GROM Grom Social Enterprises Inc

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2023

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

 

For the transition period from ________ to _________

 

Commission File Number:  001-40409

 

Grom Social Enterprises, Inc.

(Exact name of registrant as specified in its charter)

 

Florida		46-5542401
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

 

2060 NW Boca Raton Blvd., Suite #6, Boca Raton, Florida		33431
(Address of principal executive offices)		(Zip Code)

 

Registrant’s telephone number, including area code: (561) 287-5776

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001	GROM	The Nasdaq Capital Market
Warrants to purchase shares of Common Stock, par value $0.001 per share	GROMW	The Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐      No ☒

 

As of August 14, 2023, 9,044,361 shares of the registrant’s common stock were outstanding.

  

 

 

 

GROM SOCIAL ENTERPRISES, INC.

 

Table of Contents

 

		Page
Part I – FINANCIAL INFORMATION
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	40
Part II – OTHER INFORMATION
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAUTIONARY STATEMENT ON FORWARD-LOOKING INFORMATION

 

When used in this Quarterly Report, including the documents that we have incorporated by reference, in future filings with the SEC or in press releases or other written or oral communications, statements which are not historical in nature, including those containing words such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters, are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Discussions containing forward-looking statements may be found in the material set forth under “Management's Discussion and Analysis of Financial Condition and Results of Operations” and in other sections of this Quarterly Report.

 

Forward-looking statements are necessarily subjective, are based upon our current plans, intentions, objectives, goals, strategies, beliefs, projections and expectations, and involve known and unknown risks, uncertainties and other important factors.

 

Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of whether, or the times by which, our performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and management’s belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Any or all of our forward-looking statements in this report may turn out to be inaccurate. Important factors that may cause actual results, our performance or achievements, or industry results to differ materially from those contemplated by such forward-looking statements include, without limitation, those discussed under the caption “Risk Factors” in this Quarterly Report. All forward-looking statements in this report are made as of the date hereof, based on information available to us as of the date hereof, and we assume no obligation to update any forward-looking statement.

 

 

 

 

 

 

 

 

 

 

 

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

GROM SOCIAL ENTERPRISES INC.

Condensed Consolidated Balance Sheets

 

		June 30,				December 31,
		2023				2022
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	2,211,658			$	3,871,176
Accounts receivable, net			658,648				1,162,230
Inventory, net			87,040				92,303
Prepaid expenses and other current assets			632,582				605,497
Total current assets			3,589,928				5,731,206
Operating lease right of use assets			932,181				1,069,222
Property and equipment, net			122,541				285,676
Goodwill, net			10,567,484				10,567,484
Intangible assets, net			5,279,220				5,364,231
Other assets			1,570,432				1,627,078
Total assets		$	22,061,786			$	24,644,897
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	659,124			$	839,679
Accrued liabilities			292,521				378,954
Dividends payable			743,071				371,799
Advanced payments and deferred revenues			374,295				576,338
Convertible notes payable, net – current			500,696				503,465
Related party payables			–				50,000
Lease liabilities – current			232,913				269,681
Total current liabilities			2,802,620				2,989,916
Convertible notes payable, net of loan discounts			–				68,199
Lease liabilities			713,220				803,958
Other noncurrent liabilities			233,433				434,976
Total liabilities			3,749,273				4,297,049
Commitments and contingencies (Note 16)			–				–
Stockholders' Equity:
Series A preferred stock, $0.001 par value. 2,000,000 shares authorized; zero 0 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively			–				–
Series B preferred stock, $0.001 par value. 10,000,000 shares authorized; zero 0 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively			–				–
Series C preferred stock, $0.001 par value. 10,000,000 shares authorized; 9,281,809 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively			9,282				9,282
Common stock, $0.001 par value. 500,000,000 shares authorized; 9,044,361 and 2,514,858 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively			9,044				2,515
Additional paid-in capital			104,652,143				101,726,355
Accumulated deficit			(88,202,102	)			(83,472,412	)
Accumulated other comprehensive loss			(168,267	)			(166,129	)
Total Grom Social Enterprises, Inc. stockholders' equity			16,300,100				18,099,611
Noncontrolling interests			2,012,413				2,248,237
Total stockholders' equity			18,312,513				20,347,848
Total liabilities and equity		$	22,061,786			$	24,644,897

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 

 

 

GROM SOCIAL ENTERPRISES INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

 

										`
		Three Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,				Six Months Ended June 30,
		2023				2022				2023				2022
Sales		$	956,498			$	1,139,582			$	2,156,141			$	2,370,707
Cost of goods sold			730,200				947,459				1,389,706				1,864,408
Gross profit			226,298				192,123				766,435				506,299
Operating expenses:
Depreciation and amortization			152,008				64,163				305,198				128,613
Selling, general and administrative			2,061,738				1,778,696				3,937,098				3,473,515
Professional fees			338,395				299,941				615,315				704,007
Total operating expenses			2,552,141				2,142,800				4,857,611				4,306,135
Loss from operations			(2,325,843	)			(1,950,677	)			(4,091,176	)			(3,799,836	)
Other income (expense)
Interest income (expense), net			(20,311	)			(1,314,508	)			(501,089	)			(2,945,530	)
Loss on settlement of derivative liabilities			–				(39,624	)			–				(39,624	)
Unrealized gain on change in fair value of derivative liabilities			–				57,124				–				57,124
Other gains (losses)			(17,762	)			48,305				(1,976	)			72,041
Total other income (expense)			(38,073	)			(1,248,703	)			(503,065	)			(2,855,989	)
Loss before income taxes			(2,363,916	)			(3,199,380	)			(4,594,241	)			(6,655,825	)
Provision for income taxes (benefit)			–				–				–				–
Net loss			(2,363,916	)			(3,199,380	)			(4,594,241	)			(6,655,825	)
(Loss) attributable to noncontrolling interests			(149,794	)			(91,025	)			(235,824	)			(170,863	)
Net loss attributable to Grom Social Enterprises, Inc. stockholders			(2,214,122	)			(3,108,355	)			(4,358,417	)			(6,484,962	)
Dividends to Series C preferred stockholders			185,637				187,216				371,273				364,060
Net loss attributable to Grom Social Enterprises, Inc. common stockholders			(2,399,759	)			(3,295,571	)			(4,729,690	)			(6,849,022	)
Basic and diluted loss per common share		$	(0.27	)		$	(5.25	)		$	(0.67	)		$	(12.51	)
Weighted-average number of common shares outstanding:
Basic and diluted			8,911,657				627,736				7,110,731				547,681
Comprehensive loss:
Net loss		$	(2,363,916	)		$	(3,199,380	)		$	(4,594,241	)		$	(6,655,825	)
Foreign currency translation adjustment			(31,774	)			(53,303	)			(2,138	)			(57,021	)
Comprehensive loss			(2,395,690	)			(3,252,683	)			(4,596,379	)			(6,712,846	)
Comprehensive loss attributable to noncontrolling interests			(149,794	)			(91,025	)			(235,824	)			(170,863	)
Comprehensive loss attributable to Grom Social Enterprises, Inc. common stockholders		$	(2,245,896	)		$	(3,161,658	)		$	(4,360,555	)		$	(6,541,983	)

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 

 

 

GROM SOCIAL ENTERPRISES INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

 

Series A Preferred Stock

Series B Preferred Stock

Series C Preferred Stock

Common Stock

Shares

Value

Shares

Value

Shares

Value

Shares

Value

Balance, April 1, 2022

–

$

–

–

$

–

9,360,809

$

9,361

634,557

$

636

Net loss

–

–

–

–

–

–

–

–

Change in foreign currency translation

–

–

–

–

–

–

–

–

Dividends declared for Series C preferred stock

–

–

–

–

–

–

–

–

Issuance of common stock as payment for Series C preferred stock dividends payable

–

–

–

–

–

–

5,895

6

Issuance of common stock in exchange for consulting, professional and other services

–

–

–

–

–

–

1,464

1

Conversion of note principal and accrued interest into common stock

–

–

–

–

–

–

27,778

28

Stock based compensation expense related to stock options

–

–

–

–

–

–

–

–

Balance, June 30, 2022

–

$

–

–

$

–

9,360,809

$

9,361

669,694

$

671

 

 

 

										Accumulated
		Additional								Other								Total
		Paid-in				Accumulated				Comprehensive				Noncontrolling				Stockholders'
		Capital				Deficit				Loss				Interests				Equity
Balance, April 1, 2022		$	94,935,770			$	(69,957,641	)		$	(34,473	)		$	2,602,501			$	27,556,154
Net loss			–				(3,108,355	)			–				(91,025	)			(3,199,380	)
Change in foreign currency translation			–				–				(53,303	)			–				(53,303	)
Dividends declared for Series C preferred stock			–				(187,216	)			–				–				(187,216	)
Issuance of common stock as payment for Series C preferred stock dividends payable			187,449				–				–				–				187,455
Issuance of common stock in exchange for consulting, professional and other services			18,659				–				–				–				18,660
Conversion of note principal and accrued interest into common stock			449,972				–				–				–				450,000
Stock based compensation expense related to stock options			89,241				–				–				–				89,241
Balance, June 30, 2022		$	95,681,091			$	(73,253,212	)		$	(87,776	)		$	2,511,476			$	24,861,611

 

 

 

(continued)

 

 

 

 

GROM SOCIAL ENTERPRISES INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

 

Series A Preferred Stock

Series B Preferred Stock

Series C Preferred Stock

Common Stock

Shares

Value

Shares

Value

Shares

Value

Shares

Value

Balance, April 1, 2023

–

$

–

–

$

–

9,281,809

$

9,282

7,339,677

$

7,340

Net loss

–

–

–

–

–

–

–

–

Change in foreign currency translation

–

–

–

–

–

–

–

–

Dividends declared for Series C preferred stock

–

–

–

–

–

–

–

–

Issuance of common stock in connection with the exercise of common stock purchase warrants

–

–

–

–

–

–

1,704,684

1,704

Stock based compensation expense related to stock options

–

–

–

–

–

–

–

–

Balance, June 30, 2023

–

$

–

–

$

–

9,281,809

$

9,282

9,044,361

$

9,044

 

 

 

										Accumulated
		Additional								Other								Total
		Paid-in				Accumulated				Comprehensive				Noncontrolling				Stockholders'
		Capital				Deficit				Loss				Interests				Equity
Balance, April 1, 2023		$	104,609,026			$	(85,802,343	)		$	(136,493	)		$	2,162,207			$	20,849,019
Net loss			–				(2,214,122	)			–				(149,794	)			(2,363,916	)
Change in foreign currency translation			–				–				(31,774	)			–				(31,774	)
Dividends declared for Series C preferred stock			–				(185,637	)			–				–				(185,637	)
Issuance of common stock in connection with the exercise of common stock purchase warrants			(1,704	)			–				–				–				–
Stock based compensation expense related to stock options			44,821				–				–				–				44,821
Balance, June 30, 2023		$	104,652,143			$	(88,202,102	)		$	(168,267	)		$	2,012,413			$	18,312,513

 

 

 

(continued)

 

 

 

 

GROM SOCIAL ENTERPRISES INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

 

Series A Preferred Stock

Series B Preferred Stock

Series C Preferred Stock

Common Stock

Shares

Value

Shares

Value

Shares

Value

Shares

Value

Balance, January 1, 2022

–

$

–

–

$

–

9,400,309

$

9,400

433,631

$

434

Net loss

–

–

–

–

–

–

–

–

Change in foreign currency translation

–

–

–

–

–

–

–

–

Conversion of Series C preferred stock into common stock

–

–

–

–

(39,500

)

(39

)

686

1

Dividends declared for Series C preferred stock

–

–

–

–

–

–

–

–

Issuance of common stock as payment for Series C preferred stock dividends payable

–

–

–

–

–

–

11,737

12

Issuance of common stock in exchange for consulting, professional and other services

–

–

–

–

–

–

3,950

4

Conversion of note principal and accrued interest into common stock

–

–

–

–

–

–

219,690

220

Recognition of beneficial conversion features related to notes payable

–

–

–

–

–

–

–

–

Stock based compensation expense related to stock options

–

–

–

–

–

–

–

–

Balance, June 30, 2022

–

$

–

–

$

–

9,360,809

$

9,361

669,694

$

671

 

 

 

										Accumulated
		Additional								Other								Total
		Paid-in				Accumulated				Comprehensive				Noncontrolling				Stockholders'
		Capital				Deficit				Loss				Interests				Equity
Balance, January 1, 2022		$	89,863,573			$	(66,404,190	)		$	(30,755	)		$	2,682,339			$	26,120,801
Net loss			–				(6,484,962	)			–				(170,863	)			(6,655,825	)
Change in foreign currency translation			–				–				(57,021	)			–				(57,021	)
Conversion of Series C preferred stock into common stock			38				–				–				–				–
Dividends declared for Series C preferred stock			–				(364,060	)			–				–				(364,060	)
Issuance of common stock as payment for Series C preferred stock dividends payable			646,511				–				–				–				646,523
Issuance of common stock in exchange for consulting, professional and other services			95,478				–				–				–				95,482
Conversion of note principal and accrued interest into common stock			4,574,779				–				–				–				4,574,999
Recognition of beneficial conversion features related to notes payable			363,329				–				–				–				363,329
Stock based compensation expense related to stock options			137,383				–				–				–				137,383
Balance, June 30, 2022		$	95,681,091			$	(73,253,212	)		$	(87,776	)		$	2,511,476			$	24,861,611

 

 

 

(continued)

 

 

 

 

GROM SOCIAL ENTERPRISES INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

 

Series A Preferred Stock

Series B Preferred Stock

Series C Preferred Stock

Common Stock

Shares

Value

Shares

Value

Shares

Value

Shares

Value

Balance, January 1, 2023

–

$

–

–

$

–

9,281,809

$

9,282

2,514,858

$

2,515

Net loss

–

–

–

–

–

–

–

–

Change in foreign currency translation

–

–

–

–

–

–

–

–

Conversion of Series C preferred stock into common stock

–

–

–

–

–

–

–

–

Dividends declared for Series C preferred stock

–

–

–

–

–

–

–

–

Issuance of common stock in connection with sales made under private offerings

–

–

–

–

–

–

100,000

100

Issuance of common stock in connection with the exercise of common stock purchase warrants

–

–

–

–

–

–

6,406,169

6,406

Issuance of common stock in exchange for consulting, professional and other services

–

–

–

–

–

–

23,334

23

Issuance of common stock purchase warrants as consideration for waiver of a financing covenant

–

–

–

–

–

–

–

–

Stock based compensation expense related to stock options

–

–

–

–

–

–

–

–

Balance, June 30, 2023

–

$

–

–

$

–

9,281,809

$

9,282

9,044,361

$

9,044

 

 

 

										Accumulated
		Additional								Other								Total
		Paid-in				Accumulated				Comprehensive				Noncontrolling				Stockholders'
		Capital				Deficit				Loss				Interests				Equity
Balance, January 1, 2023		$	101,726,355			$	(83,472,412	)		$	(166,129	)		$	2,248,237			$	20,347,848
Net loss			–				(4,358,417	)			–				(235,824	)			(4,594,241	)
Change in foreign currency translation			–				–				(2,138	)			–				(2,138	)
Conversion of Series C preferred stock into common stock			–				–				–				–				–
Dividends declared for Series C preferred stock			–				(371,273	)			–				–				(371,273	)
Issuance of common stock in connection with sales made under private offerings			2,448,259				–				–				–				2,448,359
Issuance of common stock in connection with the exercise of common stock purchase warrants			5,903				–				–				–				12,309
Issuance of common stock in exchange for consulting, professional and other services			31,945				–				–				–				31,968
Issuance of common stock purchase warrants as consideration for waiver of a financing covenant			350,038				–				–				–				350,038
Stock based compensation expense related to stock options			89,643				–				–				–				89,643
Balance, June 30, 2023		$	104,652,143			$	(88,202,102	)		$	(168,267	)		$	2,012,413			$	18,312,513

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

  

 

 

 

GROM SOCIAL ENTERPRISES INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

 

		Six Months Ended June 30,				Six Months Ended June 30,
		2023				2022
Cash flows from operating activities:
Net loss		$	(4,594,241	)		$	(6,655,825	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization			402,349				265,804
Amortization of debt discount			10,413				1,852,816
Amortization of right-of-use assets			72,869				190,117
Provision for doubtful accounts			6,075				–
Common stock issued for financing costs			350,038				–
Common stock issued in exchange for fees and services			31,968				95,482
Derivative expense			–				1,052,350
Retirement benefit cost			18,201				–
Stock based compensation			89,643				137,383
Loss on disposal of property and equipment			549				2,296
Loss on settlement of derivative liability			–				39,624
Unrealized gain on change in fair value of derivative liabilities			–				(57,124	)
Changes in operating assets and liabilities:
Accounts receivable			497,508				287,341
Inventory			5,262				(83,237	)
Prepaid expenses and other current assets			(27,086	)			(174,109	)
Other assets			(132,258	)			(291,170	)
Accounts payable			(229,653	)			(180,381	)
Accrued liabilities			(39,832	)			127,903
Advanced payments and deferred revenues			(203,043	)			208,716
Income taxes payable and other noncurrent liabilities			(201,542	)			(3,974	)
Operating lease liabilities			(68,066	)			(197,243	)
Net cash used in operating activities			(4,010,846	)			(3,383,231	)
Cash flows from investing activities:
Purchase of property and equipment			(16,822	)			(47,377	)
Proceeds from the sale of property and equipment			4,601				14,069
Net cash used in investing activities			(12,221	)			(33,308	)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs			2,448,359				–
Proceeds from exercise of common stock purchase warrants, net of issuance costs			12,309				–
Proceeds from issuance of convertible notes			–				1,444,000
Repayments of convertible notes			(81,380	)			(72,623	)
Repayments of loans payable			–				(34,846	)
Repayments of related party payables			(50,000	)			–
Settlement of derivative liabilities			–				(295,539	)
Net cash provided by financing activities			2,329,288				1,040,992
Effect of exchange rates on cash and cash equivalents			34,263				20,149
Net decrease in cash and cash equivalents			(1,659,516	)			(2,355,398	)
Cash and cash equivalents at beginning of period			3,871,174				6,530,161
Cash and cash equivalents at end of period		$	2,211,658			$	4,174,763
Supplemental disclosure of cash flow information:
Cash paid for interest		$	12,619			$	21,780
Cash paid for income taxes		$	–			$	–
Supplemental disclosure of non-cash investing and financing activities:
Common stock issued to reduce dividends payable to Series C preferred stockholders		$	–			$	646,523
Common stock warrants issued in connection with convertible promissory notes		$	–			$	363,329
Conversion of note principal and accrued interest into common stock		$	–			$	4,574,999
Dividends payable to Series C preferred stockholders		$	371,273			$	187,216
Operating lease right-of-use assets obtained in exchange for lease liabilities		$	–			$	80,478

 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

 

 

 

GROM SOCIAL ENTERPRISES, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

 

 

1.	NATURE OF OPERATIONS

 

Grom Social Enterprises, Inc. (the “Company” or “Grom”), was incorporated in the State of Florida under the name “Illumination America, Inc.” Grom is a media, technology and entertainment company that focuses on (i) delivering content to children under the age of 13 years in a safe secure platform that is compliant with the Children’s Online Privacy Protection Act (“COPPA”) and can be monitored by parents or guardians, (ii) creating, acquiring, and developing the commercial potential of Kids & Family entertainment properties and associated business opportunities, (iii) providing world class animation services, and (iv) offering protective web filtering solutions to block unwanted or inappropriate content.

 

The Company conducts its business through the following subsidiaries:

 

	·	Grom Social, Inc. (“Grom Social”), incorporated in the State of Florida on March 5, 2012, operates Grom’s social media network designed for children under the age of 13 years.
	·	TD Holdings Limited (“TD Holdings”), incorporated in Hong Kong on September 15, 2005, operates through its two wholly-owned subsidiaries: (i) Top Draw Animation Hong Kong Limited, a Hong Kong corporation, (“Top Draw HK”), and (ii) Top Draw Animation, Inc., a Philippines corporation, (“Top Draw Philippines”). The group’s principal activity is the production of animated films and television series.
	·	Grom Educational Services, Inc. (“GES”), incorporated in the State of Florida on January 17, 2017, operates Grom’s web filtering services provided to schools and government agencies.
	·	Grom Nutritional Services, Inc. (“GNS”), incorporated in the State of Florida on April 19, 2017, intends to market and distribute nutritional supplements to children. GNS has been nonoperational since its inception.
	·	Curiosity Ink Media, LLC (“CIM”), organized in the State of Delaware on January 5, 2017, develops, acquires, builds, grows and maximizes the short, mid and long-term commercial potential of kids and family entertainment properties and associated business opportunities.

 

Grom owns 100% of each of Grom Social, TD Holdings, GES and GNS, and 80% of CIM.

 

 

2.	GOING CONCERN

 

The condensed consolidated financial statements of the Company have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business. Based on current operating levels, the Company will need to raise additional funds by selling additional equity or incurring debt.

 

On a consolidated basis, the Company has incurred significant operating losses since its inception. As of June 30, 2023, the Company has an accumulated deficit of $88.2 million. During the six months ended June 30, 2023, it used approximately $4.0 million, respectively, in cash for operating activities.

 

 

 

 

11

 

 

The Company has funded its operations primarily through sales of its common stock in public markets, proceeds from the exercise of warrants to purchase common stock, and the sale of convertible notes. Future capital requirements will depend on many factors, including the (i) rate of revenue growth, (ii) expansion of sales and marketing activities, (iii) timing and extent of spending on content development efforts, and (iv) market acceptance of the Company’s content, products and services.

 

The Company’s management intends to raise additional funds through the issuance of equity securities or debt to enable the Company to meet its obligations for the twelve-month period. However, there can be no assurance that, in the event the Company requires additional financing, such financing will be available at terms acceptable to the Company, if at all. Failure to generate sufficient cash flows from operations and/or raise additional capital could have a material adverse effect on the Company’s ability to achieve its intended business objectives. These factors raise substantial doubt about the Company’s ability to continue as a going concern for the twelve months from the date of this report.

 

The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

 

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Impact of COVID-19

 

On January 30, 2020, the World Health Organization announced a global health emergency because of the spread of a new strain of the novel coronavirus (“COVID-19”). On March 11, 2020, the World Health Organization declared the outbreak of COVID-19, a global pandemic. COVID-19 significantly affected the United States and global economies.

 

The Company experienced significant disruptions to its business and operations due to circumstances related to COVID-19, and delays caused government-imposed quarantines, office closings and travel restrictions, which affected both the Company and its service providers. The Company has significant operations in Manila, Philippines, which was locked down by the government on March 12, 2020 due to concerns related to the spread of COVID-19. As a result of the Philippines government’s call to contain COVID-19, the Company’s animation studio, located in Manila, Philippines, which accounts for approximately 86.9% of the Company’s total revenues on a consolidated basis, was forced to close its offices for significant periods of time from March 2020 through December 2021.

 

In response to the outbreak and business disruption, the Company instituted employee safety protocols to contain the spread, including domestic and international travel restrictions, work-from-home practices, extensive cleaning protocols, social distancing and various temporary closures of its administrative offices and production studio. The Company also implemented a range of actions aimed at temporarily reducing costs and preserving liquidity.

 

The Company has recalled artists and employees to return to the studio, which is currently operating at 41% seat capacity. Approximately 37% of the studio’s employees and contractors currently work from home.

 

While restrictions have eased, the virus may continue to mutate and spread which could materially impact the Company’s business. The full extent of potential impacts on the Company’s business, financing activities and the global economy will depend on future developments, which cannot be predicted due to the uncertain nature of the virus, government mandated shut downs, and its adverse effects, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. These effects could have a material adverse impact on the Company’s business, operations, financial condition and results of operations.

 

 

 

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Basis of Presentation

 

The accompanying condensed consolidated financial statements are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conjunction with the instructions to Form 10-Q of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted. For the three and six months ended June 30, 2023, the condensed consolidated financial statements include the accounts of the Company and its operating subsidiaries Grom Social, TD Holdings, GES, GNS, and Curiosity. The Company recognizes the noncontrolling interest related to its less-than-wholly-owned subsidiary, Curiosity, as equity in the consolidated financial statements separate from the parent entity’s equity. The net loss attributable to the noncontrolling interest is included in net loss in the condensed consolidated statements of operations and comprehensive loss.

 

These condensed consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments, which includes intercompany balances and transactions are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto at December 31, 2022, as presented in the Company’s Annual Report on Form 10-K filed on April 17, 2023 with the SEC.

 

Certain amounts for the prior year period have been reclassified to conform to current year’s presentation.

  

Use of Estimates

 

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The most significant estimates relate to revenue recognition, valuation of accounts receivable, goodwill and other long-lived assets, and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

 

Basic and Diluted Net Income (Loss) Per Share

 

The Company computes net income (loss) per share in accordance with FASB ASC 260, Earnings per Share which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period using the treasury stock method, and convertible preferred stock and convertible debt using the if-converted method. These potentially dilutive shares include 5,266 shares from convertible notes and accrued interest, 161,143 shares from convertible preferred stock, 9,504 shares from vested stock options and 174,235 shares from stock purchase warrants. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.

 

Update to Significant Accounting Policies

 

There have been no new or material changes to the significant accounting policies discussed in the Company’s audited financial statements in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as filed with the SEC on April 17, 2023, that are of significance, or potential significance, to the Company.

