334 |
Common Stock, shares issued | 11,933,365 | 9,457,859 | 7,610,794 |
Common Stock, shares outstanding | 11,933,365 | 9,457,859 | 7,610,794 |
Preferred stock par value | $ 0.001 | $ 0.001 | $ 0.001 |
Preferred stock shares authorized | 10,000,000 | 10,000,000 | 10,000,000 |
Preferred stock shares issued | 2,120 | 2,120 | 3,530 |
Preferred stock shares outstanding | 2,120 | 2,120 | 3,530 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Revenues: | ||||||
Total Revenues | $ 3,468,996 | $ 523,175 | $ 5,154,191 | $ 692,799 | $ 993,452 | $ 5,335,728 |
Operating Expenses: | ||||||
Marketing and Sales | 97,541 | 92,946 | 405,751 | 334,302 | 738,122 | 662,373 |
Direct Operating Costs | 2,841,358 | 476,199 | 3,929,187 | 1,206,147 | 1,536,722 | 4,257,427 |
General and Administrative | 2,092,734 | 1,207,894 | 5,298,865 | 3,858,650 | 4,982,779 | 5,329,718 |
Impairment Loss | 1,740,000 | 0 | ||||
Total Operating Expenses | 5,031,633 | 1,777,039 | 9,633,803 | 5,399,099 | 8,997,623 | 10,249,518 |
Loss from Operations | (1,562,637) | (1,253,864) | (4,479,612) | (4,706,300) | (8,004,171) | (4,913,790) |
Other Income (Expense): | ||||||
Other Income | 1,294 | 9,489 | 17,081 | 9,769 | 19,646 | 8,281 |
Loss on Extinguished Debt | (1,080,664) | 0 | (4,432,819) | 0 | ||
Other Income - Sub-Lease | 117,416 | 0 | 314,869 | 0 | ||
Interest Expense | (30,642) | (577,477) | (697,386) | (578,570) | (1,019,376) | (3,227) |
Net Other Income (Expense) | (992,596) | (567,988) | (4,798,255) | (568,801) | (999,730) | 5,054 |
Loss before Income Tax Expense | (2,555,233) | (1,821,852) | (9,277,867) | (5,275,101) | (9,003,901) | (4,908,736) |
Income Tax Expense | 0 | 0 | 0 | 0 | 0 | 0 |
Net Loss | (2,555,233) | (1,821,852) | (9,277,867) | (5,275,101) | (9,003,901) | (4,908,736) |
Beneficial Conversion Feature on Preferred Stock | (1,686,667) | (353,333) | (2,008,907) | (353,333) | (353,333) | 0 |
Net Loss Applicable to Common Shareholders | $ (4,241,900) | $ (2,175,185) | $ (11,286,774) | $ (5,628,434) | $ (9,357,234) | $ (4,908,736) |
Net Loss per Common Share (Basic And Diluted) | $ (0.38) | $ (0.24) | $ (1.07) | $ (0.66) | $ (1.07) | $ (0.81) |
Weighted Average Shares Outstanding (Basic and Diluted) | 11,241,440 | 9,062,966 | 10,538,309 | 8,556,232 | 8,758,694 | 6,084,732 |
Licensing and Royalties [Member] | ||||||
Revenues: | ||||||
Total Revenues | $ 174,261 | $ 210,675 | $ 674,107 | $ 302,140 | $ 449,385 | $ 472,134 |
Television and Home Entertainment [Member] | ||||||
Revenues: | ||||||
Total Revenues | 3,147,411 | 196,519 | 4,292,972 | 234,474 | 323,709 | 4,815,491 |
Advertising Sales [Member] | ||||||
Revenues: | ||||||
Total Revenues | 147,034 | 115,628 | 184,716 | 154,563 | 217,999 | 38,779 |
Product Sales [Member] | ||||||
Revenues: | ||||||
Total Revenues | $ 290 | $ 353 | $ 2,396 | $ 1,622 | $ 2,359 | $ 9,324 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Statement of Comprehensive Income [Abstract] | ||||||
Net Loss | $ (2,555,233) | $ (1,821,852) | $ (9,277,867) | $ (5,275,101) | $ (9,003,901) | $ (4,908,736) |
Beneficial Conversion Feature on Preferred Stock | (1,686,667) | (353,333) | (2,008,907) | (353,333) | (353,333) | 0 |
Other Comprehensive Loss, Net of Tax: | 0 | (2,360) | ||||
Comprehensive Net Loss to Common Shareholders | $ (4,241,900) | $ (2,175,185) | $ (11,286,774) | $ (5,628,434) | $ (9,357,234) | $ (4,911,096) |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) | Common Stock | Preferred Stock | Additional Paid-In Capital | Accumulated Deficit | Other Comprehensive Loss | Total |
Beginning balance, value at Dec. 31, 2016 | $ 4,011 | $ 5 | $ 46,697,029 | $ (36,642,761) | $ (2,758) | $ 10,055,526 |
Beginning balance, shares at Dec. 31, 2016 | 4,010,649 | 4,895 | ||||
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 Stock, value | $ 455 | $ (1) | (454) | |||
Conversion of Preferred Stock, shares | 455,000 | (1,365) | ||||
Issuance of Common Stock for Services | $ 24 | 129,976 | 130,000 | |||
Issuance of Common Stock for Services, shares | 24,534 | |||||
Issuance of Common Shares for Debt Extinguishment | $ 301 | (301) | ||||
Issuance of Common Shares for Debt Extinguishment, 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, value at Dec. 31, 2017 | $ 7,611 | $ 4 | 56,588,846 | (41,551,497) | (5,118) | 15,039,846 |
Ending balance, shares at Dec. 31, 2017 | 7,610,794 | 3,530 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Cumulative effect of adoption ASC 606 | 206,245 | 206,245 | ||||
Issuance of Common Stock in Registered Direct Offering, net | $ 592 | 1,595,749 | 1,596,341 | |||
Issuance of Common Stock in Registered Direct Offering, net (in shares) | 592,000 | |||||
Conversion of Preferred Stock, value | $ 470 | $ (2) | (469) | |||
Conversion of Preferred Stock, shares | 470,001 | (1,410) | ||||
Issuance of Common Stock for Services | $ 785 | 1,984,822 | 1,985,607 | |||
Issuance of Common Stock for Services, shares | 785,064 | |||||
Share Based Compensation | (16,588) | (16,588) | ||||
Value of beneficial conversion feature | 353,333 | (353,333) | ||||
Value of Beneficial Conversion Feature resulting from debt extinguishment | 1,561,111 | 1,561,111 | ||||
Value of Beneficial Conversion Feature on Secured Convertible Notes | 1,561,111 | 1,561,111 | ||||
Discount on Senior Secured Notes | 1,471,111 | 1,471,111 | ||||
Net Loss | (9,003,901) | (9,003,901) | ||||
Comprehensive Loss | 0 | |||||
Ending balance, value at Dec. 31, 2018 | $ 9,458 | $ 2 | 63,537,915 | (50,702,486) | (5,118) | 12,839,771 |
Ending balance, shares at Dec. 31, 2018 | 9,457,859 | 2,120 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Cumulative effect of adoption ASC 606 | (4,306) | (4,306) | ||||
Warrants Issued As Part Of Debt Extinguishment | 1,287,962 | 1,287,962 | ||||
Issuance of Common Stock for Services | $ 29 | 71,939 | 71,968 | |||
Issuance of Common Stock for Services, shares | 28,965 | |||||
Share Based Compensation | 35,749 | 35,749 | ||||
Value of beneficial conversion feature | 322,240 | (322,240) | ||||
Value of Beneficial Conversion Feature resulting from debt extinguishment | (213,700) | (213,700) | ||||
Proceeds from Securities Purchase Agreement, Net, shares | 945,894 | |||||
Proceeds from Securities Purchase Agreement, Net, value | $ 946 | 1,756,606 | 1,757,552 | |||
Value of Beneficial Conversion Feature on Secured Convertible Notes | (213,700) | (213,700) | ||||
Net Loss | (5,007,482) | (5,007,482) | ||||
Ending balance, value at Mar. 31, 2019 | $ 10,433 | $ 2 | 66,798,711 | (56,036,514) | (5,118) | (10,767,514) |
Ending balance, shares at Mar. 31, 2019 | 10,432,718 | 2,120 | ||||
Beginning balance, value at Dec. 31, 2018 | $ 9,458 | $ 2 | 63,537,915 | (50,702,486) | (5,118) | 12,839,771 |
Beginning balance, shares at Dec. 31, 2018 | 9,457,859 | 2,120 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net Loss | (9,277,867) | |||||
Ending balance, value at Sep. 30, 2019 | $ 11,934 | $ 2 | 70,903,988 | (62,175,450) | (5,118) | 8,735,356 |
Ending balance, shares at Sep. 30, 2019 | 11,933,365 | 2,120 | ||||
Beginning balance, value at Mar. 31, 2019 | $ 10,433 | $ 2 | 66,798,711 | (56,036,514) | (5,118) | (10,767,514) |
Beginning balance, shares at Mar. 31, 2019 | 10,432,718 | 2,120 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Issuance of Common Stock for Services | $ 43 | 80,800 | 80,843 | |||
Issuance of Common Stock for Services, shares | 43,022 | |||||
Share Based Compensation | 57,407 | 57,407 | ||||
Net Loss | (1,715,152) | (1,715,152) | ||||
Ending balance, value at Jun. 30, 2019 | $ 10,476 | $ 2 | 66,936,918 | (57,751,666) | (5,118) | 9,090,612 |
Ending balance, shares at Jun. 30, 2019 | 10,475,740 | 2,120 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Warrants Issued As Part Of Debt Extinguishment | 957,867 | 957,867 | ||||
Issuance of Common Stock for Services | $ 512 | 423,776 | 424,288 | |||
Issuance of Common Stock for Services, shares | 511,731 | |||||
Share Based Compensation | 49,263 | 49,263 | ||||
Value of beneficial conversion feature | 1,686,667 | (1,686,667) | ||||
Proceeds from warrant exchange, shares | 945,894 | |||||
Proceeds from warrant exchange, value | $ 946 | 667,613 | 668,559 | |||
Value of warrant inducement | 181,884 | (184,884) | ||||
Net Loss | (2,555,233) | (2,555,233) | ||||
Ending balance, value at Sep. 30, 2019 | $ 11,934 | $ 2 | $ 70,903,988 | $ (62,175,450) | $ (5,118) | $ 8,735,356 |
Ending balance, shares at Sep. 30, 2019 | 11,933,365 | 2,120 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Cash Flows from Operating Activities: | ||||
Net Loss | $ (9,277,867) | $ (5,275,101) | $ (9,003,901) | $ (4,908,736) |
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||||
Amortization of Film and Television Costs | 1,907,222 | 1,033,392 | 1,079,723 | 2,534,835 |
Depreciation and Amortization Expense | 216,410 | 69,530 | 88,309 | 125,918 |
Accretion of Discount on Preferred Convertible Notes | 288,609 | 399,123 | 678,015 | 0 |
Bad Debt Expense | 0 | 2,400 | 2,400 | 66,502 |
Stock Issued for Services | 119,798 | 0 | 322,605 | 130,000 |
Stock Compensation Expense | 142,420 | 113,405 | (16,588) | 663,958 |
Loss on Extinguished Debt | 4,432,819 | 0 | ||
Loss on Impairment of Assets | 1,740,000 | 0 | ||
Decrease (Increase) in Operating Assets: | ||||
Accounts Receivable, net | (1,761,137) | 2,054,496 | 2,418,706 | (4,527,354) |
Other Receivable | 18,592 | 256,872 | 235,970 | (256,872) |
Inventory, net | 3,298 | 1,407 | 1,773 | (11,027) |
Prepaid Expenses & Other Assets | (143,932) | (204,437) | (18,049) | 94,577 |
Lease Deposits | (43,001) | (325,000) | (325,000) | 0 |
Film and Television Costs, net | (2,324,023) | (3,014,150) | (5,025,236) | (2,825,426) |
Increase (Decrease) in Operating Liabilities: | ||||
Accounts Payable | 182,577 | (92,751) | 241,537 | (266,645) |
Accrued Salaries and Wages | 104,594 | (36,998) | (30,724) | 35,722 |
Deferred Revenue and Advances | 5,859 | (85,610) | 249,524 | 489,189 |
Participations Payable | 1,220,536 | 304,217 | (28,133) | 0 |
Due To Related Parties | 134,800 | 0 | 346,759 | 0 |
Accrued Expenses | 136,010 | (687,503) | (965,700) | 1,468,489 |
Net Cash Used in Operating Activities | (4,636,416) | (5,486,708) | (8,008,010) | (7,186,870) |
Cash Flows from Investing Activities: | ||||
Investment in Intangible Assets, net | 0 | (21,358) | (21,358) | (44,793) |
Investment in Property and Equipment, net | (26,976) | (21,628) | (21,627) | (62,400) |
Net Cash Used in Investing Activities | (26,976) | (42,986) | (42,985) | (107,193) |
Cash Flows from Financing Activities: | ||||
Payments on Lease Liability | (115,567) | 0 | ||
Proceeds from Sale of Securities Purchase Agreement, net | 1,757,552 | 1,596,341 | ||
Proceeds from Warrant Exchange, Net | 668,558 | 0 | 0 | 3,401,924 |
Repayment of Secured Convertible Notes | (970,834) | 4,186,054 | ||
Proceeds from Sale of Common Stock, Net | 1,596,341 | 5,699,534 | ||
Proceeds from Senior Secured Convertible Notes, Net | 4,186,054 | 0 | ||
Repayment of Production Facility, Net | 872,218 | (2,676,748) | (2,144,445) | 2,802,756 |
Net Cash Provided by Financing Activities | 2,211,927 | 3,105,647 | 3,637,949 | 11,904,214 |
Net (Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash | (2,451,465) | (2,424,047) | (4,413,046) | 4,610,151 |
Beginning Cash, Cash Equivalents, and Restricted Cash | 3,085,026 | 7,498,072 | 7,498,072 | 2,887,921 |
Ending Cash, Cash Equivalents, and Restricted Cash | 633,561 | 5,074,026 | 3,085,026 | 7,498,072 |
Supplemental Disclosures of Cash Flow Information: | ||||
Cash Paid for Interest | 435,129 | 104,758 | 271,244 | 3,227 |
Schedule of Non-Cash Financing and Investing Activities | ||||
Issuance of Common Stock for services rendered | 457,301 | 1,563,002 | 1,985,607 | 0 |
Issuance of Common Stock in Relation to Sony Transaction | 0 | 1,489,583 | ||
Beneficial Conversion Feature | 2,008,907 | 353,333 | $ 353,333 | $ 0 |
Capitalization of Operating Lease Right to Use Asset | $ 2,245,093 | $ 0 |
1. Organization and Business
1. Organization and Business | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
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 experienced industry personnel, we distribute our content in all formats as well as a broad range of consumer products based on our characters. In the children's media sector, our portfolio features “content with a purpose” for toddlers to tweens, which provides enrichment as well as entertainment. New intellectual property titles include the preschool property Rainbow Rangers Llama Llama, Baby Genius, Thomas Edison's Secret Lab® Secret Millionaires Club, Stan Lee's Superhero Kindergarten In addition, we act as licensing agent for Penguin Young Readers, a division of Penguin Random House LLC who owns or controls the underlying rights to Llama Llama The Company commenced operations in 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 2011, the Company reincorporated in Nevada and changed its name to Genius Brands International, Inc. In connection with the reincorporation, the Company changed its trading symbol to “GNUS.” In 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, A Squared, as the surviving entity, became a wholly owned subsidiary of the Company. Liquidity Historically, the Company has incurred net losses. For the three months ended September 30, 2019 and September 30, 2018, the Company reported net losses of $2,555,233 and $1,821,852, respectively. For the nine months ended September 30, 2019 and September 30, 2018, the Company reported net losses of $9,277,867 and $5,275,101, respectively. The Company reported net cash used in operating activities of $4,636,416 and $5,486,708 for the nine months ended September 30, 2019, and September 30, 2018, respectively. As of September 30, 2019, the Company had an accumulated deficit of $62,175,450 and total stockholders’ equity of $8,735,356. At September 30, 2019, the Company had current assets of $5,011,296, including cash and cash equivalents of $633,561 and current liabilities of $8,858,575. The Company had negative working capital of $3,847,279 as of September 30, 2019, compared to working capital of $971,663 as of December 31, 2018. On February 19, 2019, the Company entered into a securities purchase agreement with a certain accredited investor pursuant to which it sold 945,894 shares of its common stock, par value $0.001 per share ( the “Common Stock”), and warrants to purchase up to 945,894 shares of Common Stock, or the registered warrants, to such investor (the “February 2019 Offering”). The Company received $1,757,552 of net proceeds from this offering. Each share of Common Stock was accompanied by a registered warrant to purchase one share of Common Stock at an exercise price of $2.12. Each share of Common Stock and accompanying registered warrant were sold at a combined purchase price of $2.12. The shares of Common Stock and registered warrants were purchased together and were issued separately and were immediately separable upon issuance. In a concurrent private placement, the Company also sold to the purchaser in the February 2019 Offering, unregistered warrants to purchase up to an additional 945,894 shares of our Common Stock. Amendment, Waiver and Consent In connection with the February 2019 Offering and concurrent private placement, the Company entered into an amendment, waiver and consent agreement, or the “February Amendment, Waiver and Consent Agreement,” with certain holders of its 10% Secured Convertible Notes which were issued pursuant to a securities purchase agreement, dated August 17, 2018, by and among the Company and the purchasers identified on the signature pages thereto, or the notes purchase agreement. Pursuant to the February Amendment, Waiver and Consent Agreement, such holders agreed to amend the notes purchase agreement, waive any applicable rights and remedies under the notes purchase agreement, and consent to the February 2019 Offering and concurrent private placement. In consideration for such February Amendment, Waiver and Consent Agreement, the Company agreed to issue all holders of its 10% Secured Convertible Notes warrants to purchase up to an aggregate amount of 1,800,000 shares of our Common Stock. Such warrants have an exercise price of $2.55 per share, will become exercisable commencing six months and one day from the date of issuance and will expire five (5) years from the date of issuance. The issuance of the warrants resulted in a modification of debt in accordance with ASC 470 and is characterized as an extinguishment of debt in accordance with ASC-470-50-40. In accordance with ASC-470-50-40-2 the Company derecognized the existing debt as if it was extinguished and recorded the new debt, with the difference between the reacquisition price of the new debt and the net carrying amount of the extinguished debt, $2,064,193 being recorded as a loss on the extinguishment of debt. On July 22, 2019, in connection with a proposed public offering of shares of Common Stock (the “August 2019 Offering”), the Company entered into an amendment, waiver and consent agreement (the “July Amendment, Waiver and Consent”) with certain holders constituting (i) a majority-in-interest of the holders of its Secured Convertible Notes and (ii) 51% in interest of the shares of Common Stock issued pursuant to a securities purchase agreement, dated as of January 8, 2018, by and among the Company and the purchasers identified on the signature pages thereto (the “January 2018 Purchase Agreement”). Pursuant to the July Amendment, Waiver and Consent, such holders agreed to amend the August 2018 Purchase Agreement, the January 2018 Purchase Agreement and the Secured Convertible Notes, waive any applicable rights and remedies under each of the August 2018 Purchase Agreement and the January 2018 Purchase Agreement, and consent to the August 2019 Offering in consideration for (i) a reduction in the conversion price of the Secured Convertible Notes from $2.50 per share to an amount equal to $1.515 and (ii) the issuance to the August 2018 Purchasers of new warrants to purchase the same number of shares of Common Stock that were issued to each August 2018 Purchaser pursuant to the August 2018 Purchase Agreement (for an aggregate of 1,800,000 shares of Common Stock to all August 2018 Purchasers) at an exercise price per share equal to $1.14 and will become exercisable commencing six (6) months and one day from the date of issuance and will expire (5) years from the date of issuance. The issuance of the warrants resulted in a modification of debt in accordance with ASC 470 and is characterized as an extinguishment of debt in accordance with ASC-470-50-40. In accordance with ASC-470-50-40-2, the Company derecognized the existing debt as if it was extinguished and recorded the new debt. The difference between the reacquisition price of the debt including the fair value of the warrants issued and the net carrying amount of the extinguished debt amounted to $957,867. This amount was recorded as a loss on debt extinguishment. On August 20, 2019, pursuant to the Secured Convertible Notes, the Company elected to make six equal monthly principal payments of $750,000. The first payment with interest was paid on August 23, 2019. On September 17, 2019, the Company’s Chief Executive Officer (“CEO”), Andy Heyward, purchased $500,000 of the Secured Convertible Notes from another holder. The Company did not receive any proceeds from this transaction. On September 18, 2019, the Company entered into a private transaction (the “Private Transaction”) pursuant to a Warrant Exercise Agreement (the “Agreement”) with the holder of the Company’s existing warrants (the “Original Warrants”). The Original Warrants were originally issued on February 19, 2019, to purchase an aggregate of 945,894 shares of Common Stock, at an exercise price of $2.12 per share and were to expire on February 19, 2020. Pursuant to the Agreement, the holder of the Original Warrants and the Company agreed that such Original Warrant holder would exercise its Original Warrants in full and the Company would amend the Original Warrants to reduce the exercise price thereof to $0.76 (the “Amended Exercise Price”). The Company received $718,879 from the exercise of the Original Warrants before paying the placement agent fee of $50,321. The induced exercise resulted in the Company recognizing and recording an “imputed dividend” of $181,884. The amount was determined as the difference in warrants’ value due to the reduction in the exercise price. It was recorded by debiting Accumulated Deficit and crediting Additional Paid-In Capital. As a result, the conversion price of the Series A Convertible Preferred Stock decreased to $0.76. On September 20, 2019, the Company and the holders of $1,958,334 of the Secured Convertible Notes, extended the maturity date of those Secured Convertible Notes until January 31, 2020. The Company also agreed to pay the 10% interest to the holders monthly instead of quarterly. On September 20, 2019, the Company and the holders of $687,500 of the Secured Convertible Notes, extended the maturity date of those Secured Convertible Notes until August 20, 2021. The Company also agreed to pay the 10% interest to the holders monthly instead of quarterly. The extension of maturity dates was characterized as a modification of debt in accordance with ASC-470-50-40. To account for the debt modification, the Company established a new effective interest rate that will amortize pre-modification debt to revised future cash flows. No gain or loss is recognized immediately due to the debt modification transaction. Going Concern The Company’s current assets are not sufficient to repay its outstanding Secured Convertible Notes and fund its planned operations, and accordingly, there is substantial doubt about our ability to continue as a going concern. If the Company defaults in its payment obligations under the Secured Convertible Notes and the indebtedness under the Secured Convertible Notes were to be accelerated, there can be no assurance that the Company’s assets would be sufficient to repay such indebtedness in full at such time or it may not be able to obtain debt or equity financing on favorable terms or if at all to repay the Secured Convertible Notes. As a result, the Company could be forced into bankruptcy or liquidation. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer or Listing On September 4, 2019, the Company received a notification letter from The Nasdaq Stock Market (“Nasdaq”) informing the Company that for the last 30 consecutive business days, the bid price of the Company’s Common Stock had closed below $1.00 per share, which is the minimum required closing bid price for continued listing on The Nasdaq Capital Market pursuant to Listing Rule 5550(a)(2). This notice has no immediate effect on the Company's Nasdaq listing or trading of its Common Stock. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has 180 calendar days, or until March 2, 2020, to regain compliance. To regain compliance, the closing bid price of the Company’s Common Stock must be at least $1.00 per share for a minimum of ten consecutive business days. If the Company does not regain compliance by March 2, 2020, the Company may be eligible for additional time to regain compliance or if the Company is otherwise not eligible, the Company may request a hearing before a Hearings Panel. | 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, we distribute our content in all formats as well as a broad range of consumer products based on our characters. In the children's media sector, our portfolio features “content with a purpose” for toddlers to tweens, which provides enrichment as well as entertainment. New intellectual property titles include the preschool property Rainbow Rangers Llama Llama Baby Genius, Thomas Edison's Secret Lab® Secret Millionaires Club, In addition, we act as licensing agent for Penguin Young Readers, a division of Penguin Random House LLC who owns or controls the underlying rights to 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”. Liquidity and Going Concern Historically, the Company has incurred net losses. For the years ended December 31, 2018 and 2017, the Company reported net losses of $9,003,901 and $4,908,736, respectively. The Company reported net cash used in operating activities of $8,008,010 and $7,186,870 for the years ended December 31, 2018 and 2017, respectively. As of December 31, 2018, the Company had an accumulated deficit of $50,702,486 and total stockholders’ equity of $12,839,771. As a result, the Company will require additional capital to fund its operations and execute its business plan. As of December 31, 2018, the Company had cash, cash equivalents, and restricted cash of $3,085,026, which is not sufficient to fund the Company’s planned operations and production through one year after the date the consolidated financial statements are issued, and accordingly, there is substantial doubt about the Company’s ability to continue as a going concern. The analysis used to determine the Company’s ability as a going concern does not include cash sources outside the Company’s direct control that management expects to be available within the next 12 months. Management is in negotiations to obtain new long-term financing and has a long history of successful capital raises with its investment bank group that will be leading the upcoming round. Both the Company and the Investment banking group are confident in their ability to raise sufficient capital to meet the Company’s obligations and fund its production slate for the coming twelve months. There is inherent uncertainty and business risks that the Company will be able to raise such additional capital. The Company also expects revenue from operations to increase in the third quarter and for the subsequent quarters based on executed licensing agreements. These consolidated financial statements have been prepared on a going concern basis and do not include any adjustments to the amounts and classification of assets and liabilities that may be necessary in the event the Company can no longer continue as a going concern. During 2018, the company completed three transactions that enhanced cash and working capital balances: January 2018 Private Placement On January 8, 2018, the Company entered into a Securities Purchase Agreement with certain accredited investors pursuant to which the Company sold approximately $1,596,341 net, 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. In addition, the company issued to Chardan Capital Markets, LLC, as placement agent, warrants to purchase 93,000 shares of common stock at an exercise price of $3.00 per share. Securities Purchase Agreement On August 17, 2018, the Company entered into a Securities Purchase Agreement (the “August 2018 Purchase Agreement”) with certain investors, pursuant to which the Company agreed to sell (i) an aggregate principal amount of $4.50 million in secured convertible notes, convertible into shares of our common stock, at a conversion price of $2.50 per share (the “Secured Convertible Notes”) and (ii) warrants to purchase 1,800,000 shares of our common stock at an exercise price of $3.00 per share (the “Warrants,” and, together with the Secured Convertible Notes, the “Securities”). The Company received approximately $4,186,054 in net proceeds from the offering. Production Loans On September 28, 2018, Llama Productions LLC, a California limited liability company (“Llama”) a wholly-owned subsidiary of the Company, entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Bank Leumi USA (the “Lender”), pursuant to which the Lender agreed to make a secured loan in the aggregate amount of $4,186,054, to Llama (the “Loan”). The proceeds of the Loan were or will be used to pay the majority of the expenses of producing, completing and delivering two 22-minute episodes and sixteen 11-minute episodes of the second season of the animated series Llama Llama In addition, on September 28, 2018, Llama and Lender entered into Amendment No. 2 to the Loan and Security Agreement, effective as of August 27, 2018, by and between Llama and the Lender (the “Amendment”). Pursuant to the Amendment, the original Loan and Security Agreement, dated as of August 5, 2016 and amended as of November 7, 2017 (the “Original Loan and Security Agreement”), was amended to (i) reduce the loan commitment thereunder to $1,768,010, which is a reduction of $3,075,406 from the original loan commitment under the Original Loan and Security Agreement and (ii) include the Llama Llama season two obligations under the Loan and Security Agreement as obligations under the Original Loan and Security Agreement. The Maturity Date of the Prime Rate Loan facility and LIBOR Loan facility is March 31, 2021. Subsequent to the end of the year, on February 19, 2019, the Company entered into a Securities Purchase Agreement with an accredited investor pursuant to which the Company sold approximately $2,000,000 of common stock and warrants to such investor (the “February 2019 Private Placement”) , see note 17. 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 | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||
