What changed in this filing

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Item 3. Legal Proceedings

2023-04-13 compared with 2022-04-06 · 32 added, 100 removed, 14 unchanged (90% of the section changed)

Legal Proceedings

As of December 31, 2021, there

were no material pending legal proceedings to which the Company is a party or as to which any of its property is subject other than described

On June 16, 2021, the Company

was named as a defendant in a lawsuit filed in the U.S.

District Court for the Central District of California styled A Parent Media Co.

Genius Brands International, Inc., Case No.

2:21-CV-04897, alleging that the Company has infringed the plaintiff’s federally

registered trademarks KIDOODLE.TV, KIDOODLE and KIDOODLETV by sponsoring Google Ads in which the plaintiff’s trademarks appeared.

The parties entered into a confidential settlement agreement in November 2021, and the lawsuit was then dismissed with prejudice along

with the entry of a permanent injunction by the Court.

As previously disclosed, the

Company, its Chief Executive Officer, Andy Heyward, and its Chief Financial Officer, Robert Denton, are named as defendants in a putative

class action lawsuit filed in the U.S.

District Court for the Central District of California and styled In re Genius Brands International,

As of December 31, 2022, there were no material pending legal proceedings to which the Company is a party or as to which any of its property is subject other than described below.

As previously disclosed, the Company, its Chief Executive Officer Andy Heyward, and its Chief Financial Officer Robert Denton were named as defendants in a putative class action lawsuit filed in the U.S.

District Court for the Central District of California and styled In re Genius Brands International, Inc.

Securities Litigation , Master File No.

2:20-cv-07457 DSF (RAOx).

Initially, the lead plaintiffs alleged generally that the defendants

violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) by making materially false or

misleading statements regarding the Company’s business and business prospects, artificially inflating the Company’s stock

price during an alleged class period running from March 11, 2020, through July 5, 2020.

Plaintiffs sought unspecified damages on behalf

of the alleged class of persons who invested in our common stock during the alleged class period.

The defendants moved to dismiss lead

plaintiffs’ amended complaint;

and in a decision issued on August 30, 2021, the Court dismissed the amended complaint but granted

lead plaintiffs a further opportunity to plead a claim.

On September 27, 2021, the

lead plaintiffs filed a second amended complaint, naming the same defendants.

The new complaint alleges that the Company made numerous

false or misleading statements about the Company’s business and business prospects over an alleged class period running from March

11, 2020, through March 30, 2021, which they say violated Section 10(b) and 20(a) of the Exchange Act.

Lead plaintiffs also allege a “scheme

to defraud” during 2020 that involved several private placements of Company stock with an allegedly “insider” group

of investors that purportedly then issued press releases that inflated the stock price, after which these investors purportedly sold their

shares at higher prices.

None of these investors (save Mr.

Heyward, who is not alleged to have sold his shares) is named as a defendant

in the securities action.

The lead plaintiffs again seek unspecified damages on behalf of the alleged class—persons who invested

in the Company’s common stock during the newly alleged class period.

In November 2021, defendants filed a motion to dismiss the

second amended complaint, and the motion is fully briefed.

Argument on the motion was scheduled for March 21, 2022, on March 18, 2022,

the judge cancelled the hearing and will rule based on the parties’ written submissions.

The Company cannot predict the outcome

of the motion or the timing of a decision from the Court.

Pending resolution of the motion to dismiss, neither discovery nor other substantive

proceedings are occurring nor expected.

Related to the securities

class action, the Company’s directors, Chief Executive Officer and its Chief Financial Officer have been named as defendants in

several putative shareholder derivative lawsuits.

Lead plaintiffs alleged generally that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) by issuing allegedly false or misleading statements about the Company, initially over an alleged class period running from March into early July 2020.

Plaintiffs sought unspecified damages on behalf of the alleged class of persons who invested in the Company’s common stock during the alleged class period.

Defendants moved to dismiss lead plaintiffs’ amended complaint;

and in a decision issued on August 30, 2021, the Court dismissed the amended complaint but granted lead plaintiffs a further opportunity to plead a claim.

On September 27, 2021, lead plaintiffs filed a second amended complaint, naming the same defendants.

The new complaint alleged again that the Company made numerous false or misleading statements about the Company’s business and business prospects, this time over an expanded alleged class period that extended into March 2021;

they again alleged that these misstatements violated Section 10(b) and 20(a) of the Exchange Act.

Lead plaintiffs again sought unspecified damages on behalf of an alleged class of persons who invested in the Company’s common stock during the expanded alleged class period.

In November 2021, defendants filed a motion to dismiss the second amended complaint.

On July 15, 2022, the Court issued a decision dismissing the second amended complaint in its entirety and with prejudice.

On August 12, 2022, lead plaintiffs filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit.

Briefing of the appeal has concluded.

The Company cannot predict whether the Court will entertain oral argument of the appeal, when a hearing might be scheduled, the outcome of the appeal or the timing of a decision on the appeal.

Related to the securities class action, the Company’s directors (other than Dr.

Cynthia Turner-Graham), together with Messrs.

Heyward and Denton and former director Michael Klein, have been named as defendants in several punitive stockholder derivative lawsuits.

