What changed in this filing

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Item 1. Financial Statements

2020-08-14 compared with 2020-05-18 · 1184 added, 1199 removed, 260 unchanged (90% of the section changed)

FINANCIAL STATEMENTS.

Brands International, Inc.

Consolidated Balance Sheets

of March 31, 2020, and December 31, 2019

Genius Brands International, Inc.

Condensed Consolidated Balance Sheets

As of June 30, 2020, and December 31,

June 30, 2020

Current Assets:

1 unchanged sentence

Accounts Receivable, net

Investor Note Receivable

Prepaid and Other Assets

11 unchanged sentences

Deferred Revenue

Senior Secured Convertible Notes, net

Secured Convertible Notes, net

Payroll Protection Program

Warrant Derivative Liability

10 unchanged sentences

Stockholders’

Preferred Stock, $0.001 par value, 10,000,000 shares authorized, 431 and 1,097 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively

Common Stock, $0.001 par value, 233,333,334 shares authorized 29,592,229 and 21,877,724 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively

Preferred Stock, $0.001 par value, 10,000,000 shares authorized, 100 and 1,097 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

Common Stock, $0.001 par value, 233,333,334 shares authorized 218,856,170 and 21,877,724 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively

Additional Paid in Capital

2 unchanged sentences

(66,047,135 )

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Income (Loss)

Total Stockholders' Equity

Total Liabilities and Stockholders’

accompanying notes are an integral part of these financial statements.

Brands International, Inc.

Consolidated Statements of Operations

Months Ended March 31, 2020 and March 31, 2019

The accompanying notes are an integral part

of these financial statements.

Genius Brands International, Inc.

Condensed Consolidated Statements of

Three and Six Months Ended June 30, 2020

and June 30, 2019

Three Months Ended

March 31, 2020

March 31, 2019

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Licensing & Royalties

10 unchanged sentences

Other Income (Expense):

Interest Income

Loss on Extinguished Debt

Warrant Revaluation Expense

(208,760,698 )

(212,228,659 )

Conversion Option Revaluation Expense

(171,835,729 )

Sub-Lease Income

1 unchanged sentence

Net Other Income (Expense)

(380,881,276 )

(384,949,171 )

Loss Before Income Tax Expense

(383,258,002 )

(389,093,946 )

Income Tax Expense

(383,258,002 )

(389,093,946 )

Beneficial Conversion Feature on Preferred Stock

2 unchanged sentences

$ (1,715,152 )

$ (389,093,946 )

$ (7,044,872 )

Net Loss per Common Share (Basic And Diluted)

Weighted Average Shares Outstanding (Basic and Diluted)

accompanying notes are an integral part of these financial statements.

Brands International, Inc.

Consolidated Statements of Comprehensive Income

months ended March 31, 2020 and March 31, 2019

The accompanying notes are an integral part

of these financial statements.

Genius Brands International, Inc.

Condensed Consolidated Statements of

Comprehensive Loss

Three and Six Months Ended June 30, 2020

and June 30, 2019

Three Months Ended

March 31, 2020

March 31, 2019

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

$ (383,258,002 )

$ (1,715,152 )

$ (389,093,946 )

$ (6,722,632 )

Beneficial Conversion Feature on Preferred Stock

2 unchanged sentences

$ (1,715,152 )

accompanying notes are an integral part of these financial statements.

Brands International, Inc.

Statements of Stockholders' Equity

Months Ended March 31, 2020 and Three Months Ended March 31, 2019

$ (389,093,946 )

$ (7,044,872 )

The accompanying notes are an integral part

of these financial statements.

Genius Brands International, Inc.

Consolidated Statements of Stockholders'

Three and Six Months Ended June 30, 2020

and June 30, 2019

Preferred Stock

3 unchanged sentences

$ (66,047,135 )

Cumulative effect of adoption ASC 842

Warrants Issued As Part Of Debt Extinguishment

Beneficial Conversion Feature Resulting from Debt

Value of Preferred Stock Conversion

Proceeds from Securities Purchase Agreement, Net

Proceeds From Warrant Exchange, net

Issuance of Common Stock for Services

Share Based Compensation

Value of Beneficial Conversion Feature

Balance, March 31, 2020

(71,883,079 )

Proceeds from Securities Purchase Agreement, Net

Issuance of Common Stock for Services

Share Based Compensation

Value of Preferred Stock Conversion

Derivative Liability Adjustment

Note Conversion

Warrant Exercise

Warrant Revaluation

Warrants Issued For Services

(383,258,002 )

Balance, June 30, 2020

$ 519,985,782

$ (456,981,465 )

Balance, December 31, 2018

$ (50,702,486 )

Value of Preferred Stock Conversion

Cumulative effect of adoption ASC 842

Warrants Issued As Part Of Debt Extinguishment

Value Of Beneficial Conversion Feature

Proceeds from Securities Purchase Agreement, Net

Proceeds From Warrant Exchange, net

Issuance of Common Stock for Services

Share Based Compensation

Value of Beneficial Conversion Feature

Balance, March 31, 2019

(56,036,514 )

accompanying notes are an integral part of these financial statements.

Brands International, Inc.

Consolidated Statements of Cash Flows

months ended March 31, 2020 and March 31, 2019

March 31, 2020

March 31, 2019

Issuance of Common Stock for Services

Share Based Compensation

Balance, June 30, 2019

$ (57,751,666 )

The accompanying notes are an integral part

of these financial statements.

Genius Brands International, Inc.

Condensed Consolidated Statements of

Six Months Ended June 30, 2020 and June

June 30, 2020

June 30, 2019

Cash Flows from Operating Activities:

6 unchanged sentences

Stock Issued for Services

Stock Compensation Expense

Share Based Compensation

Warrant Revaluation Expense

Debt Discount in Excess of the Principal

Loss on Extinguished Debt

Conversion Option Revaluation Expense

Debt Discount in Excess of the Principal

Decrease (Increase) in Operating Assets:

1 unchanged sentence

Other Receivable

Inventory, net

Prepaid Expenses & Other Assets

10 unchanged sentences

Cash Flows from Investing Activities:

Investment in Intangible Assets, net

Investment in Property & Equipment

3 unchanged sentences

Proceeds from Sale of Securities Purchase Agreement, Net

Proceeds From Warrant Exchange

Proceeds From Warrant Exercises

Proceeds from Senior Secured Convertible Notes, net

Repayment on Secured Convertible Notes

(Repayment)/Proceeds on Production Facility, Net

Proceeds from Payroll Protection Program

Collection of Investor Notes

Repayment of Secured Convertible Notes

Note Conversion Costs

Repayment of Production Facility, Net

Net Cash Provided by Financing Activities

Net Increase in Cash and Cash Equivalents

Beginning Cash and Cash Equivalents

Ending Cash and Cash Equivalents

Net Increase/(Decrease) in Cash, Cash Equivalents

Beginning Cash, Cash Equivalents, and Restricted Cash

Ending Cash, Cash Equivalents, and Restricted Cash

Supplemental Disclosures of Cash Flow Information:

1 unchanged sentence

Schedule of Non-Cash Financing and Investing Activities

Warrant Derivative Liability

Issuance of Common Stock for production services

Beneficial Conversion Feature

accompanying notes are an integral part of these financial statements.

Brands International, Inc.

to Condensed Financial Statements

31, 2019 (unaudited)

Senior Convertible notes were converted into 65,476,190

shares of Common Stock

58,522,601 warrants were exercised on a cashless basis resulting in the issuance of 52,551,716 shares

of Common Stock

Issuance of 2,284,172 warrants to purchase Common Stock

at $1.39 per share for production Services

The accompanying notes are an integral

part of these financial statements.

Genius Brands International, Inc.

Notes to Condensed Financial Statements

June 30, 2020 (unaudited)

Organization and Business

and Nature of Business

Brands International, Inc.

Organization and Nature of Business

Genius Brands International, Inc.

(“we,”

1 unchanged sentence

“our,”

or the “Company”) is a global content

and brand management company that creates and licenses multimedia content.

Led by experienced industry personnel, we distribute

our content in all formats as well as a broad range of consumer products based on our characters.

In the children's media sector,

our portfolio features “content with a purpose”

or the “Company”) is a global content and brand management company that creates

and licenses multimedia content.

Led by experienced industry personnel, we distribute our content in all formats as well as a broad

range of consumer products based on our characters.

In the children's media sector, our portfolio features “content with

a purpose”

for toddlers to tweens, which provides enrichment as well as entertainment.

New intellectual property titles include the preschool property Rainbow Rangers , which debuted in November 2018 on Nickelodeon

and which was renewed for a second season and preschool property Llama Llama, which debuted on Netflix in January

2018 and was renewed by Netflix for a second season.

Our 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 which is distributed across our Genius Brands Network on Comcast’s Xfinity on Demand, AppleTV,

Roku, Amazon Fire, YouTube, Amazon Prime, Cox, Dish, Sling and Zumo as well as Connected TV.

We are also developing an all-new

animated series, Stan Lee's Superhero Kindergarten with Stan Lee's Pow!

Entertainment.

addition, we act as licensing agent for Penguin Young Readers, a division of Penguin Random House LLC who owns or controls the

underlying rights to Llama Llama , leveraging our existing licensing infrastructure to expand this brand into new product

categories, new retailers, and new territories.

Company commenced operations in 2006, assuming all the rights and obligations of its then Chief Executive Officer, under an Asset

Purchase Agreement between the Company and Genius Products, Inc., in which the Company obtained all rights, copyrights, and trademarks

to the brands “Baby Genius,”

New intellectual property titles include

the preschool property Rainbow Rangers , which debuted in November 2018 on Nickelodeon and which was renewed for a second

season and preschool property Llama Llama, which debuted on Netflix in January 2018 and was renewed by Netflix for

a second season.

Our 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, which is distributed

across our Genius Brands Network on Comcast’s Xfinity on Demand, AppleTV, Roku, Amazon Fire, YouTube, Amazon Prime, Cox,

Dish, Sling and Zumo as well as Connected TV.

We are also developing an all-new animated series, Stan Lee’s Superhero

Kindergarten with Stan Lee’s Pow!

Entertainment, Oak Productions and Alibaba.

Arnold Schwarzenegger lends his voice

as the lead and is also an Executive Producer on the series.

The show will be broadcast in the United States on Amazon Prime and

the Company’s wholly owned distribution outlet, Kartoon Channel!.

In July, 2020, the Company entered into a binding term

sheet with POW, Inc.

(“POW!”) in which we agreed to form a joint venture with POW!

to exploit certain rights in intellectual

property created by Stan Lee, as well as the name and likeness of Stan Lee.

The joint venture will be called “Stan Lee Universe,

and the Company are finalizing the details of the venture.

In addition, we act as licensing agent

for Penguin Young Readers, a division of Penguin Random House LLC who owns or controls the underlying rights to Llama Llama ,

leveraging our existing licensing infrastructure to expand this brand into new product categories, new retailers, and new territories.

The Company commenced operations in 2006,

assuming all the rights and obligations of its then Chief Executive Officer, under an Asset Purchase Agreement between the Company

and Genius Products, Inc., in which the Company obtained all rights, copyrights, and trademarks to the brands “Baby Genius,”

“Kid Genius,”

1 unchanged sentence

and “Wee Worship,”

and all then existing productions under those titles.

In 2011, the Company reincorporated in Nevada and changed its name to Genius

Brands International, Inc.

and all then existing productions under

those titles.

In 2011, the Company reincorporated in Nevada and changed its name to Genius Brands International, Inc.

(the “Reincorporation”).

In connection with the Reincorporation, the Company changed its

trading symbol to “GNUS.”

2013, the Company entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) with A Squared Entertainment

LLC, a Delaware limited liability company (“A Squared”), A Squared Holdings LLC, a California limited liability company

and sole member of A Squared (the “Parent Member”), and A2E Acquisition LLC, its newly formed, wholly-owned Delaware

subsidiary (“Acquisition Sub”).

Upon closing of the transactions, A Squared, as the surviving entity, became a wholly-owned

subsidiary of the Company.

Historically,

the Company has incurred net losses.

For the three months ended March 31, 2020 and March 31, 2019, the Company reported net losses

of 5,835,944 and $5,007,482, respectively.

The Company reported net cash used in operating activities of $995,517 and $1,213,240

for the three months ended March 31, 2020 and March 31, 2019, respectively.

As of March 31, 2020, the Company had an accumulated

deficit of $71,883,079 and total stockholders’

In connection with the Reincorporation, the Company changed its trading symbol to “GNUS.”

In 2013, the Company entered into an Agreement

and Plan of Reorganization (the “Merger Agreement”) with A Squared Entertainment LLC, a Delaware limited liability

company (“A Squared”), A Squared Holdings LLC, a California limited liability company and sole member of A Squared

(the “Parent Member”), and A2E Acquisition LLC, its newly formed, wholly-owned Delaware subsidiary (“Acquisition

Upon closing of the transactions, A Squared, as the surviving entity, became a wholly-owned subsidiary of the Company.

Historically, the Company has

incurred net losses.

For the three months ended June 30, 2020 and June 30, 2019, the Company reported net losses of

$383,258,002 and $1,715,152, respectively.

For the six months ended June 30, 2020 and June 30, 2019, the Company reported net

losses of $389,093,946 and $6,722,632, respectively.

The Company reported net cash used in operating activities of $2,331,261

and $2,550,140 for the six months ended June 30, 2020, and June 30, 2019, respectively.

As of June 30, 2020, the Company had

an accumulated deficit of $456,981,465 and total stockholders’

equity of $63,218,056.

At March 31, 2020, the Company had current assets of

$10,092,077, including cash and cash equivalents of $2,760,048 and current liabilities of $19,290,900.

The Company had negative

working capital of $9,198,823 as of March 31, 2020, compared to negative working capital of $3,650,136 as of December 31, 2019.

Exercise Agreement

January 22, 2020, the Company entered into a private transaction (the “Private Transaction”) pursuant to a Warrant

Exercise Agreement (the “Agreement”) with the holder of the Company’s existing warrants (the “Original

Warrants”).

The Original Warrants were originally issued on October 3, 2017, to purchase an aggregate of 500,000 shares

of Common Stock, at an exercise price of $3.90 per share and were to expire in October 2022.

to the Agreement, the holder of the Original Warrants and the Company agreed that such Original Warrant holder would exercise

its Original Warrants in full and the Company would amend the Original Warrants to reduce the exercise price thereof to $0.34

(the average closing price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the

signing of the Agreement) (the “Amended Exercise Price”).

The Company received approximately $170,000 from the exercise

of the Original Warrants.

Convertible Note and Warrant Private Placement

March 11, 2020, the Company and certain accredited investors (each an “Investor”

and collectively, the “Investors”)

entered into a Securities Purchase Agreement (the “SPA”) pursuant to which the Company agreed to sell and issue (1)

Senior Secured Convertible Notes to the Investors in the aggregate principal amount of $13,750,000 (each, a “Note”

and collectively, the “2020 Convertible Notes”) and $11,000,000 funding amount (reflecting an original issue discount

of $2,750,000) and (2) warrants to purchase 65,476,190 shares of the Company’s common stock, par value $0.001 per share

(the “Common Stock”), exercisable for a period of five years at an initial exercise price of $0.26 per share (each

a “Warrant”

and collectively, the “Warrants”), for consideration consisting of (i) a cash payment of $7,000,000,

and (ii) full recourse cash secured promissory notes payable by the Investors to the Company (each, an “Investor Note”

and collectively, the “Investor Notes”) in the principal amount of $4,000,000 (the “Investor Notes Principal”)

(collectively, the “Financing”).

Andy Heyward, the Company’s Chairman and Chief Executive Officer, participated

as an Investor and invested $1,000,000 in connection with the Financing, all of which was paid at the closing and not pursuant

to an Investor Note.

closing of the sale and issuance of the 2020 Convertible Notes, the Warrants and the Placement Agent Warrants described below

in Note 15 occurred on March 17, 2020 (the “Closing Date”).

The maturity date of the 2020 Convertible Notes is September

30, 2021 and the maturity date of the Investor Notes is March 11, 2060.

At June 30, 2020, the Company had

current assets of $58,460,486, including cash and cash equivalent of $54,382,775 and current liabilities of $8,783,171.

Company had positive working capital of $49,677,315 as of June 30, 2020, compared to negative working capital of $3,650,136

as of December 31, 2019.

Prior to the Company’s

successful capital raises, the Company applied a loan pursuant to the Paycheck Protection Program (PPP) established under

Coronavirus Aid, Relief, and Economic Security Act (CARES Act) as interpreted and applied by Small Business Administration

(SBA), an Agency of the United States of America.

