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Item 1A. Risk Factors

2023-04-13 compared with 2022-04-06 · 309 added, 578 removed, 46 unchanged (95% of the section changed)

Risk Factor Summary

are providing the following summary of the risk factors contained in this Annual Report on Form 10-K to enhance the readability and accessibility

of our risk factor disclosures.

We encourage you to carefully review the full risk factors contained in this Annual Report on Form 10-K

in their entirety for additional information regarding the material factors that make an investment in our securities speculative or risky.

We are providing the following summary of the risk factors contained in this Annual Report on Form 10-K to enhance the readability and accessibility of our risk factor disclosures.

We encourage you to carefully review the full risk factors contained in this Annual Report on Form 10-K in their entirety for additional information regarding the material factors that make an investment in our securities speculative or risky.

These risks and uncertainties include, but are not limited to, the following:

Risks Relating to our Business

· Our business has been and may continue to be adversely affected by the COVID-19

• We have incurred net losses since inception.

are not able to obtain sufficient capital, we may not be able to continue our growth.

· Our revenues and results of operations may fluctuate

from period to period.

· The value of our investments is subject to significant capital markets risk related to changes in interest rates

and credit spreads as well as other investment risks, which may adversely affect our results of operations, financial condition or cash

• If we are not able to obtain sufficient capital, we may not be able to continue our growth.

• Our revenues and results of operations may fluctuate from period to period.

• The value of our investments is subject to significant capital markets risk related to changes in interest rates and credit spreads as well as other investment risks, which may adversely affect our results of operations, financial condition or cash flows.

• Changes in the United States, global or regional economic conditions could adversely affect the profitability of our business.

• Our business has been and may continue to be adversely affected by the COVID-19 pandemic.

• Inaccurately anticipating changes and trends in popular culture, media and movies, fashion, or technology can negatively affect our sales.

• We face competition from a variety of content creators that sell similar merchandise and have better resources than we do.

The production of our animated content is accomplished through third-party production and animation studios around the world, and any

failure of these third parties could negatively impact our business.

· We cannot assure you that our original programming content will appeal to our distributors and viewers or that any of our original programming

content will not be cancelled or removed from our distributors’ platforms.

· Failure to successfully market or advertise our products could have an adverse effect on our business, financial condition and results

of operations.

• The production of our animated content is accomplished through third-party production and animation studios around the world, and any failure of these third parties could negatively impact our business.

• We cannot assure you that our original programming content will appeal to our distributors and viewers or that any of our original programming content will not be cancelled or removed from our distributors’ platforms.

• Failure to successfully market or advertise our products could have an adverse effect on our business, financial condition and results of operations.

• The failure of others to promote our products may adversely affect our business.

1 unchanged sentence

• Failure in our information technology and storage systems could significantly disrupt the operation of our business.

· Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer security breaches,

which could result in a material disruption and cause our business and reputation to suffer.

• Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption and cause our business and reputation to suffer.

• Loss of key personnel may adversely affect our business.

• Litigation may harm our business or otherwise distract management.

· Our vendors and licensees may be subject to various laws and government regulations, violation of which could subject these parties to

sanctions which could lead to increased costs or the interruption of normal business operations that could negatively impact our financial

condition and results of operations.

• Our vendors and licensees may be subject to various laws and government regulations, violation of which could subject these parties to sanctions which could lead to increased costs or the interruption of normal business operations that could negatively impact our financial condition and results of operations.

• Protecting and defending against intellectual property claims may have a material adverse effect on our business.

· Any additional future acquisitions or strategic

investments may not be available on attractive terms and would subject us to additional risks.

· We are exposed to investment risk with the acquisition

of an equity interest in Your Family Entertainment AG.

· We operate internationally, which exposes us

to significant risks.

• Any additional future acquisitions or strategic investments may not be available on attractive terms and would subject us to additional risks.

• We are exposed to investment risk with the acquisition of an equity interest in Your Family Entertainment AG.

• We operate internationally, which exposes us to significant risks.

• We are exposed to foreign currency exchange rate risk.

· A decrease in the fair values of our reporting

units may result in future goodwill impairments.

• A decrease in the fair values of our reporting units may result in future goodwill impairments.

Risk Related to our Indebtedness

• We have incurred indebtedness that could adversely affect our operations and financial condition.

Risk Related to Tax Rules and Regulations

• Changes in foreign, state and local tax incentives may increase the cost of original programming content to such an extent that they are no longer feasible.

• Changes in, or interpretations of, tax rules and regulations, and changes in geographic operating results, may adversely affect our effective tax rates.

Risks Relating to our Common Stock

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• If our common stock becomes subject to the penny stock rules, it may be more difficult to sell our common stock.

· If we fail to maintain effective internal controls over financial reporting,

the price of our common stock may be adversely affected.

· We are authorized to issue “blank check” preferred stock without stockholder approval, which could adversely impact the rights

of holders of our common stock.

• If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.

• We are authorized to issue “blank check” preferred stock without stockholder approval, which could adversely impact the rights of holders of our common stock.

• We do not expect to pay dividends in the future and any return on investment may be limited to the value of our common stock.

· Offers or availability for sale of a substantial

number of shares of our common stock may cause the price of our common stock to decline.

following discussion of risk factors contains forward-looking statements.

These risk factors may be important to understanding any statement

in this Form 10-K or elsewhere.

The following information should be read in conjunction with Part II, Item 7, “Management’s

Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related

notes beginning on Page F-1 of this Form 10-K.

should consider carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report

on Form 10-K, including our consolidated financial statements and related notes.

The risks and uncertainties described below are not the

only ones we face.

Our business, financial condition and operating results can be affected by a number of factors, whether currently known

or unknown, including but not limited to those described below.

Any one or more of such factors could directly or indirectly cause our

actual results of operations and financial condition to vary materially from past or anticipated future results of operations and financial

Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, results

of operations and stock price.

of the following factors, as well as other factors affecting our financial condition and operating results, past financial performance

should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate

results or trends in future periods.

• Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

The following discussion of risk factors contains forward-looking statements.

These risk factors may be important to understanding any statement in this Annual Report on Form 10-K or elsewhere.

The following information should be read in conjunction with Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes beginning on Page F-1 of this Annual Report on Form 10-K.

You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and related notes.

The risks and uncertainties described below are not the only ones we face.

Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below.

Any one or more of such factors could directly or indirectly cause our actual results of operations and financial condition to vary materially from past or anticipated future results of operations and financial condition.

Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, results of operations and stock price.

Because of the following factors, as well as other factors affecting our financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.

RISKS RELATING TO OUR BUSINESS

Our business has been and may continue to be adversely affected

by the COVID-19 pandemic.

We face various risks related

to health epidemics, pandemics and similar outbreaks, including the COVID-19 pandemic.

The COVID-19 pandemic and the mitigation efforts

by governments to attempt to control its spread have adversely impacted the global economy, leading to reduced consumer spending and lending

Our customers, and therefore our business and revenues, are sensitive to negative changes in general economic conditions.

We experienced significant revenue declines in several of our markets as a result of COVID-19, primarily due to the supply chain issues

that are affecting the toy industry and which are impacting our ChizComm Beacon Media subsidiary.

We expect that the negative impacts

of the COVID-19 pandemic on our operating revenue will continue until health and economic conditions improve.

We continue to work with our

stakeholders (including customers, employees, consumers, suppliers, business partners and local communities) to responsibly address this

global pandemic.

We will continue to monitor the situation and assess possible implications to our business and our stakeholders and will

take appropriate actions in an effort to mitigate adverse consequences.

We cannot assure you that we will be successful in any such mitigation

The extent to which the COVID-19 pandemic will continue to negatively impact our operations will depend on future developments

which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, the emergence of new virus

variants, new information which may emerge concerning the severity of the COVID-19 pandemic, outbreaks occurring at any of our facilities,

the actions taken to control the spread of COVID-19 or treat its impact, and changes in worldwide and U.S.

economic conditions.

deteriorations in economic conditions, as a result of the COVID-19 pandemic or otherwise, could lead to a further or prolonged decline

in demand for our products and services and negatively impact our business.

It may also impact financial markets and corporate credit

markets which could adversely impact our access to financing or the terms of any such financing.

We cannot at this time predict the extent

of the impact of the COVID-19 pandemic and its resulting economic impact, but it could have a material adverse effect on our business,

financial position, results of operations and cash flows.

To the extent the COVID-19 pandemic adversely affects our business and financial

results, it may also have the effect of heightening many of the other risks described in this “Item 1A.

Risk Factors” and

elsewhere in this Annual Report on Form 10-K, such as our ability to protect our information technology networks and infrastructure from

unauthorized access, misuse, malware, phishing and other events that could have a security impact as a result of our remote working environment

or otherwise.