Summary of Significant Accounting Policies | Note 2: Summary of Significant Accounting Policies Basis of Presentation The accompanying 2019 and 2018 condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of Genius Brands International, Inc., its wholly owned subsidiaries A Squared LLC, Llama Productions LLC and Rainbow Rangers Productions LLC, 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. The condensed consolidated 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 accounting principles generally accepted 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 condensed 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 September 30, 2019, Restricted Cash totaled $0. As of December 31, 2018, Restricted Cash totaled $400,543. Restricted Cash represents 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 consolidated 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 $0 for each of the periods ended September 30, 2019 and December 31, 2018. Inventory Inventory is 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. The current inventory is considered properly valued and saleable. The Company concluded that there was an appropriate reserve for slow moving and obsolete inventory of $26,097 at each of the periods ended September 30, 2019 and December 31, 2018. 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 consolidated statement of operations. Right of Use Leased Assets 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. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, which allows for an additional optional transition method where comparative periods presented in the financial statements in the period of adoption will not be restated and instead those periods will be presented under existing guidance in accordance with ASC 840, Leases. Management used this optional transition method. As of January 1, 2019, management recorded lease liability of $2,071,903, right-of-use asset of $2,153,747, accumulated amortization of $124,070, a reversal of previously recorded deferred rent of $37,920 and the increase in accumulated deficit of $4,306. 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. Debt and Attached Equity-Linked Instruments The Company measures issued debt on an amortized cost basis, net of debt premium/discount and debt issuance costs amortized using the effective interest rate method or the straight-line method when the latter does not lead to materially different results. The Company accounts for the proceeds from the issuance of convertible notes payable in accordance with FASB ASC 470-20 Debt with Conversion and Other Options. Pursuant to FASB ASC 470-20, the intrinsic value of the embedded conversion feature (beneficial conversion interest), which is in the money on the commitment date is included in the discount to debt and amortized to interest expense over the term of the note agreement. When the conversion option is not separated, the Company accounts for the entire convertible instrument including debt and the conversion feature as a liability. The Company analyzes freestanding equity-linked instruments including warrants attached to debt to conclude whether the instrument meets the definition of the derivative and whether it is considered indexed to the Company’s own stock. If the instrument is not considered indexed to Company’s stock, it is classified as an asset or liability recorded at fair value. If the instrument considered indexed to Company’s stock, the Company analyzes additional equity classification requirements per ASC 815-40 Contract’s in Entity’s Own Equity. When the requirements are met the instrument is recorded as part of the Company’s equity, initially measured based on its relative fair value with no subsequent re-measurement. When the equity classification requirements are not met, the instrument is recorded as an asset or liability and is measured at fair value with subsequent changes in fair value recorded in earnings. When required, the Company also considers the bifurcation guidance for embedded derivatives per FASB ASC 815-15 Embedded Derivatives. 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 On January 1, 2018, the Company adopted the new accounting standard ASC 606 (Topic 606), Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606. Accordingly, the Company recorded a cumulative effect adjustment to Accumulated Deficit in the amount of $206,247. The impact to the Company’s financial statements for the three and nine months ended September 30, 2018 resulting from the adoption of Topic 606 as of January 1, 2018 was a reduction of revenue in the amounts of $26,184 and $162,551, respectively, and a corresponding reduction in costs in the amounts of $14,317 and $42,952, respectively, from the amounts reported. The amounts prior to adoption were not recognized pursuant to Topic 606 and would have been reported pursuant to Topic 605. 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, such as the ability to 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, such as 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 began recognizing revenue related to licensed rights to exploit Functional IP in two ways. For minimum guarantees, the Company recognizes fixed revenue upon delivery of content and the start of the license period. For Functional IP contracts with a variable component, the Company estimates 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 began 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 sells advertising on its Kid Genius channel in the form of either flat rate promotions or impressions served. For flat rate promotions with a fixed term, the Company recognizes revenue when all five revenue recognition criteria under FASB ASC 606 are met. For impressions served, the Company delivers a certain minimum number of impressions on the channel to the advertiser for which the advertiser pays a contractual CPM per impression. Impressions served are reported to the Company on a monthly basis, and revenue 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. 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 three 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 September 30, 2019, the Company had one account with a combined uninsured balance of $279,412. As of December 31, 2018, the Company had three accounts with a combined uninsured balance of $2,183,875. For the three and nine months ended September 30, 2019, the Company had two customers whose total revenue each exceeded 10% of the total consolidated revenue. Those customers accounted for 94% and 78% of the total revenue for the three and nine months ended September 30, 2019, respectively. The Company had one customer that represented 85% of accounts receivable as of September 30, 2019. The Company had one customer who accounted for 98% of accounts receivable balance as of December 31, 2018. Fair value of financial instruments The carrying amounts of cash, receivables, accounts payable, and accrued liabilities approximate fair value due to the short-term maturity of the instruments. The carrying amount of the Production Loan Facility approximates fair value since the debt carries a variable interest rate that is tied to either the current Prime or LIBOR rates plus an applicable spread. The Company adopted FASB ASC 820 as of January 1, 2008, for financial instruments measured at fair value on a recurring basis. FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP and expands disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC Topic 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include: · Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; · Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and · Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Recent Accounting Pronouncements In January 2017, the FASB issued Accounting Standards 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. In July 2017, the FASB issued ASU No. 2017-11 addressing, among other matters, accounting for certain financial instruments. One of the amendments in this guidance intended to reduce the complexity associated with the issuer’s accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, the Board determined that a down round feature (as defined) would no longer cause a freestanding equity-linked financial instrument (or an embedded conversion option) to be accounted for as a derivative liability at fair value with changes in fair value recognized in current earnings. ASU 2017-11 is effective for public business entities for fiscal year beginning after December 15, 2018. The Company adopted ASU 2017-11 on January 1, 2019. The adoption of ASU 2017-11 did not have a material impact on the Company’s condensed consolidated financial statements or cash flows. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which changes the fair value measurement disclosure requirements of ASC 820. The update removes some disclosures, modifies others, and adds some new disclosure requirements. The amendments in this ASU are effective for all entities for fiscal years, and interim period within those fiscal years, beginning after December 15, 2019 with early adoption permitted. We are currently evaluating the potential impact of adopting this guidance on our condensed consolidated financial statements. In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which supersedes ASC 505-05 and expands the scope of ASC 718 to include all share-based payment arranges related to the acquisition of goods and services from both nonemployees and employee. As a result, most of the guidance in ASC 718 associated with employee share-based payments, including most of its requirements related to classification and measurement, applies to nonemployee share-based payment arrangements. ASC 2018-07 is effective for all entities for fiscal year beginning after December 15, 2018, and interim periods within that fiscal year. The Company adopted ASU No. 2018-07 on January 1, 2019. The adoption of ASU 2018-07 did not have a material impact on the Company’s condensed consolidated financial statements or cash flows. In March 2019, the FASB issued ASU No. 2019-02, Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and Entertainment-Broadcasters Intangibles-Goodwill and Other (Subtopic 920-350). The update aligns the accounting for production costs of an episodic television series with the accounting for production costs of films by removing the content distinction for capitalization. The amendments also require that an entity reassess estimates of the use of a film in a film group and account for any changes prospectively. The amendments in this update require that an entity test a film or license agreement for program material within the scope of Subtopic 920-350 for impairment at a film group level when the film or license agreement is predominantly monetized with other films and/or license agreements. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We are currently evaluating the potential impact of adopting this guidance on our condensed consolidated financial statements. Various other accounting pronouncements have been recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific industries and are not expected to have a material effect on our financial position, results of operations, or cash flows. | Note 2: Summary of Significant Accounting Policies Basis of Presentation The accompanying 2018 and 2017 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 LLC, Llama Productions LLC and Rainbow Rangers Productions LLC, 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. 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, 2018, and 2017, restricted cash totaled $400,543 and $568,673 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 $0 and $110,658 as of December 31, 2018 and December 31, 2017. 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. The current inventory is considered properly valued and saleable. The Company concluded that there was an appropriate reserve for slow moving and obsolete inventory of $26,097 at both December 31, 2018 and December 31, 2017. 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. Debt and Attached Equity-Linked Instruments The Company measures issued debt on an amortized cost basis, net of debt premium/discount and debt issuance costs amortized using the effective interest rate method or the straight-line method when the latter does not lead to materially different results. The Company accounts for the proceeds from the issuance of convertible notes payable in accordance with FASB ASC 470-20 Debt with Conversion and Other Options. Pursuant to FASB ASC 470-20, the intrinsic value of the embedded conversion feature (beneficial conversion interest), which is in the money on the commitment date is included in the discount to debt and amortized to interest expense over the term of the note agreement. When the conversion option is not separated, the Company accounts for the entire convertible instrument including debt and the conversion feature as a liability. The Company analyzes freestanding equity-linked instruments including warrants attached to debt to conclude whether the instrument meets the definition of the derivative and whether it is considered indexed to the Company’s own stock. If the instrument is not considered indexed to Company’s stock, it is classified as an asset or liability recorded at fair value. If the instrument considered indexed to Company’s stock, the Company analyzes additional equity classification requirements per ASC 815-40 Contract’s in Entity’s Own Equity. When the requirements are met the instrument is recorded as part of the Company’s equity, initially measured based on its relative fair value with no subsequent re-measurement. When the equity classification requirements are not met, the instrument is recorded as an asset or liability and is measured at fair value with subsequent changes in fair value recorded in earnings. When required, the Company also considers the bifurcation guidance for embedded derivatives per FASB ASC 815-15 Embedded Derivatives. Revenue Recognition On January 1, 2018, the Company adopted the new accounting standard ASC 606 (Topic 606), Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605, (Topic 605). Accordingly, on January 1, 2018 the Company recorded a cumulative effect adjustment to beginning accumulated deficit in the amount of $206,245. The impact to our financial statements for the year ended December 31, 2018 resulting from the adoption of Topic 606 as of January 1, 2018 was a reduction of revenue in the amount of $188,734 and a corresponding reduction in costs in the amount of $52,269 from the amounts reported. The amounts prior to adoption were not recognized pursuant to Topic 606 and would have been reported pursuant to Topic 605. Changes to the opening balances in prepaid and other assets, film and television costs, total assets, accrued expenses, deferred revenue and total liabilities resulting from the adoption of the new guidance were as follows (thousands): December 31, Impact of January 1 2017 Adoption 2018 Prepaid and Other Assets $ 265 $ 15 $ 280 Film and Television Costs, net $ 2,777 $ (219 ) $ 2,558 Total assets $ 27,713 $ (204 ) $ 27,509 Participations Payable $ 1,718 $ (1 ) $ 1,717 Deferred Revenue $ 5,085 $ (409 ) $ 4,676 Total liabilities $ 12,673 $ (410 ) $ 12,263 The Company performed its analysis of its existing revenue contracts and has 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, such as the 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, such as 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 began recognizing revenue related to licensed rights to exploit functional IP in two ways. For minimum guarantees, the Company recognizes fixed revenue upon delivery of content and the start of the license period. For functional IP contracts with a variable component, the Company estimates 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 began 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 sells advertising on its Kid Genius channel in the form of either flat rate promotions or impressions served. For flat rate promotions with a fixed term, the Company recognizes revenue when all five revenue recognition criteria under FASB ASC 606 are met. For impressions served, the Company delivers a certain minimum number of impressions on the channel to the advertiser for which the advertiser pays a contractual CPM per impression. Impressions served are reported to the Company on a monthly basis, and revenue 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. Prior to the adoption of Topic 606, we recognized revenue in accordance with FASB ASC 926-605 Entertainment-Films - Revenue Recognition. Accordingly, we recognize 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. Our licensing and royalty revenue represent revenue generated from license agreements that are held in conjunction with third parties that are responsible for collecting fees due and remitting to us our share after expenses. Revenue from licensed products is recognized when realized or realizable based on royalty reporting received from licensees. Licensing income that we recognize as an agent is in accordance with FASB ASC 605-45 Revenue Recognition - Principal Agent. Accordingly, our revenue is our gross billings to our customers less the amounts we pay to suppliers for their products and services. We sell advertising on our Genius Brands Network in the form of either flat rate promotions or impressions served. For flat rate promotions with a fixed term, we recognize revenue when all five revenue recognition criteria under FASB ASC 605 are met. For impressions served, we deliver 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 us on a monthly basis, and revenue is reported in the month the impressions are served. Prior to the adoption of Topic 606, recognized 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. The Company’s accounting policy elected for forfeitures is not to estimate the number of awards that are expected to vest. Instead, the Company accounts for forfeitures when they occur. 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, 2018, the Company had three accounts with a combined uninsured balance of $2,183,875. As of December 31, 2017, the Company had four accounts with a combined uninsured balance of $6,379,322. For fiscal year 2018, the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue. This customer accounted for 20% of total revenue and represented 8.5% of accounts receivable. For fiscal year 2017, the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue. That customer accounted for 84% of total revenue and represented 98% of accounts receivable. The major customer for the year ended December 31, 2018 is not the same as the major customer at December 31, 2017. 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, 2018 and 2017, 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 February 2016, the FASB issued Accounting Standards Update (ASU) 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. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, which allows for an additional optional transition method where comparative periods presented in the financial statements in the period of adoption will not be restated and instead those periods will be presented under existing guidance in accordance with ASC 840, Leases. Management will use this optional transition method. As of January 1, 2019, management recorded lease liability of $2,071,903, right-of-use asset of $2,029,677, a reversal of previously recorded deferred rent of $37,920 and the increase in accumulated deficit of $4,306. 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 became effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We have prospectively adopted ASU 2016-18. The impact to our consolidated financial position, results of operations and cash flows was minimal. In January 2017, the FASB issued Accounting Standards Update 2017-04, “Simplifying the Test for Goodwill Impairment”, which requires an entity to perform a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). It eliminates Step 2 of the current two-step goodwill impairment test, under which a goodwill impairment loss is measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The standard is effective January 1, 2020, with early adoption as of January 1, 2017 permitted. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In July 2017, the FASB issued ASU No. 2017-11 addressing, among other matters, accounting for certain financial instruments. One of the amendments in this guidance intended to reduce the complexity associated with the issuer’s accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, the Board determined that a down round feature (as defined) would no longer cause a freestanding equity-linked financial instrument (or an embedded conversion option) to be accounted for as a derivative liability at fair value with changes in fair value recognized in current earnings. ASU 2017-11 is effective for public business entities for fiscal year beginning after December 15, 2018. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which changes the fair value measurement disclosure requirements of ASC 820. The update removes some disclosures, modifies others, and add some new disclosure requirements. The amendments in this ASU are effective for all entities for fiscal years, and interim period within those fiscal years, beginning after December 15, 2019 with early adoption permitted. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which supersedes ASC 505-05 and expands the scope of ASC 718 to include all share-based payment arranges related to the acquisition of goods and services from both nonemployees and employee. As a result, most of the guidance in ASC 718 associated with employee share-based payments, including most of its requirements related to classification and measurement, applies to nonemployee share-based payment arrangements. ASC 2018-07 is effective for all entities for fiscal year beginning after December 15, 2018, and interim periods within that fiscal year. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In March 2019, the FASB issued ASU No. 2019-02, Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and Entertainment-Broadcasters Intangibles-Goodwill and Other (Subtopic 920-350). The update aligns the accounting for production costs of an episodic television series with the accounting for production costs of films by removing the content distinction for capitalization. The amendments also require that an entity reassess estimates of the use of a film in a film group and account for any changes prospectively. The amendments in this update require that an entity test a film or license agreement for program material within the scope of Subtopic 920-350 for impairment at a film group level when the film or license agreement is predominantly monetized with other films and/or license agreements. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. 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 | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