The application was approved and on April 30,2020, the Company received a

loan with a principal amount of $366,267.

The loan has an interest rate of one percent (1%) per year and matures on April 19,

The loan may be eligible, in whole or in part, for forgiveness pursuant to the PPP.

The Company shall apply to the

lender for loan forgiveness in accordance with the PPP as implemented by SBA.

The Company reported the proceeds from the PPP

loan as debt using the effective interest rate method.

Warrant Exercise Agreement

On January 22, 2020, the Company entered

into a private transaction (the “Private Transaction”) pursuant to a Warrant Exercise Agreement (the “Agreement”)

with the holder of the Company’s existing warrants (the “Original Warrants”).

The Original Warrants were originally

issued on October 3, 2017, to purchase an aggregate of 500,000 shares of Common Stock (as defined below) at an exercise price of

$3.90 per share and were to expire in October 2022.

Pursuant to the Agreement, the holder of

the Original Warrants and the Company agreed that such Original Warrant holder would exercise its Original Warrants in full and

the Company would amend the Original Warrants to reduce the exercise price thereof to $0.34 (the average closing price (as reflected

on Nasdaq.com) of the Common Stock (as defined below) for the five trading days immediately preceding the signing of the Agreement)

(the “Amended Exercise Price”).

The Company received approximately $170,000 from the exercise of the Original Warrants.

Secured Convertible Note and Warrant Private Placement

On March 11, 2020, the Company and certain

accredited investors (each an “Investor”

and collectively, the “Investors”) entered into a Securities Purchase

Agreement (the “SPA”) pursuant to which the Company agreed to sell and issue (1) Senior Secured Convertible Notes to

the Investors in the aggregate principal amount of $13,750,000 (each, a “Note”

and collectively, the “2020 Convertible

Notes”) and $11,000,000 funding amount (reflecting an original issue discount of $2,750,000) and (2) warrants to purchase

65,476,190 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), exercisable

for a period of five years at an initial exercise price of $0.26 per share (each a “Warrant”

and collectively, the

“Warrants”), for consideration consisting of (i) a cash payment of $7,000,000, and (ii) full recourse cash secured

promissory notes payable by the Investors to the Company (each, an “Investor Note”

and collectively, the “Investor

Notes”) in the principal amount of $4,000,000 (the “Investor Notes Principal”) (collectively, the “Financing”).

Andy Heyward, the Company’s Chairman and Chief Executive Officer, participated as an Investor and invested $1,000,000 in

connection with the Financing, all of which was paid at the closing and not pursuant to an Investor Note.

The closing of the sale and issuance of

the 2020 Convertible Notes, the Warrants and the Placement Agent Warrants (as defined below) described below in Note 10 occurred

on March 17, 2020 (the “Closing Date”).

The maturity date of the 2020 Convertible Notes is September 30, 2021 and the

maturity date of the Investor Notes is March 11, 2060.

2020 Convertible Notes can be converted

at the investor’s option into Common Stock at the conversion rate of $1.375 per share to be adjusted to $0.21 per share upon

receipt of stockholder approval and subject to certain other adjustments, according to the terms of the Notes (the “Conversion

Price”).

On May 15, 2020, the Company received the necessary stockholder approval in connection with the Nasdaq proposals

described below in Note 10.

As a result, the conversion price of the 2020 Convertible Notes and the exercise price of the Warrants

were each reduced to $0.21.

2020 Convertible Notes can be converted

receipt of stockholder approval and subject to certain other adjustments, according to the terms of the 2020 Convertible Notes

(the “Conversion Price”).

On May 15, 2020, the Company received the necessary stockholder approval in connection with

the Nasdaq proposals described below in Note 10.

As a result, the Conversion Price and the exercise price of the Warrants were

each reduced to $0.21.

The 2020 Convertible Notes can be converted

at the Company’s option, provided certain conditions are met, into Common Stock at the lower of the Conversion Price and

85% of the average of the five lowest daily weighted average prices of Company’s shares during the measuring period, according

to the terms of the Notes.

to the terms of the 2020 Convertible Notes.

Between June 10 and June 23, 2020, the

2020 Convertible Notes were converted and repaid through the issuance of 65,476,190 shares of Common Stock.

March 2020 Securities Purchase Agreement

On March 22, 2020, we entered into a Securities

Purchase Agreement with certain long standing investors (the “March Investors”), pursuant to which we agreed to issue

and sell, in a registered direct offering by the Company directly to the March Investors, an aggregate of 4,000,000 shares of our

Common Stock, at an offering price of $0.2568 per share for gross proceeds of approximately $1.0 million before deducting offering

May 2020 Securities Purchase Agreements

On May 7, 2020, we entered into a Securities

Purchase Agreement with certain long standing investors (the “May 7 th Investors”), pursuant to which

we agreed to issue and sell, in a registered direct offering by the Company directly to the May 7 th Investors,

an aggregate of 8,000,000 shares of our Common Stock, at an offering price of $0.35 per share for gross proceeds of approximately

$2.8 million before deducting offering expenses.

On May 8, 2020, we entered into a Securities

Purchase Agreement with certain long standing investors (the “May 8 th Investors”), pursuant to which

we agreed to issue and sell, in a registered direct offering by the Company directly to the May 8 th Investors,

an aggregate of 12,000,000 shares of our Common Stock, at an offering price of $0.454 per share for gross proceeds of approximately

$5.448 million before deducting offering expenses.

On May 18, 2020, we entered into a Securities

Purchase Agreement with certain long standing investors (the “May 18 th Investors”), pursuant to which

we agreed to issue and sell, in a registered direct offering by the Company directly to the May 18 th Investors,

an aggregate of 7,500,000 shares of our Common Stock, at an offering price of $1.20 per share for gross proceeds of approximately

$9.0 million before deducting offering expenses.

On May 28, 2020, we entered into a Securities

Purchase Agreement with certain long standing investors (the “May 28 th Investors”), pursuant to which

we agreed to issue and sell, in a registered direct offering by the Company directly to the May 28 th Investors,

an aggregate of 20,000,000 shares of our Common Stock, at an offering price of $1.50 per share for gross proceeds of approximately

$30.0 million before deducting offering expenses.

Between May 18 and June 11, 2020, the Company

received $5,649,319, net of expenses, from the exercise of 29,666,283 warrants at an exercise price of $0.21 per share.

On June 23, 2020, the Company received

$3,600,000 from the payment of the Investor Notes Principal.

Summary of Significant Accounting Policies

of Presentation

accompanying 2020 and 2019 condensed consolidated financial statements have been prepared in accordance with accounting principles

generally accepted in the United States of America.

of Consolidation

accompanying condensed consolidated financial statements include the accounts of Genius Brands International, Inc., its wholly-owned

subsidiaries A Squared Entertainment LLC, Llama Productions LLC and Rainbow Rangers Productions LLC, as well as its interest in

Stan Lee Comics, LLC (“Stan Lee Comics”).

All significant inter-company balances and transactions have been eliminated

in consolidation.

financial statements have been prepared using the acquisition method of accounting in accordance with Financial Accounting Standards

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

preparation of financial statements in conformity with generally accepted accounting principles in the United States of America

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

Basis of Presentation

The accompanying 2020 and 2019 condensed

consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United

States of America (“U.S.

GAAP”).

Principles of Consolidation

The accompanying condensed consolidated

financial statements include the accounts of Genius Brands International, Inc., its wholly-owned subsidiaries A Squared LLC, Llama

Productions LLC and Rainbow Rangers Productions LLC, as well as its interest in Stan Lee Comics, LLC (“Stan Lee Comics”).

All significant inter-company balances and transactions have been eliminated in consolidation.

The condensed consolidated financial statements

have been prepared using the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”)

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

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.

and Cash Equivalents

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

of March 31, 2020, and December 31, 2019, the Company had Cash and Cash Equivalents of $2,760,048 and $305,121, respectively.

for Doubtful Accounts

receivable are presented on the balance sheets net of estimated uncollectible amounts.

The Company assesses its accounts receivable

balances on a quarterly basis to determine collectability and records an allowance for estimated uncollectible accounts in an

amount approximating anticipated losses based on historical experience and future expectations.

Individual uncollectible accounts

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

The Company had an allowance

for doubtful accounts of $68,943 for March 31, 2020 and $0 as of December 31, 2019.

are stated at the lower of average cost or net realizable value and consist of finished goods such as DVDs, CDs and other products.

A reserve for slow-moving and obsolete inventory is established for all inventory deemed potentially non-saleable.

inventory is considered properly valued and saleable.

The Company concluded that there was an appropriate reserve for slow moving

and obsolete inventory of $0 at both March 31, 2020 and December 31, 2019.

and Equipment

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 statement of operations.

of Use Leased Assets

February 2016, the FASB issued Accounting Standards Update 2016-02, “Leases.”

The standard requires lessees to recognize

the assets and liabilities that arise from leases on the balance sheet.

A lessee should recognize in the statement of financial

position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying

asset for the lease term.

The new guidance is effective for annual and interim reporting periods beginning after December 15,

The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach

with earlier application permitted as of the beginning of an interim or annual reporting period.

July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, which allows for an additional optional

transition method where comparative periods presented in the financial statements in the period of adoption will not be restated

and instead those periods will be presented under existing guidance in accordance with ASC 840, Leases.

Management used this optional

transition method.

As of January 1, 2019, management recorded lease liability of $2,071,903, right-of-use asset of $2,153,747,

accumulated amortization of $124,070, a reversal of previously recorded deferred rent of $37,920 and the increase in accumulated

deficit of $4,306.

and Intangible Assets

represents the excess of purchase price over the estimated fair value of net assets acquired in business combinations accounted

for by the purchase 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.

To test for goodwill impairment, we are required to estimate the fair market value of each

of our reporting units, of which we have one.

While we may use a variety of methods to estimate fair value for impairment testing,

our primary method is discounted cash flows.

We estimate future cash flows and allocations of certain assets using estimates for

future growth rates and our judgment regarding the applicable discount rates.

Changes to our judgments and estimates could result

in a significantly different estimate of the fair market value of the reporting units, which could result in an impairment of

goodwill or indefinite lived intangible assets in future periods.

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.

and Attached Equity-Linked Instruments

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.

Company accounts for the proceeds from the issuance of convertible notes payable in accordance with FASB ASC 470-20

Debt with Conversion and Other Options.

Pursuant to FASB ASC 470-20, the intrinsic value of the embedded conversion

feature (beneficial conversion interest), which is in the money on the commitment date is included in the discount to debt and

amortized to interest expense over the term of the note agreement.

When the conversion option is not separated, the Company accounts

for the entire convertible instrument including debt and the conversion feature as a liability.

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

If the instrument

considered indexed to Company’s stock, the Company analyzes additional equity classification requirements per 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.

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

and Television Costs

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 then charged against revenue based on the

initial market revenue evidenced by a firm commitment over the period of commitment.

The Company expenses all capitalized costs

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

Company capitalizes production costs for films produced in accordance with FASB ASC 926-20 Entertainment - Films - Other Assets

- Film Costs.

Accordingly, production costs are capitalized at actual cost and then charged against revenue quarterly as a cost

of production based on the relative fair value of the film(s) delivered and recognized as revenue.

The Company evaluates its capitalized

production costs annually and limits recorded amounts by their ability to recover such costs through expected future sales.

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 June 30, 2020, and December 31,

2019, the Company had Cash and Cash Equivalents of $54,382,775 and $305,121, respectively.

Allowance for Doubtful Accounts

Accounts receivable are presented on the

balance sheets net of estimated uncollectible amounts.

The Company assesses its accounts receivable balances on a quarterly basis

to determine collectability and records an allowance for estimated uncollectible accounts in an amount approximating anticipated

losses based on historical experience and future expectations.

Individual uncollectible accounts are written off against the allowance

when collection of the individual accounts appears doubtful.

The Company had an allowance for doubtful accounts of $99,792 for

June 30, 2020 and $0 as of December 31, 2019.

Inventories are stated at the lower of

average cost or net realizable value and consist of finished goods such as DVDs, CDs and other products.

A reserve for slow-moving

and obsolete inventory is established for all inventory deemed potentially non-saleable.

The current inventory is considered properly

valued and saleable.

The Company concluded that there was an appropriate reserve for slow moving and obsolete inventory of $0 at

both June 30, 2020 and December 31, 2019.

Property and Equipment

Property and equipment are recorded at

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.

Right of Use Leased Assets

In February 2016, the FASB issued Accounting

Standards Update 2016-02, “Leases.”

The standard requires lessees to recognize the assets and liabilities that arise

from leases on the balance sheet.

A lessee should recognize in the statement of financial position a liability to make lease payments

(the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.

The new guidance

is effective for annual and interim reporting periods beginning after December 15, 2018.

The amendments should be applied at the

beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the

beginning of an interim or annual reporting period.

In July 2018, the FASB issued ASU 2018-11,

Leases (Topic 842), Targeted Improvements, which allows for an additional optional transition method where comparative periods

presented in the financial statements in the period of adoption will not be restated and instead those periods will be presented

under existing guidance in accordance with ASC 840, Leases.

Management used this optional transition method.

As of January 1, 2019,

management recorded lease liability of $2,071,903, right-of-use asset of $2,153,747, accumulated amortization of $124,070, a reversal

of previously recorded deferred rent of $37,920 and the increase in accumulated deficit of $4,306.

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 purchase 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.

To test for goodwill impairment, we are required to estimate the fair market value of each of our reporting units, of which we

While we may use a variety of methods to estimate fair value for impairment testing, our primary method is discounted

We estimate future cash flows and allocations of certain assets using estimates for future growth rates and our judgment

regarding the applicable discount rates.

Changes to our judgments and estimates could result in a significantly different estimate

of the fair market value of the reporting units, which could result in an impairment of goodwill or indefinite lived intangible

assets in future periods.

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.

Annual amortization

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

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 accounts for the proceeds from

the issuance of convertible notes payable in accordance with FASB ASC 470-20 Debt with Conversion and Other Options.

FASB ASC 470-20, the intrinsic value of the embedded conversion feature (beneficial conversion interest), which is in the money

on the commitment date is included in the discount to debt and amortized to interest expense over the term of the note agreement.

When the conversion option is not separated, the Company accounts for the entire convertible instrument including debt and the

conversion feature as a liability.

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 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 FASB ASC 815-15 Embedded Derivatives.

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.

Accordingly, production

costs are capitalized at actual cost and then charged against revenue based on the initial market revenue evidenced by a firm commitment

over the period of commitment.

The Company expenses all capitalized costs that exceed the initial market firm commitment revenue

in the period of delivery of the episodes.

The Company capitalizes production costs

for films produced in accordance with FASB ASC 926-20 Entertainment - Films - Other Assets - Film Costs.

Accordingly, production

costs are capitalized at actual cost and then charged against revenue quarterly as a cost of production based on the relative fair

value of the film(s) delivered and recognized as revenue.

The Company evaluates its capitalized production costs annually and limits

recorded amounts by their ability to recover such costs through expected future sales.

In March 2019, the FASB issued ASU No.

8 unchanged sentences

at a film group level when the film or license agreement is predominantly monetized with other films and/or license agreements.

For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2019,

and interim periods within those fiscal years.

For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2019, and

interim periods within those fiscal years.

We have prospectively adopted ASU 2019-02.

1 unchanged sentence

position, results of operations and cash flows were not material.

Additionally,

for both episodic series and films, 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 film or episodic series, the costs of significant improvement to existing

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

January 1, 2018, the Company adopted the new accounting standard ASC 606 (Topic 606), Revenue from Contracts with Customers and

all the related amendments (“new revenue standard”) using the modified retrospective method applied to those contracts

which were not completed as of January 1, 2018.

a result of the change, beginning January 1, 2018, the Company began recognizing 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.

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.

Revenue under these types of contracts was previously recognized

when royalty statements were received.

The Company began recognizing 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.

Company sells advertising on its Kid Genius channel in the form of either flat rate promotions or impressions served.

rate promotions with a fixed term, the Company recognizes revenue when all five revenue recognition criteria under FASB ASC 606

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.

Company recognizes revenue related to product sales when (i) the seller’s price is substantially fixed, (ii) shipment has

occurred causing the buyer to be obligated to pay for product, (iii) the buyer has economic substance apart from the seller, and

(iv) there is no significant obligation for future performance to directly bring about the resale of the product by the buyer.

Operating Costs

operating costs include costs of our product sales, non-capitalizable film costs, film and television cost amortization expense,

and participation expense related to agreements with various animation studios, post-production studios, writers, directors, musicians

or other creative talent with which we are obligated to share net profits of the properties on which they have rendered services.

required by FASB ASC 718 - Stock Compensation, the Company recognizes an expense related to the fair value of our share-based

compensation awards, including stock options, using the Black-Scholes calculation as of the date of grant.

