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Item 1. Financial Statements

2023-05-22 compared with 2022-11-14 · 809 added, 1750 removed, 316 unchanged (89% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

March 31, 2023 December 31, 2022

Current Assets:

Cash and Cash Equivalents $ 4,765 $ 7,432

Restricted Cash

Investments in Marketable Securities (amortized cost of $ 73,898 )

69,650 83,706

Accounts Receivable, net 10,382 15,558

Tax Credits Receivable

Notes & Accounts Receivable from Related Party

Tax Credits Receivable, net 23,523 26,255

Notes and Accounts Receivable from Related Party 2,896 2,844

Other Receivable 868 1,162

8 unchanged sentences

Intangible Assets, net 24,562 29,167

Goodwill 20,520 31,807

Other Assets 149 148

Total Assets $ 196,560 $ 237,918

LIABILITIES AND STOCKHOLDERS’ EQUITY

5 unchanged sentences

Deferred Revenue 6,316 9,065

Margin Loan 48,894 60,810

Production Facilities, net 16,711 18,282

Bank Indebtedness 3,865 1,741

Operating Lease Liability

Finance Lease Liability

Current Portion of Operating Lease Liability 857 802

Current Portion of Finance Lease Liability 1,726 1,623

Warrant Liability 159 548

4 unchanged sentences

Deferred Revenue 3,369 3,369

Operating Lease Liability

Finance Lease Liability

Contingent Earn Out

Operating Lease Liability, Net Current Portion 7,844 8,095

Finance Lease Liability, Net Current Portion 1,600 1,020

Deferred Tax Liability 705 705

Other Noncurrent Liabilities 936 952

Total Liabilities 105,213 125,049

Commitments and contingent liabilities (Note 21)

Commitments and Contingencies (Note 20)

Stockholders’ Equity:

Preferred Stock Series A, $ 0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Preferred Stock Series B, $ 0.001 par value, 1 share authorized, 1 share issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Common Stock, $ 0.001 par value, 400,000,000 shares authorized 318,097,275 and 303,379,122 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Preferred Stock Series A, $ 0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

Preferred Stock Series B, $ 0.001 par value, 1 share authorized, 1 share issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

Common Stock, $ 0.001 par value, 40,000,000 shares authorized, 32,113,784 and 31,918,552 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

Additional Paid in Capital 763,327 762,418

Treasury Stock, 6,993 and 0 shares of common stock as of September 30, 2022 and December 31, 2021, respectively, at cost

Treasury Stock at Cost, 46,333 and 42,633 shares of common stock as of March 31, 2023 and December 31, 2022, respectively

( 299 ) ( 290 )

Accumulated Deficit ( 666,205 ) ( 641,443 )

5 unchanged sentences

Total Liabilities and Stockholders’ Equity $ 196,560 $ 237,918

The accompanying notes are an integral part of

these financial statements.

The accompanying notes are an integral part of these financial statements.

Genius Brands International, Inc.

2 unchanged sentences

Three Months Ended

Nine months Ended

September 30,

March 31, 2023 March 31, 2022

Production Services $ 9,886 $ –

7 unchanged sentences

General and Administrative 9,225 10,857

Impairment of Property and Equipment 120 —

Impairment of Intangible Assets 4,023 –

Impairment of Goodwill 11,287 –

Total Operating Expenses 36,185 11,361

Loss from Operations ( 21,996 ) ( 9,920 )

Other Income (Expense):

Interest Expense ( 1,085 ) ( 55 )

Other Income (Expense), Net ( 1,712 ) 5,413

Net Other Income (Expense)

Loss Before Income Tax Expense ( 24,793 ) ( 4,562 )

Provision for Tax Expense

Net Loss (Income) Attributable to Non-Controlling Interests

Income Tax Expense – –

Net Loss ( 24,793 ) ( 4,562 )

Net Loss Attributable to Non-Controlling Interests 31 31

Net Loss Attributable to Genius Brands International, Inc.

$ ( 24,762 ) $ ( 4,531 )

Net Loss per Share (Basic) $ ( 0.77 ) $ ( 0.15 )

2 unchanged sentences

Weighted Average Shares Outstanding (Diluted) 31,978,335 30,377,925

The accompanying notes are an integral part of

these financial statements.

The accompanying notes are an integral part of these financial statements.

Genius Brands International, Inc.

Condensed Consolidated Statements of Comprehensive

Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

Three Months Ended

Nine months Ended

September 30,

Other Comprehensive Income (Loss):

Change in Unrealized Losses on Marketable Securities

March 31, 2023 March 31, 2022

Net Loss $ ( 24,793 ) $ ( 4,562 )

Change in Accumulated Other Comprehensive Income (Loss):

Change in Unrealized Gain/(Losses) on Marketable Securities 830 ( 3,500 )

Realized Losses on Marketable Securities Reclassified from AOCI into Earnings 1,537 79

Foreign Currency Translation Adjustment

Total Other Comprehensive Loss

Foreign Currency Translation Adjustments 3 37

Total Change in Accumulated Other Comprehensive Loss 2,370 ( 3,384 )

Total Comprehensive Net Loss $ ( 22,423 ) $ ( 7,946 )

Comprehensive Income (Loss) Attributable to Non-Controlling Interests

Net Loss Attributable to Non-Controlling Interests 31 31

Total Comprehensive Net Loss Attributable to Genius Brands International, Inc.

The accompanying notes are an integral part of

these financial statements.

$ ( 22,392 ) $ ( 7,915 )

The accompanying notes are an integral part of these financial statements.

Genius Brands International, Inc.

Condensed Consolidated Statements of Stockholders'

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share data)

Preferred Stock

Additional Paid-In

Treasury Stock

Accumulated Other Comprehensive

Common Stock Preferred Stock Additional Paid-In Capital Treasury Stock Accumulated Deficit Accumulated Other Comprehensive Loss Non-Controlling Interest Total

Shares Amount Shares Amount Shares Amount

Balance, December 31, 2022 31,918,552 $ 319 1 $ – $ 762,418 42,633 ( 290 ) $ ( 641,443 ) $ ( 9,925 ) $ 1,790 $ 112,869

$ ( 595,848 )

Issuance of Common Stock for Services

Issuance of Common Stock for Vested Restricted Stock Units

Share Based Compensation

Other Comprehensive Loss

Balance, March 31, 2022

$ ( 600,379 )

Shares Issued for Wow Acquisition

Fair Value of Replacement Options Related to Wow Acquisition

Issuance of Common Stock for Services

Issuance of Common Stock for Vested Restricted Stock Units

Share Based Compensation

Other Comprehensive Loss

Distributions to Non-Controlling Interests

Net (Loss) Income

Balance, June 30, 2022

$ ( 613,720 )

Issuance of Common Stock for Vested Restricted Stock Units, Net of Shares Withheld for Taxes 78,088 1 – – ( 1 ) 3,700 ( 9 ) – – – ( 9 )

Purchase of Treasury Stock Not Yet Settled

Fractional Shares Issued Upon Reverse Stock Split 117,144 – – – – – – – – – –

Share Based Compensation – – – – 910 – – – – – 910

Other Comprehensive Loss

Balance, September 30, 2022

Unrealized Gain on Marketable Securities

– – – – – – – – 2,367 – 2,367

Preferred Stock

Additional Paid-In

Treasury Stock

Accumulated Other Comprehensive

Balance, December 31, 2020

Foreign Translation Adjustment – – – – – – – – 3 – 3

– – – – – – – ( 24,762 ) – ( 31 ) ( 24,793 )

Shares Issued for ChizComm acquisition

Proceeds From Warrant Exchange, net

Issuance of Common Stock for Services

Share Based Compensation

Warrant Incentive

Balance, March 31, 2023 32,113,784 $ 320 1 $ – $ 763,327 46,333 $ ( 299 ) $ ( 666,205 ) $ ( 7,555 ) $ 1,759 $ 91,347

$ ( 545,816 )

Balance, December 31, 2021 30,337,914 $ 303 – $ – $ 739,495 – $ – $ ( 595,848 ) $ ( 1,221 ) $ 1,924 $ 144,653

Issuance of Common Stock for Services 38,620 – – – 311 – – – – – 311

Share Based Compensation

Other Comprehensive Loss

Balance, June 30, 2021

$ ( 553,211 )

Issuance of Common Stock for Vested Restricted Stock Units, Net of Shares Withheld for Taxes 60,366 1 – – ( 1 ) – – – – – –

Share Based Compensation – – – – 4,491 – – – – – 4,491

Other Comprehensive Loss

Balance, September 30, 2021

$ ( 562,464 )

The accompanying notes are an integral part of

these financial statements.

Unrealized Loss on Marketable Securities – – – – – – – – ( 3,421 ) – ( 3,421 )

Foreign Translation Adjustment – – – – – – – – 37 – 37

Net Loss – – – – – – – ( 4,531 ) – ( 31 ) ( 4,562 )

Balance, March 31, 2022 30,436,900 $ 304 – $ — $ 744,296 – $ — $ ( 600,379 ) $ ( 4,605 ) $ 1,893 $ 141,509

The accompanying notes are an integral part of these financial statements.

Genius Brands International, Inc.

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2022 and September

(in thousands)

September 30, 2022

September 30, 2021

March 31, 2023 March 31, 2022

Cash Flows from Operating Activities:

Net Loss $ ( 24,793 ) $ ( 4,562 )

Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:

2 unchanged sentences

Amortization of Right of Use Asset 748 97

Share Based Compensation Expense

Amortization of Premium on Marketable Securities 169 276

Loss on Revaluation of Equity Investment in Your Family Entertainment AG

Loss on Foreign Currency Transactions

Share Based Compensation Expense 910 4,491

Impairment Loss of Intangible Assets 4,023 –

Impairment of Goodwill 11,287 –

Impairment of Property and Equipment 120 –

(Gain) Loss on Revaluation of Equity Investments in Your Family Entertainment AG 895 ( 5,395 )

Unrealized (Gain) Loss on Foreign Currency Transactions ( 308 ) 192

Gain on Warrant Revaluation ( 139 ) ( 41 )

Interest Incurred on Debt

Realized Loss on Marketable Securities 1,537 79

Warrant Incentive Expense

Noncash Interest Expense 1,044 –

Stock Issued for Services – 312

Bad Debt Expense 161 9

Other Non-Cash Items 2 –

Decrease (Increase) in Operating Assets:

Accounts Receivable, net 5,107 4,399

Other Receivables

Other Receivable 294 295

Tax Credits Earned (less capitalized) ( 4,597 ) –

Tax Credits Received

Tax Credits Received, net 7,237 –

Film and Television Costs, net ( 365 ) ( 1,293 )

Prepaid Expenses & Other Assets

Prepaid Expenses and Other Assets 379 ( 914 )

Increase (Decrease) in Operating Liabilities:

6 unchanged sentences

Lease Liability ( 195 ) ( 98 )

Interest Paid on Debt ( 636 ) –

Due To Related Party ( 2 ) ( 51 )

2 unchanged sentences

Cash Flows from Investing Activities:

Cash Payment for Wow, net of Cash Acquired

Cash Payment for Equity Investment in YFE

Cash Payment for Equity Investment in Your Family Entertainment – ( 6,637 )

Cash Payment for Ameba, net of Cash Acquired – ( 3,893 )

Cash Payment for ChizComm, net of cash acquired

Investment in Stan Lee Universe, LLC

Investment in Marketable Securities

Note Receivable from Related Party

Loans to Related Party ( 52 ) ( 102 )

Proceeds from Principal Collections on Marketable Securities 460 1,910

Proceeds from Sales of Marketable Securities

Proceeds from Sales and Maturities of Marketable Securities 14,257 5,536

Purchase of Property & Equipment ( 17 ) ( 61 )

Investment in Intangible Assets

Net Cash Used in Investing Activities

Net Cash Provided by (Used in) Investing Activities 14,648 ( 3,247 )

Cash Flows from Financing Activities:

1 unchanged sentence

Repayments of Margin Loan ( 15,648 ) ( 8,210 )

Proceeds from Production Facilities

Repayments of Production Facilities

(Repayment)/Proceeds from Bank Indebtedness

Finance Lease Payments

Distributions to Noncontrolling Interests

(Repayments of)/Proceeds from Production Facilities, net ( 1,840 ) –

Proceeds from Bank Indebtedness, net 2,030 –

Repayments of Notes Payable – ( 7 )

Principal Payments on Finance Lease Obligations ( 535 ) –

Debt Issuance Costs ( 45 ) –

(Repayment)/Proceeds from Note Payable

Shares Withheld for Taxes on Vested Restricted Shares ( 9 ) –

Repayment of Payroll Protection Program

Proceeds from Warrant Exchange, net

Net Cash Provided by Financing Activities

Payment for Warrant Put Option Exercise ( 250 ) –

Net Cash Provided by (Used in) Financing Activities ( 12,565 ) 51,353

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash 7 8

3 unchanged sentences

Schedule of Non-Cash Financing and Investing Activities

Shares issued for Wow Acquisition

FV of Replacement Options Granted Related to Wow Acquisition

Liability for Treasury Stock Not Yet Settled

Shares issued for ChizComm acquisition

Liability for Acquisition Earnout Shares

Issuance of Common Stock for Services

The accompanying notes are an integral part of

these financial statements.

Leased Assets Obtained in Exchange for New Finance Lease Liabilities $ 1,216 $ –

The accompanying notes are an integral part of these financial statements.

Genius Brands International, Inc.

And Subsidiaries

Notes to Condensed Consolidated Financial Statements

September 30, 2022

March 31, 2023

Organization and Business

Organization and Nature of Business

Genius Brands International,

(“we,” “us,” “our,” or the “Company”) is a publicly traded (NASDAQ:GNUS) global content

and brand management company that creates, produces, licenses, and broadcasts timeless and educational, multimedia animated content for

Led by experienced industry personnel, the Company distributes its content primarily on streaming platforms and television and

licenses its properties for a broad range of consumer products based on the Company’s characters.

The Company is a leading “work

for hire” producer for many of the streaming outlets and IP holders.

In the children’s media sector, the Company’s portfolio

features “content with a purpose” for toddlers to tweens, providing enrichment as well as entertainment.

The Company’s

programs, along with those programs it acquires and/or licenses, are being broadcast in the United States on the Company’s wholly-owned

advertisement supported video on demand (“AVOD”) service, Kartoon Channel!

, and its subscription video on demand (“SVOD”)

distribution outlets, Kartoon Channel!

Kidaverse , and Ameba TV .

These streaming services are available on Apple TV, Apple

iOS, Android TV, Android mobile, Amazon Prime, Amazon Fire, Tubi, Roku, Comcast, Cox, Dish/Sling, Zumo, Pluto, Samsung Smart TVs, LG Smart

TVs, as well as YouTube, among other popular platforms.

The Company’s in-house owned and produced shows include Stan Lee’s

Superhero Kindergarten starring Arnold Schwarzenegger, Llama Llama starring Jennifer Garner, Rainbow Rangers, KC Pop Quiz ,

and the upcoming Shaq’s Garage starring Shaquille O’Neal, scheduled to debut in the fourth quarter of 2022.

The Company’s

library titles include the award-winning Baby Genius , adventure comedy Thomas Edison’s Secret Lab®, and Warren

Buffett’s Secret Millionaires Club , created with and starring iconic investor Warren Buffett.

The Company also licenses

its programs to other services worldwide, in addition to the operation of its own channels, including but not limited to Netflix, HBO

Max, Paramount+, Nickelodeon, and satellite, cable and terrestrial broadcasters around the world.

Through the Company’s

recent investment in Germany’s Your Family Entertainment (“YFE”) , a publicly traded company on the Frankfurt

Exchange (RTV-Frankfurt), it has gained access to one of the largest animation catalogues in Europe with over 3,000 titles, and a global

distribution network, which currently covers over 60 territories worldwide and, which the Company is currently in process of rebranding

as Kartoon Channel!

The Company also recently

acquired WOW Unlimited Media Inc.

(“Wow”), and through that acquisition, established an affiliate relationship with Mainframe

Studios, which is one of the largest animation producers in the world.

Genius Brands International, Inc.

(“we,” “us,” “our,” or the “Company”) is a global content and brand management company that creates, produces, licenses, and broadcasts timeless and educational, multimedia animated content for children.

Led by experienced industry personnel, the Company distributes its content primarily on streaming platforms and television and license properties for a broad range of consumer products based on the Company’s characters.

The Company is a “work for hire” producer for many of the streaming outlets and animated content intellectual property ("IP") holders.

In the children’s media sector, the Company’s portfolio features “content with a purpose” for toddlers to tweens, providing enrichment as well as entertainment.

With the exception of selected Wow Unlimited Media Inc.

titles, the Company’s programs, along with licensed programs, are being broadcast in the United States on the Company’s wholly-owned advertisement supported video on demand (“AVOD”) service, its free ad supported TV ("FAST") channels and subscription video on demand (“SVOD”) outlets, Kartoon Channel!

These streaming services are available on Apple TV, Apple iOS, Android TV, Android mobile, Amazon Prime, Amazon Fire, Tubi, Roku, Comcast, Cox, Dish/Sling, Xumo, Pluto, Samsung Smart TVs, LG Smart TVs, as well as YouTube, among other platforms.

The Company's in-house owned and produced animated shows include Stan Lee’s Superhero Kindergarten starring Arnold Schwarzenegger, Llama Llama starring Jennifer Garner, Rainbow Rangers, KC Pop Quiz , and the upcoming Shaq’s Garage starring Shaquille O’Neal, scheduled to debut in the second quarter of 2023.

The Company’s library titles include the award-winning Baby Genius , adventure comedy Thomas Edison’s Secret Lab®, and Warren Buffett’s Secret Millionaires Club , created with and starring iconic investor Warren Buffett, Team Zenko Go!, Reboot , Bee & PuppyCat:

Lazy in Space and Castlevania .

The Company also licenses its programs to other services worldwide, in addition to the operation of its own channels, including but not limited to Netflix, HBO Max, Paramount+, Nickelodeon, and satellite, cable and terrestrial broadcasters around the world.

Through the Company’s investments in Germany’s Your Family Entertainment (“YFE”), a publicly traded company on the Frankfurt Exchange (RTV-Frankfurt), it has gained access to one of the largest animation catalogues in Europe with over 50 titles consisting of over 1,600 episodes, and a global distribution network which currently covers over 60 territories worldwide.

Through the ownership of WOW Unlimited Media Inc.

(“Wow”), the Company established an affiliate relationship with Mainframe Studios, which is one of the largest animation producers in the world.

In addition, Wow owns Frederator Networks Inc.

(“Frederator”)

and its Channel Frederator Network , the largest animation focused multi-channel network on YouTube , with over 2,500 content

creators and currently averages over 1 billion views per month.

The Company owns a select

amount of valuable IP, including among them a controlling interest in Stan Lee Universe (“SLU”), through which it controls

the name, likeness, signature, and all consumer product and IP rights to Stan Lee (the “Stan Lee Assets”).

The Company plans

to launch a Stan Lee Centennial program of merchandise set to coincide with Stan Lee’s 100 th birthday on December 28,

The Company also owns Beacon

Media, the largest media buying service for children in North America.

Beacon represents over 30 major toy companies, including Playmobile,

Bandai Toys, Bazooka, Moose Toys, and JAKKS Pacific.

In addition, the Company recently

acquired the Canadian company Ameba TV (“Ameba”), which distributes a profitable SVOD channel for kids and is now expected

to become the backbone of the newly launched SVOD channel of Kartoon Channel!, Kartoon Channel!

The combination of the Company,

its investment in YFE, its acquired companies Wow, Ameba and Beacon Media provide the Company with world class animation production studios,

a catalogue representing thousands of hours of premium global content for children, a broadcast system for delivering that content and

an in-house Consumer Products Licensing infrastructure to fully exploit the content.

On January 13, 2022, the Company

completed its acquisition of the issued and outstanding shares of Ameba and gained access to its kid-safe SVOD platform technology and

13,000 episodes of content.

Refer to Note 3 for additional details.

On April 6, 2022, the Company

completed its acquisition of Wow.

On October 26, 2021, the Company’s wholly-owned subsidiary, 1326919 B.C.

LTD., a corporation existing

under the laws of the Province of British Columbia and Wow, entered into an Arrangement Agreement to effect a plan of arrangement under

the arrangement provisions of Part 9, Division 5 of the Business Corporations Act .

The Company purchased 100% of Wow’s issued

and outstanding shares for approximately $ 38.3 million in cash and 11,057,000 shares of the Company’s common stock.

Refer to Note

3 for additional details.

Following the initial equity

investment in YFE during the fourth quarter of 2021, the Company participated in a mandatory tender offer for the remaining publicly traded

shares held by YFE shareholders.

Upon the expiration of the offer on February 14, 2022, the Company purchased an additional 2,637,717

shares of YFE at 2.00 EUROS per share or $ 5.7 million in the aggregate.

On March 9, 2022, bonds held by YFE shareholders were converted

into 2,574,000 shares of YFE common stock, 304,631 of which were purchased by the Company, at 2.00 EUROS per share or $ 0.6 million .

April 5, 2022, the Company exercised its subscription rights to purchase an additional 914,284 shares of YFE’s common stock at 3.00

EUROS per share, or $ 2.7 million , increasing the number of YFE’s outstanding shares to 6,857,132 .

As of September 30, 2022, the

Company’s ownership in YFE is 48.0 %.

During the nine months ended

September 30, 2022, the Company’s cash, cash equivalents and restricted cash decreased by $ 3.0 million .

The decrease was primarily

due to cash used in investment activities, inclusive of the Wow and Ameba acquisitions and the YFE investments, totaling $35.9 million,

$24.2 million used for operational activities, offset by $57.4 million of financing from the margin loan, production facilities and bank

indebtedness assumed in the Wow Acquisition.

As of September 30,

2022, the Company held marketable securities with a fair value of $ 89.9

million as available-for-sale, a decrease of $ 22.7

million as compared to December 31, 2021 primarily due to the Company selling $8.8 million of its held securities during the

period, a decrease in fair value of $6.4 million recorded as an unrealized loss, additional prepayment proceeds of $6.4 million on

principals for certain mortgage-backed securities, a realized loss of $0.2 million and $0.8 million of continued amortization of

premiums during the period.

The available-for-sale securities consist principally of corporate and government debt securities and

are also available as a source of liquidity.

The Company borrowed an

additional $ 63.2

million from its investment margin account during the nine months ended September 30, 2022 and repaid $ 7.8

million with cash received from sales and/or redemptions of its marketable securities.

During the nine months ended September

30, 2022, the borrowed amounts were used to finance the Company’s additional investments in YFE and the closing of the

acquisitions of Ameba and Wow, in each case pledging certain of its marketable securities as collateral.

During the three months

ended September 30, 2022, the additional borrowings of $ 4.2

million related to quarterly operational costs.

The interest rate for these investment margin account borrowings fluctuates

based on the Federal Funds Rate plus 0.65 %

with interest only payable monthly.

The weighted average interest rate was 2.65 %

on an average margin loan balance of $ 61.2

million during the three months ended September 30, 2022.

The weighted average interest rate was 1.54 %

on an average margin loan balance of $ 43.4

million during the nine months ended September 30, 2022.

The Company incurred interest expense of $ 0.6

million during the nine months ended September 30, 2022.

The investment margin account borrowings

do not mature but are payable on demand as the custodian can issue a margin call at any time, therefore the margin

loan is recorded as a current liability on the Company’s condensed consolidated balance sheets.