On March 15, 2022, we began implementing our “Return to Office” plan.

We have incurred net losses since inception.

We have a history of operating

losses and incurred net losses in each fiscal quarter since our inception.

For the year ended December 31, 2021, we generated net revenues

of $7.9 million and incurred a net loss of $126.3 million, while for the previous year, we generated net revenue of $2.5 million and incurred

a net loss of $401.7 million.

These losses, among other things, have had an adverse effect on our results of operations, financial condition,

stockholders’ equity, net current assets and working capital.

We will need to generate additional

revenue and/or reduce costs to achieve profitability.

We are beginning to generate revenues derived from our existing properties, properties

in production, and new brands being introduced into the marketplace.

However, the ability to sustain these revenues and generate significant

additional revenues or achieve profitability will depend upon numerous factors some of which are outside of our control.

If we are not able to obtain sufficient

capital, we may not be able to continue our growth.

We expect that as our business

continues to evolve and grow, we will need additional working capital.

If adequate additional debt and/or equity financing is not available

on reasonable terms or at all, we may not be able to continue to expand our business, and we will have to modify our business plans accordingly.

We have a history of operating losses and incurred net losses in each fiscal quarter since our inception.

For the year ended December 31, 2022, we generated net revenues of $62.3 million and incurred a net loss of $44.5 million, while for the previous year, we generated net revenue of $7.9 million and incurred a net loss of $126.3 million.

These losses, among other things, have had an adverse effect on our results of operations, financial condition, stockholders’ equity, net current assets and working capital.

We will need to generate additional revenue and/or reduce costs to achieve profitability.

We are generating revenues derived from our existing properties, properties in production, and new brands being introduced into the marketplace.

However, the ability to sustain these revenues and generate significant additional revenues and reduce our expenses or achieve profitability will depend upon numerous factors some of which are outside of our control.

If we are not able to obtain sufficient capital, we may not be able to continue our growth.

We expect that as our business continues to evolve and grow, we will need additional working capital.

If adequate additional debt and/or equity financing is not available on reasonable terms or at all, we may not be able to continue to expand our business, and we will have to modify our business plans accordingly.

These factors could have a material adverse effect on our future operating results and our financial condition.

Our revenues and results of operations may

fluctuate from period to period.

Cash flow and projections

for any entertainment company producing original content can be expected to fluctuate until the animated content and ancillary consumer

products are in the market and could fluctuate thereafter even when the content and products are in the marketplace.

There is significant

lead time in developing and producing animated content before that content is in the marketplace.

Unanticipated delays in entertainment

production can delay the release of the content into the marketplace.

Structured retail windows that dictate when new products can be

introduced at retail are also out of our control.

While we believe that we have mitigated this in part by creating a slate of properties

at various stages of development or production as well as representing certain established brands which contribute immediately to cash

flow, any delays in the production and release of our content and products or any changes in the preferences of our customers could result

in lower than anticipated cash flows.

As with our cash flows, our

revenues and results of operations depend significantly upon the appeal of our content to our customers, the timing of releases of our

products and the commercial success of our products, none of which can be predicted with certainty.

Accordingly, our revenues and results

of operations may fluctuate from period to period.

Our revenues and results of operations may fluctuate from period to period.

Cash flow and projections for any entertainment company producing original content can be expected to fluctuate until the animated content and ancillary consumer products are in the market and could fluctuate thereafter even when the content and products are in the marketplace.

There is significant lead time in developing and producing animated content before that content is in the marketplace.

Unanticipated delays in entertainment production can delay the release of the content into the marketplace.

Structured retail windows that dictate when new products can be introduced at retail are also out of our control.

While we believe that we have mitigated this in part by creating a slate of properties at various stages of development or production as well as representing certain established brands which contribute immediately to cash flow, any delays in the production and release of our content and products or any changes in the preferences of our customers could result in lower than anticipated cash flows.

As with our cash flows, our revenues and results of operations depend significantly upon the appeal of our content to our customers, the timing of releases of our products and the commercial success of our products, none of which can be predicted with certainty.

Accordingly, our revenues and results of operations may fluctuate from period to period.

The results of one period may not be indicative of the results of any future period.

Any quarterly fluctuations that we report in the future may not match the expectations of market analysts and investors.

This could cause

the price of our common stock to fluctuate.

Production cost will be amortized

according to the individual film forecasting methodology.

If estimated remaining revenue is not sufficient to recover the unamortized

production costs, the unamortized production costs will be written down to fair value.

In any given quarter, if we lower our previous

forecast with respect to total anticipated revenue, we would be required to adjust amortization of related production costs.

These adjustments

would adversely impact our business, operating results and financial condition.

The value of our investments is subject

to significant capital markets risk related to changes in interest rates and credit spreads as well as other investment risks, which may

adversely affect our results of operations, financial condition or cash flows.

Our results of operations

are affected by the performance of our investment portfolio.

Our excess cash is invested by an external investment management service

provider, under the direction of the Company’s management in accordance with the Company’s investment policy.

The investment

policy defines constraints and guidelines that restrict the asset classes that we may invest in by type, duration, quality and value.

This could cause the price of our common stock to fluctuate.

Production costs will be amortized according to the individual film forecasting methodology.

If estimated remaining revenue is not sufficient to recover the unamortized production costs, the unamortized production costs will be written down to fair value.

In any given quarter, if we lower our previous forecast with respect to total anticipated revenue, we would be required to adjust amortization of related production costs.

These adjustments would adversely impact our business, operating results and financial condition.

The value of our investments is subject to significant capital markets risk related to changes in interest rates and credit spreads as well as other investment risks, which may adversely affect our results of operations, financial condition or cash flows.

Our results of operations are affected by the performance of our investment portfolio.

Our excess cash is invested by an external investment management service provider, under the direction of the Company’s management in accordance with the Company’s investment policy.

The investment policy defines constraints and guidelines that restrict the asset classes that we may invest in by type, duration, quality and value.

Our investments are subject to market-wide risks, and fluctuations, as well as to risks inherent in particular securities.

of any of the investment risk strategies that we employ could have a material adverse effect on our financial condition, results of operations

and cash flows.

The value of our investments

is exposed to capital market risks, and our consolidated results of operations, financial condition or cash flows could be adversely affected

by realized losses, impairments and changes in unrealized positions as a result of:

significant market volatility, changes in interest

rates, changes in credit spreads and defaults, a lack of pricing transparency, a reduction in market liquidity, declines in equity prices,

changes in national, state/provincial or local laws and the strengthening or weakening of foreign currencies against the U.S.

Levels of write-down or impairment are impacted by our assessment of the intent to sell securities that have declined in value as well

as actual losses as a result of defaults or deterioration in estimates of cash flows.

If we reposition or realign portions of the investment

portfolio and sell securities in an unrealized loss position, we will incur an other-than-temporary impairment charge or realized losses.

The failure of any of the investment risk strategies that we employ could have a material adverse effect on our financial condition, results of operations and cash flows.

The value of our investments is exposed to capital market risks, and our consolidated results of operations, financial condition or cash flows could be adversely affected by realized losses, impairments and changes in unrealized

positions as a result of:

significant market volatility, changes in interest rates, changes in credit spreads and defaults, a lack of pricing transparency, a reduction in market liquidity, declines in equity prices, changes in national, state/provincial or local laws and the strengthening or weakening of foreign currencies against the U.S.

Levels of write-down or impairment are impacted by our assessment of the intent to sell securities that have declined in value as well as actual losses as a result of defaults or deterioration in estimates of cash flows.

If we reposition or realign portions of the investment portfolio and sell securities in an unrealized loss position, we will incur an other-than-temporary impairment charge or realized losses.

Any such charge may have a material adverse effect on our results of operations and business.

For the year ended December

31, 2021, we incurred net realized and unrealized investment gains and losses, as described in Item 8, “Financial Statements and

Supplementary Data” included herein.

Changes in the United States, global or

regional economic conditions could adversely affect the profitability of our business.

A decrease in economic activity

in the United States or in other regions of the world in which we do business could adversely affect demand for our products, thus reducing

our revenue and earnings.

For the year ended December 31, 2022, we incurred net realized and unrealized investment gains and losses, as described in Item 8, “Financial Statements and Supplementary Data” included herein.

Changes in the United States, global or regional economic conditions could adversely affect the profitability of our business.

A decrease in economic activity in the United States or in other regions of the world in which we do business could adversely affect demand for our products, thus reducing our revenue and earnings.

A decline in economic conditions could reduce demand for and sales of our products.