 

 

 

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4.

REVENUES

 

The Company recognizes revenue from contracts with customers in accordance with FASB ASC 606. The Company’s main types of revenue contracts consists of the following:

 

Animation Revenue

 

Animation revenue is primarily generated from contracts with customers for preproduction and production services related to the development of animated movies and television series. Preproduction activities include producing storyboards, location design, model and props design, background color and color styling. Production focuses on library creation, digital asset management, background layout scene assembly, posing, animation and aftereffects.

 

The Company provides services under fixed-price contracts. Under fixed-price contracts, the Company agrees to perform the specified work for a pre-determined price. To the extent actual costs vary from estimated costs, the Company’s profit may increase, decrease, or result in a loss.

 

Web Filtering Revenue

  

Web filtering revenue from subscription sales is recognized on a pro-rata basis over the subscription period. Typically, a subscriber purchases computer appliance and a software and support service license for a period of use between one year to five years. The subscriber is billed in full at the time of the sale. The Company immediately recognizes revenue attributable to the computer appliance as it is non-refundable and control passes to the customer. The advanced billing component for software and service is initially recorded as deferred revenue and subsequently recognized as revenue on a straight-line basis over the subscription period.

 

Produced and Licensed Content Revenue

 

Produced and licensed content revenues are generated from the licensing of internally-produced films and television programs.

 

Licensed internally-produced films and television programming, each individual film or episode delivered represents a separate performance obligation and revenues are recognized when the episode is made available to the licensee for exhibition. For license agreements containing multiple deliverables, revenues are allocated based on the relative standalone selling price of each film or episode of a television series, which is based on licenses for comparable films or series within the marketplace. Agreements to license programming are often long term, with collection terms ranging from one to five years.

 

The advanced billing component for licensed content is initially recorded as deferred revenue and subsequently recognized as revenue upon completion of the performance obligation in accordance with the terms of licensing agreement.

 

 

 

14

 

 

Publishing Revenue

 

The Company has engaged the services of a third-party entity to manage the printing, publishing and distribution of the Company’s publishing content. In accordance with the terms agreed with the third party, the Company’s revenue is recognized as 50% of revenue from sales per title after the third-party vendor earns back the costs to develop, author, publish, market, promote and distribute each title, inclusive of any royalties owed to rights holders, following a six months period in market to allow for returns.

 

Publishing revenues are eligible for recognition upon the completion of a six-month sales period to provide for any potential returns and notification from the third-party entity that it has earned back all of its related publishing costs.

 

Other Revenue

 

Other revenue corresponds to ecommerce sales, commercial services, and subscription and advertising revenue from the Grom Social mobile application.

 

The following table depicts the disaggregated revenue listed above within the Sales caption in the condensed consolidated statements of operations:

Schedule of disaggregated revenue
		Three Months Ended June 30, 2023				Three Months Ended June 30, 2022				Six Months Ended June 30, 2023				Six Months Ended June 30, 2022
Animation		$	815,148			$	1,025,966			$	1,872,817			$	2,074,579
Web Filtering			116,574				113,472				207,384				295,716
Publishing			–				–				10,101				–
Other			24,776				144				65,839				412
Total Sales		$	956,498			$	1,139,582			$	2,156,141			$	2,370,707

 

The following table sets forth the components of the Company’s accounts receivable and advanced payments and deferred revenues at June 30, 2023, and December 31, 2022:

Schedule of accounts receivable
		June 30, 2023				December 31, 2022
Billed accounts receivable		$	171,721			$	607,524
Unbilled accounts receivable			531,228				592,932
Allowance for doubtful accounts			(44,301	)			(38,226	)
Total accounts receivable, net		$	658,648			$	1,162,230
Total advanced payments and deferred revenues		$	374,295			$	576,338

 

During the three and six months ended June 30, 2023, the Company had two and three customers, respectively, that accounted for 73.9% and 57.3%, respectively, of total revenues. During the three and six months ended June 30, 2022, the Company had three and four customers, respectively, that account for 78.1% and 81.7% of total revenues, respectively.

 

At June 30, 2023, the Company had two customers that accounted for 79.2% of accounts receivable. At December 31, 2022, the Company had two customers that accounted for 73.6% of accounts receivable.

 

Animation revenue contracts vary with movie contracts typically allowing for progress billings over the contract term while other episodic development activities are typically billable upon delivery of the performance obligation for an episode. These episodic activities typically create unbilled contract assets between episode delivery dates while movies can create contract assets or liabilities based on the progress of activities versus the arranged billing schedule. Revenues from web filtering contracts are all billed in advance and therefore represent contract liabilities until fully recognized on a ratable basis over the contract life.

 

 

 

 

15

 

 

 

5.

INVENTORY

 

Inventory consists of costs incurred to produce animated content for third party customers. Costs incurred to produce the animated content to customers, which include direct production costs, production overhead and supplies are recognized as work-in-progress inventory. As animated content is completed in accordance with the terms stated by the customer, inventory is classified as finished products and subsequently recognized as cost of services as animated content is accepted by and available to the customer. Carrying amounts of animated content are recorded at the lower of cost or net realizable value. Cost is determined using a weighted average cost method for direct production costs, productions overhead and supplies used for completing animation projects.

 

As of June 30, 2023 and December 31, 2022, the Company’s inventory totaled $87,040 and $92,303, respectively, and was comprised of work-in-progress of $85,382 and $85,324, respectively, and finished goods of $1,658 and $6,979, respectively.

 

 

6.	PROPERTY AND EQUIPMENT

 

The following table sets forth the components of the Company’s property and equipment at June 30, 2023 and December 31, 2022: 

Schedule of property and equipment
		June 30, 2023												December 31, 2022
		Cost				Accumulated Depreciation				Net Book Value				Cost				Accumulated Depreciation				Net Book Value
Capital assets subject to depreciation:
Computers, software and office equipment		$	2,510,394			$	(2,467,440	)		$	42,954			$	2,774,308			$	(2,651,872	)		$	122,436
Machinery and equipment			174,666				(171,835	)			2,831				189,641				(182,180	)			7,461
Vehicles			11,776				(11,776	)			–				41,112				(35,504	)			5,608
Furniture and fixtures			376,834				(365,765	)			11,069				409,996				(391,783	)			18,213
Leasehold improvements			1,079,920				(1,014,233	)			65,687				1,172,501				(1,065,148	)			107,353
Total fixed assets			4,153,590				(4,031,049	)			122,541				4,587,558				(4,326,487	)			261,071
Capital assets not subject to depreciation:
Construction in progress			–				–				–				24,605				–				24,605
Total fixed assets		$	4,153,590			$	(4,031,049	)		$	122,541			$	4,612,163			$	(4,326,487	)		$	285,676

 

For the three months ended June 30, 2023 and 2022, the Company recorded depreciation expense of $58,559 and $80,373, respectively. For the six months ended June 30, 2023 and 2022, the Company recorded depreciation expense of $128,435 and $173,047, respectively.

 

7.	OTHER ASSETS

 

The following table sets forth the components of the Company’s other assets at June 30, 2023 and December 31, 2022:

Schedule Of Other Assets
		June 30, 2023				December 31, 2022
Capitalized website development costs		$	870,017			$	1,057,312
Prepublication costs			174,545				164,042
Produced and licensed content costs			452,949				325,966
Deposits			72,921				72,027
Other noncurrent assets			–				7,731
Total other assets		$	1,570,432			$	1,627,078

 

 

 

16

 

 

Capitalized Website Development Costs

 

The Company capitalizes certain costs associated with the development of its Santa.com website after the preliminary project stage is complete and until the website is ready for its intended use. Planning and operating costs are expensed as incurred. Capitalization begins when the preliminary project stage is complete, project plan is defined, functionalities are determined and internal and external resources are identified. Qualified costs incurred during the operating stage of our software applications relating to upgrades and enhancements are capitalized to the extent it is probable that they will result in added functionality, while costs that cannot be separated between maintenance of, and minor upgrades and enhancements to the websites are expensed as incurred.

  

Capitalized website costs are amortized on a straight-line basis over their estimated useful life of three years beginning with the time when it is ready for intended use. Amounts amortized are presented through cost of sales. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

 

Prepublication Costs

 

Prepublication costs include costs incurred to create and develop the art, prepress, editorial, digital conversion and other content required for the creation of the master copy of a book or other media. Prepublication costs are amortized on a straight-line basis over a two- to five-year period based on expected future revenue. The Company regularly reviews the recoverability of the capitalized costs based on expected future revenues.

 

Produced and Licensed Content Costs

 

Produced and licensed content costs include capitalizable direct costs, production overhead, interest and development costs and are stated at the lower of cost, less accumulated amortization, or fair value. Marketing, distribution and general and administrative costs are expensed as incurred.

 

Film, television and direct to consumers through streaming services production and residual costs are expensed over the product life cycle based upon the ratio of the current period’s revenues to estimated remaining total revenues (Ultimate Revenues) for each production. For film productions and direct to consumer services, Ultimate Revenues include revenues from all sources that will be earned within ten years from the date of the initial release. For television series, Ultimate Revenues include revenues that will be earned within ten years from delivery of the first episode, or if still in production, five years from delivery of the most recent episode, if later. Costs of film, television and direct to consumer productions are subject to regular recoverability assessments, which compare the estimated fair values with the unamortized costs. The Company bases these fair value measurements on the Company’s assumptions about how market participants would price the assets at the balance sheet date, which may be different than the amounts ultimately realized in future periods. The amount by which the unamortized costs of film and television productions exceed their estimated fair values is written off. Costs for projects that have been abandoned are written off. Projects that have not been set for production within three years are also written off unless management has committed to a plan to proceed with the project and is actively working on and funding the project.

 

The following tables set forth the components of the Company’s capitalized costs at June 30, 2023 and December 31, 2022:

Schedule of capitalized cost
		June 30, 2023												December 31, 2022
		Gross Carrying Value				Accumulated Amortization				Net Book Value				Gross Carrying Value				Accumulated Depreciation				Net Book Value
Prepublication costs		$	177,635			$	(3,090	)		$	174,545			$	165,524			$	(1,482	)		$	164,042
Produced and licensed content costs			452,949				–				452,949				325,966				–				325,966
Capitalized website development costs			1,123,772				(253,755	)			870,017				1,123,772				(66,460	)			1,057,312
Total capitalized costs		$	1,754,356			$	(256,845	)		$	1,497,511			$	1,615,262			$	(67,942	)		$	1,547,320

 

 

 

17

 

 

For the three months ended June 30, 2023 and 2022, the Company recorded amortization expense of $94,451 and $499, respectively. For the six months ended June 30, 2023 and 2022, the Company recorded amortization expense of $188,903 and $499, respectively.

 

 

8.

LEASES

 

The Company has entered into operating leases primarily for office space. These leases have terms which range from two years to six years, and often include one or more options to renew or in the case of equipment rental, to purchase the equipment. During the six months ended June 30, 2023, the Company did not record any additional right of use (“ROU”) assets or lease liabilities related to new operating leases.

 

The following table presents the future minimum payment obligations and aggregate present value of lease liabilities for operating leases as of June 30, 2023:

Schedule of future minimum lease payment
Remainder of 2023		$	189,580
2024			275,894
2025			277,235
2026			225,200
2027			236,461
Thereafter			–
Total future lease payments			1,204,370
Less: Imputed interest			(258,237	)
Present value of lease liabilities		$	946,133

 

These operating leases are listed as separate line items on the Company's Consolidated Balance Sheets and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are also listed as separate line items on the Company's Consolidated Balance Sheets.

 

Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments.

 

Information related to the Company's operating right-of-use assets and related lease liabilities are as follows:

Schedule of operating right-of-use assets
		Six Months Ended June 30, 2023
Cash paid for operating lease liabilities		$	190,600
Weighted-average remaining lease term in years			2.6
Weighted-average discount rate			10%

    

For the three months ended June 30, 2023 and 2022, the Company recorded rent expenses related to lease obligations of $100,102 and $115,292, respectively. For the six months ended June 30, 2023 and 2022, the Company recorded rent expenses related to lease obligations of $200,204 and $220,632, respectively. Rent expenses related to lease obligations are allocated between cost of goods sold and selling, general and administrative expenses in the Company’s condensed consolidated statement of operations.

 

 

 

18

 

 

9.	GOODWILL AND INTANGIBLE ASSETS

 

Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the Company’s acquisitions is attributable to the value of the potential expanded market opportunity with new customers.

 

The following table sets forth the changes in the carrying amount of the Company’s goodwill as of June 30, 2023 and December 31, 2022:

 

Schedule of goodwill
Balance, January 1, 2022		$	22,376,025
Measurement Period Adjustment			(468,426	)
Impairment charge			(11,340,115	)
Balance, December 31, 2022			10,567,484
Impairments and other adjustments			–
Balance, June 30, 2023		$	10,567,484

 

At December 31, 2022, the Company performed its annual impairment tests as prescribed by ASC 350 on the carrying value of its goodwill and recorded aggregate impairment charges of $11,340,115; of which $6,202,888 was attributed to its TD Holdings Ltd animation business acquired in 2016, and $5,137,227 was attributed to its Curiosity Ink Media original content business acquired in 2021. The determination was made as the result of the Company’s qualitative assessment of each business unit, including the decline in animation revenues and delay in monetization of original content properties.

 

During the year ended December 31, 2022, the Company finalized the purchase price allocation, during the permissible measurement period, and obtained new fair value information for certain identifiable intangible assets related to its acquisition of Curiosity. The revised purchase price allocation decreased goodwill by $468,426 and increased intangible assets by $468,426. These adjustments did not have a significant impact on the Company’s consolidated financial statements.

 

The following table summarizes the individually identifiable intangible assets subsequently recognized:

 

Summary of changes in intangible assets
Licensing agreements		$	341,728
Books and stories content			126,698
Total identifiable intangible assets		$	468,426

 

At June 30, 2023 and December 31, 2022, the carrying amount of the Company’s goodwill was $10,567,484, respectively.

 

 

 

19

 

 

The following table sets forth the components of the Company’s intangible assets at June 30, 2023 and December 31, 2022:

Schedule of intangible assets
						June 30, 2023												December 31, 2022
		Amortization Period (Years)				Gross Carrying Amount				Accumulated Amortization				Net Book Value				Gross Carrying Amount				Accumulated Amortization				Net Book Value
Intangible assets subject to amortization:
Customer relationships			10.00			$	1,526,282			$	(1,068,397	)		$	457,885			$	1,526,282			$	(992,083	)		$	534,199
Licensing agreement			19.60				341,728				(33,338	)			308,390				341,728				(24,641	)			317,087
Subtotal							1,868,010				(1,101,735	)			766,275				1,868,010				(1,016,724	)			851,286
Intangible assets not subject to amortization:
Books and stories content							126,698				–				126,698				126,698				–				126,698
Trade names							4,386,247				–				4,386,247				4,386,247				–				4,386,247
Total intangible assets						$	6,380,955			$	(1,101,735	)		$	5,279,220			$	6,380,955			$	(1,016,724	)		$	5,364,231

 

For the three months ended June 30, 2023 and 2022, the Company recorded amortization expense of $42,505 and $80,373, respectively. For the six months ended June 30, 2023 and 2022, the Company recorded amortization expense of $85,011 and $173,047, respectively.

 

The following table provides information regarding estimated remaining amortization expense for intangible assets subject to amortization for each of the following years ending December 31:

Schedule of amortization
Remainder of 2023		$	85,011
2024			170,022
2025			170,022
2026			93,708
2027			17,394
Thereafter			230,118
Total remaining intangible assets subject to amortization		$	766,275

 

10.	ACCRUED LIABILITIES

 

The following table sets forth the components of the Company’s accrued liabilities at June 30, 2023 and December 31, 2022:

Schedule accrued liabilities
		June 30, 2023				December 31, 2022
Executive and employee compensation		$	115,671			$	102,151
Interest on convertible notes and promissory notes			101,231				84,292
Other accrued expenses and liabilities			75,619				192,511
Total accrued liabilities		$	292,521			$	378,954

 

 

 

20

 

 

11.	RELATED PARTY TRANSACTIONS AND PAYABLES

 

Darren Marks’s Family

 

The Company has engaged the family of Darren Marks, its Chief Executive Officer, to assist in the development of the Grom Social website and mobile application. These individuals create and produce original short form content focusing on social responsibility, anti-bullying, digital citizenship, unique blogs, and special events. Sarah Marks, the wife of Mr. Marks, and Zach Marks, Luke Marks, Jack Marks, Dawson Marks, Caroline Marks and Victoria Marks, each Mr. Marks’s children, are, or have been, employed by or independently contracted with the Company.

 

As of June 30, 2023, Zach and Luke Marks were employed by Grom Social as its Founder and Content Creator, and Content Coordinator, respectively, and receive annual salaries of $103,000 and $30,000, respectively.

 

For the three months ended June 30, 2023 and 2022, the Marks family was paid a total of $32,500 and $30,000, respectively. For the six months ended June 30, 2023 and 2022, the Marks family was paid a total of $67,917 and $30,000, respectively.

 

Compensation for services provided by the Marks family is expected to continue for the foreseeable future.

 

Liabilities Due to Executive Officers and Directors

 

On July 11, 2018, our director Dr. Thomas Rutherford loaned the Company $50,000. The loan bears interest at a rate of 10% per annum and was due on August 11, 2018. On April 21, 2023, the Company repaid the $50,000 of outstanding principal on the note.

 

As of June 30, 2023 and December 31, 2022, the aggregate related party payables balance was $23,904 and $72,383, respectively, of which $23,904 and $22,383 of accrued interest were reported under accrued liabilities on the Company’s Consolidated Balance Sheets.

 

 

12.	CONVERTIBLE NOTES

 

The following tables set forth the components of the Company’s convertible notes as of June 30, 2023 and December 31, 2022:

Schedule of convertible debt
		June 30, 2023				December 31, 2022
8% Unsecured Convertible Note (Curiosity)		$	278,000			$	278,000
12% Senior Convertible Notes with Original Issuance Discounts (OID Notes)			75,000				75,000
12% Senior Secured Convertible Notes (TDH Secured Notes)			136,510				204,907
12% Senior Secured Convertible Notes (Additional Secured Notes)			25,937				38,932
Loan discounts			(14,751	)			(25,165	)
Total convertible notes, net			500,696				571,664
Less: current portion of convertible notes, net			(500,696	)			(503,465	)
Convertible notes, net		$	–			$	68,199

 

 

 

21

 

 

8% Unsecured Convertible Notes – Curiosity

 

On July 29, 2021, the Company entered into a membership interest purchase agreement with Curiosity and the holders of all of Curiosity’s outstanding membership interests, for the purchase of 80% of Curiosity’s outstanding membership interests from the sellers. Pursuant to the purchase agreement, the Company issued 8% eighteen-month convertible promissory notes in the aggregate principal amount $278,000 to pay-down and refinance certain outstanding loans and advances previously made by certain of its principals. The notes are convertible into shares of common stock of the Company at a conversion price of $98.40 per share but may not be converted if, after giving effect to such conversion, the noteholder and its affiliates would beneficially own in excess of 9.99% of the Company’s outstanding common stock. The notes may be prepaid at any time, in whole or in part. The notes are subordinate to the Company’s senior indebtedness.

 

As of June 30, 2023, the principal balance of the Curiosity note was $278,000.

 

10% Senior Secured Convertible Note with Original Issuance Discount (L1)

 

On September 14, 2021, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with L1 Capital Global Master Fund (“L1”) pursuant to which it issued (i) a 10% original issue discount senior secured convertible note in the principal amount of $4,400,000 to L1 (the “L1 Note”) and (ii) a 5 five-year warrant to purchase 27,109 shares of the Company’s common stock at an exercise price of $126.00 per share (“Warrant Shares”) in exchange for $3,960,000 (the “First Tranche Financing”). The Purchase Agreement also provided, subject to shareholder approval, for the issuance, subject to certain conditions, of an additional $1,500,000 of notes and warrants to purchase 9,259 shares of common stock (the “Second Tranche Financing”) on the same terms.

 

On October 20, 2021, the Company and L1 entered into an amended and restated purchase agreement which increased the amount of the Second Tranche Financing from $1,500,000 to $6,000,000 and provides (i) for an amended and restated 10% original issue discount senior secured convertible note to be issued in exchange for the L1 Note pursuant to the Purchase Agreement and (ii) for the issuance of a five-year warrant to purchase 34,706 shares of the Company’s common stock at an exercise price of $126.00 per share.

 

During the year ended December 31, 2022, the Company issued an aggregate 191,192 shares of common stock to L1 upon the conversion of $4,125,000 of outstanding principal.

 

As of June 30, 2023, the principal balance was $0 and all associated loan discounts were fully amortized.

 

10% Senior Secured Convertible Note with Original Issuance Discount (L1– Second Tranche)

 

On January 20, 2022 (the “Second Tranche Closing”), the Company and L1 Capital closed on the Second Tranche of the offering, resulting in the issuance of (i) a $1,750,000 10% Original Issue Discount Senior Secured Convertible Note, due July 20, 2023, (the “Second Tranche Note”); and (ii) a five year warrant to purchase 10,123 shares of Common Stock of the Company at an exercise price of $126.00 per share (the “Second Tranche Warrants”), in exchange for consideration of $1,575,000 (i.e. the face amount less the 10% Original Issue Discount of $175,000).

 

During the year ended December 31, 2022, the Company issued an aggregate 108,025 shares of common stock and repaid $1,146,901 in cash to L1 upon the conversion of $1,750,000 of outstanding principal.

 

As of June 30, 2023, the principal balance was $0 and all associated loan discounts were fully amortized.

 

 

 

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10% Secured Convertible Notes with Original Issuance Discounts (“OID Notes”)

 

During the year ended December 31, 2017, the Company issued a series of secured, convertible notes with original issuance discounts to accredited investors. The notes were issued with original issuance discounts of 10.0%, bear interest at a rate of 10% per annum (payable semiannually in cash), and carry a two-year term with a fixed conversion price of $748.80. As of June 30, 2023, the remaining principal balance of these notes was $25,000.

 

During the year ended December 31, 2018, the Company issued a series of secured, convertible notes with original issuance discounts to accredited investors. The notes were issued with original issuance discounts of 20.0%, bear interest at a rate of 10% per annum (payable semiannually in cash), and carry a two-year term with a fixed conversion price of $480.00. As of June 30, 2023, the remaining principal balance of these notes was $50,000.

 

As of June 30, 2023, the principal balance of these notes was $75,000 and all associated loan discounts were fully amortized. No notices of default or demands for payment have been received by the Company.

 

12% Senior Secured Convertible Notes (“TDH Secured Notes”)

 

On March 16, 2020, the Company sold (the “TDH Secured Notes Offering”) an aggregate $3,000,000 of its 12% senior secured convertible notes (the “TDH Secured Notes”), to eleven accredited investors (the “TDH Secured Note Lenders”), pursuant to a subscription agreement with the TDH Secured Note Lenders. Interest on the TDH Secured Notes accrues on the outstanding principal amount at the rate of 12% per annum. Principal and interest on the TDH Secured Notes are payable monthly, on an amortized basis over 48 months, with the last payment due on March 16, 2024. Pursuant to the TDH Secured Notes, TD Holdings will pay amounts due under the TDH Secured Notes. Prepayment of amounts due under TDH Secured Notes is subject to a prepayment penalty in an amount equal to 4% of the amount prepaid.

 

The TDH Secured Notes are convertible at the option of the holders at 75% of the average sales price of the Company’s common stock over the 60 trading days immediately preceding conversion provided that the conversion price shall not be less than $96.00 per share.

 

The Company’s obligations under the TDH Secured Notes, are secured by Grom Holdings’ shares of stock of TDH, and of its wholly owned subsidiary, TDAHK. The TDH Secured Notes rank equally and ratably on a pari passu basis with (i) the other TDH Secured Notes and (ii) the Original TDH Notes issued by the Company pursuant to TDH Share Sale Agreement.

 

If the Company sells the animation studio located in Manila, Philippines, which is currently owned by TDH through TDAHK (the “Animation Studio”), for more than $12,000,000, and so long as any amount of principal is outstanding under the TDH Secured Notes, the Company will pay the TDH Secured Notes holders from the proceeds of the sale (i) all amounts of principal outstanding under the TDH Secured Notes, (ii) such amount of interest which would be due and payable assuming the TDH Secured Notes were held to maturity (minus any amounts of interest previously paid hereunder), and (iii) an additional 10% of the amount of principal outstanding under the TDH Secured Notes within five days of the closing of such sale.

 

In connection with the issuance of the TDH Secured Notes, the Company issued to each TDH Secured Note holder shares of common stock equal to 20% of the principal amount of such holder’s TDH Secured Note, divided by $96.00. Accordingly, an aggregate of 6,250 shares of common stock were issued to the TDH Secured Note holders on March 16, 2020. These shares were valued at $420,000, or $67.20 per share, which represents fair market value. The Company recorded the value of these shares as a loan discount to be amortized as interest expense over the term of the notes.

 

As of June 30, 2023, the principal balance of these notes was $136,510 and the remaining balance on the associated loan discounts was $12,396.

 

 

 

23

 

 

12% Senior Secured Convertible Notes (Additional Secured Notes)

 

On March 16, 2020, the Company issued to seven accredited investors (the “Additional Secured Note Lenders”) an aggregate of $1,060,000 of its 12% senior secured convertible notes (the “Additional Secured Notes”) in a private offering pursuant to a subscription agreement with substantially the same terms as the TDH Secured Notes except that the Additional Secured Notes are secured by all of the assets of the Company other than the shares and other assets of TDH and TDAHK, pursuant to a security agreement by and among the Company and the Additional Secured Note Lenders.