The Company has elected

to use the graded attribution method for awards which are in-substance, multiple awards based on the vesting schedule.

earnings (loss) per common share (“EPS”) is calculated by dividing net income (loss) applicable to common shareholders

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 shareholders 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”

Additionally, for both episodic series

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

After the initial release of the film or episodic series, the costs of significant improvement to existing products are

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

Revenue Recognition

On January 1, 2018, the Company adopted

the new accounting standard ASC 606 (“Topic 606”), Revenue from Contracts with Customers and all the related amendments

(“new revenue standard”) using the modified retrospective method applied to those contracts which were not completed

as of January 1, 2018.

As a result of the change, beginning January

1, 2018, the Company began recognizing 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.

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.

Revenue under these types of contracts was previously recognized when royalty statements were received.

Company began recognizing revenue related to licensed rights to exploit symbolic IP substantially similarly to functional IP.

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

of the license.

The Company sells advertising on its Kid

Genius channel in the form of either flat rate promotions or impressions served.

For flat rate promotions with a fixed term, the

Company recognizes revenue when all five revenue recognition criteria under FASB 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

The Company recognizes revenue related

to product sales when (i) the seller’s price is substantially fixed, (ii) shipment has occurred causing the buyer to be obligated

to pay for product, (iii) the buyer has economic substance apart from the seller, and (iv) there is no significant obligation for

future performance to directly bring about the resale of the product by the buyer.

Direct Operating Costs

Direct operating costs include costs of

our product sales, non-capitalizable film costs, film and television cost amortization expense, and participation expense related

to agreements with various animation studios, post-production studios, writers, directors, musicians or other creative talent with

which we are obligated to share net profits of the properties on which they have rendered services.

Share-Based Compensation

As required by FASB ASC 718 - Stock Compensation,

the Company recognizes an expense related to the fair value of our share-based compensation awards, including stock options, using

the Black-Scholes calculation as of the date of grant.

The Company has elected to use the graded attribution method for awards

which are in-substance, multiple awards based on the vesting schedule.

Earnings Per Share

Basic earnings (loss) per common share

(“EPS”) is calculated by dividing net income (loss) applicable to common shareholders 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

shareholders 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.

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

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

Company’s cash is maintained at two financial institutions and from time to time the balances for this account exceed the

Federal Deposit Insurance Corporation’s (“FDIC”) insured amount.

Balances on interest bearing deposits at banks

in the United States are insured by the FDIC up to $250,000 per account.

As of March 31, 2020, the Company had one account with

an uninsured balance of $2,478,995.

the three months ended March 31, 2020, the Company had two customers whose total revenue each exceeded 10% of the total consolidated

Those customers accounted for 22% of the total revenue.

Two other customers accounted for 92% of accounts receivable.

For fiscal year 2019, the Company had two customers whose total revenue exceeded 10% of the total consolidated revenue.

customers accounted for 65% of total revenue and represented 95% of accounts receivable.

value of financial instruments

carrying amounts of cash, receivables, accounts payable, and accrued liabilities approximate fair value due to the short-term

maturity of the instruments.

The carrying amount of the Production Loan Facility approximates fair value since the debt carries

a variable interest rate that is tied to either the current Prime or LIBOR rates plus an applicable spread.

previously adopted FASB ASC 820 for financial instruments measured at fair value on a recurring basis.

FASB ASC 820 defines fair

value, establishes a framework for measuring fair value in accordance with U.S.

GAAP and expands disclosures about fair value

measurements.

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 Topic 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).

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

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’s cash is maintained

at three financial institutions and from time to time the balances for this account exceed the Federal Deposit Insurance Corporation’s

(“FDIC”) insured amount.

Balances on interest bearing deposits at banks in the United States are insured by the FDIC

up to $250,000 per account.

As of June 30, 2020, the Company had four accounts with an uninsured balance of $53,365,354.

For the three months ended June 30, 2020,

the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue.

That customer accounted for 46%

of the total revenue and 13% of accounts receivable.

One other customer accounted for 56% of accounts receivable.

For the six months

ended June 30, 2020, the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue.

That customer

accounted for 29% of the total revenue and 13% of accounts receivable.

One other customer accounted for 56% of accounts receivable.

For three and six months ended June 30, 2019, the Company had two customers whose total revenue each exceeded 10% of the total

consolidated revenue.

Those customers accounted for 52% and 57% of the total revenue respectively for the three and six months

ended June 30, 2019 respectively.

The Company had three customers that represented 75% of accounts receivable as of June 30, 2019.

Fair value of financial instruments

The carrying amounts of cash, receivables,

accounts payable, and accrued liabilities approximate fair value due to the short-term maturity of the instruments.

amount of the Production Loan Facility approximates fair value since the debt carries a variable interest rate that is tied to

either the current Prime or LIBOR rates plus an applicable spread.

The Company adopted FASB ASC 820 as of

January 1, 2008, for financial instruments measured at fair value on a recurring basis.

FASB ASC 820 defines fair value, establishes

a framework for measuring fair value in accordance with U.S.

GAAP and expands disclosures about fair value 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.

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

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:

1, defined as observable inputs such as quoted prices for identical instruments in active markets;

Level 2, defined

as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices

for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active;

Level 3, defined

as 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.

Accounting Pronouncements

February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, “Leases.”

The standard requires lessees

to recognize the assets and liabilities that arise from leases on the balance sheet.

A lessee should recognize in the statement

of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right

to use the underlying asset for the lease term.

The new guidance is effective for annual and interim reporting periods beginning

after December 15, 2018.

July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, which allows for an additional

optional transition method where comparative periods presented in the financial statements in the period of adoption will not

be restated and instead those periods will be presented under existing guidance in accordance with ASC 840, Leases.

used this optional transition method.

As of January 1, 2019, management recorded lease liability of $2,071,903, right-of-use asset

of $2,029,677, a reversal of previously recorded deferred rent of $37,920 and the increase in accumulated deficit of $4,306.

January 2017, the FASB issued Accounting Standards Update 2017-04, “Simplifying the Test for Goodwill Impairment”,

which requires an entity to perform a one-step quantitative impairment test, whereby a goodwill impairment loss will be measured

as the excess of a reporting unit’s carrying amount over its fair value (not to exceed the total goodwill allocated to that

reporting unit).

It eliminates Step 2 of the current two-step goodwill impairment test, under which a goodwill impairment loss

is measured by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill.

The standard is effective January 1, 2020, with early adoption as of January 1, 2017 permitted.

We adopted ASU 2017-04 in 2019.

The impact to our consolidated financial position, results of operations and cash flows was not material.

July 2017, the FASB issued ASU No.

2017-11 addressing, among other matters, accounting for certain financial instruments.

of the amendments in this guidance intended to reduce the complexity associated with the issuer’s accounting for certain

financial instruments with characteristics of liabilities and equity.

Specifically, the Board determined that a down round feature

(as defined) would no longer cause a freestanding equity-linked financial instrument (or an embedded conversion option) to be

accounted for as a derivative liability at fair value with changes in fair value recognized in current earnings.

ASU 2017-11 is

effective for public business entities for fiscal year beginning after December 15, 2018.

The Company adopted ASU 2017-11 on January

The adoption of ASU 2017-11 did not have a material impact on the Company’s consolidated financial position, results

of operations, or cash flows.

August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework –

Changes to the

Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which changes the fair value measurement disclosure

requirements of ASC 820.

The update removes some disclosures, modifies others, and adds some new disclosure requirements.

amendments in this ASU are effective for all entities for fiscal years, and interim period within those fiscal years, beginning

after December 15, 2019 with early adoption permitted.

We adopted ASU 2018-13 in 2019.

Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active;

Level 3, defined as 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.

Recent Accounting Pronouncements

In March 2019, the FASB issued ASU No.

2019-02, Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and Entertainment-Broadcasters Intangibles-Goodwill and

Other (Subtopic 920-350).

The update aligns the accounting for production costs of an episodic television series with the accounting

for production costs of films by removing the content distinction for capitalization.

The amendments also require that an entity

reassess estimates of the use of a film in a film group and account for any changes prospectively.

The amendments in this update

require that an entity test a film or license agreement for program material within the scope of Subtopic 920-350 for impairment

at a film group level when the film or license agreement is predominantly monetized with other films and/or license agreements.

For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2019, and

interim periods within those fiscal years.

We have prospectively adopted ASU 2016-18.

The impact to our consolidated financial

position, results of operations and cash flows were not material.

June 2016, the FASB issued ASU No.

2016-13, Financial Instruments –

Credit Losses (Topic 326):

Measurement of Credit Losses

on Financial Instruments, which represents a new credit loss standard that will change the impairment model for most financial

assets and certain other financial instruments.

Specifically, this guidance will require entities to utilize a new “expected

model as it relates to loans issued, trade and other receivables.

In addition, entities will be required to recognize

an allowance for estimated credit losses on available-for-sale debt securities, regardless of the length of time that a security

has been in an unrealized loss position.

This guidance will be effective for annual reporting periods beginning after December

15, 2019, including interim periods within those annual reporting periods.

We adopted ASU 2016-13 in 2019.

The impact to our consolidated

financial position, results of operations and cash flows was not material.

June 2018, the FASB issued ASU No.

2018-07, Compensation –

Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based

Payment Accounting (“ASU 2018-07”), which supersedes ASC 505-05 and expands the scope of ASC 718 to include all share-based

payment arranges related to the acquisition of goods and services from both nonemployees and employee.

As a result, most of the

guidance in ASC 718 associated with employee share-based payments, including most of its requirements related to classification

and measurement, applies to nonemployee share-based payment arrangements.

ASC 2018-07 is effective for all entities for fiscal

year beginning after December 15, 2018, and interim periods within that fiscal year.

The Company adopted ASU No.

2018-07 on January

The adoption of ASU 2018-07 did not have a material impact on the Company’s consolidated financial position, results

of operations, or cash flows.

March 2019, the FASB issued ASU No.

2019-02, Entertainment-Films-Other Assets-Film Costs (Subtopic 926-20) and Entertainment-Broadcasters

Intangibles-Goodwill and Other (Subtopic 920-350).

The update aligns the accounting for production costs of an episodic television

series with the accounting for production costs of films by removing the content distinction for capitalization.

The amendments

also require that an entity reassess estimates of the use of a film in a film group and account for any changes prospectively.

The amendments in this update require that an entity test a film or license agreement for program material within the scope of

Subtopic 920-350 for impairment at a film group level when the film or license agreement is predominantly monetized with other

films and/or license agreements.

For public business entities, the amendments in this update are effective for fiscal years beginning

after December 15, 2019, and interim periods within those fiscal years.

We have prospectively adopted ASU 2016-18.

to our consolidated financial position, results of operations and cash flows were not material.

other accounting pronouncements have been recently issued, most of which represented technical corrections to the accounting literature

or were applicable to specific industries and are not expected to have a material effect on our consolidated financial position,

results of operations, or cash flows.

Various other accounting pronouncements

have been recently issued, most of which represented technical corrections to the accounting literature or were applicable to specific

industries and are not expected to have a material effect on our financial position, results of operations, or cash flows.

Property and Equipment, Net

Company has property and equipment as follows as of March 31, 2020 and December 31, 2019:

The Company has property and equipment

as follows as of June 30, 2020 and December 31, 2019:

Furniture and Equipment

4 unchanged sentences

Property and Equipment, Net

the three months ended March 31, 2020 and 2019, the Company recorded depreciation expense of $13,537 and $9,725, respectively.

During the three months ended June 30,

2020 and 2019, the Company recorded depreciation expense of $13,537 and $9,120, respectively.

During the six months ended June

30, 2020 and 2019, the Company recorded depreciation expense of $27,075 and $18,845, respectively.

Right Of Use Leased Asset

of use asset consisted of the following as of March 31, 2020 and December 31, 2019:

Right of use asset consisted of the following

as of June 30, 2020 and December 31, 2019:

Office Lease Asset

4 unchanged sentences

Right Of Use Asset, Net

the three months ended March 31, 2020 and 2019, the Company recorded amortization expense of $108,245 and $52,973 respectively.

During the three months ended June 30,

2020 and June 30, 2019, the Company recorded amortization expense of $109,458 and $37,059, respectively.

During the six months

ended June 30, 2020 and June 30, 2019, the Company recorded amortization expense of $217,704 and $214,101, respectively.

Film and Television Costs, Net

of March 31, 2020, the Company had net Film and Television Costs of $9,870,922, compared to $9,906,885 at December 31, 2019.

decrease primarily relates to the amortization of Rainbow Rangers Season 1 and Llama Llama Seasons 1 & 2 offset

by development costs related to Stan Lee’s Superhero Kindergarten .

the three months ended March 31, 2020 and 2019, the Company recorded Film and Television Cost amortization expense of $106,614

and $429,183, respectively.

following table highlights the activity in Film and Television Costs of March 31, 2020, and December 31, 2019:

As of June 30, 2020, the Company had net

Film and Television Costs of $9,996,300, compared to $9,906,885 at December 31, 2019.

The increase primarily relates to the production

costs associated with Rainbow Rangers Season 2 and development of Stan Lee’s Superhero Kindergarten offset

by the amortization of Rainbow Rangers Season 1 and Llama Llama Seasons 1 and 2.

During the three months ended June 30,

2020 and 2019, the Company recorded Film and Television Cost amortization expense of $185,748 and $192,803, respectively.

the six months ended June 30, 2020 and 2019, the Company recorded Film and Television Cost amortization expense of $292,363 and

$621,986, respectively.

The following table highlights the activity

in Film and Television Costs of June 30, 2020 and December 31, 2019:

Film and Television Costs, Net as of December 31, 2018

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Film Amortization Expense

Film and Television Costs, Net as of March 31, 2020

Goodwill and Intangible Assets, Net

2013, the Company recognized $10,365,806 in Goodwill, representing the excess of the fair value of the consideration for the Merger

over net identifiable assets acquired.

Pursuant to FASB ASC 350-20, Goodwill is not subject to amortization but is subject to

annual review to determine if certain events warrant impairment to the Goodwill asset.

Through March 31, 2020, the Company has

not recognized any impairment to Goodwill.

Company had the following intangible assets as of March 31, 2020, and December 31, 2019:

Film and Television Costs, Net as of June 30, 2020

Goodwill and Intangible Assets,

In 2013, the Company recognized $10,365,806

in Goodwill, representing the excess of the fair value of the consideration for the merger over net identifiable assets acquired.

Pursuant to FASB ASC 350-20, Goodwill is not subject to amortization but is subject to annual review to determine if certain events

warrant impairment to the Goodwill asset.

Through June 30, 2020, the Company has not recognized any impairment to Goodwill.

Intangible Assets, Net

The Company had the following intangible

assets as of June 30, 2020 and December 31, 2019:

Trademarks (a)

3 unchanged sentences

Intangible Assets, Net

Pursuant to FASB ASC 350-30-35, the Company reviews these intangible assets periodically to determine if the value should be retired

or impaired due to recent events.

At December 31, 2019, the Company determined that the Product Masters inventory had no further

useful life and the asset value and accumulated amortization were written off.

During the three months ended March 31, 2020 and March 31, 2019, the Company recognized, $10,791 and $9,773, respectively, in

amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets.

future intangible asset amortization as of March 31, 2020 is as follows:

Pursuant to FASB ASC 350-30-35, the Company reviews these intangible assets periodically to determine if the value should be retired or impaired due to recent events.

Through June 30, 2019, the Company has not recognized any impairment expense related to these assets.

During the three months ended June 30, 2020 and June 30, 2019, the Company recognized $10,847 and $9,720, respectively, in amortization expense related to the Trademarks and Other Intangible Assets.

During the six months ended June 30, 2020 and June 30, 2019, the Company recognized $21,638 and $19,492, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets.

Deferred Revenue

of March 31, 2020, and December 31, 2019, the Company had total short term and long term deferred revenue of $5,008,714 and $5,108,953,

respectively.

Deferred revenue 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.

Included in the deferred revenue balance as of

March 31, 2020 and December 31, 2019 is the $3,368,465 which is the remaining balance from the total $3,489,583 advance against

future royalty that Sony paid to the Company for both the foreign and domestic distribution rights.

As of June 30, 2020 and December 31, 2019,

the Company had total short term and long term deferred revenue of $5,171,243 and $5,108,953, respectively.

Deferred revenue 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.

Included in the deferred revenue balance as of June 30, 2020 and December 31, 2019 is the $3,367,086

which is the remaining balance from the total $3,489,583 advance against future royalty that Sony paid to the Company for both

the foreign and domestic distribution rights.