In addition, an increase

in price levels generally, or in price levels in a particular sector, could result in a shift in consumer demand away from the animated

content and consumer products we offer, which could also decrease our revenues, increase our costs, or both.

We may experience an adverse

impact on our results of operations due to the current geopolitical tensions caused by the Russian invasion of Ukraine.

The governments

of the European Union, the United States, Japan and other jurisdictions have recently announced the imposition of sanctions on certain

industry sectors and parties in Russia and the regions of Donetsk and Luhansk, as well as enhanced export controls on certain products

and industries.

These and any additional sanctions and export controls, as well as any counter responses by the governments of Russia

or other jurisdictions, could adversely affect, directly or indirectly, the levels of government spending or the global supply chain,

with negative implications on the availability and prices of raw materials, energy prices, and our customers, as well as the global financial

Further, the global economy

recovery from the COVID-19 pandemic will depend on many factors, including the recovery of the supply chain affecting the toy industry.

Any supply chain disruptions could result in loss of revenue, penalties due to delayed production and currency losses, or other unforeseen

costs which would negatively impact margins.

Inaccurately anticipating changes and trends

in popular culture, media and movies, fashion, or technology can negatively affect our sales.

While trends in the toddler

to tween sector change quickly, we respond to trends and developments by modifying, refreshing, extending, and expanding our product offerings

on an on-going basis.

However, we operate in extremely competitive industries where the ultimate appeal and popularity of content and

products targeted to this sector can be difficult to predict.

We believe our focus on “content with a purpose” serves an underrepresented

area of the toddler to tween market;

however, if the interests of our audience trend away from our current properties toward other offerings

based on current media, movies, animated content or characters, and if we fail to accurately anticipate trends in popular culture, movies,

media, fashion, or technology, our products may not be accepted by children, parents, or families and our revenues, profitability, and

results of operations may be adversely affected.

We face competition from a variety of

content creators that sell similar merchandise and have better resources than we do.

industries in which we operate are competitive, and our results of operations are sensitive to, and may be adversely affected by, competitive

pricing, promotional pressures, additional competitor offerings and other factors, many of which are beyond our control.

Indirectly through

our licensing arrangements, we compete for retailers as well as other outlets for the sale and promotion of our licensed merchandise.

In addition, an increase in price levels generally, or in price levels in a particular sector, could result in a shift in consumer demand away from the animated content and consumer products we offer, which could also decrease our revenues, increase our costs, or both.

We may experience an adverse impact on our results of operations due to the current geopolitical tensions caused by the Russian invasion of Ukraine.

The governments of the European Union, the United States, Japan and other jurisdictions have recently announced the imposition of sanctions on certain industry sectors and parties in Russia and the regions of Donetsk and Luhansk, as well as enhanced export controls on certain products and industries.

These and any additional sanctions and export controls, as well as any counter responses by the governments of Russia or other jurisdictions, could adversely affect, directly or indirectly, the levels of government spending or the global supply chain, with negative implications on the availability and prices of raw materials, energy prices, and our customers, as well as the global financial markets.

Our business has been and may continue to be adversely affected by the COVID-19 pandemic.

We face various risks related to health epidemics, pandemics and similar outbreaks, including the COVID-19 pandemic.

The COVID-19 pandemic and the mitigation efforts by governments to attempt to control its spread have adversely impacted the global economy, leading to reduced consumer spending and lending activities.

Our customers, and therefore our business and revenues, are sensitive to negative changes in general economic conditions.

We experienced significant revenue declines in several of our markets as a result of COVID-19, primarily due to the supply chain issues that are affecting the toy industry and which impacted our Beacon subsidiary.

We continue to work with our stakeholders (including customers, employees, consumers, suppliers, business partners and local communities) to responsibly address this global pandemic.

We will continue to monitor the situation and assess possible implications to our business and our stakeholders and will take appropriate actions in an effort to mitigate adverse consequences.

We cannot assure you that we will be successful in any such mitigation efforts.

The extent to which the COVID-19 pandemic will continue to negatively impact our operations will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, the emergence of new virus variants, new information which may emerge concerning the severity of the COVID-19 pandemic, outbreaks occurring at any of our facilities, the actions taken to control the spread of COVID-19 or treat its impact, and changes in worldwide and U.S.

economic conditions.

Further deterioration in economic conditions, as a result of the COVID-19 pandemic or otherwise, could lead to a further or prolonged decline in demand for our products and services and negatively impact our business.

It may also impact financial markets and corporate credit markets which could adversely impact our access to financing or the terms of any such financing.

We cannot at this time predict the extent of the impact of the COVID-19 pandemic and its resulting economic impact, but it could have a material adverse effect on our business, financial position, results of operations and cash flows.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Item 1A.

Risk Factors” and elsewhere in this Annual Report on Form 10-K, such as our ability to protect our information technology networks and infrastructure from unauthorized access, misuse, malware, phishing and other events that could have a security impact as a result of our remote working environment or otherwise.

On March 15, 2022, we began implementing our “Return to Office” plan and currently the majority of the employees based in our Beverly Hills headquarters are in the office five days a week.

Inaccurately anticipating changes and trends in popular culture, media and movies, fashion, or technology can negatively affect our sales.

While trends in the toddler to tween sector change quickly, we respond to trends and developments by modifying, refreshing, extending, and expanding our product offerings on an on-going basis.

However, we operate in extremely competitive industries where the ultimate appeal and popularity of content and products targeted to this sector can be difficult to predict.

We believe our focus on “content with a purpose” serves an underrepresented area of the toddler to tween market;

however, if the interests of our audience trend away from our current properties toward other offerings based on current media, movies, animated content or characters, and if we fail to accurately anticipate trends in popular culture, movies, media, fashion, or technology, our products may not be accepted by children, parents, or families and our revenues, profitability, and results of operations may be adversely affected.

We face competition from a variety of content creators that sell similar merchandise and have better resources than we do.

The industries in which we operate are competitive, and our results of operations are sensitive to, and may be adversely affected by, competitive pricing, promotional pressures, additional competitor offerings and other factors, many of which are beyond our control.

Indirectly through our licensing arrangements, we compete for retailers as well as other outlets for the sale and promotion of our licensed merchandise.

Our primary competition comes from competitors such as The Walt Disney Company, Nickelodeon Studios, and the Cartoon Network.

We have sought a competitive

advantage by providing “content with a purpose” which are both entertaining and enriching for children and offer differentiated

value that parents seek in making purchasing decisions for their children.

While we do not believe that this value proposition is specifically

offered by our competitors, our competitors have greater financial resources and more developed marketing channels than we do which could

impact our ability, through our licensees, to secure shelf space thereby decreasing our revenues or affecting our profitability and results

of operations.

The production of our animated content is

accomplished through third-party production and animation studios around the world, and any failure of these third parties could negatively

impact our business.

As part of our business model

to manage cash flows, we have partnered with a number of third-party production and animation studios around the world for the production

of our new content in which these partners fund the production of the content in exchange for a portion of revenues generated in certain

We are reliant on our partners to produce and deliver the content on a timely basis meeting the predetermined specifications

for that product.

We have sought a competitive advantage by providing “content with a purpose” which are both entertaining and enriching for children and offer differentiated value that parents seek in making purchasing decisions for their children.

While we do not believe that this value proposition is specifically offered by our competitors, our competitors have greater financial resources and more developed marketing channels than we do which could impact our ability, through our licensees, to secure shelf space thereby decreasing our revenues or affecting our profitability and results of operations.

The production of our animated content is accomplished through third-party production and animation studios around the world, and any failure of these third parties could negatively impact our business.

As part of our business model to manage cash flows, we have partnered with a number of third-party production and animation studios around the world for the production of our new content in which these partners fund the production of the content in exchange for a portion of revenues generated in certain territories.

We are reliant on our partners to produce and deliver the content on a timely basis meeting the predetermined specifications for that product.

The delivery of inferior content could result in additional expenditures by us to correct any problems to ensure marketability.

Further, delays in the delivery of the finished content to us could result in our failure to deliver the product to broadcasters to which

it has been pre-licensed.

While we believe we have mitigated this risk by aligning the economic interests of our partners with ours and

managing the production process remotely on a daily basis, any failures or delays from our production partners could negatively affect

our profitability.

We cannot assure you that our original programming

content will appeal to our distributors and viewers or that any of our original programming content will not be cancelled or removed from

our distributors’ platforms.

Our business depends on the

appeal of our content to distributors and viewers, which is difficult to predict.

Our business depends in part upon viewer preferences

and audience acceptance of our original programming content.