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 September 30, 2019 and December 31, 2018: September 30, 2019 December 31, 2018 Furniture and Equipment $ 19,419 $ 12,385 Computer Equipment 144,643 138,883 Leasehold Improvements 14,182 – Software 15,737 15,737 Property and Equipment, Gross 193,981 167,005 Less Accumulated Depreciation (119,594 ) (91,371 ) Property and Equipment, Net $ 74,387 $ 75,634 During the three months ended September 30, 2019 and 2018, the Company recorded depreciation expense of $9,378 and $7,955, respectively. During the nine months ended September 30, 2019 and 2018, the Company recorded depreciation expense of $28,223 and $31,653, respectively. | Note 3: Property and Equipment, Net The Company has property and equipment as follows as of December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Furniture and Equipment $ 12,385 $ 12,385 Computer Equipment 138,883 117,256 Leasehold Improvements – 176,903 Software 15,737 15,737 Property and Equipment, Gross 167,005 322,281 Less Accumulated Depreciation (91,371 ) (227,615 ) Property and Equipment, Net $ 75,634 $ 94,666 During the years ended December 31, 2018 and December 31, 2017, the Company recorded depreciation expense of $40,659 and $70,396. |
4. Film and Television Costs, N
4. Film and Television Costs, Net | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Film And Television Costs Net | ||
Film and Television Costs, net | Note 5: Film and Television Costs, Net As of September 30, 2019, the Company had net Film and Television Costs of $9,450,233, compared to $8,166,131 at December 31, 2018. The increase relates primarily to the production and development of Rainbow Rangers season 2 Llama Llama Season 2, Thomas Edison’s Secret Lab Llama Llama Seasons 1 and 2, Rainbow Rangers season 1. During the three months ended September 30, 2019 and 2018, the Company recorded Film and Television Cost amortization expense of $1,285,237 and $268,425, respectively. During the nine months ended September 30, 2019 and 2018, the Company recorded Film and Television Cost amortization expense of $1,907,222 and $1,033,392, respectively. The following table highlights the activity in Film and Television Costs of September 30, 2019, and December 31, 2018: Total Film and Television Costs, Net as of December 31, 2017 $ 2,777,088 Cumulative Effect of Adoption of ASC 606 (219,472 ) Additions to Film and Television Costs 6,644,728 Capitalized Interest 43,510 Film Amortization Expense (1,079,723 ) Film and Television Costs, Net as of December 31, 2018 8,166,131 Additions to Film and Television Costs 3,140,559 Capitalized Interest 50,765 Film Amortization Expense (1,907,222 ) Film and Television Costs, Net as of September 30, 2019 $ 9,450,233 | Note 4: Film and Television Costs, Net As of December 31, 2018, the Company had net Film and Television Costs of $8,166,131 compared to $2,777,088 at December 31, 2017. The increase relates primarily to the production and development of Rainbow Rangers Season 1 Llama Llama Season 2 Space Pop, Thomas Edison's Secret Lab Llama Llama Season 1 Rainbow Rangers. During the years ended December 31, 2018 and December 31, 2017, the Company recorded Film and Television Cost amortization expense of $1,079,723 and $2,534,835, respectively. The following table highlights the activity in Film and Television Costs as of December 31, 2018 and 2017: Total 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 Cumulative Effect of Adoption of ASC 606 (219,472 ) Additions to Film and Television Costs 6,644,728 Capitalized Interest 43,510 Film Amortization Expense (1,079,723 ) Film and Television Costs, Net as of December 31, 2018 $ 8,166,131 |
5. Goodwill and Intangible Asse
5. Goodwill and Intangible Assets, Net | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
Goodwill and Intangible Assets, Net | Note 6: Goodwill and Intangible Assets, Net Goodwill In 2013, the Company recognized $10,365,806 in Goodwill, representing the excess of the fair value of the consideration for the Merger over net identifiable assets acquired. Pursuant to FASB ASC 350-20, Goodwill is not subject to amortization but is subject to annual review to determine if certain events warrant impairment to the Goodwill asset. Through September 30, 2019, the Company has not recognized any impairment to Goodwill. Intangible Assets, Net The Company had the following intangible assets as of September 30, 2019, and December 31, 2018: September 30, 2019 December 31, 2018 Trademarks (a) $ 129,831 $ 129,831 Product Masters (a) 64,676 64,676 Other Intangible Assets (a) 272,528 272,529 Intangible Assets, Gross 467,035 467,036 Less Accumulated Amortization (b) (405,996 ) (377,048 ) Intangible Assets, Net $ 61,039 $ 89,988 (a) Pursuant to FASB ASC 350-30-35, the Company reviews these intangible assets periodically to determine if the value should be retired or impaired due to recent events. Through September 30, 2019, the Company has not recognized any impairment expense related to these assets. (b) During the three months ended September 30, 2019 and September 30, 2018, the Company recognized $9,456 and $9,560, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. During the nine months ended September 30, 2019 and September 30, 2018, the Company recognized $28,949 and $37,877, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. Expected future intangible asset amortization as of September 30, 2019 is as follows: Fiscal Year: 2019 $ 9,456 2020 37,835 2021 9,698 2022 1,861 2023 1,465 2024 724 Total $ 61,039 | Note 5: Goodwill and Intangible Assets, Net Goodwill In 2013, the Company recognized $10,365,805 in Goodwill, representing the excess of the fair value of the consideration 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, 2018, the Company has not recognized any impairment to Goodwill. Intangible Assets, Net The Company had the following intangible assets as of December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Identifiable Artistic-Related Assets (a) – $ 1,740,000 Trademarks (b) $ 129,831 129,831 Product Masters (b) 64,676 64,676 Other Intangible Assets (b) 272,529 251,171 Intangible Assets, Gross 467,036 2,185,678 Less Accumulated Amortization (c) (377,048 ) (329,398 ) Intangible Assets, Net $ 89,988 $ 1,856,280 (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. As of December 31, 2018, the Company performed an analysis and determined the Identifiable Artistic-Related Intangible Assets no longer have value and as a result has recognized $1,740,000 of impairment expense related to the Identifiable Artistic-Related Intangible 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, 2018, the Company has not recognized any impairment expense related to these assets. (c) During the years ended December 31, 2018 and December 31, 2017, the Company recognized, $47,650 and $55,520, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. Expected future intangible asset amortization as of December 31, 2018 is as follows: Fiscal Year: 2019 $ 38,405 2020 37,825 2021 9,698 2022 1,861 2023 1,465 Remaining 734 Total $ 89,988 |
6. Deferred Revenue
6. Deferred Revenue | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Deferred Revenue Disclosure [Abstract] | ||
Deferred Revenue | Note 7: Deferred Revenue As of September 30, 2019, and December 31, 2018, the Company had total short term and long term deferred revenue of $4,931,615 and $4,925,756, 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 September 30, 2019 and December 31, 2018 is $3,371,312, which is the remaining balance from the total $3,489,583 advance against future royalty that Sony paid to the Company for both the foreign and domestic distribution rights. | Note 6: Deferred Revenue As of December 31, 2018, and 2017, the Company had total short term and long term deferred revenue of $4,925,756 and $5,085,383, 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, 2018 is the $2,000,000 advance against future royalty that Sony paid to the Company in the first quarter of 2017 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 | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Payables and Accruals [Abstract] | ||
Accrued Liabilities, Current | Note 8: Accrued Liabilities – Current As of September 30, 2019, and December 31, 2018, the Company has the following current accrued liabilities: September 30, 2019 December 31, 2018 Other Accrued Expenses (a) $ 150,956 $ 52,865 Accrued Salaries and Wages (b) 242,419 137,825 Total Accrued Liabilities – Current $ 393,375 $ 190,690 (a) Represents accrued interest, insurance liability and lease deposit on sub-lease. (b) Represents accrued salaries and wages and accrued vacation payable to employees for 2019 and accrued vacation payable to employees in 2018 | Note 7: Accrued Liabilities - Current As of December 31, 2018, and 2017, the Company had the following current accrued liabilities: December 31, 2018 December 31, 2017 Accrued Salaries and Wages (a) $ 137,825 $ 168,549 Other Accrued Expenses (b) 52,865 1,020,457 Total Accrued Liabilities – Current $ 190,690 $ 1,189,006 (a) Accrued Salaries and Wages represent accrued vacation payable to employees. (b) Other Accrued Expenses include estimates of expenses incurred but not yet recorded. The majority of the balance in Other Accrued Expenses at year ended December 31, 2017 relates to estimates of final dubbing costs for our Llama Llama property. |
8. Secured Convertible Notes
8. Secured Convertible Notes | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Debt Disclosure [Abstract] | ||
Secured Convertible Notes | Note 9: Secured Convertible Notes On August 17, 2018, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors (the “Investors”), pursuant to which the Company agreed to sell (i) an aggregate principal amount of $4.50 million in secured convertible notes, convertible into shares of our Common Stock, at a conversion price of $2.50 per share (the “Secured Convertible Notes”) and (ii) warrants to purchase 1,800,000 shares of our Common Stock at an exercise price of $3.00 per share (the “Warrants,” and, together with the Secured Convertible Notes, the “Securities”). The Company received approximately $4,500,000 in gross proceeds from the Offering. The Secured Convertible Notes are the Company’s senior secured obligations and are secured by certain tangible and intangible property of the Company as described in the Purchase Agreement. The Secured Convertible Notes matured on August 20, 2019. The Secured Convertible Notes bear interest at a rate of 10% per annum and are convertible at any time until a Secured Convertible Note is no longer outstanding, in whole or in part, at the option of the holders into shares of Common Stock at a conversion price of $2.50 per share. As further described below, pursuant to the July Amendment, Waiver and Consent (as defined below), the conversion price of the Secured Convertible Notes was reduced to an amount equal to $1.515 per share. The Secured Convertible Notes have a beneficial ownership limitation such that none of the Investors have the right to convert any portion of their Secured Convertible Notes if the Investor (together with its affiliates or any other persons acting together as a group with the Investor) would beneficially own in excess of 9.99% of the number of shares of the Company’s Common Stock outstanding immediately after giving effect to the issuance of the Company’s Common Stock issuable upon conversion of such Secured Convertible Notes. In addition, the Secured Convertible Notes provide for a conversion cap, as amended by the July Amendment Waiver and Consent, such that the Company may not issue any shares of its Common Stock upon conversion of Secured Convertible Notes which would exceed the aggregate number of shares of the Company’s Common Stock it could issue upon conversion of the Secured Convertible Notes without breaching its obligations, if any, under Nasdaq Stock Market LLC rules and regulations, except that such limitation shall not apply in the event that the Company obtains the approval of its stockholders as required by the applicable rules of the then applicable trading market for issuances of shares of Common Stock upon conversion of the Secured Convertible Notes in excess of such amount. The Secured Convertible Notes matured on August 20, 2019. The Company failed to meet certain conditions under the terms of the Secured Convertible Notes and is obligated to repay in cash the then outstanding principal amount of the Secured Convertible Notes in full by the six-month anniversary of the date of maturity. On August 20, 2019, pursuant to the Secured Convertible Notes, the Company elected to make six equal monthly principal payments of $750,000. The first payment with interest was paid on August 23, 2019. As further described below, holders of the Secured Convertible Notes agreed to extend the maturity date of the Secured Convertible Notes. Subject to certain equity conditions, we may force a conversion of the debt into equity. We may redeem the Secured Convertible Notes at any time prior to maturity. The Secured Convertible Notes contain certain negative covenants, including prohibitions on the incurrence of indebtedness or liens. The Secured Convertible Notes also contain standard and customary events of default including, but not limited to, failure to make payments when due, failure to observe or perform covenants or agreements contained in the Secured Convertible Notes or the bankruptcy or insolvency of the Company or any of our subsidiaries. The Company was in compliance with these covenants as of September 30, 2019. On the date of issuance, the Secured Convertible Notes were convertible into Common Stock at $2.50 per share, or at a conversion price below the closing market price of $2.55. This “discount” is considered a beneficial conversion feature for accounting purposes. The allocation of carrying basis between the Warrants issued and the Secured Convertible Notes was determined based on relative fair value. The discount of the initial conversion price from market related to the beneficial conversion feature of the debt was $1,561,111, and such amount was recorded as a reduction of debt and increase in additional paid-in capital. The discount will be amortized as additional interest over the term of the loan. The Warrants entitle the holders to purchase 1,800,000 shares of Common Stock. The Warrants were not exercisable until after six months from the date of issuance and expire five and half years from the date of issuance. The Warrants have an exercise price of $3.00 per share. In the event of a “Fundamental Transaction” (as defined in the Warrants), the Investors have the right to receive the value of the Warrants as determined in accordance with the Black Scholes option pricing model. The Warrants are considered indexes to the Company’s own stock pursuant to ASC 815-40. The Warrants also met the additional equity classification requirements and accordingly are accounted for as part of the Company’s equity. In conjunction with the February 2019 Offering and concurrent private placement, the Company entered into an amendment, waiver and consent agreement, or the “Amendment, Waiver and Consent Agreement,” with certain holders of its 10% Secured Convertible Notes due August 20, 2019, which were issued pursuant to a securities purchase agreement, dated August 17, 2018, by and among the Company and the purchasers identified on the signature pages thereto, or the notes purchase agreement. Pursuant to the Amendment, Waiver and Consent Agreement, such holders agreed to amend the notes purchase agreement, waive any applicable rights and remedies under the notes purchase agreement, and consent to the February 2019 Offering and concurrent private placement. In consideration for such Amendment, Waiver and Consent Agreement, the Company agreed to issue such holders warrants to purchase up to an aggregate amount of 1,800,000 shares of Common Stock. Such warrants have an exercise price of $2.55 per share, will become exercisable commencing six months and one day from the date of issuance and will expire five (5) years from the date of issuance. The issuance of the warrants resulted in a modification of debt in accordance with ASC 470 and is characterized as an extinguishment of debt in accordance with ASC-470-50-40. In accordance with ASC-470-50-40-2 the Company derecognized the existing debt as if it was extinguished and recorded the new debt, with the difference between the reacquisition price of the new debt and the net carrying amount of the extinguished debt, $2,064,193 being recorded as a loss on the extinguishment of debt. In addition, the warrants were accounted for as equity instruments in accordance with ASC 815-40 and valued using the Black Scholes option pricing model. The fair value of $1,287,962 was recorded as part of the loss on extinguishment of debt. On July 22, 2019, in connection with a proposed public offering of shares of Common Stock (the “August 2019 Offering”), the Company entered into an amendment, waiver and consent agreement (the “July Amendment, Waiver and Consent”) with certain holders constituting (i) a majority-in-interest of the holders of its Secured Convertible Notes and (ii) 51% in interest of the shares of Common Stock issued pursuant to a securities purchase agreement, dated as of January 8, 2018, by and among the Company and the purchasers identified on the signature pages thereto (the “January 2018 Purchase Agreement”). Pursuant to the July Amendment, Waiver and Consent, such holders agreed to amend the August 2018 Purchase Agreement, the January 2018 Purchase Agreement and the Secured Convertible Notes, waive any applicable rights and remedies under each of the August 2018 Purchase Agreement and the January 2018 Purchase Agreement, and consent to the August 2019 Offering in consideration for (i) a reduction in the conversion price of the Secured Convertible Notes from $2.50 per share to an amount equal to $1.515 and (ii) the issuance to the August 2018 Purchasers of new warrants to purchase the same number of shares of Common Stock that were issued to each August 2018 Purchaser pursuant to the August 2018 Purchase Agreement (for an aggregate of 1,800,000 shares of Common Stock to all August 2018 Purchasers) at an exercise price per share equal to $1.14 and will become exercisable commencing six (6) months and one day from the date of issuance and will expire five (5) years from the date of issuance. The issuance of the new warrants resulted in a modification of debt in accordance with ASC 470 and is characterized as an extinguishment of debt in accordance with ASC-470-50-40. In accordance with ASC-470-50-40-2, the Company derecognized the existing debt as if it was extinguished and recorded the new debt. The difference between the reacquisition price of the debt including the fair value of the warrants issued and the net carrying amount of the extinguished debt amounted to $957,867. This amount was recorded as a loss on debt extinguishment. In addition, the conversion option was accounted for as part of the debt’s carrying value in accordance with the bifurcation guidance per ASC 815 as it applies to the debt’s conversion feature. The conversion option was valued using the Black Scholes option pricing model. The fair value of $77,172 was recorded as part of the loss on extinguishment of debt. The conversion option will be amortized using the straight-line method over the remaining terms. On August 20, 2019, pursuant to the Secured Convertible Notes, the Company elected to make six equal monthly principal payments of $750,000. The first payment with interest was paid on August 23, 2019. On September 17, 2019, the Company’s CEO, Andy Heyward, purchased $500,000 of the Secured Convertible Notes from another holder. The Company did not receive any proceeds from this transaction. On September 20, 2019, the Company and the holders of $1,958,334 of the Secured Convertible Notes, extended the maturity date of those Secured Convertible Notes until January 31, 2020. The Company also agreed to pay the 10% interest to the holders monthly instead of quarterly. On September 20, 2019, the Company and the holders of $687,500 of the Secured Convertible Notes, extended the maturity date of those Secured Convertible Notes until August 20, 2021. The Company also agreed to pay the 10% interest to the holders monthly instead of quarterly. The remaining balance of $883,332 under the Secured Convertible Notes that were not extended will be paid in four monthly installments of $220,883. The September and October payments, including interest, have been paid. | Note 8: Secured Convertible Notes On August 17, 2018, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain investors (the “Investors”), pursuant to which the Company agreed to sell (i) an aggregate principal amount of $4.50 million in secured convertible notes, convertible into shares of our common stock, at a conversion price of $2.50 per share (the “Secured Convertible Notes”) and (ii) warrants to purchase 1,800,000 shares of our common stock at an exercise price of $3.00 per share (the “Warrants,” and, together with the Secured Convertible Notes, the “Securities”). We received approximately $4,500,000 in gross proceeds from the Offering. The Secured Convertible Notes are our senior secured obligations and are secured by certain tangible and intangible property of the Company as described in the Purchase Agreement. Unless earlier converted or redeemed, the Secured Convertible Notes will mature on August 20, 2019. The Secured Convertible Notes bear interest at a rate of 10% per annum and are convertible at any time until a Secured Convertible Note is no longer outstanding, in whole or in part, at the option of the holders into shares of common stock at a conversion price of $2.50 per share. The Secured Convertible Notes have a beneficial ownership limitation such that none of the Investors have the right to convert any portion of their Secured Convertible Notes if the Investor (together with its affiliates or any other persons acting together as a group with the Investor) would beneficially own in excess of 9.99% of the number of shares of our common stock outstanding immediately after giving effect to the issuance of our common stock issuable upon conversion of such Secured Convertible Notes. In addition, the Secured Convertible Notes provide for a conversion cap such that we may not issue any shares of our common stock upon conversion of Secured Convertible Notes which would exceed the aggregate number of shares of our common stock we could issue upon conversion of the Secured Convertible Notes without breaching our obligations, if any, under Nasdaq Stock Market LLC rules and regulations. Interest under the Secured Convertible Notes is payable in arrears beginning on September 1, 2018 and thereafter on each of December 1, 2018, March 1, 2019, June 1, 2019 and at maturity when all amounts outstanding under the Secured Convertible Notes become due and payable. Subject to certain equity conditions, we may force a conversion of the debt into equity. We may redeem the Secured Convertible Notes at any time prior to maturity. If we do not meet such equity conditions at maturity, we are obligated to repay in cash one-sixth of the then outstanding principal amount of the Secured Convertible Notes each month for the six months following the date of maturity, with the first such payment due on the date of maturity, followed by payments each month thereafter. The Secured Convertible Notes contain certain negative covenants, including prohibitions on the incurrence of indebtedness or liens. The Secured Convertible Notes also contain standard and customary events of default including, but not limited to, failure to make payments when due, failure to observe or perform covenants or agreements contained in the Secured Convertible Notes or the bankruptcy or insolvency of the Company or any of our subsidiaries. The Company was in compliance with these covenants as of December 31, 2018. On the date of issuance, the Secured Convertible Notes were convertible into common stock at $2.50 per share, or at a conversion price below the closing market price of $2.55. This “discount” is considered a beneficial conversion feature for accounting purposes. The allocation of carrying basis between the Warrants issued and the Secured Convertible Notes was determined based on relative fair value. The discount of the initial conversion price from market related to the beneficial conversion feature of the debt was $1,561,111, and such amount was recorded as a reduction of debt and increase in additional paid-in capital. The discount will be amortized as additional interest over the term of the loan. The Warrants entitle the holders to purchase 1,800,000 shares of common stock. The Warrants were not exercisable until after six months from the date of issuance and expire five and half years from the date of issuance. The Warrants have an exercise price of $3.00 per share. In the event of a “Fundamental Transaction” (as defined in the Warrants), the Investors have the right to receive the value of the Warrants as determined in accordance with the Black Scholes option pricing model. The Warrants are considered indexes to the Company’s own stock pursuant to ASC 815-40. The Warrants also met the additional equity classification requirements and accordingly are accounted for as part of the Company’s equity. During the year ended December 31, 2018, the Company recognized $678,016 of discount amortization which is included in interest expense. |
9. Production Loan Facility
9. Production Loan Facility | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Debt Disclosure [Abstract] | ||
