Blueprint

1. GENERAL

Basis of Presentation

Effective March 7, 2016, the Company acquired Dolphin Films, Inc. (“Dolphin Films”) from Dolphin Entertainment, LLC. (“DE LLC”), a company wholly owned by William O’Dowd, CEO, President and Chairman of the Board of Dolphin. At the time of the acquisition, Mr. O’Dowd was also the majority shareholder of Dolphin. The acquisition from DE LLC was a transfer between entities under common control. As such, the Company recorded the assets, liabilities and deficit of Dolphin Films on its consolidated balance sheets at DE LLC’s historical basis instead of fair value. Transfers of businesses between entities under common control require prior periods to be retrospectively adjusted to furnish comparative information. Accordingly, the accompanying financial statements and related notes of the Company have been retrospectively adjusted to include the historical balances of DE LLC’s prior to the effective date of the acquisition.

Use of Estimates

Recent Accounting Pronouncements

Step 1: Identify the contract(s) with a customer

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

ASC 606 requires an entity to apply ASC 606 using one of the following two transition methods:

1.	Retrospective approach: Retrospectively to each prior reporting period presented and the entity may elect certain practical expedients.

Variable Consideration: The Company is entitled to royalties from certain international distributors based on the sales made by these distributors after recoupment of a minimum guarantee. The Company is also entitled to certain bonus payments if certain of their clients receive awards as specified in the engagement contracts. Under the new revenue recognition rules, revenues will be recorded based on best estimates available in the period of sales or usage. The Company is evaluating the impact, if any, of recognizing the variable consideration.

Principal vs. Agent: The new standard includes new guidance as to how to determine whether the Company is acting as a principal, in which case revenue would be recognized on a gross basis, or whether the Company is acting as an agent, in which case revenues would be recognized on a net basis. The Company is currently evaluating whether the new principal versus agent guidance will have an impact (i.e., changing from gross to net recognition or from net to gross recognition) under certain of its distribution arrangements.

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2. GOING CONCERN

9 Months Ended

Sep. 30, 2017

Summary Of Significant Accounting Policies

2. GOING CONCERN

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2017

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounts Receivable and Allowance for Doubtful Accounts

Revenue Recognition

Investment

Property, Equipment and Leasehold Improvements

Asset Category		Depreciation/ Amortization Period (Years)
Furniture and fixtures		5 - 7
Computer and office equipment		3 - 5
Leasehold improvements		5 - 8, not to exceed the lease terms

Deferred Landlord Reimbursement

Deferred Rent

Deferred rent consists of the excess of the rent expense recognized on the straight-line basis over the payments required under certain office leases.

Intangible assets

Goodwill

Warrants

Fair Value Measurements

Level 1

—

Inputs are quoted prices in active markets for identical assets or liabilities as of the reporting date.

Level 2

—

Inputs other than quoted prices included within Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

Level 3

—

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs. Unobservable inputs for the asset or liability that reflect management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability as of the reporting date.

As of September 30, 2016, and for the three and nine months then ended, the Company had no assets or liabilities measured at fair value, on a recurring or nonrecurring basis.

Business Segments

Through March 30, 2017 (the date the Company acquired 42West) (see Note 4), the Company operated the following business segments:

1)	Dolphin Digital Media (USA): The Company created online kids clubs and derives revenue from annual membership fees.

2)	Dolphin Digital Studios: Dolphin Digital Studios creates original programming that premieres online, with an initial focus on content geared toward tweens and teens.

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4. ACQUISITION OF 42 WEST

9 Months Ended

Sep. 30, 2017

Acquisition Of 42 West

4. ACQUISITION OF 42WEST

The consideration paid by the Company in connection with the 42West Acquisition was $18,666,666 (less, the amount of 42West’s transaction expenses paid by the Company and payments by the Company of certain 42West indebtedness) in shares of Common Stock, determined based on the Company’s 30-trading-day average stock price prior to the closing date of $9.22 per share, plus the potential to earn up to an additional $9.3 million (less payment of certain taxes) in shares of Common Stock, determined based on $9.22 per share. As a result, the Company (i) issued 615,140 shares of Common Stock to the Sellers on the closing date (the “Initial Consideration”), (ii) (a) issued 172,275 shares of Common Stock to certain current 42West employees and a former 42West employee on April 13, 2017, to settle change in control provisions in their pre-existing employment and termination agreements (the “Change in Control Provisions”), (b) issued 59,320 shares of restricted stock as employee stock bonuses (the “Employee Bonus Shares”) and (c) will issue approximately 767,563 shares of Common Stock to the Sellers, and 213,348 shares of Common Stock to certain current and former 42West employees to settle the Change in Control Provisions, on January 2, 2018 (the “Post-Closing Consideration”), and (iii) potentially under the Company’s 2017 Equity Incentive Plan may issue up to approximately 856,414 shares of Common Stock to the Sellers, and 125,149 shares to certain current and former 42West employees in accordance with the Change in Control Provisions, based on the achievement of specified 42West financial performance targets over a three-year period beginning January 1, 2017 and ending December 31, 2019 as set forth in the Purchase Agreement (the “Earn-Out Consideration”, and together with the Initial Consideration and the Post-Closing Consideration, (the “Stock Consideration”). The Purchase Agreement allows for a working capital adjustment to be calculated within 30 days of the closing of the transaction. On April 13, 2017, the Company issued 50,000 shares of Common Stock to the Sellers as a provisional working capital adjustment, and on August 30, 2017 the Company made a final cash payment to the Sellers of $185,031 to settle the working capital adjustment once all information was agreed to between the Sellers and the Company. None of the Common Stock included in the Stock Consideration have been registered under the Securities Act, except for the Employee Bonus Shares.

The Company also agreed to pay the Sellers’ transaction costs and assumed certain tax liabilities incurred or to be incurred by the Sellers based on the proceeds they receive.

The issuance of 59,320 Employee Bonus Shares and the potential issuance of 117,788 shares as part of the Earn-Out Consideration to current employees (the “Employee Earn-Out Shares”) are conditioned on the employees remaining employed by the Company up to the date the shares become issuable. If an employee does not remain employed for the requisite service period, the shares they forfeit will be allocated among and issued to the Sellers. The Employee Bonus Shares and Employee Earnout Shares are not considered part of the accounting consideration transferred to acquire 42West. The Employee Bonus Shares will be accounted for under ASC 718, Compensation Stock—Compensation, which will result in compensation expense in the Company’s consolidated statements of operations. On August 21, 2017, the Company granted 59,320 of nonvested restricted stock to current 42West employees, of which 58,205 shares remain outstanding at September 30, 2017.