These factors are difficult to predict and are subject to influences beyond

our control, such as the quality and appeal of competing programming, general economic conditions and the availability of other entertainment

Further, delays in the delivery of the finished content to us could result in our failure to deliver the product to broadcasters to which it has been pre-licensed.

While we believe we have mitigated this risk by aligning the economic interests of our partners with ours and managing the production process remotely on a daily basis, any failures or delays from our production partners could negatively affect our profitability.

We cannot assure you that our original programming content will appeal to our distributors and viewers or that any of our original programming content will not be cancelled or removed from our distributors’ platforms.

Our business depends on the appeal of our content to distributors and viewers, which is difficult to predict.

Our business depends in part upon viewer preferences and audience acceptance of our original programming content.

These factors are difficult to predict and are subject to influences beyond our control, such as the quality and appeal of competing programming, general economic conditions and the availability of other entertainment activities.

We may not be able to anticipate and react effectively to shifts in tastes and interests in markets.

A change in viewer preferences

could cause our original programming content to decline in popularity, which could jeopardize renewal of agreements with distributors.

Low ratings or viewership for programming content produced by us may lead to the cancellation, removal or non-renewal of a program and

can negatively affect future license fees for such program.

If our original programming content does not gain the level of audience

acceptance we expect, or if we are unable to maintain the popularity of our original programming, we may have a diminished negotiating

position when dealing with distributors, which could reduce our revenue.

We cannot assure you that we will be able to maintain the success

of any of our current original programming content or generate sufficient demand and market acceptance for new original programming content

in the future.

A change in viewer preferences could cause our original programming content to decline in popularity, which could jeopardize renewal of agreements with distributors.

Low ratings or viewership for programming content produced by us may lead to the cancellation, removal or non-renewal of a program and can negatively affect future license fees for such program.

If our original programming content does not gain the level of audience acceptance we expect, or if we are unable to maintain the popularity of our original programming, we may have a diminished negotiating position when dealing with distributors, which could reduce our revenue.

We cannot assure you that we will be able to maintain the success of any of our current original programming content or generate sufficient demand and market acceptance for new original programming content in the future.

This could materially adversely impact our business, financial condition, operating results, liquidity and prospects.

Failure to successfully market or advertise our products could

have an adverse effect on our business, financial condition and results of operations.

Our products are marketed

worldwide through a diverse spectrum of advertising and promotional programs.

Our ability to sell products is dependent in part upon the

success of these programs.

If we or our licensees do not successfully market our products or if media or other advertising or promotional

costs increase, these factors could have an adverse effect on our business, financial condition, and results of operations.

The failure of others to promote our products

may adversely affect our business.

The availability of retailer

programs relating to product placement, co-op advertising and market development funds, and our ability and willingness to pay for such

programs, are important with respect to promoting our properties.

In addition, although we may have agreements for the advertising and

promotion of our products through our licensees, we will not be in direct control of those marketing efforts and those efforts may not

be done in a manner that will maximize sales of our products and may have a material adverse effect on our business and operations.

We may not be able to keep pace with technological

The entertainment industry

in general, and the music and motion picture industries in particular, continue to undergo significant changes, primarily due to technological

developments.

Because of the rapid growth of technology, shifting consumer tastes and the popularity and availability of other forms

of entertainment, it is impossible to predict the overall effect these factors could have on potential revenue from, and profitability

of, distributing entertainment programming.

As it is also impossible to predict the overall effect these factors could have on our ability

to compete effectively in a changing market, if we are not able to keep pace with these technological advances, our revenues, profitability

and results from operations may be materially adversely affected.

Failure in our information technology and

storage systems could significantly disrupt the operation of our business.

Our ability to execute our

business plan and maintain operations depends on the continued and uninterrupted performance of our information technology (“IT”)

IT systems are vulnerable to risks and damages from a variety of sources, including telecommunications or network failures, malicious

human acts and natural disasters.

Moreover, despite network security and back-up measures, some of our and our vendors’ servers

are potentially vulnerable to physical or electronic break-ins, including cyber-attacks, computer viruses and similar disruptive problems.

Failure to successfully market or advertise our products could have an adverse effect on our business, financial condition and results of operations.

Our products are marketed worldwide through a diverse spectrum of advertising and promotional programs.

Our ability to sell products is dependent in part upon the success of these programs.

If we or our licensees do not successfully market our products or if media or other advertising or promotional costs increase, these factors could have an adverse effect on our business, financial condition, and results of operations.

The failure of others to promote our products may adversely affect our business.

The availability of retailer programs relating to product placement, co-op advertising and market development funds, and our ability and willingness to pay for such programs, are important with respect to promoting our properties.

In addition, although we may have agreements for the advertising and promotion of our products through our licensees, we will not be in direct control of those marketing efforts and those efforts may not be done in a manner that will maximize sales of our products and may have a material adverse effect on our business and operations.

We may not be able to keep pace with technological advances.

The entertainment industry in general, and the music and motion picture industries in particular, continue to undergo significant changes, primarily due to technological developments.

Because of the rapid growth of technology, shifting consumer tastes and the popularity and availability of other forms of entertainment, it is impossible to predict the overall effect these factors could have on potential revenue from, and profitability of, distributing entertainment programming.

As it is also impossible to predict the overall effect these factors could have on our ability to compete effectively in a changing market, if we are not able to keep pace with these technological advances, our revenues, profitability and results from operations may be materially adversely affected.

Failure in our information technology and storage systems could significantly disrupt the operation of our business.

Our ability to execute our business plan and maintain operations depends on the continued and uninterrupted performance of our information technology (“IT”) systems.

IT systems are vulnerable to risks and damages from a variety of sources, including telecommunications or network failures, malicious human acts and natural disasters.

Moreover, despite network security and back-up measures, some of our and our vendors’ servers are potentially vulnerable to physical or electronic break-ins, including cyber-attacks, computer viruses and similar disruptive problems.

These events could lead to the unauthorized access, disclosure and use of non-public information.

The techniques used by criminal elements

to attack computer systems are sophisticated, change frequently and may originate from less regulated and remote areas of the world.

a result, we may not be able to address these techniques proactively or implement adequate preventative measures.

If our computer systems

are compromised, we could be subject to fines, damages, litigation and enforcement actions, and we could lose trade secrets, the occurrence

of which could harm our business.

Despite precautionary measures to prevent unanticipated problems that could affect our IT systems, sustained

or repeated system failures that interrupt our ability to generate and maintain data could adversely affect our ability to operate our

Our internal computer systems, or those

of our collaborators or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption

and cause our business and reputation to suffer.

In the ordinary course of

business, our internal computer systems and those of our current and any future collaborators and other contractors or consultants are

vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical

The techniques used by criminal elements to attack computer systems are sophisticated, change frequently and may originate from less regulated and remote areas of the world.

As a result, we may not be able to address these techniques proactively or implement adequate preventative measures.

If our computer systems are compromised, we could be subject to fines, damages, litigation and enforcement actions, and we could lose trade secrets, the occurrence of which could harm our business.

Despite precautionary measures to prevent unanticipated problems that could affect our IT systems, sustained or repeated system failures that interrupt our ability to generate and maintain data could adversely affect our ability to operate our business.

Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption and cause our business and reputation to suffer.

In the ordinary course of business, our internal computer systems and those of our current and any future collaborators and other contractors or consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.

There may be an increased risk of cybersecurity attacks by state actors due to the current conflict between Russia and Ukraine.

Recently, Russian ransomware gangs have threatened to increase hacking activity against critical infrastructure of any nation or organization

that retaliates against Moscow for its invasion of Ukraine.

While we do not believe that we have experienced any such material system

failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could adversely

affect our business operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions.

Recently, Russian ransomware gangs have threatened to increase hacking activity against critical infrastructure of any nation or organization that retaliates against Moscow for its invasion of Ukraine.

While we do not believe that we have experienced any such material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could adversely affect our business operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions.

Any such access, disclosure or other loss of such information could result in legal claims or proceedings and damage our reputation.

Loss of key personnel may adversely affect our business.

Our success greatly depends

on the performance of our executive management team, including Andy Heyward, our Chief Executive Officer.

The loss of the services of

any member of our core executive management team or other key persons could have a material adverse effect on our business, results of

operations and financial condition.

Our success greatly depends on the performance of our executive management team, including Andy Heyward, our Chief Executive Officer.

The loss of the services of any member of our core executive management team or other key

persons could have a material adverse effect on our business, results of operations and financial condition.

We do not have “key man” insurance coverage for any of our employees.

Litigation may harm our business or otherwise

distract management.

Substantial, complex or extended

litigation could cause us to incur large expenditures and could distract management.

For example, lawsuits by licensors, consumers, employees

or stockholders could be very costly and disrupt business.