Production Loan Facility | Note 10: Production Loan Facility 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 On September 28, 2018, Llama Productions LLC, a California limited liability company (“Llama”) and a wholly-owned subsidiary of the Company, entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Bank Leumi USA (the “Lender”), pursuant to which the Lender agreed to make a secured loan in an aggregate amount not to exceed $4,231,989 to Llama (the “Loan”). The proceeds of the Loan will be used to pay the majority of the expenses of producing, completing and delivering two 22-minute episodes and sixteen 11- minute episodes of the second season of the animated series Llama Llama To secure payment of the Loan, Llama has granted to the Lender a continuing security interest in and against, generally, all of its tangible and intangible assets, which includes all seasons of the Llama Llama Under the Loan and Security Agreement, Llama can request revolving loan advances under (a) the Prime Rate Loan facility and (b) the LIBOR Loan facility, each as further described in the Loan and Security Agreement attached as an exhibit hereto. Prime Rate Loan advances shall bear interest, on the outstanding balance thereof, at a fluctuating per annum rate equal to 1.0% plus the Prime Rate (as such term is defined in the Loan and Security Agreement), provided that in no event shall the interest rate applicable to Prime Rate Loans be less than 4.0% per annum. LIBOR Loan advances shall bear interest, on the outstanding balance thereof, for the period commencing on the funding date and ending on the date which is one (1), three (3) or six (6) months thereafter, at a per annum rate equal to 3.25% plus the LIBOR determined for the applicable Interest Period (as such terms are defined in the Loan and Security Agreement), provided that in no event shall the interest rate applicable to LIBOR Loans be less than 3.25% per annum. The Maturity Date of the Prime Rate Loan facility and LIBOR Loan facility is March 31, 2021. Interest rates on advances under the Loan and Security Agreement were between 5.75% and 6.14% for both the three and nine months ended September 30, 2019. On August 16, 2019, the Loan was amended to reduce the total commitment by $400,000 to $3,831,989. In connection with the amendment, the $400,000 of cash held as collateral (recorded as Restricted Cash) was released to the Company. As of September 30, 2019, the Company had gross outstanding borrowing under the facility of $3,182,985 against which financing costs of $132,569 were applied resulting in net borrowings of $3,050,416. As of December 31, 2018, the Company had gross outstanding borrowings under the facility of $2,241,759 against which financing costs of $63,561 were applied resulting in net borrowings of $2,178,198. | Note 9: Production Loan Facility 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, (the “Series”) which is configured as fifteen half-hour episodes comprised of thirty 11-minute programs that were delivered to Netflix in fall 2017. The Facility is secured by the license fees the Company will receive from Netflix for the delivery of the Series as well as the Company’s copyright in the Series. The Facility has a term of 40 months and has an interest rate of either Prime plus 1% or one, three, or six-month LIBOR plus 3.25%. As a condition of the loan agreement with Bank Leumi, the Company deposited $1,000,000 into a cash account to be used solely to produce the Series. Additionally, the Facility contains certain standard affirmative and negative non-financial covenants such as maintaining certain levels of production insurance and providing standard financial reports. As of December 31, 2018, the Company was in compliance with these covenants. On September 28, 2018, Llama Productions LLC, a California limited liability company (“Llama”) and a wholly-owned subsidiary of the Company, entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with Bank Leumi USA (the “Lender”), pursuant to which the Lender agreed to make a secured loan in an aggregate amount not to exceed $4,231,989 to Llama (the “Loan”). The proceeds of the Loan will be used to pay the majority of the expenses of producing, completing and delivering two 22-minute episodes and sixteen 11- minute episodes of the second season of the animated series Llama Llama to be initially exhibited on Netflix. To secure payment of the Loan, Llama has granted to the Lender a continuing security interest in and against, generally, all of its tangible and intangible assets, which includes all seasons of the Llama Llama animated series. Under the Loan and Security Agreement, Llama can request revolving loan advances under (a) the Prime Rate Loan facility and (b) the LIBOR Loan facility, each as further described in the Loan and Security Agreement attached as an exhibit hereto. Prime Rate Loan advances shall bear interest, on the outstanding balance thereof, at a fluctuating per annum rate equal to 1.0% plus the Prime Rate (as such term is defined in the Loan and Security Agreement), provided that in no event shall the interest rate applicable to Prime Rate Loans be less than 4.0% per annum. LIBOR Loan advances shall bear interest, on the outstanding balance thereof, for the period commencing on the funding date and ending on the date which is one (1), three (3) or six (6) months thereafter, at a per annum rate equal to 3.25% plus the LIBOR determined for the applicable Interest Period (as such terms are defined in the Loan and Security Agreement), provided that in no event shall the interest rate applicable to LIBOR Loans be less than 3.25% per annum. The Maturity Date of the Prime Rate Loan facility and LIBOR Loan facility is March 31, 2021. Interest rates on advances under the Loan and Security Agreement were between 5.53% and 6.14% as of December 31, 2018. In addition, on September 28, 2018, Llama and Lender entered into Amendment No. 2 to Loan and Security Agreement, effective as of August 27, 2018, by and between Llama and the Lender (the “Amendment”). Pursuant to the Amendment, the original Loan and Security Agreement, dated as of August 5, 2016 and amended as of November 7, 2017 (the “Original Loan and Security Agreement”), was amended to (i) reduce the loan commitment thereunder to $1,768,010, which is a reduction of $3,075,406 from the original loan commitment under the Original Loan and Security Agreement and (ii) include the Llama Llama season two obligations under the Loan and Security Agreement as obligations under the Original Loan and Security Agreement. As of December 31, 2018, the Company had gross outstanding borrowing under the facility of $2,241,759 against which financing costs of $63,561 were applied resulting in net borrowings of $2,178,198. As of December 31, 2017, the Company had gross outstanding borrowings under the facility of $4,436,528 against which financing costs of $113,885 were applied resulting in net borrowings of $4,322,643. |
10. Disputed Trade Payable
10. Disputed Trade Payable | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Disputed Trade Payable Abstract | ||
Disputed Trade Payable | Note 11: Disputed Trade Payable 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 not owed. | Note 10: Disputed Trade Payable As part of the merger in 2013, the Company assumed certain liabilities from a previous member of A Squared which has claimed certain liabilities totaling $925,000. The Company disputes the basis for this liability. As of September 30, 2018, 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 not owed. |
11. Stockholders' Equity
11. Stockholders' Equity | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Equity [Abstract] | ||
Stockholders' Equity | Note 12: Stockholders’ Equity Common Stock The holders of the Company’s Common Stock are entitled to one vote per share. In addition, the holders of the Company’s Common Stock will be entitled to receive ratably such dividends, if any, as may be declared by the Company’s Board of Directors (the “Board”) out of legally available funds; however, the current policy of the Board is to retain earnings, if any, for operations and growth. As of September 30, 2019, the total number of authorized shares of Common Stock was 233,333,334. On January 8, 2018, the Company entered into the January 2018 Private Placement. Pursuant to a Securities 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 Securities Purchase Agreement occurred on January 10, 2018. On February 19, 2019, the Company entered into a securities purchase agreement with a certain accredited investor pursuant to which we sold 945,894 shares of Common Stock and warrants to purchase up to 945,894 shares of our Common Stock, or the registered warrants, to such investor (the “February 2019 Offering”). The Company received $1,757,552 in net proceeds from this offering. Each share of Common Stock was accompanied by a registered warrant to purchase one share of Common Stock at an exercise price of $2.12. Each share of Common Stock and accompanying registered warrant were sold at a combined purchase price of $2.12. The shares of Common Stock and registered warrants were purchased together and were issued separately and were immediately separable upon issuance. In a concurrent private placement, the Company also sold to the purchaser in the February 2019 Offering, warrants to purchase up to 945,894 shares of our Common Stock, or the private warrants. On September 18, 2019, the Company entered into a private transaction (the “Private Transaction”) pursuant to a Warrant Exercise Agreement (the “Agreement”) with the holder of the Company’s existing warrants (the “Original Warrants”). The Original Warrants were originally issued on February 19, 2019, to purchase an aggregate of 945,894 shares of Common Stock, at an exercise price of $2.12 per share and were to expire on February 19, 2020. Pursuant to the Agreement, the holder of the Original Warrants and the Company agreed that such Original Warrant holder would exercise its Original Warrants in full and the Company would amend the Original Warrants to reduce the exercise price thereof to $0.76 (the “Amended Exercise Price”). The Company received $718,879 from the exercise of the Original Warrants before paying the placement agent fee of $50,321. The induced exercise resulted in the Company recognizing and recording an “imputed dividend” of $181,884. As a result, the conversion price of the Series A Convertible Preferred Stock decreased to $0.76. This decrease resulted in a beneficial conversion feature of $706,667, which was recognized on September 18, 2019. As of September 30, 2019 and December 31, 2018, there were 11,933,365 and 9,457,859 shares of Common Stock outstanding, respectively. Series A Convertible Preferred Stock The Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001 per share. The Board 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 the Board, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights. As of both September 30, 2019 and December 31, 2018, there were 2,120 shares of Series A Convertible Preferred Stock outstanding. On May 12, 2014, the Board 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 was $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, the Company entered into securities purchase agreements with certain accredited investors pursuant to which the Company sold an aggregate of 6,000 shares of its 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, the Company incurred offering costs of $620,085 resulting in net proceeds of $5,379,915. The transaction closed on May 15, 2014. As the conversion price of the Series A Convertible Preferred Stock on a converted basis was below the market price of the common shares on the closing date, this resulted in a beneficial conversion feature recorded as an “imputed” dividend of $2,010,000. In addition, during the fourth quarter of 2015, in connection with the 2015 Private Placement in which the Company’s Common Stock was sold at $3.00 per share, the conversion price of the Series A Convertible Preferred Stock decreased to $3.00. This decrease resulted in an additional beneficial conversion feature of $3,383,850 recognized as of the time of the 2015 Private Placement. On August 17, 2018, in connection with the Securities Purchase Agreement in which the Secured Convertible Notes are convertible into shares of the Company’s Common Stock at $2.50 per share. As a result, the conversion price of the Series A Convertible Preferred Stock decreased to $2.50. This decrease resulted in a beneficial conversion feature of $353,333, which was recognized on August 17, 2018. On February 19, 2019, the Company entered into a Securities Purchase Agreement with a certain accredited investor pursuant to which the Company sold 945,894 shares of Common Stock and warrants to purchase up to 945,894 shares of the Company’s Common Stock at $2.12 per share. As a result, the conversion price of the Series A Convertible Preferred Stock decreased to $2.12. This decrease resulted in a beneficial conversion feature of $322,240, which was recognized February 19, 2019. On July 22, 2019, in connection with a proposed public offering of shares of Common Stock, the Company entered into an amendment, waiver and consent agreement (the “July Amendment, Waiver and Consent”) with certain holders constituting (i) a majority-in-interest of the holders of its Secured Convertible Notes and (ii) 51% in interest of the shares of Common Stock issued pursuant to a securities purchase agreement, dated as of January 8, 2018, by and among the Company and the purchasers identified on the signature pages thereto (the “January 2018 Purchase Agreement”). Pursuant to the July Amendment, Waiver and Consent, such holders agreed to amend the August 2018 Purchase Agreement, the January 2018 Purchase Agreement and the Secured Convertible Notes, waive any applicable rights and remedies under each of the August 2018 Purchase Agreement and the January 2018 Purchase Agreement, and consent to the August 2019 Offering in consideration for (i) a reduction in the conversion price of the Secured Convertible Notes from $2.50 per share to an amount equal to $1.515 and (ii) the issuance to the August 2018 Purchasers of new warrants to purchase the same number of shares of Common Stock that were issued to each August 2018 Purchaser pursuant to the August 2018 Purchase Agreement (for an aggregate of 1,800,000 shares of Common Stock to all August 2018 Purchasers) at an exercise price per share equal to $1.14 and will become exercisable commencing six (6) months and one day from the date of issuance and will expire five (5) years from the date of issuance. As a result, the conversion price of the Series A Convertible Preferred Stock decreased to $1.14. This decrease resulted in a beneficial conversion feature of $980,000, which was recognized on July 22, 2019. On September 18, 2019, the Company entered into a private transaction (the “Private Transaction”) pursuant to a Warrant Exercise Agreement (the “Agreement”) with the holder of the Company’s existing warrants (the “Original Warrants”). The Original Warrants were originally issued on February 19, 2019, to purchase an aggregate of 945,894 shares of Common Stock, at an exercise price of $2.12 per share and were to expire on February 19, 2020. Pursuant to the Agreement, the holder of the Original Warrants and the Company agreed that such Original Warrant holder would exercise its Original Warrants in full and the Company would amend the Original Warrants to reduce the exercise price thereof to $0.76 (the “Amended Exercise Price”). The Company received $718,879 from the exercise of the Original Warrants before paying the placement agent fee of $50,321. The induced exercise resulted in the Company recognizing and recording an “imputed dividend” of $181,884. As a result, the conversion price of the Series A Convertible Preferred Stock decreased to $0.76. This decrease resulted in a beneficial conversion feature of $706,667, which was recognized on September 18, 2019. 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. | Note 11: Stockholders’ Equity Common Stock As of December 31, 2018, the total number of authorized shares of common stock was 233,333,334. On October 6, 2016, the Board of Directors of the Company authorized a reverse stock split in preparation for the Company’s anticipated up listing 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. 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 13 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, 2018, and 2017, there were 9,457,859 and 7,610,794 shares of common stock outstanding, respectively. Below are the changes to the Company’s common stock during the year ended December 31, 2018: Year Ended December 31, 2018 · On May 7, 2018, the Company issued 277,508 shares of the Company’s common stock valued at $2.81 per share for production services. · On August 13, 2018, the Company issued 180,683 shares of the Company’s common stock valued at $2.64 per share to the same provider for production services. · On September 18, 2018, the Company issued 141,014 shares of the Company’s common stock valued at $2.17 per share to the same provider for production services. · On October 17, 2018, the Company issued 58,614 shares of the Company’s common stock valued at $2.45 per share to various providers for investor relations services. · On November 1, 2018, the Company issued 44,097 shares of the Company’s common stock valued at $2.27 per share to the same provider for production services. · On November 15, 2018, the Company issued 23,148 shares of the Company’s common stock valued at $2.16 per share for investor relations services. · On December 31, 2018, the Company issued 60,000 shares of the Company’s common stock valued at $2.16 per as part of a mediation settlement representing participation amounts due. · On various dates during the year ended December 31, 2018, the Company issued 470,001 shares of the Company’s common stock pursuant to the conversion of 1,410 shares of Series A Convertible Preferred Stock at a conversion price of $3.00. 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, 2018, and 2017, there were 2,120 and 3,530 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. On August 17, 2018, in connection with the Securities Purchase Agreement in which the Secured Convertible Notes are convertible into shares of the Company’s common stock at $2.50 per share, the conversion price of the Series A Convertible Preferred Stock decreased to $2.50. This decrease resulted in a beneficial conversion feature of $353,333 which was recognized on August 17, 2018. 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. |
12. Stock Options
12. Stock Options | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Stock Options | Note 13: 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 1,667,667 shares. The increase in shares available for issuance under the 2015 Plan was approved by the stockholders on July 25, 2017. On September 6, 2018, 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 500,000 shares from 1,667,667 shares to an aggregate of 2,167,667 shares. The increase in shares available for issuance under the 2015 Plan was approved by the Company’s stockholders on October 2, 2018. The following table summarizes the changes in the Company’s stock option plan during the nine months ended September 30, 2019: 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, 2018 1,259,415 $ 2.09 -12.00 2.50 years $ – $ 7.39 Options Granted 81,000 $ 1.99 3.0 years $ – $ 1.99 Options Exercised – – – – – Options Cancelled 40,793 $ 1.99-2.70 4.92 – 4.39 Options Expired – – – – – Balance at September 30, 2019 1,299,622 $ 2.09 -12.00 1.64 years $ – $ 7.23 Exercisable December 31, 2018 1,070,869 $ 2.70 - 9.00 2.96 years $ – $ 7.44 Exercisable September 30, 2019 1,131,172 $ 2.82 - 9.00 1.31 years $ – $ 8.00 During the nine months ended September 30, 2019, the Company granted options to purchase 81,000 shares of Common Stock to certain officers and employees. These stock options vest on December 31, 2019. The fair value of these options was determined to be $117,797 using the Black-Scholes option pricing model based on the following assumptions: Exercise Price $ 1.99 Dividend Yield 0% Volatility 125% Risk-free interest rate 2.44% Expected life of options 3 years During the nine months ended September 30, 2019, the Company recognized $142,420 in share-based compensation expense. The unvested share-based compensation as of September 30, 2019 was $192,434, which will be recognized through the second quarter of 2021 assuming the underlying grants are not cancelled or forfeited. | Note 12: 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. On September 6, 2018, 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 500,000 shares from 1,667,667 shares to an aggregate of 2,167,667 shares. The increase in shares available for issuance under the 2015 Plan was approved by the Company’s stockholders on October 2, 2018. The following table summarizes the changes in the Company’s stock option plan during the year ended December 31, 2018: 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 $ 280,642.00 $ 8.14 Options Granted – Options Exercised – Options Cancelled 79,509 $2.70 Options Expired – Balance at December 31, 2017 1,294,045 $2.09 - $12.00 2.99 years $ – $ 8.14 Options Granted 170,176 $2.09 4.55 years $ – $ 2.09 Options Exercised – Options Cancelled 57,294 $9.00 - $12.00 3.56 years $ – $ 10.08 Options Expired 147,512 $2.80 - $6.00 $ – $ 4.30 Balance at December 31, 2018 1,259,415 $2.09 - $12.00 2.50 years $ – $ 7.39 Exercisable December 31, 2017 1,070,869 $2.70 - $9.00 2.96 years $ – $ 7.44 Exercisable December 31, 2018 1,089,239 $2.70 - $9.00 2.70 years $ – $ 8.32 During the year ended December 31, 2018, the Company granted options to purchase 170,176 shares of common stock to officers. These stock options generally vest between one and three years. The fair value of these options was determined to be $285,760 using the Black-Scholes option pricing model based on the following assumptions: Exercise Price $2.09 Dividend Yield 0% Volatility 61% - 62% Risk-free interest rate 2.52% - 2.57% Expected life of options 3.5 years During the years ended December 31, 2018 and 2017, the Company recognized ($16,588) and $663,958 in share-based compensation expense, respectively. The unvested share-based compensation as of December 31, 2018 was $238,871 which will be recognized through the second quarter of 2019 assuming the underlying grants are not cancelled or forfeited. |
13. Warrants
13. Warrants | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Warrants and Rights Note Disclosure [Abstract] | ||
Warrants | Note 14: Warrants The Company has warrants outstanding to purchase up to 10,345,281 and 5,899,389 shares as of September 30, 2019 and December 31, 2018, 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 Warrant Exercise Agreement with certain holders of the Original Warrants. Pursuant to the Warrant Exercise 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 warrant exchange expense of $1,402,174 representing the difference in the fair market value of the Original Warrants and the New Warrants, as an adjustment to additional paid-in-capital. Chardan acted as financial advisor on the Private Transaction in consideration for which Chardan received $363,617 and Chardan and its designees were 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. On January 10, 2018, the Company issued warrants for 592,000 shares of the Company’s Common Stock in connection with the January 2018 Private Placement. The warrants were issued to the parties who purchased the Company’s Common Stock, as well as to Chardan and its designees who acted as placement agents of the deal. The warrants expire in five years and were exercisable immediately at an exercise price of $3.00 per share. On August 17, 2018, the Company issued warrants for 1,800,000 shares of the Company’s Common Stock in conjunction with the August 17, 2018 Securities Purchase Agreement. The warrants were issued to the parties who purchased the Company’s Secured Convertible Notes. The Warrants are not exercisable until after six months from the date of issuance and expire five and half years from the date of issuance. The Warrants have an exercise price of $3.00 per share. In the event of a “Fundamental Transaction” (as defined in the Warrants), the Investors have the right to receive the value of the Warrants as determined in accordance with the Black Scholes option pricing model. The Warrants are considered indexed to the Company’s own stock pursuant to ASC 815-40. The Warrants also met additional equity classification requirements and accordingly are accounted for as part of Company’s equity. On February 19, 2019, the Company entered into a securities purchase agreement with a certain accredited investor pursuant to which we sold 945,894 shares of Common Stock and warrants to purchase up to 945,894 shares of our Common Stock, or the registered warrants, to such investor (the “February 2019 Offering”). The Company received $1,757,552 in net proceeds from this offering. Each share of Common Stock was accompanied by a registered warrant to purchase one share of Common Stock at an exercise price of $2.12. Each share of Common Stock and accompanying registered warrant were sold at a combined purchase price of $2.12. The shares of Common Stock and registered warrants were purchased together and were issued separately and were immediately separable upon issuance. In a concurrent private placement, the Company also sold to the purchaser in the February 2019 Offering, warrants to purchase up to 945,894 shares of our Common Stock, or the private warrants. In connection with the February 2019 Offering and concurrent private placement, we entered into an amendment, waiver and consent agreement, or the “Amendment, Waiver and Consent Agreement,” with certain holders of our 10% Secured Convertible Notes, which were issued pursuant to a securities purchase agreement, dated August 17, 2018, by and among the Company and the purchasers identified on the signature pages thereto, or the notes purchase agreement. Pursuant to the Amendment, Waiver and Consent Agreement, such holders agreed to amend the notes purchase agreement, waive any applicable rights and remedies under the notes purchase agreement, and consent to the February 2019 Offering and concurrent private placement. In consideration for such Amendment, Waiver and Consent Agreement, we agreed to issue such holders warrants to purchase up to an aggregate amount of 1,800,000 shares of our Common Stock. Such warrants have an exercise price of $2.55 per share, will become exercisable commencing six months and one day from the date of issuance and will expire five (5) years from the date of issuance. The allocation of carrying basis between the Warrants issued and the Secured Convertible Notes was determined based on relative valuation. The carrying basis attributable to the Warrants to acquire Common Stock was $1,287,962 and was calculated using the Black-Scholes option pricing model. On July 22, 2019, the Company entered into an amendment, waiver