Accrued Liabilities –

of March 31, 2020, and December 31, 2019, the Company has the following current accrued liabilities:

As of June 30, 2020 and December 31, 2019,

the Company has the following current accrued liabilities:

Other Accrued Expenses (a)

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Total Accrued Liabilities –

accrued interest, insurance liability and lease deposit on sub-lease.

Represents accrued

salaries and wages and accrued vacation payable to employees for the three months ended March 31, 2020 and the year ended

December 31, 2019

Represents accrued interest, insurance liability and lease deposit on sub-lease.

Represents accrued salaries and wages and accrued vacation payable to employees for the six months ended June 30, 2020 and the year ended December 31, 2019.

Secured Convertible Notes

August 17, 2018, the Company entered into a Securities Purchase Agreement (the “August 2018 Purchase Agreement”) with

certain investors (the “Investors”), pursuant to which the Company agreed to sell (i) an aggregate principal amount

of $4.50 million in secured convertible notes, convertible into shares of our common stock, at a conversion price of $2.50 per

share (the “August 2018 Secured Convertible Notes”) and (ii) warrants to purchase 1,800,000 shares of our common stock

at an exercise price of $3.00 per share (the “Warrants,”

and, together with the August 2018 Secured Convertible Notes,

the “Securities”).

We received approximately $4,500,000 in gross proceeds from the Offering.

August 2018 Secured Convertible Notes were our senior secured obligations and were secured by certain tangible and intangible

property of the Company as described in the August 2018 Purchase Agreement.

On August 17, 2018, the Company entered

into a Securities Purchase Agreement (the “August 2018 Purchase Agreement”) with certain investors (the “Investors”),

pursuant to which the Company agreed to sell (i) an aggregate principal amount of $4.50 million in secured convertible notes, convertible

into shares of our Common Stock, at a conversion price of $2.50 per share (the “August 2018 Secured Convertible Notes”)

and (ii) warrants to purchase 1,800,000 shares of our Common Stock at an exercise price of $3.00 per share (the “Warrants,”

and, together with the August 2018 Secured Convertible Notes, the “Securities”).

We received approximately $4,500,000

in gross proceeds from the Offering.

The August 2018 Secured Convertible Notes

were our senior secured obligations and were secured by certain tangible and intangible property of the Company as described in

the August 2018 Purchase Agreement.

During the three months ended March 31,

2020, the Company recognized $7,288 of discount amortization which is included in interest expense.

In conjunction with the February 2019 Offering

(as defined below) and concurrent private placement, we entered into an amendment, waiver and consent agreement, or the “Amendment,

Waiver and Consent Agreement,”

with certain holders of our August 2018 Secured Convertible Notes.

Pursuant to the Amendment,

Waiver and Consent Agreement, such holders agreed to amend the August 2018 Purchase Agreement, waive any applicable rights and

remedies under the August 2018 Purchase Agreement, and consent to the February 2019 Offering and concurrent private placement.

In consideration for such Amendment, Waiver and Consent Agreement, we agreed to issue such holders warrants to purchase up to an

aggregate amount 1,800,000 shares of our Common Stock.

Such warrants have an exercise price of $2.55 per share, will become exercisable

commencing six months and one day from the date of issuance and will expire five (5) years from the date of issuance.

of the warrants resulted in a modification of debt in accordance with ASC 470 and is characterized as an extinguishment of debt

in accordance with ASC-470-50-40.

In accordance with ASC-470-50-40-2 the Company derecognized the existing debt as if it was extinguished

and recorded the new debt, with the difference between the reacquisition price of the new debt and the net carrying amount of the

extinguished debt, $2,064,193 being recorded as a loss on the extinguishment of debt.

On March 16, 2020, the holders of the August

2018 Secured Convertible Notes were repaid in full including interest

the three months ended March 31, 2020, the Company recognized $7,287 of discount amortization which is included in interest expense.

conjunction with the February 2019 Offering and concurrent private placement, we entered into an amendment, waiver and consent

agreement, or the “Amendment, Waiver and Consent Agreement,”

with certain holders of our 10% Secured Convertible Notes

due August 20, 2019, which were issued pursuant a securities purchase agreement, dated August 17, 2018, by and among the Company

and the purchasers identified on the signature pages thereto, or the notes purchase agreement.

Pursuant to the Amendment, Waiver

and Consent Agreement, such holders agreed to amend the notes purchase agreement, waive any applicable rights and remedies under

the notes purchase agreement, and consent to the February 2019 Offering and concurrent private placement.

In consideration for

such Amendment, Waiver and Consent Agreement, we agreed to issue such holders warrants to purchase up to an aggregate amount 1,800,000

shares of our common stock.

Such warrants have an exercise price of $2.55 per share, will become exercisable commencing six months

and one day from the date of issuance and will expire five (5) years from the date of issuance.

The issuance of the warrants resulted

in a modification of debt in accordance with ASC 470 and is characterized as an extinguishment of debt in accordance with ASC-470-50-40.

In accordance with ASC-470-50-40-2 the Company derecognized the existing debt as if it was extinguished and recorded the new debt,

with the difference between the reacquisition price of the new debt and the net carrying amount of the extinguished debt, $2,064,193

being recorded as a loss on the extinguishment of debt.

March 16, 2020, the August 2018 Secured Convertible Notes were paid in full including interest.

Senior Secured Convertible Notes

March 11, 2020, the Company and certain accredited investors (each an “Investor”

and collectively, the “Investors”)

entered into a Securities Purchase Agreement (the “SPA”) pursuant to which the Company agreed to sell and issue (1)

Senior Secured Convertible Notes to the Investors in the aggregate principal amount of $13,750,000 (each, a “Note”

and collectively, the “2020 Convertible Notes”) and $11,000,000 funding amount (reflecting an original issue discount

of $2,750,000) and (2) warrants to purchase 65,476,190 shares of Common Stock, exercisable for a period of five years at an initial

exercise price of $0.26 per share (each a “Warrant”

and collectively, the “Warrants”), for consideration

consisting of (i) a cash payment of $7,000,000, and (ii) full recourse cash secured promissory notes payable by the Investors

to the Company (each, an “Investor Note”

and collectively, the “Investor Notes”) in the principal amount

of $4,000,000 (the “Investor Notes Principal”) (collectively, the “Financing”).

Senior Secured Convertible

On March 11, 2020, the Company and the

Investors entered into the SPA pursuant to which the Company agreed to sell and issue (1) the 2020 Convertible Notes and $11,000,000

funding amount (reflecting an original issue discount of $2,750,000) and (2) the Warrants, for consideration consisting of (i)

a cash payment of $7,000,000, and (ii) the Investor Notes in the principal amount of $4,000,000.

Andy Heyward, the Company’s

1 unchanged sentence

of which was paid at the closing and not pursuant to an Investor Note.

closing of the sale and issuance of the 2020 Convertible Notes, the Warrants and the Placement Agent Warrants described below

in Note 15 occurred on March 17, 2020 (the “Closing Date”).

The maturity date of the 2020 Convertible Notes is September

30, 2021 and the maturity date of the Investor Notes is March 11, 2060.

SPA contains certain representations and warranties, covenants and indemnities customary for similar transactions.

the Company agreed to the following additional covenants including, but not limited to:

(i) the Company shall hold a stockholder

meeting (the “Stockholder Meeting”), by no later than May 15, 2020, to approve the issuance of shares of Common Stock

issuable under the 2020 Convertible Notes and pursuant to the terms of the SPA for the purposes of compliance with the stockholder

approval rules of The Nasdaq Stock Market (“Stockholder Approval”) and the Company will be obligated to continue to

seek Stockholder Approval every 90 days until such approval is obtained, (ii) until the date that the 2020 Convertible Notes are

no longer outstanding, the Company will not issue, offer, sell or grant any equity or equity-linked security, subject to certain

limited exceptions described in the SPA, unless (A) Stockholder Approval has been obtained prior thereto and (B) (i) at least

75% of the gross proceeds in excess of the first $2,000,000 of gross proceeds of all subsequent Financings consummated prior to

the six month anniversary of the Closing Date are first applied to the redemption of the 2020 Convertible Notes (pro-rata based

on an Investor’s Purchase Price which redemption may be waiver by an Investor and it will not increase the pro-rata percentage

of any other Investors) or (ii) at least 75% of the gross proceeds of any such subsequent placement consummated after the six

month anniversary of the Closing Date are first applied to the redemption of the 2020 Convertible Notes (pro-rata), (iii) the

Company shall use its best efforts to effectuate the transactions contemplated by the Voting Agreements executed by the Company

and the stockholders who hold in the aggregate approximately 40% of the outstanding shares of Common Stock which require that

such stockholders vote in favor of the proposals voted on at the Stockholder Meeting, and (iv) promptly securing the listing of

certain shares issuable pursuant to the transaction documents and maintaining the listing of the shares of Common Stock on an

eligible market.

addition, pursuant to the terms of the SPA, the 2020 Convertible Notes and the Warrants, the Company agreed that the following

will apply or become effective only following Stockholder Approval:

(1) the conversion price of the 2020 Convertible Notes shall

be reduced to $0.21 per share and may be further reduced to any amount and for any period of time deemed appropriate by the board

of directors of the Company, (2) the exercise price of the Warrants shall be immediately reduced to $0.21 per share and may be

further reduced to any amount and for any period of time deemed appropriate by the board of directors of the Company, (3) the

2020 Convertible Notes and Warrants shall each have full ratchet anti-dilution protection for subsequent financings (subject to

certain exceptions), (4) existing warrant holders that are participating in the Financing (representing warrants to purchase an

aggregate of 8,715,229 shares of Company Common Stock) will have their existing warrants’

exercise prices reduced to $0.21

and (5) the investors shall have a most favored nations right which provides that if the Company enters into a subsequent financing,

then the Investors (together with their affiliates) at their sole discretion shall have the ability to exchange their 2020 Convertible

Notes on a $1 for $1 basis into securities issued in the new transaction.

Additionally, in the event that any warrants or options

(or any similar security or right) issued in a subsequent financing include any terms more favorable to the holders thereof (less

favorable to the Company) than the terms of the Warrants, the Warrants shall be automatically amended to include such more favorable

addition, for as long as any 2020 Convertible Notes or Warrants remain outstanding, the Company will not (i) issue or sell any

rights, warrants or options to subscribe for or purchase Common Stock or directly or indirectly convertible into or exchangeable

or exercisable for Common Stock at a price which varies or may vary with the market price of the Common Stock, including by way

of one or more reset(s) to any fixed price, unless the conversion, exchange or exercise price of any such security cannot be less

than the then applicable Conversion Price with respect to the Common Stock into which any 2020 Convertible Notes are convertible

or redeemable or the then applicable Exercise Price (as defined in the Warrants) with respect to the Common Stock into which any

Warrant is exercisable or (ii) enter into, or effect any transaction under, any agreement, including, but not limited to, an equity

line of credit, an “at-the-market”

offering or similar agreement, whereby the Company may issue securities at a future

determined price.

March 16, 2020, the holders of the August 2018 Secured Convertible Notes were repaid in full, including any outstanding interest.

On May 15, 2020, the Company received

the necessary Stockholder Approval in connection with the Nasdaq proposals described above.

As a result, the conversion price

of the 2020 Convertible Notes and the exercise price of the Warrants were each reduced to $0.21.

In addition, existing warrant

holders that participated in the Financing (representing warrants to purchase an aggregate of 8,715,229 shares of Common Stock)

also had their existing warrants’

The closing of the sale and issuance of

the 2020 Convertible Notes, the Warrants and the Placement Agent Warrants occurred on March 17, 2020.

The maturity date of the

2020 Convertible Notes is September 30, 2021 and the maturity date of the Investor Notes is March 11, 2060.

The SPA contains certain representations

and warranties, covenants and indemnities customary for similar transactions

In addition, pursuant to the terms of the

SPA, the 2020 Convertible Notes and the Warrants, the Company agreed that the following will apply or become effective only following

Stockholder Approval:

(1) the conversion price of the 2020 Convertible Notes shall be reduced to $0.21 per share and may be further

reduced to any amount and for any period of time deemed appropriate by the board of directors of the Company (the “Board

of Directors”), (2) the exercise price of the Warrants shall be immediately reduced to $0.21 per share and may be further

reduced to any amount and for any period of time deemed appropriate by the Board of Directors, (3) the 2020 Convertible Notes and

Warrants shall each have full ratchet anti-dilution protection for subsequent financings (subject to certain exceptions), (4) existing

warrant holders that are participating in the Financing (representing warrants to purchase an aggregate of 8,715,229 shares of

Company Common Stock) will have their existing warrants’

exercise prices reduced to $0.21 and (5) the investors shall have

a most favored nations right which provides that if the Company enters into a subsequent financing, then the Investors (together

with their affiliates) at their sole discretion shall have the ability to exchange their 2020 Convertible Notes on a $1 for $1

basis into securities issued in the new transaction.

Additionally, in the event that any warrants or options (or any similar security

or right) issued in a subsequent financing include any terms more favorable to the holders thereof (less favorable to the Company)

than the terms of the Warrants, the Warrants shall be automatically amended to include such more favorable terms.

On May 15, 2020, the Company received necessary

Stockholder Approval in connection with the Nasdaq proposals described above.

As a result, the conversion price of the 2020 Convertible

Notes and the exercise price of the Warrants were each reduced to $0.21.

In addition, existing warrant holders that participated

in the Financing (representing warrants to purchase an aggregate of 9,172,463 shares of Common Stock) also had their existing warrants’

exercise prices reduced to $0.21.

2020 Convertible Notes provide that the Company will repay the principal amount of 2020 Convertible Notes in equal monthly installments

of 1/12th of the principal amount of the 2020 Convertible Notes beginning October 31, 2020 and the last business day of each calendar

month anniversary thereafter (each an “Installment Date”).

On each Installment Date, assuming the Equity Conditions

described below are met and Stockholder Approval has been obtained, all or some of the Installment Amount (as defined in the 2020

Convertible Notes) shall be converted into shares of Common Stock, provided however that the Company may elect prior to any Installment

Date to pay all or a portion of the installment amount in cash, as described below.

Company may elect to pay each monthly Installment Amount in (i) cash (a “Company Redemption”

and such cash payment,

the “Company Installment Redemption Price”) equal to 100% of the portion of such Installment Amount which the Company

elects or is required to redeem pursuant to a Company Redemption (the “Company Redemption Amount”) or (ii) if (a)

the Equity Conditions described below are satisfied or waived and (b) the Company so elects and Stockholder Approval has been

obtained, by conversion of all or some of an Installment Amount into Common Stock (a “Company Conversion”).

extent that the Company elects to pay an Installment Amount in shares of Common Stock, then (A) twenty-three (23) trading days

prior to the applicable Installment Date (each such date being a “Pre-Installment Date”), the Company shall deliver

to the Investor(s) a number of shares of Common Stock (each such quantity being a “Pre-Installment Share Amount”)

equal to the Installment Amount being paid in shares of Common Stock divided by the lower of (i) the then prevailing Conversion

Price or (ii) the Market Price (as defined below) determined on the applicable Pre-Installment Date, and (B) on the applicable

Installment Date, the Company shall deliver to the Investor a number of shares of Common Stock equal to (a) the amount of the

applicable Installment Amount being paid in shares of Common Stock divided by the lower of (i) the then prevailing Conversion

Price or (ii) the Market Price determined on the applicable Installment Date, less (b) any applicable Pre-Installment Share Amount

delivered pursuant to the applicable Installment Amount.