As previously disclosed, these include a consolidated proceeding pending in the U.S.

District Court for the Central District of California and styled In re Genius Brands Stockholder Derivative Litigation, Case

District Court for the Central District of California and styled In re Genius Brands Stockholder Derivative Litigation , Case No.

2:20-cv-08277 DSF (RAOx);

3 unchanged sentences

District Court for the District of Nevada, styled Miceli, etc.

al., Case No.

Heyward, et al ., Case No.

3:21-cv-00132-MMD-WGC.

While the allegations and legal claims vary somewhat among the derivative actions, they all

generally allege that the defendants breached fiduciary duties owed to the Company by, among other things, causing the Company to issue

the supposedly false and misleading statements that underlie the securities lawsuit, purportedly exposing the Company to liability and

damaging the Company in an unspecified amount.

By these derivative lawsuits, the plaintiffs seek no recovery from the Company.

as a shareholder derivative action, the Company is named as a nominal defendant.

The plaintiffs, all alleged stockholders of the Company,

purport to sue on behalf and for the benefit of the Company.

Pursuant to agreements among the parties, the courts in all of the derivative

lawsuits have stayed proceedings pending the outcome of the motion to dismiss in the securities action.

The Company is also a nominal

defendant in an action filed January 11, 2022, in the U.S.

District Court for the Southern District of New York and styled Todd Augenbaum

Anson Investments Master Fund LP, et al., Case No.

1:22-cv-00249 VM.

The action, which purports to be brought on behalf and for the

benefit of the Company, seeks the recovery under Section 16(b) of the Exchange Act of supposed short-swing profits allegedly realized

by roughly a dozen persons and entities that participated as investors in the Company’s March 11, 2020 offering of convertible debt

securities and warrants.

Plaintiff Augenbaum, who purports to be a Company stockholder, filed his lawsuit after issuing a demand to the

Company’s Board of Directors asking that the Company sue the investor defendants.

The Company rejected the demand in late December

2021, and Mr.

Augenbaum sued a few weeks later, as Section 16(b) permits him to do.

No Company officer or director is among the defendants.

The action is currently in its very early stages, with the parties currently negotiating a date for defendants’ initial responses

to the complaint.

The Company cannot predict the outcome of the lawsuit, but again notes that plaintiff seeks no relief against the Company.

On July 7, 2020, the Company

received a letter from a law firm alleging that rights that Genius Brands had licensed from POW!

LLC, through its joint venture, Stan

Lee Universe, LLC, had already been sold to another company, Proxima, represented by that law firm.

The law firm alleged that the Company

is, inter alia, interfering with Proxima’s contractual rights.

On or about November 4, 2021, POW!

and Proxima entered a binding

settlement agreement resolving all the claims made by Proxima.

On January 18, 2022, the Company

was named as a defendant in a lawsuit filed in the Supreme Court of the State of New York, County of New York styled Harold Chizick and

Jennifer Chizick v.

While the allegations and legal claims vary somewhat among the derivative actions, they all generally allege that the defendants breached fiduciary duties owed to the Company.

The plaintiffs, all alleged stockholders of the Company, purport to sue on behalf and for the benefit of the Company.

Accordingly, the derivative plaintiffs seek no recovery from the Company.

Instead, as a stockholder derivative action, the Company is named as a nominal defendant.

Pursuant to agreements among the parties, the courts in all of the derivative lawsuits have stayed proceedings pending the outcome of the securities class action.

The Company cannot predict the impact of the securities class action’s dismissal on the shareholder derivative lawsuits.

On January 18, 2022, the Company was named as a defendant in a lawsuit filed in the Supreme Court of the State of New York, County of New York styled Harold Chizick and Jennifer Chizick v.

Genius Brands International, Inc., ChizComm Ltd., Index No.

650278/2022, alleging:

(1) breach of employment agreement,

(2) breach of duty of good faith, (3) constructive dismissal, (4) indemnification, (5) violation of the Employment Standards Act 2000

of Ontario, and (6) defamation.

On February 25, 2022, the Company filed a Motion to Dismiss on the ground that venue is improper.

Plaintiffs’ counsel has advised that they will be amending their complaint to address the arguments in the Company’s venue

Plaintiffs filed their Amended Complaint on March 17, 2022.

The case remains at the pleading stage and no trial date has been

In all of the above-mentioned

active proceedings, the Company has denied and continues to deny any wrongdoing and intends to defend the claims vigorously.

(1) breach of employment agreement, (2) breach of duty of good faith, (3) constructive dismissal, (4) indemnification, (5) violation of the Employment Standards Act 2000 of Ontario, and (6) defamation.

On October 3, 2022, the parties reached a full and complete settlement of the New York state action and the AAA arbitration proceeding and both proceedings have been dismissed with prejudice.

In all of the above-mentioned active proceedings, the Company has denied and continues to deny any wrongdoing and intends to defend the claims vigorously.

The Company maintains a program of directors’ and officers’ liability insurance that, subject to the insurers’ reservations of rights, has offset a portion of the costs of defending the securities class action litigation, and that the Company expects will afford coverage for some costs of the other shareholder litigation should any of those cases proceed.

Mine Safety Disclosures

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 3. Legal Proceedings