and consent agreement (the “Amendment, Waiver and Consent”) with certain holders constituting (i) a majority-in-interest of the holders of our 10% Secured Convertible Notes due August 20, 2019 (the “Notes”), which were issued pursuant to a securities purchase agreement, dated as of August 17, 2018 and as amended on February 14, 2019, by and among the Company and the purchasers identified on the signature pages thereto (the “August 2018 Purchase Agreement”) and (ii) 51% in interest of the shares of Common Stock issued pursuant to a securities purchase agreement, dated as of January 8, 2018, by and among the Company and the purchasers identified on the signature pages thereto (the “January 2018 Purchase Agreement”). Pursuant to the Amendment, Waiver and Consent, such holders have agreed to (i) amend the definition of “Exempt Issuance” in each of the August 2018 Purchase Agreement and January 2018 Purchase Agreement to include an agreement to issue or announce the issuance or proposed issuance of Common Stock or Common Stock Equivalents (as that term is defined in each of the August 2018 Purchase Agreement and January 2018 Purchase Agreement) in a public offering for an effective per share purchase price of Common Stock of less than $2.50 (the “Offering”), (ii) waive any applicable rights and remedies under the August 2018 Purchase Agreement and January 2018 Purchase Agreement, and (iii) consent to the Offering. In consideration for the Amendment, Waiver and Consent, the Company agreed to reduce the conversion price of the Notes from $2.50 per share of Common Stock to $1.515 (the “Note Amendment”) and issue all of the purchasers under the August 2018 Purchase Agreement warrants to purchase up to an aggregate of 1,800,000 shares of our Common Stock (the “Waiver Warrants”). The Waiver Warrants will have an exercise price of $1.14 per share, will become exercisable commencing six months and one day from the date of issuance and will expire five (5) years from the date of issuance. On September 18, 2019, the Company entered into a private transaction (the “Private Transaction”) pursuant to a Warrant Exercise Agreement (the “Agreement”) with the holder of the Company’s existing warrants (the “Original Warrants”). The Original Warrants were originally issued on February 19, 2019, to purchase an aggregate of 945,894 shares of Common Stock at an exercise price of $2.12 per share and were to expire on February 19, 2020. Pursuant to the Agreement, the holder of the Original Warrants and the Company agreed that such Original Warrant holder would exercise its Original Warrants in full and the Company would amend the Original Warrants to reduce the exercise price thereof to $0.76. The Company received $718,879 from the exercise of the Original Warrants before paying the placement agent fee of $50,321. The induced exercise resulted in the Company recognizing and recording an “imputed dividend” of $181,884. The following table summarizes the changes in the Company’s outstanding warrants during the nine months ended September 30, 2019: 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, 2018 5,899,389 $ 3.30 – 6.00 3.74 years $ 3.35 $ – Warrants Granted 5.491,788 $ 1.14 – 2.55 4.89 years $ 3.00 $ – Warrants Exercised 945,894 $ 0.76 – $ 0.76 $ – Warrants Expired 100,002 $ 6.00 – $ 6.00 $ – Balance at September 30, 2019 10,345,281 $ 1.14 – 5.30 3.86 years $ 2.80 $ – $ Exercisable December 31, 2018 5,899,389 $ 3.30 – 6.00 3.74 years $ 3.53 $ – Exercisable September 30, 2019 8,545,281 $ 2.12 – 5.30 3.55 years $ 3.15 $ – | Note 13: Warrants The Company has warrants outstanding to purchase up to 5,899,389 shares and 3,414,389 shares at December 31, 2018 and 2017, 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. On January 10, 2018, the Company issued warrants for 685,000 shares of the Company’s common stock in connection with the January 2018 Private Placement. The warrants were issued to the parties who purchased the Company’s common stock, as well as to Chardan and its designees who acted as placement agents of the deal. The warrants expire in five years and were exercisable immediately at an exercise price of $3.00 per share. On August 17, 2018, the Company issued warrants for 1,800,000 shares of the Company’s common stock in conjunction with the August 17, 2018 Securities Purchase Agreement. The warrants were issued to the parties who purchased the Company’s Secured Convertible Notes. The Warrants are not exercisable until after six months from the date of issuance and expire five and half years from the date of issuance. The Warrants have an exercise price of $3.00 per share. In the event of a “Fundamental Transaction” (as defined in the Warrants), the Investors have the right to receive the value of the Warrants as determined in accordance with the Black Scholes option pricing model. The Warrants are considered indexed to the Company’s own stock pursuant to ASC 815-40. The Warrants also met additional equity classification requirements and accordingly are accounted for as part of Company’s equity. The allocation of carrying basis between the Warrants issued and the Secured Convertible Notes was determined based on relative valuation. The carrying basis attributable to the Warrants to acquire common stock was $1,471,111 and was calculated using the Black-Scholes option pricing model. The following table summarizes the changes in the Company’s outstanding warrants during the year ended December 31, 2018: 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, 2017 3,414,389 $ 3.30 - 6.00 4.21 years $ 3.92 – Warrants Granted 2,485,000 $ 3.00 4.46 years 3.00 ؘ– Warrants Exercised – – – – – Warrants Expired – – – – – Balance at December 31, 2018 5,899,389 $ 3.00 – 6.00 3.74 years – – Exercisable December 31, 2017 3,414,389 $ 3.30 - 6.00 4.21 years $ 3.92 – Exercisable December 31, 2018 5,899,389 $ 3.30 - 6.00 3.74 years $ 3.53 – |
14. Income Taxes
14. Income Taxes | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Income Taxes | Note 15: Income Taxes 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. ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. The Company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operation in the provision for income taxes. As of September 30, 2019, and December 31, 2018, the Company had no accrued interest or penalties related to uncertain tax positions. The Company files income tax returns in the U.S. federal jurisdiction and in the state of California and Massachusetts. The Company is currently subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities since inception of the Company. | Note 14: 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, 2018 and 2017: 2018 2017 Deferred tax assets: NOL Carryover $ 8,278,500 $ 6,406,000 Bad Debt Reserve – 31,000 Inventory Reserve 7,300 7,300 Deferred Rent 10,600 – Accrued Compensated Absences 37,100 46,100 Charitable Contributions 6,900 3,500 Subtotal 8,340,400 6,493,900 Valuation Allowance (7,619,300 ) (6,458,800 ) Deferred tax liabilities: Convertible Notes (658,800 ) – Depreciation (49,100 ) (16,500 ) Prepaid Expenses (13,200 ) (18,600 ) 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, 2018 and 2017 due to the following: 2018 2017 Income Tax Expense Computed at the Statutory Federal Rate $ (1,890,800 ) $ (1,669,000 ) State Income Taxes, Net of Federal Tax Effect (506,700 ) – Meals and Entertainment 5,200 10,600 Stock Options (3,500 ) 225,700 Intangible Assets 365,400 – Tax Cut and Job Act Impact – 2,809,700 Other 21,400 1,600 Valuation Allowance 2,009,000 (1,378,600 ) $ – $ – At December 31, 2018, the Company had Federal net operating loss carry forwards of approximately $30,053,000 and state net operating loss carry forwards of approximately $28,172,000 that may be offset against future taxable income from the year 2028 through 2038. No tax benefit has been reported in the December 31, 2018 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, 2018, 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. During the year ended December 31, 2018, the Company completed its accounting for the effects of the Tax Act which had no significant impact on the 2018 financial statement. The Company files income tax returns in the U.S. federal jurisdiction and in the state of California. The Company is currently subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities since inception of the Company. |
15. Commitment and Contingencie
15. Commitment and Contingencies | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Commitment and Contingencies | Note 16: Commitment and Contingencies 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. For practically all leases, 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. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, which allows for an additional optional transition method where comparative periods presented in the financial statements in the period of adoption will not be restated and instead those periods will be presented under existing guidance in accordance with ASC 840, Leases. Management will use this optional transition method. As of January 1, 2019, management recorded lease liability of $2,071,903, right-of-use asset of $2,153,747, accumulated amortization of $124,070, a reversal of previously recorded deferred rent of $37,920 and the increase in accumulated deficit of $4,306. As of September 30, 2019, weighted-average lease term for operating leases equals to 86 months. Weighted-average discount rate equals to 10.30%. On February 6, 2018, the Company entered into an operating lease for 6,969 square feet of general office space at 131 South Rodeo Drive, Suite 250, Beverly Hills, CA 90212 pursuant to a 91-month lease that commenced on May 25, 2018. We pay rent of $364,130 annually, subject to annual escalations of 3.5%. On December 28, 2018, the Company entered into a lease for 5,765 square feet of general office space at 8383 Wilshire Blvd., Suite 412, Beverly Hills, CA 90211 pursuant to a 6-month lease that commenced January 28, 2019. We paid rent of $24,501 monthly through August 31, 2019. Effective January 21, 2019, the Company entered into a sublease for the 6,969 square feet of general office space located at 131 South Rodeo Drive, Suite 250, Beverly Hills, CA 90212 pursuant to an 83-month sublease that commenced on February 4, 2019. The subtenant will pay us rent of $422,321 annually, subject to annual escalations of 3.5%. On January 30, 2019, the Company entered into an operating lease for 5,838 square feet of general office space at 190 N. Canon Drive, 4 th In addition, the Company has contractual commitments for employment agreements of certain employees. Rental expenses incurred for operating leases during the three months ended September 30, 2019 and September 30, 2018 were $210,062 and $130,173, respectively. Rental expenses incurred for operating leases during the nine months ended September 30, 2019 and September 30, 2018 were $531,519 and $241,578, respectively. During the three months ended September 30, 2019, we received sub-lease income of $117,416. During the nine months ended September 30, 2019, we received sub-lease income of $314,869. The following is a schedule of future minimum contractual obligations as of September 30, 2019, under the Company’s operating leases and employment agreements: 2019 2020 2021 2022 2023 2024 Thereafter Total Operating Leases 136,257 652,764 744,056 840,125 871,679 904,423 1,871,252 6,020,556 Employment Contracts 56,250 393,595 322,950 322,950 282,581 – – 1,378,326 Total 192,507 1,046,359 1,067,006 1,163,075 1,154,260 904,423 1,871,252 7,398,882 | Note 15: 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 2018, 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 25, 2018, the Company began leasing approximately 6,969 square feet of general office space at 131 S Rodeo Drive, Suite 250, Beverly Hills, California 90212 pursuant to a 91-month lease. The Company will pay $364,130 annually, subject to annual escalations of 3.5%. Rental expenses incurred for operating leases during the years ended December 31, 2018 and 2017 were $343,347 and $143,451, respectively. The following is a schedule of future minimum contractual obligations as of December 31, 2018, under the Company’s operating leases and employment agreements: 2019 2020 2021 2022 2023 Thereafter Total Operating Leases $ 369,923 $ 382,871 $ 396,271 $ 410,141 $ 424,495 $ 978,315 $ 2,962,016 Employment Contracts 635,808 393,595 322,950 322,950 282,581 – 1,957,884 Total $ 1,005,731 $ 776,466 $ 719,221 $ 733,091 $ 707,077 $ 978,315 $ 4,919,860 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. |
16. Related Party Transactions
16. Related Party Transactions | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Related Party Transactions [Abstract] | ||
Related Party Transactions | Note 17: 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. On August 31, 2018, Llama Productions LLC entered into an animation production services agreement with Mr. Heyward for services as a producer for which he is to receive $124,000 through the course of production of the Company’s animated series Llama Llama Season 2. Pursuant to his employment agreement dated November 16, 2018, Mr. Heyward is entitled to an Executive Producer fee of $12,400 per half hour episode for each episode he provides services as an executive producer. The first identified series under this employment agreement is Rainbow Rangers. Pursuant to his employment agreement dated November 16, 2018, Mr. Heyward is entitled to an Executive Producer fee of $12,400 per half hour episode for each episode he provides services as an executive producer. The second identified series under this employment agreement is the twenty-six half hour episodes of Rainbow Rangers: Season 2. On July 25, 2016, the Company entered into a consulting agreement with Foothill Entertainment, Inc. (“Foothill”), an entity whose Chairman is Gregory Payne, our former 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, Mr. 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 owing $827 to Mr. Payne. As of December 31, 2018, no amounts are due to or from Mr. Payne or Foothill. On September 17, 2019, Mr. Heyward purchased $500,000 of the Secured Convertible Notes from another holder. The Company did not receive any proceeds from this transaction. As of September 30, 2019, Andy Heyward is owed $47,963 for reimbursable expenses which are included in the Due To Related Parties line item on our condensed consolidated balance sheet As of September 30, 2019, $1,233 of accrued interest on the Secured Convertible Notes is included in the Due To Related Parties line item on our condensed consolidated balance sheet. | Note 16: 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. On August 31, 2018 Llama Productions LLC entered into an animation production services agreement with Mr. Heyward for services as a producer for which he is to receive $124,000 through the course of production of the Company’s animated series Llama Llama. Season 2. Pursuant to his employment agreement dated November 16, 2018, Mr. Heyward is entitled to an Executive Producer fee of $12,400 per half hour episode for each episode he provides services as an executive producer. The first identified series under this employment agreement is Rainbow Rangers. 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 owing to Mr. Payne $827. As of December 31, 2018, no amounts are due to or from Mr. Payne or Foothill. |
17. Subsequent Events
17. Subsequent Events | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Subsequent Events [Abstract] | ||
Subsequent Events | Note 18: Subsequent Events Pursuant to FASB ASC 855, Management has evaluated all events and transactions that occurred from September 30, 2019 through the date of issuance of these financial statements. During this period, we did not have any significant subsequent events, except as disclosed below: Stock Purchase Agreement On October 2, 2019, the Company and Mr. Heyward entered into a stock purchase agreement (the “Stock Purchase Agreement”) pursuant to which Mr. Heyward agreed to purchase 1,000,000 shares of Common Stock, in a private placement for an aggregate purchase price of $760,000, or $0.76 per share (the “Private Placement”). The Private Placement closed on October 3, 2019. The shares issued in the Private Placement were offered and sold in reliance upon an exemption from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and/or Rule 506 of Regulation D promulgated by the SEC under the Securities Act. Conversion of Series A Convertible Preferred Stock On October 4, 2019, 100 shares of the Company’s Series A Convertible Preferred Stock were converted into 131,579 shares of the Company’s Common Stock. On October 17, 2019, 100 shares of the Company’s Series A Convertible Preferred Stock were converted into 131,579 shares of the Company’s Common Stock. On October 22, 2019, 25 shares of the Company’s Series A Convertible Preferred Stock were converted into 32,895 shares of the Company’s Common Stock. Stock Issued For Services On October 18, 2019, in exchange for freelance animation services, the Company issued a total of 534,247 shares of Common Stock to a vendor Securities Purchase Agreement On October 28, 2019, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a certain investor named therein (the “Investor”), pursuant to which the Company agreed to issue and sell, in a registered direct offering by the Company directly to the Investor (the “Registered Offering”), an aggregate of 663,158 shares (the “Shares”) of Common Stock, at an offering price of $0.76 per share for gross proceeds of approximately $504,000 before deducting the placement agent fee and related offering expenses. The placement agent received a cash fee of $35,280 and warrants to purchase 46,421 shares of Common Stock at an exercise price of $0.836 per share. The Shares were offered by the Company pursuant to a registration statement on Form S-3 (File No. 333-214805), which was filed with the Securities and Exchange Commission (the “Commission”) on November 25, 2016 and was declared effective by the Commission on December 19, 2016 (the “Registration Statement”). Concurrent Private Placement In a concurrent private placement (the “Private Placement” and together with the Registered Offering, the “Offerings”), the Company agreed to issue to the Investor who participated in the Registered Offering warrants (the “Warrants” and collectively with the Shares, the “Securities”) exercisable for one share of Common Stock for an aggregate of 477,474 shares of Common Stock at an exercise price of $0.76 per share. Each Warrant will be immediately exercisable on the date of its issuance and will expire five years from the date it becomes exercisable. Subject to limited exceptions, a holder of a Warrant will not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership Limitation”); provided, however, that upon 61 days’ prior notice to the Company, the holder may increase or decrease the Beneficial Ownership Limitation, provided further that in no event shall the Beneficial Ownership Limitation exceed 9.99%. | Note 17: Subsequent Events Pursuant to FASB ASC 855, Management has evaluated all events and transactions that occurred from December 31, 2018 through the date of issuance of these financial statements. During this period, we did not have any significant subsequent events, except as disclosed below: February 2019 Sale of Securities and Warrants On February 19, 2019, the Company entered into a securities purchase agreement with a certain accredited investor pursuant to which we sold 945,894 shares of common stock and warrants to purchase up to 945,894 shares of our common stock, or the registered warrants, to such investor (the “February 2019 Offering”). The Company received $1,757,552 in net proceeds from this offering. Each share of common stock was accompanied by a registered warrant to purchase one share of common stock at an exercise price of $2.12. Each share of common stock and accompanying registered warrant were sold at a combined purchase price of $2.12. The shares of common stock and registered warrants were purchased together and were issued separately and were immediately separable upon issuance. In a concurrent private placement, the Company also sold to the purchaser in the February 2019 Offering, warrants to purchase up to 945,894 shares of our common stock, or the private warrants. Amendment, Waiver and Consent In connection with the February 2019 Offering and concurrent private placement, we entered into an amendment, waiver and consent agreement, or the “Amendment, Waiver and Consent Agreement,” with certain holders of our 10% Secured Convertible Notes due August 20, 2019, which were issued pursuant a securities purchase agreement, dated August 17, 2018, by and among the Company and the purchasers identified on the signature pages thereto, or the notes purchase agreement. Pursuant to the Amendment, Waiver and Consent Agreement, such holders agreed to amend the notes purchase agreement, waive any applicable rights and remedies under the notes purchase agreement, and consent to the February 2019 Offering and concurrent private placement. In consideration for such Amendment, Waiver and Consent Agreement, we agreed to issue such holders warrants to purchase up to an aggregate amount 1,800,000 shares of our comment stock. Such warrants have an exercise price of $2.55 per share, will become exercisable commencing six months and one day from the date of issuance and will expire five (5) years from the date of issuance. Series A Convertible Preferred Stock Price Adjustment As a result of this offering, the conversion price of our outstanding Series A Convertible Preferred Stock will be adjusted to $2.12. Leases Effective January 21, 2019, we entered into sublease for the 6,969 square feet of general office space located at 131 South Rodeo Drive, Suite 250, Beverly Hills, CA 90212 pursuant to an 83-month sublease that commenced on February 4, 2019. The subtenant will pay us rent of $422,321 annually, subject to annual escalations of 3.5%. On December 28, 2018, we entered into lease for 5,765 square feet of general office space at 8383 Wilshire Blvd., Suite 412, Beverly Hills, CA 90211 pursuant to a 6-month lease that commenced January 28, 2019. We will pay rent of $24,501 monthly. On January 30, 2019, we entered into lease for 5,838 square feet of general office space at 190 Cannon Drive, Suite 400, Beverly Hills, CA 90210 pursuant to a 96-month lease that is scheduled to commence on August 1, 2019. We will pay rent of $392,316 annually, subject to annual escalations of 3.5%. Company Stock Options At the board meeting on March 7, 2019, the Board of Directors approved the granting of options, to all persons employed as of December 31, 2018. It gave such person the option to purchase 81,000 shares of the Company’s Common Stock at a price of $1.99 which was the closing price on that date. Shares Issued For Services On January 10, 2019, the Company issued 17,200 shares of the Company’s common stock valued at $2.44 per share for investor relations services. On January 17, 2019, the Company issued 11,765 shares of the Company’s common stock valued at $2.55 per share for investor relations services. |
4. Right of Use Leased Asset (S
4. Right of Use Leased Asset (Sept 2019 Note) | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements | |
4. Right of Use Leased Asset | Note 4: Right Of Use Leased Asset In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, which allows for an additional optional transition method where comparative periods presented in the financial statements in the period of adoption will not be restated and instead those periods will be presented under existing guidance in accordance with ASC 840, Leases. Management used this optional transition method. As of January 1, 2019, management recorded lease liability of $2,071,903, right-of-use asset of $2,153,747, accumulated amortization of $124,070, a reversal of previously recorded deferred rent of $37,920 and the increase in accumulated deficit of $4,306. September 30, 2019 Right Of Use Leased Assets Office Lease Asset $ 4,387,955 Printer Lease Asset 12,374 Right Of Use Asset, Gross 4,400,329 Less Accumulated Amortization Office Lease Accumulated Amortization 278,066 Printer Lease Accumulated Amortization 6,731 Accumulated Amortization 284,797 Right Of Use Asset, Net $ 4,115,532 During the three months ended September 30, 2019, the Company recorded amortization expense of $70,020. During the nine months ended September 30, 2019, the Company recorded amortization expense of $159,238. |
2. Summary of Significant Acc_2
2. Summary of Significant Accounting Policies (Policies) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||
Basis of Presentation | Basis of Presentation The accompanying 2019 and 2018 condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. | Basis of Presentation The accompanying 2018 and 2017 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 condensed consolidated financial statements include the accounts of Genius Brands International, Inc., its wholly owned subsidiaries A Squared LLC, Llama Productions LLC and Rainbow Rangers Productions LLC, 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. The condensed consolidated 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. | Principles of Consolidation The accompanying consolidated financial statements include the accounts of Genius Brands International, Inc., its wholly-owned subsidiaries A Squared LLC, Llama Productions LLC and Rainbow Rangers Productions LLC, 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. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. | Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. |
Financial Statement Reclassification | Financial Statement Reclassification Certain account balances from prior periods have been reclassified in these condensed consolidated financial statements to conform to current period classifications. | Financial Statement Reclassification Certain account balances from prior periods have been reclassified in these consolidated financial statements to conform to current period classifications. |