 

Interest on the Additional Secured Notes accrues on the outstanding principal amount at the rate of 12% per annum. Principal and interest on the Additional Secured Notes are payable monthly, on an amortized basis over 48 months, with the last payment due on March 16, 2024. Prepayment of the amounts due under the Additional Secured Notes is subject to a prepayment penalty of 4% of the amount prepaid.

 

The Additional Secured Notes are convertible at the option of the holders at 75% of the average sales price of the Company’s common stock over the 60 trading days immediately preceding conversion provided that the conversion price shall not be less than $96.00 per share.

 

In connection with the issuance of the Additional Secured Notes, the Company issued to each Additional Secured Note Lender shares of common stock equal to 20% of the principal amount of such holder’s Additional Secured Note, divided by $96.00. Accordingly, an aggregate of 2,208 shares of common stock were issued. These shares were valued at $148,000, or $67.20 per share, which represents fair market value. The Company recorded the value of these shares as a loan discount to be amortized as interest expense over the term of the related convertible notes.

 

As of June 30, 2023, the principal balance of these notes was $25,937 and the remaining balance on the associated loan discounts was $2,355.

 

Future Minimum Principal Payments

 

The remaining future principal repayments based upon the maturity dates of the Company’s borrowings for each of the next five years are as follows:

Schedule of future debt maturity payments
Remainder of 2023		$	439,760
2024			75,687
2025 and thereafter			–
Total Convertible notes principal amount payable.		$	515,447

 

 

13.	EMPLOYEE BENEFIT PLAN

  

The Company’s subsidiary, Top Draw Animation, Inc., has an unfunded, non-contributory defined benefit plan covering its permanent employees.

 

Under the existing regulatory framework, the Company is required to pay eligible employees at least the minimum regulatory benefit upon retirement, which provides a retirement benefit equal to 22.5 days’ pay for every year of credited service, subject to age and service requirements. The regulatory benefit is paid in a lump sum upon retirement. The existing regulatory framework does not require minimum funding of the plan.

 

 

 

24

 

 

Retirement benefit expenses and liabilities are determined in accordance with an actuarial study made for the plan utilizing the net interest approach which disaggregates the defined benefit cost into the following components: service costs (cost of services received); net interest (financing effect of paying for benefits in advance or in arrears); and remeasurements (period-to-period fluctuations in the amounts of defined benefit obligations and plan assets).

 

Under the net interest approach, service cost and net interest on the defined benefit liability (asset) are both recognized in the statement of operations, while remeasurements of the defined benefit liability (asset) are recognized in other comprehensive income. Remeasurements recognized in other comprehensive income shall not be reclassified to profit or loss in a subsequent period.

 

The amount of the defined benefit liability reported under other noncurrent liabilities in the Company’s Consolidated Balance Sheet is determined as follows:

Schedule of defined benefit liability
		June 30, 2023				December 31, 2022
Benefit obligation		$	233,433			$	434,974
Plan assets			–				–
Total		$	233,433			$	434,974

 

The components of the accumulated benefit cost to be recognized under selling, general and administrative expense in consolidated statement of operations are the service cost (current service cost, past service cost or credit and settlement gains or losses) and net interest expense on the net defined benefit liability:

Schedule of components of accumulated benefit cost
		June 30, 2023				June 30, 2022
Current service cost		$	9,164			$	2,471
Net interest expense			8,857				–
Total		$	18,021			$	2,471

 

The change in the accumulated benefit cost in the Company’s Condensed Consolidated Balance Sheet for the six months ended June 30, 2023 is as follows:

Schedule of changes in accumulated benefit cost
		2023
Balance, January 1		$	434,974
Foreign currency translation			2,398
Expense recognized in other comprehensive income			18,021
Remeasurement on actuarial gain (loss) recognized			(44,351	)
Contributions paid			(177,609	)
Balance, June 30		$	233,433

 

 

 

25

 

 

The cumulative amount of actuarial gains recognized in other comprehensive income for the six months ended June 30, 2023 and 2022 is as follows:

Schedule of actuarial gains
		2023				2022
Balance, January 1		$	(36,682	)		$	60,518
Foreign currency translation			–				–
Actuarial gain (loss)			(42,733	)			–
Balance, June 30			79,405				60,518
Tax effect			19,851				(12,439	)
Cumulative actuarial gain (loss), net of tax		$	(59,544	)		$	48,079

 

The assumptions used to determine retirement benefits for the six months ended June 30, 2023 are as follows:

Schedule of assumption used to determine retirement benefits
		June 30, 2023
Discount rate			6.22%
Salary increase rate			2.00%

 

 

14.	INCOME TAXES

 

In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon currently known facts and circumstances and applies that rate to its year-to-date earnings or losses. The Company’s effective tax rate is based on expected income and statutory tax rates and takes into consideration permanent differences between financial statement and tax return income applicable to the Company in the various jurisdictions in which the Company operates. The effect of discrete items, such as changes in estimates, changes in rates or tax status, and unusual or infrequently occurring events, is recognized in the interim period in which the discrete item occurs. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the result of new judicial interpretations or regulatory or tax law changes.

 

The Company’s interim effective tax rate, inclusive of discrete items, for the three and six months ended June 30, 2023 and 2022 was 0%, respectively, due to recurrent net losses for the periods presented.

 

15.	STOCKHOLDERS’ EQUITY

 

Preferred Stock

 

The Company is authorized to issue 25,000,000 shares of preferred stock, par value of $0.001 per share.

 

Series A Preferred Stock

 

As of June 30, 2023 and December 31, 2022, the Company had no shares of Series A Stock issued and outstanding.

 

 

 

26

 

 

Series B Preferred Stock

 

As of June 30, 2023 and December 31, 2022, the Company had no shares of Series B Stock issued and outstanding, respectively.

 

Series C Preferred Stock

 

On May 20, 2021, the Company filed with the Secretary of State of the State of Florida a Certificate of Designation of Preferences, Rights and Limitations of Series C Stock designating 10,000,000 shares as Series C Preferred Stock (the “Series C Stock”). The Series C Stock ranks senior and prior to all other classes or series of the Company’s preferred stock and common stock.

 

The holder may, at any time after the 6-month anniversary of the issuance of the shares of Series C Preferred Stock, convert such shares into common stock at a conversion rate of $57.60 per share. In addition, the Company may, at any time after the issuance of the shares, convert any or all of the outstanding shares of Series C Preferred Stock at a conversion rate of $57.60 per share.

 

Each share of Series C Stock entitles the holder to 1.5625 votes for each share of Series C Stock. The consent of the holders of at least two-thirds of the shares of Series C Stock is required for the amendment to any of the terms of the Series C Stock, to create any additional class of stock unless the stock ranks junior to the Series C Stock, to make any distribution or dividend on any securities ranking junior to the Series C Stock, to merge or sell all or substantially all of the assets of the Company or acquire another business or effectuate any liquidation of the Company.

 

Cumulative dividends accrue on each share of Series C Stock at the rate of 8% per annum of the stated value of $1.00 per share and are payable in arrears quarterly commencing 90 days from issuance. The dividend shall be payable in shares of common stock (a “PIK Dividend”) and are be due and payable on the date on which such PIK Dividend was declared.

 

Upon a liquidation, dissolution or winding up of the Company, the holders of the Series C Stock are entitled to $1.00 per share plus all accrued and unpaid dividends. No distribution may be made to holders of shares of capital stock ranking junior to the Series C Stock upon a liquidation until Series C stockholders receive their liquidation preference. The holders of 66 2/3% of the then outstanding shares of Series C Stock, may elect to deem a merger, reorganization or consolidation of the Company into or with another corporation, not affiliated with said majority, or other similar transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of in exchange for property, rights or securities distributed to holders thereof by the acquiring person, firm or other entity, or the sale of all or substantially all of the assets of the Company.

 

On January 24, 2022, the Company issued 686 shares of common stock to a stockholder upon the conversion of 39,500 shares of Series C preferred stock.

 

As of June 30, 2023 and December 31, 2022, the Company had 9,281,809 shares of Series C Stock issued and outstanding, respectively.

 

For the three months and six ended June 30, 2023, the Company declared cumulative dividends totaling $187,216 and $371,273, respectively, for amounts accrued on its Series C Stock.

 

Common Stock

 

The Company is authorized to issue 500,000,000 shares of common stock, par value of $0.001 per share and had 9,044,361 and 2,514,858 shares of common stock issued and outstanding as of June 30, 2023 and December 31, 2022, respectively.

 

 

 

27

 

 

Reverse Stock Split

 

On October 4, 2022, the Board and shareholders approved the granting of authority to the Board to amend the Company’s articles of incorporation to effect a reverse stock split of the issued and outstanding shares of its common stock, by a ratio of no less than 1-for-2 and no more than 1-for-30, with the exact ratio to be determined by the Board in its sole discretion, and with such reverse stock split to be effective at such time and date, if at all, as determined by the Board in its sole discretion. On December 9, 2022, the Board effected a 1-for-30 reverse stock split in connection with the Company’s continued listing of its common stock on Nasdaq.

 

PIPE Offering and Related Waiver

 

On January 25, 2023, the Company consummated a private placement (the “PIPE Offering”) pursuant to the terms of the Securities Purchase Agreement dated as of January 25, 2023 (the “2023 SPA”) that it entered into with institutional investors, in which the Company issued (i) 100,000 shares of common stock; (ii) 1,327,434 purchase warrants (the “Purchase Warrants”) to purchase an aggregate of 2,323,010 shares of common stock; and (iii) 1,227,434 pre-funded warrants (the “Pre-Funded Warrants”) to purchase an aggregate of 1,227,434 shares of common stock. The purchase price of each share of common stock and associated Purchase Warrant was $2.26. The purchase price of each Pre-Funded Warrant was $2.25. The aggregate gross proceeds of the PIPE Offering was approximately $3.0 million, before deducting fees to the placement agent and other expenses payable by the Company. EF Hutton, division of Benchmark Investments, LLC, acted as the exclusive placement agent in connection with the PIPE Offering.

 

In connection with the PIPE Offering, the Company entered into a Waiver (the “Waiver”) with L1 Capital Global Opportunities Master Fund (“L1”) waiving certain provisions of the Securities Purchase Agreement, dated as of September 14, 2021 (the “2021 SPA”), by and between it and L1. Pursuant to the terms of the Waiver, L1 waived certain provisions of the 2021 SPA and in consideration thereof, the Company (i) issued 150,000 purchase warrants substantially similar to the Purchase Warrants issued in connection with the 2023 SPA; and (ii) paid a cash fee of $50,000 to L1.

 

Pursuant to the 2023 SPA, the Company is obligated to hold a special stockholders’ meeting no later than 60 days following the date of the Purchase Agreement to solicit the approval of the issuance of the shares, Warrants and the shares of common stock underlying the Warrants in compliance with the rules of The Nasdaq Stock Market LLC (without regard to any limitations on exercise set forth in the Warrants or the Pre-Funded Warrants. On March 27, 2023, the Company held a special meeting of stockholders and the stockholders approved the PIPE Offering.

 

In connection with the PIPE Offering, the Company entered into a Registration Rights Agreement with the Purchasers, dated January 25, 2023 (the “Registration Rights Agreement”). The Registration Rights Agreement provides that we shall file a registration statement covering the resale of all of the Registrable Securities (as defined in the Registration Rights Agreement) with the SEC. The Registration Statement was filed and declared effective by the SEC on February 9, 2023.

 

Common Stock Issued in Exchange for Consulting, Professional and Other Services

 

During the three and six months ended June 30, 2023, the Company issued 0 and 23,334 shares of common stock, respectively, with a fair market value of $0 and $31,968, respectively, to contractors for services rendered.

 

During the three and six months ended June 30, 2022, the Company issued 1,464 and 3,950 shares of common stock, respectively, with a fair market value of $18,660 and $95,482, respectively, to contractors for services rendered.

 

 

 

28

 

 

Common Stock Issued in Connection with the Conversion of Convertible Note Principal and Accrued Interest

 

During the three and six months ended June 30, 2022, the Company issued 27,778 and 219,960 shares of common stock, respectively, upon the conversion of $450,000 and $4,575,000, respectively, in convertible note principal and accrued interest.

 

Common Stock Issued in Connection with Series C Stock Dividends

 

During the three and six months ended June 30, 2022, the Company issued 5,895 and 11,737 shares of common stock, respectively, valued at $187,455 and $646,523, respectively, for cumulative dividends declared on its Series C Stock.

 

Stock Purchase Warrants

 

Stock purchase warrants are accounted for as equity in accordance with ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity.

 

The following table reflects all outstanding and exercisable warrants at June 30, 2023 and December 31, 2022. All warrants are exercisable for a period of three to five years from the date of issuance:

Schedule of warrants
		Number of Warrants Outstanding				Weighted Average Exercise Price				Weighted Average Remaining Contractual Life (Yrs.)
Balance January 1, 2022			141,572			$	132.00				1.75
Warrants issued			4,280,355				3.20
Warrants exercised			(279,069	)			–
Warrants forfeited			(5,678	)			–
December 31, 2022			4,137,180			$	7.29				4.89
Warrants issued			3,812,944			$	2.26
Warrants exercised			(7,775,889	)			–
Warrants forfeited			–				–
Balance June 30, 2023			174,235			$	107.32				3.24

  

On January 31, 2023, in connection with the PIPE Offering described above, the Company issued 1,327,434 Purchase Warrants to purchase an aggregate of 2,323,010 shares of common stock. The Purchase Warrants are immediately exercisable for $2.26 per share of common stock. The Purchase Warrant holders may also effect an alternative cashless exercise on or after the later of (i) the 30 day anniversary of the initial exercise date and (ii) the stockholder approval date (as defined in the 2023 SPA). In such event, the aggregate number of shares of common stock issuable in such alternative cashless exercise shall equal the product of the aggregate number of shares of common stock that would be issuable upon exercise of the Purchase Warrants and 0.85.

 

 

 

29

 

 

The Purchase Warrants were valued using the Black-Scholes option pricing model with the following average assumptions: the Company’s stock price on the date of the issuance ($2.15), an expected dividend yield of 0%, a historical volatility of 176.6%, a risk-free interest rate of 3.6%, and an expected term of one year. The Purchase Warrants were allocated a relative fair value of $1,387,429.

 

On January 31, 2023, the Company also issued 150,000 purchase warrants, substantially similar to the Purchase Warrants issued in connection with the PIPE Offering, to purchase an aggregate of 262,500 shares of common stock. The Purchase Warrants were valued using the Black-Scholes option pricing model with the following average assumptions: the Company’s stock price on the date of the issuance ($2.15), an expected dividend yield of 0%, a historical volatility of 176.6%, a risk-free interest rate of 3.6%, and an expected term of 1 year. The fair value of the purchase warrants was $350,039.

 

During the six months ended June 30, 2023, the Company issued 1,262,787 shares of common stock upon the exercise of 1,262,787 prefunded warrants for gross proceeds of $12,309.

 

During the six months ended June 30, 2023, the Company also issued 5,143,382 shares of common stock upon the cashless exercise of 6,513,102 purchase warrants.

 

As of June 30, 2023, the outstanding stock purchase warrants had an aggregate intrinsic value of $0.

 

Stock Options

 

The following table represents all outstanding and exercisable stock options as of June 30, 2023:

Schedule of options
Year Issued		Options Issued				Options Forfeited				Options Outstanding				Vested Options				Weighted Average Exercise Price				Weighted Average Remaining Life (Yrs.)
2013			8,058				(870	)			7,188				7,188			$	230.40				0.22
2018			62				(62	)			–				–				–				–
2021			6,950				–				6,950				2,317			$	89.40				3.08
Total			15,070				(932	)			14,138				9,505			$	161.08				1.62

 

During the three and six months ended June 30, 2023, the Company recorded $44,821 and $89,643, respectively, in stock-based compensation costs related to stock options. During the three and six months ended June 30, 2022, the Company recorded $89,241 and $137,383, respectively, in stock-based compensation costs related to stock options. Stock-based compensation expense is reported in selling, general and administrative on the Company’s Condensed Consolidated Statement of Operations and Comprehensive Loss.

 

As of June 30, 2023, the total unrecognized cost of stock-based compensation related to stock options was $97,308. This cost is expected to be recognized over a weighted average period of 1.08 years.

 

As of June 30, 2023, the outstanding stock options had an aggregate intrinsic value of $0.

 

 

 

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16.	COMMITMENTS AND CONTINGENCIES

 

In the ordinary course of business, the Company and its subsidiaries are subject to various pending and potential legal actions, arbitration proceedings, claims, investigations, examinations, regulatory proceedings, information gathering requests, subpoenas, inquiries and matters relating to compliance with laws and regulations (collectively, legal proceedings).

 

Based on the Company’s current knowledge, and taking into consideration its legal expenses, the Company does not believe it is a party to, nor are any of its subsidiaries the subject of, any legal proceeding that would have a material adverse effect on the Company’s consolidated financial condition or liquidity.

 

See also Note 8 (“Leases”).

 

See also Note 14 (“Income Taxes”).

 

17.	SUBSEQUENT EVENTS

 

In accordance with FASB ASC 855-10, Subsequent Events, the Company has analyzed its operations subsequent to June 30, 2023 to the date these condensed consolidated financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these condensed consolidated financial statements, except as follows:

 

Reverse Stock Split

 

On August 8, 2023, the Company’s shareholders approved the granting of authority to the Company’s Board of Directors (“Board”) to amend its articles of incorporation to effect a reverse stock split of the issued and outstanding shares of its common stock, by a ratio of no less than 1-for-2 and no more than 1-for-20, with the exact ratio to be determined by the Board in its sole discretion, and with such reverse stock split to be effective at such time and date, if at all, as determined by the Board in its sole discretion. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto. The management's discussion and analysis contain forward-looking statements, such as statements of our plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words "believe," "plan," "intend," "anticipate," "target," "estimate," "expect" and the like, and/or future tense or conditional constructions ("will," "may," "could," "should," etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under "Risk Factors," which appear in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which we filed with the Securities and Exchange Commission on April 17, 2023, that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.

 

Overview

 

We are a media, technology and entertainment company that focuses on (i) delivering content to children under the age of 13 years in a safe secure platform that is compliant with the Children’s Online Privacy Protection Act (“COPPA”) and can be monitored by parents or guardians, (ii) creating, acquiring, and developing the commercial potential of Kids & Family entertainment properties and associated business opportunities, (iii) providing world class animation services, and (iv) offering protective web filtering solutions to block unwanted or inappropriate content. We conduct our business through our following subsidiaries:

 

	·	Grom Social, Inc. (“Grom Social”), incorporated in the State of Florida on March 5, 2012, operates our social media network designed for children under the age of 13 years.
	·	TD Holdings Limited (“TD Holdings”), incorporated in Hong Kong on September 15, 2005, operates through its two wholly-owned subsidiaries: (i) Top Draw Animation Hong Kong Limited, a Hong Kong corporation (“Top Draw HK”) and (ii) Top Draw Animation, Inc., a Philippines corporation (“Top Draw Philippines”). The group’s principal activity is the production of animated films and television series.
	·	Grom Educational Services, Inc. (“GES”), incorporated in the State of Florida on January 17, 2017, operates our web filtering services provided to schools and government agencies.
	·	Grom Nutritional Services, Inc. (“GNS”), incorporated in the State of Florida on April 19, 2017, intends to market and distribute nutritional supplements to children. GNS has been nonoperational since its inception.
	·	Curiosity Ink Media, LLC (“CIM”), organized in the State of Delaware on January 9, 2017, develops the commercial potential of Kids & Family entertainment properties and associated business opportunities.

 

We own 100% of each of Grom Social, TD Holdings, GES and GNS, and 80% of CIM.

  

Business Description

 

Grom Social

 

Grom Social is a growing social media platform and original content provider of entertainment for children under 13 years of age, which provides safe and secure digital environments for kids that can also be monitored by their parents or guardians. We initially launched our Grom mobile app in 2019. We are currently working to rebrand the app, with a focus on improving the in-app user experience and incorporating new, unique features. The app updates for iOS are anticipated to be available in late 2023. We remain committed to increasing user growth and expanding our reach in an effort to monetize the app.

 

 

 

 

Top Draw Animation

 

Top Draw Animation (“Top Draw”) is an award-winning, full-service production and pre-production animation studio that specializes in providing two-dimensional digital production services for animated television series and movies on a contract basis or under co-production arrangements. Top Draw’s pre-production services include planning and creating storyboards, location design, model and props design, background color and color styling. Its production services focus on library creation, digital asset management, background layout scene assembly, posing, animation and after-effects.

 

As part of its COVID-19 protocols, Top Draw currently operates at approximately 41% seat capacity at its studio. However, it supplements its reduced studio capacity through its work-from-home program which accounts for approximately 37% of its workforce. For the three and six months ended June 30, 2023, our animation services revenues trailed the levels that we recognized during the corresponding periods of 2022. This is largely attributable to changes in our production schedule resulting from customer delays in providing us with necessary materials and content, changes to project start dates, or cancellation of an anticipated project. As a byproduct, we realized higher production costs by deploying the resources necessary to service our customers’ needs efficiently and effectively prior to these changes to our schedule.

 

During the six months ended June 30, 2023, we secured approximately $1.6 million in new contracts for Top Draw. These projects are all expected to commence during the year and have service periods of up to twelve months in length. At June 30, 2023, our production backlog was valued at approximately $2.2 million. Based upon our current production schedule, we believe that our efficiency and productivity will increase through December 31, 2023.

 

Grom Educational Services

 

Grom Educational Services provides scalable network monitoring and security solutions that are compliant with Children Internet Protection Act (CIPA) guidelines. Our goal is to enhance safety, good digital citizenship, education, and social responsibility by giving schools and parents the ability to monitor and filter their students’ and children’s access to technology while simultaneously educating them.

 

Our products include web filtering appliances and software, reporting and event management solutions, and our Digital Citizenship License (DCL) Program. The proprietary DCL program is a series of videos design to teach minors about appropriate online behavior. On November 2, 2022, we expanded our educational services product offering by teaming up with tech management company, Radix, to offer its cloud-based classroom management solution, TeacherView. Radix’s TeacherView is equipped with a built-in video conference system to enable remote (at home), local or hybrid learning. The program gives educators an "over the shoulder" teaching experience to help oversee an enhanced learning experience.

 

During the six months ended June 30, 2023, we entered into new agreements totaling $251,394. The service contracts range between one and five years in length.

 

Curiosity Ink Media

 

Curiosity Ink Media (“Curiosity”) is a global media company that develops, acquires, builds, grows and maximizes the short, mid, and long-term commercial potential of Kids & Family entertainment properties and associated business opportunities. Driven by a best-in-class leadership team, Curiosity’s multi-faceted intellectual property library is designed to amass ongoing value through strategic stewardship, partnerships, and highly targeted market entry.

 

Depending upon the nature, Curiosity’s original properties can require a substantial amount of time to develop and produce. The Company continuously evaluates the viability of its entertainment properties, and works with its strategic partners and advisors to determine the appropriate form of media and channels of distribution for each property to ensure their greatest potential for success.

 

We continue to develop our Santa.com website. The digital holiday entertainment hub features a bold look, an ecommerce marketplace where consumers can fulfill all of their holiday needs, and an improved user experience featuring a virtual North Pole with curated gifting ideas, decor and entertainment tips, alongside other immersive content for kids and adults.

 

Furthermore, we recently entered into production on two properties with the content production, development and distribution company, Toon2Tango: (i) our feature film titled Santa.com, an original animated musical holiday special set for release in the fall of 2025, and (ii) Hey Fuzzy Yellow!, an animated preschool series scheduled to air in several markets beginning in early 2025.

 

 

 

 

Impact of COVID-19

 

On January 30, 2020, the World Health Organization announced a global health emergency because of the spread of a new strain of the novel coronavirus (“COVID-19”). On March 11, 2020, the World Health Organization declared the outbreak of COVID-19, a global pandemic. COVID-19 has and continues to significantly affect the United States and global economies.

 

We have experienced significant disruptions to our business and operations due to circumstances related to COVID-19, and delays caused government-imposed quarantines, office closings and travel restrictions, which affect both us and our service providers. We have significant operations in Manila, Philippines, which was locked down by the government on March 12, 2020 due to concerns related to the spread of COVID-19. As a result of the Philippines government’s call to contain COVID-19, our Manila-based animation studio, which accounts for approximately 85% of our total revenues on a consolidated basis, was forced to close its offices for significant periods of time from March 2020 through December 2021.

 

In response to the outbreak and business disruption, we have instituted employee safety protocols to contain the spread, including domestic and international travel restrictions, work-from-home practices, extensive cleaning protocols, social distancing and various temporary closures of its administrative offices and production studio. We have implemented a range of actions aimed at temporarily reducing costs and preserving liquidity.

 

We have recalled artists and employees to return to the studio, which is currently operating at 41% seat capacity. Approximately 37% of our studio’s employees and contractors currently work from home.

 

While restrictions have eased, the virus may continue to mutate and spread which could materially impact our business. The full extent of potential impacts on our business, financing activities and the global economy will depend on future developments, which cannot be predicted due to the uncertain nature of the virus, government mandated shut downs, and its adverse effects, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. These effects could have a material adverse impact on our business, operations, financial condition and results of operations.