Upon the acquisition of Wow,

the Company assumed certain credit facilities (the “Facilities”) with a Canadian bank.

The Facilities are comprised of:

a $ 5.0 million CAD ($ 3.9 million USD) revolving demand facility, (ii) an $ 8.0 million CAD ($ 6.2 million USD) equipment lease line, (iii)

a treasury risk management facility of up to $ 0.5 million CAD ($ 0.4 million USD) for foreign exchange forward contracts, and (iv) interim

financing facilities for specific production titles.

The Facilities are guaranteed by the Company and the security reflects substantially

all of the tangible and intangible assets of the Company and its subsidiary guarantors subject to permitted encumbrances, including a

combination of federal and provincial tax credits, other government incentives, production service agreements, and license agreements.

The Facilities are generally repayable on demand and are subject to customary affirmative and negative covenants, default provisions,

representations and warranties and other terms and conditions.

Refer to Note 14 for additional details.

Historically, the Company

has incurred net losses.

For the three months ended September 30, 2022 and 2021, the Company reported net losses of $11.2 million and

$9.3 million, respectively.

For the nine months ended September 30, 2022 and 2021, the Company reported net losses of $29.1 million and

$92.9 million, respectively.

The Company reported net cash used in operating activities of $22.8 million and $16.0 million for the nine

months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, the Company had an accumulated deficit of $624.9 million

and total stockholders’ equity of $128.5 million.

As of September 30, 2022, the Company had current assets of $143.6 million, including

cash and cash equivalents of $7.1 million and current liabilities of $111.2 million.

The Company had working capital of $ 32.4 million

as of September 30, 2022, compared to working capital of $ 115.1 million as of December 31, 2021.

(“Frederator”) and its Channel Frederator Network , the largest animation focused multi-channel network on YouTube with over 2,500 channels.

The Company has rights to a select amount of valuable IP, included among them a controlling interest in Stan Lee Universe (“SLU”), through which it controls the name, likeness, signature, and all consumer product and IP rights to Stan Lee (the “Stan Lee Assets”).

The Company also owns Beacon Media Group ("Beacon"), the largest media buying service for children in North America.

Beacon represents over 30 major toy companies, including Playmobile, Bandai Toys, Bazooka, Moose Toys, and JAKKS Pacific.

In addition, the Company owns the Canadian company Ameba Inc.

(“Ameba”), which distributes SVOD service for kids, and has become the focal point of revenue growth for Genius Networks’ subscription offering.

The Company and its affiliates provide world class animation production studios, a catalogue representing thousands of hours of premium global content for children, a broadcast system for delivering that content and an in-house consumer products licensing infrastructure to fully exploit the content.

Recent Developments

On February 6, 2023, the Company's board of directors approved a 1-for-10 reverse stock split of the Company's outstanding shares of common stock.

The reverse stock split was effected on February 10, 2023 at 5:00 p.m.

Eastern time.

At the effective time, every 10 issued and outstanding shares of the Company's common stock were converted into one share of common stock.

Any fractional shares of common stock resulting from the reverse stock split were rounded up to the nearest whole post-split share and no shareholders received cash in lieu of fractional shares.

The par value of each share of common stock remained unchanged.

The reverse stock split proportionately reduced the number of shares of authorized common stock from 400,000,000 to 40,000,000 shares.

The reverse stock split also applied to common stock issuable upon the exercise of the Company's outstanding warrants and stock options.

The reverse stock split did not affect the authorized preferred stock of 10,000,001 shares.

Unless noted, all references to shares of common stock and per share amounts contained in this Quarterly Report on Form 10-Q have been retroactively adjusted to reflect a 1-for-10 reverse stock split.

As of March 31, 2023, the Company had cash and cash equivalents of $ 4.8 million, which decreased by $ 2.7 million as compared to December 31, 2022.

The decrease was primarily due to cash used in financing activities of $ 12.6 million, primarily due to the repayment of the margin loan, and $ 4.8 million used in operational activities.

The cash used was offset by cash provided by the sales and maturities of marketable securities of $ 14.3 million.

As of March 31, 2023, the Company held available-for-sale marketable securities with a fair value of $ 69.7 million, which decreased by $ 14.1 million as compared to December 31, 2022.

The decrease was primarily due to selling $ 11.4 million of securities, $ 2.9 million of securities maturing and additional prepayment proceeds of $ 0.5 million on principals for certain mortgage-backed securities during the three months ended March 31, 2023.

The decrease was offset by the net decrease of $ 0.8 million in unrealized and realized loss activity.

The available-for-sale securities consist principally of corporate and government debt securities and are also available as a source of liquidity.

The Company borrowed an additional $ 3.7 million from its investment margin account during the three months ended March 31, 2023 and repaid $ 16.3 million with cash received from sales and maturities of marketable securities.

During the three months ended March 31, 2023, the borrowed amounts were primarily used for operational costs.

The interest rates for the borrowings fluctuate based on the Federal Funds Rate plus 0.65 %.

The weighted average interest rates were 0.89 % and 1.66 % on average margin loan balances of $ 46.2 million and $ 27.1 million as of March 31, 2023 and December 31, 2022, respectively.

The Company incurred interest expense on the loan of $ 0.7 million and $ 21,846 during the three months ended March 31, 2023 and March 31, 2022, respectively.

The investment margin account borrowings do not mature but are collateralized by the marketable securities held by the same custodian and the custodian can issue a margin call at any time, effecting a payable on demand loan.

Due to the call option, the margin loan is recorded as a current liability on the Company’s condensed consolidated balance sheets.

As of March 31, 2023 and December 31, 2022, the Company's margin loan balance was $ 48.9 million and $ 60.8 million, respectively.

Historically, the Company has incurred net losses.

For the three months ended March 31, 2023 and March 31, 2022, the Company reported net losses of $ 24.8 million and $ 4.5 million, respectively.

The Company reported net cash used in operating activities of $ 4.8 million and $ 5.4 million for the three months ended March 31, 2023 and March 31, 2022, respectively.

As of March 31, 2023, the Company had an accumulated deficit of $ 666.2 million and total stockholders’ equity of $ 91.3 million.

As of March 31, 2023, the Company had current assets of $ 114.3 million, including cash and cash equivalents of $ 4.8 million and marketable securities of $ 69.7 million, and current liabilities of $ 90.8 million.

The Company had working capital of $ 23.5 million as of March 31, 2023, compared to working capital of $ 28.6 million as of December 31, 2022.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed

consolidated balance sheet as of December 31, 2021 has been derived from audited statements.

The accompanying unaudited condensed consolidated

financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.

they do not include all of the information and footnotes required by generally accepted accounting principles (“US GAAP”)

for complete financial statements and should be read in conjunction with the audited financial statements and related footnotes included

in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission

on April 6, 2022.

The accompanying condensed

consolidated financial statements include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and

reclassifications) necessary to state fairly the Condensed Consolidated Balance Sheets, Statements of Operations, Statements of Comprehensive

Loss, Statements of Stockholders' Equity, and Statements of Cash Flows for all periods presented.

Certain prior period amounts

have been reclassified for consistency with the current period presentation.

These reclassifications had no effect on the reported results

of operations.

The Company determined its

operating segments on the same basis that it assesses performance and makes operating decisions.

The Company principally operates

in two distinct business segments:

the Content Production & Distribution Segment, which produces and distributes children’s

content, and the Media Advisory & Advertising Services Segment, which provides media and advertising services.

These segments are

reflective of how the Company’s Chief Operating Decision Maker (“CODM”) reviews operating results for the purposes of

allocating resources and assessing performance.

The accompanying condensed consolidated financial statements have been prepared in conformity with U.S.

Generally Accepted Accounting Principles (“GAAP”).

The accompanying condensed consolidated financial statements include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to state fairly the Condensed Consolidated Balance Sheets, Statements of Operations, Statements of Comprehensive Loss, Statements of Stockholders' Equity, and Statements of Cash Flows for all periods presented.

Certain prior period amounts have been reclassified for consistency with the current period presentation.

These reclassifications had no effect on the reported results of operations.

The Company determines its operating segments on the same basis that it assesses performance and makes operating decisions.

The Company principally operates in two distinct business segments:

the Content Production & Distribution Segment, which produces and distributes children’s content, and the Media Advisory & Advertising Services Segment, which provides media and advertising services.

These segments are reflective of how the Company’s Chief Operating Decision Maker (“CODM”) reviews operating results for the purposes of allocating resources and assessing performance.

The Company has identified its Chief Executive Officer as the CODM.

The segments are organized

around the products and services provided to customers and represent the Company’s reportable segments.

Prior to the acquisition

of the Beacon Media Group (formerly “ChizComm”), the Company’s operations were comprised of a single segment.

The accounting policies for

each segment are the same as for the Company as a whole.

The segments are organized around the products and services provided to customers and represent the Company’s reportable segments.

The accounting policies for each segment are the same as for the Company as a whole.

Refer to Note 22 for additional information.

Principles of Consolidation and Basis of Presentation

The Company’s condensed

consolidated financial statements include the accounts of Genius Brands International, Inc.

The Company’s condensed consolidated financial statements include the accounts of Genius Brands International, Inc.

and its wholly-owned subsidiaries.

consolidates all majority-owned subsidiaries, investments in entities in which it has controlling influence and variable interest entities

where the Company has been determined to be the primary beneficiary.

Minority interests are recorded as non-controlling interests.

Non-consolidated

investments are accounted for using the equity method or the fair value option when the Company has the ability to significantly influence

the operating decisions of the investee.

When the Company does not have the ability to significantly influence the operating decisions

of an investee, these equity securities are classified as either marketable investment securities or other investments and recorded at

fair value with changes recognized within other Income (expense) on the consolidated statements of operations and comprehensive income

The Company consolidates all majority-owned subsidiaries and variable interest entities where the Company has been determined to be the primary beneficiary.

The interests in a variable interest entity which the Company does not control are recorded as non-controlling interests.

Non-consolidated investments are accounted for using the equity method or the fair value option and recorded at fair value with changes recognized within Other Income (Expense), net on the condensed consolidated statements of operations and comprehensive income (loss).

All significant intercompany accounts and transactions have been eliminated in consolidation.

Business Combinations

The Company accounts for transactions

that are classified as business combinations in accordance with the Financial Accounting Standards Boards’ (“FASB”)

Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”) .

Once a business

is acquired, the Company allocates the fair value of the purchase consideration to the tangible assets, liabilities, and intangible assets

acquired based on their estimated fair values.

The excess of the fair value of purchase consideration over the fair values of these identifiable

assets and liabilities is recorded as goodwill.

As required, preliminary fair values are determined upon acquisition, with the final determination

of the fair values being completed within the one-year measurement period from the date of acquisition.

The valuation of acquired assets

and assumed liabilities requires significant judgment and estimates, especially with respect to intangible assets.

The valuation of intangible

assets requires that the Company use valuation techniques such as the income approach.

The income approach includes the use of a discounted

cash flow model, which includes discounted cash flow scenarios and requires significant estimates such as future expected revenue, expenses,

capital expenditures and other costs, and discount rates.

The Company estimates the fair value based upon assumptions management believes

to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and

liabilities assumed.

Acquisition-related expenses and any related restructuring costs are recognized separately from the business combination

and are expensed as incurred.

The Company accounts for transactions that are classified as business combinations in accordance with the Financial Accounting Standards Boards’ (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”) .

Once a business is acquired, the Company allocates the fair value of the purchase consideration to the tangible assets, liabilities, and intangible assets acquired based on their estimated fair values.

The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

As required, preliminary fair values are determined upon acquisition, with the final determination of the fair values being completed within the one-year measurement period from the date of acquisition.

The valuation of acquired assets and assumed liabilities requires significant judgment and estimates, especially with respect to intangible assets.

The valuation of intangible assets requires that the Company use valuation techniques such as the income approach.

The income approach includes the use of a discounted cash flow model, which includes discounted cash flow scenarios and requires significant estimates such as future expected revenue, expenses, capital expenditures and other costs, and discount rates.

The Company estimates the fair value based upon assumptions management believes to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and liabilities assumed.

Acquisition-related expenses and any related restructuring costs are recognized separately from the business combination and are expensed as incurred.

Variable Interest Entities

The Company holds an interest

in Stan Lee University (“SLU”), an entity that is considered a variable interest entity (“VIE”).

interest relates to 50% ownership in the entity that is comprised of the Stan Lee Assets (as defined below) and that requires additional

financial support from the Company to continue operations.

The Company’s total net cash investment in SLU as of September 30, 2022,

is $ 0.8 million .

In addition, the Company has incurred $ 0.4 million of costs incurred for marketing and operational services.

is considered the primary beneficiary and is required to consolidate the VIE.

In evaluating whether the

Company has the power to direct the activities of a VIE that most significantly impact its economic performance, the Company considers

the purpose for which the VIE was created, the importance of each of the activities in which it is engaged and the Company’s decision-making

role, if any, in those activities that significantly determine the entity’s economic performance as compared to other economic interest

This evaluation requires consideration of all facts and circumstances relevant to decision-making that affects the entity’s

future performance and the exercise of professional judgment in deciding which decision-making rights are most important.

In determining whether the

Company has the right to receive benefits or the obligation to absorb losses that could potentially be significant to the VIE, the Company

evaluates all of its economic interests in the entity, regardless of form (debt, equity, management and servicing fees, and other contractual

arrangements).

The Company holds an interest in Stan Lee University (“SLU”), an entity that is considered a variable interest entity (“VIE”).

The variable interest relates to 50 % ownership in the entity that is comprised of the Stan Lee Assets and that requires additional financial support from the Company to continue operations.

The Company is considered the primary beneficiary and is required to consolidate the VIE.

In evaluating whether the Company has the power to direct the activities of a VIE that most significantly impact its economic performance, the Company considers the purpose for which the VIE was created, the importance of each of the activities in which it is engaged and the Company’s decision-making role, if any, in those activities that significantly determine the entity’s economic performance as compared to other economic interest holders.

This evaluation requires consideration of all facts and circumstances relevant to decision-making that affects the entity’s future performance and the exercise of professional judgment in deciding which decision-making rights are most important.

In determining whether the Company has the right to receive benefits or the obligation to absorb losses that could potentially be significant to the VIE, the Company evaluates all of its economic interests in the entity, regardless of form (debt, equity, management and servicing fees, and other contractual arrangements).

This evaluation considers all relevant factors of the entity’s design, including:

the entity’s capital structure,

contractual rights to earnings (losses), subordination of the Company’s interests relative to those of other investors, contingent

payments, as well as other contractual arrangements that have the potential to be economically significant.

The evaluation of each of

these factors in reaching a conclusion about the potential significance of the Company’s economic interests is a matter that requires

the exercise of professional judgment.

The Company continuously assesses whether it is the primary beneficiary of a variable interest

entity as changes to existing relationships or future transactions may result in the Company consolidating its collaborators or partners.

the entity’s capital structure, contractual rights to earnings (losses), subordination of the Company’s interests relative to those of other investors, contingent payments, as well as other contractual arrangements that have the potential to be economically significant.

The evaluation of each of these factors in reaching a conclusion about the potential significance of the Company’s economic interests is a matter that requires the exercise of professional judgment.

The Company continuously assesses whether it is the primary beneficiary of a variable interest entity as changes to existing relationships or future transactions may result in the Company consolidating its collaborators or partners.

Use of Estimates

The preparation of financial

statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets

and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts

of revenues and expenses during the reporting periods.

The preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Foreign Currency

The Company considers the

dollar to be its functional currency for its United States based operations.

The Company considers the Canadian dollar to be its

functional currency for its Canada based operations.

Accordingly, the financial information is translated from the Canadian dollar to

dollar for inclusion in the Company’s consolidated financial statements.

Revenue and expenses are translated at average

exchange rates prevailing during the period, and assets and liabilities are translated at exchange rates in effect at the balance sheet

Resulting translation adjustments are included as a component of accumulated other comprehensive income (loss), net in stockholders’

Foreign exchange transaction

gains and losses are included in other income (expense), net in the condensed consolidated statements of operations.

The Company considers the U.S.

dollar ("USD") to be its functional currency for its United States and certain Canadian based operations.

The Canadian dollar ("CAD") is the functional currency of its Wow entity.

Accordingly, the financial information is translated from the Canadian dollar to the U.S.

dollar for inclusion in the Company’s condensed consolidated financial statements.

Revenue and expenses are translated at average exchange rates prevailing during the period, and assets and liabilities are translated at exchange rates in effect at the balance sheet date.

Resulting translation adjustments are included as a component of Accumulated Other Comprehensive Income (Loss), net in stockholders’ equity.

Foreign exchange transaction gains and losses are included in Other Income (Expense), Net on the condensed consolidated statements of operations.

Foreign Currency Forward Contracts

The Company's wholly-owned subsidiary, Wow, is exposed to fluctuations in various foreign currencies against its functional currency, the Canadian dollar.

Wow uses foreign currency derivatives, specifically foreign currency forward contracts ("FX forwards"), to manage its exposure to fluctuations in the CAD-USD exchange rates.

FX forwards involve fixing the foreign currency exchange rate for delivery of a specified amount of foreign currency on a specified date.

The FX forwards are typically settled in CAD for their fair value at or close to their settlement date.

The Company does not currently designate any of the FX forwards under hedge accounting and therefore reflects changes in fair value as unrealized gains or losses immediately in earnings as part of the revenue generated from the transactions hedged.

The Company does not hold or use these instruments for speculative or trading purposes.

Per FASB ASC 815-10-45, Derivatives and Hedging , the Company has elected an accounting policy to offset the fair value amounts recognized for eligible forward contract derivative instruments.

Therefore, the Company presents the asset or liability position of the FX forwards that are with the same counterparty net as either an asset or liability in its condensed consolidated balance sheets.

As of March 31, 2023, the gross amount of FX forwards in an asset and liability position that were subject to a master netting arrangement was $ 14.9 million and $ 15.0 million, respectively, resulting in a liability recorded within Other Current Liabilities on the Company's condensed consolidated balance sheet of $ 0.1 million.

The change in fair value of $ 0.1 million for the three months ended March 31, 2023 was recorded as an unrealized gain within Production Services Revenue on the Company's condensed consolidated statement of operations.

The Company did not hold FX forwards prior to the Wow Acquisition.

Cash and Cash Equivalents

The Company considers all

highly liquid debt instruments with initial maturities of three months or less to be cash equivalents.

As of September 30, 2022 and December

31, 2021, the Company had cash and cash equivalents of $ 7.1 million and $ 2.1 million , respectively.

The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents.

As of March 31, 2023 and December 31, 2022, the Company had cash and cash equivalents of $ 4.8 million and $ 7.4 million, respectively, that at times could exceed FDIC or CDIC limits.

Allowance for Doubtful Accounts

Accounts receivables are presented on the condensed consolidated balance sheets, net of estimated uncollectible amounts.

The carrying amounts of trade accounts receivable and unbilled accounts receivable represent the maximum credit risk exposure of these assets.

On a quarterly basis, in accordance with FASB ASC 326, Measurement of Credit Losses on Financial Instruments ("ASC 326") , the Company evaluates the collectability of outstanding accounts receivable balances to determine an allowance for doubtful accounts that reflects its best estimate of the lifetime expected credit losses.

The allowance for credit loss is based on an assessment of past events, current economic conditions, and forecasts of future events.

Individual uncollectible accounts are written off against the allowance when collection of the individual accounts appears doubtful.

As of March 31, 2023 and December 31, 2022, the Company recorded an allowance for doubtful accounts of $ 70,977 and $ 65,421 , respectively.

The Company limits its exposure to this credit risk through a credit approval process and credit monitoring procedures.

In addition, Wow’s contracts with customers usually require upfront and milestone payments throughout the production process.

The Company’s customer base is mainly comprised of major Canadian, American, and worldwide studios, distributors, broadcasters, toy companies and AVOD and SVOD platforms that have been customers for several years.

Tax Credits Receivable

The Federal and certain Provincial

governments in Canada provide programs that are designed to assist film and television production in the form of refundable tax credits

or other incentives.

Estimated amounts receivable

in respect of refundable tax credits are recorded as an offset to the related production operating cost, or to investment in film and

television programming when the conditions for eligibility of production assistance based on the government’s criteria are met,

the qualifying expenditures are made and there is reasonable assurance of realization.

Determination of when and if the conditions of

eligibility have been met is based on management’s judgment, and the amount recognized is based on management’s estimates

of qualifying expenditures.

The ultimate collection of previously recorded estimates is 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.

The Company continuously reviews the results of these audits to determine

if any circumstances arise that in management’s judgment would result in a previously recognized amount to be considered no longer

The Company classifies the

tax credits receivable as current based on their normal operating cycle.

Government assistance, in the form of refundable tax credits,

is relied upon as a key component of production financing.

These amounts are claimed from the CRA through the submission of income tax

returns and can take up to 18 to 24 months from the date of the first tax credit dollar being earned to being received.

As this financing

is fundamental to the Company’s ability to produce animated productions and generate revenue in the normal course of business, the

normal operating cycle for such assets is considered to be a 12-to-24-month period, or the time it takes for the CRA to assess and refund

the tax credits earned.

As of September 30,

2022, the Company had recorded $ 26.4

million in current tax credit receivables related to Wow’s film and television productions on its condensed

consolidated balance sheet.

The Company does not have an allowance on tax credits receivable as of September 30, 2022, based on

historical experience and future expectations.

The Canada Revenue Agency (“CRA”) and certain Provincial governments in Canada provide programs that are designed to assist film and television production in the form of refundable tax credits or other incentives.

Estimated amounts receivable in respect of refundable tax credits are recorded as an offset to the related production operating cost, or to investment in film and television costs when the conditions for eligibility of production assistance based on the government’s criteria are met, the qualifying expenditures are made and there is reasonable assurance of realization.

Determination of when and if the conditions of eligibility have been met is based on management’s judgment, and the amount recognized is based on management’s estimates of qualifying expenditures.

The ultimate collection of previously recorded estimates is subject to ordinary course audits from the CRA and Provincial agencies.

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

The Company continuously reviews the results of these audits to determine if any circumstances arise that in management’s judgment would result in a previously recognized amount to be considered no longer collectible.

The Company classifies the tax credits receivable as current based on their normal operating cycle.

Government assistance, in the form of refundable tax credits, is relied upon as a key component of production financing.

These amounts are claimed from the CRA through the submission of income tax returns and can take up to 18 to 24 months from the date of the first tax credit dollar being earned to being received.

As this financing is fundamental to the Company’s ability to produce animated productions and generate revenue in the normal course of business, the normal operating cycle for such assets is considered to be a 12 to 24-month period, or the time it takes for the CRA to assess and refund the tax credits earned.

As of March 31, 2023 and December 31, 2022, $ 23.5 million and $ 26.3 million in current tax credit receivables related to Wow’s film and television productions was recorded, net of $ 0.3 million and $ 0.2 million recorded as an allowance for doubtful accounts, respectively.

Marketable Debt Securities

The Company purchases high

quality, investment grade securities from diverse issuers.

Management determines the appropriate classification of securities at

the time of purchase and reevaluates such designation as of each balance sheet date.

Currently, the Company classifies its investments

in marketable securities as “available-for-sale” and records these investments at fair value.

The securities are available

to support current operations and, accordingly, the Company classifies the investments as current assets without regard to their contractual

Unrealized gains or losses

on available-for-sale securities for which the Company expects to fully recover the amortized cost basis are recognized in accumulated

other comprehensive (loss) income, a component of stockholders’ equity.