Cash, Cash Equivalents, and Restricted Cash | Cash, Cash Equivalents, and Restricted Cash The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents. As of September 30, 2019, Restricted Cash totaled $0. As of December 31, 2018, Restricted Cash totaled $400,543. Restricted Cash represents funds held in a cash account to be used solely for the production of Llama Llama | Cash, Cash Equivalents, and Restricted Cash The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents. As of December 31, 2018, and 2017, restricted cash totaled $400,543 and $568,673 which represented funds held in a cash account to be used solely for the production of Llama Llama |
Allowance for Doubtful Accounts | llowance for Doubtful Accounts Accounts receivable are presented on the consolidated 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 $0 for each of the periods ended September 30, 2019 and December 31, 2018. | 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 $0 and $110,658 as of December 31, 2018 and December 31, 2017. |
Inventories | Inventory Inventory is 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. The current inventory is considered properly valued and saleable. The Company concluded that there was an appropriate reserve for slow moving and obsolete inventory of $26,097 at each of the periods ended September 30, 2019 and December 31, 2018. | 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. The current inventory is considered properly valued and saleable. The Company concluded that there was an appropriate reserve for slow moving and obsolete inventory of $26,097 at both December 31, 2018 and December 31, 2017. |
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 consolidated statement of operations. | Property and Equipment Property and equipment are recorded at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from two to seven years. Maintenance, repairs, and renewals, which neither materially add to the value of the assets nor appreciably prolong their lives, are charged to expense as incurred. Gains and losses from any dispositions of property and equipment are reflected in the statement of operations. |
Right of Use Leased Assets | Right of Use Leased Assets 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. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, which allows for an additional optional transition method where comparative periods presented in the financial statements in the period of adoption will not be restated and instead those periods will be presented under existing guidance in accordance with ASC 840, Leases. Management used this optional transition method. As of January 1, 2019, management recorded lease liability of $2,071,903, right-of-use asset of $2,153,747, accumulated amortization of $124,070, a reversal of previously recorded deferred rent of $37,920 and the increase in accumulated deficit of $4,306. | |
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. | 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. | 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. |
Debt and Attached Equity-Linked Instruments | Debt and Attached Equity-Linked Instruments The Company measures issued debt on an amortized cost basis, net of debt premium/discount and debt issuance costs amortized using the effective interest rate method or the straight-line method when the latter does not lead to materially different results. The Company accounts for the proceeds from the issuance of convertible notes payable in accordance with FASB ASC 470-20 Debt with Conversion and Other Options. Pursuant to FASB ASC 470-20, the intrinsic value of the embedded conversion feature (beneficial conversion interest), which is in the money on the commitment date is included in the discount to debt and amortized to interest expense over the term of the note agreement. When the conversion option is not separated, the Company accounts for the entire convertible instrument including debt and the conversion feature as a liability. The Company analyzes freestanding equity-linked instruments including warrants attached to debt to conclude whether the instrument meets the definition of the derivative and whether it is considered indexed to the Company’s own stock. If the instrument is not considered indexed to Company’s stock, it is classified as an asset or liability recorded at fair value. If the instrument considered indexed to Company’s stock, the Company analyzes additional equity classification requirements per ASC 815-40 Contract’s in Entity’s Own Equity. When the requirements are met the instrument is recorded as part of the Company’s equity, initially measured based on its relative fair value with no subsequent re-measurement. When the equity classification requirements are not met, the instrument is recorded as an asset or liability and is measured at fair value with subsequent changes in fair value recorded in earnings. When required, the Company also considers the bifurcation guidance for embedded derivatives per FASB ASC 815-15 Embedded Derivatives. | Debt and Attached Equity-Linked Instruments The Company measures issued debt on an amortized cost basis, net of debt premium/discount and debt issuance costs amortized using the effective interest rate method or the straight-line method when the latter does not lead to materially different results. The Company accounts for the proceeds from the issuance of convertible notes payable in accordance with FASB ASC 470-20 Debt with Conversion and Other Options. Pursuant to FASB ASC 470-20, the intrinsic value of the embedded conversion feature (beneficial conversion interest), which is in the money on the commitment date is included in the discount to debt and amortized to interest expense over the term of the note agreement. When the conversion option is not separated, the Company accounts for the entire convertible instrument including debt and the conversion feature as a liability. The Company analyzes freestanding equity-linked instruments including warrants attached to debt to conclude whether the instrument meets the definition of the derivative and whether it is considered indexed to the Company’s own stock. If the instrument is not considered indexed to Company’s stock, it is classified as an asset or liability recorded at fair value. If the instrument considered indexed to Company’s stock, the Company analyzes additional equity classification requirements per ASC 815-40 Contract’s in Entity’s Own Equity. When the requirements are met the instrument is recorded as part of the Company’s equity, initially measured based on its relative fair value with no subsequent re-measurement. When the equity classification requirements are not met, the instrument is recorded as an asset or liability and is measured at fair value with subsequent changes in fair value recorded in earnings. When required, the Company also considers the bifurcation guidance for embedded derivatives per FASB ASC 815-15 Embedded Derivatives. |
Revenue Recognition | Revenue Recognition On January 1, 2018, the Company adopted the new accounting standard ASC 606 (Topic 606), Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606. Accordingly, the Company recorded a cumulative effect adjustment to Accumulated Deficit in the amount of $206,247. The impact to the Company’s financial statements for the three and nine months ended September 30, 2018 resulting from the adoption of Topic 606 as of January 1, 2018 was a reduction of revenue in the amounts of $26,184 and $162,551, respectively, and a corresponding reduction in costs in the amounts of $14,317 and $42,952, respectively, from the amounts reported. The amounts prior to adoption were not recognized pursuant to Topic 606 and would have been reported pursuant to Topic 605. 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, such as the ability to 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, such as 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 began recognizing revenue related to licensed rights to exploit Functional IP in two ways. For minimum guarantees, the Company recognizes fixed revenue upon delivery of content and the start of the license period. For Functional IP contracts with a variable component, the Company estimates 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 began 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 sells advertising on its Kid Genius channel in the form of either flat rate promotions or impressions served. For flat rate promotions with a fixed term, the Company recognizes revenue when all five revenue recognition criteria under FASB ASC 606 are met. For impressions served, the Company delivers a certain minimum number of impressions on the channel to the advertiser for which the advertiser pays a contractual CPM per impression. Impressions served are reported to the Company on a monthly basis, and revenue 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. | Revenue Recognition On January 1, 2018, the Company adopted the new accounting standard ASC 606 (Topic 606), Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605, (Topic 605). Accordingly, on January 1, 2018 the Company recorded a cumulative effect adjustment to beginning accumulated deficit in the amount of $206,245. The impact to our financial statements for the year ended December 31, 2018 resulting from the adoption of Topic 606 as of January 1, 2018 was a reduction of revenue in the amount of $188,734 and a corresponding reduction in costs in the amount of $52,269 from the amounts reported. The amounts prior to adoption were not recognized pursuant to Topic 606 and would have been reported pursuant to Topic 605. Changes to the opening balances in prepaid and other assets, film and television costs, total assets, accrued expenses, deferred revenue and total liabilities resulting from the adoption of the new guidance were as follows (thousands): December 31, Impact of January 1 2017 Adoption 2018 Prepaid and Other Assets $ 265 $ 15 $ 280 Film and Television Costs, net $ 2,777 $ (219 ) $ 2,558 Total assets $ 27,713 $ (204 ) $ 27,509 Participations Payable $ 1,718 $ (1 ) $ 1,717 Deferred Revenue $ 5,085 $ (409 ) $ 4,676 Total liabilities $ 12,673 $ (410 ) $ 12,263 The Company performed its analysis of its existing revenue contracts and has 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, such as the 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, such as 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 began recognizing revenue related to licensed rights to exploit functional IP in two ways. For minimum guarantees, the Company recognizes fixed revenue upon delivery of content and the start of the license period. For functional IP contracts with a variable component, the Company estimates 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 began 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 sells advertising on its Kid Genius channel in the form of either flat rate promotions or impressions served. For flat rate promotions with a fixed term, the Company recognizes revenue when all five revenue recognition criteria under FASB ASC 606 are met. For impressions served, the Company delivers a certain minimum number of impressions on the channel to the advertiser for which the advertiser pays a contractual CPM per impression. Impressions served are reported to the Company on a monthly basis, and revenue 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. Prior to the adoption of Topic 606, we recognized revenue in accordance with FASB ASC 926-605 Entertainment-Films - Revenue Recognition. Accordingly, we recognize 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. Our licensing and royalty revenue represent revenue generated from license agreements that are held in conjunction with third parties that are responsible for collecting fees due and remitting to us our share after expenses. Revenue from licensed products is recognized when realized or realizable based on royalty reporting received from licensees. Licensing income that we recognize as an agent is in accordance with FASB ASC 605-45 Revenue Recognition - Principal Agent. Accordingly, our revenue is our gross billings to our customers less the amounts we pay to suppliers for their products and services. We sell advertising on our Genius Brands Network in the form of either flat rate promotions or impressions served. For flat rate promotions with a fixed term, we recognize revenue when all five revenue recognition criteria under FASB ASC 605 are met. For impressions served, we deliver 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 us on a monthly basis, and revenue is reported in the month the impressions are served. Prior to the adoption of Topic 606, recognized 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. | 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. | 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. The Company’s accounting policy elected for forfeitures is not to estimate the number of awards that are expected to vest. Instead, the Company accounts for forfeitures when they occur. The Company issues authorized shares available for the issuance under 2015 Plan upon employees’ exercise of their stock options. |
Earnings Per Share | Earnings Per Share Basic earnings (loss) per common share (“EPS”) is calculated by dividing net income (loss) applicable to common shareholders by the weighted average number of shares of common stock outstanding for the period. Diluted EPS is calculated by dividing net income (loss) applicable to common shareholders by the weighted average number of shares of common stock outstanding, plus the assumed exercise of all dilutive securities using the treasury stock or “as converted” method, as appropriate. During periods of net loss, all common stock equivalents are excluded from the diluted EPS calculation because they are antidilutive. | Earnings Per Share Basic earnings (loss) per common share (“EPS”) is calculated by dividing net income (loss) applicable to common shareholders by the weighted average number of shares of common stock outstanding for the period. Diluted EPS is calculated by dividing net income (loss) applicable to common shareholders by the weighted average number of shares of common stock outstanding, plus the assumed exercise of all dilutive securities using the treasury stock or “as converted” method, as appropriate. During periods of net loss, all common stock equivalents are excluded from the diluted EPS calculation because they are antidilutive. |
Income Taxes | Income Taxes Deferred income tax assets and liabilities are recognized based on differences between the financial statement and tax basis of assets and liabilities using presently enacted tax rates. At each balance sheet date, the Company evaluates the available evidence about future taxable income and other possible sources of realization of deferred tax assets and records a valuation allowance that reduces the deferred tax assets to an amount that represents management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized. | Income Taxes Deferred income tax assets and liabilities are recognized based on differences between the financial statement and tax basis of assets and liabilities using presently enacted tax rates. At each balance sheet date, the Company evaluates the available evidence about future taxable income and other possible sources of realization of deferred tax assets and records a valuation allowance that reduces the deferred tax assets to an amount that represents management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized. |
Concentration of Risk | Concentration of Risk The Company’s cash is maintained at three 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 September 30, 2019, the Company had one account with a combined uninsured balance of $279,412. As of December 31, 2018, the Company had three accounts with a combined uninsured balance of $2,183,875. For the three and nine months ended September 30, 2019, the Company had two customers whose total revenue each exceeded 10% of the total consolidated revenue. Those customers accounted for 94% and 78% of the total revenue for the three and nine months ended September 30, 2019, respectively. The Company had one customer that represented 85% of accounts receivable as of September 30, 2019. The Company had one customer who accounted for 98% of accounts receivable balance as of December 31, 2018. | 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, 2018, the Company had three accounts with a combined uninsured balance of $2,183,875. As of December 31, 2017, the Company had four accounts with a combined uninsured balance of $6,379,322. For fiscal year 2018, the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue. This customer accounted for 20% of total revenue and represented 8.5% of accounts receivable. For fiscal year 2017, the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue. That customer accounted for 84% of total revenue and represented 98% of accounts receivable. The major customer for the year ended December 31, 2018 is not the same as the major customer at December 31, 2017. 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, 2018 and 2017, 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 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. The Company adopted FASB ASC 820 as of January 1, 2008, for financial instruments measured at fair value on a recurring basis. FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP and expands disclosures about fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC Topic 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). These tiers include: · Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; · Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and · Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. | 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 January 2017, the FASB issued Accounting Standards 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. In July 2017, the FASB issued ASU No. 2017-11 addressing, among other matters, accounting for certain financial instruments. One of the amendments in this guidance intended to reduce the complexity associated with the issuer’s accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, the Board determined that a down round feature (as defined) would no longer cause a freestanding equity-linked financial instrument (or an embedded conversion option) to be accounted for as a derivative liability at fair value with changes in fair value recognized in current earnings. ASU 2017-11 is effective for public business entities for fiscal year beginning after December 15, 2018. The Company adopted ASU 2017-11 on January 1, 2019. The adoption of ASU 2017-11 did not have a material impact on the Company’s condensed consolidated financial statements or cash flows. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which changes the fair value measurement disclosure requirements of ASC 820. The update removes some disclosures, modifies others, and adds some new disclosure requirements. The amendments in this ASU are effective for all entities for fiscal years, and interim period within those fiscal years, beginning after December 15, 2019 with early adoption permitted. We are currently evaluating the potential impact of adopting this guidance on our condensed consolidated financial statements. In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which supersedes ASC 505-05 and expands the scope of ASC 718 to include all share-based payment arranges related to the acquisition of goods and services from both nonemployees and employee. As a result, most of the guidance in ASC 718 associated with employee share-based payments, including most of its requirements related to classification and measurement, applies to nonemployee share-based payment arrangements. ASC 2018-07 is effective for all entities for fiscal year beginning after December 15, 2018, and interim periods within that fiscal year. The Company adopted ASU No. 2018-07 on January 1, 2019. The adoption of ASU 2018-07 did not have a material impact on the Company’s condensed consolidated financial statements or cash flows. In March 2019, the FASB issued ASU No. 2019-02, Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and Entertainment-Broadcasters Intangibles-Goodwill and Other (Subtopic 920-350). The update aligns the accounting for production costs of an episodic television series with the accounting for production costs of films by removing the content distinction for capitalization. The amendments also require that an entity reassess estimates of the use of a film in a film group and account for any changes prospectively. The amendments in this update require that an entity test a film or license agreement for program material within the scope of Subtopic 920-350 for impairment at a film group level when the film or license agreement is predominantly monetized with other films and/or license agreements. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. We are currently evaluating the potential impact of adopting this guidance on our condensed consolidated financial statements. Various other accounting pronouncements have been recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific industries and are not expected to have a material effect on our financial position, results of operations, or cash flows. | Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update (ASU) 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. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, which allows for an additional optional transition method where comparative periods presented in the financial statements in the period of adoption will not be restated and instead those periods will be presented under existing guidance in accordance with ASC 840, Leases. Management will use this optional transition method. As of January 1, 2019, management recorded lease liability of $2,071,903, right-of-use asset of $2,029,677, a reversal of previously recorded deferred rent of $37,920 and the increase in accumulated deficit of $4,306. 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 became effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We have prospectively adopted ASU 2016-18. The impact to our consolidated financial position, results of operations and cash flows was minimal. In January 2017, the FASB issued Accounting Standards Update 2017-04, “Simplifying the Test for Goodwill Impairment”, which requires an entity to perform a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that reporting unit). It eliminates Step 2 of the current two-step goodwill impairment test, under which a goodwill impairment loss is measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. The standard is effective January 1, 2020, with early adoption as of January 1, 2017 permitted. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In July 2017, the FASB issued ASU No. 2017-11 addressing, among other matters, accounting for certain financial instruments. One of the amendments in this guidance intended to reduce the complexity associated with the issuer’s accounting for certain financial instruments with characteristics of liabilities and equity. Specifically, the Board determined that a down round feature (as defined) would no longer cause a freestanding equity-linked financial instrument (or an embedded conversion option) to be accounted for as a derivative liability at fair value with changes in fair value recognized in current earnings. ASU 2017-11 is effective for public business entities for fiscal year beginning after December 15, 2018. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which changes the fair value measurement disclosure requirements of ASC 820. The update removes some disclosures, modifies others, and add some new disclosure requirements. The amendments in this ASU are effective for all entities for fiscal years, and interim period within those fiscal years, beginning after December 15, 2019 with early adoption permitted. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”), which supersedes ASC 505-05 and expands the scope of ASC 718 to include all share-based payment arranges related to the acquisition of goods and services from both nonemployees and employee. As a result, most of the guidance in ASC 718 associated with employee share-based payments, including most of its requirements related to classification and measurement, applies to nonemployee share-based payment arrangements. ASC 2018-07 is effective for all entities for fiscal year beginning after December 15, 2018, and interim periods within that fiscal year. We are currently evaluating the potential impact of adopting this guidance on our consolidated financial statements. In March 2019, the FASB issued ASU No. 2019-02, Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and Entertainment-Broadcasters Intangibles-Goodwill and Other (Subtopic 920-350). The update aligns the accounting for production costs of an episodic television series with the accounting for production costs of films by removing the content distinction for capitalization. The amendments also require that an entity reassess estimates of the use of a film in a film group and account for any changes prospectively. The amendments in this update require that an entity test a film or license agreement for program material within the scope of Subtopic 920-350 for impairment at a film group level when the film or license agreement is predominantly monetized with other films and/or license agreements. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. 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. |
2. Summary of Significant Acc_3
2. Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Impact of adoptions on financial statements | Changes to the opening balances in prepaid and other assets, film and television costs, total assets, accrued expenses, deferred revenue and total liabilities resulting from the adoption of the new guidance were as follows (thousands): December 31, Impact of January 1 2017 Adoption 2018 Prepaid and Other Assets $ 265 $ 15 $ 280 Film and Television Costs, net $ 2,777 $ (219 ) $ 2,558 Total assets $ 27,713 $ (204 ) $ 27,509 Participations Payable $ 1,718 $ (1 ) $ 1,717 Deferred Revenue $ 5,085 $ (409 ) $ 4,676 Total liabilities $ 12,673 $ (410 ) $ 12,263 |