We recently had a securities class action and derivative shareholder action

filed against us.

While disputes from time to time are not uncommon, we may not be able to resolve such disputes on terms favorable to

Our vendors and licensees may be subject

to various laws and government regulations, violation of which could subject these parties to sanctions which could lead to increased

costs or the interruption of normal business operations that could negatively impact our financial condition and results of operations.

Our vendors and licensees

may operate in a highly regulated environment in the U.S.

Litigation may harm our business or otherwise distract management.

Substantial, complex or extended litigation could cause us to incur large expenditures and could distract management.

For example, lawsuits by licensors, consumers, employees or stockholders could be very costly and disrupt business.

We recently had a securities class action and derivative shareholder action filed against us.

While disputes from time to time are not uncommon, we may not be able to resolve such disputes on terms favorable to us.

Our vendors and licensees may be subject to various laws and government regulations, violation of which could subject these parties to sanctions which could lead to increased costs or the interruption of normal business operations that could negatively impact our financial condition and results of operations.

Our vendors and licensees may operate in a highly regulated environment in the U.S.

and international markets.

Federal, state and local governmental entities and

foreign governments may regulate aspects of their businesses, including the production or distribution of our content or products.

regulations may include accounting standards, taxation requirements (including changes in applicable income tax rates, new tax laws and

revised tax law interpretations), product safety and other safety standards, trade restrictions, regulations regarding financial matters,

environmental regulations, advertising directed toward children, product content, and other administrative and regulatory restrictions.

While we believe our vendors and licensees take all the steps necessary to comply with these laws and regulations, there can be no assurance

that they are compliant or will be in compliance in the future.

Failure to comply could result in monetary liabilities and other sanctions

which could increase our costs or decrease our revenue resulting in a negative impact on our business, financial condition and results

of operations.

Protecting and defending against intellectual

property claims may have a material adverse effect on our business.

Our ability to compete

in the animated content and entertainment industry depends, in part, upon successful protection of our proprietary and intellectual

We protect our property rights to our productions through available copyright and trademark laws and licensing and

distribution arrangements with reputable companies in specific territories and media for limited durations.

Despite these

precautions, existing copyright and trademark laws afford only limited, or no, practical protection in some jurisdictions.

possible for unauthorized third parties to copy and distribute our productions or portions of our productions.

In addition, although

we own most of the music and intellectual property included in our products, there are some titles which the music or other elements

are in the public domain and for which it is difficult or even impossible to determine whether anyone has obtained ownership or

royalty rights.

It is an inherent risk in our industry that people may make such claims with respect to any title already included

in our products, whether or not such claims can be substantiated.

For example, in July 2020, we received a letter from a law firm

alleging that rights that we had licensed from POW!, LLC had already been sold to another company, Proxima.

This matter was settled

in November 2021, but the settlement negotiations were costly and required diversion of management attention.

If litigation

is necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and

scope of the proprietary rights of others or to defend against claims of infringement or invalidity.

Any such litigation could

result in substantial costs and the resulting diversion of resources could have an adverse effect on our business, operating results

or financial condition.

Any additional future acquisitions or strategic

investments may not be available on attractive terms and would subject us to additional risks.

Much of our growth is attributable

to acquisitions.

In an effort to implement our business strategies, we may from time to time in the future attempt to pursue other acquisition

or expansion opportunities, including strategic investments.

To the extent we can identify attractive opportunities, these transactions

could involve acquisitions of entire businesses or investments in start-up or established companies and could take several forms.

types of transactions may present significant risks and uncertainties, including the difficulty of identifying appropriate companies to

acquire or invest in on acceptable terms, potential violations of covenants in our debt instruments, insufficient revenue acquired to

offset liabilities assumed, unexpected expenses, inadequate return of capital, regulatory or compliance issues, potential infringements,

difficulties integrating the new properties into our operations, and other unidentified issues not discovered in due diligence.

the financing of any future acquisition completed by us could adversely impact our capital structure.

Except as required by law or applicable

securities exchange listing standards, we do not expect to ask our shareholders to vote on any proposed acquisition.

We are exposed to investment risk with the

acquisition of an equity interest in Your Family Entertainment AG.

During the year ended December

31, 2021, we acquired an equity interest in Your Family Entertainment AG (“YFE”).

We are exposed to risk of the success of

the YFE business.

Federal, state and local governmental entities and foreign governments may regulate aspects of their businesses, including the production or distribution of our content or products.

These regulations may include accounting standards, taxation requirements (including changes in applicable income tax rates, new tax laws and revised tax law interpretations), product safety and other safety standards, trade restrictions, regulations regarding financial matters, environmental regulations, advertising directed toward children, product content, and other administrative and regulatory restrictions.

While we believe our vendors and licensees take all the steps necessary to comply with these laws and regulations, there can be no assurance that they are compliant or will be in compliance in the future.

Failure to comply could result in monetary liabilities and other sanctions which could increase our costs or decrease our revenue resulting in a negative impact on our business, financial condition and results of operations.

Protecting and defending against intellectual property claims may have a material adverse effect on our business.

Our ability to compete in the animated content and entertainment industry depends, in part, upon successful protection of our proprietary and intellectual property.

We protect our property rights to our productions through available copyright and trademark laws and licensing and distribution arrangements with reputable companies in specific territories and media for limited durations.

Despite these precautions, existing copyright and trademark laws afford only limited, or no, practical protection in some jurisdictions.

It may be possible for unauthorized third parties to copy and distribute our productions or portions of our productions.

In addition, although we own most of the music and intellectual property included in our products, there are some titles which the music or other elements are in the public domain and for which it is difficult or even impossible to determine whether anyone has obtained ownership or royalty rights.

It is an inherent risk in our industry that people may make such claims with respect to any title already included in our products, whether or not such claims can be substantiated.

For example, in July 2020, we received a letter from a law firm alleging that rights that we had licensed from POW!

Entertainment, LLC ("POW").

had already been sold to another company, Proxima.

This matter was settled by POW in November 2021, but the settlement negotiations were costly and required diversion of management attention.

If litigation is necessary in the future to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity.

Any such litigation could result in substantial costs and the resulting diversion of resources could have an adverse effect on our business, operating results or financial condition.

Any additional future acquisitions or strategic investments may not be available on attractive terms and would subject us to additional risks.

Much of our growth is attributable to acquisitions.

In an effort to implement our business strategies, we may from time to time in the future attempt to pursue other acquisition or expansion opportunities, including strategic investments.

To the extent we can identify attractive opportunities, these transactions could involve acquisitions of entire businesses or investments in start-up or established companies and could take several forms.

These types of transactions may present significant risks and uncertainties, including the difficulty of identifying appropriate companies to acquire or invest in on acceptable terms, potential violations of covenants in our debt instruments, insufficient revenue acquired to offset liabilities assumed, unexpected expenses, inadequate return of capital, regulatory or compliance issues, potential infringements, difficulties integrating the new properties into our operations, and other unidentified issues not discovered in due diligence.

In addition, the financing of any future acquisition completed by us could adversely impact our capital structure.

Except as required by law or applicable securities exchange listing standards, we do not expect to ask our shareholders to vote on any proposed acquisition.

We are exposed to investment risk with the acquisition of an equity interest in Your Family Entertainment AG.

During the year ended December 31, 2021, we acquired an equity interest in Your Family Entertainment AG (“YFE”).

We are exposed to the risk of success of the YFE business.

We are also exposed to risk of adverse reactions to the transaction or changes to business relationships;

competitive responses;

inability to maintain key personnel and changes in general economic conditions in Germany.

If YFE fails to perform to our expectations,

it could have a material adverse effect on our results of operations or financial condition.

We operate internationally, which exposes

us to significant risks.

We have expanded into international

operations, including the acquisition of ChizComm, our pending acquisition of WOW and our investment in YFE.

As part of our growth strategy,

we will continue to evaluate potential opportunities for further international expansion.

Operating in international markets requires

significant resources and management attention, and subjects us to legal, regulatory, economic and political risks in addition to those

we face in the United States.

We have limited experience with international operations, and further international expansion efforts may

not be successful.

In addition, we face risks

in doing business internationally that could adversely affect our business, including:

· Fluctuations in currency exchange rates, which

could increase the price of our products outside of the United States, increase the expenses of our international operations and expose

us to foreign currency exchange rate risk;

· Currency control regulations, which might restrict

or prohibit our conversion of other currencies into U.S.

If YFE fails to perform to our expectations, it could have a material adverse effect on our results of operations or financial condition.

We may not realize all of the anticipated financial, marketing and operational benefits of the Wow Acquisition.