If the Company intends to sell a debt security, or it is

more likely than not that it would be required to sell a debt security before the recovery of its amortized cost basis, the entire difference

between the security's amortized cost basis and its fair value at the balance sheet date would be recognized as a loss in the condensed

consolidated statements of operations.

The Company reports

accrued interest receivable separately from the available-for-sale securities and has elected not to measure an allowance for credit

losses for accrued interest receivables.

Uncollectible accrued interest is written off when the Company determines that no

additional interest payments will be received.

Classified within Other Receivables on the condensed consolidated balance sheets,

approximately $ 0.4

million in interest income was receivable as of September 30, 2022 and December 31, 2021.

Interest earned on investment

securities is reported in interest income, net of applicable adjustments for accretion of discounts and amortization of premiums accounted

for by the level yield method with no pre-payment anticipated.

The Company purchases high quality, investment grade securities from diverse issuers.

Management determines the appropriate classification of securities at the time of purchase and reevaluates such designation as of each balance sheet date.

Currently, the Company classifies its investments in marketable securities as available-for-sale ("AFS") and records these investments at fair value.

The securities are available to support current operations and, accordingly, the Company classifies the investments as current assets without regard to their contractual maturity.

Unrealized gains or losses on available-for-sale securities for which the Company expects to fully recover the amortized cost basis are recognized in accumulated other comprehensive income (loss), a component of stockholders’ equity.

Gains and losses as a result of sales of securities are reclassified from previously unrealized gains and losses on AFS securities in accumulated other comprehensive income (loss) to other income (expense), net in the condensed consolidated statements of operations.

On a quarterly basis, the Company reviews its AFS securities to assess declines in fair value for credit losses.

For each AFS security with an amortized cost that exceeds its fair value, the Company first determines if it intends to sell or is more-likely-than-not required to sell the debt security before the expected recovery of its amortized cost.

If it intends to sell or will more-likely-than-not be required to sell the security, the Company recognizes the impairment as a credit loss in the condensed consolidated statements of operations by writing down the security’s amortized cost to its fair value.

For AFS securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss.

The portion of the decline in fair value that is due to factors other than a credit loss is recognized in accumulated other comprehensive income (loss) as an unrealized loss.

The Company reports accrued interest receivable separately from the AFS securities and has elected not to measure an allowance for credit losses for accrued interest receivables.

Uncollectible accrued interest is written off when the Company determines that no additional interest payments will be received.

Classified within Other Receivables on the condensed consolidated balance sheets, approximately $ 0.4 million and $ 0.3 million in interest income was receivable as of March 31, 2023 and December 31, 2022, respectively.

Interest earned on investment securities is reported in interest income, net of applicable adjustments for accretion of discounts and amortization of premiums accounted for over the life of the security or, in the case of callable securities, through the first call date, using the level yield method, with no prepayment anticipated.

Equity-Method Investments

When the Company does not

have a controlling financial interest in an entity but can exert significant influence over the entity’s operating and financial

policies, the investment is accounted for either (i) under the equity method of accounting or (ii) at fair value by electing

the fair value option available under U.S.

Significant influence generally exists when the firm owns 20% to 50% of the

entity’s common stock or in-substance common stock.

In general, the Company accounts

for investments acquired at fair value.

See Note 5 for further information about the Company’s investment in YFE’s equity

securities accounted for under the fair value option.

Allowance for Doubtful Accounts

Accounts receivable are presented

on the balance sheets net of estimated uncollectible amounts.

The carrying amounts of trade accounts receivable and unbilled accounts

receivable represents the maximum credit risk exposure of these assets.

The Company evaluates its accounts receivable balances on a quarterly

basis to determine collectability based on an assessment of past events, current economic conditions, and forecasts of future events.

The Company records an allowance for estimated uncollectible accounts in an amount approximating anticipated losses.

Individual uncollectible

accounts are written off against the allowance when collection of the individual accounts appears doubtful.

The Company limits its exposure

to this credit risk through a credit approval process and credit monitoring procedures.

In addition, Wow’s contracts with customers

usually require upfront and milestone payments throughout the production process.

The Company’s customer base is mainly comprised

of major Canadian, American, and worldwide studios, distributors, broadcasters, toy companies and AVOD and SVOD platforms that have been

customers for several years.

When the Company does not have a controlling financial interest in an entity but can exert significant influence over the entity’s operating and financial policies, the investment is accounted for either (i) under the equity method of accounting or (ii) at fair value by electing the fair value option available under U.S.

Significant influence generally exists when the firm owns 20% to 50% of the entity’s common stock or in-substance common stock.

In general, the Company accounts for investments acquired at fair value.

See Note 5 for further information about the Company’s investment in YFE’s equity securities accounted for under the fair value option.

Property and Equipment

Property and equipment are

recorded at cost.

Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of

the assets, which range from two to ten years.

Maintenance, repairs, and renewals, which neither materially add to the value of the assets

nor appreciably prolong their lives, are charged to expense as incurred.

Gains and losses from any dispositions of property and equipment

are reflected in the consolidated statements of operations.

Property and equipment are recorded at cost.

Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from two to seven years .

Maintenance, repairs, and renewals, which neither materially add to the value of the assets nor appreciably prolong their lives, are charged to expense as incurred.

Gains and losses from any dispositions of property and equipment are reflected in the condensed consolidated statement of operations.

Whenever events or circumstances change, an assessment is made as to whether there has been impairment to the value of long-lived assets by determining whether projected undiscounted cash flows generated by the applicable asset exceed its net book value as of the assessment date.

The Company has performed an interim review of its long-lived assets due to decreases in the Company's market value during the three months ended March 31, 2023.

Refer to Note 7 for details.

Right of Use Leased Assets

The Company determines at

contract inception whether the arrangement is a lease based on its ability to control a physically distinct asset and determines the classification

of the lease as either operating or finance under FASB ASC 842, Leases (“ASC 842”) .

For all leases, the Company combines

all components of the lease including related nonlease components as a single component.

Operating leases are reflected as operating lease

right of use (“ROU”) assets and operating lease liabilities and finance leases are reflected as finance lease ROU assets and

finance lease liabilities in the consolidated balance sheets.

Lease ROU assets and liabilities

are recognized at commencement date based on the present value of lease payments over the lease term.

As the Company’s operating

leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement

date in determining the present value of lease payments.

The Company estimates the incremental borrowing rate to reflect the profile of

collateralized borrowing over the expected term of the leases based on the information available on the lease commencement date or for

leases existing upon the date of initial adoption of ASC 842, the date of adoption.

The implicit rates within the Company’s existing

finance leases are determinable and therefore used to determine the present value of finance lease payments.

The operating lease ROU asset

also includes any lease payments made prior to lease commencement date and excludes lease incentives.

Lease terms may include options

to extend or terminate the lease when the Company is reasonably certain that it will exercise the option.

Lease expense is recognized

on a straight-line basis over the lease term in the consolidated statements of operations.

Lease incentives are recognized as a reduction

to the lease expense on a straight-line basis over the underlying lease term.

The Company determines at contract inception whether the arrangement is a lease based on its ability to control a physically distinct asset and determines the classification of the lease as either operating or finance under FASB ASC 842, Leases (“ASC 842”) .

For all leases, the Company combines all components of the lease including related nonlease components as a single component.

Operating leases are reflected as Operating Lease Right of Use (“ROU”) Assets and Operating Lease Liabilities and finance leases are reflected as Finance Lease ROU assets and Finance Lease Liabilities on the condensed consolidated balance sheets.

Lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As the Company’s operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

The Company estimates the incremental borrowing rate to reflect the profile of collateralized borrowing over the expected term of the leases based on the information available on the lease commencement date or for leases

existing upon the date of initial adoption of ASC 842, the date of adoption.

The implicit rates within the Company’s existing finance leases are determinable and therefore used to determine the present value of finance lease payments.

The operating lease ROU assets also include any lease payments made prior to lease commencement date and excludes lease incentives.

Specific lease terms used in computing the ROU assets and lease liabilities may include options to extend or terminate the lease when the Company is reasonably certain that it will exercise the option.

The Company will reassess expected lease terms based on changes in circumstances that indicate options may be more or less likely to be exercised.

Lease expense is recognized on a straight-line basis over the lease term within General and Administrative Expenses on the condensed consolidated statements of operations.

Lease incentives are recognized as a reduction to the lease expense on a straight-line basis over the underlying lease term.

Refer to Notes 8 and 20 for details of the Company's leases.

Film and Television Costs

The Company capitalizes production

costs for episodic series produced in accordance with FASB ASC 926-20, Entertainment-Films - Other Assets - Film Costs .

production costs are capitalized at actual cost and amortized using the individual-film-forecast-computation method, whereby these costs

are amortized, and participations costs are accrued based on the ratio of the current period’s revenues to management’s estimate

of ultimate revenue expected to be recognized from each production.

Due to the inherent uncertainties

involved in making such estimates of ultimate revenues and expenses, these estimates have differed in the past from actual results and

are likely to differ to some extent in the future from actual results.

In addition, in the normal course of the Company’s business,

some titles are more successful or less successful than anticipated.

Management reviews its ultimate revenue for productions in development

and cost estimates on a title-by-title basis, when an event or change in circumstances indicates that the fair value of the production

may be less than its unamortized cost.

This may result in a change in the rate of amortization of film costs and participations and/or

a write-down of all or a portion of the unamortized costs of the film or television production to its estimated fair value.

These write-downs are included

in amortization expense within Direct Operating Expenses on the Company’s condensed consolidated statements of operations.

were no events or changes in circumstances that would indicate a change in fair value of productions and therefore the Company has not

recorded any impairment charges during the nine months ended September 30, 2022 or 2021.

The Company expenses

all capitalized costs that exceed the initial market firm commitment revenue in the period of delivery of the episodes.

Additionally,

for episodic series, from time to time, the Company develops additional content, improved animation and bonus songs/features for its existing

After the initial release of the episodic series, the costs of significant improvement to existing products are capitalized while

routine and periodic alterations to existing products are expensed as incurred.

The Company capitalizes production costs for episodic series produced in accordance with FASB ASC 926-20, Entertainment-Films - Other Assets - Film Costs .

Accordingly, production costs are capitalized at actual cost and amortized using the individual-film-forecast method, whereby these costs are amortized, and participations costs are accrued based on the ratio of the current period’s revenues to management’s estimate of ultimate revenue expected to be recognized from each production.

Productions in Development

Capitalized development costs are reclassified to productions in progress once the project is approved and physical production of the film or television program commences.

Development costs include the costs of acquiring film rights to books, scripts or original screenplays and the third-party costs to adapt such projects, including visual development and design.

Advances or contributions received from third parties to assist in development are deducted from these costs.

Productions in Progress

For the Company’s film and television programs in progress, capitalized costs include all direct production and financing costs incurred during production that are expected to provide future economic benefit to the Company.

Borrowing costs and depreciation are capitalized to the cost of a film or television program until substantially all of the activities necessary to prepare the film or television program for its use intended by management are complete.

Completed Productions

Completed productions are carried at the cost of proprietary film and television programs which have been produced by the Company or to which the Company has acquired distribution rights, less accumulated amortization and accumulated impairment losses.

Due to the inherent uncertainties involved in making such estimates of ultimate revenues and expenses, these estimates have differed in the past from actual results and are likely to differ to some extent in the future from actual results.

In addition, in the normal course of business, some titles are more successful or less successful than anticipated.

Management reviews the ultimate revenue and cost estimates on a title-by-title basis, when an event or change in circumstances indicates that the fair value of the production may be less than its unamortized cost.

This may result in a change in the rate of amortization of film costs and participations and/or a write-down of all or a portion of the unamortized costs of the film or television production to its estimated fair value.

An impairment charge is recorded in the amount by which the unamortized costs exceed the estimated fair value.

These write-downs are included in amortization expense within Direct Operating Expenses on the condensed consolidated statements of operations.

All capitalized costs that exceed the initial market firm commitment revenue are expensed in the period of delivery of the episodes.

Additionally, for episodic series, from time to time, the Company develops additional content, improved animation and bonus songs/features for its existing content.

After the initial release of the episodic series, the costs of significant improvement to existing products are capitalized while routine and periodic alterations to existing products are expensed as incurred.

Goodwill and Intangible Assets

Goodwill represents the excess

of purchase price over the estimated fair value of net assets acquired in business combinations accounted for by the acquisition method.

In accordance with FASB ASC 350, Intangibles Goodwill and Other , goodwill and certain intangible assets are presumed to have indefinite

useful lives and are thus not amortized, but subject to an impairment test annually or more frequently if indicators of impairment arise.

Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired in business combinations accounted for by the acquisition method.

In accordance with FASB ASC 350, Intangibles Goodwill and Other, goodwill and certain intangible assets are presumed to have indefinite useful lives and are thus not amortized, but subject to an impairment test annually or more frequently if indicators of impairment arise.

The Company completes the annual goodwill and indefinite-lived intangible asset impairment tests at the end of each fiscal year.

for goodwill impairment, the Company may elect to perform a qualitative assessment to determine whether it is more likely than not that

the fair value of a reporting unit, of which the Company has two, is less than its carrying value.

If impairment is indicated in the qualitative

assessment, or, if management elects to initially perform a quantitative assessment of goodwill, the impairment test uses a one-step approach.

To test for goodwill impairment, the Company may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit, of which the Company has two , is less than its carrying value.

If impairment is indicated in the qualitative assessment, or, if management elects to initially perform a quantitative assessment of goodwill, the impairment test uses a one-step approach.

The fair value of a reporting unit is compared with its carrying amount, including goodwill.

If the fair value of the reporting unit exceeds

its carrying amount, goodwill of the reporting unit is not impaired.

If the carrying amount of a reporting unit exceeds its fair value,

an impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed

the total amount of goodwill allocated to that reporting unit.

Changes in future results,

assumptions, and estimates after the measurement date may lead to an outcome where additional impairment charges would be required in

future periods.

Specifically, actual results may vary from the Company’s forecasts and such variations may be material and unfavorable,

thereby triggering the need for future impairment tests where the conclusions may differ in reflection of prevailing market conditions.

Further, continued adverse market conditions could result in the recognition of additional impairment if the Company determines that the

fair values of its reporting units have fallen below their carrying values.

Other intangible assets have

been acquired, either individually or with a group of other assets, and were initially recognized and measured based on fair value.

amortization of these intangible assets is computed based on the straight-line method over the remaining economic life of the asset.

If the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired.

If the carrying amount of a reporting unit exceeds its fair value, an impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

Changes in future results, assumptions, and estimates after the measurement date may lead to an outcome where additional impairment charges would be required in future periods.

Specifically, actual results may vary from the Company’s forecasts and such variations may be material and unfavorable, thereby triggering the need for future impairment tests where the conclusions may differ in reflection of prevailing market conditions.

Further, continued adverse market conditions could result in the recognition of additional impairment if the Company determines that the fair values of its reporting units have fallen below their carrying values.

Intangible assets have been acquired, either individually or with a group of other assets, and were initially recognized and measured based on fair value.

Annual amortization of these intangible assets is computed based on the straight-line method over the remaining economic life of the asset.

The Company has performed an interim review of its intangible assets and goodwill due to decreases in the Company's market value during the three months ended March 31, 2023.

Refer to Note 10 for details.

Debt and Attached Equity-Linked Instruments

The Company measures issued

debt on an amortized cost basis, net of debt premium/discount and debt issuance costs amortized using the effective interest rate method

or the straight-line method when the latter does not lead to materially different results.

The Company analyzes freestanding

equity-linked instruments including warrants attached to debt to conclude whether the instrument meets the definition of the derivative

and whether it is considered indexed to the Company’s own stock.

If the instrument is not considered indexed to the Company’s

stock, it is classified as an asset or liability recorded at fair value.

If the instrument is considered indexed to the Company’s

stock, the Company analyzes additional equity classification requirements per FASB ASC 815-40, Contract’s in Entity’s Own

When the requirements are met, the instrument is recorded as part of the Company’s equity, initially measured based

on its relative fair value with no subsequent re-measurement.

When the equity classification requirements are not met, the instrument

is recorded as an asset or liability and is measured at fair value with subsequent changes in fair value recorded in earnings.

When required, the Company

also considers the bifurcation guidance for embedded derivatives per ASC 815-15, Embedded Derivatives .

The Company measures issued debt on an amortized cost basis, net of debt premium/discount and debt issuance costs amortized using the effective interest rate method or the straight-line method when the latter does not lead to materially different results.

The Company analyzes freestanding equity-linked instruments including warrants attached to debt to determine whether the instrument meets the definition of the derivative and whether it is considered indexed to the Company’s own stock.

If the instrument is not considered indexed to the Company’s stock, it is classified as an asset or liability recorded at fair value.

If the instrument is considered indexed to the Company’s stock, the Company analyzes additional equity classification requirements per FASB ASC 815-40, Contract’s in Entity’s Own Equity .

When the requirements are met, the instrument is recorded as part of the Company’s equity, initially measured based on its relative fair value with no subsequent re-measurement.

When the equity classification requirements are not met, the instrument is recorded as an asset or liability and is measured at fair value with subsequent changes in fair value recorded in earnings.

When required, the Company also considers the bifurcation guidance for embedded derivatives per ASC 815-15, Embedded Derivatives .

Treasury stock

The Company records the repurchase

of shares of its common stock at cost on the trade date of the transaction.

These shares are considered treasury stock, which is a reduction

to stockholders’ equity.

The Company records the repurchase of shares of its common stock at cost on the trade date of the transaction.

These shares are considered treasury stock, which is a reduction to stockholders’ equity.

Treasury stock is included in authorized and issued shares but excluded from outstanding shares.

Borrowing Costs

Borrowing costs relate

to the issuance of Wow’s interim production financing and are recorded as a reduction to the carrying amount of interim

production financing and measured at amortized cost using the effective interest method.

Borrowing costs are recognized as part of

interest expense in the condensed consolidated statements of operations in the period in which they are incurred.

Borrowing costs

directly attributable to the acquisition or production of qualifying assets, which are assets that necessarily take a substantial

period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time the assets are

substantially ready for their intended use or sale.

Upon the acquisition of Wow, the Company recorded $ 0.3

million and $ 0.6 million related to production financing during the three and nine months ended September 30, 2022, respectively.

Revenue Recognition

The Company accounts for revenue

according to standard FASB ASC 606, Revenue from Contracts with Customers (“ASC 606”) .

Revenue is measured based

on the consideration specified in a contract with a customer.

Revenue is recognized when a customer obtains control of the products or

services in a contract.

Judgment is required in determining the timing of whether the transfer of control occurs at a point in time or

over time and is discussed below.

The Company evaluates each contract to identify separate performance obligations as a contract with

a customer may have one or more performance obligations.

Consideration in a contract with multiple performance obligations is allocated

to the separate performance obligations based on their stand-alone selling prices.

If a stand-alone selling price is not determinable,

the Company estimates the stand-alone selling price using an adjusted market assessment approach.

The Company’s main sources of

revenue are derived from animation production services provided to third parties, the sale of licenses for the distribution of films and

television programs, advertising revenues, and merchandising and licensing sales.

Gross versus Net Revenue Presentation

The Company evaluates individual

arrangements with third parties to determine whether the Company acts as principal or agent under the terms.

To the extent that the Company

acts as the principal in an arrangement, revenues are reported on a gross basis, resulting in revenues and expenses being classified in

their respective financial statement line items.

To the extent that the Company acts as the agent in an arrangement, revenues are reported

on a net basis, resulting in revenues being presented net of any expenses incurred in providing agency services.

Determining whether the

Company acts as principal or agent is based on an evaluation of which party has substantial risks and rewards of ownership under the terms

of an arrangement.

The most significant factors that the Company considers include identification of the primary obligor, as well as which

party has credit risk, general and inventory risk and the latitude or ability in establishing prices.

The Company has identified

the following material and distinct performance obligations.

The Company accounts for revenue according to standard FASB ASC 606, Revenue from Contracts with Customers (“ASC 606”).

Revenue is measured based on the consideration specified in a contract with a customer.

Revenue is recognized when a customer obtains control of the products or services in a contract.

Judgment is required in determining the timing of whether the transfer of control occurs at a point in time or over time and is discussed below.

The Company evaluates each contract to identify separate performance obligations as a contract with a customer may have one or more performance obligations.

Consideration in a contract with multiple performance obligations is allocated to the separate performance obligations based on their stand-alone selling prices.

If a stand-alone selling price is not determinable, the Company estimates the stand-alone selling price using an adjusted market assessment approach.

The Company’s main sources of revenue are derived from animation production services provided to third parties, the sale of licenses for the distribution of films and television programs, advertising revenues, and merchandising and licensing sales.

The Company has identified the following material and distinct performance obligations:

• Provide animation production services.

License rights to exploit Functional Intellectual Property (“functional IP” is defined as intellectual property that has significant standalone functionality, such as the ability be played or aired.

• License rights to exploit Functional Intellectual Property (“functional IP” is defined as intellectual property that has significant standalone functionality, such as the ability to be played or aired.

Functional IP derives a substantial portion of its utility from its significant standalone functionality).

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• Provide media and advertising services to clients.

Fixed and variable fee advertising and subscription-based revenue generated from the Genius Brands Kartoon Channel!

and the Frederator owned and operated YouTube channels.

• Fixed and variable fee advertising and subscription-based revenue generated from the Genius Brands Kartoon Channel!, the Frederator owned and operated YouTube channels and revenues generated from the operation of its multi-channel network on YouTube .

• Options to renew or extend a contract at fixed terms.

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Animation Production Services

For revenue from animation

production services, the customer controls the output throughout the production process.

Each production is made to an individual customer’s

specifications and if the contract is terminated by the customer, the Company is entitled to be reimbursed for any costs incurred to date,

and for any prepaid commitments made, plus the agreed contractual mark-up.

Revenue and the associated costs of such contracts are recognized

over time on a percentage of completion basis - i.e.

as the project is being produced, prior to it being delivered to the customer.

percentage-of-completion is calculated based upon the proportion of costs incurred cumulatively to total expected costs.

Changes in revenue

recognized as a result of adjustments to total expected costs are recognized in profit or loss on a prospective basis.

Invoices related

to these projects are issued based on the achievement of milestones during the project or other contractual terms.

The difference between

contractual payments received and revenue recognized is recorded as deferred revenue when receipts exceed revenue.

When revenue exceeds

milestone billings, the Company recognizes this difference as unbilled accounts receivable.

Unbilled accounts receivable is transferred

to accounts receivable when the Company has an unconditional right to consideration.

When the outcome of an arrangement

cannot be estimated reliably, revenue is recognized only to the extent of the expenses incurred that are recoverable.

For revenue from animation production services, the customer controls the output throughout the production process.

Each production is made to an individual customer’s specifications and if the contract is terminated by the customer, the Company is entitled to be reimbursed for any costs incurred to date, and for any prepaid commitments made, plus the agreed contractual mark-up.

Revenue and the associated costs of such contracts are recognized over time on a percentage of completion basis - i.e., as the project is being produced, prior to it being delivered to the customer.

The percentage-of-completion is calculated based upon the proportion of costs incurred cumulatively to total expected costs.

Changes in revenue recognized as a result of adjustments to total expected costs are recognized in profit or loss on a prospective basis.

Invoices related to these projects are issued based on the achievement of milestones during the project or other contractual terms.