“Market Price”

means 85% of the arithmetic average of the

five (5) lowest daily Weighted Average Prices of the Common Stock during the twenty (20) consecutive Trading Day period ending

on the Trading Day immediately preceding the applicable date of determination, subject to adjustments for any stock split, stock

dividend, stock combination, reclassification or other similar transaction during such measuring period.

respect to any given date of determination, the “Equity Conditions”

on each day during the period beginning thirty (30) Trading Days immediately prior to the applicable date of determination and

ending on and including the applicable date of determination (the “Equity Conditions Measuring Period”), the shares

of Common Stock issuable pursuant to the 2020 Convertible Notes and upon exercise of the Warrants (the “Underlying Securities”)

shall be registered for resale pursuant to one or more registration statements filed with the SEC or eligible for sale pursuant

to Rule 144 promulgated under the Securities Act (or a successor rule thereto) (collectively, “Rule 144”);

on each day during the Equity Conditions Measuring Period, the Common Stock is designated for quotation on the Nasdaq Capital

Market (the “Principal Market”) or any other eligible market and shall not have been suspended from trading on such

exchange or market nor shall delisting or suspension by such exchange or market been threatened (with delisting reasonably likely

to occur after giving effect to all applicable notice, appeal, cure, compliance and hearing periods), commenced or pending either

(A) in writing by such exchange or market or (B) by falling below the then effective minimum listing maintenance requirements

of such exchange or market;

during the Equity Conditions Measuring Period, the Company shall have delivered shares of Common Stock pursuant to the terms of

the 2020 Convertible Notes and shares of Common Stock upon exercise of the Warrants to the holders on a timely basis as set forth

in the 2020 Convertible Notes and the Warrants, respectively;

the shares of Common Stock issuable upon conversion of the Conversion Amount that is subject to the applicable Company Conversion

or Company Optional Redemption, as applicable, requiring the satisfaction of the Equity Conditions may be issued in full without

violating the 2020 Convertible Notes and the rules or regulations of the Principal Market or any other applicable eligible market;

during the Equity Conditions Measuring Period, the Company shall not have failed to timely make any payments within five (5) business

days of when such payment is due pursuant to any transaction document.

during the Equity Conditions Measuring Period, there shall not have occurred either (A) the public announcement of a pending,

proposed or intended Fundamental Transaction (as defined in the 2020 Convertible Notes) which has not been abandoned, terminated

or consummated, (B) an Event of Default or (C) an event that with the passage of time or giving of notice would constitute an

Event of Default or Triggering Event (as defined in the 2020 Convertible Notes);

the Company shall have no knowledge of any fact that would cause (x) one or more registration statements not to be effective and

available for the resale of all remaining shares of Common Stock issuable pursuant to the terms of the 2020 Convertible Notes

and upon exercise of the Warrants (in each case, without giving effect to any limitation on conversion or exercise set forth herein

and therein), including the shares of Common Stock issuable upon conversion of the Conversion Amount that is subject to the applicable

Company Conversion or Company Optional Redemption, as applicable, requiring the satisfaction of the Equity Conditions, or (y)

any shares of Common Stock issuable pursuant to the terms of the 2020 Convertible Notes and upon exercise of the Warrants (in

each case, without giving effect to any limitation on conversion or exercise set forth herein and therein), including the shares

of Common Stock issuable upon conversion of the Conversion Amount that is subject to the applicable Company Conversion or Company

Optional Redemption, as applicable, requiring the satisfaction of the Equity Conditions, not to be eligible for sale without restriction

pursuant to Rule 144 (other than with respect to Rule 144(i)) (or any successor thereto) promulgated under the Securities Act,

provided that no Public Information Failure has occurred, and any applicable state securities laws;

during the Equity Conditions Measuring Period, the Company otherwise shall have been in compliance with and shall not have breached

any provision, covenant, representation or warranty of any transaction document in any material respect (other than representations

or warranties subject to material adverse effect or materiality, which may not be breached in any respect);

during the Equity Conditions Measuring Period, the Investor shall not have been in possession of any material, nonpublic information

received from the Company, any subsidiary or its respective agent or affiliates;

the shares of Common Stock issuable upon conversion of the Conversion Amount that is subject to the applicable Company Conversion

or Company Optional Redemption, as applicable, requiring the satisfaction of the Equity Conditions are duly authorized and listed

and eligible for trading without restriction on an eligible market;

the average daily dollar trading volume of the Common Stock as reported by Bloomberg during the twenty (20) Trading Days immediately

prior to the applicable date of determination shall be at least $100,000;

on each Trading Day during the Equity Conditions Measuring Period, the closing price of the Common Stock equals or exceeds $0.05

(as adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction occurring after March

holder of a Note may, by notice to the Company, accelerate future installment payments to any applicable Installment Date, in

which case the Company will deliver shares of Common Stock for the conversion of such accelerated payments (the “Accelerated

Amount”), regardless of whether the Installment Amount scheduled to be paid on such applicable Installment Date shall be

paid in cash, shares of Common Stock or a combination thereof.

In the event that the Investor delivers one or more such notices

of acceleration, the aggregated Accelerated Amount shall not be greater than six (6) times such Investor’s pro rata amount.

the Company fails to redeem the Company Redemption Amount on the applicable Installment Date by payment of the Company Installment

Redemption Price on such date, then at the option of the Investor designated in writing to the Company (any such designation shall

be deemed a “Conversion Notice”

pursuant to the 2020 Convertible Notes), (i) the Investor shall have the rights set

forth in the 2020 Convertible Notes as if the Company failed to pay the applicable Company Installment Redemption Price and all

other rights as an Investor in the 2020 Convertible Notes (including, without limitation, such failure constituting an Event of

Default described in the 2020 Convertible Notes) and (ii) the Investor may require the Company to convert all or any part of the

Company Redemption Amount at the Company Conversion Price as in effect on the applicable Installment Date.

to certain beneficial ownership limitations, until the Company Installment Redemption Price is paid in full, the Company Redemption

Amount may be converted, in whole or in part, by the Investor into Common Stock.

In the event the Investor elects to convert all

or any portion of the Company Redemption Amount prior to the applicable Installment Date as set forth in the immediately preceding

sentence, the Company Redemption Amount so converted shall be deducted in reverse order starting from the final Installment Amount

to be paid on the final Installment Date, unless the Investor otherwise indicates and allocates among any Installment Dates in

the applicable Conversion Notice.

of Investor’s Notes

Company will receive the applicable portion of the Investor Notes principal due upon each voluntary or mandatory prepayment of

the Investor Notes.

The Investors may, at their option and at any time, voluntarily prepay the Investor Notes, in whole or in

The Investor Notes are also subject to mandatory prepayment, in whole or in part, upon the occurrence of one or more of

the mandatory prepayment events.

The Company may require an investor to prepay the Investor Notes provided certain conditions

are met including but not limited to the following:

Stockholder Approval has been obtained, no Event of Default as defined in

the terms of 2020 Convertible Notes took place.

Investor Notes also contain certain offset rights of the Company and the Investors, which if exercised, would reduce the amount

outstanding under 2020 Convertible Notes and the Investor Notes by the same amount and, accordingly, the cash proceeds received

by the Company from the investors.

These offset rights are triggered by specific occurrences that could jeopardize an Investor’s

the maturity date of 2020 Convertible Notes, the outstanding principal amount owed by an investor to the Company under such Investor

Note shall be satisfied and cancelled in exchange for the cancellation of an equal amount owed the Company to such investor under

the related 2020 Convertible Notes.

Company reports the Investor Notes and the respective portion of the Convertible Notes that may be offset against the Investor

Notes on a “gross”

Amortization of Principal

The 2020 Convertible Notes provide that

the Company will repay the principal amount of 2020 Convertible Notes in equal monthly installments of 1/12th of the principal

amount of the 2020 Convertible Notes beginning October 31, 2020 and the last business day of each calendar month anniversary thereafter

(each an “Installment Date”).

On each Installment Date, assuming the Equity Conditions described below are met and

Stockholder Approval has been obtained, all or some of the Installment Amount (as defined in the 2020 Convertible Notes) shall

be converted into shares of Common Stock, provided however that the Company may elect prior to any Installment Date to pay all

or a portion of the installment amount in cash, under certain conditions in the SPA.

Any holder of a 2020 Convertible Note may,

by notice to the Company, accelerate future installment payments to any applicable Installment Date, in which case the Company

will deliver shares of Common Stock for the conversion of such accelerated payments (the “Accelerated Amount”), regardless

of whether the Installment Amount scheduled to be paid on such applicable Installment Date shall be paid in cash, shares of Common

Stock or a combination thereof.

In the event that the Investor delivers one or more such notices of acceleration, the aggregated

Accelerated Amount shall not be greater than six (6) times such Investor’s pro rata amount.

If the Company fails to redeem the Company

Redemption Amount on the applicable Installment Date by payment of the Company Installment Redemption Price on such date, then

at the option of the Investor designated in writing to the Company (any such designation shall be deemed a “Conversion Notice”

pursuant to the 2020 Convertible Notes), (i) the Investor shall have the rights set forth in the 2020 Convertible Notes as if the

Company failed to pay the applicable Company Installment Redemption Price and all other rights as an Investor in the 2020 Convertible

Notes (including, without limitation, such failure constituting an Event of Default described in the 2020 Convertible Notes) and

(ii) the Investor may require the Company to convert all or any part of the Company Redemption Amount at the Company Conversion

Price as in effect on the applicable Installment Date.

Subject to certain beneficial ownership

limitations, until the Company Installment Redemption Price is paid in full, the Company Redemption Amount may be converted, in

whole or in part, by the Investor into Common Stock.

In the event the Investor elects to convert all or any portion of the Company

Redemption Amount prior to the applicable Installment Date as set forth in the immediately preceding sentence, the Company Redemption

Amount so converted shall be deducted in reverse order starting from the final Installment Amount to be paid on the final Installment

Date, unless the Investor otherwise indicates and allocates among any Installment Dates in the applicable Conversion Notice.

Payment of Investor’s Notes

The Company will receive the applicable

portion of the Investor Notes Principal due upon each voluntary or mandatory prepayment of the Investor Notes.

The Investors may,

at their option and at any time, voluntarily prepay the Investor Notes, in whole or in part.

The Investor Notes are also subject

to mandatory prepayment, in whole or in part, upon the occurrence of one or more of the mandatory prepayment events.

may require an investor to prepay the Investor Notes provided certain conditions are met including but not limited to the following:

Stockholder Approval has been obtained, and no Event of Default as defined in the terms of the 2020 Convertible Notes took place.

The Investor Notes also contain certain

offset rights of the Company and the Investors, which if exercised, would reduce the amount outstanding under 2020 Convertible

Notes and the Investor Notes by the same amount and, accordingly, the cash proceeds received by the Company from the investors.

These offset rights are triggered by specific occurrences that could jeopardize an Investor’s investment.

On the maturity date of the 2020 Convertible

Notes, the outstanding principal amount owed by an Investor to the Company under such Investor Note shall be satisfied and cancelled

in exchange for the cancellation of an equal amount owed the Company to such Investor under the related 2020 Convertible Notes.

The Company reports the Investor Notes

and the respective portion of the Convertible Notes that may be offset against the Investor Notes on a “gross”

as an asset and a liability, respectively.

Redemption at Company’s Election

any time after the date of issuance of the 2020 Convertible Notes, the Company will have the right to redeem a portion or all

of the 2020 Convertible Notes in cash at a price equal to (i) so long as there has been no Equity Conditions Failure during the

period beginning on the date on which the Company provided notice of such redemption through the trading day immediately before

the date the Company makes the entire redemption payment, 110% of the Conversion Amount to be redeemed and (ii) if an Equity Conditions

Failure occurs (which is not waived in writing by the holder) at any time during the period beginning on the date on which the

Company provided notice of such redemption through the trading day immediately before the date the Company makes the entire redemption

payment, the greater of (x) 125% of the Conversion Amount to be redeemed and (y) the product of (A) the Conversion Amount being

redeemed and (B) the quotient determined by dividing (I) the greatest closing price of the Common Stock on any trading day during

the period commencing on the date immediately preceding the date on which the Company provided notice of such redemption and ending

on the trading day immediately before the date the Company makes the entire redemption payment, by (II) the lowest Conversion

Price in effect during such period.

of the 2020 Convertible Notes

Note is convertible, at the option of the Note holder, into shares of Common Stock at an initial conversion price of $1.375, subject

Optional Redemption at Company’s

At any time after the date of issuance

of the 2020 Convertible Notes, the Company will have the right to redeem a portion or all of the 2020 Convertible Notes in cash

at prices depending on certain conditions as described in the SPA.

Conversion of the 2020 Convertible Notes

Each 2020 Convertible Note is convertible,

at the option of the holder, into shares of Common Stock at an initial conversion price of $1.375, subject to adjustment as provided

in the 2020 Convertible Notes;

provided, however, upon receipt of Stockholder Approval, the conversion price shall be $0.21, subject

to adjustment as provided in the 2020 Convertible Notes.

provided, however, upon receipt of Stockholder Approval, the conversion

price shall be $0.21, subject to adjustment as provided in the 2020 Convertible Notes.

or after the date Stockholder Approval is obtained, if the Company issues or sells, or the Company publicly announces the issuance

or sale of, any shares of Common Stock, or convertible securities or options issuable or exchangeable into Common Stock (a “New

Issuance”), under which such Common Stock is sold for a consideration per share less than the Conversion Price then in effect,

the conversion price of the 2020 Convertible Notes will be adjusted to the New Issuance price in accordance with the formulas

provided in the 2020 Convertible Notes.

Any such adjustment will not apply with respect to the issuance of Excluded Securities

(as defined in the 2020 Convertible Notes).

Upon Stockholder Approval, the conversion price may be further reduced to any amount

and for any period of time deemed appropriate by the board of directors of the Company.

On or after the date Stockholder Approval

is obtained, if the Company issues or sells, or the Company publicly announces the issuance or sale of, any shares of Common Stock,

or convertible securities or options issuable or exchangeable into Common Stock (a “New Issuance”), under which such

Common Stock is sold for a consideration per share less than the Conversion Price then in effect, the Conversion Price of the 2020

Convertible Notes will be adjusted to the New Issuance price in accordance with the formulas provided in the 2020 Convertible Notes.

Any such adjustment will not apply with respect to the issuance of Excluded Securities (as defined in the 2020 Convertible Notes).

Upon Stockholder Approval, the Conversion Price may be further reduced to any amount and for any period of time deemed appropriate

by the Board of Directors.

The Company classified the detachable warrants

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and Company’s conversion options as a compound embedded derivative liability recorded separately from the

The amount of debt discount arising from the separate accounting of the above financial instruments at March 17, 2020 is

The change in the fair value of the detachable

warrants two conversion options for the quarter ended March 31, 2020 is $3,467,961.

The Company estimated that the fair value of

the investor’s conversion options and the fair value of Company’s conversion options at March 17, 2020 and March 31,

2020 are immaterial.

The amount of debt discount arising from the separate accounting of the above financial instruments at March 17, 2020 was

On May 15, 2020 stockholders of the Company

approved the reduction of the Conversion Price to $0.21.

During the three months ended June 30, 2020 the Investors converted their

2020 Convertible Notes in accordance with the terms of the agreement.

$105,000 of the 2020 Convertible Notes were converted on

June 6, 2020 with the remainder of $13,645,000 converted on June 23, 2020.

As part of the conversion accounting, the Company increased

the equity by the sum of the carrying amounts of the debt and separated conversion option liabilities, with no gain or loss recognized.

Overall amount credited to equity per the above accounting treatment was 1,990,413 on June 6, 2020 and 169,845,316 on June 23,

The Company estimated that the fair value

of the investor’s conversion options and the fair value of Company’s conversion options at March 17, 2020 and March

31, 2020 were immaterial.

The estimated fair value of the investor’s conversion options associated with $105,000 of debt

immediately before the conversion on June 6, 2020 was 1,990,408.

The estimated fair value of the investor’s conversion options

associated with $13,645,000 of debt immediately before the conversion on June 12, 2020 was $169,845,321.

The Company estimated

that the fair value of Company’s conversion option on both conversion dates was immaterial.

During the three months ended

June 30, 2020, the Company recognized a revaluation loss of $171,835,729 associated with the 2020 Convertible Notes conversion

Additionally, the Company recognized revaluation loss associated with detachable warrants of $208,760,698.

Company’s interest expense associated

with 2020 Convertible Notes was $ 631,855 for the quarter ended March 31, 2020.

The interest expense included $ 631,852 excess

of discount over Notes’

The discount is mainly attributable to detachable warrants and 20% original issuance discount.

The amount of unamortized discount at March 31, 2020 is $ 13,749,996.

Company recognizes interest expense associated with 2020

Convertible Notes using the effective interest rate method.

with the 2020 Convertible Notes was $401,814 and $ 1,033,666, respectively for the three and six months ended June 30, 2020.

interest expense included $631,852 excess of discount over the 2020 Convertible Notes’

The discount is mainly

attributable to detachable warrants and 20% original issuance discount.

The amount of unamortized discount at June 30, 2020 is

$0 Company recognizes interest expense associated with 2020 Convertible Notes using the effective interest rate method.

On June 23, 2020 the Company received $3,600,000,

net of expenses, from the payment of the Investor Notes Principal.

Between June 10 and June 23, 2020, the

2020 Convertible Notes were converted and repaid through the issuance of 65,476,190 shares of Common Stock.

Production Loan Facility

August 8, 2016, Llama Productions, LLC closed a $5,275,000 multiple draw-down, secured, non-recourse, non-revolving credit facility

(the “Facility”) with Bank Leumi USA to produce its animated series Llama Llama , (the “Series”)

which is configured as fifteen half-hour episodes comprised of thirty 11-minute programs that were delivered to Netflix in fall

The Facility is secured by the license fees the Company will receive from Netflix for the delivery of the Series as well

as the Company’s copyright in the Series.