The Purchase Agreement contains customary representations, warranties, covenants and indemnifications.

In addition, in connection with the 42West Acquisition, on March 30, 2017, the Company entered into a registration rights agreement with the Sellers (the “Registration Rights Agreement”) pursuant to which the Sellers are entitled to rights with respect to the registration under the Securities Act. All fees, costs and expenses of underwritten registrations under the Registration Rights Agreement will be borne by the Company. At any time after the one-year anniversary of the Registration Rights Agreement, the Company will be required, upon the request of such Sellers holding at least a majority of the Stock Consideration received by the Sellers, to file a registration statement on Form S-1 and use its reasonable efforts to affect a registration covering up to 25% of the Stock Consideration received by the Sellers. In addition, if the Company is eligible to file a registration statement on Form S-3, upon the request of such Sellers holding at least a majority of the Stock Consideration received by the Sellers, the Company will be required to use its reasonable efforts to affect a registration of such shares on Form S-3 covering up to an additional 25% of the Stock Consideration received by the Sellers. The Company is required to effect only one registration on Form S-1 and one registration statement on Form S-3, if eligible. The right to have the Stock Consideration received by the Sellers registered on Form S-1 or Form S-3 is subject to other specified conditions and limitations.

The provisional acquisition-date fair value of the consideration transferred totaled $24,113,798, which consisted of the following:

Common Stock issued at closing and in April 2017 (787,415 shares)	$	6,693,028
Common Stock issuable on January 2, 2018 (980,911 shares)		8,337,739
Contingent Consideration		3,627,000
Put Rights		3,800,000
Sellers’ transaction costs paid at closing		260,000
Sellers’ tax liabilities assumed		786,000
Working capital adjustment (50,000 shares issued in April 2017 plus paid $185,031 in cash in August 2017)		610,031
	$	24,113,798

Cash	$	273,625
Accounts receivable		1,706,644
Property, equipment and leasehold improvements		1,087,962
Other assets		265,563
Indemnification asset		300,000
Intangible assets		9,110,000
Total identifiable assets acquired		12,743,794

Accounts payable and accrued expenses		(731,475	)
Line of credit and note payable		(1,025,000	)
Settlement liability		(300,000	)
Other liabilities		(902,889	)
Tax liabilities		(22,000	)
Total liabilities assumed		(2,981,364	)
Net identifiable assets acquired		9,762,430
Goodwill		14,351,368
Net assets acquired	$	24,113,798

In accordance with the terms of the Purchase Agreement, the Sellers indemnified the Company with respect to the Guild Dispute for losses incurred related the Company’s alleged contribution obligations to the Plans for the period between March 25, 2012 through March 26, 2016. The Company has recorded an indemnification asset related to the recorded settlement liability, measured at fair value on the same basis as the settlement liability. The indemnification asset represents the estimated fair value of the indemnification payment expected to be received from Sellers, related to the indemnification by the Sellers of the estimated settlement liability. As the estimated fair value of the settlement liability is provisional, so too is the estimated fair value of the indemnification asset.

The deferred tax liability related to 42West is a provisional estimate pending the completion of an analysis of deferred income taxes.

	For the three months ended September 30, 2017		For the nine months ended September 30, 2017
Revenue	$	5,409,166	$	15,236,278
Net income	$	247,247	$	1,612,589

Pro Forma Consolidated Statements of Operations

	Three months ended September 30,					Nine months ended September 30,
	2017		2016			2017			2016
Revenues	$	6,8808,014	$	5,88,495		$	19,862,073		$	15,064,851
Net income (loss)		5,923,245		(11,617,330	)		(10,897,757	)		(22,205,725	)

	March 31, 2017 (As initially reported)			Measurement Period Adjustments		September 30, 2017 (As adjusted)
Cash	$	273,625		$	—	$	273,625
Accounts receivable		1,706,644			—		1,706,644
Property, equipment and leasehold improvements		1,087,962			—		1,087,962
Other assets		265,563			—		265,563
Indemnification asset		—			300,000		300,000
Intangible assets		9,110,000			—		9,110,000
Total identifiable assets acquired		12,443,794			300,000		12,743,794

Accounts payable and accrued expenses		(731,475	)		—		(731,475	)
Line of credit and note payable		(1,025,000	)		—		(1,025,000	)
Settlement liability		(300,000	)		—		(300,000	)
Other liabilities		(902,889	)		—		(902,889	)
Tax liabilities		(22,000	)		—		(22,000	)
Total liabilities assumed		(2,981,364	)		—		(2,981,364	)
Net identifiable assets acquired		9,462,430			—		9,762,430
Goodwill		13,996,337			355,031		14,351,368
Net assets acquired	$	23,458,767		$	655,031	$	24,113,798

The above estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. As of March 31, 2017, the Company recorded the identifiable net assets acquired of $9,462,430 as shown in the table above in its condensed consolidated balance sheet. During the period from March 31, 2017 through September 30, 2017, the Company’s measurement period adjustments of $655,032 were made based on new information obtained after the acquisition date about facts and circumstances that existed as of the acquisition date, and, accordingly, the Company recognized these adjustments in its September 30, 2017 condensed consolidated balance sheet to reflect the adjusted identifiable net assets acquired of $9,762,430 as shown in the table above. The changes to the provisional amounts did not result in changes to the Company’s previously reported condensed consolidated income statement for the three months ended March 31, 2017.

The following is a reconciliation of the initially reported fair value to the adjusted fair value of goodwill:

Goodwill originally reported at March 31, 2017	$	13,996,337
Changes to estimated fair values:
Contingent Consideration		86,000
Put Rights		(200,000	)
Sellers’ tax liabilities assumed		159,000
Working capital adjustment		610,031
Indemnification asset		(300,000	)
		355,031
Adjusted goodwill	$	14,351,368

The provisional estimated fair value of the Put Rights decreased from the originally reported amount primarily due to a decrease in the annual asset volatility assumption.

Capitalized Production Costs Accounts Receivables And Other Current Assets

The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).