The difference between contractual payments received and revenue recognized is recorded as deferred revenue when receipts exceed revenue.

When revenue exceeds milestone billings, the Company recognizes this difference as unbilled accounts receivable within other receivables on the Company's condensed consolidated balance sheet.

Unbilled accounts receivables are transferred to accounts receivable when the Company has an unconditional right to consideration.

When the outcome of an arrangement cannot be estimated reliably, revenue is recognized only to the extent of the expenses incurred that are recoverable.

Content Distribution

Film and Television Licensing

The Company recognizes revenue

related to licensed rights to exploit functional IP in two ways;

for minimum guarantees, the Company recognizes fixed revenue upon delivery

of content and the start of the license period and for functional IP contracts with a variable component, the Company estimates revenue

such that it is probable there will not be a material reversal of revenue in future periods.

The Company recognizes revenue related to

licensed rights to exploit symbolic IP substantially similarly to functional IP.

Although it has a different recognition pattern from

functional IP, the valuation method is substantially the same, depending on the nature of the license.

Invoices related to these

projects are issued based on the achievement of milestones during the project or other contractual terms.

The difference between contractual

payments received and revenue recognized is recorded as deferred revenue when receipts exceed revenue.

When revenue exceeds milestone

billings, the Company recognizes this difference as unbilled accounts receivable.

Unbilled accounts receivables are transferred to accounts

receivable when the Company has an unconditional right to consideration.

The Company recognizes revenue related to licensed rights to exploit functional IP in two ways;

for minimum guarantees, the Company recognizes fixed revenue upon delivery of content and the start of the license period and for functional IP contracts with a variable component, the Company estimates revenue such that it is probable there will not be a material reversal of revenue in future periods.

The Company recognizes revenue related to licensed rights to exploit symbolic IP substantially similarly to functional IP.

Although it has a different recognition pattern from functional IP, the valuation method is substantially the same, depending on the nature of the license.

Invoices related to these projects are issued based on the achievement of milestones during the project or other contractual terms.

The difference between contractual payments received and revenue recognized is recorded as deferred revenue when receipts exceed revenue.

When revenue exceeds milestone billings, the Company recognizes this difference as unbilled accounts receivable within other receivables on the Company's condensed consolidated balance sheet.

Unbilled accounts receivables are transferred to accounts receivable when the Company has an unconditional right to consideration.

Advertising revenues

The Company sells advertising

and subscriptions on its wholly-owned AVOD service, Kartoon Channel!

The Company sells advertising and subscriptions on its wholly-owned AVOD service, Kartoon Channel!

, and its SVOD distribution outlets, Kartoon Channel!

and Ameba TV .

Kidaverse , and Ameba TV .

Advertising sales are generated in the form of either flat rate promotions or advertising impressions served.

flat rate promotions with a fixed term, the Company recognizes revenue when all five revenue recognition criteria under ASC 606 are met.

For impressions served, the Company delivers a certain minimum number of impressions on the channel to the advertiser for which the advertiser

pays a contractual CPM per impression.

Impressions served are reported to the Company on a monthly basis, and revenue is reported in the

month the impressions are served.

For subscription-based revenue, the Company recognizes revenue when a customer downloads the mobile

device application and their credit card is charged.

Upon the acquisition of Wow, the Company generates

advertising revenue from Frederator’s owned and operated YouTube channels as well as revenues generated from the operation

of its multi-channel network on YouTube .

Revenue is recognized when services are provided in accordance with the Company’s

agreement with YouTube, the price is fixed or determinable, and collection of the related receivable is probable.

Receivables are usually

collectable within 30 days.

For flat rate promotions with a fixed term, revenue is recognized when all five revenue recognition criteria under ASC 606 are met.

For impressions served, the Company delivers a certain minimum number of impressions on the channel to the advertiser for which the advertiser pays a contractual cost per mille impressions ("CPM").

Impressions served are reported on a monthly basis, and revenue is reported in the month the impressions are served.

For subscription-based revenue, revenue is recognized when a customer downloads the mobile device application and their credit card is charged.

Upon the acquisition of Wow, the Company generates advertising revenue from Frederator’s owned and operated YouTube channels as well as revenues generated from the operation of its multi-channel network on YouTube .

Revenue is recognized when services are provided in accordance with the Company’s agreement with YouTube, the price is fixed or determinable, and collection of the related receivable is probable.

Receivables are usually collectable within 30 days.

Licensing & Royalties

Merchandising and licensing

The Company enters into merchandising

and licensing agreements that allow customers to produce merchandise utilizing certain of the Company’s intellectual property.

minimum guaranteed amounts that make up a contract, revenue is recognized over time, over the term of the license period commencing on

the date at which the customer can use and benefit from the licensed content.

Variable consideration in excess of non-refundable guaranteed

amounts, such as royalties and other contractual payments are recognized as revenue when the amounts are known and become due provided

collectability is reasonably assured.

Invoices are issued based on the contractual terms of an agreement and are usually payable within

The Company enters into merchandising and licensing agreements that allow licensees to produce merchandise utilizing certain of the Company’s intellectual property.

For minimum guaranteed amounts that make up a contract, revenue is recognized over time, over the term of the license period commencing on the date at which the licensees can use and benefit from the licensed content.

Variable consideration in excess of non-refundable guaranteed amounts, such as royalties and other contractual payments are recognized as revenue when the amounts are known and become due provided collectability is reasonably assured.

Invoices are issued based on the contractual terms of an agreement and are usually payable within 30 - 45 days.

Product Sales

The Company recognizes revenue

related to product sales when the Company completes its performance obligation, which is when the goods are transferred to the buyer.

Media Advisory & Advertising

The Company recognizes revenue related to product sales when the Company completes its performance obligation, which is when the goods are transferred to the buyer.

Media Advisory & Advertising Services

Media and Advertising Services

The Company provides media

and advertising services to clients.

The Company provides media and advertising services to clients.

Revenue is recognized when the services are performed.

When the Company purchases advertising for

clients on linear and across digital and streaming platforms and receives a commission, the commissions are recognized as revenue in the

month the advertising is displayed.

When the Company purchases advertising for clients on linear and across digital and streaming platforms and receives a commission, the commissions are recognized as revenue in the month the advertising is displayed.

Gross Versus Net Revenue Presentation

The Company evaluates individual arrangements with third parties to determine whether the Company acts as principal or agent under the terms.

To the extent that the Company acts as the principal in an arrangement, revenues are reported on a gross basis, resulting in revenues and expenses being classified in their respective financial statement line

To the extent that the Company acts as the agent in an arrangement, revenues are reported on a net basis, resulting in revenues being presented net of any expenses incurred in providing agency services.

Determining whether the Company acts as principal or agent is based on an evaluation of which party has substantial risks and rewards of ownership under the terms of an arrangement.

The most significant factors that the Company considers include identification of the primary obligor, as well as which party has credit risk, general and inventory risk and the latitude or ability in establishing prices.

Direct Operating Costs

Direct operating costs include

costs of the Company’s product sales, non-capitalizable film costs, film and television cost amortization expense, impairment expenses

related to film and television costs, and participation expense related to agreements with various animation studios, post-production

studios, writers, directors, musicians or other creative talent with which the Company is obligated to share net profits of the properties

on which they have rendered services.

Upon the acquisition of Wow, the Company also includes salaries and related service production employee

costs as part of its direct operating costs.

Direct operating costs include costs of the Company’s product sales, non-capitalizable film costs, film and television cost amortization expense, impairment expenses related to film and television costs, and participation expense related to agreements with various animation studios, post-production studios, writers, directors, musicians or other creative talent with which the Company is obligated to share net profits of the properties on which they have rendered services.

Upon the acquisition of Wow, the Company also includes salaries and related service production employee costs as part of its direct operating costs.

Share-Based Compensation

The Company issues stock-based

awards to employees and non-employees that are generally in the form of stock options or restricted stock units (“RSUs”).

Share-based compensation cost is recorded for all options and awards of unvested stock based on the grant-date fair value of the award.

The fair value of stock options

is estimated at the date of grant using the Black-Scholes-Merton (“BSM”) option pricing model, which requires management to

make assumptions with respect to the fair value on the grant date.

The Company issues stock-based awards to employees and non-employees that are generally in the form of stock options or restricted stock units (“RSUs”).

Share-based compensation cost is recorded for all options and awards based on the grant-date fair value of the award.

The fair value of stock options is estimated at the date of grant using the Black-Scholes-Merton (“BSM”) option pricing model, which requires management to make assumptions with respect to the fair value on the grant date.

The assumptions are as follows:

(i) the expected term assumption of

the award is based on the Company’s historical exercise and post-vesting behavior (ii) the expected volatility assumption is based

on historical and implied volatilities of the Company’s common stock calculated based on a period of time generally commensurate

with the expected term of the award;

(i) the expected term assumption of the award is based on the Company’s historical exercise and post-vesting behavior (ii) the expected volatility assumption is based on historical and implied volatilities of the Company’s common stock calculated based on a period of time generally commensurate with the expected term of the award;

(iii) the risk-free interest rates are based on the implied yield available on U.S.

treasury zero-coupon

issues with an equivalent expected term;

(iv) and the expected dividend yields of the Company’s stock are based on history and expectations

of future dividends payable.

In the case of RSUs the fair value is calculated based on the Company’s underlying common stock on

the date of grant.

The Company recognizes compensation

expense over the requisite service period ratably, using the graded attribution method, which is in-substance, recognizing multiple awards

based on the vesting schedule.

treasury zero-coupon issues with an equivalent expected term;

(iv) and the expected dividend yields of the Company’s stock are based on history and expectations of future dividends payable.

In the case of RSUs the fair value is calculated based on the Company’s underlying common stock on the date of grant.

The Company recognizes compensation expense over the requisite service period ratably, using the graded attribution method, which is in-substance, recognizing multiple awards based on the vesting schedule.

The Company has elected to account for forfeitures when they occur.

The Company issues authorized shares

available for issuance under the Company’s 2015 Incentive Plan and the Company’s 2020 Incentive Plan upon employees’

exercise of their stock options.

The Company issues authorized shares available for issuance under the Company’s 2015 Incentive Plan and the Company’s 2020 Incentive Plan upon employees’ exercise of their stock options.

Debt Issuance Costs

Debt issuance costs relate to the issuance of Wow’s Production Facilities and are recorded as a reduction to the carrying amount of debt and amortized to interest expense using the effective interest method over the respective terms of the facilities.

Debt issuance costs directly attributable to the acquisition or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time the assets are substantially ready for their intended use or sale.

Debt issuance costs as of March 31, 2023 and December 31, 2022 were insignificant.

Earnings Per Share

Basic earnings (loss) per

share of common stock (“EPS”) is calculated by dividing net income (loss) applicable to common stockholders by the weighted

average number of shares of common stock outstanding for the period.

Diluted EPS is calculated by dividing net income (loss) applicable

to common stockholders by the weighted average number of shares of common stock outstanding, plus the assumed exercise of all dilutive

securities using the treasury stock or “as converted” method, as appropriate.

During periods of net loss, all common stock

equivalents are excluded from the diluted EPS calculation because they are antidilutive.

Deferred income tax assets

and liabilities are recognized based on differences between the financial statement and tax basis of assets and liabilities using presently

enacted tax rates.

At each balance sheet date, the Company evaluates the available evidence about future taxable income and other possible

sources of realization of deferred tax assets and records a valuation allowance that reduces the deferred tax assets to an amount that

represents management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized.

Basic earnings (loss) per share of common stock (“EPS”) is calculated by dividing net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding for the period.

Diluted EPS is calculated by dividing net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding, plus the assumed exercise of all dilutive securities using the treasury stock or “as converted” method, as appropriate.

During periods of net loss, all common stock equivalents are excluded from the diluted EPS calculation because they are antidilutive.

Deferred income tax assets and liabilities are recognized based on differences between the financial statement and tax basis of assets and liabilities using presently enacted tax rates.

At each balance sheet date, the Company evaluates the available evidence about future taxable income and other possible sources of realization of deferred tax assets and records a

valuation allowance that reduces the deferred tax assets to an amount that represents management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized.

Concentration of Risk

The Company maintains its

cash in bank deposit accounts which, at times, may exceed the Federal Deposit Insurance Corporation’s (“FDIC”) or the

Canadian Deposit Insurance Corporation’s (“CDIC”) insured amounts.

Balances on interest bearing deposits at banks in

the United States are insured by the FDIC up to $250,000 per account and deposits in banks in Canada are insured by the CDIC up to $100,000

As of September 30, 2022, the Company had fifteen accounts with an uninsured balance in bank deposit accounts of $ 3.0

As of December 31, 2021, the Company had four accounts with an uninsured balance in bank deposit accounts of $ 1.1

The Company has a

managed account and a brokerage account with a financial institution.

The managed account maintains the Company’s investments

in marketable securities of $ 89.9

million and $ 112.5

million as of September 30, 2022 and December 31, 2021, respectively.

The brokerage account did not hold a material amount of

the Company’s cash as of September 30, 2022 or December 31, 2021.

Assets in the managed and brokerage account are protected by

the Securities Investor Protection Corporation (“SIPC”) up to $500,000 (with a limit of $ 250,000

In addition, the financial institution provides additional “excess of SIPC” coverage which insures up to $1

As of September 30, 2022 and December 31, 2021, the Company has not had account balances held at this financial institution

that exceeded the insured balances.

The Company also has an

account with a German bank that manages its foreign transactions with YFE.

The cash balance as of September 30, 2022 held at the

German institution was $ 2.7

Deposits in German banks are subject to a mandatory basic security amount up to $100,000 EURO.

In addition, the

institution is a member of the deposit protection fund for the German private banking industry that currently insures $ 5.5

million of each customer’s deposit account.

As of September 30, 2022 and December 31, 2021, the Company has not had account

balances held at this financial institution that exceeded the insured balances.

The Company’s investment

portfolio consists of investment-grade securities diversified among security types, industries and issuers.

The Company’s policy

limits the amount of credit exposure to any one security issue or issuer and the Company believes no significant concentration of credit

risk exists with respect to these investments.

For the three months

ended September 30, 2022, the Company had four customers, whose total revenue exceeded 10 % of total consolidated revenue.

These customers

accounted for 83 % of total revenue.

For the nine months ended

September 30, 2022, the Company had four customers whose total revenue exceeded 10 % of total consolidated revenue.

These customers accounted

for 74 % of total revenue.

As of September 30, 2022, the Company had two customers whose total accounts receivable exceeded 10 % of total

accounts receivable.

These customers accounted for 28 % of the total accounts receivable as of September 30, 2022.

For the three months ended

September 30, 2021, the Company had one customer whose total revenue exceeded 10 % of the total consolidated revenue.

This customer accounted

for 13 % of total revenue.

For the nine months ended

September 30, 2021, the Company had one customer, whose total revenue exceeded 10 % of total consolidated revenue.

This customer accounted

for 22 % of total revenue.

As of September 30, 2021, the Company had three customers whose accounts receivable exceeded 10 % of total accounts

Those customers accounted for 59 % of accounts receivable.

There is significant financial

risk associated with a dependence upon a small number of customers.

The Company periodically assesses the financial strength of these

customers and establishes allowances for any anticipated bad debt.

As of September 30, 2022 and December 31, 2021, the Company recorded

an allowance for bad debt of $ 87,710 and $ 22,080 , respectively.

The Company maintains its cash in bank deposit accounts which, at times, may exceed the Federal Deposit Insurance Corporation’s (“FDIC”) or the Canadian Deposit Insurance Corporation’s (“CDIC”) insured amounts.

Balances on interest bearing deposits at banks in the United States are insured by the FDIC up to $250,000 per account and deposits in banks in Canada are insured by the CDIC up to $100,000 CAD.

As of March 31, 2023 and December 31, 2022, the Company had eleven and twelve bank deposit accounts with an aggregate uninsured balance of $ 3.2 million and $ 3.4 million, respectively.

The Company has a managed account and a brokerage account with a financial institution.

The managed account maintains its investments in marketable securities of $ 69.7 million as of March 31, 2023.

The brokerage account did not have a cash balance as of March 31, 2023.

Assets in the managed account and brokerage account are protected by the Securities Investor Protection Corporation (“SIPC”) up to $500,000 (with a limit of $250,000 for cash).

In addition, the financial institution provides additional “excess of SIPC” coverage which insures up to $1.0 billion.

As of March 31, 2023, the Company has not had account balances held at this financial institution that exceed the insured balances.

The Company’s investment portfolio consists of investment-grade securities diversified among security types, industries and issuers.

The Company’s policy limits the amount of credit exposure to any one security issue or issuer and the Company believes no significant concentration of credit risk exists with respect to these investments.

During the three months ended March 31, 2023, the Company had three customers, whose total revenue exceeded 10% of total consolidated revenue.

These customers accounted for 71.9 % of total revenue.

As of March 31, 2023, the Company had five customers whose total accounts receivable exceeded 10% of total accounts receivable.

These customers accounted for 69.0 % of the total accounts receivable as of March 31, 2023.

During the three months ended March 31, 2022, the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue.

This customer accounted for 13.3 % of total revenue.

As of December 31, 2022, the Company had two customers whose total accounts receivable exceeded 10% of total accounts receivable.

These customers accounted for 26.1 % of the total accounts receivable as of December 31, 2022.

There is significant financial risk associated with a dependence upon a small number of customers.

The Company periodically assesses the financial strength of these customers and establishes allowances for any anticipated bad debt.

Fair value of Financial Instruments

Fair value is defined as the

price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at

the measurement date.

FASB ASC 820, Fair Value Measurement (“ASC 820”) establishes a three-tier fair value hierarchy

which prioritizes the inputs used in measuring fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active

markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).

These tiers include:

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• Level 3 - Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Financial instruments that

are not measured at fair value on the condensed consolidated statements of operations are represented by cash, receivables, payables, accrued

liabilities, bank indebtedness, the Company’s margin loan and interim production financing.

The carrying amounts of cash,

restricted cash, receivables, payables, accrued liabilities, bank indebtedness and the Company’s margin loan approximate fair value

due to the short-term nature of the instruments.

The fair values of the Company’s liability-classified derivative warrants are revalued

at the end of each reporting period determined using the BSM model (Level 2) with standard valuation inputs.

Refer to Note 19 for additional

The carrying amounts of cash, restricted cash, receivables, payables, accrued liabilities, bank indebtedness and the margin loan approximate fair value due to the short-term nature of the instruments.

The Company used the fair values of the liability-classified derivative warrants revalued at the end of each reporting period determined using the BSM model (Level 2) with standard valuation inputs.

Refer to Note 18 for additional details.

The investment in YFE is also revalued at the end of each reporting period based on the trading price of YFE (Level 1).

to Note 5 for additional details.

Upon acquisition of Wow, the Company assumed foreign currency forward contracts that are not traded

in active markets.

These are fair valued using observable forward exchange rates at the measurement dates and interest rates corresponding

to the maturity of the contracts.

The fair values of the available-for-sale

securities are generally based on quoted market prices, where available.

These fair values are obtained primarily from third-party pricing

services, which generally use Level 1 or Level 2 inputs for the determination of fair value to facilitate fair value measurements and

Level 2 securities primarily include corporate securities, securities from states, municipalities and political subdivisions,

mortgage-backed securities, United States Government securities, foreign government securities, and certain other asset-backed securities.

For securities not actively traded, the pricing services may use quoted market prices of comparable instruments or a variety of valuation

techniques, incorporating inputs that are currently observable in the markets for similar securities.

The following table summarizes

the marketable securities measured at fair value by level within the fair value hierarchy as of September 30, 2022 (in thousands):

Schedule of marketable security measured at fair value

Total Fair Value

Refer to Note 5 for additional details.

Upon the acquisition of Wow, foreign currency forward contracts that are not traded in active markets were assumed.

fair valued using observable forward exchange rates at the measurement dates and interest rates corresponding to the maturity of the contracts (Level 2).

The fair values of the available-for-sale securities are generally based on quoted market prices, where available.

These fair values are obtained primarily from third-party pricing services, which generally use Level 1 or Level 2 inputs for the determination of fair value to facilitate fair value measurements and disclosures.

Level 2 securities primarily include corporate securities, securities from states, municipalities and political subdivisions, mortgage-backed securities, United States Government securities, foreign government securities, and certain other asset-backed securities.

For securities not actively traded, the pricing services may use quoted market prices of comparable instruments or a variety of valuation techniques, incorporating inputs that are currently observable in the markets for similar securities.

The following table summarizes the marketable securities measured at fair value by level within the fair value hierarchy as of March 31, 2023 (in thousands):

Level 1 Level 2 Total Fair Value

Marketable investments:

Corporate Bonds $ 31,552 $ 2,387 $ 33,939

Mortgage-Backed

Treasury 19,775 – 19,775

agency and government sponsored securities — 6,392 6,392

states and municipalities — 9,544 9,544

Fair values were determined

for each individual security in the investment portfolio.

The Company’s marketable securities are considered to be available-for-sale

investments as defined under FASB ASC 320, Investments – Debt and Equity Securities .

There were no impairment charges recorded

for the marketable securities.

Total $ 51,327 $ 18,323 $ 69,650

Fair values were determined for each individual security in the investment portfolio.

The Company’s marketable securities are considered to be available-for-sale investments as defined under FASB ASC 320, Investments – Debt and Equity Securities .

Neither an impairment or an allowance for credit loss was recorded for the marketable securities as of March 31, 2023 and December 31, 2022.

Refer to Note 6 for additional details.

Financial and nonfinancial

assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs and

include the Company’s contingent earn-out liability, goodwill and film and television costs as of September 30, 2022.

no significant events that occurred or circumstances that resulted in an adjustment to the fair value of those assets and liabilities

measured on a non-recurring basis during the nine months ended September 30, 2022.

Recent Accounting Pronouncements

In June 2016, the FASB issued

Accounting Standards Update ("ASU") No.

Financial and nonfinancial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs and include the Company’s goodwill, intangible assets and film and television costs.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update ("ASU") No.

2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326) .

ASU 2016-13 replaces the “incurred loss” credit losses framework with a new accounting standard that requires management's

measurement of the allowance for credit losses to be based on a broader range of reasonable and supportable information for lifetime

credit loss estimates.

ASU 2016-13 replaces the “incurred loss” credit losses framework with a new accounting standard that requires management's measurement of the allowance for credit losses to be based on a broader range of reasonable and supportable information for lifetime credit loss estimates.

The new model, referred to as the current expected credit loss (“CECL”) model, will apply to:

(1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures.

This includes,

but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees.

The CECL model does not

apply to available-for-sale (“AFS”) debt securities.

For AFS debt securities with unrealized losses, entities will measure

credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions

in the amortized cost of the securities.

The ASU also simplifies the accounting model for purchased credit-impaired debt securities and

2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating

the allowance for loan and lease losses.

This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees.

The CECL model does not apply to available-for-sale (“AFS”) debt securities.

For AFS debt securities with unrealized losses, entities will measure credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities.

The ASU also simplifies the accounting model for purchased credit-impaired debt securities and loans.

2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses.

On October 16, 2019, the FASB approved a proposal to change the effective date of ASU No.

for smaller reporting companies, such as the Company, delaying the effective date to fiscal years beginning after December 31, 2022,

including interim periods within those fiscal periods.

2016-13 for smaller reporting companies, such as the Company, delaying the effective date to fiscal years beginning after December 31, 2022, including interim periods within those fiscal periods.