  

Recent Events

 

PIPE Offering and Related Waiver

 

On January 25, 2023, we consummated a private placement (the “PIPE Offering”) pursuant to the terms of the Securities Purchase Agreement, dated as of January 25, 2023 (the “2023 SPA”) that we entered into with institutional investors, in which we issued (i) 100,000 shares of common stock; (ii) 1,327,434 purchase warrants (the “Purchase Warrants”) to purchase an aggregate of 2,323,010 shares of common stock; and (iii) 1,227,434 pre-funded warrants (the “Pre-Funded Warrants”) to purchase an aggregate of 1,227,434 shares of common stock. The purchase price of each share of common stock and associated Purchase Warrant was $2.26. The purchase price of each Pre-Funded Warrant was $2.25. The aggregate gross proceeds of the PIPE Offering was approximately $3.0 million, before deducting fees to the placement agent and other expenses payable by us. EF Hutton, division of Benchmark Investments, LLC, acted as the exclusive placement agent in connection with the PIPE Offering.

 

In connection with the PIPE Offering, we entered into a Waiver (the “Waiver”) with L1 Capital Global Opportunities Master Fund (“L1”) waiving certain provisions of the Securities Purchase Agreement, dated as of September 14, 2021 (the “2021 SPA”), by and between us and L1. Pursuant to the terms of the Waiver, L1 waived certain provisions of the 2021 SPA and in consideration thereof, we (i) issued 150,000 purchase warrants substantially similar to the Purchase Warrants issued in connection with the 2023 SPA; and (ii) paid a cash fee of $50,000 to L1.

 

 

 

 

Pursuant to the 2023 SPA, we are obligated to hold a special stockholders’ meeting no later than 60 days following the date of the Purchase Agreement to solicit the approval of the issuance of the shares, Warrants and the shares of common stock underlying the Warrants in compliance with the rules of The Nasdaq Stock Market LLC (without regard to any limitations on exercise set forth in the Warrants or the Pre-Funded Warrants. On March 27, 2023, we held a special meeting of stockholders and the stockholders approved the PIPE Offering.

 

In connection with the PIPE Offering, we entered into a Registration Rights Agreement with the Purchasers, dated January 25, 2023 (the “Registration Rights Agreement”). The Registration Rights Agreement provides that we shall file a registration statement covering the resale of all of the Registrable Securities (as defined in the Registration Rights Agreement) with the SEC. The Registration Statement was filed and declared effective by the SEC on February 9, 2023.

 

Notice of Delisting of Failure to Satisfy a Continued Listing Rule or Standard

 

On April 10, 2023, we received a deficiency letter (the “Notice”) from the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) notifying us that, based upon the closing bid price of our common stock for the last 30 consecutive business days, we are not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Requirement”). The Notice has no immediate effect on the continued listing status of our common stock on Nasdaq, and, therefore, our listing remains fully effective. We are provided a compliance period of 180 calendar days from the date of the Notice, or until October 9, 2023, to regain compliance with Nasdaq Listing Rule 5550(a)(2). If at any time before October 9, 2023, the closing bid price of our common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, subject to Nasdaq’s discretion to extend this period pursuant to Nasdaq Listing Rule 5810(c)(3)(H), Nasdaq will provide written notification that we have achieved compliance with the Minimum Bid Requirement, and the matter would be resolved.

 

If we do not regain compliance with the Minimum Bid Requirement during the initial 180 calendar day compliance period, we may be eligible for an additional 180 calendar day compliance period. To qualify, we would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for Nasdaq, with the exception of the Minimum Bid Requirement, and would need to provide written notice of our intention to cure the deficiency during the second compliance period, by effecting a reverse stock split, if necessary.

 

We intend to actively monitor the closing bid price of our common stock and will evaluate available options to regain compliance with the Minimum Bid Requirement. Our Board has discretion to effect a 1-for-20 reverse stock split in connection our continued listing of our common stock on Nasdaq. However, there can be no assurance that we will regain compliance with the Minimum Bid Requirement during the initial or additional 180 calendar day compliance period, secure the additional 180 calendar day compliance period, or maintain compliance with the other Nasdaq listing requirements. If we do not regain compliance with the Minimum Bid Requirement within the allotted compliance periods, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that our common stock will be subject to delisting. We would then be entitled to appeal that determination to a Nasdaq hearings panel.

 

If our common stock ceases to be listed for trading on Nasdaq, we expect that the common stock would be traded on one of the three tiered marketplaces of the OTC Markets Group.

 

Reverse Stock Split

 

On June 23, 2023, our Board and shareholders approved the granting of authority to the Board to amend our articles of incorporation to effect a reverse stock split of the issued and outstanding shares of our common stock, by a ratio of no less than 1-for-2 and no more than 1-for-20, with the exact ratio to be determined by the Board in its sole discretion, and with such reverse stock split to be effective at such time and date, if at all, as determined by the Board in its sole discretion.

 

The reverse stock split will not have any impact on the number of authorized shares of common stock, which shall remain at 500,000,000 shares.

 

Strategic Partnership

 

We continue to evaluate strategic acquisition opportunities to help accelerate our growth and complement our existing business. We recently entered into a strategic advisory partnership with an association of churches to achieve the highest possible social impact by utilizing all metrics available for values-based investors, including a biblically responsible investing (or “BRI”) score for us and our operations. Once we have established a rating, together we will create a program to increase our exposure and market our services to their member organizations and other affiliates.

 

 

 

 

Results of Operations

 

Comparison of Results of Operations for the Three Months Ended June 30, 2023 and 2022

  

Revenue

 

Revenue for the three months ended June 30, 2023 was $956,498, compared to revenue of $1,139,582 during the three months ended June 30, 2022, representing a decrease of $183,084 or 16.1%.

  

Animation revenue for the three months ended June 30, 2023 was $815,148, compared to animation revenue of $1,025,966 during the three months ended June 30, 2022, representing a decrease of $210,818 or 20.5%. The decrease in animation revenue is primarily attributable to a smaller number of animation projects currently in production as compared to the prior year period.

 

Web filtering revenue for the three months ended June 30, 2023 was $116,574, compared to web filtering revenue of $113,472 during the three months ended June 30, 2022, representing an increase of $3,102 or 2.7%. The increase is primarily due to an increase in organic sales growth and the timing of contract renewals.

 

Other revenue for the three months ended June 30, 2023 was $24,776 compared to other revenue of $144 during the three months ended June 30, 2022, representing an increase of $24,632. Other revenue corresponds to ecommerce sales, commercial services, and subscription and/or advertising revenue from the Grom Social mobile app. The increase in other revenue is primarily attributable to commercial services rendered by Curiosity.

 

No revenue was generated from sales of our publications or produced and licensed content during either of the three months ended June 30, 2023 and 2022.

 

Gross Profit

 

Our gross profits vary significantly by subsidiary. In recent years, our animation business has realized gross profits between 35% and 40%, while our web filtering business has realized gross profits between 91% and 94%. Our gross profits may vary from period to period due to the nature of the business of each subsidiary, the amount of revenue recognized or recorded, and the timing and volume of customer contracts and projects. Current gross profit percentages may not be indicative of future gross profit performance.

 

Gross profit for the three months ended June 30, 2023 and 2022 were $226,298, or 23.7%, and $192,123, or 16.9%, respectively. The increase in gross profit is primarily attributable to improved contract margins in our animation business and lower fixed overhead expenses being absorbed against reduced revenue levels.

 

Operating Expenses

 

Operating expenses for the three months ended June 30, 2023 were $2,552,141, compared to operating expenses of $2,142,800 during the three months ended June 30, 2022, representing an increase of $409,341 or 19.1%. The increase is primarily attributable to an increase in selling, general and administrative costs, professional fees, and depreciation and amortization expense during the three months ended June 30, 2023 as described below.

 

Selling, general and administrative (“SG&A”) are comprised of selling, marketing and promotional expenses, compensation and benefits, insurance, investor relations, rent and related facility costs, research and development, and other general expenses. SG&A expenses were $2,061,738 for the three months ended June 30, 2023, compared to $1,778,696 for the three months ended June 30, 2022, representing an increase of $283,042 or 15.9%. The increase is primarily attributable to higher costs associated with the development of our mobile app and original content properties realized during the three months ended June 30, 2023.

 

 

 

 

Stock-based compensation, a non-cash component of our SG&A, was $44,822 for the three months ended June 30, 2023, compared to $48,142 for the three months ended June 30, 2022. Stock-based compensation is attributable to the amortization of the fair value for options to purchase shares of our common stock in connection with grants made under certain employment agreements entered into at the time of our acquisition of Curiosity.

 

Professional fees are comprised of accounting and compliance services, legal services, and certain other advisory and consultancy fees. Professional fees were $338,395 for the three months ended June 30, 2023, compared to $299,941 for the three months ended June 30, 2022, representing an increase of $38,454 or 12.8%. The increase is largely attributable to greater income tax compliance and legal fees realized during the three months ended June 30, 2023.

 

Depreciation and amortization included in operating expenses was $152,008 for the three months ended June 30, 2023, compared to $64,163 for the three months ended June 30, 2022, representing an increase of $87,845 or 136.9%. The increase is primarily attributable to the amortization of capitalized costs from the development of our Santa.com ecommerce website and prepublication costs from our graphic novels and other published content.

 

Other Income (Expense)

 

Net other expense for the three months ended June 30, 2023 was $38,073, compared to a net other expense of $1,248,703 for the three months ended June 30, 2022, representing a decrease of $1,210,630 or 97.0%. The decrease in other expense is largely attributable to reduced interest expense from the recognition of a derivative liability.

 

Interest expense is comprised of interest accrued and paid on our convertible notes and recorded from the amortization of note discounts. Interest expense was $20,311 for the three months ended June 30, 2023, compared to $1,314,508 during the three months ended June 30, 2022, representing a decrease of $1,294,197 or 98.5%. In May 2022, we recognized interest expense of $1,052,350 related to the fair value of a derivative liability resulting from our second tranche of convertible notes issued to L1 Capital.

 

Net Loss Attributable to Common Stockholders

 

We realized a net loss attributable to common stockholders of $2,399,759, or $0.44 per share, for the three months ended June 30, 2023, compared to a net loss attributable to common stockholders of $3,295,571, or $5.25 per share, during the three months ended June 30, 2022, representing a decrease in net loss attributable to common stockholders of $895,812 or 27.2%.

 

Comparison of Results of Operations for the Six Months Ended June 30, 2023 and 2022

 

Revenue

 

Revenue for the six months ended June 30, 2023 was $2,156,141, compared to revenue of $2,370,707 during the six months ended June 30, 2022, representing a decrease of $214,566 or 9.1%.

  

Animation revenue for the six months ended June 30, 2023 was $1,872,817, compared to animation revenue of $2,074,579 during the six months ended June 30, 2022, representing a decrease of $201,762 or 9.7%. The decrease in animation revenue is primarily attributable to a smaller number of animation projects currently in production as compared to the prior year period.

 

Web filtering revenue for the six months ended June 30, 2023 was $207,384, compared to web filtering revenue of $295,716 during the six months ended June 30, 2022, representing an increase of $88,332 or 29.9%. The decrease is primarily due to a decrease in organic sales and the timing of contract renewals.

 

Publication revenue for the six months ended June 30, 2023 was $10,101 compared to publication revenue of $0 during the six months ended June 30, 2022, representing an increase of $10,101 or 100.0%. Publishing revenues were generated from the sales of our graphic novel, Thunderous.

 

 

 

 

Other revenue for the six months ended June 30, 2023 was $65,839 compared to other revenue of $412 during the six months ended June 30, 2022, representing an increase of $65,427. Other revenue corresponds to ecommerce sales, commercial services, and subscription and/or advertising revenue from the Grom Social mobile app. The increase in other revenue is primarily attributable to commercial services rendered by Curiosity.

 

No revenue was generated from sales of produced and licensed content during either of the six months ended June 30, 2023 and 2022.

 

Gross Profit

 

Our gross profits vary significantly by subsidiary. In recent years, our animation business has realized gross profits between 35% and 40%, while our web filtering business has realized gross profits between 91% and 94%. Our gross profits may vary from period to period due to the nature of the business of each subsidiary, and the timing and volume of customer contracts and projects. Current gross profit percentages may not be indicative of future gross profit performance.

 

Gross profit for the six months ended June 30, 2023 and 2022 were $766,435, or 35.5%, and $506,299, or 21.4%, respectively. The increase in gross profit is primarily attributable to improved contract margins in our animation business and lower fixed overhead expenses being absorbed against reduced revenue levels.

  

Operating Expenses

 

Operating expenses for the six months ended June 30, 2023 were $4,857,611, compared to operating expenses of $4,306,135 during the six months ended June 30, 2022, representing an increase of $551,476 or 12.8%. The increase is primarily attributable to an increase in selling, general and administrative costs and depreciation and amortization expense during the six months ended June 30, 2023 as described below.

 

Selling, general and administrative (“SG&A”) are comprised of selling, marketing and promotional expenses, compensation and benefits, insurance, investor relations, rent and related facility costs, research and development, and other general expenses. SG&A expenses were $3,937,098 for the six months ended June 30, 2023, compared to $3,473,515 for the six months ended June 30, 2022, representing an increase of $463,583 or 13.3%. The increase is primarily attributable to higher costs associated with the development of our mobile app and original content properties realized during the six months ended June 30, 2023.

 

Stock-based compensation, a non-cash component of our SG&A, was $89,644 for the six months ended June 30, 2023, compared to $137,383 for the six months ended June 30, 2022. Stock-based compensation is attributable to the amortization of the fair value for options to purchase shares of our common stock in connection with grants made under certain employment agreements entered into at the time of our acquisition of Curiosity.

 

Professional fees are comprised of accounting and compliance services, legal services, and certain other advisory and consultancy fees. Professional fees were $615,315 for the six months ended June 30, 2023, compared to $704,007 for the six months ended June 30, 2022, representing a decrease of $88,692 or 12.6%. The decrease is largely attributable to lower accounting fees realized by during the six months ended June 30, 2023. During the six months ended June 30, 2022, we completed the post-acquisition audit of the financial statements for Curiosity.

 

Depreciation and amortization included in operating expenses was $305,198 for the six months ended June 30, 2023, compared to $128,613 for the six months ended June 30, 2022, representing an increase of $176,585 or 137.3%. The increase is primarily attributable to the amortization of capitalized costs from the development of our Santa.com ecommerce website and prepublication costs from our graphic novels and other published content.

 

 

 

 

Other Income (Expense)

 

Net other expense for the six months ended June 30, 2023 was $503,065, compared to a net other expense of $2,855,989 for the six months ended June 30, 2022, representing a decrease of $2,352,924 or 82.4%. The decrease in net other expense is primarily attributable to reduced interest expense realized from the amortization or write offs of debt discounts on convertible notes due to conversions, and from the recognition of a derivative liability.

 

Interest expense is comprised of interest incurred on our convertible notes and from the amortization of note discounts. Interest expense was $501,089 for the six months ended June 30, 2023, compared to $2,945,530 during the six months ended June 30, 2022, representing a decrease of $2,444,441 or 83.0%. In January 2023, we recognized $350,039 in interest expense for the warrants issued to L1 Capital in exchange for the Waiver (see PIPE Offering and Related Waiver above). In May 2022, we recognized interest expense of $1,052,350 related to the fair value of a derivative liability resulting from our second tranche of convertible notes issued to L1 Capital.

  

Net Loss Attributable to Common Stockholders

 

We realized a net loss attributable to common stockholders of $4,729,690, or $0.68 per share, for the six months ended June 30, 2023, compared to a net loss attributable to common stockholders of $6,849,022, or $12.51 per share, during the six months ended June 30, 2022, representing a decrease in net loss attributable to common stockholders of $2,119,332 or 30.9%.

 

Liquidity and Capital Resources

 

At June 30, 2023, we had cash and cash equivalents of $2,211,658.

 

Net cash used in operating activities for the six months ended June 30, 2023 was $4,010,846, compared to net cash used in operating activities of $3,383,231 during the six months ended June 30, 2022, representing an increase in cash used of $627,615, primarily due to the increase in our loss from operations and the change in our operating assets and liabilities.

 

Net cash used in investing activities for the six months ended June 30, 2023 was $12,221, compared to net cash used in investing activities of $33,308 during the six months ended June 30, 2022 representing a decrease in cash used of $21,087. This change is attributable to a reduction in capital expenditures, most notably made by our animation studio in Manilla, Philippines from the six-month period ended June 30, 2022.

 

Net cash provided by financing activities for the six months ended June 30, 2023 was $2,329,288, compared to net cash provided by financing activities of $1,040,992 for the six months ended June 30, 2022, representing an increase in cash provided of $1,288,296. Our primary source(s) of cash from financing activities during the six months ended June 30, 2023 was attributable to $2,460,668 in net proceeds from the PIPE Offering and stock purchase warrant exercises, as compared to $1,444,000 in proceeds from the second tranche of convertible notes issued to L1 Capital. These increases were offset, in part, by the repayment of convertible notes of $81,380 and the repayment of a related party loan of $50,000 during the six months ended June 30, 2023, as compared to the repayment of convertible notes and loans payable of $107,469 and cash settlement of a derivative liability of $295,539 in accordance with a note conversion during the six months ended June 30, 2022.

 

Going Concern

 

We have incurred significant operating losses since our inception. We have funded our operations primarily through sales of our common stock in public markets, proceeds from the exercise of warrants to purchase common stock, and the sale of convertible notes. Future capital requirements will depend on many factors, including the (i) rate of revenue growth, (ii) expansion of sales and marketing activities, (iii) timing and extent of spending on content development efforts, and (iv) market acceptance of our content, products and services.

 

Our management intends to raise additional funds through the issuance of equity securities or debt to enable us to meet our obligations for the twelve-month period. However, there can be no assurance that, in the event we require additional financing, such financing will be available at terms acceptable to us, if at all. Failure to generate sufficient cash flows from operations and/or raise additional capital could have a material adverse effect on our ability to achieve our intended business objectives. These factors raise substantial doubt about our ability to continue as a going concern for the twelve months from the date of this report.

 

 

 

 

Off-Balance Sheet Arrangements

 

We have no off-balance sheet arrangements.

 

Critical Accounting Estimates

 

Our condensed consolidated financial statements and accompanying notes have been prepared in accordance with GAAP. The preparation of these condensed consolidated financial statements requires management to make estimates, judgments, and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare the condensed consolidated financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position.

 

During the three and six months ended June 30, 2023, there were no significant changes to the critical accounting estimates disclosed under the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2021 Annual Report on Form 10-K.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

We are a smaller reporting company and are not required to provide this information.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our principal executive officer and principal financial officer has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of June 30, 2023, the end of the period covered by this Quarterly Report.

 

These controls are designed to ensure that information required to be disclosed in the reports we file or submit pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial, as appropriate officer to allow timely decisions regarding required disclosure. Based on this evaluation, our principal executive officer and the principal financial officer have concluded that our disclosure controls and procedures were not effective as of June 30, 2023.

 

The Company’s assessment identified certain material weaknesses which are set forth below:

 

Functional Controls and Segregation of Duties

 

Because of the Company’s limited resources, there are limited controls over information processing. Additionally, there is inadequate segregation of duties consistent with control objectives. Our Company’s management is composed of a small number of individuals resulting in a situation where limitations on segregation of duties exist. In order to remedy this situation, we will need to hire additional staff to provide greater segregation of duties.

 

Accordingly, as the result of identifying the above material weakness we have concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements may not be prevented or detected on a timely basis by the Company’s internal controls.

 

 

 

 

Management believes that the material weaknesses set forth above were the result of the scale of our operations and are intrinsic to our small size. Management continues to take actions to remedy these weaknesses, including the process of hiring additional staff to create the necessary segregation of duties to improve controls over information processing. Additionally, management has initiated the process of building a risk management framework with plans to embed the principles of this framework across all aspects of the business.

 

Remediation Plan

 

Management has implemented remediation steps to address the material weakness and to improve our internal control over financial reporting. Specifically, we (i) expanded and improved our review process for complex transactions and related accounting standards, including the identification of third-party professionals with whom to consult regarding the application of complex accounting matters, (ii) hired qualified personnel to improve the oversight of our accounting operations, and (iii) established new processes and policies. While we believe that these remediation actions will improve the effectiveness of our internal control over financial reporting, the material weakness identified will not be considered remediated until the controls operate for a sufficient period of time, and we cannot assure you that the measures we have taken to date, or any measures we may take in the future will be sufficient to remediate the material weakness we have identified or avoid potential future material weaknesses. 

 

Changes in Internal Control over Financial Reporting

 

Other than the remediation efforts described above, there were no changes in our internal controls over financial reporting during our first two fiscal quarters, that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

There are no pending legal proceedings to which the Company or any of its subsidiaries is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company's and its subsidiaries’ property is not the subject of any pending legal proceedings.

 

Item 1A. Risk Factors.

 

Not applicable as we are a small reporting company.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

There were no sales of equity securities sold during the period covered by this Report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company.

 

Item 3. Defaults upon Senior Securities.

 

None.

  

Item 4. Mine Safety Disclosures.

 

Not applicable.

  

Item 5. Other Information.

 

None.

 

 

 

 

 

 

 

Item 6. Exhibits.

 

Exhibit No.		Description
31.1*		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2*		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32**		Chief Executive Officer and Chief Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS***		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH***		Inline XBRL Taxonomy Extension Schema Document
101.CAL***		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF***		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB***		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE***		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104***		Cover Page Interactive Data File (formatted in IXBRL, and included in exhibit 101).

 

*Filed herewith.

**Furnished herewith.

*** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

 

 

 

 

 

 

 

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

Date: August 18, 2023	By:	/s/ Darren Marks
		Darren Marks
		Chief Executive Officer and President (Principal Executive Officer)
Date: August 18, 2023	By:	/s/ Jason Williams
		Jason Williams
		Chief Financial Officer (Principal Financial and Accounting Officer)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT 31.1

 

CERTIFICATION PURSUANT TO

18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

 

I, Darren Marks, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of Grom Social Enterprises, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedure to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and

 

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: August 18, 2023	/s/ Darren Marks
	Darren Marks, Chief Executive Officer and President (Principal Executive Officer)

 

EXHIBIT 31.2

 

CERTIFICATION PURSUANT TO

18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

 

I, Jason Williams, certify that:

 

1.

I have reviewed this quarterly report on Form 10-Q of Grom Social Enterprises, Inc.;

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedure to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b.

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c.

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based upon such evaluation; and

 

d.

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.

The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a.

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

 

b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: August 18, 2023

/s/ Jason Williams Jason Williams, Chief Financial Officer (Principal Financial and Accounting Officer)

 

EXHIBIT 32

 

CERTIFICATION PURSUANT TO

18 USC, SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with this quarterly report of Grom Social Enterprises, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, the undersigned, in the capacities and on the date indicated below, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of our knowledge:

 

1.