+ References

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+ Details

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5 .CAPITALIZED PRODUCTION COSTS, ACCOUNTS RECEIVABLES AND OTHER CURRENT ASSETS

9 Months Ended

Sep. 30, 2017

5. CAPITALIZED PRODUCTION COSTS, ACCOUNTS RECEIVABLES AND OTHER CURRENT ASSETS

Capitalized Production Costs

Motion Pictures

For the three and nine months ended September 30, 2017, revenues earned from motion pictures were $1,398,839 and $4,625,801, respectively, mainly attributable to Max Steel, the motion picture released on October 14, 2016 and international sales of Believe, the motion picture released in December 2013. During the three and nine months ended September 30, 2016, the Company earned revenues of $1,140,000 and $1,144,157, respectively from the international sales of Max Steel and Believe. The Company amortized capitalized production costs (included as direct costs) in the condensed consolidated statements of operations using the individual film forecast computation method in the amount of $206,798 and $2,256,711, respectively during the three and nine months ended September 30, 2017 and $1,106,829 for each of the three and nine months ended September 30, 2016, related to Max Steel. All capitalized production costs for Believe were either amortized or impaired in prior years. Subsequent to the release of Max Steel, the Company used a discounted cash flow model and determined that the fair value of the capitalized production costs should be impaired by $2,000,000 due to a lower than expected domestic box office performance. As of September 30, 2017, and December 31, 2016, the Company had a balance of $1,933,219, and $4,189,930, respectively recorded as capitalized production costs related to Max Steel.

Digital Productions

Accounts Receivables

The Company entered into various agreements with foreign distributors for the licensing rights of our motion picture, Max Steel, in certain international territories. The motion picture was delivered to the distributors and other stipulations, as required by the contracts were met. As of September 30, 2017 and December 31, 2016, the Company had a balance of $2,025,160 and $3,668,646, respectively, in accounts receivable related to the revenues of Max Steel.

Other Current Assets

The Company had a balance of $450,648 and $2,665,781 in other current assets on its condensed consolidated balance sheets as of September 30, 2017 and December 31, 2016, respectively. As of September 30, 2017, these amounts were primarily comprised of deferred offering costs and indemnification asset related to the 42West Acquisition. (See note 4 for further discussion) As of December 31, 2016, these amounts were primarily comprised of tax incentive receivables, and prepaid loan interest.

Prepaid Interest – The Company entered into a loan and security agreement to finance the distribution and marketing costs of Max Steel and prepaid interest related to the agreement. As of September 30, 2017, and December 31, 2016, there was a balance of $0 and $602,697 of prepaid interest.

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6. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

9 Months Ended

Sep. 30, 2017

Property Equipment And Leasehold Improvements

6. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvement consists of:

	September 30, 2017			December 31, 2016
Furniture and fixtures	$	539,715		$	65,311
Computers and equipment		408,058			41,656
Leasehold improvements		356,946			7,649
		1,304,719			114,616
Less: accumulated depreciation		(192,820	)		(79,428	)
	$	1,111,899		$	35,188

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7 .INVESTMENT	9 Months Ended
7 .INVESTMENT	Sep. 30, 2017
Investment
7. INVESTMENT	Investments, at cost, consist of 344,980 shares of common stock of VRC. In exchange for services rendered by 42West to VRC during 2015, 42West received both cash consideration and a promissory note that was convertible into shares of common stock of VRC. On April 7, 2016, VRC closed an equity financing round resulting in common stock being issued to a third-party investor. This transaction triggered the conversion of all outstanding promissory notes into shares of common stock of VRC. The Company’s investment in VRC represents less than 1% noncontrolling ownership interest in VRC. The Company had a balance of $220,000 on its condensed consolidated balance sheet as of September 30, 2017, related to this investment.

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8. DEBT

9 Months Ended

Sep. 30, 2017

8. DEBT

Loan and Security Agreements

First Group Film Funding

Web Series Funding

Second Group Film Funding

During the year ended December 31, 2015, the Company entered into various loan and security agreements with individual noteholders (the “Second Loan and Security Noteholders”) for notes with an aggregate principal amount of $9,274,327 to fund a new group of film projects (the “Second Loan and Security Agreements”). Of this total aggregate amount, notes with an aggregate principal amount of $8,774,327 were issued in exchange for debt that had originally been incurred by DE LLC, primarily related to the production and distribution of the motion picture, “Believe”. The remaining $500,000 of principal amount was related to a note issued in exchange for cash. The notes issued pursuant to the Second Loan and Security Agreements accrue interest at rates ranging from 11.25% to 12% per annum, payable monthly through December 31, 2016. The Company did not exercise its option to extend the maturity date of these notes until July 31, 2018. The Second Loan and Security Noteholders, as a group, were to receive the Company’s entire share of the proceeds from the related group of film projects, on a prorata basis, until the principal balance was repaid. Thereafter, the Second Loan and Security Noteholders, as a group, would have the right to participate in 15% of the Company’s future profits from such projects (defined as the Company’s gross revenues of such projects less the aggregate amount of principal and interest paid for the financing of such projects) on a prorata basis based on each Second Loan and Security Noteholder’s loan principal as a percentage of the total loan proceeds received to fund the specific motion picture productions.

Prints and Advertising Loan

During 2016, Dolphin Max Steel Holding, LLC, a Florida limited liability company (“Max Steel Holding”) and a wholly owned subsidiary of Dolphin Films, entered into a loan and security agreement (the “P&A Loan”) providing for up to $14,500,000 non-revolving credit facility that matures on August 25, 2017. Proceeds of the credit facility in the aggregate amount of $12,500,000 were used to pay a portion of the print and advertising expenses of the domestic distribution of Max Steel. To secure Max Steel Holding’s obligations under the D&A Loan, the Company granted to the lender a security interest in bank account funds totaling $1,250,000 pledged as collateral and recorded as restricted cash in the condensed consolidated balance sheet as of December 31, 2016, and rights to the assets of Max Steel Holdings. Repayment of the loan was intended to be made from revenues generated by Max Steel in the U.S. Max Steel did not generate sufficient funds to repay the loan prior to the maturity date. As a result, if the lender forecloses on the collateral securing the loan, the Company’s subsidiary will lose the copyright for Max Steel and, consequently, will no longer receive any revenues from the domestic distribution of Max Steel. In addition, the Company would impair the entire capitalized production costs of Max Steel included as an asset on its balance sheet, which as of September 30, 2017 was $1,933,219. The loan is also partially secured by a $4,500,000 corporate guaranty from a party associated with the film, of which Dolphin has backstopped $620,000. The lender had retained a reserve of $1,531,871 for loan fees and interest. Amounts borrowed under the credit facility accrue interest at either (i) a fluctuating per annum rate equal to the 5.5% plus a base rate or (ii) a per annum rate equal to 6.5% plus the LIBOR determined for the applicable interest period.