Early adoption is permitted for interim and annual reporting periods.

is currently evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements but does not expect that the

adoption of this standard will have a material impact.

In October 2021, the FASB

issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with

Customers" (“ASU 2021-08”).

The standard requires an acquirer in a business combination to recognize and measure

contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, “Revenue from Contracts

with Customers,” as if it had originated the contracts.

The standard is effective for fiscal years, and interim periods within those

fiscal years, beginning after December 15, 2022.

Early adoption is permitted.

The Company adopted this ASU during the second quarter of

2022 and has incorporated this guidance in its evaluation of the accounting for the acquisition of Wow.

On January 13, 2022, the Company

completed the acquisition of Ameba, pursuant to a Stock Purchase Agreement (the “SPA”) by and between the Company and Tony

Havelka, a resident of the Province of Manitoba (the “Seller”), in which the Company acquired from the Seller all of the issued

and outstanding equity interests of Ameba.

Concurrently, pursuant to an Asset Purchase Agreement (the “APA”) by and among

the Company, the Seller and Tek Gear Inc., a corporation owned by the Seller, the Company acquired from the Seller a proprietary software

platform (the “Technology”) that powers the Ameba SVOD deliveries.

The transactions contemplated by the SPA and the APA are

referred to as the “Ameba Acquisition.”

Consideration paid by the

Company in the transaction at closing consisted of $ 3.8 million in cash, inclusive of $ 0.3 million

for a net working capital adjustment (the “NWC Adjustment”) pursuant to the SPA and $0.3 million in cash pursuant to the APA,

for total consideration of $ 4.1 million , or $ 3.9 million net of cash acquired, excluding transaction costs and subject to as described

in more detail below.

costs incurred relating to the Ameba Acquisition, including legal and accounting, totaled $ 0.1 million , which are included in general and

administrative expenses on the statements of operations.

The agreement provided for an adjustment to the purchase price based on an adjusted

net working capital (“NWC”) as defined in the agreement.

Ameba acquisition facilitates the Company’s expansion into SVOD with its technology and content essential to the launch of the ad-free

subscription-based Kartoon Channel!

Kidaverse platform.

The acquisition provides immediate benefit recognized through the content

available on the SVOD Ameba channel app, available for download on Amazon Fire TV, Roku, Xbox 360, Xumo, LG Smart TV, TiVo, VEWD, CINEMOOD

and iOS and Android devices.

Company has determined that the Ameba Acquisition constitutes a business acquisition as defined by ASC 805.

Accordingly, the assets acquired,

and the liabilities assumed in the transaction were recorded at their estimated acquisition fair values, while transaction costs associated

with the acquisition were expensed as incurred pursuant to the purchase method of accounting in accordance with ASC 805.

The Company’s

preliminary purchase price allocation was based on an evaluation of the available data to determine the appropriate fair values based

on the requirements of ASC 820 and represents managements best estimates.

following table summarizes the consideration paid, including the Net Working Capital Adjustment (in thousands):

Total purchase price consideration paid

SPA cash consideration at closing

APA cash consideration at closing

Net working capital adjustment

The net working capital

calculation was finalized as $ 268,657

and paid to the acquiree during the three months ended June 30, 2022, as determined by the Company and agreed upon by the

As of September 30, 2022,

the accounting for the acquisition is preliminary, as the Company is finalizing its valuation and determination of the intangible assets.

The Company has engaged a third-party valuation firm to assist with the purchase price allocation, which will be completed in subsequent

The preliminary purchase price

allocation is based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company on January 13,

2022 as follows (in thousands):

Assets acquired and liabilities assumed

Accounts Receivable

Prepaids Expenses

Digital Network

Accounts Payable and Accrued Expenses

Tax Liability

Total Consideration

The identifiable intangible

assets acquired of $ 3.1 million is comprised of $2.8 million for the Digital Network, Ameba TV, with a remaining economic life of 18 years,

$23,000 for Ameba’s trade name with a useful life of 3 years and $0.3 million for the SVOD technology with a remaining useful life

of approximately 3 years.

The $0.7 million in goodwill arising from the acquisition consists largely of the synergies expected from the

combined businesses, including the Company’s build-out of its technology for the expansion of the Kartoon Channel!

The goodwill was recorded to the Content Production & Distribution reporting unit and is not

deductible for tax purposes.

The valuation and allocation

of the preliminary purchase price shown in the above table was based upon a preliminary valuation and estimates and assumptions, especially

with respect to intangible assets, that are subject to change within the purchase price allocation period generally one year from the

acquisition date, including the Company’s evaluation of certain income tax positions, with corresponding adjustments to goodwill.

Valuation Methodology

digital network was valued by performing a discounted cash flow analysis.

This method includes discounting the projected cash flows associated

with the current digital network content, based primarily upon historical revenue and projections over its expected life and considers

the operating expenses and contributory asset charges associated with servicing such network.

Projected cash flows attributable to the

digital network was discounted to the present value at a rate commensurate with the perceived risk.

The useful life of the digital network

is estimated based primarily upon the present value of cash flows attributable to the digital network.

Ameba trade name was valued using the relief-from-royalty method.

This method is an income approach that estimates the portion of a company’s

earnings attributable to an asset based on the royalty rate the company would have paid for the use of the asset if it did not own it.

Royalty payments are estimated by applying a royalty rate to the prospective revenue attributable to the intangible asset.

The resulting

annual royalty payments are tax-affected and then discounted to present value.

The useful life of the trade name is based on the estimated

time it will take for the Company to rebrand the Ameba trade name and logo with the Company branded Kartoon Channel!

Kidaverse trade

The technology was valued

at cost as the Company determined that the cost approximated the fair value.

assumptions used in forecasting cash flows for each of the identified intangible assets included consideration of the following:

Historical performance including sales and profitability.

Expense estimates.

Contributory asset charges.

Estimated economic life of asset.

Acquisition of new customers.

Attrition of existing customers.

The Company has adopted the ASU as of January 1, 2023.

The adoption did not have a material impact on the Company's condensed consolidated financial statements.

Refer to Note 6 for additional details.

The Company has determined that the following acquisition completed by the Company constitutes a business acquisition as defined by ASC 805, Business Combinations (“ASC 805”).

Accordingly, the assets acquired and the liabilities assumed in the transaction were recorded at their estimated acquisition date fair values, while transaction costs

associated with the acquisition were expensed as incurred pursuant to the purchase method of accounting in accordance with ASC 805.

The Company’s purchase price allocations were based on an evaluation of the appropriate fair values and represent management's best estimate based on available data at the time of acquisition and during the one year period thereafter.

Fair values were determined based on the requirements of ASC 820, Fair Measurements and Disclosures (“ASC 820”).

Wow Unlimited Media

On April 6, 2022, the Company

completed the acquisition of Wow.

On April 6, 2022, the Company completed the acquisition of Wow.

On October 26, 2021, the Company’s wholly-owned subsidiary, 1326919 B.C.

LTD., a corporation existing

under the laws of the Province of British Columbia and Wow, entered into an Arrangement Agreement to effect a plan of arrangement under

the arrangement provisions of Part 9, Division 5 of the Business Corporations Act .

The Company purchased 100% of issued and outstanding

shares of Wow for $ 38.3 million in cash and 11,057,085 shares of the Company’s common stock, including Wow’s subsidiary Frederator.

The plan of arrangement and final agreement, together with the acquisition of Wow’s Mainframe

Studios and its subsidiary Frederator, are referred to as the “Wow Acquisition.”

Final consideration paid by

the Company in the transaction at closing consisted of $ 38.3 million in cash and 11,057,085

shares of the Company’s common stock, including 691,262 Exchangeable Shares, with a fair value of $ 11.6 million , 2,409,515 options

granted to employees of Wow with a fair value of previously vested options of $ 1.2 million , included in the purchase price, and $ 0.3 million

for future services and $ 1.6 million in severance and bonuses to executives, for total consideration

of $ 52.7 million , or $ 50.1 million net of cash acquired, excluding transaction costs as described in more detail below.

costs incurred relating to the Wow Acquisition, including banks, legal and accounting, totaled $ 3.1 million , which is included in general

and administrative expenses on the statements of operations for the nine months ended September 30, 2022.

The Company will also expense

the unvested replacement options, with a fair value of $ 0.3 million , as stock-based compensation expense over the remaining requisite

service period specified in the agreements.

Wow Acquisition facilitates the Company’s expansion as a global animation and children’s digital media company.

content, ongoing production projects and the addition of two studios that can also be leveraged for in-house production of the Company’s

properties, will drive cost synergies, facilitate further expansion into the global children’s entertainment market and strengthen

financial growth.

Frederator, with its owned and operated channels on YouTube , will provide a distribution platform to facilitate

the global growth of Kartoon Channel !.

Company has determined that the Wow Acquisition constitutes a business acquisition as defined by ASC 805.

Accordingly, the assets acquired,

and the liabilities assumed in the transaction were recorded at their estimated acquisition fair values, while transaction costs associated

with the acquisition were expensed as incurred pursuant to the purchase method of accounting in accordance with ASC 805.

The Company’s

preliminary purchase price allocation was based on an evaluation of the available data to determine the appropriate fair values based

on the requirements of ASC 820 and represents managements best estimates.

following table summarizes the consideration paid:

Schedule of total purchase price consideration paid

LTD., a corporation existing under the laws of the Province of British Columbia and Wow, entered into an Arrangement Agreement to effect a plan of arrangement under the arrangement provisions of Part 9, Division 5 of the Business Corporations Act.

The Company purchased 100 % of the issued and outstanding shares of Wow, including Wow’s subsidiary Frederator.

The plan of arrangement and final agreement, together with the acquisition of Wow’s Mainframe Studios and its subsidiary Frederator, are referred to as the “Wow Acquisition.”

The final consideration of $ 52.7 million, excluding transaction costs, was paid by the Company at closing.

The consideration consisted of $ 38.3 million in cash, 1,105,708 shares of the Company’s common stock, including 69,126 Exchangeable Shares, with a fair value of $ 11.6 million, 240,952 options granted to employees of Wow, 196,753 of which with a fair value of $ 1.2 million, were previously vested and included in the purchase price and $ 1.6 million in severance and bonuses to executives.

Transaction costs relating to the Wow Acquisition of $ 4.5 million, including bank, legal and accounting fees, were expensed as part of General and Administrative expenses on the Company's fiscal year ended December 31, 2022 consolidated statement of operations.

The Company will also expense the unvested replacement options, with a fair value of $ 0.3 million, as stock-based compensation expense over the remaining requisite service period specified in the agreements.

The Wow Acquisition facilitates the Company’s expansion as a global animation and children’s digital media company.

With Wow’s content, ongoing production projects and the addition of two studios that can also be leveraged for in-house production of the Company’s properties, will drive cost synergies, facilitate further expansion into the global children’s entertainment market and strengthen financial growth.

Frederator, with its owned and operated channels on YouTube, will provide a distribution platform to facilitate the global growth of Kartoon Channel!

The following table summarizes the consideration paid (in thousands):

Cash $ 38,310

Genius Common Stock Issued 10,832

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Severance Payments 1,044

As of September 30, 2022,

the accounting for the acquisition is preliminary, as the Company is finalizing its valuation and determination of the intangible assets.

The Company has engaged a third-party valuation firm to assist with the purchase price allocation, which will be completed in subsequent

The preliminary purchase price

allocation is based upon the estimate of the fair value of the assets acquired and the liabilities assumed by the Company on April 6,

2022 as follows (in thousands):

Schedule of fair value of the assets acquired and the liabilities assumed

Total $ 52,651

The Company has completed and finalized the purchase price allocation as of December 31, 2022 and recorded the respective fair values of assets acquired and liabilities assumed on April 6, 2022 as follows (in thousands):

Cash and cash equivalents $ 2,573

Accounts Receivable 34,237

Other Receivables

Other Receivable 78

Prepaid Expenses and Other 1,245

Property and Equipment 1,936

IP (In-Process)

IP (Proprietary Productions)

ROU Assets 10,311

IP (Productions in Progress) 4,600

IP (Completed Productions) 5,684

Tradename 7,630

Customer Relationships 16,064

Networks and Platforms 803

Goodwill 21,398

Accounts Payable ( 1,547 )

Participations Payable ( 1,380 )

Bank Debt ( 1,475 )

Accrued Liabilities ( 3,825 )

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Total Consideration

The identifiable intangible

assets acquired of $ 34.8 million is comprised of $16.1 million for Customer Relationships, with remaining economic lives of 8 years, $10.3

million for IP Content including completed productions and productions in progress, that is included as part of Film and Television costs

on the condensed consolidated balance sheet and will be amortized as such, Tradenames for $ 7.6 million , with an indefinite life and Networks

and Platforms of $ 0.8 million , with a remaining economic life of 16 years.

The goodwill of $ 21.4 million arising from the acquisition

consists largely of the synergies expected from the combined businesses, including the Company’s ability to produce its content

in-house utilizing the acquired studios and expansion of the Kartoon Channel!

The goodwill was recorded to the Content

Production & Distribution reporting unit and is not deductible for tax purposes.

The valuation and allocation

of the preliminary purchase price shown in the above table was based upon a preliminary valuation and estimates and assumptions, especially

with respect to intangible assets, that are subject to change within the purchase price allocation period generally one year from the

acquisition date, including the Company’s evaluation of certain income tax positions, with corresponding adjustments to goodwill.

The identifiable intangible assets acquired of $ 34.8 million is comprised of $ 16.1 million for Customer Relationships, with remaining economic lives of 8 years, $ 10.3 million for IP Content including completed productions and productions in progress, that is included as part of Film and Television Costs, net on the condensed consolidated balance sheet and will be amortized as such, Tradenames for $ 7.6 million, with an indefinite life and Networks and Platforms of $ 0.8 million, with a remaining economic life of 16 years.

The goodwill of $ 21.4 million arising from the acquisition consists largely of the synergies expected from the combined businesses, including the Company’s ability to produce its content in-house utilizing the acquired studios and expansion of the Kartoon Channel!

The goodwill was recorded to the Content Production & Distribution reporting unit and is not deductible for tax purposes.

The fair values of the acquired identifiable intangible assets as described above were determined using the following methods:

Valuation Methodology

Networks and Platforms were valued by performing a discounted cash flow analysis, specifically the multi-period excess earnings method.

This method involves quantifying the amount of residual (or excess) cash flows generated by the current digital network content, based

primarily upon historical revenue and projections over its expected life, and considers the operating expenses and contributory asset

charges associated with servicing such network.

Projected cash flows attributable to the networks are discounted to present value at a

rate commensurate with the perceived risk.

The significant assumptions used in this model included the customer attrition rate, acquisition

rate of new customers, weighted average cost of capital, and expense estimates.

The useful life of the networks is estimated based primarily

upon the present value of cash flows attributable to the digital network.

The significant assumptions used in this method included the

royalty rate and weighted average cost of capital.

Tradenames were valued using the relief-from-royalty method.

The relief-from-royalty method is one of the methods under the income approach

wherein estimates of a company’s earnings attributable to the intangible asset are based on the royalty rate the company would have

paid for the use of the asset if it did not own it.

Royalty payments are estimated by applying a royalty rate to the prospective revenue

attributable to the intangible asset.

The Networks and Platforms were valued by performing a discounted cash flow analysis, specifically the multi-period excess earnings method.

This method involves quantifying the amount of residual (or excess) cash flows generated by the current digital network content, based primarily upon historical revenue and projections over its expected life, and considers the operating expenses and contributory asset charges associated with servicing such network.

Projected cash flows attributable to the networks are discounted to present value at a rate commensurate with the perceived risk.

The significant assumptions used in this model included the customer attrition rate, acquisition rate of new customers, weighted average cost of capital, and expense estimates.

The useful life of the networks is estimated based primarily upon the present value of cash flows attributable to the digital network.

The significant assumptions used in this method included the royalty rate and weighted average cost of capital.

The Tradenames were valued using the relief-from-royalty method.

The relief-from-royalty method is one of the methods under the income approach wherein estimates of a company’s earnings attributable to the intangible asset are based on the royalty rate the company would have paid for the use of the asset if it did not own it.

Royalty payments are estimated by applying a royalty rate to the prospective revenue attributable to the intangible asset.

The resulting annual royalty payments are tax-affected and then discounted to present value.

Supplemental Pro Forma Information

The following unaudited supplemental

pro forma information summarizes the Company’s results of operations as if the acquisitions were completed at the beginning of

the periods presented (in thousands, except for share and per share data):

Supplemental pro forma information

Three Months Ended

Genius Brands Consolidated

(including Wow and Ameba results)

September 30,

Total Revenues

Net Income (Loss)

Net Loss per Share of Common Stock (Basic and Diluted)

Weighted Average Shares Outstanding (Basic and Diluted)

Nine months Ended

The following supplemental unaudited pro forma information summarizes the Company’s results of operations as if the acquisitions were completed at the beginning of the periods presented (in thousands, except for share and per share data):

Three Months Ended Three Months Ended

Genius Brands Consolidated

(including Wow and Ameba results)

September 30, 2022

September 30, 2021

September 30, 2022 (1)

September 30, 2022

September 30, 2021 (1)

September 30, 2021

(including WOW Pre-Acquisition Results) Wow Pre-Acquisition

March 31, 2023

March 31, 2022 (1)

Total Revenues $ 14,189 $ 19,517 $ 18,076

Net Income (Loss)

Net Income (Loss) Attributable to Genius Brands International, Inc.

$ ( 24,762 ) $ ( 3,520 ) $ 1,011

Net Loss per Share of Common Stock (Basic and Diluted) $ ( 0.77 ) $ ( 0.11 )

Weighted Average Shares Outstanding (Basic and Diluted) 31,978,335 31,483,633

(1) The unaudited historical financial statements of Wow

are not adjusted for conversion to U.S.

GAAP from International Financial Reporting Standards, as the adjustments are immaterial to the

periods presented.

(1) The unaudited historical financial statements of Wow are not adjusted for conversion to U.S.

GAAP from International Financial Reporting Standards, as the adjustments are immaterial to the periods presented.

Variable Interest Entity

In July 2020, the

Company entered into a binding term sheet with POW, Inc.

(“POW!”) in which the Company agreed to form an entity with

to exploit certain rights in intellectual property created by Stan Lee, as well as the name and likeness of Stan Lee.

entity is called “Stan Lee Universe, LLC” (“SLU”).

and the Company executed an Operating Agreement for

the joint venture, effective as of June 1, 2021, with activity commencing during the fourth quarter of 2021.

The purpose of the

acquisition was to enable the Company to assume the worldwide rights, in perpetuity, to the name, physical likeness, physical

signature, live-action and animated motion picture, television, online, digital, publishing, comic book, merchandising and licensing

rights to Stan Lee and over 100 original Stan Lee creations (the “Stan Lee Assets”), from which Genius Brands plans to

develop and license multiple properties each year.

The Company contributed $ 2.0

million to obtain 50% of SLU’s voting equity and POW, for the remaining 50%, contributed the specified intangible assets associated

with the Stan Lee Assets.

POW will retain certain rights in the transferred intangible assets, namely existing the rights/obligations

arising from current licensing agreements.

Under ASC 805, the Company determined that the value of SLU was wholly attributable to the

Stan Lee Assets and would be accounted for as an asset acquisition.

The acquisition cost of $ 2.0 million was equivalent to the value of

the Stan Lee Assets contributed by POW.

Therefore, the fair value of the consideration paid by the entity of $2.0 million and the fair

value of the 50% non-controlling interest approximated a total of $4.0 million.

Pursuant to the guidance under

ASC 810, the Company concluded that SLU qualifies as a variable interest entity (“VIE”).

The Company consolidates the results

of SLU as it was determined that the Company is the primary beneficiary due to having the power through the collaboration to direct the

activities that most significantly impact the entity’s economic performance and the Company is required to fund over half of the

economic support of the entity.

Accordingly, the Company recorded the total fair value of the Stan Lee Assets in SLU of $ 4.0 million ,

as an intangible asset to be amortized over the duration of 70 years, the life of the publicity rights related to Stan Lee’s name,

likeness, voice, physical characteristics, etc.

During the three and nine

months ended September 30, 2022, SLU generated $ 46,947 and $ 2.3 million in net income, respectively.

During the nine months ended September

30, 2022, the Company distributed $ 1.2 million to POW as their share of the non-controlling interest in SLU.

The Company’s investment

in SLU, net of the cash received from a distribution of $ 1.2 million , is $ 0.8 million as of September 30, 2022.

In addition, the Company

has incurred $ 0.4 million of costs incurred for marketing and operational services.

There were no changes in facts

and circumstances that occurred during the three or nine months ended September 30, 2022 that would result in a re-evaluation of the VIE

In July 2020, the Company entered into a binding term sheet with POW!

Entertainment, LLC.

(“POW”) in which we agreed to form an entity with POW to exploit certain rights in intellectual property created by Stan Lee, as well as the name and likeness of Stan Lee.

The entity is called “Stan Lee Universe, LLC.” POW and the Company executed an Operating Agreement for the joint venture, effective as of June 1, 2021.

The purpose of the acquisition was to enable the Company to assume the worldwide rights, in perpetuity, to the name, physical likeness, physical signature, live-action and animated motion picture, television, online, digital, publishing, comic book, merchandising and licensing rights to Stan Lee and over 100 original Stan Lee creations (the “Stan Lee Assets”), from which the Company plans to develop and license multiple properties each year.

During the three months ended March 31, 2023, SLU generated $ 0.1 million in net income.

The Company's net investment as of March 31, 2023 of $ 0.8 million, remained the same as compared to December 31, 2022.

There were no changes in facts and circumstances that occurred during the three months ended March 31, 2023 that would result in a re-evaluation of the VIE assessment.

Investment in Equity Interest

On December 1, 2021, the Company

completed a $ 6.8 million investment in YFE.

In exchange for $ 3.4 million in cash and 2,281,269 shares of the Company’s common stock

(valued at approximately $3.4 million), the Company received 3,000,000 shares of YFE’s common stock.

Following the initial equity

investment in YFE during the fourth quarter of 2021, the Company participated in a mandatory tender offer for the remaining publicly

traded shares held by YFE shareholders.

Upon the expiration of the offer on February 14, 2022, the Company purchased an additional 2,637,717

shares of YFE at 2.00 EUROS per share or $5.7 million in the aggregate.

On March 9, 2022, bonds held by YFE shareholders, were

converted into 2,574,000

shares of YFE common stock, 304,631

of which were purchased by the Company at 2.00 EUROS per share, or $0.6 million.

On April 5, 2022, the Company exercised its subscription

rights to purchase an additional 914,284

shares of YFE’s common stock at 3.00 EUROS per share, or $ 2.7

million , increasing the number of YFE’s outstanding shares to 6,857,132 .

As of September 30, 2022 and December 31, 2021, the Company’s ownership in YFE was 48.0 %

respectively.

The Company has elected to

apply the fair value option for its investment in YFE (Level 1) as YFE is a publicly traded company on the Frankfurt Exchange, therefore

its trading price is readily available and relied upon by investors.

The Company recognizes changes in the fair value of its investment

in YFE as unrealized gains (losses), net in the accompanying consolidated statements of operations with other income (loss), net.

The Company revalues the investment

in YFE securities as of the end of each reporting period.

During the three and nine months ended September 30, 2022, the Company recorded

a total loss of $ 5.4 million and $ 3.8 million , respectively, within other income (expense) on the Company’s condensed consolidated

statements of operations.