The benefits we expect to achieve as a result of the Wow Acquisition will depend, in part, on our ability to realize anticipated growth opportunities and cost synergies.

Our success in realizing these growth opportunities and cost synergies, and the timing of this realization, depends on the successful integration of Wow’s business and operations with our business and operations.

Even if we are able to integrate our business with Wow’s business successfully, this integration may not result in the realization of the full benefits of the growth opportunities and cost synergies we currently expect within the anticipated time frame or at all.

For example, we may be unable to eliminate duplicative costs, achieve growth plans, or effectively increase market share exposure.

Moreover, we anticipate that we will incur substantial expenses in connection with the integration of our business with Wow’s business.

While we anticipate that certain expenses will be incurred, such expenses are difficult to estimate accurately, and may exceed current estimates.

Accordingly, the benefits from the Wow Acquisition may be offset by costs incurred or delays in integrating the companies, which could cause our financial assumptions to be inaccurate.

We operate internationally, which exposes us to significant risks.

We have expanded into international operations, including the acquisitions of Wow and Ameba and our investment in YFE.

As part of our growth strategy, we will continue to evaluate potential opportunities for further international expansion.

Operating in international markets requires significant resources and management attention, and subjects us to legal, regulatory, economic and political risks in addition to those we face in the United States.

We have limited experience with international operations, and further international expansion efforts may not be successful.

In addition, we face risks in doing business internationally that could adversely affect our business, including:

• Fluctuations in currency exchange rates, which could increase the price of our products outside of the United States, increase the expenses of our international operations and expose us to foreign currency exchange rate risk;

• Currency control regulations, which might restrict or prohibit our conversion of other currencies into U.S.

• Restrictions on the transfer of funds;

· Difficulties in managing and staffing international

operations, including difficulties related to the increased operations, travel, infrastructure, employee attrition and legal compliance

costs associated with numerous international locations;

· Our ability to effectively price our products

in competitive international markets;

• Difficulties in managing and staffing international operations, including difficulties related to the increased operations, travel, infrastructure, employee attrition and legal compliance costs associated with numerous international locations;

• Our ability to effectively price our products in competitive international markets;

• New and different sources of competition;

· The need to adapt and localize our products for

specific countries;

· Challenges in understanding and complying with

local laws, regulations and customs in foreign jurisdictions;

· International trade policies, tariffs and other

non-tariff barriers, such as quotas;

· The continued threat of terrorism and the impact

of military and other action, including military actions involving Russia and Ukraine;

· Adverse consequences relating to the complexity

of operating in multiple international jurisdictions with different laws, regulations and case law which are subject to interpretation

by taxpayers, including us.

In addition, due to potential

costs from our international expansion efforts outside of the United States, our gross margin for international customers may be lower

than our gross margin for domestic customers.

As a result, our overall gross margin may fluctuate as we further expand our operations

and customer base internationally.

Our failure to manage any

of these risks successfully could harm our international operations, and adversely affect our business, results of operations and financial

We are exposed to foreign currency exchange rate risk.

Because we conduct a growing

portion of our business outside the United States but report our financial results in U.S.

dollars, we face exposure to adverse movements

in currency exchange rates.

Our foreign operations are exposed to foreign exchange rate fluctuations as the financial results are translated

from the local currency into U.S.

dollars upon consolidation.

dollar weakens against foreign currencies, the translation of

these foreign currency denominated transactions will result in increased revenue, operating expenses and net income (or loss).

dollar strengthens against foreign currencies, however, the translation of these foreign currency denominated transactions will result

in decreased revenue, operating expenses and net income (or loss).

As exchange rates vary, sales and other operating results, when translated,

may differ materially from expectations.

We continue to review potential hedging strategies that may reduce the effect of fluctuating

currency rates on our business, but there can be no assurances that we will implement such a hedging strategy or that once implemented,

such a strategy would accomplish our objectives or not result in losses.

A decrease in the fair values of our reporting

units may result in future goodwill impairments.

When we acquire an entity,

the excess of the purchase price over the fair value of the net identifiable assets acquired is allocated to goodwill.

We conduct impairment

tests on our goodwill at least annually based upon the fair value of the reporting unit to which such goodwill relates, including the

determination of expected future cash flows and/or profitability of such reporting units, and we take into account market value multiples

and/or cash flows of entities that we deem to be comparable in nature, scope or size to our reporting units.

A goodwill impairment is

created if the estimated fair value of one or more of our reporting units decreases, causing the carrying value of the net assets assigned

to the reporting unit — which includes the value of the assigned goodwill — to exceed the fair value of such net assets.

we determine such an impairment exists, we adjust the carrying value of goodwill allocated to that reporting unit by the amount of fair

value in excess of the carrying value.

The impairment charge is recorded in our income statement in the period in which the impairment

is determined.

If we are required in the future to record additional goodwill impairments, our financial condition and results of operations

would be negatively affected.

In connection with fair value measurements and the accounting for goodwill, the use of generally accepted

accounting principles requires management to make certain estimates and assumptions.

Significant judgment is required in making these

estimates and assumptions, and actual results may ultimately be materially different from such estimates and assumptions.

• The need to adapt and localize our products for specific countries;

• Challenges in understanding and complying with local laws, regulations and customs in foreign jurisdictions;

• International trade policies, tariffs and other non-tariff barriers, such as quotas;

• The continued threat of terrorism and the impact of military and other action, including military actions involving Russia and Ukraine;

• Adverse consequences relating to the complexity of operating in multiple international jurisdictions with different laws, regulations and case law which are subject to interpretation by taxpayers, including us.

In addition, due to potential costs from our international expansion efforts outside of the United States, our gross margin for international customers may be lower than our gross margin for domestic customers.

As a result, our overall gross margin may fluctuate as we further expand our operations and customer base internationally.

Our failure to manage any of these risks successfully could harm our international operations, and adversely affect our business, results of operations and financial condition.

Exchange rate fluctuations could result in significant foreign currency gains and losses and affect our business results.

Wow's functional currency is the Canadian dollar, therefore their financial results are translated into USD, our reporting currency, upon consolidation of our financial statements.

We are then exposed to more significant currency

fluctuation risks as a result of the Wow Acquisition.

Fluctuations between the foreign exchange rates, in particular the Canadian dollar and the U.S.

dollar, affect the amounts we record for our foreign assets, liabilities, revenues and expenses, and could have a negative effect on our financial results.

Further, each entity conducts a growing portion of their businesses in currencies other than such entity's own functional currency.

Therefore, in addition to the foreign currency translation risk, we face exposure to adverse movements in currency exchange rates with each transaction made outside of the entities' functional currency.

If the functional currency of the entity weakens against the foreign currencies in which transactions are being made, the remeasurement of these foreign currency denominated transactions will result in increased revenue, operating expenses and net income (or loss).

However, if the functional currency of the entity weakens against the foreign currencies in which transactions are being made, the remeasurement of these foreign currency denominated transactions will result in decreased revenue, operating expenses and net income (or loss).

As exchange rates vary, sales and other operating results, when remeasured, may differ materially from expectations.

We continue to review potential hedging strategies that may reduce the effect of fluctuating currency rates on our business, but there can be no assurances that we will implement such a hedging strategy or that once implemented, such a strategy would accomplish our objectives or not result in losses.

A decrease in the fair values of our reporting units may result in future goodwill impairments.

When we acquire an entity, the excess of the purchase price over the fair value of the net identifiable assets acquired is allocated to goodwill.

We conduct impairment tests on our goodwill at least annually based upon the fair value of the reporting unit to which such goodwill relates, including the determination of expected future cash flows and/or profitability of such reporting units, and we take into account market value multiples and/or cash flows of entities that we deem to be comparable in nature, scope or size to our reporting units.

A goodwill impairment is created if the estimated fair value of one or more of our reporting units decreases, causing the carrying value of the net assets assigned to the reporting unit — which includes the value of the assigned goodwill — to exceed the fair value of such net assets.

If we determine such an impairment exists, we adjust the carrying value of goodwill allocated to that reporting unit by the amount of fair value in excess of the carrying value.

The impairment charge is recorded in our income statement in the period in which the impairment is determined.

If we are required in the future to record additional goodwill impairments, our financial condition and results of operations would be negatively affected.

In connection with fair value measurements and the accounting for goodwill, the use of generally accepted accounting principles requires management to make certain estimates and assumptions.

Significant judgment is required in making these estimates and assumptions, and actual results may ultimately be materially different from such estimates and assumptions.

RISK RELATING TO OUR INDEBTEDNESS

We have incurred indebtedness that could adversely affect our operations and financial condition.

As of December 31, 2022, we and our subsidiaries have production loan facility obligations of approximately $18.3 million and advances outstanding of $1.7 million under our senior secured revolving credit facility.