3. Property and Equipment, Net
3. Property and Equipment, Net (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Schedule of property and equipment, net | The Company has property and equipment as follows as of September 30, 2019 and December 31, 2018: September 30, 2019 December 31, 2018 Furniture and Equipment $ 19,419 $ 12,385 Computer Equipment 144,643 138,883 Leasehold Improvements 14,182 – Software 15,737 15,737 Property and Equipment, Gross 193,981 167,005 Less Accumulated Depreciation (119,594 ) (91,371 ) Property and Equipment, Net $ 74,387 $ 75,634 | The Company has property and equipment as follows as of December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Furniture and Equipment $ 12,385 $ 12,385 Computer Equipment 138,883 117,256 Leasehold Improvements – 176,903 Software 15,737 15,737 Property and Equipment, Gross 167,005 322,281 Less Accumulated Depreciation (91,371 ) (227,615 ) Property and Equipment, Net $ 75,634 $ 94,666 |
4. Film and Television Costs,_2
4. Film and Television Costs, Net (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Film And Television Costs Net | ||
Schedule of film and television costs activity | Total Film and Television Costs, Net as of December 31, 2017 $ 2,777,088 Cumulative Effect of Adoption of ASC 606 (219,472 ) Additions to Film and Television Costs 6,644,728 Capitalized Interest 43,510 Film Amortization Expense (1,079,723 ) Film and Television Costs, Net as of December 31, 2018 8,166,131 Additions to Film and Television Costs 3,140,559 Capitalized Interest 50,765 Film Amortization Expense (1,907,222 ) Film and Television Costs, Net as of September 30, 2019 $ 9,450,233 | The following table highlights the activity in Film and Television Costs as of December 31, 2018 and 2017: Total 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 Cumulative Effect of Adoption of ASC 606 (219,472 ) Additions to Film and Television Costs 6,644,728 Capitalized Interest 43,510 Film Amortization Expense (1,079,723 ) Film and Television Costs, Net as of December 31, 2018 $ 8,166,131 |
5. Goodwill and Intangible As_2
5. Goodwill and Intangible Assets, Net (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Goodwill And Intangible Assets Net | ||
Schedule of Intangible Asset | September 30, 2019 December 31, 2018 Trademarks (a) $ 129,831 $ 129,831 Product Masters (a) 64,676 64,676 Other Intangible Assets (a) 272,528 272,529 Intangible Assets, Gross 467,035 467,036 Less Accumulated Amortization (b) (405,996 ) (377,048 ) Intangible Assets, Net $ 61,039 $ 89,988 (a) Pursuant to FASB ASC 350-30-35, the Company reviews these intangible assets periodically to determine if the value should be retired or impaired due to recent events. Through September 30, 2019, the Company has not recognized any impairment expense related to these assets. (b) During the three months ended September 30, 2019 and September 30, 2018, the Company recognized $9,456 and $9,560, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. During the nine months ended September 30, 2019 and September 30, 2018, the Company recognized $28,949 and $37,877, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. | The Company had the following intangible assets as of December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Identifiable Artistic-Related Assets (a) – $ 1,740,000 Trademarks (b) $ 129,831 129,831 Product Masters (b) 64,676 64,676 Other Intangible Assets (b) 272,529 251,171 Intangible Assets, Gross 467,036 2,185,678 Less Accumulated Amortization (c) (377,048 ) (329,398 ) Intangible Assets, Net $ 89,988 $ 1,856,280 (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. As of December 31, 2018, the Company performed an analysis and determined the Identifiable Artistic-Related Intangible Assets no longer have value and as a result has recognized $1,740,000 of impairment expense related to the Identifiable Artistic-Related Intangible 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, 2018, the Company has not recognized any impairment expense related to these assets. (c) During the years ended December 31, 2018 and December 31, 2017, the Company recognized, $47,650 and $55,520, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. |
Schedule of expected future ingtangible asset amortization | Expected future intangible asset amortization as of September 30, 2019 is as follows: Fiscal Year: 2019 $ 9,456 2020 37,835 2021 9,698 2022 1,861 2023 1,465 2024 724 Total $ 61,039 | Expected future intangible asset amortization as of December 31, 2018 is as follows: Fiscal Year: 2019 $ 38,405 2020 37,825 2021 9,698 2022 1,861 2023 1,465 Remaining 734 Total $ 89,988 |
7. Accrued Liabilities - Curr_2
7. Accrued Liabilities - Current (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Payables and Accruals [Abstract] | ||
Schedule of other accrued liabilities | As of September 30, 2019, and December 31, 2018, the Company has the following current accrued liabilities: September 30, 2019 December 31, 2018 Other Accrued Expenses (a) $ 150,956 $ 52,865 Accrued Salaries and Wages (b) 242,419 137,825 Total Accrued Liabilities – Current $ 393,375 $ 190,690 | December 31, 2018 December 31, 2017 Accrued Salaries and Wages (a) $ 137,825 $ 168,549 Other Accrued Expenses (b) 52,865 1,020,457 Total Accrued Liabilities – Current $ 190,690 $ 1,189,006 (a) Accrued Salaries and Wages represent accrued vacation payable to employees. (b) Other Accrued Expenses include estimates of expenses incurred but not yet recorded. The majority of the balance in Other Accrued Expenses at year ended December 31, 2017 relates to estimates of final dubbing costs for our Llama Llama property. |
12. Stock Options (Tables)
12. Stock Options (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Schedule of stock option activity | The following table summarizes the changes in the Company’s stock option plan during the nine months ended September 30, 2019: 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, 2018 1,259,415 $ 2.09 -12.00 2.50 years $ – $ 7.39 Options Granted 81,000 $ 1.99 3.0 years $ – $ 1.99 Options Exercised – – – – – Options Cancelled 40,793 $ 1.99-2.70 4.92 – 4.39 Options Expired – – – – – Balance at September 30, 2019 1,299,622 $ 2.09 -12.00 1.64 years $ – $ 7.23 Exercisable December 31, 2018 1,070,869 $ 2.70 - 9.00 2.96 years $ – $ 7.44 Exercisable September 30, 2019 1,131,172 $ 2.82 - 9.00 1.31 years $ – $ 8.00 | 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 $ 280,642.00 $ 8.14 Options Granted – Options Exercised – Options Cancelled 79,509 $2.70 Options Expired – Balance at December 31, 2017 1,294,045 $2.09 - $12.00 2.99 years $ – $ 8.14 Options Granted 170,176 $2.09 4.55 years $ – $ 2.09 Options Exercised – Options Cancelled 57,294 $9.00 - $12.00 3.56 years $ – $ 10.08 Options Expired 147,512 $2.80 - $6.00 $ – $ 4.30 Balance at December 31, 2018 1,259,415 $2.09 - $12.00 2.50 years $ – $ 7.39 Exercisable December 31, 2017 1,070,869 $2.70 - $9.00 2.96 years $ – $ 7.44 Exercisable December 31, 2018 1,089,239 $2.70 - $9.00 2.70 years $ – $ 8.32 |
Schedule of assumptions used | The fair value of these options was determined to be $117,797 using the Black-Scholes option pricing model based on the following assumptions: Exercise Price $ 1.99 Dividend Yield 0% Volatility 125% Risk-free interest rate 2.44% Expected life of options 3 years | The fair value of these options was determined to be $285,760 using the Black-Scholes option pricing model based on the following assumptions: Exercise Price $2.09 Dividend Yield 0% Volatility 61% - 62% Risk-free interest rate 2.52% - 2.57% Expected life of options 3.5 years |
13. Warrants (Tables)
13. Warrants (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Warrants and Rights Note Disclosure [Abstract] | ||
Schedule of warrant activity | The following table summarizes the changes in the Company’s outstanding warrants during the three months ended September 30, 2019: 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, 2018 5,899,389 $ 3.30 – 6.00 3.74 years $ 3.35 $ – Warrants Granted 5.491,788 $ 1.14 – 2.55 4.89 years $ 3.00 $ – Warrants Exercised 945,894 $ 0.76 – $ 0.76 $ – Warrants Expired 100,002 $ 6.00 – $ 6.00 $ – Balance at September 30, 2019 10,345,281 $ 1.14 – 5.30 3.86 years $ 2.80 $ – $ Exercisable December 31, 2018 5,899,389 $ 3.30 – 6.00 3.74 years $ 3.53 $ – Exercisable September 30, 2019 8,545,281 $ 2.12 – 5.30 3.55 years $ 3.15 $ – | 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, 2017 3,414,389 $ 3.30 - 6.00 4.21 years $ 3.92 – Warrants Granted 2,485,000 $ 3.00 4.46 years 3.00 ؘ– Warrants Exercised – – – – – Warrants Expired – – – – – Balance at December 31, 2018 5,899,389 $ 3.00 – 6.00 3.74 years – – Exercisable December 31, 2017 3,414,389 $ 3.30 - 6.00 4.21 years $ 3.92 – Exercisable December 31, 2018 5,899,389 $ 3.30 - 6.00 3.74 years $ 3.53 – |
14. Income Taxes (Tables)
14. Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of deferred tax assets and liabilities | Net deferred tax liabilities consist of the following components as of December 31, 2018 and 2017: 2018 2017 Deferred tax assets: NOL Carryover $ 8,278,500 $ 6,406,000 Bad Debt Reserve – 31,000 Inventory Reserve 7,300 7,300 Deferred Rent 10,600 – Accrued Compensated Absences 37,100 46,100 Charitable Contributions 6,900 3,500 Subtotal 8,340,400 6,493,900 Valuation Allowance (7,619,300 ) (6,458,800 ) Deferred tax liabilities: Convertible Notes (658,800 ) – Depreciation and Amortization (49,100 ) (16,500 ) Prepaid Expenses (13,200 ) (18,600 ) Net Deferred Tax Asset $ – $ – |
Schedule of effective income tax rate reconciliation | 2018 2017 Income Tax Expense Computed at the Statutory Federal Rate $ (1,890,800 ) $ (1,669,000 ) State Income Taxes, Net of Federal Tax Effect (506,700 ) – Meals and Entertainment 5,200 10,600 Stock Options (3,500 ) 225,700 Intangible Assets 365,400 – Tax Cut and Job Act Impact – 2,809,700 Other 21,400 1,600 Valuation Allowance 2,009,000 (1,378,600 ) $ – $ – |
15. Commitment and Contingenc_2
15. Commitment and Contingencies (Tables) | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | ||
Schedule of future minimum lease payments | The following is a schedule of future minimum contractual obligations as of September 30, 2019, under the Company’s operating leases and employment agreements: 2019 2020 2021 2022 2023 2024 Thereafter Total Operating Leases 136,257 652,764 744,056 840,125 871,679 904,423 1,871,252 6,020,556 Employment Contracts 56,250 393,595 322,950 322,950 282,581 – – 1,378,326 Total 192,507 1,046,359 1,067,006 1,163,075 1,154,260 904,423 1,871,252 7,398,882 | 2019 2020 2021 2022 2023 Thereafter Total Operating Leases $ 369,923 $ 382,871 $ 396,271 $ 410,141 $ 424,495 $ 978,315 $ 2,962,016 Employment Contracts 635,808 393,595 322,950 322,950 282,581 – 1,957,884 Total $ 1,005,731 $ 776,466 $ 719,221 $ 733,091 $ 707,077 $ 978,315 $ 4,919,860 |
4. Right of Use Leased Asset _2
4. Right of Use Leased Asset (Sept 2019 Note) (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Notes to Financial Statements | |
Schedule of right of use asset | September 30, 2019 Right Of Use Leased Assets Office Lease Asset $ 4,387,955 Printer Lease Asset 12,374 Right Of Use Asset, Gross 4,400,329 Less Accumulated Amortization Office Lease Accumulated Amortization 278,066 Printer Lease Accumulated Amortization 6,731 Accumulated Amortization 284,797 Right Of Use Asset, Net $ 4,115,532 |
1. Organization and Business (D
1. Organization and Business (Details Narrative) - USD ($) | Jan. 08, 2018 | Feb. 19, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Aug. 17, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 28, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Net loss | $ (2,555,233) | $ (1,715,152) | $ (5,007,482) | $ (1,821,852) | $ (9,277,867) | $ (5,275,101) | $ (9,003,901) | $ (4,908,736) | |||||
Net Cash Used in Operating Activities | (4,636,416) | $ (5,486,708) | (8,008,010) | (7,186,870) | |||||||||
Accumulated deficit | (62,175,450) | (62,175,450) | (50,702,486) | (41,551,497) | |||||||||
Stockholders equity | $ 8,735,356 | $ 9,090,612 | $ (10,767,514) | $ 8,735,356 | 12,839,771 | 15,039,846 | $ 10,055,526 | ||||||
Cash, cash equivalents and restricted cash | 3,085,026 | ||||||||||||
Proceeds from sale of stock | $ 1,596,341 | 5,699,534 | |||||||||||
Warrants issued | 930,001 | ||||||||||||
Proceeds from issuance of convertible debt | $ 4,186,054 | $ 0 | |||||||||||
Llama Productions [Member] | Loan and Security Agreement [Member] | |||||||||||||
Proceeds from issuance of convertible debt | $ 4,186,054 | ||||||||||||
Production loan maximum | $ 1,768,010 | ||||||||||||
Production loan maturity date | Mar. 31, 2021 | ||||||||||||
January 2018 Private Placement [Member] | |||||||||||||
Warrants issued | 685,000 | ||||||||||||
Securities Purchase Agreement [Member] | January 2018 Private Placement [Member] | Accredited Investors [Member] | |||||||||||||
Proceeds from sale of stock | $ 1,596,340 | ||||||||||||
Warrants issued | 592,000 | ||||||||||||
Securities Purchase Agreement [Member] | January 2018 Private Placement [Member] | Chardan Capital Markets [Member] | |||||||||||||
Warrants issued | 93,000 | ||||||||||||
Securities Purchase Agreement [Member] | August 2018 Purchase Agreement [Member] | Certain Investors [Member] | |||||||||||||
Warrants issued | 1,800,000 | ||||||||||||
Proceeds from issuance of convertible debt | $ 4,186,054 | ||||||||||||
Debt face amount | $ 4,500,000 | ||||||||||||
Securities Purchase Agreement [Member] | February 2019 Private Placement [Member] | An Accredited Investor [Member] | Subsequent Event [Member] | |||||||||||||
Proceeds from the sale of equity | $ 2,000,000 |
2. Summary of Significant Acc_4
2. Summary of Significant Accounting Policies (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 | Jan. 02, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Prepaid and Other Assets | $ 441,474 | $ 297,542 | $ 264,818 | ||
Film and Television Costs, net | 9,450,233 | 8,166,131 | 2,777,088 | $ 2,260,964 | |
Total assets | 29,446,294 | 24,602,141 | 27,712,592 | ||
Participations Payable | 1,718,000 | ||||
Deferred Revenue | 4,925,756 | 5,085,383 | |||
Total liabilities | $ 20,710,938 | $ 11,762,370 | 12,672,746 | ||
Impact of Adoption [Member] | |||||
Prepaid and Other Assets | (15,000) | ||||
Film and Television Costs, net | (219,000) | ||||
Total assets | (204,000) | ||||
Participations Payable | (1,000) | ||||
Deferred Revenue | (409,000) | ||||
Total liabilities | $ (410,000) | ||||
After Adjustment [Member] | |||||
Prepaid and Other Assets | $ 280,000 | ||||
Film and Television Costs, net | 2,558,000 | ||||
Total assets | 27,509,000 | ||||
Participations Payable | 1,717,000 | ||||
Deferred Revenue | 4,676,000 | ||||
Total liabilities | $ 12,263,000 |
2. Significant Accounting Polic
2. Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2019 | |
Restricted Cash | $ 400,543 | $ 568,673 | $ 0 |
Allowance for doubtful accounts | 0 | 110,658 | 0 |
Reserve for obsolete inventory | 26,097 | 26,097 | 26,097 |
Uninsured cash balances | $ 2,183,875 | $ 6,379,322 | $ 279,412 |
Sales Revenue, Net [Member] | One Customer | |||
Concentration risk percentage | 20.00% | 84.00% | |
Accounts Receivable [Member] | One Customer | |||
Concentration risk percentage | 8.50% | 98.00% |
3. Property and Equipment, Ne_2
3. Property and Equipment, Net (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Property and equipment, gross | $ 193,981 | $ 167,005 | $ 322,281 |
Less Accumulated Depreciation | (119,594) | (91,371) | (227,615) |
Property and Equipment, Net | 74,387 | 75,634 | 94,666 |
Furniture and Fixtures [Member] | |||
Property and equipment, gross | 19,419 | 12,385 | 12,385 |
Computer Equipment [Member] | |||
Property and equipment, gross | 144,643 | 138,883 | 117,256 |
Leasehold Improvements [Member] | |||
Property and equipment, gross | 14,182 | 0 | 176,903 |
Software [Member] | |||
Property and equipment, gross | $ 15,737 | $ 15,737 | $ 15,737 |
3. Property and Equipment, Ne_3
3. Property and Equipment, Net (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||||||
Depreciation expense | $ 9,378 | $ 7,955 | $ 28,223 | $ 31,653 | $ 40,659 | $ 70,396 |
4. Film and Television Costs,_3
4. Film and Television Costs, Net (Details) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Film And Television Costs Net | ||||
Film and Television costs, beginning balance | $ 8,166,131 | $ 2,777,088 | $ 2,777,088 | $ 2,260,964 |
Cumulative Effect of Adoption of ASC | (219,472) | |||
Additions to Film and Television Costs | 3,140,559 | 6,644,728 | 2,863,076 | |
Capitalized interest | 50,765 | 43,510 | 187,883 | |
Film Amortization Expense | (1,907,222) | $ (1,033,392) | (1,079,723) | (2,534,835) |
Film and Television Costs, ending balance | $ 9,450,233 | $ 8,166,131 | $ 2,777,088 |
4. Film and Television Costs,_4
4. Film and Television Costs, net (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Film And Television Costs Net | ||||||
Film amortization expense | $ 1,285,237 | $ 268,425 | $ 1,907,222 | $ 1,033,392 | $ 1,079,723 | $ 2,534,835 |
5. Goodwill and Intangible As_3
5. Goodwill and Intangible Assets, Net (Details - Intangibles) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Intangible assets | $ 467,035 | $ 467,036 | $ 2,185,678 | ||
Less Accumulated Amortization | (405,996) | [1] | (377,048) | [1] | (329,398) |
Net Intangible Assets | 61,039 | 89,988 | 1,856,280 | ||
Identifiable artistic-related assets [Member] | |||||
Intangible assets | 0 | 1,740,000 | |||
Trademarks [Member] | |||||
Intangible assets | 129,831 | [2] | 129,831 | [2] | 129,831 |
Product Masters [Member] | |||||
Intangible assets | 64,676 | [2] | 64,676 | [2] | 64,676 |
Other Intangible Assets [Member] | |||||
Intangible assets | $ 272,528 | [2] | $ 272,529 | [2] | $ 251,171 |
[1] | During the three months ended September 30, 2019 and September 30, 2018, the Company recognized $9,456 and $9,560, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. During the nine months ended September 30, 2019 and September 30, 2018, the Company recognized $28,949 and $37,876, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. | ||||
[2] | Pursuant to FASB ASC 350-30-35, the Company reviews these intangible assets periodically to determine if the value should be retired or impaired due to recent events. Through September 30, 2019, the Company has not recognized any impairment expense related to these assets. |
5. Goodwill and Intangible As_4
5. Goodwill and Intangible Assets (Details - future amortization) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Future intangible asset amortization | ||
2019 | $ 38,405 | |
2020 | $ 37,835 | 37,825 |
2021 | 9,698 | 9,698 |
2022 | 1,861 | 1,861 |
2023 | 1,465 | 1,465 |
Remaining | 724 | 734 |
Total | $ 61,039 | $ 89,988 |
5. Goodwill and Intangible As_5
5. Goodwill and Intangible Assets, Net (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Amortization expense | $ 1,285,237 | $ 268,425 | $ 1,907,222 | $ 1,033,392 | $ 1,079,723 | $ 2,534,835 |
Impairment of intangible assets | 1,740,000 | 0 | ||||
Identifiable artistic-related assets [Member] | ||||||
Impairment of intangible assets | 1,740,000 | |||||
Trademarks, Product Masters, and Other Intangible Assets [Member] | ||||||
Amortization expense | $ 47,650 | $ 55,520 |
6. Deferred Revenue (Details Na
6. Deferred Revenue (Details Narrative) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred revenue | $ 4,925,756 | $ 5,085,383 |
Royalty Advance [Member] | ||
Deferred revenue | 2,000,000 | |
Distribution Rights [Member] | ||
Deferred revenue | $ 1,489,583 |
7. Accrued Liabilities - Curr_3
7. Accrued Liabilities - Current (Details) - USD ($) | Sep. 30, 2019 | [1] | Dec. 31, 2018 | Dec. 31, 2017 | |
Payables and Accruals [Abstract] | |||||
Accrued Salaries and Wages | $ 137,825 | $ 168,549 | |||
Other accrued expenses | $ 150,956 | 52,865 | [1] | 1,020,457 | |
Total accrued liabilities | $ 190,690 | $ 1,189,006 | |||
[1] | Represents accrued interest, insurance liability and lease deposit on sub-lease. |
8. Secured Convertible Notes (D
8. Secured Convertible Notes (Details Narrative) - USD ($) | 3 Months Ended | 8 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Aug. 17, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Beneficial conversion feature | $ (1,686,667) | $ (353,333) | $ (2,008,907) | $ (353,333) | $ (353,333) | $ 0 | |
Warrants issued | 930,001 | ||||||
Proceeds from issuance of convertible debt | $ 4,186,054 | $ 0 | |||||
Securities Purchase Agreement [Member] | |||||||
Proceeds from offering | 4,500,000 | ||||||
Beneficial conversion feature | 1,561,111 | ||||||
Amortization discount | $ 678,016 | ||||||
August 2018 Purchase Agreement [Member] | Securities Purchase Agreement [Member] | Certain Investors [Member] | |||||||
Warrants issued | 1,800,000 | ||||||
Proceeds from issuance of convertible debt | $ 4,186,054 | ||||||
Debt face amount | $ 4,500,000 |
9. Production Loan Facility (De
9. Production Loan Facility (Details Narrative) - Llama Productions [Member] - USD ($) | 7 Months Ended | 9 Months Ended | 12 Months Ended | |
Aug. 08, 2016 | Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Credit line initiation date | Aug. 8, 2016 | Aug. 8, 2016 | ||
Credit line term | 40 months | 40 months | ||
Credit line interest rate | Prime plus 1% or one, three, or six month LIBOR plus 3.25% | Either Prime plus 1% or one, three, or six month LIBOR plus 3.25% | ||
Credit line effective interest rates | 5.53% and 6.14% | |||
Credit line maximum | $ 5,275,000 | |||
Gross borrowings under the facility | $ 3,182,985 | $ 2,241,759 | $ 4,436,528 | |
Payment of financing costs | 132,569 | 63,561 | 113,885 | |
Net borrowings under the facility | $ 3,050,416 | $ 2,178,198 | $ 4,322,643 |
10. Disputed Trade Payable (Det
10. Disputed Trade Payable (Details Narrative) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Disputed Trade Payable Abstract | |||
Disputed Trade Payable | $ 925,000 | $ 925,000 | $ 925,000 |
11. Stockholders' Equity (Detai
11. Stockholders' Equity (Details Narrative) - USD ($) | Nov. 15, 2018 | Nov. 01, 2018 | Oct. 17, 2018 | Sep. 18, 2018 | Aug. 13, 2018 | May 07, 2018 | Dec. 31, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Oct. 03, 2017 | Aug. 01, 2017 | Mar. 14, 2017 | Jan. 17, 2017 | Jan. 10, 2017 |
Shares authorized | 233,333,334 | 233,333,334 | 233,333,334 | 233,333,334 | ||||||||||||
Reverse stock split | 1-for-3 reverse stock split on November 4, 2016 | |||||||||||||||
Common shares outstanding | 9,457,859 | 11,933,365 | 9,457,859 | 7,610,794 | ||||||||||||
Preferred stock issued | 2,120 | 2,120 | 2,120 | 3,530 | ||||||||||||
Preferred stock outstanding | 2,120 | 2,120 | 2,120 | 3,530 | ||||||||||||
Proceeds from Warrant Exchange, Net | $ 668,558 | $ 0 | $ 0 | $ 3,401,924 | ||||||||||||
Stock price | $ 2.81 | $ 2.16 | $ 2.16 | |||||||||||||
Stock issued for settlement, shares | 60,000 | |||||||||||||||
Gross proceeds from sale of stock | $ 1,596,341 | $ 5,699,534 | ||||||||||||||
Common Stock [Member] | ||||||||||||||||
Conversion of preferred stock, common stock issued | 470,001 | 455,000 | ||||||||||||||
Series A Convertible Preferred Stock [Member] | ||||||||||||||||
Conversion of preferred stock, preferred stock converted | 1,410 | 1,365 | ||||||||||||||
Convertible Preferred [Member] | ||||||||||||||||
Conversion price | $ 3 | $ 3 | $ 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 | |||||||||||||||
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 | |||||||||||||||
Provider [Member] | ||||||||||||||||
Stock price | $ 2.27 | $ 2.17 | $ 2.64 | |||||||||||||
Stock issued for services, shares | 44,097 | 141,014 | 180,683 | 277,508 | ||||||||||||
Investor [Member] | ||||||||||||||||
Stock price | $ 2.16 | $ 2.45 | ||||||||||||||
Stock issued for services, shares | 23,148 | 58,614 | ||||||||||||||
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 |
12. Stock Options (Details-Opti
12. Stock Options (Details-Option activity) - Stock Options [Member] - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Stock Options | ||||
Number of Options outstanding beginning balance | 1,259,415 | 1,294,045 | 1,373,554 | |
Number of Options Granted | 81,000 | 170,176 | 0 | |
Number of Options Exercised | 0 | 0 | 0 | |
Number of Options Cancelled | 40,793 | 57,294 | 79,509 | |
Number of Options Expired | 0 | 147,512 | 0 | |
Number of Options outstanding ending balance | 1,299,622 | 1,259,415 | 1,294,045 | 1,373,554 |
Number of Options exercisable | 1,131,172 | 1,089,239 | 1,070,869 | |
Exercise Price Per Share | ||||
Exercise price per share, range | $2.09 - 12.00 | $2.09 - $12.00 | $2.82 - $12.00 | |
Exercise price per share, options granted | $1.99 | $2.09 | ||
Exercise price per share, options cancelled | $1.99 - 2.70 | $9.00 - $12.00 | $2.70 | |
Exercise price per share, Expired | $2.80 - $6.00 | |||
Exercise prices at period end | $2.09 - 12.00 | $2.09 - $12.00 | $2.09 - $12.00 | |
Exercise price per share, exercisable | $2.82 - 9.00 | $2.70 - $9.00 | $2.70 - $9.00 | |
Weighted Average Remaining Contractual Life | ||||
Weighted Average Remaining Contractual Life | 1 year 7 months 21 days | 2 years 6 months | 2 years 11 months 26 days | 3 years 11 months 26 days |
Weighted average remaining contractual life, options granted | 3 years | 4 years 6 months 18 days | ||
Weighted average remaining contractual life, options cancelled | 4 years 11 months 1 day | 3 years 6 months 21 days | ||
Weighted average remaining contractual life, exercisable | 1 year 3 months 22 days | 2 years 8 months 12 days | 2 years 11 months 15 days | |
Aggregate Intrinsic Value | ||||
Aggregate intrinsic value, options outstanding | $ 0 | $ 0 | $ 280,642 | |
Aggregate intrinsic value, exercisable | $ 0 | $ 0 | $ 0 | |
Weighted Average Exercise Price Per Share | ||||
Weighted Average Exercise Price per Share beginning balance | $ 7.39 | $ 8.14 | $ 8.14 | |
Weighted Average Exercise Price Options Granted | 1.99 | 2.09 | ||
Weighted Average Exercise Price Options Cancelled | 4.39 | 10.08 | ||
Weighted Average Exercise Price Options Expired | 4.3 | |||
Weighted Average Exercise Price per Share ending balance | 7.23 | 7.39 | 8.14 | $ 8.14 |
Weighted Average Exercise Price per Share Exercisable | $ 8 | $ 8.32 | $ 7.44 |
12. Stock Options (Details Narr