The total loss includes $ 1.3 million and $ 2.6 million due to the change in the foreign currency translation rate

during the three and nine months ended September 30, 2022, respectively.

Wow has a 63% membership interest

in Ratchet Productions, LLC (“RPLLC”), a privately-owned company registered in Colorado.

Wow accounts for its interest using

the equity method of accounting.

Prior to the Wow Acquisition, in 2016, Wow determined that its investment in RPLLC was impaired and reduced

its investment to $ 0 .

As the investment has been $ 0 , and remains as such, there has been no impact on the Company’s financial statements

for the membership interest in RPLLC.

As of March 31, 2023, the Company owned 6,857,132 shares of YFE.

At the time of the initial investment in 2021, it was determined that based on the Company's 28.69 % ownership in YFE, the Company had significant influence over the entity.

Therefore, under the equity method of accounting, the Company elected to account for the investment at fair value under the fair value option.

Under the fair value option, the investment is remeasured and recorded at fair value each reporting period, with the change recorded through earnings.

As of March 31, 2023, the fair value of the investment was determined to be $ 15.7 million recorded within noncurrent assets on the Company's condensed consolidated balance sheets.

The fair value as of March 31, 2023 decreased $ 0.6 million, as compared to December 31, 2022.

The decrease is comprised of the net impact of a decrease in YFE's stock price, resulting in a loss in fair value of $ 0.9 million and the effect of remeasuring the investment balance from the EURO to USD, resulting in a gain of $ 0.3 million.

The total change in fair value is recorded within Other Income (Expense) on the Company's condensed consolidated statement of operations.

As of March 31, 2023 and December 31, 2022, the Company's ownership in YFE was 44.8 %.

Marketable Securities

The Company classifies and

accounts for its marketable debt securities as available-for-sale and the securities are stated at fair value.

The investments in marketable

securities had an adjusted cost basis of $97.5 million and a market value of $89.9 million as of September 30, 2022.

The balances consisted

of the following securities (in thousands) :

Summary of investment in marketable security

Adjusted Cost

Unrealized Gain/(Loss)

Corporate Bonds

Mortgage-Backed

agency and government sponsored securities

states and municipalities

The investments in marketable securities

had an adjusted cost basis of $113.8 million and a market value of $112.5 million as of December 31, 2021.

The balances consisted of the

following securities (in thousands) :

Adjusted Cost

Unrealized Gain/(Loss)

The Company classifies and accounts for its marketable debt securities as AFS and the securities are stated at fair value.

On January 1, 2023, the Company adopted ASU 2016-13 Measurement of Credit Losses on Financial Instruments (Topic 326) , which replaced the legacy GAAP other-than-temporary impairment (“OTTI”) model with a credit loss model.

The credit loss model applicable to AFS debt securities require the recognition of credit losses through an allowance account but retains the concept from the OTTI model that credit losses are recognized once securities become impaired.

The adoption of the ASU did not have a material impact on the Company's financial statements.

The investments in marketable securities had an adjusted cost basis of $ 73.9 million and a market value of $ 69.7 million as of March 31, 2023.

The balances consisted of the following securities (in thousands) :

Adjusted Cost Unrealized Gain/(Loss) Fair Value

Corporate Bonds $ 35,901 $ ( 1,962 ) $ 33,939

Mortgage-Backed

Treasury 20,816 ( 1,041 ) 19,775

agency and government sponsored securities 6,898 ( 506 ) 6,392

states and municipalities 10,283 ( 739 ) 9,544

Commercial paper

The Company reported the net

unrealized losses in accumulated other comprehensive (loss) income, a component of stockholders' equity.

The decline in fair value is

largely due to changes in interest rates and other market conditions and is expected to recover as the securities approach maturity.

Company has evaluated these securities and determined that no allowance is necessary based on the credit quality and the low risk of loss

due to the security type.

The Company holds sixty-two available-for-sale securities, all of which are in an unrealized loss position as

of September 30, 2022.

The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position

for a period greater than 12 months as of September 30, 2022 are as follows (in thousands):

Schedule of unrealized losses and fair values of available for sale securities

Unrealized Loss

Total $ 73,898 $ ( 4,248 ) $ 69,650

The investments in marketable securities as of December 31, 2022 had an adjusted cost basis of $ 90.3 million and a market value of $ 83.7 million.

The balances consisted of the following securities (in thousands) :

Adjusted Cost Unrealized Gain/(Loss) Fair Value

Corporate Bonds $ 40,823 $ ( 2,579 ) $ 38,244

Treasury 20,869 ( 1,313 ) 19,556

Mortgage-Backed 5,980 ( 606 ) 5,374

1 unchanged sentence

states and municipalities 11,801 ( 895 ) 10,906

As of December 31, 2021, the Company had not yet held marketable securities

in an unrealized loss position for greater than twelve months.

A net realized loss of $ 36,332

and $ 159,624 related to the prepayment of principals for certain mortgage-backed securities was recorded in earnings during the three

and nine months ended September 30, 2022, respectively.

The contractual maturities

of the Company’s marketable investments as of September 30, 2022 were as follows (in

Summary of contractual maturity

Asset-Backed 67 ( 1 ) 66

Total $ 90,321 $ ( 6,615 ) $ 83,706

The Company holds sixty-eight AFS securities, all of which are in an unrealized loss position and have been in an unrealized loss position for a period greater than twelve months as of March 31, 2023.

The AFS securities held by the Company as of December 31, 2022 have also been in an unrealized loss position for a period greater than twelve months .

The Company reported the net unrealized losses in accumulated other comprehensive (loss) income, a component of stockholders' equity.

As of March 31, 2023 and December 31, 2022, no allowance for credit loss impairment has been recognized as the issuers of these securities have not established a cause for default and various rating agencies have reaffirmed each security's investment grade status.

The fair value of these securities has fluctuated since the purchase date as market interest rates fluctuate.

The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell before the recovery of the securities' amortized cost basis.

Realized losses of $ 1.5 million were recognized in earnings during the three months ended March 31, 2023.

The realized losses were primarily due to the sale of certain mortgage and asset-backed securities prior to their maturities to prevent further losses on the securities due to market conditions during the quarter.

Realized losses of $ 0.1 million were recognized during the three months ended March 31, 2022 due to prepayments of principal on certain mortgage-backed securities.

The contractual maturities of the Company’s marketable investments as of March 31, 2023 were as follows (in thousands):

Due within 1 year $ 16,240

Due after 1 year through 5 years 53,410

Due after 5 years through 10 years

Due after 10 years

The Company may sell certain

of its marketable debt securities prior to their stated maturities for reasons including, but not limited to, managing liquidity, credit

risk, duration and asset allocation.

The Company did not sell any

securities during the three or nine months ended September 30, 2022 that resulted in material gains or losses.

Total $ 69,650

The Company may sell certain of its marketable debt securities prior to their stated maturities for reasons including, but not limited to, managing liquidity, credit risk, duration and asset allocation.

Property and Equipment, Net

The Company has property and

equipment as follows (in thousands) :

Schedule of property and equipment, net

September 30,

The Company has property and equipment as follows (in thousands):

March 31, 2023 December 31, 2022

Furniture and Equipment $ 180 $ 224

1 unchanged sentence

Leasehold Improvements 2,258 2,273

Software 163 263

Production Equipment — 23

1 unchanged sentence

Less Accumulated Depreciation ( 471 ) ( 530 )

Foreign Currency Translation Adjustment ( 168 ) ( 168 )

Property and Equipment, Net $ 2,175 $ 2,400

During the three months ended

September 30, 2022 and 2021, the Company recorded depreciation expense of $ 86,980 and $ 23,665 , respectively.

During the nine months ended

September 30, 2022 and 2021, the Company recorded depreciation expense of $ 0.2 million and $ 53,494 , respectively.

Right of Use Leased Assets

Right of use assets consisted

of the following (in thousands) :

Schedule of right of use asset

September 30,

During the three months ended March 31, 2023 and 2022, the Company recorded depreciation expense of $ 121,607 and $ 37,051 , respectively.

During the three months ended March 31, 2023, due to changes in the Company's estimated undiscounted future cash flows, a reassessment of its long-lived assets was performed.

As a result, the carrying value of one of the Company's asset groups property and equipment assets were written down to zero and an Impairment of Property and Equipment of $ 119,727 was recorded within Operating Expenses in the condensed consolidated statement of operations.

Right of Use Leased Asset

Right of use asset consisted of the following (in thousands):

March 31, 2023 December 31, 2022

Office Lease Assets $ 10,313 $ 10,313

Equipment Lease Assets 5,145 3,928

Right of Use Assets, Gross

Right Of Use Asset, Gross 15,458 14,241

Accumulated Amortization ( 3,335 ) ( 2,587 )

Right of Use Assets, Net

During the three months ended

September 30, 2022 and 2021, the Company recorded ROU asset amortization expense of $ 0.7 million and $ 0.1 million , respectively.

the nine months ended September 30, 2022 and 2021, the Company recorded ROU asset amortization expense of $ 1.3 million and $ 0.2 million ,

respectively.

Foreign Currency Translation Adjustment ( 810 ) ( 810 )

Right Of Use Asset, Net $ 11,313 $ 10,844

Refer to Note 20 for details on the Company's lease commitments.

As of March 31, 2023, the weighted-average lease term for the Company's operating leases was 90 months and the weighted-average discount rate was 10.4 %.

As of December 31, 2022, the weighted-average lease term for operating leases was 93 months and the weighted-average discount rate was 10.4 %.

As of March 31, 2023, the weighted-average lease term for the Company's finance leases was 43 months and the weighted-average discount rate was 5.4 %.

As of December 31, 2022, the weighted-average lease term for the Company's finance leases was 35 months and the weighted-average discount rate was 5.3 %.

Operating lease costs during the three months ended March 31, 2023 and 2022 were $ 0.4 million and $ 0.2 million, respectively, recorded within General and Administrative Expenses on the Company's condensed consolidated statement of operations.

During the three months ended March 31, 2023 the Company recorded finance lease costs of $ 0.6 million, comprised of ROU amortization of $ 0.5 million recorded within General and Administrative Expenses on the Company's condensed consolidated statement of operations and accretion of interest expense of $ 49,904 recorded within Interest

Expense on the Company's condensed consolidated statement of operations.

The Company did not have finance leases as of March 31, 2022.

Film and Television Costs, Net

During the nine months

ended September 30, 2022, Film and Television Costs increased by $ 12.0

million , net of amortization expense, as compared to December 31, 2021.

Excluding the $7.3 million from the Wow Acquisition,

Film and Television Costs increased $ 4.4

million during the nine months ended September 30, 2022, primarily due to the production of Shaq’s Garage .

increase is partially offset by amortization of Rainbow Rangers and Superhero Kindergarten .

During the three months ended

September 30, 2022 and 2021, the Company recorded Film and Television Cost amortization expense of $ 2.8 million and $ 0.2 million , respectively.

During the nine months ended September 30, 2022 and 2021, the Company recorded Film and Television Cost amortization expense of $ 5.1 million

and $ 1.1 million , respectively.

The following table highlights

the activity in Film and Television Costs as of September 30, 2022 and December 31, 2021 (in thousands):

Schedule of film and television costs activity

The following table highlights the activity in Film and Television Costs as of March 31, 2023 and December 31, 2022 (in thousands):

Film and Television Costs, Net as of December 31, 2021 $ 2,940

Additions to Film and Television Costs 18,364

Film Amortization Expense

Disposals ( 11 )

Film Amortization Expense & Impairment Losses ( 12,996 )

Foreign Currency Translation Adjustment ( 517 )

Film and Television Costs, Net as of December 31, 2022 7,780

2 unchanged sentences

Foreign Currency Translation Adjustment —

Film and Television Costs, Net as of September 30, 2022

Film and Television Costs, Net as of March 31, 2023 $ 7,909

Intangible Assets, Net and Goodwill

Intangible Assets, Net

The Company had the following

intangible assets (in thousands) with their weighted average remaining amortization period (in years) :

The Company had the following intangible assets (in thousands) with their weighted average remaining amortization period (in years) :

Intangible Assets, Net

Schedule of intangible assets

Weighted Average Remaining Amortization Period

September 30,

March 31, 2023 December 31, 2022

Customer Relationships 6.9 $ 17,325 $ 17,325

Digital Networks 15.0 803 3,537

Trade Names 68.2 10,360 11,783

Technology – – 293

Other Intangible Assets (a) – – 325

4 unchanged sentences

_______________________

Represents the remaining unamortized logo and website intangible assets related to the merger with A Squared.

During the three months ended

September 30, 2022 and 2021, the Company recorded amortization expense of $ 0.7 million and $ 0.1 million , respectively.

During the nine

months ended September 30, 2022 and 2021, the Company recorded amortization expense of $ 1.7 million and $ 0.4 million , respectively.

Pursuant to ASC 350-30, General

Intangibles Other than Goodwill , the Company reviews these intangible assets periodically to determine if the value should be retired

or impaired due to recent events.

There were no changes in events or circumstances during the nine months ended September 30,

2022 that would indicate an impairment of the intangible assets.

As of December 31, 2021, the Company decided to discontinue the use

of the trade name acquired as part of the acquisition of Beacon Media Group (formerly ChizComm), resulting in a write-down of the full

book value of $3.4 million.

Expected future intangible asset amortization as

of September 30, 2022 is as follows (in thousands):

Expected future intangible asset amortization

In 2013, the Company recognized

$ 10.4 million in goodwill, as a result of the merger with A Squared.

During the first quarter of 2021, the Company recognized $ 9.7 million

in goodwill, as a result of the acquisition of the Beacon Media Group (formerly ChizComm), which was subsequently determined to be impaired

as of December 31, 2021, resulting in an impairment charge of $ 4.8 million and a goodwill balance of $ 4.9 million .

As a result of the Ameba Acquisition

during the first quarter of 2022, the Company recorded goodwill of $ 0.7 million as determined to be the amount in excess of the fair value

of the assets acquired and liabilities assumed in the acquisition.

The goodwill recorded for the Ameba Acquisition was allocated to the

Content Production and Distribution reportable segment.

As a result of the Wow Acquisition

during the second quarter of 2022, the Company recorded goodwill of $ 21.4 million as determined to be the amount in excess of the fair

value of the assets acquired and liabilities assumed in the acquisition.

The goodwill recorded for the Wow Acquisition was allocated to

the Content Production and Distribution reportable segment.

As Beacon Communications and

Wow are incorporated as Canadian companies with CAD being their functional currency, goodwill will change each period due to currency

exchange differences.

The Company will perform its

annual review of goodwill during the fourth quarter of 2022.

There were no events or changes in circumstances that would indicate an impairment

in goodwill during the nine months ended September 30, 2022.

The following table summarizes

the changes in the carrying amount of goodwill by reportable segment (in thousands) :

Schedule of goodwill

Content Production & Distribution

Media Advisory & Advertising Services

(a) Represents the remaining unamortized logo and website intangible assets related to the merger with A Squared.

During the three months ended March 31, 2023 and 2022, the Company recorded intangible asset amortization expense of $ 0.6 million and $ 0.2 million, respectively.

As of March 31, 2023, $ 7.2 million of the Company's intangible assets related to the acquired trade names from the Wow acquisition that have indefinite lives and are not subject to amortization.

The Company did not have any indefinite-lived intangible assets as of March 31, 2022.

Pursuant to ASC 350-30, General Intangibles Other than Goodwill , the Company reviews its intangible assets periodically to determine if the value should be retired or impaired due to recent events.

During the three months ended March 31, 2023, due to changes in the Company's financial projections, the Company reassessed its definite and indefinite-

lived intangible asset values to determine whether impairments existed.

As a result, the Company recorded a total Impairment of Intangible Assets of $ 4.0 million within Operating Expenses in the condensed consolidated statement of operations at March 31, 2023.

The impairment charge consisted of a write-down of definite-lived intangible assets of $ 2.8 million due to a decrease in one of the Company's asset groups estimated undiscounted cash flows.

In addition, due to a decrease in its estimated present value of cash flows, it was determined that the Frederator tradename, an indefinite-lived intangible asset, was impaired by $ 1.3 million.

Expected future amortization of intangible assets subject to amortization as of March 31, 2023 is as follows (in thousands):

Thereafter 8,846

Total $ 18,623

In 2013, the Company recognized $ 10.4 million in goodwill as a result of its merger with A Squared which was allocated to the Content Production and Distribution reporting unit.

During the first quarter of 2021, the Company recognized $ 9.7 million in goodwill as a result of its acquisition of Beacon, which was allocated to its Media Advisory and Advertising Services reporting unit.

As a result of the Ameba Acquisition during the first quarter of 2022 and the Wow Acquisition during the second quarter of 2022, the Company recorded goodwill of $ 1.5 million, including a tax basis step-up of $ 0.8 million and $ 21.4 million, respectively.

The goodwill resulting from the Ameba and Wow Acquisitions was allocated to the Content Production and Distribution reportable segment.

As Wow's functional currency is the CAD, goodwill will change each period due to currency exchange differences.

As of December 31, 2022, the goodwill allocated to the Company's Media Advisory and Advertising Services reporting unit was written down to zero due to impairment.

During the three months ended March 31, 2023, the Company reassessed its remaining goodwill allocated to the Content Production and Distribution reporting unit for impairment.

As a result, the Company recorded an Impairment of Goodwill of $ 11.3 million within Operating Expenses in its condensed consolidated statement of operations.

The following table summarizes the changes in the carrying amount of goodwill by reporting unit (in thousands):

Content Production & Distribution Media Advisory & Advertising Services Total

Goodwill as of December 31, 2022 $ 31,807 $ – $ 31,807

Acquisition of Ameba

Acquisition of Wow

Goodwill Impairment ( 11,287 ) – ( 11,287 )

Foreign Currency Translation Adjustment – – –

Goodwill as of September 30, 2022

Goodwill as of March 31, 2023 $ 20,520 $ – $ 20,520

Deferred Revenue

As of September 30, 2022 and

December 31, 2021, the Company had total short term and long term deferred revenue of $ 14.2 million and $ 3.9 million , respectively.

in the deferred revenue balance as of September 30, 2022 is $ 10.6 million the Company assumed in the Wow Acquisition.

The deferred revenue

balance assumed represents cash received from customers for productions in progress.

As of March 31, 2023 and December 31, 2022, the Company had total short term and long term deferred revenue of $ 9.7 million and $ 12.4 million, respectively.

The decrease in deferred revenue is primarily related to productions on various shows nearing completion of the project as of March 31, 2023, compared to the progress as of December 31, 2022.

Wow's deferred revenue balance relates to cash received from customers for productions in progress.

Revenue is fully recognized upon production completion.

Deferred revenue also includes both (i) variable fee contracts with licensees and customers in which the Company had collected advances

and minimum guarantees against future royalties and (ii) fixed fee contracts.

The Company recognizes revenue related to these contracts

when all revenue recognition criteria have been met.

Supplemental Financial Statement

Deferred revenue also includes both (i) variable fee contracts with licensees and

customers in which the Company collected advances and minimum guarantees against future royalties and (ii) fixed fee contracts.

The Company recognizes revenue related to these contracts when all revenue recognition criteria have been met.

Supplemental Financial Statement Information

Other Income (Expense), Net

Components of other income (expense), net are

summarized as follows (in thousands) :

Schedule of other income (expense)

Components of other income (expense), net, are summarized as follows (in thousands):

Three Months Ended

Nine months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Gain (Loss) on Warrant Revaluation (a)

Loss on Foreign Exchange (b)

Loss on Marketable Securities Investments (c)

Gain (Loss) on Revaluation of Equity Investment in YFE(d)

Interest Income (e)

Warrant Incentive Expense (f)

Interest Expense (g)

Net Other Income (Expense)

The gain on warrant revaluation is related to the change in fair value of outstanding warrants that were determined to be derivative liabilities attached to previously issued and converted convertible notes.

For the three and nine months ended September 30, 2022 loss on foreign exchange primarily relates to the foreign exchange loss on the investment in YFE’s equity securities accounted for under the fair value option.

For the three and nine months ended September 30, 2021 loss on foreign exchange related to foreign currency denominated monetary transactions.

The Company started investing in marketable securities during the three months ended June 30, 2021.

The net realized loss on marketable securities recognized during the three and nine months ended September 30, 2022 reflects the loss in the investments in available-for-sale securities that will not be recovered due to prepayments of principals on certain mortgage-backed securities.

The loss on revaluation of the equity investment in YFE is the change in fair value recognized on the Company’s investments in YFE accounted for using the fair value option.

The loss is a result of the change in YFE’s stock price at the end of the current reporting period.

Interest Income received during the three and nine months ended September 30, 2022 and 2021 primarily consists of cash interest received on the investments in marketable securities, net amortization of premiums.

The Warrant Incentive Expense is related to the fair value of new warrants that were issued in 2021 to certain existing warrant holders in exchange for previously issued outstanding warrants.

Interest expense during the three and nine months ended September 30, 2022 primarily consists of $0.4 million and $0.6 million, respectively, of interest incurred on the Company’s margin loan collateralized by its marketable security investments and $0.3 million and $0.6 million, respectively, of interest incurred on its production facilities loan and bank indebtedness assumed as part of the Wow Acquisition.

March 31, 2023 March 31, 2022

Interest Expense (a) $ ( 1,085 ) $ ( 55 )

Gain on Warrant Revaluation (b) 139 41

Gain (Loss) on Foreign Exchange (c) 320 ( 192 )

Loss on Marketable Securities Investments (d) ( 1,537 ) ( 79 )

Gain (Loss) on Revaluation of Equity Investment in YFE (e) ( 895 ) 5,395

Interest Income (f) 310 248

Finance Lease Interest Expense (g) ( 50 ) –

Other Income (Expense) $ ( 1,712 ) $ 5,413

(a) Interest expense during the three months ended March 31, 2023 primarily consisted of $ 0.7 million of interest incurred on the margin loan collateralized by the marketable security investments and $ 0.4 million of interest incurred on production facilities loans and bank indebtedness assumed as part of the Wow Acquisition.

(b) The gain on warrant revaluation is related to the change in fair value of outstanding warrants that were determined to be derivative liabilities attached to previously issued and converted convertible notes.

(c) The gain on foreign currency exchange during the three months ended March 31, 2023 primarily related to the EURO weakening against the USD compared to the previous reporting period end date of December 31, 2022.

The remeasurement of the investment in YFE’s equity securities resulted in a foreign exchange gain of $ 0.3 million.

(d) The net realized loss on marketable securities reflects the loss that will not be recovered from the investments due to selling securities and issuers' prepayments of principals on certain mortgage-backed securities.

(e) The fair value revaluation of the investment in YFE accounted for using the fair value option as of March 31, 2023, resulted in a $ 0.9 million loss, excluding the impact of foreign currency recorded separately as a Gain on Foreign Exchange.

The loss is a result of the decrease in YFE’s stock price as of March 31, 2023, as compared to December 31, 2022.

(f) Interest Income during the three months ended March 31, 2023 primarily consisted of cash interest received of $ 0.4 million from the investments in marketable securities, net of premium amortization expense of $ 0.2 million.

The remaining increase is due to interest accrued on the Notes Receivable from Related Parties.

(g) The finance lease interest expense represents the interest portion of the finance lease obligations assumed as part of the Wow Acquisition for equipment purchased under an equipment lease line.

Prior to the acquisition of Wow, the Company did not have any finance leases.

Bank Indebtedness and Production Facilities

The Company assumed the following bank indebtedness

instruments and production facilities as part of the Wow Acquisition.