We also had an outstanding margin loan of $60.8 million secured by our marketable investment securities as of December 31, 2022.

The facilities are guaranteed by us and the security reflects substantially all of our tangible and intangible assets including a combination of federal and provincial tax credits, other government incentives, production service agreements and license agreements.

The facilities and the margin loan are generally repayable on demand and are subject to customary default provisions, representations and warranties and other terms and conditions.

Our level of debt could have adverse consequences on our business, such as making it more difficult for us to satisfy our obligations with respect to our other debt;

limiting our ability to refinance such indebtedness or to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

requiring a substantial portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;

increasing our vulnerability to economic downturns and adverse developments in our business;

exposing us to the risk of increased interest rates as certain of our borrowings are at fixed long term rates and or variable rates of interest;

limiting our flexibility in planning for, and reducing our flexibility in reacting to, changes in the conditions of the financial markets and our industry;

placing us at a competitive disadvantage compared to other, less leveraged competitors;

increasing our cost of borrowing;

and restricting the way in which we conduct our business because of financial and operating covenants in the agreements governing our existing and future indebtedness and exposing us to potential events of default (if not cured or waived) under covenants contained in our debt instruments.

RISK RELATED TO TAX RULES AND REGULATIONS

Changes in foreign, state and local tax incentives may increase the cost of original programming content to such an extent that they are no longer feasible.

Original programming requires substantial financial commitment, which can occasionally be offset by foreign, state or local tax incentives.

However, there is a risk that the tax incentives will not remain available for the duration of a series.

If tax incentives are no longer available or reduced substantially, it may result in increased costs for us to complete the production, or make the production of additional seasons more expensive.

If we are unable to produce original programming content on a cost effective basis our business, financial condition and results of operations would be materially adversely affected.

Further we are subject to ordinary course audits from the Canada Revenue Agency (“CRA”) and Provincial agencies.

Changes in administrative policies by the CRA or subsequent review of eligibility documentation may impact the collectability of these estimates.

We continuously review the results of these audits to determine if any circumstances arise that in management’s judgment would result in previously recognized tax credit receivables to be considered no longer collectible.

While we believe our estimates are reasonable, we cannot assure you that final determinations from any review will not be materially different from those reflected in our financial statements.

Any adverse outcome from any examinations may have an adverse effect on our business and operating results, which could cause the market price of our securities to decline.

Changes in, or interpretations of, tax rules and regulations, and changes in geographic operating results, may adversely affect our effective tax rates .

We are subject to income taxes in Canada, the U.S.

and foreign tax jurisdictions.

We also conduct business and financing activities between our entities in various jurisdictions and we are subject to complex transfer pricing regulations in the countries in which we operate.

Although uniform transfer pricing standards are emerging in many of the countries in which we operate, there is still a relatively high degree of uncertainty and inherent subjectivity in complying with these rules.

In addition, due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change.

Our future effective tax rates could be affected by changes in tax laws or regulations or the interpretation thereof, (including those affecting the allocation of profits and expenses to differing jurisdictions), by changes in the amount of revenue or earnings that we derive from international sources in countries with high or low statutory tax rates, by changes in the valuation of our deferred tax assets and liabilities, by changes in the expected timing and amount of the release of any tax valuation allowance, or by the tax effects of stock-based compensation.

Unanticipated changes in our effective tax rates could affect our future results of operations.

Further, we may be subject to examination of our income tax returns by federal, state, and foreign tax jurisdictions.

We regularly assess the likelihood of outcomes resulting from possible examinations to determine the adequacy of our provision for income taxes.

In making such assessments, we exercise judgment in estimating our provision for income taxes.

While we believe our estimates are reasonable, we cannot assure you that final determinations from any examinations will not be materially different from those reflected in our historical income tax provisions and accruals.

Any adverse outcome from any examinations may have an adverse effect on our business and operating results, which could cause the market price of our securities to decline.

RISKS RELATING TO OUR COMMON STOCK

Our stock price may be subject to substantial

volatility, and stockholders may lose all or a substantial part of their investment.

common stock currently trades on the Nasdaq Capital Market.

There is limited public float, and trading volume historically has been low

and sporadic.

Our stock price may be subject to substantial volatility, and stockholders may lose all or a substantial part of their investment.

Our common stock currently trades on the Nasdaq Capital Market.

There is limited public float, and trading volume historically has been low and sporadic.

As a result, the market price for our common stock may not necessarily be a reliable indicator of our fair market value.

The price at which our common stock trades may fluctuate as a result of a number of factors, including the number of shares available

for sale in the market, quarterly variations in our operating results, actual or anticipated announcements of new releases by us or competitors,

the gain or loss of significant customers, changes in the estimates of our operating performance, market conditions in our industry and

the economy as a whole.

Our failure to

meet the continued listing requirements of Nasdaq Capital Market could result in a delisting of our common stock.

we fail to satisfy the continued listing requirements of Nasdaq Capital Market, such as minimum financial and other continued listing

requirements and standards, including those regarding minimum stockholders’ equity, minimum share price, and certain corporate governance

requirements, Nasdaq may take steps to delist our common stock.

Such a delisting would likely have a negative effect on the price of our

common stock and would impair your ability to sell or purchase our common stock when you wish to do so.

In the event of a delisting, we

would expect to take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that

any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of

our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement, or prevent future non-compliance

with Nasdaq’s listing requirements.

March 4, 2022, we received written notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”)

notifying us that for the preceding 30 consecutive business days, our common stock did not maintain a minimum closing bid price of $1.00

per share (“Minimum Bid Price Requirement”) as required by Nasdaq Listing Rule 5550(a)(2).

The notice had no immediate effect

on the listing or trading of our common stock, and our common stock will continue to trade on The Nasdaq Capital Market under the symbol

“GNUS” at this time.

accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a grace period of 180 calendar days, or until August 31, 2022, to regain compliance

with Nasdaq Listing Rule 5550(a)(2).

Compliance will be achieved automatically and without further action when the closing bid price of

our common stock is at or above $1.00 for a minimum of 10 consecutive business days at any time during the 180-day compliance period,

in which case Nasdaq will notify us of our compliance and the matter will be closed.

however, we do not achieve compliance with the Minimum Bid Price Requirement by August 31, 2022, we may be eligible for additional time

In order to be eligible for such additional time, we will be required to meet the continued listing requirement for market

value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum

Bid Price Requirement, and we must notify Nasdaq in writing of its intention to cure the deficiency during the second compliance period.

There can be no guarantee that we will regain compliance with the Minimum Bid Price Requirement, that we will maintain compliance with

other Nasdaq Listing Rules, or that we will be eligible for a second compliance period.

If our common stock becomes subject to the

penny stock rules, it may be more difficult to sell our common stock.

The SEC has adopted rules

that regulate broker-dealer practices in connection with transactions in penny stocks.

Penny stocks are generally equity securities with

a price of less than $5.00 (other than securities registered on certain national securities exchanges or authorized for quotation on certain

automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided

by the exchange or system).

The OTC Bulletin Board does not meet such requirements and if the price of our common stock is less than $5.00

and our common stock is no longer listed on a national securities exchange such as Nasdaq, our stock may be deemed a penny stock.

penny stock rules require a broker-dealer, at least two business days prior to a transaction in a penny stock not otherwise exempt from

those rules, to deliver to the customer a standardized risk disclosure document containing specified information and to obtain from the

customer a signed and date acknowledgment of receipt of that document.

In addition, the penny stock rules require that prior to effecting

any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that

the penny stock is a suitable investment for the purchaser and receive:

(i) the purchaser’s written acknowledgment of the receipt

of a risk disclosure statement;

The price at which our common stock trades may fluctuate as a result of a number of factors, including the number of shares available for sale in the market, quarterly variations in our operating results, actual or anticipated announcements of new releases by us or competitors, the gain or loss of significant customers, changes in the estimates of our operating performance, market conditions in our industry and the economy as a whole.

Our failure to meet the continued listing requirements of Nasdaq Capital Market could result in a delisting of our common stock.

If we fail to satisfy the continued listing requirements of Nasdaq Capital Market, such as minimum financial and other continued listing requirements and standards, including those regarding minimum stockholders’ equity, minimum share price, and certain corporate governance requirements, Nasdaq may take steps to delist our common stock.

delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so.

In the event of a delisting, we would expect to take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement, or prevent future non-compliance with Nasdaq’s listing requirements.

On March 4, 2022, we received written notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying us that for the preceding 30 consecutive business days, our common stock did not maintain a minimum closing bid price of $1.00 per share (“Minimum Bid Price Requirement”) as required by Nasdaq Listing Rule 5550(a)(2).