The Facility has a term of 40 months and has an interest rate of either Prime

plus 1% or one, three, or six-month LIBOR plus 3.25%.

On August 8, 2016, Llama Productions LLC

(“Llama”) closed a $5,275,000 multiple draw-down, secured, non-recourse, non-revolving credit facility (the “Facility”)

with Bank Leumi USA (the “Lender”) to produce its animated series Llama Llama , (the “Series”) which

is configured as fifteen half-hour episodes comprised of thirty 11-minute programs that were delivered to Netflix in fall 2017.

The Facility is secured by the license fees the Company will receive from Netflix for the delivery of the Series as well as the

Company’s copyright in the Series.

The Facility has a term of 40 months and has an interest rate of either Prime plus 1%

or one, three, or six-month LIBOR plus 3.25%.

As a condition of the loan agreement with Bank Leumi, the Company deposited $1,000,000

into a cash account to be used solely to produce the Series.

Additionally, the Facility contains certain standard affirmative

and negative non-financial covenants such as maintaining certain levels of production insurance and providing standard financial

As of March 31, 2020, the Company was in compliance with these covenants.

September 28, 2018, Llama Productions LLC entered into a Loan and Security Agreement (the “Loan and Security Agreement”)

with Bank Leumi USA (the “Lender”), pursuant to which the Lender agreed to make a secured loan in an aggregate amount

not to exceed $4,231,989 to Llama (the “Loan”).

The proceeds of the Loan will be used to pay the majority of the expenses

of producing, completing and delivering two 22-minute episodes and sixteen 11- minute episodes of the second season of the animated

series Llama Llama to be initially exhibited on Netflix.

To secure payment of the Loan, Llama has granted to the Lender

a continuing security interest in and against, generally, all of its tangible and intangible assets, which includes all seasons

of the Llama Llama animated series.

the Loan and Security Agreement, Llama can request revolving loan advances under (a) the Prime Rate Loan facility and (b) the

LIBOR Loan facility, each as further described in the Loan and Security Agreement attached as an exhibit hereto.

Prime Rate Loan

advances shall bear interest, on the outstanding balance thereof, at a fluctuating per annum rate equal to 1.0% plus the Prime

Rate (as such term is defined in the Loan and Security Agreement), provided that in no event shall the interest rate applicable

to Prime Rate Loans be less than 4.0% per annum.

LIBOR Loan advances shall bear interest, on the outstanding balance thereof,

for the period commencing on the funding date and ending on the date which is one (1), three (3) or six (6) months thereafter,

at a per annum rate equal to 3.25% plus the LIBOR determined for the applicable Interest Period (as such terms are defined in

the Loan and Security Agreement), provided that in no event shall the interest rate applicable to LIBOR Loans be less than 3.25%

The Maturity Date of the Prime Rate Loan facility and LIBOR Loan facility is March 31, 2021.

Interest rates on advances

under the Loan and Security Agreement were between 4.25% and 5.17% as of March 31, 2020.

addition, on September 28, 2018, Llama and Lender entered into Amendment No.

2 to Loan and Security Agreement, effective as of

August 27, 2018, by and between Llama and the Lender (the “Amendment”).

Pursuant to the Amendment, the original Loan

and Security Agreement, dated as of August 8, 2016 and amended as of November 7, 2017 (the “Original Loan and Security Agreement”),

was amended to (i) reduce the loan commitment thereunder to $1,768,010, and (ii) include the Llama Llama season two obligations

under the Loan and Security Agreement as obligations under the Original Loan and Security Agreement.

of March 31, 2020, the Company had gross outstanding borrowing under the facility of $2,294,130.

As of December 31, 2019, the

Company had gross outstanding borrowing under the facility of $3,091,739.

Additionally, the Facility contains certain standard affirmative and

negative non-financial covenants such as maintaining certain levels of production insurance and providing standard financial reports.

As of June 30, 2020, the Company was in compliance with these covenants.

On September 28, 2018, Llama entered into

a Loan and Security Agreement (the “Loan and Security Agreement”) with the Lender, pursuant to which the Lender agreed

to make a secured loan in an aggregate amount not to exceed $4,231,989 to Llama (the “Loan”).

The proceeds of the Loan

will be used to pay the majority of the expenses of producing, completing and delivering two 22-minute episodes and sixteen 11-

minute episodes of the second season of the animated series Llama Llama to be initially exhibited on Netflix.

payment of the Loan, Llama has granted to the Lender a continuing security interest in and against, generally, all of its tangible

and intangible assets, which includes all seasons of the Llama Llama animated series.

Under the Loan and Security Agreement,

Llama can request revolving loan advances under (a) the Prime Rate Loan facility and (b) the LIBOR Loan facility, each as further

described in the Loan and Security Agreement attached as an exhibit hereto.

Prime Rate Loan advances shall bear interest, on the

outstanding balance thereof, at a fluctuating per annum rate equal to 1.0% plus the Prime Rate (as such term is defined in the

Loan and Security Agreement), provided that in no event shall the interest rate applicable to Prime Rate Loans be less than 4.0%

LIBOR Loan advances shall bear interest, on the outstanding balance thereof, for the period commencing on the funding

date and ending on the date which is one (1), three (3) or six (6) months thereafter, at a per annum rate equal to 3.25% plus the

LIBOR determined for the applicable Interest Period (as such terms are defined in the Loan and Security Agreement), provided that

in no event shall the interest rate applicable to LIBOR Loans be less than 3.25% per annum.

The Maturity Date of the Prime Rate

Loan facility and LIBOR Loan facility is March 31, 2021.

Interest rates on advances under the Loan and Security Agreement were

between 3.57% and 4.99% as of June 30, 2020.

In addition, on September 28, 2018, Llama

and the Lender entered into Amendment No.

2 to the Loan and Security Agreement, effective as of August 27, 2018, by and between

Llama and the Lender (the “Amendment”).

Pursuant to the Amendment, the original Loan and Security Agreement, dated

as of August 8, 2016 and amended as of November 7, 2017 (the “Original Loan and Security Agreement”), was amended to

(i) reduce the loan commitment thereunder to $1,768,010, and (ii) include the Llama Llama season two obligations under the

Loan and Security Agreement as obligations under the Original Loan and Security Agreement.

As of June 30, 2020, the Company had gross

outstanding borrowing under the facility of $1,889,426.

As of December 31, 2019, the Company had gross outstanding borrowing under

the facility of $3,091,739.

Disputed Trade Payable

part of the merger in 2013, the Company assumed certain liabilities from a previous member of A Squared which has claimed certain

liabilities totaling $925,000.

The Company disputes the basis for this liability.

As of December 31, 2017, the Company believes

that the statute of limitations applicable to the assertion of any legal claim relating to the collection of these liabilities

has expired and therefore believes this liability is not owed.

As part of the merger in 2013, the Company

assumed certain liabilities from a previous member of A Squared which has claimed certain liabilities totaling $925,000.

disputes the basis for this liability.

As of December 31, 2017, the Company believed that the statute of limitations applicable

to the assertion of any legal claim relating to the collection of these liabilities has expired and therefore believes this liability

Stockholders’

of March 31, 2020, the total number of authorized shares of common stock was 233,333,334.

January 8, 2020, the Company issued 43,077 shares of Common Stock valued at $0.65 per share to a provider for investor relations

January 15, 2020, the Company issued 3,171,428 shares of Common Stock in exchange for 666 shares of Preferred Stock at a conversion

price of $0.21 per share.

January 22, 2020, the Company entered into a private transaction (the “Private Transaction”) pursuant to a Warrant

Exercise Agreement (the “Agreement”) with the holder of the Company’s existing warrants (the “Original

Warrants”).

The Original Warrants were originally issued on October 3, 2017, to purchase an aggregate of 500,000 shares

of Common Stock, at an exercise price of $3.90 per share and were to expire in October 2022.

to the Agreement, the holder of the Original Warrants and the Company agreed that such Original Warrant holder would exercise

its Original Warrants in full and the Company would amend the Original Warrants to reduce the exercise price thereof to $0.34

(the average closing price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the

signing of the Agreement) (the “Amended Exercise Price”).

The Company received approximately $170,000 from the exercise

of the Original Warrants.

March 22, 2020, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain long

standing investors (the “Investors”), pursuant to which the Company agreed to issue and sell, in a registered direct

offering by the Company directly to the Investors (the “Registered Offering”), an aggregate of 4,000,000 shares Common

Stock at an offering price of $0.2568 per share for gross proceeds of approximately $1.0 million before deducting offering expenses.

As of June 30, 2020, the total number of

authorized shares of Common Stock was 233,333,334.

On January 8, 2020, the Company issued

43,077 shares of Common Stock valued at $0.65 per share to a provider for investor relations services.

On January 15, 2020, the Company issued

3,171,428 shares of Common Stock in exchange for 667 shares of Preferred Stock at a conversion price of $0.21 per share.

On January 22, 2020, the Company entered

into the Private Transaction pursuant to the Agreement with the holder of the Original Warrants.

The Original Warrants were originally

issued on October 3, 2017, to purchase an aggregate of 500,000 shares of Common Stock, at an exercise price of $3.90 per share

and were to expire in October 2022.

Pursuant to the Agreement, the holder of

the Original Warrants and the Company agreed that such Original Warrant holder would exercise its Original Warrants in full and

the Company would amend the Original Warrants to reduce the exercise price thereof to the Amended Exercise Price.

The Company received

approximately $170,000 from the exercise of the Original Warrants.

On March 22, 2020, the Company entered

into the Purchase Agreement with the Investors, pursuant to which the Company agreed to issue and sell, in the Registered Offering,

an aggregate of 4,000,000 shares Common Stock at an offering price of $0.2568 per share for gross proceeds of approximately $1.0

million before deducting offering expenses.

The Registered Offering closed on March 25, 2020.

of March 31, 2020, and December 31, 2019, there were 29,592,229 and 21,877,724 shares of common stock outstanding, respectively.

Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001 per share.

On May 7, 2020, we entered into a Securities

Purchase Agreement with the May 7 th Investors, pursuant to which we agreed to issue and sell, in a registered direct

offering by the Company directly to the May 7 th Investors, an aggregate of 8,000,000 shares of our Common Stock,

at an offering price of $0.35 per share for gross proceeds of approximately $2.8 million before deducting offering expenses.

On May 8, 2020, we entered into a Securities

Purchase Agreement with the May 8 th Investors, pursuant to which we agreed to issue and sell, in a registered direct

offering by the Company directly to the May 8 th Investors, an aggregate of 12,000,000 shares of our Common Stock,

at an offering price of $0.454 per share for gross proceeds of approximately $5.448 million before deducting offering expenses.

On May 18, 2020, we entered into a Securities

Purchase Agreement with the May 18 th Investors, pursuant to which we agreed to issue and sell, in a registered

direct offering by the Company directly to the May 18 th Investors, an aggregate of 7,500,000 shares of our Common

Stock, at an offering price of $1.20 per share for gross proceeds of approximately $9.0 million before deducting offering expenses.

On May 28, 2020, we entered into a Securities

Purchase Agreement with the May 28 th Investors, pursuant to which we agreed to issue and sell, in a registered

direct offering by the Company directly to the May 28 th Investors, an aggregate of 20,000,000 shares of our Common

Stock, at an offering price of $1.50 per share for gross proceeds of approximately $30.0 million before deducting offering expenses.

Between May 18 and June 11, 2020, the Company

received $5,649,319, net of expenses, from the exercise of 29,666,283 warrants at an exercise price of $0.21 per share.

Between May 15 and June 19, 2020 certain

warrant holders exercised 50,014,895 warrants in cashless transactions resulting in the issuance of 45,000,428 shares of Common

Between May 18 and June 24, 2020, the Company

issued 1,571,430 shares of Common Stock in exchange for 330 shares of Preferred Stock at a conversion price of $0.21 per share.

On June 22, 2020, the Company issued 49,610

shares of Common Stock valued at $3.85 per share to a provider for investor relations services.

Between June 10 and June 23, 2020, the

2020 Convertible Notes were converted and repaid through the issuance of 65,476,190 shares of Common Stock.

As of June 30, 2020 and December 31, 2019,

there were 218,856,170 and 21,877,724 shares of Common Stock outstanding, respectively.

Preferred Stock

The Company has 10,000,000 shares of preferred

stock authorized with a par value of $0.001 per share (the “Preferred Stock”).

The Board of Directors is authorized,

4 unchanged sentences

may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

of March 31, 2020, and December 31, 2019, there were 431 and 1,097 shares of Series A Convertible Preferred Stock outstanding

respectively.

May 12, 2014, the Board of Directors authorized the designation of a class of preferred stock as “Series A Convertible Preferred

Stock.”

On May 14, 2014, the Company filed the Certificate of Designation, Preferences and Rights of the 0% Series A Convertible

Preferred Stock (the “Certificate of Designations”) with the Secretary of State of the State of Nevada.

share of the Series A Convertible Preferred Stock is convertible into shares of Common Stock, based on a conversion calculation

equal to the Base Amount divided by the conversion price.

The Base Amount is defined as the sum of (i) the aggregate stated value

of the Series A Convertible Preferred Stock to be converted and (ii) all unpaid dividends thereon.

The stated value of each share

of the Series A Convertible Preferred Stock is $1,000 and the initial conversion price is $6.00 per share, subject to adjustment

in the event of stock splits, dividends and recapitalizations.

Additionally, in the event the Company issues shares of its common

stock or common stock equivalents at a per share price that is lower than the conversion price then in effect, the conversion

price shall be adjusted to such lower price, subject to certain exceptions.

The Company is prohibited from effecting a conversion

of the Series A Convertible Preferred Stock to the extent that as a result of such conversion, the investor would beneficially

own more than 9.99% in the aggregate of the issued and outstanding shares of the Company’s common stock, calculated immediately

after giving effect to the issuance of shares of common stock upon conversion of the Series A Convertible Preferred Stock.

shares of Series A Convertible Preferred Stock possess no voting rights.

May 14, 2014, the Company entered into securities purchase agreements with certain accredited investors pursuant to which we sold

an aggregate of 6,000 shares of our then newly designated Series A Convertible Preferred Stock at a price of $1,000 per share

for gross proceeds to us of $6,000,000.

Related to the sale, we incurred offering costs of $620,085 resulting in net proceeds

of $5,379,915.

The transaction closed on May 15, 2014.

the conversion price of the Series A Convertible Preferred Stock on a converted basis was below the market price of the common

shares on the closing date, this resulted in a beneficial conversion feature recorded as an “imputed”

In addition, during the fourth quarter of 2015, in connection with the 2015 Private Placement in which the Company’s

common stock was sold at $3.00 per share, the conversion price of the Series A Convertible Preferred Stock decreased to $3.00.

This decrease resulted in an additional beneficial conversion feature of $3,383,850 recognized as of the time of the 2015 Private

August 17, 2018, in connection with the Securities Purchase Agreement in which the August 2018 Secured Convertible Notes are convertible

into shares of the Company’s common stock at $2.50 per share.

As a result, the conversion price of the Series A Convertible

Preferred Stock decreased to $2.50.

This decrease resulted in a beneficial conversion feature of $353,333 which was recognized

on August 17, 2018.

February 19, 2019, the Company entered into a Securities Purchase Agreement with a certain accredited investor pursuant to which

we sold 945,894 shares of common stock and warrants to purchase up to 945,894 shares of our common stock at 2.12 per share.

a result, the conversion price of the Series A Convertible Preferred Stock decreased to $2.12.

This decrease resulted in a beneficial

conversion feature of $322,240 which was recognized February 19, 2019.

October 4, 2019 and October 22, 2019, the Company issued 296,053 shares of Common Stock in exchange for 225 shares of Preferred

Stock at a conversion price of $0.76 per share.

November 20, 2019, we entered into a settlement agreement and release (“Settlement Agreement”) with certain holders

of our Series A Convertible Preferred Stock (each, a “Preferred Holder”

and collectively, the “Preferred Holders”)

constituting 58% of the outstanding Series A Preferred Stock in connection with a dispute that arose between the parties with

respect to certain rights under the Certificate of Designations.

Pursuant to the Settlement Agreement, we agreed to adjust the

conversion price of the Series A Convertible Preferred Stock to $0.21 and the parties agreed to terminate and deem null and void

that certain Securities Purchase Agreement, dated as of May 14, 2014, by and among the Preferred Holders and the other parties

signatories thereto, with respect to the Preferred Holders.

The Preferred Holders, constituting the holders of at least a majority

of the outstanding Preferred Shares (the “Required Holders”), agreed and consented to an amendment and restatement

of the Certificate of Designations.