Production Service Agreement

During the year ended December 31, 2014, Dolphin Films entered into a financing agreement for the production of one of the Company’s feature films, Max Steel (the “Production Service Agreement”). The Production Service Agreement was for a total amount of $10,419,009 with the lender taking an $892,619 producer fee. The Production Service Agreement contained repayment milestones to be made during the year ended December 31, 2015, that if not met, accrued interest at a default rate of 8.5% per annum above the published base rate of HSBC Private Bank (UK) Limited until the maturity on January 31, 2016 or the release of the movie. Due to a delay in the release of Max Steel, the Company did not make the repayments as prescribed in the Production Service Agreement. As a result, the Company recorded accrued interest of $1,425,146 and $1,147,520, respectively, as of September 30, 2017 and December 31, 2016 in other current liabilities on the Company’s condensed consolidated balance sheets. The loan was partially secured by international distribution agreements entered into by the Company prior to the commencement of principal photography and the receipt of tax incentives. As a condition to the Production Service Agreement, the Company acquired a completion guarantee from a bond company for the production of the motion picture. The funds for the loan were held by the bond company and disbursed as needed to complete the production in accordance with the approved production budget. The Company recorded debt as funds were transferred from the bond company for the production.

As of September 30, 2017, and December 31, 2016 the Company had outstanding balances of $2,697,157 and $6,243,069, respectively, related to this debt on its condensed consolidated balance sheets.

Line of Credit

Payable to Former Member of 42West

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9. NOTES PAYABLE

9 Months Ended

Sep. 30, 2017

9. NOTES PAYABLE

Convertible Notes

2015 Convertible Debt

2017 Convertible Debt

Nonconvertible Notes

On July 5, 2012, the Company signed an unsecured promissory note in the amount of $300,000 bearing 10% interest per annum and payable on demand.

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10. LOANS FROM RELATED PARTY

9 Months Ended

Sep. 30, 2017

10. LOANS FROM RELATED PARTY

As discussed in Note 9, the Company signed a promissory note and received $150,000 from an entity, of which Allan Mayer, director, shareholder and employee of the Company, is the trustee.

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11 .FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2017

Fair Value Measurements

11. FAIR VALUE MEASUREMENTS

Warrants

The Company records the fair value of the liability in the condensed consolidated balance sheets under the caption “Warrant liability” and records changes to the liability against earnings or loss under the caption “Changes in fair value of warrant liability” in the condensed consolidated statements of operations. The carrying amount at fair value of the aggregate liability for the Warrants recorded on the condensed consolidated balance sheet at September 30, 2017 and December 31, 2016 is $2,774,583 and $20,405,190. Due to the change in the fair value of the Warrant Liability for the period in which the Warrants were outstanding during the three and nine months ended September 30, 2017, the Company recorded a gain on the change in fair value of the warrant liability of $1,396,094 and $7,685, 607, respectively, for the three and nine months ended September 30, 2017, in the condensed consolidated statement of operations.

The Warrants outstanding at September 30, 2017 have the following terms:

	Issuance Date	Number of Common Shares		Per Share Exercise Price		Remaining Term (Months)		Expiration Date
Series G Warrants	November 4, 2016		750,000	$	9.22		4	January 31, 2018
Series H Warrants	November 4, 2016		250,000	$	9.22		16	January 31, 2019
Series I Warrants	November 4, 2016		250,000	$	9.22		28	January 31, 2020

he Warrants have an adjustable exercise price due to a full ratchet down round provision, which would result in a downward adjustment to the exercise price in the event the Company completes a financing in which the price per share of the financing is lower than the exercise price of the Warrants in effect immediately prior to the financing.

The Company determined the fair values of the Warrants by using the following key inputs to the Monte Carlo Simulation model at September 30, 2017:

	As of September 30, 2017
Inputs	Series G			Series H			Series I
Volatility (1)		71.2	%		67.0	%		76.3	%
Expected term (years)		0.33			1.33			2.33
Risk free interest rate		1.107	%		1.363	%		1.520	%
Common stock price	$	8.40		$	8.40		$	8.44
Exercise price	$	9.22		$	9.22		$	9.22

(1)“Level 3” input.

	Warrants “G”, “H” and “I”			Warrants “J” and “K”			Total
Beginning fair value balance reported in the consolidated balance sheet at December 31, 2016	$	6,393,936		$	14,011,254		$	20,405,190
Change in fair value (gain) reported in the statements of operations		(3,619,353	)		(4,066,254	)		(7,685,607	)
Exercise of “J” and “K” Warrants		—			(9,945,000	)		(9,945,000	)
Ending fair value balance reported in the condensed consolidated balance sheet at September 30, 2017	$	2,774,583		$	—		$	2,774,583

Put Rights

The Company determined the fair value by using the following key inputs to the Black-Scholes Option Pricing Model:

Inputs

On the date of Acquisition

(March 30, 2017)

As of

September 30,

2017

Equity Volatility estimate

75%

82.5%

Discount rate based on US Treasury obligations

0.12% -1.70%

1.04% - 1.65%

Beginning fair value balance on the Acquisition Date (March 30, 2017)	$	3,800,000
Change in fair value (loss) reported in the statements of operations		(100,000	)
Ending fair value balance reported in the condensed consolidated balance sheet at September 30, 2017	$	3,700,000

Contingent Consideration

In connection with the 42West acquisition (note 4), the Seller have the potential to earn up to $9,333,333 (1,727,551 shares of Common Stock) on achievement of adjusted EBITDA targets based on the operations of 42West over the three-year period beginning January 1, 2017 (the “Contingent Consideration”).

The Company determined the fair value by using the following key inputs to the Monte Carlo Simulation Model:

Inputs	On the date of Acquisition (March 30, 2017)	As of September 30, 2017
Risk Free Discount Rate (based on US government treasury obligation with a term similar to that of the Contingent Consideration)	1.03%-1.55%	1.31% -1.62%
Annual Asset Volatility Estimate	72.5%	80%
Estimated EBITDA	$3,600,000- $3,900,000	$3,600,000- $3,900,000

Beginning fair value balance on the Acquisition Date (March 30, 2017)	$	3,627,000
Change in fair value (loss) reported in the statements of operations		346,000
Ending fair value balance reported in the condensed consolidated balance sheet at September 30, 2017	$	3,973,000

There were no assets or liabilities carried at fair value on a recurring basis at September 30, 2016.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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12. LICENSING AGREEMENT - RELATED PARTY	9 Months Ended
12. LICENSING AGREEMENT - RELATED PARTY	Sep. 30, 2017
Notes to Financial Statements
12. LICENSING AGREEMENT - RELATED PARTY	During 2008, the Company entered into a ten-year licensing agreement with DE LLC, a related party. Under the license, the Company is authorized to use DE LLC’s brand properties in connection with the creation, promotion and operation of subscription based Internet social networking websites for children and young adults. The license requires that the Company pays to DE LLC royalties at the rate of fifteen percent of net sales from performance of the licensed activities. The Company did not use any of the brand properties related to this agreement and as such, there was no royalty expense for the three and nine months ended September 30, 2017 and 2016.