Upon the acquisition of Wow, the Company assumed certain credit facilities (the “Facilities”).

The Facilities are comprised of the following:

Revolving Demand Facility

under the $5.0 million CAD revolving demand facility can be made in Canadian or US dollars at the option of the Company by way of bank

prime rate loans, Canadian Bankers’ Acceptances, USD LIBOR, or letters of credit and can be repaid at any time without penalty and

without notice and are generally repayable on demand .

Canadian or US dollar bank prime borrowings

bear interest at a rate equal to bank prime plus 2.00% per annum.

For other draws under the revolving facility, the respective loans bear

interest at a rate equal to Canadian Bankers’ Acceptances or USD LIBOR plus 3.75% per annum.

As of September 30, 2022, the Company

had an outstanding balance of $2.1 million USD on the revolving demand facility, included as Bank Indebtedness within current liabilities

on the Company’s condensed consolidated balance sheet.

of September 30, 2022, the Company was in compliance with all covenants under the revolving demand facility.

On December 15, 2022, the Company amended the Facility.

Draws of up to $ 8.0 million CAD (previously $ 5.0 million CAD) under a revolving demand facility can be made in Canadian or US dollars at the option of the Company by way of bank prime rate loans, Canadian Bankers’ Acceptances, Secured Overnight Financing Rate (“SOFR”) or letters of credit.

Canadian or US dollar bank prime borrowings bear interest at a rate equal to bank prime plus 2.00 % per annum.

For other draws under the revolving facility, the respective loans bear interest at a rate equal to Canadian Bankers’ Acceptances or SOFR plus 3.75 % per annum.

As of March 31, 2023, the Company had an outstanding balance of $ 3.9 million USD ($ 5.2 million CAD) on the revolving demand facility by way of bank prime rate loan draws, included as Bank Indebtedness within current liabilities on the Company’s condensed consolidated balance sheets.

Equipment Lease Line

transaction under the $8.0 million CAD equipment lease line has specific financing terms in respect of the leased equipment such as

term, finance amount, rate, and payment terms.

The finance rates for these equipment leases range from 4%- 4.5% with remaining lease

terms of 17-31 months as of the Wow Acquisition date.

The Company has recorded right of use assets and lease liabilities for the

leased equipment acquired in respect of these draws.

The Company has drawn down a total of $7.9 million CAD ($6.0 million USD), with

an outstanding balance as of September 30, 2022 of $2.2 million CAD ($1.6 million USD), net of repayments, included within current

and noncurrent finance lease liabilities on the Company’s condensed consolidated balance sheet.

On March 17 2023, the Company amended the terms of the equipment lease line under the Facility.

Under the equipment lease line, the Company may borrow up to $ 4.0 million CAD (previously $ 4.3 million CAD) under a revolving demand equipment lease line.

Each transaction under the equipment lease line has specific financing terms in respect of the leased equipment such as term, finance amount, rate, and payment terms.

The finance rates for these equipment leases range from 3.94 % - 7.18 % with remaining lease terms of 5 - 40 months.

The Company has recorded finance lease right of use assets and finance lease liabilities for the leased equipment acquired in respect of these draws.

As of March 31, 2023, the Company has drawn down a total of $ 2.1 million USD ($ 2.9 million CAD) under the equipment lease line.

These outstanding balances as of March 31, 2023, net of repayments, are included within current and noncurrent Finance Lease Liabilities on the Company’s condensed consolidated balance sheets.

Treasury Risk Management Facility

Advances under the treasury

risk management facility are subject to market rates as determined by the lender’s treasury department or derivatives group at the

time of the drawdown request.

Advances of up to $ 500,000 CAD available under the treasury risk management facility are subject to market rates as determined by the lender’s treasury department or derivatives group at the time of the drawdown request.

The maximum term for foreign exchange forward contracts and interest rate swaps is one year .

of September 30, 2022, there were no outstanding amounts drawn under the treasury risk management facility.

Financing Facilities

The Company’s interim

financing facilities for specific productions bear interest at rates ranging from bank prime plus 1.25% - 1.75% per annum.

production financing facilities are generally repayable on demand and are generally secured by a combination of federal and provincial

tax credits, other government incentives, production service agreements and license agreements.

As of September 30, 2022, the Company

had an outstanding balance of $19.3 million USD recorded as Production Facilities, net within current liabilities on the Company’s

condensed consolidated balance sheet.

The Company borrowed an

additional $ 63.2

million from its investment margin account during the nine months ended September 30, 2022 and repaid $ 7.8

million with cash received from sales and/or redemptions of its marketable securities.

During the nine months ended September

30, 2022, the borrowed amounts were used to finance the Company’s additional investments in YFE and the closing of the

acquisitions of Ameba and Wow, in each case pledging certain of its marketable securities as collateral.

During the three months

ended September 30, 2022, the additional borrowings of $4.2 million were used for quarterly operational costs.

The interest rate for

these investment margin account borrowings fluctuates based on the Federal Funds Rate plus 0.65% with interest only payable

The weighted average interest rate was 2.65% on an average margin loan balance of $61.2 million during the three months

ended September 30, 2022.

The weighted average interest rate was 1.54% on an average margin loan balance of $43.4 million during the

nine months ended September 30, 2022.

The Company incurred interest expense of $ 0.6

million during the nine months ended September 30, 2022.

The investment margin account borrowings

do not mature but are payable on demand as the custodian can issue a margin call at any time, therefore the margin

loan is recorded as a current liability on the Company’s condensed consolidated balance sheets.

As of March 31, 2023, there were no outstanding amounts drawn under the treasury risk management facility.

As of March 31, 2023, the Company was in compliance with all covenants under the Facility.

Production Facilities

As part of the acquisition of WOW, the Company assumed production facilities for financing specific productions.

The Company’s production facilities bear interest at rates ranging from bank prime plus 1.00 % - 1.25 % per annum.

The production facilities are generally repayable on demand and are guaranteed and secured by the Company.

The security reflects substantially all of the Company's tangible and intangible assets including a combination of federal and provincial tax credits, other government incentives, production service agreements and license agreements.

As of March 31, 2023, the Company had an outstanding balance of $ 16.7 million USD ($ 22.6 million CAD), including $ 0.8 million USD ($ 1.1 million CAD of interest), recorded as Production Facilities, net within current liabilities on the Company’s condensed consolidated balance sheets.

Equipment Lease Facility

Separate from the Facility's equipment lease line, a subsidiary of the Company entered into an equipment lease agreement with a Canadian bank.

This additional equipment lease facility allows the Company to finance equipment purchases of up to $ 1.4 million CAD in total.

Each equipment lease is for a term of three years and will have specific financing terms such as finance amount and the bank’s lease base rate.

The Company has recorded finance lease right of use assets and finance lease liabilities for the leased equipment acquired in respect of these draws.

The outstanding balance as of March 31, 2023, net of repayments, is $ 0.5 million USD ($ 0.7 million CAD) and is included within current and noncurrent Finance Lease Liabilities on the Company’s condensed consolidated balance sheets.

During the three months ended March 31, 2023, the borrowed amounts were primarily used for operational costs.

The interest rates for the borrowings fluctuate based on the Federal Funds Rate plus 0.65 % with interest only payable monthly.

The weighted average interest rates were 0.89 % and 1.66 % on average margin loan balances of $ 46.2 million and $ 27.1 million as of March 31, 2023 and December 31, 2022, respectively.

The Company incurred interest expense on the loan of $ 0.7 million and $ 21,846 during the three months ended March 31, 2023 and March 31, 2022, respectively.

The investment

margin account borrowings do not mature but are collateralized by the marketable securities held by the same custodian and the custodian can issue a margin call at any time, effecting a payable on demand loan.

Due to the call option, the margin loan is recorded as a current liability on the Company’s condensed consolidated balance sheets.

As of March 31, 2023 and December 31, 2022, the Company's margin loan balance was $ 48.9 million and $ 60.8 million, respectively.

Stockholders’ Equity

As of September 30, 2022,

the total number of authorized shares of common stock was 400,000,000 .

As of September 30, 2022,

and December 31, 2021, there were 318,097,275 and 303,379,122 shares of common stock outstanding, respectively.

On February 18, 2022, the

Company issued 350,000 shares of the Company’s common stock valued at $ 0.3 million to a nonemployee for productions services.

On February 24, 2022, the

Company issued 36,196 shares of the Company’s common stock valued at $ 65,515 which were held in escrow as part of the ChizComm acquisition.

On April 7, 2022, the Company

issued 10,365,823 shares of the Company’s common stock valued at $ 10.8 million related to the Wow Acquisition, as part of the purchase

Also included as part of the Wow Acquisition, the Company has issued 691,262 shares, valued at $ 0.7 million , which will be exchanged

at a future redemption date upon tender of ExchangeCo (as defined below) shares as specified in the agreement.

See additional information

on the ExchangeCo shares below under “Preferred Stock.”

During the nine months ended

September 30, 2022, the Company issued 2,538,205 shares of the Company’s common stock valued at $ 1.6 million representing delivery

of vested RSUs.

On February 6, 2023, the Company's board of directors approved a 1-for-10 reverse stock split of the Company's outstanding shares of common stock.

The reverse stock split was effected on February 10, 2023 at 5:00 p.m.

Eastern time.

At the effective time, every 10 issued and outstanding shares of the Company's common stock were converted into 1 share of common stock.

Any fractional shares of common stock resulting from the reverse stock split were rounded up to the nearest whole post-split share and no shareholders received cash in lieu of fractional shares.

The par value of each share of common stock remained unchanged.

The reverse stock split proportionately reduced the number of shares of authorized common stock from 400,000,000 to 40,000,000 shares.

The reverse stock split also applied to common stock issuable upon the exercise of the Company's outstanding warrants and stock options.

The reverse stock split did not affect the authorized preferred stock of 10,000,001 shares.

As of March 31, 2023, the total number of authorized shares of common stock was 40,000,000 .

As of March 31, 2023 and December 31, 2022, there were 32,113,784 and 31,918,552 shares of common stock outstanding, respectively.

Preferred Stock

The Company has 10,000,001

shares of preferred stock authorized with a par value of $0.001 per share.

The Board of Directors is authorized, subject to any limitations

prescribed by law, without further vote or action by the Company’s stockholders, to issue from time-to-time shares of preferred

stock in one or more series.

Each series of preferred stock will have such number of shares, designations, preferences, voting powers,

qualifications and special or relative rights or privileges as shall be determined by the Company’s Board of Directors, which may

include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

In connection with the Company’s

acquisition of Wow, certain eligible Canadian shareholders, noteholders and optionholders of Wow elected to receive the Exchangeable Shares

in the capital of the Wow Exchange Co.

(“ExchangeCo”) instead of shares of the Company’s common stock to which

they were otherwise entitled.

The shares of ExchangeCo are

exchangeable into shares of the Company’s common stock in accordance with their terms.

Holders of the ExchangeCo shares are entitled

to defined voting rights (the “Voting Rights”) in the Company pursuant to a voting and exchange trust agreement (the “Voting

Agreement”) dated April 6, 2022 between the Company, ExchangeCo, 1329258 B.C.

and Computershare Trust Company of Canada (the

“Voting Trustee”).

The Voting Trustee holds a single share of Series B Preferred Stock in the capital of the Company (the

“Special Voting Share”), which grants the Voting Trustee that number of votes at the meetings of the Company’s shareholders

as is equal to the number of shares of the Company’s common stock that at such time have not been delivered pursuant to the tender

of ExchangeCo shares.

The Voting Trustee is required to exercise each vote attached to the Special Voting Share only as directed by the

relevant holder of the underlying Company shares of common stock and, in the absence of any instructions, will not exercise voting rights

with respect to the applicable shares.

As of September 30, 2022

and December 31, 2021, there were 0 shares of Series A Convertible Preferred Stock outstanding.

As of September 30, 2022 and

December 31, 2021, there was 1 share of Series B Preferred Stock outstanding.

The Company has 10,000,001 shares of preferred stock authorized with a par value of $ 0.001 per share.

The Board of Directors is authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders, to issue from time-to-time shares of preferred stock in one or more series.

Each series of preferred stock will have such number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by our Board of Directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

In connection with the Company’s acquisition of Wow, certain eligible Canadian shareholders, noteholders and optionholders of Wow elected to receive the Exchangeable Shares in the capital of the Wow Exchange Co.

(“ExchangeCo”) instead of shares of the Company’s common stock to which they were otherwise entitled.

The shares of ExchangeCo are exchangeable into shares of the Company’s common stock in accordance with their terms.

Holders of the ExchangeCo shares are entitled to defined voting rights (the “Voting Rights”) in the Company pursuant to a voting and exchange trust agreement (the “Voting Agreement”) dated April 6, 2022 between the Company, ExchangeCo, 1329258 B.C.

and Computershare Trust Company of Canada (the “Voting Trustee”).

The Voting Trustee holds a single share of Series B Preferred Stock in the capital of the Company (the “Special Voting Share”), which grants the Voting Trustee that number of votes at the meetings of the Company’s shareholders as is equal to the number of shares of the Company’s common stock that at such time have not been delivered pursuant to the tender of ExchangeCo shares.

The Voting Trustee is required to exercise each vote attached to the Special Voting Share only as directed by the relevant holder of the underlying Company shares of common stock and, in the absence of any instructions, will not exercise voting rights with respect to the applicable shares.

As of March 31, 2023 and December 31, 2022, there were 0 shares of Series A Convertible Preferred Stock outstanding.

As of March 31, 2023 and December 31, 2022, there was 1 share of Series B Preferred Stock outstanding.

Treasury Stock

During the three months ended

September 30, 2022, 6,993 shares of common stock were withheld to cover withholding taxes owed by certain employees, all of which were

taken into treasury stock.

In addition, during the three

months ended September 30, 2022, the Company agreed to settle the lawsuit, Harold Chizick and Jennifer Chizick v.

Genius Brands International,

Inc., ChizComm Ltd, pursuant to a settlement agreement (the “Settlement Agreement”) dated October 6, 2022 (the “Settlement

Pursuant to the Settlement Agreement, the Company agreed to purchase the 419,336 non-escrow shares of common stock (the

“Settlement Shares”) that the Chizicks held as of the Settlement Date.

The Settlement Shares were purchased at the market

price of $ 0.68 per share, plus a premium of $ 1.31 per share, for a total purchase price of $ 834,479 .

As of September 30, 2022, the Company

recorded a liability within other current liabilities on the Company’s condensed consolidated balance sheet for the total purchase

price, and the Company recorded the cost based on the market price on the Settlement Date of $ 285,148 to additional paid in capital for

the share repurchase yet to be settled as of the balance sheet date.

The Company recorded the amount in excess of cost of $ 549,330 as

a legal expense within general and administrative expenses on the Company’s condensed consolidated statements of comprehensive income

During the three months ended March 31, 2023, 3,700 shares of common stock with a cost of $ 9.435 were withheld to cover taxes owed by certain employees, all of which were included as treasury stock outstanding and recorded at cost within Treasury Stock on the condensed consolidated balance sheet.

Stock Options

On September 18, 2015, the

Company adopted the Genius Brands International, Inc.

On September 18, 2015, the Company adopted the Genius Brands International, Inc.

2015 Incentive Plan (the “2015 Plan”).

The total number of shares that

can be issued under the 2015 Plan is 2,167,667 shares.

On September 1, 2020, the

Company adopted the Genius Brands International, Inc.

The total number of shares that can be issued under the 2015 Plan is 216,767 shares.

On September 1, 2020, the Company adopted the Genius Brands International, Inc.

2020 Incentive Plan (the “2020 Plan”).

On August 4, 2020, the Board

of Directors voted to adopt the 2020 Plan.

The shares available for issuance under the 2020 Plan was approved by stockholders on August

The 2020 Plan as approved by the stockholders increased the maximum number of shares available for issuance up to an aggregate

of 32,167,667 shares of common stock, which does not include shares that the Company may issue related to acquisitions.

During the nine months ended

September 30, 2022, the Company granted options to purchase 1,985,294

shares of common stock to employees with a fair market value of $ 1.3

The options vest evenly over three years and expire five to ten years from grant date.

In addition, as part of

the Wow Acquisition, the Company granted replacement options to purchase 1,733,100

shares of the Company’s common stock to Wow employees who would continue to provide services to the Company.

options to purchase common stock were also granted to certain departing Wow shareholders to replace their previously vested Wow

These options were cancelled after 30 days of the grant date if not exercised.

The fair market value of $ 1.5

million was determined utilizing assumptions as of the replacement date of April 6, 2022 and were valued using the BSM option

pricing model.

The number of shares granted was determined by using an exchange ratio calculated by a third party based on the

intrinsic value of the Wow common stock purchased as part of the acquisition and the value of the Company’s common stock as of

the agreement date.

The vesting terms of the replacement options remained the same as the Wow options for which they were exchanged.

All shares that replaced previously vested Wow shares were included as part of the purchase price based on the calculated fair value

on the acquisition date of $ 1.2

million for 1,967,528

The remaining options to vest with a fair value of $ 0.3

million will be expensed over the remaining requisite period.

The options expire within 3 years from the replacement option

grant date or the original Wow option, whichever is greater.

The fair value of the options

granted during the nine months ended September 30, 2022 were calculated using the BSM option pricing model based on the following assumptions:

Schedule of assumptions used

Exercise Price

$ 0.51 -$ 1.66

Dividend Yield

Risk-free interest rate

2.67 %- 2.70 %

Expected life of options

3.0 - 4.3 years

The following table summarizes

the stock option activity during the nine months ended September 30, 2022:

Schedule of stock option activity

Number of Shares

Weighted- Average Remaining Contractual Life

Weighted- Average Exercise Price

On August 4, 2020, the Board of Directors voted to adopt the 2020 Plan.

The shares available for issuance under the 2020 Plan were approved by stockholders on August 27, 2020.

The 2020 Plan as approved by the stockholders increased the maximum number of shares available for issuance up to an aggregate of 3,000,000 shares of common stock, which does not include shares that the Company may issue related to acquisitions.

The following table summarizes the stock option activity during the three months ended March 31, 2023:

Number of Shares Weighted- Average Remaining Contractual

Life Weighted- Average Exercise Price

Outstanding at December 31, 2022 1,351,421 6.49 $ 15.09

Granted – – $ –

Exercised – – $ –

Forfeited/Cancelled ( 4,100 ) 2.78 $ 30.34

( 1,082,915 )

Outstanding at September 30, 2022

Unvested at September 30, 2022

Vested and exercisable at September 30, 2022

During the three months ended

September 30, 2022 and 2021, the Company recognized $ 0.5 million and $ 0.9 million , respectively, in share-based compensation expense related

to stock options.

During the nine months ended September 30, 2022 and 2021, the Company recognized $ 1.3 million and $ 2.8 million , respectively,

in share-based compensation expense related to stock options.

The unrecognized share-based compensation expense related to stock options

at September 30, 2022 of $ 1.8 million will be recognized through the third quarter of 2025 based on the remaining vesting periods, assuming

the options are not cancelled or forfeited.

As of September 30, 2022, there was $ 0 of aggregate intrinsic value related to outstanding

unvested options.

The weighted average fair value per option granted during the three months ended September 30, 2022 was $ 0.64 .

Expired – – $ –

Outstanding at March 31, 2023 1,347,321 6.26 $ 15.05

Unvested at March 31, 2023 312,877 5.92 $ 13.23

Vested and exercisable March 31, 2023 1,034,444 6.36 $ 15.59

During the three months ended March 31, 2023, upon termination of certain employees, the Company accelerated the vesting of any unvested options held by the employee per the original employment agreement.

This resulted in 95,758 options becoming immediately vested on the separation date and $ 0.1 million in expense recognized by the Company.

During the three months ended March 31, 2023 and 2022, the Company recognized $ 0.4 million and $ 0.4 million, respectively, in share-based compensation expense related to stock options.

The unrecognized share-based compensation expense as of March 31, 2023 was $ 0.9 million and will be recognized over a weighted average remaining contractual life of 6.26 years.

The outstanding shares as of March 31, 2023 have an aggregated intrinsic value of $ 0 .

Restricted Stock Units

During the nine months ended

September 30, 2022, the Company granted 1,086,667

fully vested RSUs to nonemployees with a fair market value of $ 1.0

million and 500,000 RSUs to an employee with a fair market value of $ 390,000

that vest evenly over three years.

On March 17, 2023, the Company granted 11,070 fully vested RSUs to the Company's board members with a fair market value of $ 30,000 .

The RSUs expire five years from date of grant.

Per terms of the restricted

stock agreements, for certain employees the Company paid the employee’s related taxes associated with the employee’s vested

stock and decreased the freely tradable shares issued to the employee by a corresponding value, resulting in a share issuance net of taxes

to the employee.

The value of the shares netted for employee taxes represents treasury stock repurchased.

An aggregate of 4,426,064 shares

of common stock were issued as a result of vested RSUs, of which, 6,993 shares of common stock were withheld to pay employee taxes upon

such vesting.

The Company recorded the cost of the withheld shares of $ 2,553 as treasury stock as of September 30, 2022.

The following table summarizes the Company’s

RSU activity during the nine months ended September 30, 2022:

Schedule of restricted stock units

Restricted Stock Units

Average Remaining Contractual Life

An aggregate of 593,358 shares of common stock were issued as a result of vested RSUs.

The following table summarizes the Company’s RSU activity during the three months ended March 31, 2023:

Restricted Stock Units Weighted-

Average Remaining Contractual Life Weighted-

Average Grant Date Fair Value per Share

Unvested at December 31, 2022 1,161,944 3.41 $ 13.67

( 4,088,301 )

Granted 11,070 4.96 $ 2.71

Vested ( 37,105 ) 3.49 $ 11.76

Forfeited/Cancelled – – $ –

Unvested at September 30, 2022

During the three months ended

September 30, 2022 and 2021, the Company recognized $ 0.3 million and $ 4.6 million , respectively, in share-based compensation expense related

During the nine months ended September 30, 2022 and 2021, the Company recognized $ 8.7 million and $ 8.3 million , respectively,

in share-based compensation expense related to RSUs.

The unrecognized share-based compensation expense related to RSUs at September 30,

2022 of $ 2.2 million will be recognized through the second quarter of 2025 based on the remaining vesting periods, assuming the underlying

grants are not cancelled or forfeited.

The Company had warrants outstanding

to purchase up to 44,843,429 shares and 45,511,965 of the Company’s common stock as of September 30, 2022 and December 31, 2021,

respectively with a total value of $ 74.1 million , a weighted average exercise price of $ 2.24 and a weighted average remaining term of

3.4 years as of September 30, 2022.

As of September 30, 2022,

892,857 liability classified derivative warrants to purchase shares of the Company’s common stock remained outstanding and are revalued

each reporting period.

As of September 30, 2022, the warrants were revalued at $0.4 million, resulting in a decrease of $ 0.4 million in

liability as compared to December 31, 2021.

The change in value is recorded within net other income (expense) on the condensed consolidated

statements of operations.

The valuation inputs as of September 30, 2022 included an expected volatility of 99.97 % and an annual interest

rate of 4.23 %.

On August 11, 2022, 668,536

warrants expired.

The Company accounts for income

taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires the recognition of deferred tax liabilities

and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial

statements or tax returns.

A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than

not to be realized.

ASC 740 provides guidance

on the accounting for uncertainty in income taxes recognized in a company’s financial statements.

ASC 740 requires a company to

determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of

the position.