The parties also agreed to customary releases and a covenant not to sue as further contained

in the Settlement Agreement.

Accordingly, on November 21, 2019, we filed an Amended and Restated Certificate of Designation (the

“Amended and Restated Certificate”) for our Series A Convertible Preferred Stock.

The amendments, among other things,

had the effect of setting the conversion price of the Series A Convertible Preferred Stock at $0.21.

November 21, 2019 and December 10, 2019, the Company issued 3,804,766 shares of the Common Stock in exchange for 798 shares of

preferred Stock at a conversion price of $0.21 per share.

January 9, 2020, the Company issued 3,171,428 shares of the Common Stock in exchange for 666 shares of preferred Stock at a conversion

price of $0.21 per share.

As of June 30, 2020 and December 31,

2019, there were 100 and 1,097 shares of Series A Convertible Preferred Stock outstanding respectively.

On February 19, 2019, the Company entered

into a Securities Purchase Agreement with a certain accredited investor pursuant to which we sold 945,894 shares of Common Stock

and warrants to purchase up to 945,894 shares of our Common Stock at 2.12 per share.

As a result, the conversion price of the

Series A Convertible Preferred Stock decreased to $2.12.

This decrease resulted in a beneficial conversion feature of $322,240

which was recognized February 19, 2019.

October 4, 2019 and October 22, 2019, the Company issued 296,053 shares of Common Stock in exchange for 225 shares of Series A

Convertible Preferred Stock at a conversion price of $0.76 per share.

On November 20, 2019, we entered into a

settlement agreement and release (“Settlement Agreement”) with certain holders of our Series A Convertible Preferred

Stock (each, a “Preferred Holder”

and collectively, the “Preferred Holders”) constituting 58% of the outstanding

Series A Preferred Stock in connection with a dispute that arose between the parties with respect to certain rights under the Certificate

of Designations.

Pursuant to the Settlement Agreement, we agreed to adjust the conversion price of the Series A Convertible Preferred

Stock to $0.21 and the parties agreed to terminate and deem null and void that certain Securities Purchase Agreement, dated as

of May 14, 2014, by and among the Preferred Holders and the other parties signatories thereto, with respect to the Preferred Holders.

The Preferred Holders, constituting the holders of at least a majority of the outstanding Preferred Shares (the “Required

Holders”), agreed and consented to an amendment and restatement of the Certificate of Designations.

The parties also agreed

to customary releases and a covenant not to sue as further contained in the Settlement Agreement.

Accordingly, on November 21,

2019, we filed an Amended and Restated Certificate of Designation (the “Amended and Restated Certificate”) for our

Series A Convertible Preferred Stock.

The amendments, among other things, had the effect of setting the conversion price of the

Series A Convertible Preferred Stock at $0.21.

Between May 18 and June 24, 2020, the Company

issued 1,571,428 shares of Common Stock in exchange for 330 shares of Series A Convertible Preferred Stock at a conversion price

of $0.21 per share.

On January 9, 2020, the Company issued

3,171, 428 shares of the Common stock in exchange for 667 shares of Series A Convertible Preferred Stock at a conversion price

of $0.21 per share.

Stock Options

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 2015 Plan was approved by the Company’s stockholders in September 2015.

The 2015 Plan as approved by the stockholders

authorized the issuance up to an aggregate of 150,000 shares of common stock.

On December 14, 2015, the Board of Directors voted

to amend the 2015 Plan to increase the total number of shares that can be issued under the 2015 Plan by 1,293,334 from 150,000

shares to 1,443,334 shares.

The increase in shares available for issuance under the 2015 Plan was approved by stockholders on

February 3, 2016.

On May 18, 2017, the Board of Directors voted to amend the 2015 Plan to increase the total number of shares

that can be issued under the 2015 Plan by 223,333 shares from 1,443,334 shares to an aggregate of 1,667,667 shares.

in shares available for issuance under the 2015 Plan was approved by the stockholders on July 25, 2017.

On September 6, 2018,

the Board of Directors voted to amend the 2015 Plan to increase the total number of shares that can be issued under the 2015 Plan

by 500,000 shares from 1,667,667 shares to an aggregate of 2,167,667 shares.

The increase in shares available for issuance under

the 2015 Plan was approved by the Company’s stockholders on October 2, 2018.

following table summarizes the changes in the Company’s stock option plan during the three months ended March 31, 2020:

The 2015 Plan was approved by the Company’s

stockholders in September 2015.

The 2015 Plan as approved by the stockholders authorized the issuance up to an aggregate of 150,000

shares of Common Stock.

On December 14, 2015, the Board of Directors voted to amend the 2015 Plan to increase the total number

of shares that can be issued under the 2015 Plan by 1,293,334 from 150,000 shares to 1,443,334 shares.

The increase in shares available

for issuance under the 2015 Plan was approved by stockholders on February 3, 2016.

On May 18, 2017, the Board of Directors voted

to amend the 2015 Plan to increase the total number of shares that can be issued under the 2015 Plan by 223,333 shares from 1,443,334

shares to an aggregate of 1,667,667 shares.

The increase in shares available for issuance under the 2015 Plan was approved by the

stockholders on July 25, 2017.

On September 6, 2018, the Board of Directors voted to amend the 2015 Plan to increase the total

number of shares that can be issued under the 2015 Plan by 500,000 shares from 1,667,667 shares to an aggregate of 2,167,667 shares.

The increase in shares available for issuance under the 2015 Plan was approved by the Company’s stockholders on October 2,

On June 25, 2020, the Company granted options

to purchase 185,000 shares of Common Stock to certain employees and granted options to purchase 445,000 shares of Common Stock

to consultants for services.

These stock options generally vest in three years.

The fair value of these options was determined

to be $2,649,379 using the Black-Scholes option pricing model based on the following assumptions:

Exercise Price

$2.61 - $10.00

Dividend Yield

Risk-free interest rate

Expected life of options

The following table summarizes the changes

in the Company’s stock option plan during the six months ended June 30, 2020:

Options Outstanding Number Of Shares

6 unchanged sentences

Options Granted

$ 2.61 - 10.00

Options Exercised

1 unchanged sentence

Options Expired

Balance at March 31, 2020

Balance at June 30, 2020

$ 1.99 - 10.00

1 unchanged sentence

$ 1.99 - 9.00

Exercisable March 31, 2020

Exercisable June 30, 2020

$ 1.99 - 3.17

the three months ended March 31, 2020, and March 31, 2019, the Company recognized $23,814 and $35,749, respectively in share-based

compensation expense.

The unvested share-based compensation as of March 31, 2020 was $119,067, which will be recognized through

the second quarter of 2021 assuming the underlying grants are not cancelled or forfeited.

Company has warrants outstanding to purchase up to 82,698,215 and 11,124,405 shares as of March 31, 2020 and December 31, 2019,

respectively.

connection with the sale of the Company’s Series A Convertible Preferred Stock in May 2014, Chardan Capital Markets LLC

(“Chardan”) acted as sole placement agent in consideration for which it received a cash fee of $535,000 and a warrant

to purchase up to 100,002 shares of the Company’s common stock.

These warrants are exercisable immediately, have an exercise

price of $6.00 per share, and have a five-year term.

connection with the 2015 Private Placement, the Company issued to accredited investors the Original Warrants to purchase up to

an aggregate of 1,443,362 shares of common stock for a purchase price of $3.00 per share.

The Original Warrants are exercisable

into shares of common stock for a period of five (5) years from issuance at an initial exercise price of $3.30 per share, subject

to adjustment in the event of stock splits, dividends and recapitalizations.

The Original Warrants are exercisable immediately.

The Company is prohibited from effecting an exercise of the warrants to the extent that as a result of such exercise, the holder

would beneficially own more than 4.99% (subject to increase up to 9.99% upon 61 days’

notice) in the aggregate of the issued

and outstanding shares of common stock, calculated immediately after giving effect to the issuance of shares of common stock upon

exercise of the warrant.

connection with the 2015 Private Placement, Chardan acted as sole placement agent in consideration for which it received a cash

fee of $300,000 and a warrant to purchase up to 141,668 shares of the Company’s common stock.

These warrants are exercisable

immediately, have an exercise price of $3.60 per share, and have a five-year term.

February 9, 2017, the Company entered into the Private Transaction pursuant to the Warrant Exercise Agreement with certain holders

of the Original Warrants.

Pursuant to the Warrant Exercise Agreement, the holders of the Original Warrants and the Company agreed

that such Original Warrant holders would exercise their Original Warrants in full, and the Company would issue to each such holder

new warrants, with the new warrants being identical to the Original Warrants except that the termination date of such new warrants

is February 10, 2022 (the “Reload Warrants”).

In addition, depending on the number of Original Warrants exercised

by all holders of the Original Warrants, the Company also agreed to issue to the holders another new warrant, identical to the

Original Warrant except that the exercise price of such warrant is $5.30 and such warrant is not exercisable until August 10,

2017 (the “Market Price Warrants”

and together with the Reload Warrants, the “New Warrants”).

Company received gross proceeds of $3,866,573 from the exercise of the Original Warrants and issued Reload Warrants to purchase

an aggregate of 799,991 shares of Common Stock and Market Price Warrants to purchase an aggregate of 371,699 shares of the Company’s

common stock.

In association with the Private Transaction, the Company recorded warrant exchange expense of $1,402,174 representing

the difference in the fair market value of the Original Warrants and the New Warrants, as an adjustment to additional paid - capital.

acted as financial advisor on the Private Transaction in consideration for which Chardan received $363,617 and Chardan and its

designees were New Warrants for 115,000 shares of the Company’s common stock.

October 3, 2017, the Company sold, in a registered direct offering, 1,647,691 shares of common stock at an offering price of $3.90

per share and, in a concurrent private placement, warrants to purchase an aggregate of 1,647,691 shares of common stock for gross

proceeds of approximately $6,425,995 before deducting the placement agent fee and related offering expenses.

January 10, 2018, the Company issued warrants for 592,000 shares of the Company’s common stock in connection with the January

2018 Private Placement.

The warrants were issued to the parties who purchased the Company’s common stock, as well as to

Chardan and its designees who acted as placement agents of the deal.

The warrants expire in five years and were exercisable immediately

at an exercise price of $3.00 per share.

August 17, 2018, the Company issued warrants for 1,800,000 shares of the Company’s common stock in conjunction with the

August 17, 2018 Securities Purchase Agreement.

The warrants were issued to the parties who purchased the Company’s August

During the three and six months ended

June 30, 2020, the Company recognized $328,497 and $352,311, respectively in share-based compensation expense.

During the three

and six months ended June 30, 2019, the Company recognized $80,800 and $116,549, respectively in share-based compensation expense.

The unvested share-based compensation as of June 30, 2020 was $2,383,856 which will be recognized through the second quarter of

2025 assuming the underlying grants are not cancelled or forfeited.

The Company has warrants outstanding to

purchase up to 5,274,208 and 11,124,405 shares as of June 30, 2020 and December 31, 2019, respectively.

On February 19, 2019, the Company entered

into a securities purchase agreement with a certain accredited investor pursuant to which we sold 945,894 shares of Common Stock

and warrants to purchase up to 945,894 shares of our Common Stock, or the registered warrants, to such investor (the “February

2019 Offering”).

The Company received $1,757,552 in net proceeds from this offering.

Each share of Common Stock was accompanied

by a registered warrant to purchase one share of Common Stock at an exercise price of $2.12.

Each share of Common Stock and accompanying

registered warrant were sold at a combined purchase price of $2.12.

The shares of Common Stock and registered warrants were purchased

together and were issued separately and were immediately separable upon issuance.

In a concurrent private placement, the Company

also sold to the purchaser in the February 2019 Offering, warrants to purchase up to 945,894 shares of our Common Stock, or the

private warrants.

In connection with the February 2019 Offering

and concurrent private placement, we entered into the Amendment, Waiver and Consent Agreement with certain holders of our August

2018 Secured Convertible Notes.

The Warrants are not exercisable until after six months from the date of issuance and expire five

and half years from the date of issuance.

The Warrants have an exercise price of $3.00 per share.

In the event of a “Fundamental

Transaction”

(as defined in the Warrants), the Investors have the right to receive the value of the Warrants as determined

in accordance with the Black-Scholes option pricing model.

The Warrants are considered indexed to the Company’s own stock

pursuant to ASC 815-40.

The Warrants also met additional equity classification requirements and accordingly are accounted for

as part of Company’s equity.

allocation of carrying basis between the Warrants issued and the August 2018 Secured Convertible Notes was determined based on

relative valuation.

The carrying basis attributable to the Warrants to acquire common stock was $1,471,111 and was calculated

using the Black-Scholes option pricing model.

February 19, 2019, the Company entered into a securities purchase agreement with a certain accredited investor pursuant to which

the Company sold 945,894 shares of Common Stock and warrants to purchase up to 945,894 shares of Common Stock, or the registered

warrants, to such investor (the “February 2019 Offering”).

The Company received $1,757,552 in net proceeds from this

Each share of Common Stock was accompanied by a registered warrant to purchase one share of Common Stock at an exercise

price of $2.12.

Each share of Common Stock and accompanying registered warrant were sold at a combined purchase price of $2.12.

The shares of Common Stock and registered warrants were purchased together and were issued separately and were immediately separable

upon issuance.

In a concurrent private placement, the Company also sold to the purchaser in the February 2019 Offering, warrants

to purchase up to 945,894 shares of Common Stock, or the private warrants.

connection with the February 2019 Offering and concurrent private placement, the Company entered into an amendment, waiver and

consent agreement, or the “Amendment, Waiver and Consent Agreement,”

with certain holders of its 10% Secured Convertible

Notes due August 20, 2019, which were issued pursuant a securities purchase agreement, dated August 17, 2018, by and among the

Company and the purchasers identified on the signature pages thereto, or the notes purchase agreement.

Pursuant to the Amendment, Waiver and Consent Agreement, such holders agreed to amend the notes

purchase agreement, waive any applicable rights and remedies under the notes purchase agreement, and consent to the February 2019

Offering and concurrent private placement.

In consideration for such Amendment, Waiver and Consent Agreement, we agreed to issue

such holders warrants to purchase up to an aggregate amount of 1,800,000 shares of our Common Stock.

Such warrants have an exercise

price of $2.55 per share, will become exercisable commencing six months and one day from the date of issuance and will expire five

(5) years from the date of issuance.

The allocation of carrying basis between

the Warrants issued and the August 2018 Secured Convertible Notes was determined based on relative valuation.

The carrying basis

attributable to the Warrants to acquire Common Stock was $1,287,962 and was calculated using the Black-Scholes option pricing model.

On July 22, 2019, the Company entered into

an amendment, waiver and consent agreement (the “Amendment, Waiver and Consent”) with certain holders constituting

(i) a majority-in-interest of the holders of the August 2018 Secured Convertible Notes and (ii) 51% in interest of the shares of

Common Stock issued pursuant to a securities purchase agreement, dated as of January 8, 2018, by and among the Company and the

purchasers identified on the signature pages thereto (the “January 2018 Purchase Agreement”).

Pursuant to the Amendment,

Waiver and Consent Agreement, such holders agreed to amend the notes purchase agreement, waive any applicable rights and remedies

under the notes purchase agreement, and consent to the February 2019 Offering and concurrent private placement.

In consideration

for such Amendment, Waiver and Consent Agreement, the Company agreed to issue such holders warrants to purchase up to an aggregate

amount 1,800,000 shares of Common Stock.

Such warrants have an exercise price of $2.55 per share, will become exercisable commencing

six months and one day from the date of issuance and will expire five (5) years from the date of issuance.

allocation of carrying basis between the Warrants issued and the August 2018 Secured Convertible Notes was determined based on

relative valuation.

The carrying basis attributable to the Warrants to acquire common stock was $1,287,962 and was calculated

using the Black-Scholes option pricing model.

July 22, 2019, the Company entered into an amendment, waiver and consent agreement (the “Amendment, Waiver and Consent”)

with certain holders constituting (i) a majority-in-interest of the holders of our 10% Secured Convertible Notes due August 20,

2019 (the “Notes”), which were issued pursuant to a securities purchase agreement, dated as of August 17, 2018 and

as amended on February 14, 2019, by and among the Company and the purchasers identified on the signature pages thereto (the “August

2018 Purchase Agreement”) and (ii) 51% in interest of the shares of Common Stock issued pursuant to a securities purchase

agreement, dated as of January 8, 2018, by and among the Company and the purchasers identified on the signature pages thereto

(the “January 2018 Purchase Agreement”).