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13. DEFERRED REVENUE	9 Months Ended
13. DEFERRED REVENUE	Sep. 30, 2017
Deferred Revenue [Abstract]
13. DEFERRED REVENUE	During the year ended December 31, 2014, the Company entered into agreements with various entities for the international distribution rights of a motion picture that was in production. As required by the distribution agreements, the Company received $1,418,368 of deposits for these rights that was recorded as deferred revenue on its condensed consolidated balance sheet. During the year ended December 31, 2016, the Company delivered the motion picture to various international distributors and recorded $1,371,687 of revenue from production from these deposits. As of September 30, 2017 and December 31, 2016, respectively, the Company has a balance of $20,303 and $46,681 as deferred revenue on its condensed consolidated balance sheets.

The entire disclosure for deferred revenues at the end of the reporting period, and description and amounts of significant changes that occurred during the reporting period. Deferred revenue is a liability as of the balance sheet date related to a revenue producing activity for which revenue has not yet been recognized. Generally, an entity records deferred revenue when it receives consideration from a customer before achieving certain criteria that must be met for revenue to be recognized in conformity with GAAP.

14. VARIABLE INTEREST ENTITIES

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14. VARIABLE INTEREST ENTITIES

9 Months Ended

Sep. 30, 2017

Variable Interest Entities

Following is summary financial information for the VIE’s:

Max Steel Productions LLC

JB Believe LLC

(in USD)

As of and for the nine months ended September 30, 2017

As of and for the three months ended September 30, 2017

As of December 31,2016

As of and for the nine months ended September 30, 2016

As of and for the three months ended September 30, 2016

As of and for the nine months ended September 30, 2017

As of and for the three months ended September 30, 2017

As of December 31,2016

As of and for the nine months ended September 30, 2016

As of and for the three months ended September 30, 2016

Assets	9,597,807		9,597,807		12,327,887		n/a		n/a		—		—		240,269		n/a		n/a
Liabilities	(12,578,388	)	(12,578,411	)	(15,922,552	)	n/a		n/a		(6,752,271	)	(6,752,271	)	(7,014,098	)	n/a		n/a
Revenues	4,572,665		1,398,839		n/a		1,140,000		1,140,000		53,136		—		n/a		3,786		—
Expenses	(3,958,581	)	(575,366	)	n/a		(2,253,056	)	(1,711,325	)	(31,578	)	(27,786	)	n/a		(392,416	)	(131,825	)

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15. STOCKHOLDERS' DEFICIT

9 Months Ended

Sep. 30, 2017

15. STOCKHOLDERS' DEFICIT

A.	Preferred Stock

The Certificate of Designation also provides for a liquidation value of $0.001 per share and dividend rights of the Series C Convertible Preferred Stock on parity with the Company’s Common Stock.

B.	Common Stock

The Company’s Articles of Incorporation previously authorized the issuance of 200,000,000 shares of Common Stock. 250,000 shares had been designated for the 2012 Omnibus Incentive Compensation Plan (the “2012 Plan”). Shares issuable under the 2012 Plan were not registered pursuant to a registration statement on Form S-8 and, consequently, no awards were granted, under the 2012 Plan. On June 29, 2017, the shareholders of the Company approved the 2017 Plan that replaced the 2012 Plan. On August 7, 2017, the Company filed a registration statement on Form S-8 to register 1,000,000 shares of Common Stock issuable under the Plan. As of September 30, 2017, 59,320 shares of restricted stock were issued under the 2017 Plan. The shares of restricted stock were issued on August 21, 2017 and have a vesting period of six months (February 21, 2018). Employees that received the awards must remain employed by the Company until the vesting date or they risk the forfeiture of the award.

On March 30, 2017, the Principal Sellers of 42West, exercised put options in the aggregate amount of 43,381 shares of Common Stock and were paid an aggregate total of $400,000 on April 10, 2017.

On May 5, 2017, the Principal Sellers of 42West exercised put options in the aggregate amount of 32,538 shares of Common Stock and were paid an aggregate total of $300,000 on June 2, 2017.

On June 22, 2017, one of the Principal Sellers of 42West exercised a put option for 8,134 shares of Common Stock and was paid $75,000 on July 10, 2017.

On August 21, 2017, the Company issued 59,320 shares of restricted stock to certain employees pursuant to the 2017 Plan. (See further discussion of the 2017 Plan above)

As of September 30, 2017, and December 31, 2016, the Company had 9,367,057 and 7,197,761 shares of Common Stock issued and outstanding, respectively.

C.	Noncontrolling Interest

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16. EARNINGS (LOSS) PER SHARE

9 Months Ended

Sep. 30, 2017

16. EARNINGS (LOSS) PER SHARE

The following table sets forth the computation of basic and diluted income (loss) per share:

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Numerator:
Net income (loss)	$	6,172,578		$	(11,540,729	)	$	9,575,304		$	(22,799,765	)
Preferred stock deemed dividend		—			—			—			(5,227,247	)
Numerator for basic income (loss) per share		6,172,578			(11,540,729	)		9,575,304			(28,027,012	)
Change in fair value of Warrants “J” and “K” (note 11)		(1,396,094	)		—			(7,685,607	)		—
Change in fair value of Put rights		(200,000	)		—			—			—
Numerator for diluted income (loss) per share	$	4,576,484		$	(11,540,729	)	$	1,889,697		$	(28,027,012	)
Denominator:
Denominator for basic EPS — weighted–average shares		9,336,826			5,337,108			8,640,543			3,801,626
Effect of dilutive securities:
Warrants		3,704			—			501,918			—
Employee nonvested stock awards		25,556			—			8,612			—
Shares issuable in January 2018 in connection with the 42West acquisition (Note 4)		980,911			—			328,767			—
Put rights in connection with the 42West acquisition (Note 4)		35,821			—			—			—
Denominator for diluted EPS — adjusted weighted-average shares assuming exercise of warrants		10,382,818			5,337,108			9,479,840			3,801,626
Basic income (loss) per share	$	0.66		$	(2.16	)	$	1.11		$	(7.37	)
Diluted Income (loss) per share	$	0.44		$	(2.16	)	$	0.20		$	(7.37	)

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17. WARRANTS

9 Months Ended

Sep. 30, 2017

17. WARRANTS

A summary of warrants outstanding at December 31, 2016 and issued exercised and expired during the nine months ended September 30, 2017 is as follows:

Warrants:	Shares		Weighted Avg. Exercise Price
Balance at December 31, 2016		2,945,000	$	5.98
Issued		—		—
Exercised		1,332,885		1.28
Expired		—		—
Balance at September 30, 2017		1,612,115	$	9.28

Warrants:	Number of Shares		Exercise price at September 30, 2017		Original Exercise Price		Fair Value as of September 30, 2017		Fair Value as of December 31, 2016		Expiration Date
Warrant “G”		750,000	$	9.22	$	10.00	$	1,043,761	$	3,300,671	January 31, 2018
Warrant “H”		250,000	$	9.22	$	12.00		715,215		1,524,805	January 31, 2019
Warrant “I”		250,000	$	9.22	$	14.00		1,015,607		1,568,460	January 31, 2020
		1,250,000					$	2,774,583	$	6,393,936

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18. OTHER RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2017

18. RELATED PARTY TRANSACTIONS

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19. SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2017

Settlement liability

19. SEGMENT INFORMATION

	Three months ended September 30,			Nine months ended September 30,
	2017
Revenue:
EPD	$	5,409,175		$	10,546,716
CPD		1,398,839			4,625,801
Total	$	6,808,014		$	15,172,517
Segment operating income (loss):
EPD	$	1,432,148		$	2,200,996
CPD		308,054			(1,161,828	)
Total		1,740,202			1,039,168
Interest expense		(424,187	)		(1,273,166	)
Other income, net		4,856,563			9,809,302
Income before income taxes	$	6,172,578		$	9,575,304

	As of September 30, 2017
Total assets:
EPD	$	27,682,381
CPD		6,079,839
Total	$	33,762,220

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 34
-URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8981-108599

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
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Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8595-108599

Reference 5: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
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Reference 7: http://www.xbrl.org/2003/role/presentationRef
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Reference 8: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
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Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 40
-URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e9031-108599

Reference 10: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 42
-URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e9054-108599

Reference 11: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8538-108599

Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
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-URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8864-108599

Reference 13: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
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-URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8924-108599

Reference 14: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
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-URI http://asc.fasb.org/extlink&oid=68060357&loc=d3e8906-108599

+ Details

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20. COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2017

20. COMMITMENTS AND CONTINGENCIES

Litigation

Tax Filings

Kids Club

Incentive Compensation Plan

On June 29, 2017, the shareholders of the Company approved the 2017 Plan which replaced the 2012 Plan. The 2017 Plan was adopted as a flexible incentive compensation plan that would allow us to use different forms of compensation awards to attract new employees, executives and directors, to further the goal of retaining and motivating existing personnel and directors and to further align such individuals’ interests with those of the Company’s shareholders. Under the 2017 Plan, the total number of shares of Common Stock reserved and available for delivery under the 2017 Plan (the “Awards”), at any time during the term of the 2017 Plan, will be 1,000,000 shares of Common Stock. The 2017 Plan imposes individual limitations on the amount of certain Awards, in part with the intention to comply with Section 162(m) of the Code. Under these limitations, in any fiscal year of the Company during any part of which the 2017 Plan is in effect, no participant may be granted (i) stock options or stock appreciation rights with respect to more than 300,000 Shares, or (ii) performance shares (including shares of restricted stock, restricted stock units, and other stock based-awards that are subject to satisfaction of performance goals) that the Committee intends to be exempt from the deduction limitations under Section 162(m) of the Code, with respect to more than 300,000 Shares, in each case, subject to adjustment in certain circumstances. The maximum amount that may be paid out to any one participant as performance units that the Committee intends to be exempt from the deduction limitations under Section 162(m) of the Code, with respect to any 12-month performance period is $1,000,000 (pro-rated for any performance period that is less than 12 months), and with respect to any performance period that is more than 12 months, $2,000,000. On August 21, 2017, the Company issued 59,320 Shares as Awards to certain employees. There is a vesting period of six months. Through September 30, 2017, the Company recorded compensation expense of $103,760 on its condensed consolidated statement of operations.

Employee Benefit Plan

Employment Contracts

Talent, Director, Producer, and Other Participations

Per agreements with talent, directors and producers on certain projects, the Company will be responsible for bonus and back end payments upon release of a motion picture and achieving certain box office performance as determined by the individual agreements. The Company cannot estimate the amounts that will be due as these are based on future box office performance. In addition payments may be due to the guarantor of the P&A loan of Max Steel from future domestic distribution revenues of Max Steel. However, based on the information provided by our distributor, the motion picture is not expected to generate sufficient domestic distribution revenues to trigger these payments. As of September 30, 2017 and December 31, 2016, the Company had not recorded any liability related to these participations.

Leases

Future minimum annual rent payments are as follows:

Period ended September 30, 2017
October 1, 2017 – December 31, 2017	$	345,403
2018		1306,473
2019		1,329,613
2020		1,433,403
2021		1,449,019
Thereafter		4,675,844
	$	10,539,756

Rent expense, including escalation charges, amounted to approximately $292,415 and $924,389, respectively, for the three and nine months ended September 30, 2017.

Motion Picture Industry Pension Accrual

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21. SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

On October 10 and 18, 2017, the Company entered into agreements with two note holders to extend the maturity date of each of their promissory notes until December 15, 2017. The interest rate for on one of the promissory notes increased from 10% to 12%.

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2017

Summary Of Significant Accounting Policies Policies

Accounts Receivable and Allowance for Doubtful Accounts

Revenue Recognition

Investments

Property, Equipment and Leasehold Improvements

Asset Category		Depreciation/ Amortization Period (Years)
Furniture and fixtures		5 - 7
Computer and office equipment		3 - 5
Leasehold improvements		5 - 8, not to exceed the lease terms

Deferred Landlord Reimbursement

Deferred Rent

Deferred rent consists of the excess of the rent expense recognized on the straight-line basis over the payments required under certain office leases.

Intangible assets

Goodwill

Warrants

Fair Value Measurements

Level 1	—	Inputs are quoted prices in active markets for identical assets or liabilities as of the reporting date.
Level 2	—	Inputs other than quoted prices included within Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated with observable market data.

Level 3	—	Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs. Unobservable inputs for the asset or liability that reflect management’s own assumptions about the assumptions that market participants would use in pricing the asset or liability as of the reporting date.

As of September 30, 2016, and for the three and nine months then ended, the Company had no assets or liabilities measured at fair value, on a recurring or nonrecurring basis.

Business Segments

Through March 30, 2017 (the date the Company acquired 42West) (see Note 4), the Company operated the following business segments:

1)	Dolphin Digital Media (USA): The Company created online kids clubs and derives revenue from annual membership fees.

2)	Dolphin Digital Studios: Dolphin Digital Studios creates original programming that premieres online, with an initial focus on content geared toward tweens and teens.

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3 .SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2017

Summary Of Significant Accounting Policies Tables

Schedule of Years of Useful Life

	Depreciation/
	Amortization
Asset Category	Period (Years)
Furniture and fixtures		5 - 7
Computer equipment		3 - 5
Leasehold improvements		5 - 8, not to exceed the lease terms

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4. ACQUISITION OF 42 WEST (Tables)

9 Months Ended

Sep. 30, 2017

Acquisition Of 42 West Tables

Condensed Consolidated Statement of Operations, retrospectively adjusted for the acquisition of Dolphin Films

Common Stock issued at closing and in April 2017 (787,415 shares)	$	6,693,028
Common Stock issuable on January 2, 2018 (980,911 shares)		8,337,739
Contingent Consideration		3,627,000
Put Rights		3,800,000
Sellers’ transaction costs paid at closing		260,000
Sellers’ tax liabilities assumed		786,000
Working capital adjustment (50,000 shares issued in April 2017 plus paid $185,032 in cash in August 2017)		610,032
	$	24,113,799

Condensed Consolidated Statement of Operations, retrospectively adjusted for the acquisition of Dolphin Films

Cash	$	273,625
Accounts receivable		1,706,644
Property, equipment and leasehold improvements		1,087,962
Other assets		265,563
Indemnification asset		300,000
Intangible assets		9,110,000
Total identifiable assets acquired		12,743,794

Accounts payable and accrued expenses		(731,475	)
Line of credit and note payable		(1,025,000	)
Settlement liability		(300,000	)
Other liabilities		(902,889	)
Tax liabilities		(22,000	)
Total liabilities assumed		(2,981,364	)
Net identifiable assets acquired		9,762,430
Goodwill		14,351,369
Net assets acquired	$	24,113,799

	March 31, 2017 (As initially reported)			Measurement Period Adjustments		September 30, 2017 (As adjusted)
Cash	$	273,625		$	—	$	273,625
Accounts receivable		1,706,644			—		1,706,644
Property, equipment and leasehold improvements		1,087,962			—		1,087,962
Other assets		265,563			—		265,563
Indemnification asset		—			300,000		300,000
Intangible assets		9,110,000			—		9,110,000
Total identifiable assets acquired		12,443,794			300,000		12,743,794

Accounts payable and accrued expenses		(731,475	)		—		(731,475	)
Line of credit and note payable		(1,025,000	)		—		(1,025,000	)
Settlement liability		(300,000	)		—		(300,000	)
Other liabilities		(902,889	)		—		(902,889	)
Tax liabilities		(22,000	)		—		(22,000	)
Total liabilities assumed		(2,981,364	)		—		(2,981,364	)
Net identifiable assets acquired		9,462,430			—		9,762,430
Goodwill		13,996,337			355,032		14,351,369
Net assets acquired	$	23,458,767		$	655,032	$	24,113,799

Condensed Consolidated Statement of Cash Flows, retrospectively adjusted for the acquisition of Dolphin Films

	For the three months ended September 30, 2017		For the nine months ended September 30, 2017
Revenue	$	5,409,166	$	15,236,278
Net income	$	247,247	$	1,612,589

Pro Forma Consolidated Statements of Operations

	Three months ended September 30,					Nine months ended September 30,
	2017		2016			2017			2016
Revenues	$	6,8808,014	$	5,88,495		$	19,862,073		$	15,064,851
Net income (loss)		5,923,245		(11,617,330	)		(10,897,757	)		(22,205,725	)

Schedule of Fair value to the adjusted fair value of goodwill

Goodwill originally reported at March 31, 2017	$	13,996,337
Changes to estimated fair values:
Contingent Consideration		86,000
Put Rights		(200,000	)
Sellers’ tax liabilities assumed		159,000
Working capital adjustment		610,031
Indemnification asset		(300,000	)
		355,031
Adjusted goodwill	$	14,351,368

Tabular disclosure of all significant concentrations of risk, including credit risk and market risk, arising from all financial instruments (as defined), whether from an individual counterparty or groups of counterparties. The disclosure concerning concentrations of risk may consist of the following information: (1) for concentrations of credit risk disclosure may include: (a) information about the (shared) activity, region, or economic characteristic that identifies the concentration, (b) the maximum amount of loss due to credit risk that, based on the gross fair value of the financial instrument, the entity would incur if parties to the financial instruments that make up the concentration failed completely to perform according to the terms of the contracts and the collateral or other security, if any, for the amount due proved to be of no value to the entity, (c) the policy of requiring collateral or other security to support financial instruments subject to credit risk, information about the entity's access to that collateral or other security, and the nature and a brief description of the collateral or other security supporting those financial instruments, and (d) the policy of entering into master netting arrangements to mitigate the credit risk of financial instruments, information about the arrangements for which the entity is a party, and a brief description of the terms of those arrangements, including the extent to which they would reduce the entity's maximum amount of loss due to credit risk and (2) for disclosure of quantitative information about the market risks of financial instruments that is consistent with the way the company manages or adjusts those risks, disclosure may include: (a) more details about current positions and perhaps activity during the period, (b) the hypothetical effects on comprehensive income (or net assets), or annual income, of several possible changes in market prices, (c) a gap analysis of interest rate re-pricing or maturity dates, (d) the duration of the financial instruments, (e) the entity's value at risk from derivatives and from other positions at the end of the reporting period and the average value at risk during the year, or (f) other ways of reporting quantitative information as internally developed.

Property Equipment And Leasehold Improvements Tables

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6 .PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Tables)

9 Months Ended

Sep. 30, 2017

Schedule of Property, equipment and leasehold

	September 30, 2017			December 31, 2016
Furniture and fixtures	$	539,715		$	65,311
Computers and equipment		408,058			41,656
Leasehold improvements		356,946			7,649
		1,304,719			114,616
Less: accumulated depreciation		(192,820	)		(79,428	)
	$	1,111,899		$	35,188

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11 .FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2017

Fair Value Measurements Tables

Schedule of Warrant terms

	Issuance Date	Number of Common Shares		Per Share Exercise Price		Remaining Term (Months)		Expiration Date
Series G Warrants	November 4, 2016		750,000	$	9.22		4	January 31, 2018
Series H Warrants	November 4, 2016		250,000	$	9.22		16	January 31, 2019
Series I Warrants	November 4, 2016		250,000	$	9.22		28	January 31, 2020

Schedule of determined the fair values of the Warrants

	As of September 30, 2017
Inputs	Series G			Series H			Series I
Volatility (1)		71.2	%		67.0	%		76.3	%
Expected term (years)		0.33			1.33			2.33
Risk free interest rate		1.107	%		1.363	%		1.520	%
Common stock price	$	8.40		$	8.40		$	8.44
Exercise price	$	9.22		$	9.22		$	9.22

(1)“Level 3” input.

Schedule of Warrants, which measured at fair value categorized

	Warrants “G”, “H” and “I”			Warrants “J” and “K”			Total
Beginning fair value balance reported in the consolidated balance sheet at December 31, 2016	$	6,393,936		$	14,011,254		$	20,405,190
Change in fair value (gain) reported in the statements of operations		(3,619,353	)		(4,066,254	)		(7,685,607	)
Exercise of “J” and “K” Warrants		—			(9,945,000	)		(9,945,000	)
Ending fair value balance reported in the condensed consolidated balance sheet at September 30, 2017	$	2,774,583		$	—		$	2,774,583

Schedule of Fair value

The Company determined the fair value by using the following key inputs to the Black-Scholes Option Pricing Model:

Inputs

On the date of Acquisition

(March 30, 2017)

As of

September 30,

2017

Equity Volatility estimate

75%

82.5%

Discount rate based on US Treasury obligations

0.12% -1.70%

1.04% - 1.65%

The Company determined the fair value by using the following key inputs to the Monte Carlo Simulation Model:

Inputs	On the date of Acquisition (March 30, 2017)	As of September 30, 2017
Risk Free Discount Rate (based on US government treasury obligation with a term similar to that of the Contingent Consideration)	1.03%-1.55%	1.31% -1.62%
Annual Asset Volatility Estimate	72.5%	80%
Estimated EBITDA	$3,600,000- $3,900,000	$3,600,000- $3,900,000

Schedule of Estimated EBITDA

Beginning fair value balance on the Acquisition Date (March 30, 2017)	$	3,627,000
Change in fair value (loss) reported in the statements of operations		346,000
Ending fair value balance reported in the condensed consolidated balance sheet at September 30, 2017	$	3,973,000

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14 .VARIABLE INTEREST ENTITIES (Tables)

9 Months Ended

Sep. 30, 2017

Variable Interest Entities Tables

Summary financial information for the VIE's

Max Steel Productions LLC

JB Believe LLC

(in USD)

As of and for the nine months ended September 30, 2017

As of and for the three months ended September 30, 2017

As of December 31,2016

As of and for the nine months ended September 30, 2016

As of and for the three months ended September 30, 2016

As of and for the nine months ended September 30, 2017

As of and for the three months ended September 30, 2017

As of December 31,2016

As of and for the nine months ended September 30, 2016

As of and for the three months ended September 30, 2016

Assets	9,597,807		9,597,807		12,327,887		n/a		n/a		—		—		240,269		n/a		n/a
Liabilities	(12,578,388	)	(12,578,411	)	(15,922,552	)	n/a		n/a		(6,752,271	)	(6,752,271	)	(7,014,098	)	n/a		n/a
Revenues	4,572,665		1,398,839		n/a		1,140,000		1,140,000		53,136		—		n/a		3,786		—
Expenses	(3,958,581	)	(575,366	)	n/a		(2,253,056	)	(1,711,325	)	(31,578	)	(27,786	)	n/a		(392,416	)	(131,825	)

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

Schedule of basic and diluted income (loss) per share

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16 .EARNINGS (LOSS) PER SHARE (Tables)

9 Months Ended

Sep. 30, 2017

Earnings Loss Per Share Tables

	Three months ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Numerator:
Net income (loss)	$	6,172,578		$	(11,540,729	)	$	9,575,304		$	(22,799,765	)
Preferred stock deemed dividend		—			—			—			(5,227,247	)
Numerator for basic income (loss) per share		6,172,578			(11,540,729	)		9,575,304			(28,027,012	)
Change in fair value of Warrants “J” and “K” (note 11)		(1,396,094	)		—			(7,685,607	)		—
Change in fair value of Put rights		(200,000	)		—			—			—
Numerator for diluted income (loss) per share	$	4,576,484		$	(11,540,729	)	$	1,889,697		$	(28,027,012	)
Denominator:
Denominator for basic EPS — weighted–average shares		9,336,826			5,337,108			8,640,543			3,801,626
Effect of dilutive securities:
Warrants		3,704			—			501,918			—
Employee nonvested stock awards		25,556			—			8,612			—
Shares issuable in January 2018 in connection with the 42West acquisition (Note 4)		980,911			—			328,767			—
Put rights in connection with the 42West acquisition (Note 4)		35,821			—			—			—
Denominator for diluted EPS — adjusted weighted-average shares assuming exercise of warrants		10,382,818			5,337,108			9,479,840			3,801,626
Basic income (loss) per share	$	0.66		$	(2.16	)	$	1.11		$	(7.37	)
Diluted Income (loss) per share	$	0.44		$	(2.16	)	$	0.20		$	(7.37	)

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17. WARRANTS (Tables)

9 Months Ended

Sep. 30, 2017

Warrants Tables

Warrants activity

Warrants:	Shares		Weighted Avg. Exercise Price
Balance at December 31, 2016		2,945,000	$	5.98
Issued		—		—
Exercised		1,332,885		1.28
Expired		—		—
Balance at September 30, 2017		1,612,115	$	9.28

Summary of warrants issued

Warrants:	Number of Shares		Exercise price at September 30, 2017		Original Exercise Price		Fair Value as of September 30, 2017		Fair Value as of December 31, 2016		Expiration Date
Warrant “G”		750,000	$	9.22	$	10.00	$	1,043,761	$	3,300,671	January 31, 2018
Warrant “H”		250,000	$	9.22	$	12.00		715,215		1,524,805	January 31, 2019
Warrant “I”		250,000	$	9.22	$	14.00		1,015,607		1,568,460	January 31, 2020
		1,250,000					$	2,774,583	$	6,393,936

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.