12. Stock Options (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Share-based compensation | $ 142,420 | $ 113,405 | $ (16,588) | $ 663,958 |
Unvested share based compensation | $ 238,871 | |||
2015 Plan [Member] | ||||
Shares authorized under plan | 2,167,667 | 1,666,667 |
13. Warrants (Details)
13. Warrants (Details) - Warrant [Member] - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Warrant | |||
Number of Warrants outstanding beginning balance | 5,899,389 | 3,414,389 | 1,651,698 |
Warrants Granted | 5.491788 | 2,485,000 | |
Warrants Exercised | 945,894 | 0 | |
Warrants Expired | 100,002 | 0 | |
Number of Warrants outstanding ending balance | 10,345,281 | 5,899,389 | 3,414,389 |
Number of Warrants exercisable | 5,899,389 | 5,899,389 | 3,414,389 |
Exercise Price Per Share | |||
Warrant exercise price per share, beginning balance | $3.30 - 6.00 | $3.30-$6.00 | |
Warrant exericse price per share, granted | $1.14 - 2.55 | $3.00 | |
Warrant exercise price per share, exercised | $0.76 | ||
Warrant exercise price per share, ending balance | $1.14 - 5.30 | $3.00-$6.00 | $3.30-$6.00 |
Warrant exercise price per share, exercisable | $2.12 - 6.00 | $3.60-$6.00 | $3.60-$6.00 |
Weighted Average Remaining Contractual Life | |||
Weighted average remaining contractual life, warrants granted | 4 years 10 months 21 days | 4 years 5 months 16 days | |
Weighted average remaining contractual life, warrants outstanding | 3 years 10 months 10 days | 3 years 8 months 26 days | 4 years 2 months 16 days |
Weighted average remaining contractual life, exercisable | 3 years 6 months 18 days | 3 years 8 months 26 days | 4 years 2 months 16 days |
Weighted Average Exercise Price per Share | |||
Warrant weighted average exercise price per share, beginning balance | $ .00 | $ 3.92 | |
Warrants Granted weighted average exercise price per share, beginning balance | 3 | ||
Warrant weighted average exercise price per share, ending balance | 2.8 | .00 | $ 3.92 |
Warrant weighted average exercise price per share, exercisable | $ 3.15 | $ 3.53 | $ 3.92 |
Aggregate Intrinsic Value | |||
Aggregate intrinsic value, outstanding | $ 0 | $ 0 | $ 0 |
Aggregate instrinsic value, exercisable | $ 0 | $ 0 | $ 0 |
13. Warrants (Details Narrative
13. Warrants (Details Narrative) - USD ($) | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Sep. 30, 2019 | Dec. 31, 2016 | |
Gross proceeds from exercise of warrants | $ 3,866,573 | |||
Warrants issued | 930,001 | |||
Fair value of warrants issued | $ 1,471,111 | |||
Warrant [Member] | ||||
Warrants outstanding | 5,899,389 | 3,414,389 | 10,345,281 | 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 | |||
January 2018 Private Placement [Member] | ||||
Warrants issued | 685,000 |
14. Income Taxes (Details-Defer
14. Income Taxes (Details-Deferred income taxes) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Deferred tax assets: | |||
NOL Carryover | $ 8,278,500 | $ 6,406,000 | |
Bad Debt Reserve | 0 | 31,000 | |
Inventory Reserve | 7,300 | 7,300 | |
Deferred Rent | 10,600 | 0 | |
Accrued Compensated Absences | 37,100 | 46,100 | |
Charitable Contributions | 6,900 | 3,500 | |
Deferred tax assets | 8,340,400 | 6,493,900 | |
Valuation Allowance | (7,619,300) | (6,458,800) | |
Deferred tax liabilities: | |||
Convertible Notes | (658,800) | 0 | |
Depreciation and Amortization | (49,100) | (16,500) | |
Prepaid Expenses | (13,200) | (18,600) | |
Net deferred tax asset | $ 0 | $ 0 | $ 0 |
14. Income Taxes (Details-Incom
14. Income Taxes (Details-Income tax provision) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||||||
Income Tax Expense computed at the Statutory Federal Rate | $ (1,890,800) | $ (1,669,000) | ||||
State Income Taxes, Net of Federal Tax Effect | (506,700) | 0 | ||||
Meals and Entertainment | 5,200 | 10,600 | ||||
Stock Options | (3,500) | 225,700 | ||||
Intangible Assets | 365,400 | 0 | ||||
Tax Cut and Job Act Impact | 0 | 2,809,700 | ||||
Other | 21,400 | 1,600 | ||||
Valuation Allowance | 2,009,000 | (1,378,600) | ||||
Income Tax Expense | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 |
14. Income Taxes (Details Narra
14. Income Taxes (Details Narrative) | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Income Tax Disclosure [Abstract] | |
Federal net operating loss carry forwards | $ 30,053,000 |
State net operating loss carry forwards | $ 28,172,000 |
Operating loss carryforward expiration date | Dec. 31, 2038 |
Net deferred tax assets before valuation allowance | $ 2,809,700 |
Statutory tax rate | 21.00% |
15. Commitment and Contingenc_3
15. Commitment and Contingencies (Details - Minimum lease commitments) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Employment Contracts [Member] | ||
Other commitment 2019 | $ 56,250 | $ 635,808 |
Other commitment 2020 | 393,595 | 393,595 |
Other commitment 2021 | 322,950 | 322,950 |
Other commitment 2022 | 322,950 | 322,950 |
Other commitment 2023 | 282,581 | 282,581 |
Other commitment Thereafter | 0 | 0 |
Total | 1,378,326 | 1,957,884 |
Operating leases and Employment Agreements [Member] | ||
Other commitment 2019 | 192,507 | 1,005,731 |
Other commitment 2020 | 1,046,359 | 776,466 |
Other commitment 2021 | 1,067,006 | 719,221 |
Other commitment 2022 | 1,163,075 | 733,091 |
Other commitment 2023 | 1,154,260 | 707,077 |
Other commitment Thereafter | 1,871,252 | 978,315 |
Total | 7,398,882 | 4,919,860 |
Operating Leases [Member] | ||
Operating lease 2019 | 136,257 | 369,923 |
Operating lease 2020 | 652,764 | 382,871 |
Operating lease 2021 | 744,056 | 396,271 |
Operating lease 2022 | 840,125 | 410,141 |
Operating lease 2023 | 871,679 | 424,495 |
Operating lease Thereafter | 1,871,252 | 978,315 |
Total | $ 6,020,556 | $ 2,962,016 |
15. Commitments and Contingenci
15. Commitments and Contingencies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | ||||||
Rental expenses | $ 210,062 | $ 130,173 | $ 531,519 | $ 241,578 | $ 143,451 | $ 343,347 |
16. Related Party (Details Narr
16. Related Party (Details Narrative) - USD ($) | 12 Months Ended | 15 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2017 | Sep. 30, 2019 | |
Due to related party | $ 346,759 | $ 0 | $ 0 | $ 933,596 |
Andy Heyward Animation Art [Member] | ||||
Royalty income | 0 | 96 | ||
Andy Heyward [Member] | ||||
Production cost | 186,000 | |||
Andy Heyward [Member] | Animation Production Services [Member] | ||||
Due to related party | 45,310 | |||
Andy Heyward [Member] | Executive Producer Fee [Member] | ||||
Due to related party | 235,600 | |||
Gregory Payne [Member] | ||||
Due from related party | 0 | 5,558 | 5,558 | |
Foothill Entertainment [Member] | ||||
Due from related party | $ 0 | $ 7,517 | $ 7,517 |
1. Organization and Business (S
1. Organization and Business (Sept 2019 Note) (Details Narrative) - USD ($) | 2 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||||||
Feb. 19, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Net loss | $ (2,555,233) | $ (1,715,152) | $ (5,007,482) | $ (1,821,852) | $ (9,277,867) | $ (5,275,101) | $ (9,003,901) | $ (4,908,736) | ||
Net cash used in operating activities | (4,636,416) | (5,486,708) | (8,008,010) | (7,186,870) | ||||||
Accumulated deficit | (62,175,450) | (62,175,450) | (50,702,486) | (41,551,497) | ||||||
Stockholders equity | 8,735,356 | $ 9,090,612 | $ (10,767,514) | 8,735,356 | 12,839,771 | 15,039,846 | $ 10,055,526 | |||
Current assets | 5,011,296 | 5,011,296 | 5,579,582 | 10,834,926 | ||||||
Cash, Cash Equivalents, and Restricted Cash | 633,561 | $ 5,074,026 | 633,561 | $ 5,074,026 | 3,085,026 | 7,498,072 | $ 2,887,921 | |||
Current liabilities | 8,858,575 | 8,858,575 | 4,607,919 | $ 2,793,647 | ||||||
Working capital | $ (3,847,279) | $ (3,847,279) | $ 971,663 | |||||||
Warrants issued, shares | 930,001 | |||||||||
Private Placement [Member] | ||||||||||
Warrants issued, shares | 685,000 | |||||||||
Securities Purchase Agreement [Member] | Private Placement [Member] | Accredited Investors [Member] | ||||||||||
Stock issued new, shares | 945,894 | |||||||||
Proceeds from issuance of equity | $ 1,757,552 | |||||||||
Warrants issued, shares | 945,894 | |||||||||
Warrans issued for offering costs | 93,000 | |||||||||
Securities Purchase Agreement [Member] | Private Placement [Member] | The Purchaser [Member] | ||||||||||
Warrants issued, shares | 945,894 |
2. Significant Accounting Pol_2
2. Significant Accounting Policies (Sept 2019 Note) (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2019 | Dec. 31, 2018 | Jan. 02, 2018 | Dec. 31, 2017 | |
Restricted Cash | $ 0 | $ 0 | $ 400,543 | $ 568,673 | |
Allowance for doubtful accounts | 0 | 0 | 0 | 110,658 | |
Reserve for obsolete inventory | 26,097 | 26,097 | 26,097 | 26,097 | |
Lease liability | 2,071,903 | 2,071,903 | $ 2,071,903 | ||
Right of use asset | 4,115,532 | 4,115,532 | 0 | 2,153,747 | |
Accumulated amortization of right to use asset | 284,797 | 284,797 | 124,070 | ||
Deferred rent | $ 37,920 | ||||
Cumulative effect of adoption of ASC | (4,306) | ||||
Uninsured cash balances | $ 279,412 | $ 279,412 | $ 2,183,875 | $ 6,379,322 | |
Sales Revenue, Net [Member] | Two Customer [Member] | |||||
Concentration risk percentage | 94.00% | 78.00% | |||
Accounts Receivable [Member] | One Customer | |||||
Concentration risk percentage | 85.00% | 98.00% |
3. Property and Equipment, Ne_4
3. Property and Equipment, Net (Sept 2019 Note) (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Property and equipment, gross | $ 193,981 | $ 167,005 | $ 322,281 |
Less Accumulated Depreciation | (119,594) | (91,371) | (227,615) |
Property and Equipment, Net | 74,387 | 75,634 | 94,666 |
Furniture and Equipment [Member] | |||
Property and equipment, gross | 19,419 | 12,385 | 12,385 |
Computer Equipment [Member] | |||
Property and equipment, gross | 144,643 | 138,883 | 117,256 |
Leasehold Improvements [Member] | |||
Property and equipment, gross | 14,182 | 0 | 176,903 |
Software [Member] | |||
Property and equipment, gross | $ 15,737 | $ 15,737 | $ 15,737 |
4. Right of Use Leased Asset _3
4. Right of Use Leased Asset (Sept 2019 Note) (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 | Jan. 02, 2018 |
Notes to Financial Statements | |||
Office lease asset | $ 4,387,955 | ||
Printer lease asset | 12,374 | ||
Right of use asset, gross | 4,400,329 | ||
Office lease accumulated amortization | 278,066 | ||
Printer lease accumulated amortization | 6,731 | ||
Total accumulated amortization | 284,797 | $ 124,070 | |
Right of use asset, net | $ 4,115,532 | $ 0 | $ 2,153,747 |
4. Right of Use Leased Asset _4
4. Right of Use Leased Asset (Sept 2019 Note) (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2019 | Dec. 31, 2018 | Jan. 02, 2018 | |
Notes to Financial Statements | ||||
Lease liability | $ 2,071,903 | $ 2,071,903 | $ 2,071,903 | |
Right of use asset | 4,115,532 | 4,115,532 | $ 0 | 2,153,747 |
Accumulated amortization of right to use asset | 284,797 | 284,797 | 124,070 | |
Deferred rent | $ 37,920 | |||
Amortization expense | $ 70,020 | $ 159,238 |
6. Goodwill and Intangible Asse
6. Goodwill and Intangible Assets, Net (Sept 2019 Note) (Details - Intangibles) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Intangible assets | $ 467,035 | $ 467,036 | $ 2,185,678 | ||
Less Accumulated Amortization | (405,996) | [1] | (377,048) | [1] | (329,398) |
Net Intangible Assets | 61,039 | 89,988 | 1,856,280 | ||
Trademarks [Member] | |||||
Intangible assets | 129,831 | [2] | 129,831 | [2] | 129,831 |
Product Masters [Member] | |||||
Intangible assets | 64,676 | [2] | 64,676 | [2] | 64,676 |
Other Intangible Assets [Member] | |||||
Intangible assets | $ 272,528 | [2] | $ 272,529 | [2] | $ 251,171 |
[1] | During the three months ended September 30, 2019 and September 30, 2018, the Company recognized $9,456 and $9,560, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. During the nine months ended September 30, 2019 and September 30, 2018, the Company recognized $28,949 and $37,876, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets. | ||||
[2] | Pursuant to FASB ASC 350-30-35, the Company reviews these intangible assets periodically to determine if the value should be retired or impaired due to recent events. Through September 30, 2019, the Company has not recognized any impairment expense related to these assets. |
6. Goodwill and Intangible As_2
6. Goodwill and Intangible Assets (Sept 2019 Note) (Details - future amortization) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Future intangible asset amortization | ||
2019 | $ 9,456 | |
2020 | 37,835 | $ 37,825 |
2021 | 9,698 | 9,698 |
2022 | 1,861 | 1,861 |
2023 | 1,465 | 1,465 |
2024 | 724 | 734 |
Total | $ 61,039 | $ 89,988 |
8. Accrued Liabilities - Curren
8. Accrued Liabilities - Current (Sept 2019 Note) (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | ||
Payables and Accruals [Abstract] | |||||
Other Accrued Expenses | $ 150,956 | [1] | $ 52,865 | [1] | $ 1,020,457 |
Accrued Salaries and Wages | 242,419 | [2] | 137,825 | [2] | $ 168,549 |
Total accrued liabilities - Current | $ 393,375 | $ 190,690 | |||
[1] | Represents accrued interest, insurance liability and lease deposit on sub-lease. | ||||
[2] | Represents accrued salaries and wages and accrued vacation payable to employees for 2019 and accrued vacation payable to employees in 2018 |
9. Secured Convertible Notes (S
9. Secured Convertible Notes (Sept 2019 Note) (Details Narrative) - USD ($) | 2 Months Ended | 3 Months Ended | 8 Months Ended | 9 Months Ended | 12 Months Ended | |||
Feb. 19, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Aug. 17, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Proceeds from convertible debt | $ 4,186,054 | $ 0 | ||||||
Beneficial conversion feature | $ (1,686,667) | $ (353,333) | $ (2,008,907) | $ (353,333) | (353,333) | $ 0 | ||
Loss on extinguishment of debt | $ (1,080,664) | $ 0 | $ (4,432,819) | $ 0 | ||||
Fair value of warrants | $ 1,471,111 | |||||||
Purchase Agreement [Member] | Amendment to February 2019 Offering [Member] | Warrants [Member] | ||||||||
Warrants issued, shares | 1,800,000 | |||||||
Warrant exercise price | $ 2.55 | |||||||
Loss on extinguishment of debt | $ (2,064,193) | |||||||
Fair value of warrants | $ 1,287,962 | |||||||
Purchase Agreement [Member] | Secured Convertible Notes [Member] | ||||||||
Proceeds from convertible debt | $ 4,500,000 | |||||||
Debt maturity date | Aug. 20, 2019 | |||||||
Debt interest rate | 10.00% | |||||||
Conversion price per share | $ 2.50 | |||||||
Beneficial conversion feature | $ 1,561,111 | |||||||
Purchase Agreement [Member] | Warrant [Member] | ||||||||
Warrants issued, shares | 1,800,000 | |||||||
Warrant exercise price | $ 3 |
10. Production Loan Facility (S
10. Production Loan Facility (Sept 2019 Note) (Details Narrative) - Llama Productions [Member] - USD ($) | 3 Months Ended | 7 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2019 | Aug. 08, 2016 | Sep. 30, 2019 | Sep. 28, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Aug. 16, 2019 | |
Credit line initiation date | Aug. 8, 2016 | Aug. 8, 2016 | |||||
Credit line maximum | $ 5,275,000 | ||||||
Credit line term | 40 months | 40 months | |||||
Credit line interest rate | Prime plus 1% or one, three, or six month LIBOR plus 3.25% | Either Prime plus 1% or one, three, or six month LIBOR plus 3.25% | |||||
Gross borrowings during the period | $ 3,182,985 | $ 2,241,759 | $ 4,436,528 | ||||
Payment of financing costs | 132,569 | 63,561 | 113,885 | ||||
Proceeds from line of credit | $ 3,050,416 | $ 2,178,198 | $ 4,322,643 | ||||
Amendment 2 [Member] | |||||||
Credit line maximum | $ 1,768,010 | ||||||
Loan and Security Agreement [Member] | |||||||
Credit line maximum | $ 4,231,989 | $ 3,831,989 | |||||
Credit line interest rate | 1.0% plus the Prime Rate | ||||||
Maturity date | Mar. 31, 2021 | ||||||
Interest rate range on advances | 5.75% and 6.14% | 5.75% and 6.14% |
12. Stockholders' Equity (Sept
12. Stockholders' Equity (Sept 2019 Note) (Details Narrative) - USD ($) | Jan. 08, 2018 | Feb. 19, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Aug. 17, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 |
Warrants issued | 930,001 | ||||||||
Beneficial conversion feature | $ (1,686,667) | $ (353,333) | $ (2,008,907) | $ (353,333) | $ (353,333) | $ 0 | |||
February 2019 Offering [Member] | |||||||||
Proceeds from issuance of equity | $ 1,757,552 | ||||||||
Securities Purchase Agreement [Member] | Price Decrease [Member] | |||||||||
Beneficial conversion feature | $ 353,333 | ||||||||
Common Stock | February 2019 Offering [Member] | |||||||||
Stock issued new, shares | 945,894 | ||||||||
Warrant [Member] | February 2019 Offering [Member] | |||||||||
Warrants issued | 945,894 | ||||||||
Warrant [Member] | February 2019 Offering [Member] | The Purchaser [Member] | |||||||||
Warrants issued | 945,894 | ||||||||
Warrant [Member] | February 2019 Offering [Member] | The Purchaser [Member] | Price Decrease [Member] | |||||||||
Beneficial conversion feature | $ 322,240 | ||||||||
Private Placement [Member] | |||||||||
Warrants issued | 685,000 | ||||||||
Private Placement [Member] | Common Stock | |||||||||
Stock issued new, shares | 592,000 | ||||||||
Private Placement [Member] | Warrants [Member] | |||||||||
Warrants issued | 1,800,000 |
13. Stock Options (Sept 2019 No
13. Stock Options (Sept 2019 Note) (Details-Option activity) - Stock Options [Member] - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Stock Options | ||||
Number of Options outstanding beginning balance | 1,259,415 | 1,294,045 | 1,373,554 | |
Number of Options Granted | 81,000 | 170,176 | 0 | |
Number of Options Exercised | 0 | 0 | 0 | |
Number of Options Cancelled | 40,793 | 57,294 | 79,509 | |
Number of Options Expired | 0 | 147,512 | 0 | |
Number of Options outstanding ending balance | 1,299,622 | 1,259,415 | 1,294,045 | 1,373,554 |
Number of Options exercisable | 1,131,172 | 1,089,239 | 1,070,869 | |
Exercise price per share, range | $2.09 - 12.00 | $2.09 - $12.00 | $2.82 - $12.00 | |
Exercise price per share, options granted | $1.99 | $2.09 | ||
Exercise price per share, options cancelled | $1.99 - 2.70 | $9.00 - $12.00 | $2.70 | |
Exercise prices at period end | $2.09 - 12.00 | $2.09 - $12.00 | $2.09 - $12.00 | |
Exercise price per share, exercisable | $2.82 - 9.00 | $2.70 - $9.00 | $2.70 - $9.00 | |
Weighted Average Remaining Contractual Life | 1 year 7 months 21 days | 2 years 6 months | 2 years 11 months 26 days | 3 years 11 months 26 days |
Weighted average remaining contractual life, options granted | 3 years | 4 years 6 months 18 days | ||
Weighted average remaining contractual life, options cancelled | 4 years 11 months 1 day | 3 years 6 months 21 days | ||
Weighted average remaining contractual life, exercisable | 1 year 3 months 22 days | 2 years 8 months 12 days | 2 years 11 months 15 days | |
Aggregate intrinsic value, options outstanding | $ 0 | $ 0 | $ 280,642 | |
Aggregate intrinsic value, exercisable | $ 0 | $ 0 | $ 0 | |
Weighted Average Exercise Price per Share beginning balance | $ 7.39 | $ 8.14 | $ 8.14 | |
Weighted Average Exercise Price Options Granted | 1.99 | 2.09 | ||
Weighted Average Exercise Price Options Cancelled | 4.39 | 10.08 | ||
Weighted Average Exercise Price Options Expired | 4.3 | |||
Weighted Average Exercise Price per Share ending balance | 7.23 | 7.39 | 8.14 | $ 8.14 |
Weighted Average Exercise Price per Share Exercisable | $ 8 | $ 8.32 | $ 7.44 |
13. Stock Options (Sept 2019 _2
13. Stock Options (Sept 2019 Note) (Details - Assumptions) - Stock Options [Member] - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2019 | Dec. 31, 2018 | |
Exercise price | $ 1.99 | $ 2.09 |
Dividend yield | 0.00% | |
Volatility | 125.00% | |
Risk-free interest rate | 2.44% | |
Expected life | 3 years |
13. Stock Options (Sept 2019 _3
13. Stock Options (Sept 2019 Note) (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Share-based compensation expense | $ 142,420 | $ 113,405 | $ (16,588) | $ 663,958 |
Unvested share-based compensation | $ 238,871 | |||
2015 Plan [Member] | ||||
Shares authorized under plan | 2,167,667 | 1,666,667 | ||
Stock Options [Member] | ||||
Options granted | 81,000 | 170,176 | 0 | |
Fair value of options granted | $ 117,797 | |||
Unvested share-based compensation | $ 192,434 |
14. Warrants (Sept 2019 Note) (
14. Warrants (Sept 2019 Note) (Details) - Warrant [Member] - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 | |
Warrant | |||
Number of Warrants outstanding beginning balance | 5,899,389 | 3,414,389 | 1,651,698 |
Warrants Granted | 5.491788 | 2,485,000 | |
Warrants Exercised | 945,894 | 0 | |
Warrants Expired | 100,002 | 0 | |
Number of Warrants outstanding ending balance | 10,345,281 | 5,899,389 | 3,414,389 |
Number of Warrants exercisable | 5,899,389 | 5,899,389 | 3,414,389 |
Exercise Price Per Share | |||
Warrant exercise price per share, beginning balance | $3.30 - 6.00 | $3.30-$6.00 | |
Warrant exericse price per share, granted | $1.14 - 2.55 | $3.00 | |
Warrant exercise price per share, exercised | $0.76 | ||
Warrant exercise price per share, Expired | $6.00 | ||
Warrant exercise price per share, ending balance | $1.14 - 5.30 | $3.00-$6.00 | $3.30-$6.00 |
Warrant exercise price per share, exercisable | $2.12 - 6.00 | $3.60-$6.00 | $3.60-$6.00 |
Weighted Average Remaining Contractual Life | |||
Weighted average remaining contractual life, warrants outstanding | 3 years 10 months 10 days | 3 years 8 months 26 days | 4 years 2 months 16 days |
Weighted average remaining contractual life, warrants granted | 4 years 10 months 21 days | 4 years 5 months 16 days | |
Weighted average remaining contractual life, exercisable | 3 years 6 months 18 days | 3 years 8 months 26 days | 4 years 2 months 16 days |
Weighted Average Exercise Price per Share | |||
Warrant weighted average exercise price per share, beginning balance | $ .00 | $ 3.92 | |
Warrant weighted average exercise price per share, granted | 3 | ||
Warrant weighted average exercise price per share, exercised | 0.76 | ||
Warrant weighted average exercise price per share, expired | 6 | ||
Warrant weighted average exercise price per share, ending balance | 2.8 | .00 | $ 3.92 |
Warrant weighted average exercise price per share, exercisable | $ 3.15 | $ 3.53 | $ 3.92 |
Aggregate Intrinsic Value | |||
Aggregate intrinsic value, outstanding | $ 0 | $ 0 | $ 0 |
Aggregate instrinsic value, exercisable | $ 0 | $ 0 | $ 0 |
14. Warrants (Sept 2019 Note)_2
14. Warrants (Sept 2019 Note) (Details Narrative) - USD ($) | Jan. 08, 2018 | Feb. 19, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Aug. 17, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 |
Warrants issued | 930,001 | ||||||||
Beneficial conversion feature | $ (1,686,667) | $ (353,333) | $ (2,008,907) | $ (353,333) | $ (353,333) | $ 0 | |||
February 2019 Offering [Member] | |||||||||
Proceeds from issuance of equity | $ 1,757,552 | ||||||||
Securities Purchase Agreement [Member] | Price Decrease [Member] | |||||||||
Beneficial conversion feature | $ 353,333 | ||||||||
Common Stock | February 2019 Offering [Member] | |||||||||
Stock issued new, shares | 945,894 | ||||||||
Warrant [Member] | February 2019 Offering [Member] | |||||||||
Warrants issued | 945,894 | ||||||||
Warrant value | $ 1,287,962 | ||||||||
Warrant [Member] | February 2019 Offering [Member] | The Purchaser [Member] | |||||||||
Warrants issued | 945,894 | ||||||||
Warrant [Member] | February 2019 Offering [Member] | The Purchaser [Member] | Price Decrease [Member] | |||||||||
Beneficial conversion feature | $ 322,240 | ||||||||
Private Placement [Member] | |||||||||
Warrants issued | 685,000 | ||||||||
Private Placement [Member] | Common Stock | |||||||||
Stock issued new, shares | 592,000 | ||||||||
Private Placement [Member] | Warrants [Member] | |||||||||
Warrants issued | 1,800,000 |
15. Income Taxes (Sept 2019 Not
15. Income Taxes (Sept 2019 Note) (Details Narrative) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 | Dec. 31, 2017 |
Income Tax Disclosure [Abstract] | |||
Uncertain tax positions | $ 0 | $ 0 | |
Deferred tax assets, net | $ 0 | $ 0 | $ 0 |
16. Commitment and Contingencie
16. Commitment and Contingencies (Sept 2019 Note) (Details - Minimum lease commitments) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Employment Contracts [Member] | ||
Other commitment remainder of 2019 | $ 56,250 | $ 635,808 |
Other commitment 2020 | 393,595 | 393,595 |
Other commitment 2021 | 322,950 | 322,950 |
Other commitment 2022 | 322,950 | 322,950 |
Other commitment 2023 | 282,581 | 282,581 |
Other commitment 2024 | 0 | |
Other commitment thereafter | 0 | 0 |
Total commitment | 1,378,326 | 1,957,884 |
Operating leases and Employment Agreements [Member] | ||
Other commitment remainder of 2019 | 192,507 | 1,005,731 |
Other commitment 2020 | 1,046,359 | 776,466 |
Other commitment 2021 | 1,067,006 | 719,221 |
Other commitment 2022 | 1,163,075 | 733,091 |
Other commitment 2023 | 1,154,260 | 707,077 |
Other commitment 2024 | 904,423 | |
Other commitment thereafter | 1,871,252 | 978,315 |
Total commitment | 7,398,882 | 4,919,860 |
Operating Leases [Member] | ||
Operating lease remainder of 2019 | 136,257 | 369,923 |
Operating lease 2020 | 652,764 | 382,871 |
Operating lease 2021 | 744,056 | 396,271 |
Operating lease 2022 | 840,125 | 410,141 |
Operating lease 2023 | 871,679 | 424,495 |
Operating lease 2024 | 904,423 | |
Operating lease thereafter | 1,871,252 | 978,315 |
Operating lease remaining | $ 6,020,556 | $ 2,962,016 |
16. Commitment and Contingenice
16. Commitment and Contingenices (Sept 2019 Note) (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | ||||||
Rental expenses | $ 210,062 | $ 130,173 | $ 531,519 | $ 241,578 | $ 143,451 | $ 343,347 |
Sublease income | $ 117,416 | $ 314,869 | ||||
Weighted average lease term operating lease | 86 months | 86 months | ||||
Weighted average discount rate operating lease | 10.30% | 10.30% |
17. Related Party (Sept 2019 No
17. Related Party (Sept 2019 Note) (Details Narrative) | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Accrued interest | $ 1,233 |
Heyward [Member] | Animation Production Services [Member] | |
Consulting fees | 124,000 |
Heyward [Member] | Executive Producer [Member] | |
Due to related parties | 322,400 |
Heyward [Member] | Executive Producer [Member] | |
Due to related parties | 62,000 |
Heyward [Member] | Reimbursable expenses [Member] | |
Due to related parties | $ 47,963 |