If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize

in the financial statements.

The Company includes interest

and penalties arising from the underpayment of income taxes in the statements of operation in the provision for income taxes.

As of September

30, 2022 and December 31, 2021, the Company had no accrued interest or penalties related to uncertain tax positions.

The Company files income tax

returns in the U.S.

Unvested at March 31, 2023 1,135,909 3.17 $ 13.63

During the three months ended March 31, 2023, upon termination of certain employees, the Company accelerated the vesting of any unvested shares held by the employee per the original employment agreement.

This resulted in 24,243 shares becoming immediately vested and issued on the separation date and $ 0.1 million in expense recognized by the Company.

During the three months ended March 31, 2023 and 2022, the Company recognized $ 0.5 million and $ 4.1 million, respectively, in share-based compensation expense related to RSU awards.

The unvested share-based compensation as of March 31, 2023 is $ 1.2 million which will be recognized through the second quarter of 2025 assuming the underlying grants are not cancelled or forfeited.

The total fair value of shares vested during the three months ended March 31, 2023 was $ 0.4 million.

The following table summarizes the activity in the Company's outstanding warrants during the three months ended March 31, 2023:

Warrants Outstanding Number of

Shares Weighted Average Remaining

Contractual Life Weighted Average Exercise Price Per

Balance at December 31, 2022 4,433,593 3.37 $ 22.50

Granted – – $ –

Exercised – – $ –

Expired ( 4,000 ) – $ 30.00

Forfeitures ( 50,000 ) 7.69 $ 13.90

Balance at March 31, 2023 4,379,593 3.08 $ 22.59

Exercisable March 31, 2023 4,379,593 3.08 $ 22.59

Exercisable December 31, 2022 4,433,593 3.37 $ 22.50

The warrants to purchase shares of the Company’s common stock outstanding as of March 31, 2023 and December 31, 2022 had a total value of $ 72.4 million and $ 73.3 million, respectively.

As of March 31, 2023, 89,286 liability classified derivative warrants to purchase shares of the Company’s common stock remained outstanding and are revalued each reporting period.

As of March 31, 2023, the warrants were revalued at $ 0.2 million, resulting in a decrease of $ 0.1 million in liability as compared to December 31, 2022.

The change in value is recorded within net other income (expense) on the condensed consolidated statements of operations.

The fair value of the outstanding derivative warrants was determined by using the Black-Scholes option pricing model ("BSM") based on the following assumptions:

Exercise Price $ 2.10

Dividend Yield 0 %

Volatility 127 %

Risk-free interest rate 4.03 %

Expected life of options 2.0 years

On February 16, 2023, the Company received a notification of exercise from the holder of the remaining 50,000 warrants with a put option.

The put option was exercised for a fixed rate of $ 250,000 .

The Company accounts for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”), which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns.

A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized.

ASC 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company’s financial statements.

ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position.

If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.

The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operation in the provision for income taxes.

As of March 31, 2023 and December 31, 2022, the Company had no accrued interest or penalties related to uncertain tax positions.

The Company files income tax returns in the U.S.

federal jurisdiction and in the states of California, Massachusetts and New Jersey and will start filing in New York.

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federal, state and local, or non-U.S.

income tax examinations by tax authorities since inception

of the Company.

The Company is subject to

US income taxes on a stand-alone basis.

The Company, the Beacon Media Group (formerly ChizComm) and Wow file separate stand-alone tax

returns in each jurisdiction in which they operate.

Beacon Communications, Wow and Ameba are corporations operating in Canada and are

subject to Canadian income taxes on its stand-alone taxable income.

Commitment and Contingencies

The following is a schedule of future minimum contractual

obligations as of September 30, 2022 (in thousands) :

Schedule of future minimum lease payments

income tax examinations by tax authorities since inception of the Company.

The Company is subject to U.S.

income taxes on a stand-alone basis.

The Company, the Beacon Media Group (formerly ChizComm) and Wow file separate stand-alone tax returns in each jurisdiction in which they operate.

Beacon Communications, Wow and Ameba are corporations operating in Canada and are subject to Canadian income taxes on their stand-alone taxable income.

Commitments and Contingencies

The following is a schedule of future minimum contractual obligations as of March 31, 2023 (in thousands):

2023 2024 2025 2026 2027 Thereafter Total

Operating Leases $ 1,229 $ 1,701 $ 1,750 $ 1,768 $ 1,541 $ 4,601 $ 12,590

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Consulting Contracts 2,365 1,428 – – – – 3,793

On January 30, 2019, the Company

entered into an operating lease for 5,838 square feet of general office space at 190 N.

Canon Drive, Suite 400, Beverly Hills, CA 90210

pursuant to a 96-month lease that commenced on August 1, 2019.

The Company pays rent of $0.4 million annually, subject to annual escalations

On February 1, 2021, as part

of the ChizComm Acquisition, the Company assumed an operating lease that was entered into on May 19, 2019 for 6,845 square feet of general

office space located at 245 Fairview Mall Drive, Suites 202 and 301, Toronto, Ontario M2J 4T1 pursuant to an 84-month lease which commenced

on October 1, 2019.

The Company pays rent of $95,830 annually, subject to annual escalations 5% to 7%.

Also, as part of the ChizComm Acquisition,

the Company assumed an operating lease that was entered into on April 30, 2019 for 3,379 square feet of general office space located at

One International Boulevard, 11 th Floor, Mahawh, New Jersey pursuant to a 24-month lease which ended on May 1, 2021.

Company pays rent of $74,338 annually.

On March 2, 2021, the Company

entered into an operating lease for 4,765 square feet of general office space located at 1050 Wall Street West, Suite 665, Lyndhurst NJ,

07071 pursuant to an 89-month lease which commenced on October 1, 2021.

The Company pays rent of $0.1 million annually subject to annual

escalations of 2.5%.

On April 6, 2022, as part

of the Wow Acquisition, the Company assumed an operating lease for 45,119 square feet of general office space located at 2025 West Broadway,

Suite 200, Vancouver, B.C., V6J 1Z6.

The right of use asset and lease liability were revalued on the acquisition date based on the remaining

lease term of 117 months with payments of $81,769 per month, subject to escalations of 7% each of the third and fifth years.

liability and right of use asset were determined to be $6.6 million, utilizing a discount rate of 11.5 %.

As part of the assumed office

lease, the Company also assumed a parking lease for 80 parking spaces.

The parking lease was also revalued utilizing the 11.5% discount

With a remaining lease term of 117 months, paying $6,091 per month, the ROU asset and lease liability were determined to be $ 0.5

million as of the acquisition date.

Also, as part of the Wow

Acquisition, the Company assumed various equipment finance leases, the majority of which are under Master Line of Credit Agreements

with certain banking institutions.

As the rates were implicit in the leases, the Company determined that the carrying value of the

leases as of the acquisition date equaled the fair value.

As determined by utilizing the implicit rate in the leases that ranged

from 3.7%- 14.5% with remaining lease terms of 10-33 months and monthly payments of

$1,346-$57,362 as of the Wow Acquisition date .

The remaining finance lease obligations of $ 3.5

million as of the acquisition date was included as part of the Company’s existing current and noncurrent finance lease

liabilities on the Company’s condensed consolidated balance sheet upon consolidation.

As of September 30,

2022, the weighted-average lease term for the Company’s operating leases are 95

months and the weighted-average discount rate on the leases was 10.39 %.

As of September 30, 2022, the weighted-average lease term for the Company’s

finance leases are 27 months and the weighted-average discount rate on the leases was 5.11 %.

As of December 31, 2021, the

weighted-average lease term for operating leases was 70 months.

The weighted-average discount rate on the leases was 24.9 %.

Rental expenses incurred for

operating and finance leases during the three months ended September 30, 2022 and 2021 were $ 0.9 million and $ 0.1 million , respectively.

Rental expenses incurred for operating and finance leases during the nine months ended September 30, 2022 and 2021 were $ 2.0 million and

$ 0.4 million , respectively.

Debt 52,759 16,711 – – – – 69,470

$ 60,781 $ 21,994 $ 2,765 $ 1,996 $ 1,541 $ 4,601 $ 93,678

On January 30, 2019, the Company entered into an operating lease for 5,838 square feet of general office space at 190 N.

Canon Drive, Suite 400, Beverly Hills, CA 90210 pursuant to a 96-month lease that commenced on August 1, 2019.

The Company pays rent of $ 0.4 million annually, subject to annual escalations of 3.5 %.

On February 1, 2021, as part of the ChizComm Acquisition, the Company assumed an operating lease that was entered into on May 19, 2019 for 6,845 square feet of general office space located at 245 Fairview Mall Drive, Suites 202 and 301, Toronto, Ontario M2J 4T1 pursuant to an 84-month lease which commenced on October 1, 2019.

The Company pays rent of $ 95,830 annually, subject to annual escalations of 5 % to 7 %.

On March 2, 2021, the Company entered into an operating lease for 4,765 square feet of general office space located at 1050 Wall Street West, Suite 665, Lyndhurst NJ, 07071 pursuant to an 89-month lease which commenced on October 1, 2021.

The Company pays rent of $ 115,154 annually subject to annual escalations of 2.5 %.

On April 6, 2022, as part of the Wow Acquisition, the Company assumed an operating lease for 45,119 square feet of general office space located at 2025 West Broadway, Suite 200, Vancouver, B.C., V6J 1Z6.

The right of use asset and lease liability were revalued on the acquisition date based on the remaining lease term of 117 months with payments of $ 81,769 per month, subject to escalations of 7 % each of the third and fifth years.

The lease liability and right of use asset were determined to be $ 6.6 million, utilizing a discount rate of 11.5 %.

As part of the assumed office lease, the Company also assumed a parking lease for 80 parking spaces.

The parking lease was also revalued utilizing the 11.5 % discount rate.

With a remaining lease term of 117 months, paying $ 6,091 per month, the ROU asset and lease liability were determined to be $ 0.5 million as of the acquisition date and recorded within current and noncurrent Operating Lease Liabilities on the Company's condensed consolidated balance sheet upon acquisition.

Also, as part of the Wow Acquisition, the Company assumed various equipment finance leases, the majority of which are under Master Line of Credit Agreements with certain banking institutions.

As the rates were implicit in the leases, the Company determined that the carrying value of the leases as of the acquisition date equaled the fair value.

With the implicit rates in the leases range from 3.7 %- 14.5 %, remaining lease terms of 10 - 33 months and monthly payments of $ 1,346 -$ 57,362 as of the Wow Acquisition date, the finance lease obligations were determined to be $ 3.5 million and recorded as current and noncurrent Finance Lease Liabilities on the Company’s condensed consolidated balance sheet upon consolidation.

The present value discount of the minimum operating lease payments above was $ 3.9 million as of March 31, 2023.

Other Funding Commitments

The Company enters into various

agreements associated with its individual properties.

Some of these agreements call for the potential future payment of royalties or “profit”

participations for either (i) the use of third party intellectual property, in which the Company is obligated to share net profits with

the underlying rights holders on a certain basis as defined in the respective agreements or (ii) services rendered by animation studios,

post-production studios, writers, directors, musicians or other creative talent for which the Company is obligated to share with these

service providers a portion of the net profits of the properties on which they have rendered services, as defined in each respective agreement.

The Company enters into various agreements associated with its individual properties.

Some of these agreements call for the potential future payment of royalties or “profit” participations for either (i) the use of third party intellectual property, in which the Company is obligated to share net profits with the underlying rights holders on a certain basis as defined in the respective agreements or (ii) services rendered by animation studios, post-production studios, writers, directors, musicians or other creative talent for which the Company is obligated to share with these service providers a portion of the net profits of the properties on which they have rendered services, as defined in each respective agreement.

Related Party Transactions

Pursuant to his

employment agreements dated December 7, 2020, Andy Heyward, the Company’s CEO, is entitled to an Executive Producer fee of

$12,500 per one-half hour episode for each episode he provides services as an executive producer .

During the nine months

ended September 30, 2022, Mr.

Heyward earned and the Company paid $ 0.6

million in producer fees.

During the nine months ended September 30, 2021, Mr.

Heyward earned $ 0.2 million in producer fees.

Heyward has also earned $ 55,000

as part of his quarterly discretionary bonus in each of the quarters of 2022 and 2021.

Pursuant to his employment

agreement dated April 7, 2022, whereas Michael Hirsh was appointed as the CEO of Wow and its Frederator and Mainframe Studio subsidiaries,

a member of the Company’s Executive Committee and a member of the Company’s Board of Directors, is entitled to an Executive

Producer fee of $12,400 per one-half hour for each episode of any audio-visual production produced by Wow and any of its subsidiaries

during the term of his employment, up to 52 episodes per year .

During the nine months ended September 30, 2022, Mr.

Hirsh did not

yet earn any producer fees under the employment agreement.

On July 21, 2020, the

Company entered into a merchandising and licensing agreement with Andy Heyward Animation Art (“AHAA”), whose principal

is Andy Heyward.

The Company entered into a customary merchandise license agreement with AHAA for the use of characters and logos

related to Warren Buffett’s Secret Millionaires Club and Stan Lee’s Mighty 7 in connection with certain

products to be sold by AHAA.

The terms and conditions of such license are customary within the industry, and the Company earns an

arm-length industry standard royalty on all sales made by AHAA utilizing the licensed content.

Since execution of the agreement, the

Company has earned $ 0

in royalties from this agreement.

On September 30, 2021,

the Company entered into a Loan Agreement and Promissory Note with POW!

in the amount of $ 1,250,000 ,

accruing simple interest at the annualized rate of 9 %.

The entire principal sum was required to be remitted to POW!’s client trust account of POW!’s legal counsel within 5

days of the effective date.

The principal, plus interest must be repaid by no later than November 1, 2022.

Within the Loan

Agreement, it is stated that the proceeds of $1,000,000 are required to be used by POW!

to settle the arbitration against Stan Lee

Studios (aka Proxima Studios) and $250,000 shall be used to solely pay for the payment of legal costs and fees.

The principal amount

was transferred to POW!

on October 12, 2021 and on or about November 4, 2021, POW and Proxima entered into a binding settlement

agreement resolving all the claims made by Proxima.

The loan has accrued interest of $ 78,660

and $ 26,221 as of September 30, 2022 and December 31, 2021, respectively, recorded with the principal balance within Note Receivable

from Related Party on the Company’s condensed consolidated balance sheets.

In addition, pursuant to its joint venture with POW!

and formation of the entity Stan Lee Universe, LLC, the Company included within Note Receivable from Related Party, the amount owed

to the Company related to the 50% non-controlling interest held by POW!.

During the three months ended

September 30, 2022, the Company and YFE completed an asset exchange transaction pursuant to a License and Distribution Agreement (the

“Agreement”) signed on June 27, 2022.

The Agreement includes multiple elements, including (i) broadcast rights and (ii) distribution

Stefan Piëch, a member of the Company’s Board of Directors since June 23, 2022, is the chief executive officer of YFE.

The Company currently has a 48.0 % economic ownership interest in YFE and Mr.

Piech has a 28.2 % economic ownership interest in YFE.

to the Agreement, the Company granted YFE the right to use certain of the Company’s programs to broadcast on YFE’s channels

in certain territories and in exchange, the Company shall be entitled to receive a flat fee of EUR 1,000,000 upon delivery of the programs.

In addition, YFE granted the Company the right to use certain of YFE’s programs to broadcast on the Company’s channels in

certain territories and in exchange, YFE shall be entitled to receive a flat fee of EUR 1,000,000 upon YFE’s delivery of the programs.

The rights between the parties were exchanged and invoices were generated and marked as paid without cash actually being exchanged between

the parties as it was agreed that the physical transfer of cash was unnecessary.

The EUR 1,000,000 was treated as an asset exchange and

was not included as part of revenue generated by the Company.

Each party granted to the other distribution rights to those same titles.

The distribution rights grant the Company the right to license the YFE titles to third parties within specific territories and YFE the

right to license the Company’s titles to third parties worldwide.

Each party will earn a commission of 30% from gross receipts of

titles distributed and reimbursement of up to 5 % of expenses incurred.

On July 19, 2022, the Company

entered into a Shareholder Loan Agreement with YFE in the amount of USD $ 1.3 million , accruing interest at the fixed annualized rate of

5 %, with successive interest periods of three months due on the last day of each calendar quarter.

The entire principal sum was required

to be remitted to YFE within 5 days of the effective date.

Pursuant to his employment agreements dated December 7, 2020, Andy Heyward, the Company’s CEO, is entitled to an Executive Producer fee of $ 12,500 per one-half hour episode for each episode he provides services as an executive producer .

During the three months ended March 31, 2023 and March 31, 2022, Mr.

Heyward earned and was paid $ 162,500 and $ 612,155 in producer fees, respectively.

Heyward also earned his $ 55,000 quarterly bonus during the three months ended March 31, 2023.

On August 25, 2022, Mr.

Heyward's employment agreement was amended to include assignment of music royalties to Mr.

Heyward for all musical compositions in which he provides services as a composer for or on behalf of the Company, in the event that the Company acquires up to 50 % of the writer's share of the royalties for that musical composition.

If the Company acquires more than 50 % of the writer's share of the royalties on musical compositions Mr.

Heyward provided services for, he has the option to purchase the additional royalties from the Company at the price the Company paid to acquire the additional royalties.

During the three months ended March 31, 2023, Mr.

Heyward has not earned royalties from musical compositions.

Pursuant to his employment agreement dated April 7, 2022, Michael Hirsh, CEO of Wow and its Frederator and Mainframe Studio subsidiaries is entitled to an Executive Producer fee of $ 12,400 per one-half hour for each episode of any audio-visual production produced by Wow and any of its subsidiaries during the term of his employment, up to 52 episodes per year .

During the three months ended March 31, 2023, Mr.

Hirsh has not earned producer fees under the employment agreement.

On July 21, 2020, the Company entered into a merchandising and licensing agreement with Andy Heyward Animation Art (“AHAA”), whose principal is Andy Heyward.

The Company entered into a customary merchandise license

agreement with AHAA for the use of characters and logos related to Warren Buffett’s Secret Millionaires Club and Stan Lee’s Mighty 7 in connection with certain products to be sold by AHAA.

The terms and conditions of such license are customary within the industry, and the Company earns an arm-length industry standard royalty on all sales made by AHAA utilizing the licensed content.

During the three months ended March 31, 2023 and March 31, 2022, Mr.

Heyward has not earned royalties from this agreement.

On September 30, 2021, the Company entered into a Loan Agreement and Promissory Note with POW in the amount of $ 1,250,000 , accruing simple interest at the annualized rate of 9 %.

The loan has accrued interest of $ 0.2 million and $ 0.1 million as of March 31, 2023 and December 31, 2022, respectively, recorded with the principal balance within Note Receivable from Related Party on the Company’s condensed consolidated balance sheets.

In addition, pursuant to its joint venture with POW and formation of the entity Stan Lee Universe, LLC, the Company included within Note Receivable from Related Party, the amount owed to the Company related to the 50 % non-controlling interest held by POW.

On November 1, 2022, POW failed to repay the Loan as set forth in the applicable loan agreement and the Company had not received any payment as of March 31, 2023.

As the Library secures repayment, the Company initiated a public sale of the Stan Lee Library owned by POW during February 2023, however, POW has since repaid the loan during April 2023 and the auction has been cancelled.

On July 19, 2022, the Company entered into a Shareholder Loan Agreement with YFE in the amount of EURO 1.3 million, accruing interest at the fixed annualized rate of 5 %, with successive interest periods of three months due on the last day of each calendar quarter.

The entire principal sum was required to be remitted to YFE within 5 days of the effective date.

The principal, plus interest must be repaid by no later than June 30, 2026.

The loan has accrued interest of USD $ 11,639 as of September 30, 2022 recorded with the principal balance within Note Receivable from

Related Party on the Company’s condensed consolidated balance sheet.

The loan has accrued interest of USD $ 44,701 as of March 31, 2023 recorded with the principal balance within Note Receivable from Related Party on the Company’s condensed consolidated balance sheet.

On December 1, 2021, the Company entered into an Independent Contractor Agreement for two years with F&M Film and Medien Beteiligungs GmbH ("F&M"), a company controlled by Dr.

Stefan Piëch.

Pursuant to the agreement, F&M will receive $ 150,000 annually, paid on a semi-monthly basis.

In addition, Dr.

Piëch was granted 30,000 of the Company's RSUs that vest in three six-month intervals beginning on December 1, 2021.

During 2022, the Company entered into a sublease agreement with a related party to lease one office in the general office space at 190 N.

Canon Drive, Suite 400, Beverly Hills, CA 90210.

The sublease payment is $ 595 per month and recorded to Other Income in the Company's condensed consolidated statement of operations.

Segment Reporting

The Company’s

CODM uses revenue and net earnings to evaluate the profitability and performance of each operating segment.

All other financial

information is reviewed by the CODM on a consolidated basis.

The CODM does not evaluate the operating segments using asset

information and it is therefore not disclosed.

All expenses directly attributable to each reportable segment is included in

operating results for each segment.

However, the CODM does not evaluate the expenses by operating segment and, therefore, it is not

separately presented.

The following table presents

the revenue and net earnings within the Company’s two operating segments for the three and nine months ended September 30, 2022

and 2021 (in thousands) :

Segment information by revenues and net earnings

The Company’s CODM uses revenue and net earnings to evaluate the profitability and performance of each operating segment.

All other financial information is reviewed by the CODM on a consolidated basis.

The CODM does not evaluate the operating segments using asset information and it is therefore not disclosed.

All expenses directly attributable to each reportable segment are included in the operating results for each segment.

However, the CODM does not evaluate the expenses by operating segment and, therefore, it is not separately presented.

The following table presents the revenue and net earnings within the Company's two operating segments (in thousands):

Three Months Ended

Nine months Ended

September 30,

March 31, 2023 March 31, 2022

Total Revenues:

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Media Advisory & Advertising Services ( 554 ) ( 491 )

Total Net Operating Loss

Total Operating Loss $ ( 24,762 ) $ ( 4,531 )

Geographic Information

The following table provides

information about disaggregated revenue by geographic area for the three and nine months ended September 30, 2022 and 2021 (in

Schedule of segments by geographic area

The following table provides information about disaggregated revenue by geographic area (in thousands):

Three Months Ended

Nine months Ended

September 30,

March 31, 2023 March 31, 2022

Total Revenues:

United States $ 8,640 $ 553

Canada 3,555 888

United Kingdom 1,844 –

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Subsequent Events

On October 4, 2022, Andy Heyward

was paid $55,000 for his third quarter discretionary bonus.

On October 6, 2022, pursuant

to the Settlement Agreement, 419,336 shares of the Company’s common stock were purchased at the market price of $0.68 per share,

plus a premium of $1.31 per share, for a total purchase price of $834,479.

The cost of $285,148 was recorded as treasury stock.

On October 10, 2022, the Company

received a notification of exercise from a holder of certain warrants with a put option exercisable on October 25, 2022.

The put option

was exercisable for a fixed rate of $250,000 for the 500,000 warrants held.

The Company paid the amount on October 10, 2022.

On October 21, 2022, the Company

issued 100,000 shares of common stock to a nonemployee for vested RSUs valued at $62,000.

On November 1, 2022, Andy

Heyward was paid $50,000 for producer fees.

During April 2023, the Company received the principal, plus interest accrued, payment due of $ 1.4 million related to the Loan Agreement and Promissory Note with POW.

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-Q

Item 1. Financial Statements