The Report fully complies with the requirements of Rule 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated:  August 18, 2023	/s/ Darren Marks Darren Marks, Chief Executive Officer and President (Principal Executive Officer)
Dated:  August 18, 2023	/s/ Jason Williams Jason Williams, Chief Financial Officer (Principal Financial and Accounting Officer)

 

v3.23.2

Cover - shares	6 Months Ended
	Jun. 30, 2023	Aug. 14, 2023
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2023
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2023
Current Fiscal Year End Date	--12-31
Entity File Number	001-40409
Entity Registrant Name	Grom Social Enterprises, Inc.
Entity Central Index Key	0001662574
Entity Tax Identification Number	46-5542401
Entity Incorporation, State or Country Code	FL
Entity Address, Address Line One	2060 NW Boca Raton Blvd
Entity Address, Address Line Two	Suite #6
Entity Address, City or Town	Boca Raton
Entity Address, State or Province	FL
Entity Address, Postal Zip Code	33431
City Area Code	(561)
Local Phone Number	287-5776
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		9,044,361
Common Stock, par value $0.001
Title of 12(b) Security	Common Stock, par value $0.001
Trading Symbol	GROM
Security Exchange Name	NASDAQ
Warrants to purchase shares of Common Stock, par value $0.001 per share
Title of 12(b) Security	Warrants to purchase shares of Common Stock, par value $0.001 per share
Trading Symbol	GROMW
Security Exchange Name	NASDAQ

v3.23.2

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 2,211,658	$ 3,871,176
Accounts receivable, net	658,648	1,162,230
Inventory, net	87,040	92,303
Prepaid expenses and other current assets	632,582	605,497
Total current assets	3,589,928	5,731,206
Operating lease right of use assets	932,181	1,069,222
Property and equipment, net	122,541	285,676
Goodwill, net	10,567,484	10,567,484
Intangible assets, net	5,279,220	5,364,231
Other assets	1,570,432	1,627,078
Total assets	22,061,786	24,644,897
Current liabilities:
Accounts payable	659,124	839,679
Accrued liabilities	292,521	378,954
Dividends payable	743,071	371,799
Advanced payments and deferred revenues	374,295	576,338
Convertible notes payable, net – current	500,696	503,465
Related party payables	0	50,000
Lease liabilities – current	232,913	269,681
Total current liabilities	2,802,620	2,989,916
Convertible notes payable, net of loan discounts	0	68,199
Lease liabilities	713,220	803,958
Other noncurrent liabilities	233,433	434,976
Total liabilities	3,749,273	4,297,049
Commitments and contingencies (Note 16)
Stockholders' Equity:
Common stock, $0.001 par value. 500,000,000 shares authorized; 9,044,361 and 2,514,858 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	9,044	2,515
Additional paid-in capital	104,652,143	101,726,355
Accumulated deficit	(88,202,102)	(83,472,412)
Accumulated other comprehensive loss	(168,267)	(166,129)
Total Grom Social Enterprises, Inc. stockholders' equity	16,300,100	18,099,611
Noncontrolling interests	2,012,413	2,248,237
Total stockholders' equity	18,312,513	20,347,848
Total liabilities and equity	22,061,786	24,644,897
Series A Preferred Stock [Member]
Stockholders' Equity:
Preferred Stock, Value, Issued	0	0
Series B Preferred Stock [Member]
Stockholders' Equity:
Preferred Stock, Value, Issued	0	0
Series C Preferred Stock [Member]
Stockholders' Equity:
Preferred Stock, Value, Issued	$ 9,282	$ 9,282

v3.23.2

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2023	Dec. 31, 2022
Preferred stock, par value	$ 0.001
Preferred stock, shares authorized	25,000,000
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	9,044,361	2,514,858
Common stock, shares outstanding	9,044,361	2,514,858
Series A Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Series B Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Series C Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	9,281,809	9,281,809
Preferred stock, shares outstanding	9,281,809	9,281,809

v3.23.2

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
Sales	$ 956,498	$ 1,139,582	$ 2,156,141	$ 2,370,707
Cost of goods sold	730,200	947,459	1,389,706	1,864,408
Gross profit	226,298	192,123	766,435	506,299
Operating expenses:
Depreciation and amortization	152,008	64,163	305,198	128,613
Selling, general and administrative	2,061,738	1,778,696	3,937,098	3,473,515
Professional fees	338,395	299,941	615,315	704,007
Total operating expenses	2,552,141	2,142,800	4,857,611	4,306,135
Loss from operations	(2,325,843)	(1,950,677)	(4,091,176)	(3,799,836)
Other income (expense)
Interest income (expense), net	(20,311)	(1,314,508)	(501,089)	(2,945,530)
Loss on settlement of derivative liabilities	0	(39,624)	0	(39,624)
Unrealized gain on change in fair value of derivative liabilities	0	57,124	0	57,124
Other gains (losses)	(17,762)	48,305	(1,976)	72,041
Total other income (expense)	(38,073)	(1,248,703)	(503,065)	(2,855,989)
Loss before income taxes	(2,363,916)	(3,199,380)	(4,594,241)	(6,655,825)
Provision for income taxes (benefit)	0	0	0	0
Net loss	(2,363,916)	(3,199,380)	(4,594,241)	(6,655,825)
(Loss) attributable to noncontrolling interests	(149,794)	(91,025)	(235,824)	(170,863)
Net loss attributable to Grom Social Enterprises, Inc. stockholders	(2,214,122)	(3,108,355)	(4,358,417)	(6,484,962)
Dividends to Series C preferred stockholders	185,637	187,216	371,273	364,060
Net loss attributable to Grom Social Enterprises, Inc. common stockholders	(2,399,759)	(3,295,571)	(4,729,690)	(6,849,022)
Comprehensive loss:
Foreign currency translation adjustment	(31,774)	(53,303)	(2,138)	(57,021)
Comprehensive loss	(2,395,690)	(3,252,683)	(4,596,379)	(6,712,846)
Comprehensive loss attributable to noncontrolling interests	(149,794)	(91,025)	(235,824)	(170,863)
Comprehensive loss attributable to Grom Social Enterprises, Inc. common stockholders	$ (2,245,896)	$ (3,161,658)	$ (4,360,555)	$ (6,541,983)

v3.23.2

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (Parenthetical) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Income Statement [Abstract]
Earnings Per Share, Basic	$ (0.27)	$ (5.25)	$ (0.67)	$ (12.51)
Earnings Per Share, Diluted	$ (0.27)	$ (5.25)	$ (0.67)	$ (12.51)
Weighted Average Number of Shares Outstanding, Basic	8,911,657	627,736	7,110,731	547,681
Weighted Average Number of Shares Outstanding, Diluted	8,911,657	627,736	7,110,731	547,681

v3.23.2

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)	Preferred Stock Series A [Member]	Preferred Stock Series B [Member]	Preferred Stock Series C [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Noncontrolling Interest [Member]	Total
Beginning balance, value at Dec. 31, 2021	$ 0	$ 0	$ 9,400	$ 434	$ 89,863,573	$ (66,404,190)	$ (30,755)	$ 2,682,339	$ 26,120,801
Beginning balance, shares at Dec. 31, 2021	0	0	9,400,309	433,631
Net loss						(6,484,962)		(170,863)	(6,655,825)
Change in foreign currency translation							(57,021)		(57,021)
Dividends declared for Series C preferred stock						(364,060)			(364,060)
Issuance of common stock as payment for Series C preferred stock dividends payable				$ 12	646,511				646,523
Issuance of common stock as payment for Series C preferred stock dividends payable, shares				11,737
Issuance of common stock in exchange for consulting, professional and other services				$ 4	95,478				95,482
Issuance of common stock in exchange for consulting, professional and other services, shares				3,950
Conversion of note principal and accrued interest into common stock				$ 220	4,574,779				4,574,999
Conversion of note principal and accrued interest into common stock, shares				219,690
Stock based compensation expense related to stock options					137,383				137,383
Conversion of Series C preferred stock into common stock			$ (39)	$ 1	38	0	0	0	0
Conversion of Series C preferred stock into common stock, shares			(39,500)	686
Recognition of beneficial conversion features related to notes payable					363,329				363,329
Ending balance, value at Jun. 30, 2022	$ 0	$ 0	$ 9,361	$ 671	95,681,091	(73,253,212)	(87,776)	2,511,476	24,861,611
Ending balance, shares at Jun. 30, 2022	0	0	9,360,809	669,694
Beginning balance, value at Mar. 31, 2022	$ 0	$ 0	$ 9,361	$ 636	94,935,770	(69,957,641)	(34,473)	2,602,501	27,556,154
Beginning balance, shares at Mar. 31, 2022	0	0	9,360,809	634,557
Net loss						(3,108,355)		(91,025)	(3,199,380)
Change in foreign currency translation							(53,303)		(53,303)
Dividends declared for Series C preferred stock						(187,216)			(187,216)
Issuance of common stock as payment for Series C preferred stock dividends payable				$ 6	187,449				187,455
Issuance of common stock as payment for Series C preferred stock dividends payable, shares				5,895
Issuance of common stock in exchange for consulting, professional and other services				$ 1	18,659				18,660
Issuance of common stock in exchange for consulting, professional and other services, shares				1,464
Conversion of note principal and accrued interest into common stock				$ 28	449,972				450,000
Conversion of note principal and accrued interest into common stock, shares				27,778
Stock based compensation expense related to stock options					89,241				89,241
Ending balance, value at Jun. 30, 2022	$ 0	$ 0	$ 9,361	$ 671	95,681,091	(73,253,212)	(87,776)	2,511,476	24,861,611
Ending balance, shares at Jun. 30, 2022	0	0	9,360,809	669,694
Beginning balance, value at Dec. 31, 2022	$ 0	$ 0	$ 9,282	$ 2,515	101,726,355	(83,472,412)	(166,129)	2,248,237	20,347,848
Beginning balance, shares at Dec. 31, 2022	0	0	9,281,809	2,514,858
Net loss						(4,358,417)		(235,824)	(4,594,241)
Change in foreign currency translation							(2,138)		(2,138)
Dividends declared for Series C preferred stock						(371,273)			(371,273)
Issuance of common stock in connection with sales made under private offerings				100	2,448,259				2,448,359
Issuance of common stock in exchange for consulting, professional and other services				$ 23	31,945				31,968
Issuance of common stock in exchange for consulting, professional and other services, shares				23,334
Stock based compensation expense related to stock options
Issuance of common stock in connection with the exercise of common stock purchase warrants, shares				6,406,169
Conversion of Series C preferred stock into common stock
Issuance of common stock in connection with sales made under private offerings, shares				100,000
Issuance of common stock purchase warrants as consideration for waiver of a financing covenant					350,038				350,038
Issuance of common stock in connection with the exercise of common stock purchase warrants				6,406	5,903				12,309
Stock based compensation expense related to stock options					89,643				89,643
Ending balance, value at Jun. 30, 2023	$ 0	$ 0	$ 9,282	$ 9,044	104,652,143	(88,202,102)	(168,267)	2,012,413	18,312,513
Ending balance, shares at Jun. 30, 2023	0	0	9,281,809	9,044,361
Beginning balance, value at Mar. 31, 2023	$ 0	$ 0	$ 9,282	$ 7,340	104,609,026	(85,802,343)	(136,493)	2,162,207	20,849,019
Beginning balance, shares at Mar. 31, 2023	0	0	9,281,809	7,339,677
Net loss						(2,214,122)		(149,794)	(2,363,916)
Change in foreign currency translation							(31,774)		(31,774)
Dividends declared for Series C preferred stock						(185,637)			(185,637)
Stock based compensation expense related to stock options					44,821				44,821
Issuance of common stock in connection with the exercise of common stock purchase warrants				1,704	(1,704)
Ending balance, value at Jun. 30, 2023	$ 0	$ 0	$ 9,282	$ 9,044	$ 104,652,143	$ (88,202,102)	$ (168,267)	$ 2,012,413	$ 18,312,513
Ending balance, shares at Jun. 30, 2023	0	0	9,281,809	9,044,361

v3.23.2

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash flows from operating activities:
Net loss	$ (4,594,241)	$ (6,655,825)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization	402,349	265,804
Amortization of debt discount	10,413	1,852,816
Amortization of right-of-use assets	72,869	190,117
Provision for doubtful accounts	6,075	0
Common stock issued for financing costs	350,038	0
Common stock issued in exchange for fees and services	31,968	95,482
Derivative expense	0	1,052,350
Retirement benefit cost	18,201	0
Stock based compensation	89,643	137,383
Loss on disposal of property and equipment	549	2,296
Loss on settlement of derivative liability	(0)	39,624
Unrealized gain on change in fair value of derivative liabilities	0	(57,124)
Changes in operating assets and liabilities:
Accounts receivable	497,508	287,341
Inventory	5,262	(83,237)
Prepaid expenses and other current assets	(27,086)	(174,109)
Other assets	(132,258)	(291,170)
Accounts payable	(229,653)	(180,381)
Accrued liabilities	(39,832)	127,903
Advanced payments and deferred revenues	(203,043)	208,716
Income taxes payable and other noncurrent liabilities	(201,542)	(3,974)
Operating lease liabilities	(68,066)	(197,243)
Net cash used in operating activities	(4,010,846)	(3,383,231)
Cash flows from investing activities:
Purchase of property and equipment	(16,822)	(47,377)
Proceeds from the sale of property and equipment	4,601	14,069
Net cash used in investing activities	(12,221)	(33,308)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of issuance costs	2,448,359	0
Proceeds from exercise of common stock purchase warrants, net of issuance costs	12,309	0
Proceeds from issuance of convertible notes	0	1,444,000
Repayments of convertible notes	(81,380)	(72,623)
Repayments of loans payable	0	(34,846)
Repayments of related party payables	(50,000)	0
Settlement of derivative liabilities	0	(295,539)
Net cash provided by financing activities	2,329,288	1,040,992
Effect of exchange rates on cash and cash equivalents	34,263	20,149
Net decrease in cash and cash equivalents	(1,659,516)	(2,355,398)
Cash and cash equivalents at beginning of period	3,871,174	6,530,161
Cash and cash equivalents at end of period	2,211,658	4,174,763
Supplemental disclosure of cash flow information:
Cash paid for interest	12,619	21,780
Cash paid for income taxes	0	0
Supplemental disclosure of non-cash investing and financing activities:
Common stock issued to reduce dividends payable to Series C preferred stockholders	0	646,523
Common stock warrants issued in connection with convertible promissory notes	0	363,329
Conversion of note principal and accrued interest into common stock	0	4,574,999
Dividends payable to Series C preferred stockholders	371,273	187,216
Operating lease right-of-use assets obtained in exchange for lease liabilities	$ 0	$ 80,478

v3.23.2

NATURE OF OPERATIONS	6 Months Ended
	Jun. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
NATURE OF OPERATIONS	1. NATURE OF OPERATIONS   Grom Social Enterprises, Inc. (the “Company” or “Grom”), was incorporated in the State of Florida under the name “Illumination America, Inc.” Grom is a media, technology and entertainment company that focuses on (i) delivering content to children under the age of 13 years in a safe secure platform that is compliant with the Children’s Online Privacy Protection Act (“COPPA”) and can be monitored by parents or guardians, (ii) creating, acquiring, and developing the commercial potential of Kids & Family entertainment properties and associated business opportunities, (iii) providing world class animation services, and (iv) offering protective web filtering solutions to block unwanted or inappropriate content.   The Company conducts its business through the following subsidiaries:     · Grom Social, Inc. (“Grom Social”), incorporated in the State of Florida on March 5, 2012, operates Grom’s social media network designed for children under the age of 13 years.         · TD Holdings Limited (“TD Holdings”), incorporated in Hong Kong on September 15, 2005, operates through its two wholly-owned subsidiaries: (i) Top Draw Animation Hong Kong Limited, a Hong Kong corporation, (“Top Draw HK”), and (ii) Top Draw Animation, Inc., a Philippines corporation, (“Top Draw Philippines”). The group’s principal activity is the production of animated films and television series.         · Grom Educational Services, Inc. (“GES”), incorporated in the State of Florida on January 17, 2017, operates Grom’s web filtering services provided to schools and government agencies.         · Grom Nutritional Services, Inc. (“GNS”), incorporated in the State of Florida on April 19, 2017, intends to market and distribute nutritional supplements to children. GNS has been nonoperational since its inception.         · Curiosity Ink Media, LLC (“CIM”), organized in the State of Delaware on January 5, 2017, develops, acquires, builds, grows and maximizes the short, mid and long-term commercial potential of kids and family entertainment properties and associated business opportunities.   Grom owns 100% of each of Grom Social, TD Holdings, GES and GNS, and 80% of CIM.

v3.23.2

GOING CONCERN	6 Months Ended
	Jun. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
GOING CONCERN	2. GOING CONCERN   The condensed consolidated financial statements of the Company have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business. Based on current operating levels, the Company will need to raise additional funds by selling additional equity or incurring debt.   On a consolidated basis, the Company has incurred significant operating losses since its inception. As of June 30, 2023, the Company has an accumulated deficit of $88.2 million. During the six months ended June 30, 2023, it used approximately $4.0 million, respectively, in cash for operating activities.   The Company has funded its operations primarily through sales of its common stock in public markets, proceeds from the exercise of warrants to purchase common stock, and the sale of convertible notes. Future capital requirements will depend on many factors, including the (i) rate of revenue growth, (ii) expansion of sales and marketing activities, (iii) timing and extent of spending on content development efforts, and (iv) market acceptance of the Company’s content, products and services.   The Company’s management intends to raise additional funds through the issuance of equity securities or debt to enable the Company to meet its obligations for the twelve-month period. However, there can be no assurance that, in the event the Company requires additional financing, such financing will be available at terms acceptable to the Company, if at all. Failure to generate sufficient cash flows from operations and/or raise additional capital could have a material adverse effect on the Company’s ability to achieve its intended business objectives. These factors raise substantial doubt about the Company’s ability to continue as a going concern for the twelve months from the date of this report.   The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

v3.23.2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	6 Months Ended
	Jun. 30, 2023
Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   Impact of COVID-19   On January 30, 2020, the World Health Organization announced a global health emergency because of the spread of a new strain of the novel coronavirus (“COVID-19”). On March 11, 2020, the World Health Organization declared the outbreak of COVID-19, a global pandemic. COVID-19 significantly affected the United States and global economies.   The Company experienced significant disruptions to its business and operations due to circumstances related to COVID-19, and delays caused government-imposed quarantines, office closings and travel restrictions, which affected both the Company and its service providers. The Company has significant operations in Manila, Philippines, which was locked down by the government on March 12, 2020 due to concerns related to the spread of COVID-19. As a result of the Philippines government’s call to contain COVID-19, the Company’s animation studio, located in Manila, Philippines, which accounts for approximately 86.9% of the Company’s total revenues on a consolidated basis, was forced to close its offices for significant periods of time from March 2020 through December 2021.   In response to the outbreak and business disruption, the Company instituted employee safety protocols to contain the spread, including domestic and international travel restrictions, work-from-home practices, extensive cleaning protocols, social distancing and various temporary closures of its administrative offices and production studio. The Company also implemented a range of actions aimed at temporarily reducing costs and preserving liquidity.   The Company has recalled artists and employees to return to the studio, which is currently operating at 41% seat capacity. Approximately 37% of the studio’s employees and contractors currently work from home.   While restrictions have eased, the virus may continue to mutate and spread which could materially impact the Company’s business. The full extent of potential impacts on the Company’s business, financing activities and the global economy will depend on future developments, which cannot be predicted due to the uncertain nature of the virus, government mandated shut downs, and its adverse effects, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. These effects could have a material adverse impact on the Company’s business, operations, financial condition and results of operations.   Basis of Presentation   The accompanying condensed consolidated financial statements are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conjunction with the instructions to Form 10-Q of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted. For the three and six months ended June 30, 2023, the condensed consolidated financial statements include the accounts of the Company and its operating subsidiaries Grom Social, TD Holdings, GES, GNS, and Curiosity. The Company recognizes the noncontrolling interest related to its less-than-wholly-owned subsidiary, Curiosity, as equity in the consolidated financial statements separate from the parent entity’s equity. The net loss attributable to the noncontrolling interest is included in net loss in the condensed consolidated statements of operations and comprehensive loss.   These condensed consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments, which includes intercompany balances and transactions are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto at December 31, 2022, as presented in the Company’s Annual Report on Form 10-K filed on April 17, 2023 with the SEC.   Certain amounts for the prior year period have been reclassified to conform to current year’s presentation.    Use of Estimates   The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The most significant estimates relate to revenue recognition, valuation of accounts receivable, goodwill and other long-lived assets, and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.   Basic and Diluted Net Income (Loss) Per Share   The Company computes net income (loss) per share in accordance with FASB ASC 260, Earnings per Share which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period using the treasury stock method, and convertible preferred stock and convertible debt using the if-converted method. These potentially dilutive shares include 5,266 shares from convertible notes and accrued interest, 161,143 shares from convertible preferred stock, 9,504 shares from vested stock options and 174,235 shares from stock purchase warrants. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.   Update to Significant Accounting Policies   There have been no new or material changes to the significant accounting policies discussed in the Company’s audited financial statements in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as filed with the SEC on April 17, 2023, that are of significance, or potential significance, to the Company.

v3.23.2

REVENUES	6 Months Ended
	Jun. 30, 2023
Revenue from Contract with Customer [Abstract]
REVENUES	4. REVENUES   The Company recognizes revenue from contracts with customers in accordance with FASB ASC 606. The Company’s main types of revenue contracts consists of the following:   Animation Revenue   Animation revenue is primarily generated from contracts with customers for preproduction and production services related to the development of animated movies and television series. Preproduction activities include producing storyboards, location design, model and props design, background color and color styling. Production focuses on library creation, digital asset management, background layout scene assembly, posing, animation and aftereffects.   The Company provides services under fixed-price contracts. Under fixed-price contracts, the Company agrees to perform the specified work for a pre-determined price. To the extent actual costs vary from estimated costs, the Company’s profit may increase, decrease, or result in a loss.   Web Filtering Revenue    Web filtering revenue from subscription sales is recognized on a pro-rata basis over the subscription period. Typically, a subscriber purchases computer appliance and a software and support service license for a period of use between one year to five years. The subscriber is billed in full at the time of the sale. The Company immediately recognizes revenue attributable to the computer appliance as it is non-refundable and control passes to the customer. The advanced billing component for software and service is initially recorded as deferred revenue and subsequently recognized as revenue on a straight-line basis over the subscription period.   Produced and Licensed Content Revenue   Produced and licensed content revenues are generated from the licensing of internally-produced films and television programs.   Licensed internally-produced films and television programming, each individual film or episode delivered represents a separate performance obligation and revenues are recognized when the episode is made available to the licensee for exhibition. For license agreements containing multiple deliverables, revenues are allocated based on the relative standalone selling price of each film or episode of a television series, which is based on licenses for comparable films or series within the marketplace. Agreements to license programming are often long term, with collection terms ranging from one to five years.   The advanced billing component for licensed content is initially recorded as deferred revenue and subsequently recognized as revenue upon completion of the performance obligation in accordance with the terms of licensing agreement.   Publishing Revenue   The Company has engaged the services of a third-party entity to manage the printing, publishing and distribution of the Company’s publishing content. In accordance with the terms agreed with the third party, the Company’s revenue is recognized as 50% of revenue from sales per title after the third-party vendor earns back the costs to develop, author, publish, market, promote and distribute each title, inclusive of any royalties owed to rights holders, following a six months period in market to allow for returns.   Publishing revenues are eligible for recognition upon the completion of a six-month sales period to provide for any potential returns and notification from the third-party entity that it has earned back all of its related publishing costs.   Other Revenue   Other revenue corresponds to ecommerce sales, commercial services, and subscription and advertising revenue from the Grom Social mobile application.   The following table depicts the disaggregated revenue listed above within the Sales caption in the condensed consolidated statements of operations: Schedule of disaggregated revenue                             Three Months Ended June 30, 2023     Three Months Ended June 30, 2022     Six Months Ended June 30, 2023     Six Months Ended June 30, 2022                             Animation   $ 815,148     $ 1,025,966     $ 1,872,817     $ 2,074,579   Web Filtering     116,574       113,472       207,384       295,716   Publishing     –       –       10,101       –   Other     24,776       144       65,839       412   Total Sales   $ 956,498     $ 1,139,582     $ 2,156,141     $ 2,370,707     The following table sets forth the components of the Company’s accounts receivable and advanced payments and deferred revenues at June 30, 2023, and December 31, 2022: Schedule of accounts receivable                 June 30, 2023     December 31, 2022                 Billed accounts receivable   $ 171,721     $ 607,524   Unbilled accounts receivable     531,228       592,932   Allowance for doubtful accounts     (44,301 )     (38,226 ) Total accounts receivable, net   $ 658,648     $ 1,162,230   Total advanced payments and deferred revenues   $ 374,295     $ 576,338     During the three and six months ended June 30, 2023, the Company had two and three customers, respectively, that accounted for 73.9% and 57.3%, respectively, of total revenues. During the three and six months ended June 30, 2022, the Company had three and four customers, respectively, that account for 78.1% and 81.7% of total revenues, respectively.   At June 30, 2023, the Company had two customers that accounted for 79.2% of accounts receivable. At December 31, 2022, the Company had two customers that accounted for 73.6% of accounts receivable.   Animation revenue contracts vary with movie contracts typically allowing for progress billings over the contract term while other episodic development activities are typically billable upon delivery of the performance obligation for an episode. These episodic activities typically create unbilled contract assets between episode delivery dates while movies can create contract assets or liabilities based on the progress of activities versus the arranged billing schedule. Revenues from web filtering contracts are all billed in advance and therefore represent contract liabilities until fully recognized on a ratable basis over the contract life.

v3.23.2

INVENTORY	6 Months Ended
	Jun. 30, 2023
Inventory Disclosure [Abstract]
INVENTORY	5. INVENTORY   Inventory consists of costs incurred to produce animated content for third party customers. Costs incurred to produce the animated content to customers, which include direct production costs, production overhead and supplies are recognized as work-in-progress inventory. As animated content is completed in accordance with the terms stated by the customer, inventory is classified as finished products and subsequently recognized as cost of services as animated content is accepted by and available to the customer. Carrying amounts of animated content are recorded at the lower of cost or net realizable value. Cost is determined using a weighted average cost method for direct production costs, productions overhead and supplies used for completing animation projects.   As of June 30, 2023 and December 31, 2022, the Company’s inventory totaled $87,040 and $92,303, respectively, and was comprised of work-in-progress of $85,382 and $85,324, respectively, and finished goods of $1,658 and $6,979, respectively.

v3.23.2

PROPERTY AND EQUIPMENT	6 Months Ended
	Jun. 30, 2023
Property, Plant and Equipment [Abstract]
PROPERTY AND EQUIPMENT	6. PROPERTY AND EQUIPMENT   The following table sets forth the components of the Company’s property and equipment at June 30, 2023 and December 31, 2022:  Schedule of property and equipment                                         June 30, 2023     December 31, 2022       Cost     Accumulated Depreciation     Net Book Value     Cost     Accumulated Depreciation     Net Book Value   Capital assets subject to depreciation:                                                 Computers, software and office equipment   $ 2,510,394     $ (2,467,440 )   $ 42,954     $ 2,774,308     $ (2,651,872 )   $ 122,436   Machinery and equipment     174,666       (171,835 )     2,831       189,641       (182,180 )     7,461   Vehicles     11,776       (11,776 )     –       41,112       (35,504 )     5,608   Furniture and fixtures     376,834       (365,765 )     11,069       409,996       (391,783 )     18,213   Leasehold improvements     1,079,920       (1,014,233 )     65,687       1,172,501       (1,065,148 )     107,353   Total fixed assets     4,153,590       (4,031,049 )     122,541       4,587,558       (4,326,487 )     261,071   Capital assets not subject to depreciation:                                                 Construction in progress     –       –       –       24,605       –       24,605   Total fixed assets   $ 4,153,590     $ (4,031,049 )   $ 122,541     $ 4,612,163     $ (4,326,487 )   $ 285,676     For the three months ended June 30, 2023 and 2022, the Company recorded depreciation expense of $58,559 and $80,373, respectively. For the six months ended June 30, 2023 and 2022, the Company recorded depreciation expense of $128,435 and $173,047, respectively.

v3.23.2

OTHER ASSETS	6 Months Ended
	Jun. 30, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
OTHER ASSETS	7. OTHER ASSETS   The following table sets forth the components of the Company’s other assets at June 30, 2023 and December 31, 2022: Schedule Of Other Assets                 June 30, 2023     December 31, 2022                 Capitalized website development costs   $ 870,017     $ 1,057,312   Prepublication costs     174,545       164,042   Produced and licensed content costs     452,949       325,966   Deposits     72,921       72,027   Other noncurrent assets     –       7,731   Total other assets   $ 1,570,432     $ 1,627,078     Capitalized Website Development Costs   The Company capitalizes certain costs associated with the development of its Santa.com website after the preliminary project stage is complete and until the website is ready for its intended use. Planning and operating costs are expensed as incurred. Capitalization begins when the preliminary project stage is complete, project plan is defined, functionalities are determined and internal and external resources are identified. Qualified costs incurred during the operating stage of our software applications relating to upgrades and enhancements are capitalized to the extent it is probable that they will result in added functionality, while costs that cannot be separated between maintenance of, and minor upgrades and enhancements to the websites are expensed as incurred.    Capitalized website costs are amortized on a straight-line basis over their estimated useful life of three years beginning with the time when it is ready for intended use. Amounts amortized are presented through cost of sales. Management evaluates the useful lives of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.   Prepublication Costs   Prepublication costs include costs incurred to create and develop the art, prepress, editorial, digital conversion and other content required for the creation of the master copy of a book or other media. Prepublication costs are amortized on a straight-line basis over a two- to five-year period based on expected future revenue. The Company regularly reviews the recoverability of the capitalized costs based on expected future revenues.   Produced and Licensed Content Costs   Produced and licensed content costs include capitalizable direct costs, production overhead, interest and development costs and are stated at the lower of cost, less accumulated amortization, or fair value. Marketing, distribution and general and administrative costs are expensed as incurred.   Film, television and direct to consumers through streaming services production and residual costs are expensed over the product life cycle based upon the ratio of the current period’s revenues to estimated remaining total revenues (Ultimate Revenues) for each production. For film productions and direct to consumer services, Ultimate Revenues include revenues from all sources that will be earned within ten years from the date of the initial release. For television series, Ultimate Revenues include revenues that will be earned within ten years from delivery of the first episode, or if still in production, five years from delivery of the most recent episode, if later. Costs of film, television and direct to consumer productions are subject to regular recoverability assessments, which compare the estimated fair values with the unamortized costs. The Company bases these fair value measurements on the Company’s assumptions about how market participants would price the assets at the balance sheet date, which may be different than the amounts ultimately realized in future periods. The amount by which the unamortized costs of film and television productions exceed their estimated fair values is written off. Costs for projects that have been abandoned are written off. Projects that have not been set for production within three years are also written off unless management has committed to a plan to proceed with the project and is actively working on and funding the project.   The following tables set forth the components of the Company’s capitalized costs at June 30, 2023 and December 31, 2022: Schedule of capitalized cost                                         June 30, 2023     December 31, 2022       Gross Carrying Value     Accumulated Amortization     Net Book Value     Gross Carrying Value     Accumulated Depreciation     Net Book Value   Prepublication costs   $ 177,635     $ (3,090 )   $ 174,545     $ 165,524     $ (1,482 )   $ 164,042   Produced and licensed content costs     452,949       –       452,949       325,966       –       325,966   Capitalized website development costs     1,123,772       (253,755 )     870,017       1,123,772       (66,460 )     1,057,312   Total capitalized costs   $ 1,754,356     $ (256,845 )   $ 1,497,511     $ 1,615,262     $ (67,942 )   $ 1,547,320     For the three months ended June 30, 2023 and 2022, the Company recorded amortization expense of $94,451 and $499, respectively. For the six months ended June 30, 2023 and 2022, the Company recorded amortization expense of $188,903 and $499, respectively.

v3.23.2

LEASES	6 Months Ended
	Jun. 30, 2023
Leases
LEASES	8. LEASES   The Company has entered into operating leases primarily for office space. These leases have terms which range from two years to six years, and often include one or more options to renew or in the case of equipment rental, to purchase the equipment. During the six months ended June 30, 2023, the Company did not record any additional right of use (“ROU”) assets or lease liabilities related to new operating leases.   The following table presents the future minimum payment obligations and aggregate present value of lease liabilities for operating leases as of June 30, 2023: Schedule of future minimum lease payment       Remainder of 2023   $ 189,580   2024     275,894   2025     277,235   2026     225,200   2027     236,461   Thereafter     –   Total future lease payments     1,204,370   Less: Imputed interest     (258,237 ) Present value of lease liabilities   $ 946,133     These operating leases are listed as separate line items on the Company's Consolidated Balance Sheets and represent the Company’s right to use the underlying asset for the lease term. The Company’s obligation to make lease payments are also listed as separate line items on the Company's Consolidated Balance Sheets.   Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments.   Information related to the Company's operating right-of-use assets and related lease liabilities are as follows: Schedule of operating right-of-use assets           Six Months Ended June 30, 2023   Cash paid for operating lease liabilities   $ 190,600   Weighted-average remaining lease term in years     2.6   Weighted-average discount rate     10%        For the three months ended June 30, 2023 and 2022, the Company recorded rent expenses related to lease obligations of $100,102 and $115,292, respectively. For the six months ended June 30, 2023 and 2022, the Company recorded rent expenses related to lease obligations of $200,204 and $220,632, respectively. Rent expenses related to lease obligations are allocated between cost of goods sold and selling, general and administrative expenses in the Company’s condensed consolidated statement of operations.

v3.23.2

GOODWILL AND INTANGIBLE ASSETS	6 Months Ended
	Jun. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
GOODWILL AND INTANGIBLE ASSETS	9. GOODWILL AND INTANGIBLE ASSETS   Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the Company’s acquisitions is attributable to the value of the potential expanded market opportunity with new customers.   The following table sets forth the changes in the carrying amount of the Company’s goodwill as of June 30, 2023 and December 31, 2022:   Schedule of goodwill         Balance, January 1, 2022   $ 22,376,025   Measurement Period Adjustment     (468,426 ) Impairment charge     (11,340,115 ) Balance, December 31, 2022     10,567,484   Impairments and other adjustments     –   Balance, June 30, 2023   $ 10,567,484     At December 31, 2022, the Company performed its annual impairment tests as prescribed by ASC 350 on the carrying value of its goodwill and recorded aggregate impairment charges of $11,340,115; of which $6,202,888 was attributed to its TD Holdings Ltd animation business acquired in 2016, and $5,137,227 was attributed to its Curiosity Ink Media original content business acquired in 2021. The determination was made as the result of the Company’s qualitative assessment of each business unit, including the decline in animation revenues and delay in monetization of original content properties.   During the year ended December 31, 2022, the Company finalized the purchase price allocation, during the permissible measurement period, and obtained new fair value information for certain identifiable intangible assets related to its acquisition of Curiosity. The revised purchase price allocation decreased goodwill by $468,426 and increased intangible assets by $468,426. These adjustments did not have a significant impact on the Company’s consolidated financial statements.   The following table summarizes the individually identifiable intangible assets subsequently recognized:   Summary of changes in intangible assets         Licensing agreements   $ 341,728   Books and stories content     126,698   Total identifiable intangible assets   $ 468,426     At June 30, 2023 and December 31, 2022, the carrying amount of the Company’s goodwill was $10,567,484, respectively.   The following table sets forth the components of the Company’s intangible assets at June 30, 2023 and December 31, 2022:  Schedule of intangible assets                                                     June 30, 2023     December 31, 2022       Amortization Period (Years)     Gross Carrying Amount     Accumulated Amortization     Net Book Value     Gross Carrying Amount     Accumulated Amortization     Net Book Value   Intangible assets subject to amortization:                                                         Customer relationships     10.00     $ 1,526,282     $ (1,068,397 )   $ 457,885     $ 1,526,282     $ (992,083 )   $ 534,199   Licensing agreement     19.60       341,728       (33,338 )     308,390       341,728       (24,641 )     317,087   Subtotal             1,868,010       (1,101,735 )     766,275       1,868,010       (1,016,724 )     851,286   Intangible assets not subject to amortization:                                                         Books and stories content             126,698       –       126,698       126,698       –       126,698   Trade names             4,386,247       –       4,386,247       4,386,247       –       4,386,247   Total intangible assets           $ 6,380,955     $ (1,101,735 )   $ 5,279,220     $ 6,380,955     $ (1,016,724 )   $ 5,364,231     For the three months ended June 30, 2023 and 2022, the Company recorded amortization expense of $42,505 and $80,373, respectively. For the six months ended June 30, 2023 and 2022, the Company recorded amortization expense of $85,011 and $173,047, respectively.   The following table provides information regarding estimated remaining amortization expense for intangible assets subject to amortization for each of the following years ending December 31: Schedule of amortization       Remainder of 2023   $ 85,011   2024     170,022   2025     170,022   2026     93,708   2027     17,394   Thereafter     230,118   Total remaining intangible assets subject to amortization   $ 766,275

v3.23.2

ACCRUED LIABILITIES	6 Months Ended
	Jun. 30, 2023
Payables and Accruals [Abstract]
ACCRUED LIABILITIES	10. ACCRUED LIABILITIES   The following table sets forth the components of the Company’s accrued liabilities at June 30, 2023 and December 31, 2022: Schedule accrued liabilities                 June 30, 2023     December 31, 2022                 Executive and employee compensation   $ 115,671     $ 102,151   Interest on convertible notes and promissory notes     101,231       84,292   Other accrued expenses and liabilities     75,619       192,511   Total accrued liabilities   $ 292,521     $ 378,954

v3.23.2

RELATED PARTY TRANSACTIONS AND PAYABLES	6 Months Ended
	Jun. 30, 2023
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS AND PAYABLES	11. RELATED PARTY TRANSACTIONS AND PAYABLES   Darren Marks’s Family   The Company has engaged the family of Darren Marks, its Chief Executive Officer, to assist in the development of the Grom Social website and mobile application. These individuals create and produce original short form content focusing on social responsibility, anti-bullying, digital citizenship, unique blogs, and special events. Sarah Marks, the wife of Mr. Marks, and Zach Marks, Luke Marks, Jack Marks, Dawson Marks, Caroline Marks and Victoria Marks, each Mr. Marks’s children, are, or have been, employed by or independently contracted with the Company.   As of June 30, 2023, Zach and Luke Marks were employed by Grom Social as its Founder and Content Creator, and Content Coordinator, respectively, and receive annual salaries of $103,000 and $30,000, respectively.   For the three months ended June 30, 2023 and 2022, the Marks family was paid a total of $32,500 and $30,000, respectively. For the six months ended June 30, 2023 and 2022, the Marks family was paid a total of $67,917 and $30,000, respectively.   Compensation for services provided by the Marks family is expected to continue for the foreseeable future.   Liabilities Due to Executive Officers and Directors   On July 11, 2018, our director Dr. Thomas Rutherford loaned the Company $50,000. The loan bears interest at a rate of 10% per annum and was due on August 11, 2018. On April 21, 2023, the Company repaid the $50,000 of outstanding principal on the note.   As of June 30, 2023 and December 31, 2022, the aggregate related party payables balance was $23,904 and $72,383, respectively, of which $23,904 and $22,383 of accrued interest were reported under accrued liabilities on the Company’s Consolidated Balance Sheets.

v3.23.2

CONVERTIBLE NOTES	6 Months Ended
	Jun. 30, 2023
Debt Disclosure [Abstract]
CONVERTIBLE NOTES	12. CONVERTIBLE NOTES   The following tables set forth the components of the Company’s convertible notes as of June 30, 2023 and December 31, 2022: Schedule of convertible debt                     June 30, 2023     December 31, 2022   8% Unsecured Convertible Note (Curiosity)   $ 278,000     $ 278,000   12% Senior Convertible Notes with Original Issuance Discounts (OID Notes)     75,000       75,000   12% Senior Secured Convertible Notes (TDH Secured Notes)     136,510       204,907   12% Senior Secured Convertible Notes (Additional Secured Notes)     25,937       38,932   Loan discounts     (14,751 )     (25,165 ) Total convertible notes, net     500,696       571,664   Less: current portion of convertible notes, net     (500,696 )     (503,465 ) Convertible notes, net   $ –     $ 68,199     8% Unsecured Convertible Notes – Curiosity   On July 29, 2021, the Company entered into a membership interest purchase agreement with Curiosity and the holders of all of Curiosity’s outstanding membership interests, for the purchase of 80% of Curiosity’s outstanding membership interests from the sellers. Pursuant to the purchase agreement, the Company issued 8% eighteen-month convertible promissory notes in the aggregate principal amount $278,000 to pay-down and refinance certain outstanding loans and advances previously made by certain of its principals. The notes are convertible into shares of common stock of the Company at a conversion price of $98.40 per share but may not be converted if, after giving effect to such conversion, the noteholder and its affiliates would beneficially own in excess of 9.99% of the Company’s outstanding common stock. The notes may be prepaid at any time, in whole or in part. The notes are subordinate to the Company’s senior indebtedness.   As of June 30, 2023, the principal balance of the Curiosity note was $278,000.   10% Senior Secured Convertible Note with Original Issuance Discount (L1)   On September 14, 2021, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with L1 Capital Global Master Fund (“L1”) pursuant to which it issued (i) a 10% original issue discount senior secured convertible note in the principal amount of $4,400,000 to L1 (the “L1 Note”) and (ii) a 5 five-year warrant to purchase 27,109 shares of the Company’s common stock at an exercise price of $126.00 per share (“Warrant Shares”) in exchange for $3,960,000 (the “First Tranche Financing”). The Purchase Agreement also provided, subject to shareholder approval, for the issuance, subject to certain conditions, of an additional $1,500,000 of notes and warrants to purchase 9,259 shares of common stock (the “Second Tranche Financing”) on the same terms.   On October 20, 2021, the Company and L1 entered into an amended and restated purchase agreement which increased the amount of the Second Tranche Financing from $1,500,000 to $6,000,000 and provides (i) for an amended and restated 10% original issue discount senior secured convertible note to be issued in exchange for the L1 Note pursuant to the Purchase Agreement and (ii) for the issuance of a five-year warrant to purchase 34,706 shares of the Company’s common stock at an exercise price of $126.00 per share.   During the year ended December 31, 2022, the Company issued an aggregate 191,192 shares of common stock to L1 upon the conversion of $4,125,000 of outstanding principal.   As of June 30, 2023, the principal balance was $0 and all associated loan discounts were fully amortized.   10% Senior Secured Convertible Note with Original Issuance Discount (L1– Second Tranche)   On January 20, 2022 (the “Second Tranche Closing”), the Company and L1 Capital closed on the Second Tranche of the offering, resulting in the issuance of (i) a $1,750,000 10% Original Issue Discount Senior Secured Convertible Note, due July 20, 2023, (the “Second Tranche Note”); and (ii) a five year warrant to purchase 10,123 shares of Common Stock of the Company at an exercise price of $126.00 per share (the “Second Tranche Warrants”), in exchange for consideration of $1,575,000 (i.e. the face amount less the 10% Original Issue Discount of $175,000).   During the year ended December 31, 2022, the Company issued an aggregate 108,025 shares of common stock and repaid $1,146,901 in cash to L1 upon the conversion of $1,750,000 of outstanding principal.   As of June 30, 2023, the principal balance was $0 and all associated loan discounts were fully amortized.   10% Secured Convertible Notes with Original Issuance Discounts (“OID Notes”)   During the year ended December 31, 2017, the Company issued a series of secured, convertible notes with original issuance discounts to accredited investors. The notes were issued with original issuance discounts of 10.0%, bear interest at a rate of 10% per annum (payable semiannually in cash), and carry a two-year term with a fixed conversion price of $748.80. As of June 30, 2023, the remaining principal balance of these notes was $25,000.   During the year ended December 31, 2018, the Company issued a series of secured, convertible notes with original issuance discounts to accredited investors. The notes were issued with original issuance discounts of 20.0%, bear interest at a rate of 10% per annum (payable semiannually in cash), and carry a two-year term with a fixed conversion price of $480.00. As of June 30, 2023, the remaining principal balance of these notes was $50,000.   As of June 30, 2023, the principal balance of these notes was $75,000 and all associated loan discounts were fully amortized. No notices of default or demands for payment have been received by the Company.   12% Senior Secured Convertible Notes (“TDH Secured Notes”)   On March 16, 2020, the Company sold (the “TDH Secured Notes Offering”) an aggregate $3,000,000 of its 12% senior secured convertible notes (the “TDH Secured Notes”), to eleven accredited investors (the “TDH Secured Note Lenders”), pursuant to a subscription agreement with the TDH Secured Note Lenders. Interest on the TDH Secured Notes accrues on the outstanding principal amount at the rate of 12% per annum. Principal and interest on the TDH Secured Notes are payable monthly, on an amortized basis over 48 months, with the last payment due on March 16, 2024. Pursuant to the TDH Secured Notes, TD Holdings will pay amounts due under the TDH Secured Notes. Prepayment of amounts due under TDH Secured Notes is subject to a prepayment penalty in an amount equal to 4% of the amount prepaid.   The TDH Secured Notes are convertible at the option of the holders at 75% of the average sales price of the Company’s common stock over the 60 trading days immediately preceding conversion provided that the conversion price shall not be less than $96.00 per share.   The Company’s obligations under the TDH Secured Notes, are secured by Grom Holdings’ shares of stock of TDH, and of its wholly owned subsidiary, TDAHK. The TDH Secured Notes rank equally and ratably on a pari passu basis with (i) the other TDH Secured Notes and (ii) the Original TDH Notes issued by the Company pursuant to TDH Share Sale Agreement.   If the Company sells the animation studio located in Manila, Philippines, which is currently owned by TDH through TDAHK (the “Animation Studio”), for more than $12,000,000, and so long as any amount of principal is outstanding under the TDH Secured Notes, the Company will pay the TDH Secured Notes holders from the proceeds of the sale (i) all amounts of principal outstanding under the TDH Secured Notes, (ii) such amount of interest which would be due and payable assuming the TDH Secured Notes were held to maturity (minus any amounts of interest previously paid hereunder), and (iii) an additional 10% of the amount of principal outstanding under the TDH Secured Notes within five days of the closing of such sale.   In connection with the issuance of the TDH Secured Notes, the Company issued to each TDH Secured Note holder shares of common stock equal to 20% of the principal amount of such holder’s TDH Secured Note, divided by $96.00. Accordingly, an aggregate of 6,250 shares of common stock were issued to the TDH Secured Note holders on March 16, 2020. These shares were valued at $420,000, or $67.20 per share, which represents fair market value. The Company recorded the value of these shares as a loan discount to be amortized as interest expense over the term of the notes.   As of June 30, 2023, the principal balance of these notes was $136,510 and the remaining balance on the associated loan discounts was $12,396.   12% Senior Secured Convertible Notes (Additional Secured Notes)   On March 16, 2020, the Company issued to seven accredited investors (the “Additional Secured Note Lenders”) an aggregate of $1,060,000 of its 12% senior secured convertible notes (the “Additional Secured Notes”) in a private offering pursuant to a subscription agreement with substantially the same terms as the TDH Secured Notes except that the Additional Secured Notes are secured by all of the assets of the Company other than the shares and other assets of TDH and TDAHK, pursuant to a security agreement by and among the Company and the Additional Secured Note Lenders.   Interest on the Additional Secured Notes accrues on the outstanding principal amount at the rate of 12% per annum. Principal and interest on the Additional Secured Notes are payable monthly, on an amortized basis over 48 months, with the last payment due on March 16, 2024. Prepayment of the amounts due under the Additional Secured Notes is subject to a prepayment penalty of 4% of the amount prepaid.   The Additional Secured Notes are convertible at the option of the holders at 75% of the average sales price of the Company’s common stock over the 60 trading days immediately preceding conversion provided that the conversion price shall not be less than $96.00 per share.   In connection with the issuance of the Additional Secured Notes, the Company issued to each Additional Secured Note Lender shares of common stock equal to 20% of the principal amount of such holder’s Additional Secured Note, divided by $96.00. Accordingly, an aggregate of 2,208 shares of common stock were issued. These shares were valued at $148,000, or $67.20 per share, which represents fair market value. The Company recorded the value of these shares as a loan discount to be amortized as interest expense over the term of the related convertible notes.   As of June 30, 2023, the principal balance of these notes was $25,937 and the remaining balance on the associated loan discounts was $2,355.   Future Minimum Principal Payments   The remaining future principal repayments based upon the maturity dates of the Company’s borrowings for each of the next five years are as follows: Schedule of future debt maturity payments         Remainder of 2023   $ 439,760   2024     75,687   2025 and thereafter     –   Total Convertible notes principal amount payable.   $ 515,447

v3.23.2

EMPLOYEE BENEFIT PLAN	6 Months Ended
	Jun. 30, 2023
Retirement Benefits [Abstract]
EMPLOYEE BENEFIT PLAN	13. EMPLOYEE BENEFIT PLAN    The Company’s subsidiary, Top Draw Animation, Inc., has an unfunded, non-contributory defined benefit plan covering its permanent employees.   Under the existing regulatory framework, the Company is required to pay eligible employees at least the minimum regulatory benefit upon retirement, which provides a retirement benefit equal to 22.5 days’ pay for every year of credited service, subject to age and service requirements. The regulatory benefit is paid in a lump sum upon retirement. The existing regulatory framework does not require minimum funding of the plan.   Retirement benefit expenses and liabilities are determined in accordance with an actuarial study made for the plan utilizing the net interest approach which disaggregates the defined benefit cost into the following components: service costs (cost of services received); net interest (financing effect of paying for benefits in advance or in arrears); and remeasurements (period-to-period fluctuations in the amounts of defined benefit obligations and plan assets).   Under the net interest approach, service cost and net interest on the defined benefit liability (asset) are both recognized in the statement of operations, while remeasurements of the defined benefit liability (asset) are recognized in other comprehensive income. Remeasurements recognized in other comprehensive income shall not be reclassified to profit or loss in a subsequent period.   The amount of the defined benefit liability reported under other noncurrent liabilities in the Company’s Consolidated Balance Sheet is determined as follows: Schedule of defined benefit liability                     June 30, 2023     December 31, 2022                 Benefit obligation   $ 233,433     $ 434,974   Plan assets     –       –   Total   $ 233,433     $ 434,974     The components of the accumulated benefit cost to be recognized under selling, general and administrative expense in consolidated statement of operations are the service cost (current service cost, past service cost or credit and settlement gains or losses) and net interest expense on the net defined benefit liability: Schedule of components of accumulated benefit cost                     June 30, 2023     June 30, 2022                 Current service cost   $ 9,164     $ 2,471   Net interest expense     8,857       –   Total   $ 18,021     $ 2,471     The change in the accumulated benefit cost in the Company’s Condensed Consolidated Balance Sheet for the six months ended June 30, 2023 is as follows: Schedule of changes in accumulated benefit cost             2023           Balance, January 1   $ 434,974   Foreign currency translation     2,398   Expense recognized in other comprehensive income     18,021   Remeasurement on actuarial gain (loss) recognized     (44,351 ) Contributions paid     (177,609 ) Balance, June 30   $ 233,433     The cumulative amount of actuarial gains recognized in other comprehensive income for the six months ended June 30, 2023 and 2022 is as follows:  Schedule of actuarial gains                     2023     2022                 Balance, January 1   $ (36,682 )   $ 60,518   Foreign currency translation     –       –   Actuarial gain (loss)     (42,733 )     –   Balance, June 30     79,405       60,518   Tax effect     19,851       (12,439 ) Cumulative actuarial gain (loss), net of tax   $ (59,544 )   $ 48,079     The assumptions used to determine retirement benefits for the six months ended June 30, 2023 are as follows:  Schedule of assumption used to determine retirement benefits           June 30, 2023           Discount rate     6.22%   Salary increase rate     2.00%

v3.23.2

INCOME TAXES	6 Months Ended
	Jun. 30, 2023
Income Tax Disclosure [Abstract]
INCOME TAXES	14. INCOME TAXES   In calculating the provision for income taxes on an interim basis, the Company uses an estimate of the annual effective tax rate based upon currently known facts and circumstances and applies that rate to its year-to-date earnings or losses. The Company’s effective tax rate is based on expected income and statutory tax rates and takes into consideration permanent differences between financial statement and tax return income applicable to the Company in the various jurisdictions in which the Company operates. The effect of discrete items, such as changes in estimates, changes in rates or tax status, and unusual or infrequently occurring events, is recognized in the interim period in which the discrete item occurs. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained or as the result of new judicial interpretations or regulatory or tax law changes.   The Company’s interim effective tax rate, inclusive of discrete items, for the three and six months ended June 30, 2023 and 2022 was 0%, respectively, due to recurrent net losses for the periods presented.

v3.23.2

STOCKHOLDERS’ EQUITY	6 Months Ended
	Jun. 30, 2023
Equity [Abstract]
STOCKHOLDERS’ EQUITY	15. STOCKHOLDERS’ EQUITY   Preferred Stock   The Company is authorized to issue 25,000,000 shares of preferred stock, par value of $0.001 per share.   Series A Preferred Stock   As of June 30, 2023 and December 31, 2022, the Company had no shares of Series A Stock issued and outstanding.   Series B Preferred Stock   As of June 30, 2023 and December 31, 2022, the Company had no shares of Series B Stock issued and outstanding, respectively.   Series C Preferred Stock   On May 20, 2021, the Company filed with the Secretary of State of the State of Florida a Certificate of Designation of Preferences, Rights and Limitations of Series C Stock designating 10,000,000 shares as Series C Preferred Stock (the “Series C Stock”). The Series C Stock ranks senior and prior to all other classes or series of the Company’s preferred stock and common stock.   The holder may, at any time after the 6-month anniversary of the issuance of the shares of Series C Preferred Stock, convert such shares into common stock at a conversion rate of $57.60 per share. In addition, the Company may, at any time after the issuance of the shares, convert any or all of the outstanding shares of Series C Preferred Stock at a conversion rate of $57.60 per share.   Each share of Series C Stock entitles the holder to 1.5625 votes for each share of Series C Stock. The consent of the holders of at least two-thirds of the shares of Series C Stock is required for the amendment to any of the terms of the Series C Stock, to create any additional class of stock unless the stock ranks junior to the Series C Stock, to make any distribution or dividend on any securities ranking junior to the Series C Stock, to merge or sell all or substantially all of the assets of the Company or acquire another business or effectuate any liquidation of the Company.   Cumulative dividends accrue on each share of Series C Stock at the rate of 8% per annum of the stated value of $1.00 per share and are payable in arrears quarterly commencing 90 days from issuance. The dividend shall be payable in shares of common stock (a “PIK Dividend”) and are be due and payable on the date on which such PIK Dividend was declared.   Upon a liquidation, dissolution or winding up of the Company, the holders of the Series C Stock are entitled to $1.00 per share plus all accrued and unpaid dividends. No distribution may be made to holders of shares of capital stock ranking junior to the Series C Stock upon a liquidation until Series C stockholders receive their liquidation preference. The holders of 66 2/3% of the then outstanding shares of Series C Stock, may elect to deem a merger, reorganization or consolidation of the Company into or with another corporation, not affiliated with said majority, or other similar transaction or series of related transactions in which more than 50% of the voting power of the Company is disposed of in exchange for property, rights or securities distributed to holders thereof by the acquiring person, firm or other entity, or the sale of all or substantially all of the assets of the Company.   On January 24, 2022, the Company issued 686 shares of common stock to a stockholder upon the conversion of 39,500 shares of Series C preferred stock.   As of June 30, 2023 and December 31, 2022, the Company had 9,281,809 shares of Series C Stock issued and outstanding, respectively.   For the three months and six ended June 30, 2023, the Company declared cumulative dividends totaling $187,216 and $371,273, respectively, for amounts accrued on its Series C Stock.   Common Stock   The Company is authorized to issue 500,000,000 shares of common stock, par value of $0.001 per share and had 9,044,361 and 2,514,858 shares of common stock issued and outstanding as of June 30, 2023 and December 31, 2022, respectively.   Reverse Stock Split   On October 4, 2022, the Board and shareholders approved the granting of authority to the Board to amend the Company’s articles of incorporation to effect a reverse stock split of the issued and outstanding shares of its common stock, by a ratio of no less than 1-for-2 and no more than 1-for-30, with the exact ratio to be determined by the Board in its sole discretion, and with such reverse stock split to be effective at such time and date, if at all, as determined by the Board in its sole discretion. On December 9, 2022, the Board effected a 1-for-30 reverse stock split in connection with the Company’s continued listing of its common stock on Nasdaq.   PIPE Offering and Related Waiver   On January 25, 2023, the Company consummated a private placement (the “PIPE Offering”) pursuant to the terms of the Securities Purchase Agreement dated as of January 25, 2023 (the “2023 SPA”) that it entered into with institutional investors, in which the Company issued (i) 100,000 shares of common stock; (ii) 1,327,434 purchase warrants (the “Purchase Warrants”) to purchase an aggregate of 2,323,010 shares of common stock; and (iii) 1,227,434 pre-funded warrants (the “Pre-Funded Warrants”) to purchase an aggregate of 1,227,434 shares of common stock. The purchase price of each share of common stock and associated Purchase Warrant was $2.26. The purchase price of each Pre-Funded Warrant was $2.25. The aggregate gross proceeds of the PIPE Offering was approximately $3.0 million, before deducting fees to the placement agent and other expenses payable by the Company. EF Hutton, division of Benchmark Investments, LLC, acted as the exclusive placement agent in connection with the PIPE Offering.   In connection with the PIPE Offering, the Company entered into a Waiver (the “Waiver”) with L1 Capital Global Opportunities Master Fund (“L1”) waiving certain provisions of the Securities Purchase Agreement, dated as of September 14, 2021 (the “2021 SPA”), by and between it and L1. Pursuant to the terms of the Waiver, L1 waived certain provisions of the 2021 SPA and in consideration thereof, the Company (i) issued 150,000 purchase warrants substantially similar to the Purchase Warrants issued in connection with the 2023 SPA; and (ii) paid a cash fee of $50,000 to L1.   Pursuant to the 2023 SPA, the Company is obligated to hold a special stockholders’ meeting no later than 60 days following the date of the Purchase Agreement to solicit the approval of the issuance of the shares, Warrants and the shares of common stock underlying the Warrants in compliance with the rules of The Nasdaq Stock Market LLC (without regard to any limitations on exercise set forth in the Warrants or the Pre-Funded Warrants. On March 27, 2023, the Company held a special meeting of stockholders and the stockholders approved the PIPE Offering.   In connection with the PIPE Offering, the Company entered into a Registration Rights Agreement with the Purchasers, dated January 25, 2023 (the “Registration Rights Agreement”). The Registration Rights Agreement provides that we shall file a registration statement covering the resale of all of the Registrable Securities (as defined in the Registration Rights Agreement) with the SEC. The Registration Statement was filed and declared effective by the SEC on February 9, 2023.   Common Stock Issued in Exchange for Consulting, Professional and Other Services   During the three and six months ended June 30, 2023, the Company issued 0 and 23,334 shares of common stock, respectively, with a fair market value of $0 and $31,968, respectively, to contractors for services rendered.   During the three and six months ended June 30, 2022, the Company issued 1,464 and 3,950 shares of common stock, respectively, with a fair market value of $18,660 and $95,482, respectively, to contractors for services rendered.   Common Stock Issued in Connection with the Conversion of Convertible Note Principal and Accrued Interest   During the three and six months ended June 30, 2022, the Company issued 27,778 and 219,960 shares of common stock, respectively, upon the conversion of $450,000 and $4,575,000, respectively, in convertible note principal and accrued interest.   Common Stock Issued in Connection with Series C Stock Dividends   During the three and six months ended June 30, 2022, the Company issued 5,895 and 11,737 shares of common stock, respectively, valued at $187,455 and $646,523, respectively, for cumulative dividends declared on its Series C Stock.   Stock Purchase Warrants   Stock purchase warrants are accounted for as equity in accordance with ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity.   The following table reflects all outstanding and exercisable warrants at June 30, 2023 and December 31, 2022. All warrants are exercisable for a period of three to five years from the date of issuance:  Schedule of warrants                       Number of Warrants Outstanding     Weighted Average Exercise Price     Weighted Average Remaining Contractual Life (Yrs.)                       Balance January 1, 2022     141,572     $ 132.00       1.75   Warrants issued     4,280,355       3.20           Warrants exercised     (279,069 )     –           Warrants forfeited     (5,678 )     –           December 31, 2022     4,137,180     $ 7.29       4.89   Warrants issued     3,812,944     $ 2.26           Warrants exercised     (7,775,889 )      –           Warrants forfeited     –       –           Balance June 30, 2023     174,235     $ 107.32       3.24      On January 31, 2023, in connection with the PIPE Offering described above, the Company issued 1,327,434 Purchase Warrants to purchase an aggregate of 2,323,010 shares of common stock. The Purchase Warrants are immediately exercisable for $2.26 per share of common stock. The Purchase Warrant holders may also effect an alternative cashless exercise on or after the later of (i) the 30 day anniversary of the initial exercise date and (ii) the stockholder approval date (as defined in the 2023 SPA). In such event, the aggregate number of shares of common stock issuable in such alternative cashless exercise shall equal the product of the aggregate number of shares of common stock that would be issuable upon exercise of the Purchase Warrants and 0.85.   The Purchase Warrants were valued using the Black-Scholes option pricing model with the following average assumptions: the Company’s stock price on the date of the issuance ($2.15), an expected dividend yield of 0%, a historical volatility of 176.6%, a risk-free interest rate of 3.6%, and an expected term of one year. The Purchase Warrants were allocated a relative fair value of $1,387,429.   On January 31, 2023, the Company also issued 150,000 purchase warrants, substantially similar to the Purchase Warrants issued in connection with the PIPE Offering, to purchase an aggregate of 262,500 shares of common stock. The Purchase Warrants were valued using the Black-Scholes option pricing model with the following average assumptions: the Company’s stock price on the date of the issuance ($2.15), an expected dividend yield of 0%, a historical volatility of 176.6%, a risk-free interest rate of 3.6%, and an expected term of 1 year. The fair value of the purchase warrants was $350,039.   During the six months ended June 30, 2023, the Company issued 1,262,787 shares of common stock upon the exercise of 1,262,787 prefunded warrants for gross proceeds of $12,309.   During the six months ended June 30, 2023, the Company also issued 5,143,382 shares of common stock upon the cashless exercise of 6,513,102 purchase warrants.   As of June 30, 2023, the outstanding stock purchase warrants had an aggregate intrinsic value of $0.   Stock Options   The following table represents all outstanding and exercisable stock options as of June 30, 2023:  Schedule of options                                     Year Issued   Options Issued     Options Forfeited     Options Outstanding     Vested Options     Weighted Average Exercise Price     Weighted Average Remaining Life (Yrs.)                                         2013     8,058       (870 )     7,188       7,188     $ 230.40       0.22   2018     62       (62 )      –       –       –       –   2021     6,950       –       6,950       2,317     $ 89.40       3.08   Total     15,070       (932 )     14,138       9,505     $ 161.08       1.62     During the three and six months ended June 30, 2023, the Company recorded $44,821 and $89,643, respectively, in stock-based compensation costs related to stock options. During the three and six months ended June 30, 2022, the Company recorded $89,241 and $137,383, respectively, in stock-based compensation costs related to stock options. Stock-based compensation expense is reported in selling, general and administrative on the Company’s Condensed Consolidated Statement of Operations and Comprehensive Loss.   As of June 30, 2023, the total unrecognized cost of stock-based compensation related to stock options was $97,308. This cost is expected to be recognized over a weighted average period of 1.08 years.   As of June 30, 2023, the outstanding stock options had an aggregate intrinsic value of $0.

v3.23.2

COMMITMENTS AND CONTINGENCIES	6 Months Ended
	Jun. 30, 2023
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	16. COMMITMENTS AND CONTINGENCIES   In the ordinary course of business, the Company and its subsidiaries are subject to various pending and potential legal actions, arbitration proceedings, claims, investigations, examinations, regulatory proceedings, information gathering requests, subpoenas, inquiries and matters relating to compliance with laws and regulations (collectively, legal proceedings).   Based on the Company’s current knowledge, and taking into consideration its legal expenses, the Company does not believe it is a party to, nor are any of its subsidiaries the subject of, any legal proceeding that would have a material adverse effect on the Company’s consolidated financial condition or liquidity.   See also Note 8 (“Leases”).   See also Note 14 (“Income Taxes”).

v3.23.2

SUBSEQUENT EVENTS	6 Months Ended
	Jun. 30, 2023
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	17. SUBSEQUENT EVENTS   In accordance with FASB ASC 855-10, Subsequent Events, the Company has analyzed its operations subsequent to June 30, 2023 to the date these condensed consolidated financial statements were issued, and has determined that it does not have any material subsequent events to disclose in these condensed consolidated financial statements, except as follows:   Reverse Stock Split   On August 8, 2023, the Company’s shareholders approved the granting of authority to the Company’s Board of Directors (“Board”) to amend its articles of incorporation to effect a reverse stock split of the issued and outstanding shares of its common stock, by a ratio of no less than 1-for-2 and no more than 1-for-20, with the exact ratio to be determined by the Board in its sole discretion, and with such reverse stock split to be effective at such time and date, if at all, as determined by the Board in its sole discretion.

v3.23.2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	6 Months Ended
	Jun. 30, 2023
Accounting Policies [Abstract]
Impact of COVID-19	Impact of COVID-19   On January 30, 2020, the World Health Organization announced a global health emergency because of the spread of a new strain of the novel coronavirus (“COVID-19”). On March 11, 2020, the World Health Organization declared the outbreak of COVID-19, a global pandemic. COVID-19 significantly affected the United States and global economies.   The Company experienced significant disruptions to its business and operations due to circumstances related to COVID-19, and delays caused government-imposed quarantines, office closings and travel restrictions, which affected both the Company and its service providers. The Company has significant operations in Manila, Philippines, which was locked down by the government on March 12, 2020 due to concerns related to the spread of COVID-19. As a result of the Philippines government’s call to contain COVID-19, the Company’s animation studio, located in Manila, Philippines, which accounts for approximately 86.9% of the Company’s total revenues on a consolidated basis, was forced to close its offices for significant periods of time from March 2020 through December 2021.   In response to the outbreak and business disruption, the Company instituted employee safety protocols to contain the spread, including domestic and international travel restrictions, work-from-home practices, extensive cleaning protocols, social distancing and various temporary closures of its administrative offices and production studio. The Company also implemented a range of actions aimed at temporarily reducing costs and preserving liquidity.   The Company has recalled artists and employees to return to the studio, which is currently operating at 41% seat capacity. Approximately 37% of the studio’s employees and contractors currently work from home.   While restrictions have eased, the virus may continue to mutate and spread which could materially impact the Company’s business. The full extent of potential impacts on the Company’s business, financing activities and the global economy will depend on future developments, which cannot be predicted due to the uncertain nature of the virus, government mandated shut downs, and its adverse effects, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. These effects could have a material adverse impact on the Company’s business, operations, financial condition and results of operations.
Basis of Presentation	Basis of Presentation   The accompanying condensed consolidated financial statements are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conjunction with the instructions to Form 10-Q of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures required by GAAP for complete financial statements have been condensed or omitted. For the three and six months ended June 30, 2023, the condensed consolidated financial statements include the accounts of the Company and its operating subsidiaries Grom Social, TD Holdings, GES, GNS, and Curiosity. The Company recognizes the noncontrolling interest related to its less-than-wholly-owned subsidiary, Curiosity, as equity in the consolidated financial statements separate from the parent entity’s equity. The net loss attributable to the noncontrolling interest is included in net loss in the condensed consolidated statements of operations and comprehensive loss.   These condensed consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations. All such adjustments, which includes intercompany balances and transactions are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto at December 31, 2022, as presented in the Company’s Annual Report on Form 10-K filed on April 17, 2023 with the SEC.   Certain amounts for the prior year period have been reclassified to conform to current year’s presentation.
Use of Estimates	Use of Estimates   The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The most significant estimates relate to revenue recognition, valuation of accounts receivable, goodwill and other long-lived assets, and contingencies. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
Basic and Diluted Net Income (Loss) Per Share	Basic and Diluted Net Income (Loss) Per Share   The Company computes net income (loss) per share in accordance with FASB ASC 260, Earnings per Share which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential shares of common stock outstanding during the period using the treasury stock method, and convertible preferred stock and convertible debt using the if-converted method. These potentially dilutive shares include 5,266 shares from convertible notes and accrued interest, 161,143 shares from convertible preferred stock, 9,504 shares from vested stock options and 174,235 shares from stock purchase warrants. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Update to Significant Accounting Policies	Update to Significant Accounting Policies   There have been no new or material changes to the significant accounting policies discussed in the Company’s audited financial statements in its Annual Report on Form 10-K for the fiscal year ended December 31, 2022 as filed with the SEC on April 17, 2023, that are of significance, or potential significance, to the Company.

v3.23.2

REVENUES (Tables)	6 Months Ended
	Jun. 30, 2023
Revenue from Contract with Customer [Abstract]
Schedule of disaggregated revenue	Schedule of disaggregated revenue                             Three Months Ended June 30, 2023     Three Months Ended June 30, 2022     Six Months Ended June 30, 2023     Six Months Ended June 30, 2022                             Animation   $ 815,148     $ 1,025,966     $ 1,872,817     $ 2,074,579   Web Filtering     116,574       113,472       207,384       295,716   Publishing     –       –       10,101       –   Other     24,776       144       65,839       412   Total Sales   $ 956,498     $ 1,139,582     $ 2,156,141     $ 2,370,707
Schedule of accounts receivable	Schedule of accounts receivable                 June 30, 2023     December 31, 2022                 Billed accounts receivable   $ 171,721     $ 607,524   Unbilled accounts receivable     531,228       592,932   Allowance for doubtful accounts     (44,301 )     (38,226 ) Total accounts receivable, net   $ 658,648     $ 1,162,230   Total advanced payments and deferred revenues   $ 374,295     $ 576,338

v3.23.2

PROPERTY AND EQUIPMENT (Tables)	6 Months Ended
	Jun. 30, 2023
Property, Plant and Equipment [Abstract]
Schedule of property and equipment	Schedule of property and equipment                                         June 30, 2023     December 31, 2022       Cost     Accumulated Depreciation     Net Book Value     Cost     Accumulated Depreciation     Net Book Value   Capital assets subject to depreciation:                                                 Computers, software and office equipment   $ 2,510,394     $ (2,467,440 )   $ 42,954     $ 2,774,308     $ (2,651,872 )   $ 122,436   Machinery and equipment     174,666       (171,835 )     2,831       189,641       (182,180 )     7,461   Vehicles     11,776       (11,776 )     –       41,112       (35,504 )     5,608   Furniture and fixtures     376,834       (365,765 )     11,069       409,996       (391,783 )     18,213   Leasehold improvements     1,079,920       (1,014,233 )     65,687       1,172,501       (1,065,148 )     107,353   Total fixed assets     4,153,590       (4,031,049 )     122,541       4,587,558       (4,326,487 )     261,071   Capital assets not subject to depreciation:                                                 Construction in progress     –       –       –       24,605       –       24,605   Total fixed assets   $ 4,153,590     $ (4,031,049 )   $ 122,541     $ 4,612,163     $ (4,326,487 )   $ 285,676

v3.23.2

OTHER ASSETS (Tables)	6 Months Ended
	Jun. 30, 2023
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Schedule Of Other Assets	Schedule Of Other Assets                 June 30, 2023     December 31, 2022                 Capitalized website development costs   $ 870,017     $ 1,057,312   Prepublication costs     174,545       164,042   Produced and licensed content costs     452,949       325,966   Deposits     72,921       72,027   Other noncurrent assets     –       7,731   Total other assets   $ 1,570,432     $ 1,627,078
Schedule of capitalized cost	Schedule of capitalized cost                                         June 30, 2023     December 31, 2022       Gross Carrying Value     Accumulated Amortization     Net Book Value     Gross Carrying Value     Accumulated Depreciation     Net Book Value   Prepublication costs   $ 177,635     $ (3,090 )   $ 174,545     $ 165,524     $ (1,482 )   $ 164,042   Produced and licensed content costs     452,949       –       452,949       325,966       –       325,966   Capitalized website development costs     1,123,772       (253,755 )     870,017       1,123,772       (66,460 )     1,057,312   Total capitalized costs   $ 1,754,356     $ (256,845 )   $ 1,497,511     $ 1,615,262     $ (67,942 )   $ 1,547,320

v3.23.2

LEASES (Tables)	6 Months Ended
	Jun. 30, 2023
Leases
Schedule of future minimum lease payment	Schedule of future minimum lease payment       Remainder of 2023   $ 189,580   2024     275,894   2025     277,235   2026     225,200   2027     236,461   Thereafter     –   Total future lease payments     1,204,370   Less: Imputed interest     (258,237 ) Present value of lease liabilities   $ 946,133
Schedule of operating right-of-use assets	Schedule of operating right-of-use assets           Six Months Ended June 30, 2023   Cash paid for operating lease liabilities   $ 190,600   Weighted-average remaining lease term in years     2.6   Weighted-average discount rate     10%

v3.23.2

GOODWILL AND INTANGIBLE ASSETS (Tables)	6 Months Ended
	Jun. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract]
Schedule of goodwill	Schedule of goodwill         Balance, January 1, 2022   $ 22,376,025   Measurement Period Adjustment     (468,426 ) Impairment charge     (11,340,115 ) Balance, December 31, 2022     10,567,484   Impairments and other adjustments     –   Balance, June 30, 2023   $ 10,567,484
Summary of changes in intangible assets	Summary of changes in intangible assets         Licensing agreements   $ 341,728   Books and stories content     126,698   Total identifiable intangible assets   $ 468,426
Schedule of intangible assets	Schedule of intangible assets                                                     June 30, 2023     December 31, 2022       Amortization Period (Years)     Gross Carrying Amount     Accumulated Amortization     Net Book Value     Gross Carrying Amount     Accumulated Amortization     Net Book Value   Intangible assets subject to amortization:                                                         Customer relationships     10.00     $ 1,526,282     $ (1,068,397 )   $ 457,885     $ 1,526,282     $ (992,083 )   $ 534,199   Licensing agreement     19.60       341,728       (33,338 )     308,390       341,728       (24,641 )     317,087   Subtotal             1,868,010       (1,101,735 )     766,275       1,868,010       (1,016,724 )     851,286   Intangible assets not subject to amortization:                                                         Books and stories content             126,698       –       126,698       126,698       –       126,698   Trade names             4,386,247       –       4,386,247       4,386,247       –       4,386,247   Total intangible assets           $ 6,380,955     $ (1,101,735 )   $ 5,279,220     $ 6,380,955     $ (1,016,724 )   $ 5,364,231     For the three months ended June 30, 2023 and 2022, the Company recorded amortization expense of $42,505 and $80,373, respectively. For the six months ended June 30, 2023 and 2022, the Company recorded amortization expense of $85,011 and $173,047, respectively.   The following table provides information regarding estimated remaining amortization expense for intangible assets subject to amortization for each of the following years ending December 31:
Schedule of amortization	Schedule of amortization       Remainder of 2023   $ 85,011   2024     170,022   2025     170,022   2026     93,708   2027     17,394   Thereafter     230,118   Total remaining intangible assets subject to amortization   $ 766,275

v3.23.2

ACCRUED LIABILITIES (Tables)	6 Months Ended
	Jun. 30, 2023
Payables and Accruals [Abstract]
Schedule accrued liabilities	Schedule accrued liabilities                 June 30, 2023     December 31, 2022                 Executive and employee compensation   $ 115,671     $ 102,151   Interest on convertible notes and promissory notes     101,231       84,292   Other accrued expenses and liabilities     75,619       192,511   Total accrued liabilities   $ 292,521     $ 378,954

v3.23.2

CONVERTIBLE NOTES (Tables)	6 Months Ended
	Jun. 30, 2023
Debt Disclosure [Abstract]
Schedule of convertible debt	Schedule of convertible debt                     June 30, 2023     December 31, 2022   8% Unsecured Convertible Note (Curiosity)   $ 278,000     $ 278,000   12% Senior Convertible Notes with Original Issuance Discounts (OID Notes)     75,000       75,000   12% Senior Secured Convertible Notes (TDH Secured Notes)     136,510       204,907   12% Senior Secured Convertible Notes (Additional Secured Notes)     25,937       38,932   Loan discounts     (14,751 )     (25,165 ) Total convertible notes, net     500,696       571,664   Less: current portion of convertible notes, net     (500,696 )     (503,465 ) Convertible notes, net   $ –     $ 68,199
Schedule of future debt maturity payments	Schedule of future debt maturity payments         Remainder of 2023   $ 439,760   2024     75,687   2025 and thereafter     –   Total Convertible notes principal amount payable.   $ 515,447

v3.23.2

EMPLOYEE BENEFIT PLAN (Tables)	6 Months Ended
	Jun. 30, 2023
Retirement Benefits [Abstract]
Schedule of defined benefit liability	Schedule of defined benefit liability                     June 30, 2023     December 31, 2022                 Benefit obligation   $ 233,433     $ 434,974   Plan assets     –       –   Total   $ 233,433     $ 434,974
Schedule of components of accumulated benefit cost	Schedule of components of accumulated benefit cost                     June 30, 2023     June 30, 2022                 Current service cost   $ 9,164     $ 2,471   Net interest expense     8,857       –   Total   $ 18,021     $ 2,471
Schedule of changes in accumulated benefit cost	Schedule of changes in accumulated benefit cost             2023           Balance, January 1   $ 434,974   Foreign currency translation     2,398   Expense recognized in other comprehensive income     18,021   Remeasurement on actuarial gain (loss) recognized     (44,351 ) Contributions paid     (177,609 ) Balance, June 30   $ 233,433
Schedule of actuarial gains	Schedule of actuarial gains                     2023     2022                 Balance, January 1   $ (36,682 )   $ 60,518   Foreign currency translation     –       –   Actuarial gain (loss)     (42,733 )     –   Balance, June 30     79,405       60,518   Tax effect     19,851       (12,439 ) Cumulative actuarial gain (loss), net of tax   $ (59,544 )   $ 48,079
Schedule of assumption used to determine retirement benefits	Schedule of assumption used to determine retirement benefits           June 30, 2023           Discount rate     6.22%   Salary increase rate     2.00%

v3.23.2

STOCKHOLDERS’ EQUITY (Tables)	6 Months Ended
	Jun. 30, 2023
Equity [Abstract]
Schedule of warrants	Schedule of warrants                       Number of Warrants Outstanding     Weighted Average Exercise Price     Weighted Average Remaining Contractual Life (Yrs.)                       Balance January 1, 2022     141,572     $ 132.00       1.75   Warrants issued     4,280,355       3.20           Warrants exercised     (279,069 )     –           Warrants forfeited     (5,678 )     –           December 31, 2022     4,137,180     $ 7.29       4.89   Warrants issued     3,812,944     $ 2.26           Warrants exercised     (7,775,889 )      –           Warrants forfeited     –       –           Balance June 30, 2023     174,235     $ 107.32       3.24
Schedule of options	Schedule of options                                     Year Issued   Options Issued     Options Forfeited     Options Outstanding     Vested Options     Weighted Average Exercise Price     Weighted Average Remaining Life (Yrs.)                                         2013     8,058       (870 )     7,188       7,188     $ 230.40       0.22   2018     62       (62 )      –       –       –       –   2021     6,950       –       6,950       2,317     $ 89.40       3.08   Total     15,070       (932 )     14,138       9,505     $ 161.08       1.62

v3.23.2

GOING CONCERN (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated Deficit	$ 88,202,102		$ 83,472,412
Net cash used in operating activities	$ 4,010,846	$ 3,383,231

v3.23.2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative)	6 Months Ended
	Jun. 30, 2023 shares
Convertible Notes And Accrued Interest [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	5,266
Convertible Preferred Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	161,143
Vested Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	9,504
Stock Purchase Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	174,235

v3.23.2

REVENUES (Details - Revenue by segment) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Total Sales	$ 956,498	$ 1,139,582	$ 2,156,141	$ 2,370,707
Animation [Member]
Total Sales	815,148	1,025,966	1,872,817	2,074,579
Web Filtering [Member]
Total Sales	116,574	113,472	207,384	295,716
Publishing [Member]
Total Sales	0	0	10,101	0
Other Revenue [Member]
Total Sales	$ 24,776	$ 144	$ 65,839	$ 412

v3.23.2

REVENUES (Details - Accounts Receivable) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Revenue from Contract with Customer [Abstract]
Billed accounts receivable	$ 171,721	$ 607,524
Unbilled accounts receivable	531,228	592,932
Allowance for doubtful accounts	(44,301)	(38,226)
Total accounts receivable, net	658,648	1,162,230
Total advanced payments and deferred revenues	$ 374,295	$ 576,338

v3.23.2

REVENUES (Details Narrative) - Customer Concentration Risk [Member]	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Three Customers [Member] | Revenue Benchmark [Member]
Disaggregation of Revenue [Line Items]
Concentration percentage	73.90%	78.10%	57.30%	81.70%
Four Customers [Member] | Revenue Benchmark [Member]
Disaggregation of Revenue [Line Items]
Concentration percentage	73.90%	78.10%	57.30%	81.70%
Two Customers [Member] | Accounts Receivable [Member]
Disaggregation of Revenue [Line Items]
Concentration percentage			79.20%		73.60%

v3.23.2

INVENTORY (Details Narrative) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Inventory Disclosure [Abstract]
Inventory, Net	$ 87,040	$ 92,303
Inventory work-in-progress	85,382	85,324
Inventory finished goods	$ 1,658	$ 6,979

v3.23.2

PROPERTY AND EQUIPMENT (Details) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 4,153,590	$ 4,612,163
Accumulated depreciation	(4,031,049)	(4,326,487)
Property and equipment, net	122,541	285,676
Computers Software [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	2,510,394	2,774,308
Accumulated depreciation	(2,467,440)	(2,651,872)
Property and equipment, net	42,954	122,436
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	174,666	189,641
Accumulated depreciation	(171,835)	(182,180)
Property and equipment, net	2,831	7,461
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	11,776	41,112
Accumulated depreciation	(11,776)	(35,504)
Property and equipment, net	0	5,608
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	376,834	409,996
Accumulated depreciation	(365,765)	(391,783)
Property and equipment, net	11,069	18,213
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,079,920	1,172,501
Accumulated depreciation	(1,014,233)	(1,065,148)
Property and equipment, net	65,687	107,353
Total Fixed Assets [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	4,153,590	4,587,558
Accumulated depreciation	(4,031,049)	(4,326,487)
Property and equipment, net	122,541	261,071
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	0	24,605
Accumulated depreciation	0	0
Property and equipment, net	$ 0	$ 24,605

v3.23.2

PROPERTY AND EQUIPMENT (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Property, Plant and Equipment [Abstract]
Depreciation	$ 58,559	$ 80,373	$ 128,435	$ 173,047

v3.23.2

OTHER ASSETS (Details - Schedule of other assets) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Capitalized website development costs	$ 870,017	$ 1,057,312
Prepublication costs	174,545	164,042
Produced and licensed content costs	452,949	325,966
Deposits	72,921	72,027
Other noncurrent assets	0	7,731
Total other assets	$ 1,570,432	$ 1,627,078

v3.23.2

OTHER ASSETS (Details - Schedule of capitalized costs) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Website development costs	$ 1,754,356	$ 1,615,262
Accumulated Amortization	(256,845)	(67,942)
Net Book Value	1,497,511	1,547,320
Prepublication Costs [Member]
Property, Plant and Equipment [Line Items]
Website development costs	177,635	165,524
Accumulated Amortization	(3,090)	(1,482)
Net Book Value	174,545	164,042
Produced And Licensed Content [Member]
Property, Plant and Equipment [Line Items]
Website development costs	452,949	325,966
Accumulated Amortization	0	0
Net Book Value	452,949	325,966
Capitalized Website Development Costs [Member]
Property, Plant and Equipment [Line Items]
Website development costs	1,123,772	1,123,772
Accumulated Amortization	(253,755)	(66,460)
Net Book Value	$ 870,017	$ 1,057,312

v3.23.2

OTHER ASSETS (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Amortization expense	$ 94,451	$ 499	$ 188,903	$ 499

v3.23.2

LEASES (Details - Future minimum payment obligations)	Jun. 30, 2023 USD ($)
Leases
Remainder of 2023	$ 189,580
2024	275,894
2025	277,235
2026	225,200
2027	236,461
Thereafter	0
Total future lease payments	1,204,370
Less: Imputed interest	(258,237)
Present value of lease liabilities	$ 946,133

v3.23.2

LEASES (Details - Operating right-of-use assets and related lease liabilities)	6 Months Ended
	Jun. 30, 2023 USD ($)
Leases
Cash paid for operating lease liabilities	$ 190,600
Weighted-average remaining lease term (in years)	2 years 7 months 6 days
Weighted-average discount rate	10.00%

v3.23.2

LEASES (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Leases
Operating lease right of use assets	$ 0		$ 0
Operating Lease, Expense	$ 100,102	$ 115,292	$ 200,204	$ 220,632

v3.23.2

GOODWILL AND INTANGIBLE ASSETS (Details - Goodwill) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Dec. 31, 2022	Dec. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	$ 10,567,484	$ 10,567,484	$ 22,376,025
Measurement period adjustment		(468,426)
Impairment and other adjustments	$ 0	$ (11,340,115)

v3.23.2

GOODWILL AND INTANGIBLE ASSETS (Details - Change in intangible assets)	12 Months Ended
	Dec. 31, 2022 USD ($)
Finite-Lived Intangible Assets [Line Items]
Total identifiable intangible assets	$ 468,426
Licensing Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Total identifiable intangible assets	341,728
Books And Stories Content [Member]
Finite-Lived Intangible Assets [Line Items]
Total identifiable intangible assets	$ 126,698

v3.23.2

GOODWILL AND INTANGIBLE ASSETS (Details - Intangibles) - USD ($)	6 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Finite-Lived Intangible Assets [Line Items]
Finite intangible assets, gross	$ 1,868,010	$ 1,868,010
Accumulated amortization	(1,101,735)	(1,016,724)
Finite lived intangible asset	766,275	851,286
Total intangible assets	6,380,955	6,380,955
Total Accumulated Amortization	(1,101,735)	(1,016,724)
Total intangible assets	5,279,220	5,364,231
Books And Stories Content [Member]
Finite-Lived Intangible Assets [Line Items]
Indefinite lived intangible asset, gross	126,698	126,698
Indefinite lived intangible asset	126,698	126,698
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Indefinite lived intangible asset, gross	4,386,247	4,386,247
Indefinite lived intangible asset	$ 4,386,247	4,386,247
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Acquired Finite-Lived Intangible Assets, Weighted Average Useful Life	10 years
Finite intangible assets, gross	$ 1,526,282	1,526,282
Accumulated amortization	(1,068,397)	(992,083)
Finite lived intangible asset	$ 457,885	534,199
Licensing Agreements [Member]
Finite-Lived Intangible Assets [Line Items]
Acquired Finite-Lived Intangible Assets, Weighted Average Useful Life	19 years 7 months 6 days
Finite intangible assets, gross	$ 341,728	341,728
Accumulated amortization	(33,338)	(24,641)
Finite lived intangible asset	$ 308,390	$ 317,087

v3.23.2

GOODWILL AND INTANGIBLE ASSETS (Details - Amortization schedule) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Goodwill and Intangible Assets Disclosure [Abstract]
Remainder of 2023	$ 85,011
2024	170,022
2025	170,022
2026	93,708
2027	17,394
Thereafter	230,118
Total remaining intangible assets subject to amortization	$ 766,275	$ 851,286

v3.23.2

GOODWILL AND INTANGIBLE ASSETS (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Dec. 31, 2021
Indefinite-Lived Intangible Assets [Line Items]
Goodwill, Impairment Loss			$ (0)		$ 11,340,115
Decrease in goodwill					468,426
Increase in intangible assets					468,426
Goodwill	$ 10,567,484		10,567,484		10,567,484	$ 22,376,025
Amortization of Intangible Assets	$ 42,505	$ 80,373	$ 85,011	$ 173,047
T D Holdings Ltd [Member]
Indefinite-Lived Intangible Assets [Line Items]
Goodwill, Impairment Loss					6,202,888
Curiosity Ink Media [Member]
Indefinite-Lived Intangible Assets [Line Items]
Goodwill, Impairment Loss					$ 5,137,227

v3.23.2

ACCRUED LIABILITIES (Details) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Payables and Accruals [Abstract]
Executive and employee compensation	$ 115,671	$ 102,151
Interest on convertible notes and promissory notes	101,231	84,292
Other accrued expenses and liabilities	75,619	192,511
Total accrued liabilities	$ 292,521	$ 378,954

v3.23.2

RELATED PARTY TRANSACTIONS AND PAYABLES (Details Narrative) - USD ($)			3 Months Ended		6 Months Ended
	Apr. 21, 2023	Jul. 11, 2018	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Related Party Transaction [Line Items]
Repayments of Related Party Debt					$ 50,000	$ (0)
Marks Family [Member]
Related Party Transaction [Line Items]
Wages paid			$ 32,500	$ 30,000	67,917	$ 30,000
Rutherford [Member]
Related Party Transaction [Line Items]
Notes Payable		$ 50,000
Debt interest rate		10.00%
Maturity date		Aug. 11, 2018
Repayments of Related Party Debt	$ 50,000
Executive Officers And Directors [Member]
Related Party Transaction [Line Items]
Accounts payable, related parties			23,904		23,904		$ 72,383
Accounts payable, related parties			$ 23,904		$ 23,904		$ 22,383

v3.23.2

CONVERTIBLE NOTES (Details - Convertible debentures) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Debt Instrument [Line Items]
Convertible Debt, Current	$ (500,696)	$ (503,465)
Convertible Debt, Noncurrent	0	68,199
Unsecured Convertible Notes Curiosity [Member]
Debt Instrument [Line Items]
Convertible debt, gross	278,000	278,000
Convertible Debentures [Member]
Debt Instrument [Line Items]
Convertible debt, gross	500,696	571,664
Debt Instrument, Unamortized Discount	(14,751)	(25,165)
Convertible Debentures [Member] | Secured Convertible Notes O I D [Member]
Debt Instrument [Line Items]
Convertible debt, gross	75,000	75,000
Convertible Debentures [Member] | Senior Secured Convertible T D H Notes [Member]
Debt Instrument [Line Items]
Convertible debt, gross	136,510	204,907
Convertible Debentures [Member] | Senior Secured Convertible Additional Secured Notes [Member]
Debt Instrument [Line Items]
Convertible debt, gross	$ 25,937	$ 38,932

v3.23.2

CONVERTIBLE NOTES (Details - Debt maturities)	Jun. 30, 2023 USD ($)
Debt Disclosure [Abstract]
Remainder of 2023	$ 439,760
2024	75,687
2025 and thereafter	0
Total Convertible notes principal amount payable.	$ 515,447

v3.23.2

CONVERTIBLE NOTES (Details Narrative) - USD ($)					6 Months Ended		12 Months Ended
	Jan. 20, 2022	Oct. 20, 2021	Sep. 14, 2021	Mar. 16, 2020	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Dec. 31, 2021	Oct. 21, 2021	Jul. 29, 2021
Debt Instrument [Line Items]
Proceeds from Convertible Debt					$ 0	$ 1,444,000
Class of Warrant or Right, Exercise Price of Warrants or Rights					$ 107.32		$ 7.29	$ 132.00
Original issue discount	$ 175,000
Unsecured Convertible Notes Curiosity [Member]
Debt Instrument [Line Items]
Convertible note					$ 278,000		$ 278,000
L 1 Capital Secured Note [Member]
Debt Instrument [Line Items]
Debt converted, shares issued							108,025
Repayments of Notes Payable							$ 1,146,901
Debt Conversion, Original Debt, Amount							$ 1,750,000
Senior Ten Percentage Secured Convertible Note With Original Issuance Discount L 1 [Member]
Debt Instrument [Line Items]
Convertible debt, gross					0
Number of securities called by each warrant	10,123
Convertible note					0
Senior Ten Percentage Secured Convertible Note With Original Issuance Discount L 1 [Member] | Second Tranche [Member]
Debt Instrument [Line Items]
Proceeds from Convertible Debt	$ 1,750,000
Secured 10 Conv Notes [Member]
Debt Instrument [Line Items]
Convertible debt, gross					25,000
Debt interest rate	10.00%
Secured Convertible Notes Issued 2018 [Member]
Debt Instrument [Line Items]
Convertible debt, gross					50,000
Secured Convertible Notes Issued 2017 And 2018 [Member]
Debt Instrument [Line Items]
Convertible note					75,000
Secured 12 Conv Notes [Member] | Orginal T D H Secured Notes [Member]
Debt Instrument [Line Items]
Convertible debt, gross				$ 3,000,000
Secured 12 Conv Notes [Member] | T D H Secured Notes [Member]
Debt Instrument [Line Items]
Convertible debt, gross					136,510
Stock issued with debt, shares				6,250
Stock issued with debt, value				$ 420,000
Unamortized discount					12,396
Secured 12 Conv Notes [Member] | Additional Secured Notes [Member]
Debt Instrument [Line Items]
Convertible debt, gross				$ 1,060,000	25,937
Debt interest rate				12.00%
Stock issued with debt, shares				2,208
Stock issued with debt, value				$ 148,000
Unamortized discount					$ 2,355
Debt maturity date				Mar. 16, 2024
Purchase Agreement [Member] | Unsecured Convertible Notes Curiosity [Member]
Debt Instrument [Line Items]
Convertible debt, gross										$ 278,000
Conversion price										$ 98.40
Convertible debt, gross						$ 278,000
Securities Purchase Agreement [Member] | L 1 Capital Secured Note [Member]
Debt Instrument [Line Items]
Convertible debt, gross			$ 4,400,000
Number of securities called by each warrant			27,109
Debt converted, shares issued							191,192
Debt Conversion, Converted Instrument, Amount							$ 4,125,000
Securities Purchase Agreement [Member] | L 1 Capital Secured Note [Member] | First Tranche Financing [Member]
Debt Instrument [Line Items]
Exchange shares value			$ 3,960,000
Securities Purchase Agreement [Member] | L 1 Capital Secured Note [Member] | Second Tranche Financing [Member]
Debt Instrument [Line Items]
Number of securities called by each warrant									34,706
Proceeds from Convertible Debt		$ 6,000,000
Securities Purchase Agreement [Member] | Senior Ten Percentage Secured Convertible Note With Original Issuance Discount L 1 [Member]
Debt Instrument [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 126.00
Securities Purchase Agreement [Member] | Senior Ten Percentage Secured Convertible Note With Original Issuance Discount L 1 [Member] | Second Tranche Financing [Member]
Debt Instrument [Line Items]
Exchange shares value	$ 1,575,000

v3.23.2

EMPLOYEE BENEFIT PLAN (Details - Defined benefit liability) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Retirement Benefits [Abstract]
Benefit obligation	$ 233,433	$ 434,974
Plan assets	0	0
Total	$ 233,433	$ 434,974

v3.23.2

EMPLOYEE BENEFIT PLAN (Details - Accumulated benefit cost) - USD ($)	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Retirement Benefits [Abstract]
Current service cost	$ 9,164	$ 2,471
Net interest expense	8,857	0
Total	$ 18,021	$ 2,471

v3.23.2

EMPLOYEE BENEFIT PLAN (Details - Changes in accumulated benefit cost)	6 Months Ended
	Jun. 30, 2023 USD ($)
Retirement Benefits [Abstract]
Balance, January 1	$ 434,974
Foreign currency translation	2,398
Expense recognized in other comprehensive income	18,021
Remeasurement on actuarial gain (loss) recognized	(44,351)
Contributions paid	(177,609)
Balance, June 30	$ 233,433

v3.23.2

EMPLOYEE BENEFIT PLAN (Details - Actuarial gains) - USD ($)	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Other comprehensive income (loss), beginning	$ (166,129)
Other comprehensive income (loss), ending	(168,267)
Top Draw Animation [Member]
Other comprehensive income (loss), beginning	(36,682)	$ 60,518
Foreign currency translation	0	0
Actuarial gain (loss)	(42,733)	0
Other comprehensive income (loss), ending	79,405	60,518
Tax effect	19,851	(12,439)
Actuarial gain (loss)	$ (59,544)	$ 48,079

v3.23.2

EMPLOYEE BENEFIT PLAN (Details - Assumptions)	Jun. 30, 2023
Retirement Benefits [Abstract]
Discount rate	6.22%
Salary increase rate	2.00%

v3.23.2

INCOME TAXES (Details Narrative)	6 Months Ended
	Jun. 30, 2022
Income Tax Disclosure [Abstract]
Effective Income Tax Rate Reconciliation, Percent	0.00%

v3.23.2

STOCKHOLDERS' EQUITY (Details - Warrant activity) - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Dec. 31, 2022	Dec. 31, 2021
Equity [Abstract]
Warrants outstanding, beginning balance	4,137,180	141,572
Weighted Average Exercise Price, Warrants outstanding, beginning balance	$ 7.29	$ 132.00
Average Remaining Contractual Term, Warrants outstanding	3 years 2 months 26 days	4 years 10 months 20 days	1 year 9 months
Warrants issued	3,812,944	4,280,355
Weighted Average Exercise Price, Warrants issued	$ 2.26	$ 3.20
Warrants exercised	(7,775,889)	(279,069)
Weighted Average Exercise Price, Warrants exercised	$ 0	$ 0
Warrants forfeited	0	(5,678)
Weighted Average Exercise Price, Warrants forfeited	$ 0	$ 0
Warrants outstanding, ending balance	174,235	4,137,180	141,572
Weighted Average Exercise Price, Warrants outstanding, ending balance	$ 107.32	$ 7.29	$ 132.00

v3.23.2

STOCKHOLDERS' EQUITY (Details - Option Activity) - Equity Option [Member]	6 Months Ended
	Jun. 30, 2023 $ / shares shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Options issued	15,070
Options forfeited	(932)
Options outstanding	14,138
Vested options	9,505
Weighted average exercise price | $ / shares	$ 161.08
Weighted average remaining life	1 year 7 months 13 days
Option 1 [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Options issued	8,058
Options forfeited	(870)
Options outstanding	7,188
Vested options	7,188
Weighted average exercise price | $ / shares	$ 230.40
Weighted average remaining life	2 months 19 days
Options Issued 2018 [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Options issued	62
Options forfeited	(62)
Options outstanding	0
Vested options	0
Weighted average exercise price | $ / shares	$ 0
Option 3 [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Options issued	6,950
Options forfeited	0
Options outstanding	6,950
Vested options	2,317
Weighted average exercise price | $ / shares	$ 89.40
Weighted average remaining life	3 years 29 days

v3.23.2

STOCKHOLDERS’ EQUITY (Details Narrative) - USD ($)			1 Months Ended		3 Months Ended		6 Months Ended
	Jan. 24, 2022	Oct. 04, 2020	Jan. 31, 2023	Jan. 25, 2023	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Dec. 31, 2021
Class of Stock [Line Items]
Preferred stock, shares authorized					25,000,000		25,000,000
Preferred stock, par value					$ 0.001		$ 0.001
Common stock, shares authorized					500,000,000		500,000,000		500,000,000
Common stock, par value					$ 0.001		$ 0.001		$ 0.001
Common stock, shares issued					9,044,361		9,044,361		2,514,858
Common stock, shares outstanding					9,044,361		9,044,361		2,514,858
Reverse stock split		1-for-30
Stock issued for services, value						$ 18,660	$ 31,968	$ 95,482
Warrant exericse price					$ 107.32		$ 107.32		$ 7.29	$ 132.00
Stock price			$ 2.15		$ 2.15		$ 2.15
Expected dividend yield			0.00%				0.00%
Volatility rate			176.60%				176.60%
Risk-free interest rate			3.60%				3.60%
Warrants fair value					$ 1,387,429		$ 1,387,429
Expected term			1 year
Fair value of purchase warrant			$ 350,039
Stock based compensation expenses					44,821	$ 89,241	89,643	$ 137,383
Uunrecognized cost of stock-based compensation					97,308		$ 97,308
Rrecognized weighted average period							1 year 29 days
Intrinsic value					$ 0		$ 0
Warrant [Member]
Class of Stock [Line Items]
Warrant issued			1,327,434
Warrant purchase			2,323,010
Warrants exercisable			$ 2.26
Warrant exericse price			$ 0.85
Warrant 1 [Member]
Class of Stock [Line Items]
Warrant issued			150,000
Warrant purchase			262,500
Common Stock [Member]
Class of Stock [Line Items]
Conversion of Stock, Shares Converted								686
Stock issued for services, shares						1,464	23,334	3,950
Stock issued for services, value						$ 1	$ 23	$ 4
Number of shares issued upon exercise, warrants							1,262,787
Number of shares issued other							5,143,382
Purchase warrants					6,513,102		6,513,102
Pre Funded Warrants [Member]
Class of Stock [Line Items]
Number of shares issued upon exercise, warrants							1,262,787
Number of shares issued upon exercise, value							$ 12,309
Conv Debt And Interest [Member]
Class of Stock [Line Items]
Issuance of common stock in connection with the amendment of terms of promissory notes, shares						27,778		219,960
Issuance of common stock in connection with the amendment of terms of promissory notes, value						$ 450,000		$ 4,575,000
Contractors [Member]
Class of Stock [Line Items]
Stock issued for services, shares					0	1,464	23,334	3,950
Stock issued for services, value					$ 0	$ 18,660	$ 31,968	$ 95,482
Securities Purchase Agreement [Member] | L 1 Capital Global [Member]
Class of Stock [Line Items]
Stock Repurchased During Period, Shares				150,000
Payments for Other Fees				$ 50,000
Common Stocks [Member] | Securities Purchase Agreement [Member]
Class of Stock [Line Items]
Shares, Issued				100,000
Stock Repurchased During Period, Shares				2,323,010
Warrants [Member] | Securities Purchase Agreement [Member]
Class of Stock [Line Items]
Shares, Issued				1,327,434
Stock Repurchased During Period, Shares				1,227,434
[custom:WarrantPurchasePrice-0]				$ 2.26
Series C Preferred Converted [Member]
Class of Stock [Line Items]
Conversion of Stock, Shares Issued	686
Conversion of Stock, Shares Converted	39,500
Series A Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares authorized					2,000,000		2,000,000		2,000,000
Preferred stock, par value					$ 0.001		$ 0.001		$ 0.001
Preferred stock, shares issued					0		0		0
Preferred stock, shares outstanding					0		0		0
Series B Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares authorized					10,000,000		10,000,000		10,000,000
Preferred stock, par value					$ 0.001		$ 0.001		$ 0.001
Preferred stock, shares issued					0		0		0
Preferred stock, shares outstanding					0		0		0
Series C Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares authorized					10,000,000		10,000,000		10,000,000
Preferred stock, par value					$ 0.001		$ 0.001		$ 0.001
Preferred stock, shares issued					9,281,809		9,281,809		9,281,809
Preferred stock, shares outstanding					9,281,809		9,281,809		9,281,809
Declared cumulative dividends					$ 187,216		$ 371,273
Series C Preferred Stock Dividend [Member]
Class of Stock [Line Items]
Issuance Of Common Stock In Connection With Issuance Of Preferred Stock Dividend Shares					5,895		11,737
Issuance Of Common Stock In Connection With Issuance Of Preferred Stock Dividend Value					$ 187,455		$ 646,523

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