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we were granted an initial grace period of 180 calendar days, or until August 31, 2022 (the “Initial Compliance Period”), to regain compliance with the Minimum Bid Price Requirement.

We did not regain compliance with the Minimum Bid Price Requirement during the Initial Compliance Period, but on September 1, 2022, we received another notice from Nasdaq notifying us that it had determined to grant us an extension of another 180 days, or until February 27, 2023 (the “Second Compliance Period”) to regain compliance with the Minimum Bid Price Requirement.

On February 10, 2023, we effected a reverse stock split of our issued and outstanding shares of common stock at a ratio of 1-for-10 in order to regain compliance with the Minimum Bid Price Requirement, and on February 28, 2023, we received written notification from Nasdaq notifying us that we had regained compliance with the Minimum Bid Price Requirement and that this matter is now closed.

However, there is no guarantee that we will be able to maintain compliance with the Minimum Bid Price Requirement or any other Nasdaq listing requirements in the future.

If our common stock becomes subject to the penny stock rules, it may be more difficult to sell our common stock.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks.

Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).

The OTC Bulletin Board does not meet such requirements and if the price of our common stock is less than $5.00 and our common stock is no longer listed on a national securities exchange such as Nasdaq, our stock may be deemed a penny stock.

The penny stock rules require a broker-dealer, at least two business days prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver to the customer a standardized risk disclosure document containing specified information and to obtain from the customer a signed and date acknowledgment of receipt of that document.

In addition, the penny stock rules require that prior to effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive:

(i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement;

(ii) a written agreement to transactions involving penny stocks;

and (iii) a signed and dated

copy of a written suitability statement.

These disclosure requirements may have the effect of reducing the trading activity in the secondary

market for our common stock, and therefore stockholders may have difficulty selling their shares.

If we fail to maintain effective internal controls over financial

reporting, the price of our common stock may be adversely affected.

Our internal control over

financial reporting may have weaknesses and conditions that could require correction or remediation, the disclosure of which may have

an adverse impact on the price of our common stock.

We are required to establish and maintain appropriate internal controls over financial

Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures

regarding our business, prospects, financial condition or results of operations.

Rules adopted by the SEC pursuant

to Section 404 of the Sarbanes-Oxley Act of 2002 require an annual assessment of internal controls over financial reporting, and for certain

issuers an attestation of this assessment by the issuer’s independent registered public accounting firm.

The standards that must

be met for management to assess the internal controls over financial reporting as effective are evolving and complex, and require significant

documentation, testing, and possible remediation to meet the detailed standards.

We expect to incur significant expenses and to devote

resources to Section 404 compliance on an ongoing basis.

In addition, we are not subject to auditor attestation of internal controls which

may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that

may raise concerns for investors.

Any actual or perceived weaknesses and conditions that need to be addressed in our internal control

over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an

adverse impact on the price of our common stock.

We are authorized

to issue “blank check” preferred stock without stockholder approval, which could adversely impact the rights of holders of

our common stock.

Our Articles of Incorporation

authorize us to issue up to 10,000,000 shares of blank check preferred stock.

Any additional preferred stock that we issue in the future

may rank ahead of our common stock in terms of dividend priority or liquidation premiums and may have greater voting rights than our common

In addition, such preferred stock may contain provisions allowing those shares to be converted into shares of common stock, which

could dilute the value of common stock to current stockholders and could adversely affect the market price, if any, of our common stock.

In addition, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a

change in control of our company.

Although we have no present intention to issue any additional shares of authorized preferred stock,

there can be no assurance that we will not do so in the future.

We do not expect

to pay dividends in the future and any return on investment may be limited to the value of our common stock.

We do not currently anticipate

paying cash dividends in the foreseeable future.

The payment of dividends on our common stock will depend on earnings, financial condition

and other business and economic factors affecting it at such time as our Board of Directors may consider relevant.

Our current intention

is to apply net earnings, if any, in the foreseeable future to increasing our capital base and development and marketing efforts.

can be no assurance that we will ever have sufficient earnings to declare and pay dividends to the holders of our common stock, and in

any event, a decision to declare and pay dividends is at the sole discretion of our Board of Directors.

If we do not pay dividends, our

common stock may be less valuable because the return on investment will only occur if its stock price appreciates.

Offers or availability for sale of a substantial

number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial

amounts of our common stock in the public market upon the expiration of any statutory holding period under Rule 144, or shares issued

upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang”

and, in anticipation of which, the market price of our common stock could fall.

The existence of an overhang, whether or not sales have

occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related

securities in the future at a time and price that we deem reasonable or appropriate.

In general, under Rule 144,

a non-affiliated person who has held restricted shares of our common stock for a period of six months may sell into the market all of

their shares, subject to us being current in our periodic reports filed with the SEC.

As of December 31, 2021, approximately

285,646,247 shares of common stock of the 303,379,122 shares of common stock issued and outstanding are free trading.

As of the same date,

there are 5,406,465 shares of common stock underlying outstanding warrants that could be sold pursuant to Rule 144 to the extent permitted

by any applicable vesting requirements as well as 40,105,500 shares of common stock underlying registered warrants.

Lastly, as of December

31, 2021, there are 10,197,312 shares of common stock underlying outstanding options granted, 17,488,177 shares of common stock underlying

outstanding restricted stock units (“RSUs”) and 4,482,178 shares reserved for issuance under our Genius Brands International,

and (iii) a signed and dated copy of a written suitability statement.

These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.

If we fail to maintain effective internal controls over financial reporting, the price of our common stock may be adversely affected.

Our internal control over financial reporting may have weaknesses and conditions that could require correction or remediation, the disclosure of which may have an adverse impact on the price of our common stock.

We are required to establish and maintain appropriate internal controls over financial reporting.

Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations.

Rules adopted by the SEC pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require an annual assessment of internal controls over financial reporting, and for certain issuers an attestation of this assessment by the issuer’s independent registered public accounting firm.

The standards that must be met for management to assess the internal controls over financial reporting as effective are evolving and complex, and require significant documentation, testing, and possible remediation to meet the detailed standards.

We expect to incur significant expenses and to devote resources to Section 404 compliance on an ongoing basis.

In addition, we are not subject to auditor attestation of internal controls which may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors.

Any actual or perceived weaknesses and conditions that

need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our common stock.

We are authorized to issue “blank check” preferred stock without stockholder approval, which could adversely impact the rights of holders of our common stock.

Our Articles of Incorporation authorize us to issue up to 10,000,000 shares of blank check preferred stock.

Any additional preferred stock that we issue in the future may rank ahead of our common stock in terms of dividend priority or liquidation premiums and may have greater voting rights than our common stock.

In addition, such preferred stock may contain provisions allowing those shares to be converted into shares of common stock, which could dilute the value of common stock to current stockholders and could adversely affect the market price, if any, of our common stock.

In addition, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company.

Although we have no present intention to issue any additional shares of authorized preferred stock, there can be no assurance that we will not do so in the future.

We do not expect to pay dividends in the future and any return on investment may be limited to the value of our common stock.

We do not currently anticipate paying cash dividends in the foreseeable future.

The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting it at such time as our Board of Directors may consider relevant.

Our current intention is to apply net earnings, if any, in the foreseeable future to increasing our capital base and development and marketing efforts.

There can be no assurance that we will ever have sufficient earnings to declare and pay dividends to the holders of our common stock, and in any event, a decision to declare and pay dividends is at the sole discretion of our Board of Directors.

If we do not pay dividends, our common stock may be less valuable because the return on investment will only occur if its stock price appreciates.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial amounts of our common stock in the public market upon the expiration of any statutory holding period under Rule 144, or shares issued upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang” and, in anticipation of which, the market price of our common stock could fall.

The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

In general, under Rule 144, a non-affiliated person who has held restricted shares of our common stock for a period of six months may sell into the market all of their shares, subject to us being current in our periodic reports filed with the SEC.

As of April 12, 2023, approximately 30,018,578 shares of common stock of the 32,059,657 shares of common stock issued and outstanding are free trading.

As of December 31, 2022, there are 423,793 shares of common stock underlying outstanding warrants that could be sold pursuant to Rule 144 to the extent permitted by any applicable vesting requirements as well as 4,009,800 shares of common stock underlying registered warrants.

Lastly, as of December 31, 2022, there are 1,351,421 shares of common stock underlying outstanding options granted, 1,939,985 shares of common stock underlying outstanding restricted stock units (“RSUs”) and 98,672 shares reserved for issuance under our Genius Brands International, Inc.

2020 Incentive Plan.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors