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	)

SEC Form 10-Q filed by Grom Social Enterprises Inc.