Pursuant to the Amendment, Waiver and Consent, such holders have agreed to

(i) amend the definition of “Exempt Issuance”

in each of the August 2018 Purchase Agreement and January 2018 Purchase

Agreement to include an agreement to issue or announce the issuance or proposed issuance of Common Stock or Common Stock Equivalents

(as that term is defined in each of the August 2018 Purchase Agreement and January 2018 Purchase Agreement) in a public offering

for an effective per share purchase price of Common Stock of less than $2.50 (the “Offering”), (ii) waive any applicable

rights and remedies under the August 2018 Purchase Agreement and January 2018 Purchase Agreement, and (iii) consent to the Offering.

In consideration for the Amendment, Waiver and Consent, the Company agreed to reduce the conversion price of the Notes from $2.50

per share of Common Stock to $1.515 (the “Note Amendment”) and issue all of the purchasers under the August 2018 Purchase

Agreement warrants to purchase up to an aggregate of 1,800,000 shares of our Common Stock (the “Waiver Warrants”).

The Waiver Warrants will have an exercise price of $1.14 per share, will become exercisable commencing six months and one day

from the date of issuance and will expire five (5) years from the date of issuance.

September 18, 2019, the Company entered into a private transaction (the “Private Transaction”) pursuant to a Warrant

Exercise Agreement (the “Agreement”) with the holder of the Company’s existing warrants (the “Original

Warrants”).

The Original Warrants were originally issued on February 19, 2019, to purchase an aggregate of 945,894 shares

of Common Stock at an exercise price of $2.12 per share and were to expire on February 19, 2020.

to the Agreement, the holder of the Original Warrants and the Company agreed that such Original Warrant holder would exercise

its Original Warrants in full and the Company would amend the Original Warrants to reduce the exercise price thereof to $0.76.

The Company received $718,879 from the exercise of the Original Warrants before paying the placement agent fee of $50,321.

induced exercise resulted in the Company recognizing and recording an “imputed dividend”

a connection with a Private Placement, the Company issued to the Investor warrants exercisable for one share of Common Stock for

an aggregate of 477,474 shares of Common Stock at an exercise price of $0.76 per share.

Each Warrant will be immediately exercisable

on the date of its issuance and will expire five years from the date it becomes exercisable.

Subject to limited exceptions, a

holder of a Warrant will not have the right to exercise any portion of its warrants if the holder, together with its affiliates,

would beneficially own in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect

to such exercise.

The Special Equities Group, LLC, a division of Bradley Woods & Co.

LTD, acted as placement agent and will

receive a cash fee of $35,280 and warrants to purchase 46,421 shares at an exercise price of $0.836 per share.

December 16, 2019, the Company entered into Warrant Exercise Agreements (the “Exercise Agreements”) with certain of

the holders of the Existing Warrants to purchase an aggregate of 3,646,135 shares of Common Stock (the “Exercising Holders”).

Pursuant to the Exercise Agreements, the Exercising Holders and the Company agreed that, subject to any applicable beneficial

ownership limitations, the Exercising Holders would exercise their Existing Warrants (the “Investor Warrants”) for

shares of Common Stock underlying such Existing Warrants (the “Exercised Shares”) at a reduced exercise price of $0.21

per share of Common Stock.

In order to induce the Exercising Holders to cash exercise the Investor Warrants, the Exercise Agreements

provide for the issuance of new warrants to purchase up to an aggregate of approximately 3,646,135 shares of Common Stock (the

“New Warrants”), with such New Warrants to be issued in an amount equal to the number of the Exercised Shares underlying

any Investor Warrants.

The New Warrants are exercisable six months and one day after issuance and terminate on the date that is

five years following the initial exercise date.

The New Warrants have an exercise price per share of $0.3004, which was the Nasdaq

Official Closing Price on December 13, 2019.

January 22, 2020, the Company entered into a private transaction (the “Private Transaction”) pursuant to a Warrant

Exercise Agreement (the “Agreement”) with the holder of the Company’s existing warrants (the “Original

Warrants”).

The Original Warrants were originally issued on October 3, 2017, to purchase an aggregate of 500,000 shares

of Common Stock, at an exercise price of $3.90 per share and were to expire in October 2022.

to the Agreement, the holder of the Original Warrants and the Company agreed that such Original Warrant holder would exercise

its Original Warrants in full and the Company would amend the Original Warrants to reduce the exercise price thereof to $0.34

(the average closing price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the

signing of the Agreement) (the “Amended Exercise Price”).

The Company received approximately $170,000 from the exercise

of the Original Warrants.

placement agent received warrants to purchase 50,000 shares at an exercise price of $0.34 per share.

to the SPA described in Note 10, the Company issued to the note holders warrants to purchase 65,476,191 shares of Common Stock,

exercisable for a period of five years at an initial exercise price of $0.26 per share.

The placement agent received

warrants to purchase 6,547,619 shares at an exercise price of $0.26 per share.

The fair values of derivative warrants attached

to 2020 Convertible Notes and Notes conversion option were determined based on Level 3 inputs, using the Black-Scholes-Merton

model with standard valuation inputs.

The valuation inputs at March 17, 2020 included expected volatility of 88.98%, and

annual interest rate of 0.66%.

The valuation inputs at March 31, 2020 included expected volatility of 89.91%, and annual interest

rate of 0.37%.

following table summarizes the changes in the Company’s outstanding warrants during the three months ended March 31, 2020:

Waiver and Consent, such holders have agreed to (i) amend the definition of “Exempt Issuance”

in each of the August

2018 Purchase Agreement and January 2018 Purchase Agreement to include an agreement to issue or announce the issuance or proposed

issuance of Common Stock or Common Stock Equivalents (as that term is defined in each of the August 2018 Purchase Agreement and

January 2018 Purchase Agreement) in a public offering for an effective per share purchase price of Common Stock of less than $2.50

(the “Offering”), (ii) waive any applicable rights and remedies under the August 2018 Purchase Agreement and January

2018 Purchase Agreement, and (iii) consent to the Offering.

In consideration for the Amendment, Waiver and Consent, the Company

agreed to reduce the conversion price of the Notes from $2.50 per share of Common Stock to $1.515 (the “Note Amendment”)

and issue all of the purchasers under the August 2018 Purchase Agreement warrants to purchase up to an aggregate of 1,800,000 shares

of our Common Stock (the “Waiver Warrants”).

The Waiver Warrants will have an exercise price of $1.14 per share, will

become exercisable commencing six months and one day from the date of issuance and will expire five (5) years from the date of

On September 18, 2019, the Company entered

into a private transaction (the “2019 Private Transaction”) pursuant to the Agreement with the holder of the Original

The Original Warrants were originally issued on February 19, 2019, to purchase an aggregate of 945,894 shares of Common

Stock at an exercise price of $2.12 per share and were to expire on February 19, 2020.

Pursuant to the Agreement, the holder of

the Original Warrants and the Company agreed that such Original Warrant holder would exercise its Original Warrants in full and

the Company would amend the Original Warrants to reduce the exercise price thereof to $0.76.

The Company received $718,879 from

the exercise of the Original Warrants before paying the placement agent fee of $50,321.

The induced exercise resulted in the Company

recognizing and recording an “imputed dividend”

In connection with a private placement,

the Company issued to the Investor warrants exercisable for one share of Common Stock for an aggregate of 477,474 shares of Common

Stock at an exercise price of $0.76 per share.

Each Warrant will be immediately exercisable on the date of its issuance and will

expire five years from the date it becomes exercisable.

Subject to limited exceptions, a holder of a Warrant will not have the

right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of

4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise.

The Special Equities

Group, LLC, a division of Bradley Woods & Co.

LTD, acted as placement agent and will receive a cash fee of $35,280 and warrants

to purchase 46,421 shares at an exercise price of $0.836 per share.

On December 16, 2019, the Company entered

into Warrant Exercise Agreements (the “Exercise Agreements”) with certain of the holders of the Existing Warrants to

purchase an aggregate of 3,646,135 shares of Common Stock (the “Exercising Holders”).

Pursuant to the Exercise Agreements,

the Exercising Holders and the Company agreed that, subject to any applicable beneficial ownership limitations, the Exercising

Holders would exercise their Existing Warrants (the “Investor Warrants”) for shares of Common Stock underlying such

Existing Warrants (the “Exercised Shares”) at a reduced exercise price of $0.21 per share of Common Stock.

to induce the Exercising Holders to cash exercise the Investor Warrants, the Exercise Agreements provide for the issuance of new

warrants to purchase up to an aggregate of approximately 3,646,135 shares of Common Stock (the “New Warrants”), with

such New Warrants to be issued in an amount equal to the number of the Exercised Shares underlying any Investor Warrants.

Warrants are exercisable six months and one day after issuance and terminate on the date that is five years following the initial

exercise date.

The New Warrants have an exercise price per share of $0.3004, which was the Nasdaq Official Closing Price on December

On January 22, 2020, the Company entered

into the Private Transaction pursuant to the Agreement with the holder of the Company’s Original Warrants.

The Original Warrants

were originally issued on October 3, 2017, to purchase an aggregate of 500,000 shares of Common Stock, at an exercise price of

$3.90 per share and were to expire in October 2022.

Pursuant to the Agreement, the holder of

the Original Warrants and the Company agreed that such Original Warrant holder would exercise its Original Warrants in full and

the Company would amend the Original Warrants to reduce the exercise price thereof to $0.34 (the average closing price of the Common

Stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the Agreement).

The Company received

approximately $170,000 from the exercise of the Original Warrants.

The placement agent received warrants to

purchase 50,000 shares at an exercise price of $0.34 per share.

Pursuant to the SPA described in Note 10,

the Company issued to the note holders warrants to purchase 65,476,191 shares of Common Stock, exercisable for a period of five

years at an initial exercise price of $0.26 per share.

The placement agent received warrants to

purchase 6,547,619 shares at an exercise price of $0.26 per share.

On May 15, 2020 stockholders of the Company

approved the reduction in warrants exercise price for the 2020 Convertible Notes holders to $0.21.

During the three months ended

June 30, 2020, certain warrant holders exercised warrants for 29,000,526 shares of Common Stock at $0.21 per share in cash.

other warrant holders exercised 41,508,189, warrants on a cashless basis, resulting in the issuance of 37,449,140 shares of Common

Estimated fair value of the exercised warrants

immediately before the exercise was $219,034,621.

Estimated fair value of warrants outstanding at June 30, 2020 was $3,179,569.

During the three months ended June 30, 2020 the Company recognized revaluation loss associated with all warrants issued to the

note holders and placement agent of $208,760,698.

The fair values of derivative warrants attached to the 2020

Convertible Notes were determined based on Level 3 inputs, using the Black-Scholes-Merton model with standard valuation inputs.

valuation inputs used to value the warrants at March 31, 2020 included expected volatility of 89.91%, and annual interest rate

The valuation inputs for the warrants outstanding at June 30, 2020 included expected volatility of 113.47%, and annual

risk-free interest rate of 0.28%.

On May 15, 2020 stockholders of the Company approved the reduction

of all previously issued warrants held by the 2020 Convertible Notes holders exercise price to $0.21.

The repricing of the warrants

resulted in a deemed dividend of $1,840,384, which was charged to additional paid in capital for warrants issued in connection

with prior equity instruments and a warrant repricing loss of $744,321 recorded in Company’s consolidated statements of operations,

if the warrants were issued in connection with prior debt transaction.

All warrants were repriced using standard Black-Scholes-Merton

valuation model.

The valuation inputs for warrant repricing exercise included expected volatility varying between 98.56% and 203.81%

and annual risk-free interest rate of approximately 0.2%.

During the three months ended June 30, 2020, certain warrant

holders exercised 655,757 warrants for shares of Common Stock at $0.21 per share in cash.

Certain other warrant holders exercised

8,506,706 warrants on a cashless basis, resulting in the issuance of 7,551,288 shares of Common Stock.

On May 25, 2020, the Company issued to an individual and his

management company 2,284,172 warrants to purchase shares of Common Stock at $1.39 per share for his involvement with the production

and distribution of a television series being developed by the Company.

The warrants have a 10-year term and are fully vested upon

The warrants become immediately exercisable in whole upon the earlier of May 21, 2021 or the first date the series is

exhibited on television or is otherwise available for viewing through a streaming service or otherwise on the internet.

anticipates the warrants will become exercisable by December 31, 2020.

The warrants were valued at $3,174,806 using the Black-Scholes

option pricing model.

The warrants were issued as an advance payment against participation amounts that will become due to the

individual upon the performance of the series.

The warrants are being accounted as non-employee compensation expense which has

been recorded as prepaid participation expense over the expected exercise period.

As of June 30, 2020, $519,514 was recorded as

prepaid participation expense.

The valuation inputs for the warrants included expected volatility of 253.01%, and annual risk-free

interest rate of 0.7%.

The following table summarizes the changes

in the Company’s outstanding warrants during the six months ended June 30, 2020:

Warrants Outstanding Number Of Shares

2 unchanged sentences

Weighted Average Exercise Price Per Share

Aggregate Intrinsic Value

Balance at December 31, 2019

3 unchanged sentences

Warrants Exercised

$ 0.21 - 5.30

Warrants Expired

Balance at March 31, 2020

Balance at June 30, 2020

$ 0.21 - 5.30

1 unchanged sentence

$ 0.76 - 6.00

Exercisable March 31, 2020

Exercisable June 30, 2020

$ 0.21 - 5.30

Company accounts for income taxes in accordance with Accounting Standards Codification Topic 740 Income Taxes (“Topic 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.

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.

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, 2020, and December 31, 2019, the Company had no accrued interest or penalties related to uncertain

tax positions.

Company files income tax returns in the U.S.

The Company accounts for income taxes in

accordance with Accounting Standards Codification Topic 740 Income Taxes (“Topic 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.

Topic 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 consolidated statements of operation in the provision for income taxes.

of June 30, 2020, and December 31, 2019, the Company had no accrued interest or penalties related to uncertain tax positions.

The Company files income tax returns in

federal jurisdiction and in the state of California and Massachusetts.

is currently subject to U.S.

federal, state and local, or non-U.S.

income tax examinations by tax authorities since inception

of the Company.

The Company is currently subject to U.S.

state and local, or non-U.S.

income tax examinations by tax authorities since inception of the Company.

Commitment and Contingencies

February 2016, the FASB issued Accounting Standards Update 2016-02, “Leases.”

The standard requires lessees to recognize

the assets and liabilities that arise from leases on the balance sheet.

For practically all leases, a lessee should recognize

in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing

its right to use the underlying asset for the lease term.

The new guidance is effective for annual and interim reporting periods

beginning after December 15, 2018.

July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, which allows for an additional optional

transition method where comparative periods presented in the financial statements in the period of adoption will not be restated

and instead those periods will be presented under existing guidance in accordance with ASC 840, Leases.

Management will use this

optional transition method.

As of January 1, 2019, management recorded lease liability of $2,071,903, right-of-use asset of $2,153,747,

accumulated amortization of $124,070, a reversal of previously recorded deferred rent of $37,920 and the increase in accumulated

deficit of $4,306.

of March 31, 2020, weighted-average lease term for operating leases equals to 79.32 months.

Weighted-average discount rate equals

February 6, 2018, the Company entered into an operating lease for 6,969 square feet of general office space at 131 South Rodeo

Drive, Suite 250, Beverly Hills, CA 90212 pursuant to a 91-month lease that commenced on May 25, 2018.

We will pay rent of $364,130

In February 2016, the FASB issued Accounting

Standards Update 2016-02, “Leases.”

The standard requires lessees to recognize the assets and liabilities that arise

from leases on the balance sheet.

For practically all leases, a lessee should recognize in the statement of financial position

a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying

asset for the lease term.

The new guidance is effective for annual and interim reporting periods beginning after December 15, 2018.

In July 2018, the FASB issued ASU 2018-11,

Leases (“Topic 842”), Targeted Improvements, which allows for an additional optional transition method where comparative

periods presented in the financial statements in the period of adoption will not be restated and instead those periods will be

presented under existing guidance in accordance with ASC 840, Leases.

Management will use this optional transition method.

January 1, 2019, management recorded lease liability of $2,071,903, right-of-use asset of $2,153,747, accumulated amortization

of $124,070, a reversal of previously recorded deferred rent of $37,920 and the increase in accumulated deficit of $4,306.

As of June 30, 2020, weighted-average lease

term for operating leases equals to 76.52 months.

Weighted-average discount rate equals to 10.31%.

On February 6, 2018, the Company entered

into an operating lease for 6,969 square feet of general office space at 131 South Rodeo Drive, Suite 250, Beverly Hills, CA 90212

pursuant to a 91-month lease that commenced on May 25, 2018.

We will pay rent of $364,130 annually, subject to annual escalations

Effective January 21, 2019, the Company

entered into a sublease for the 6,969 square feet of general office space located at 131 South Rodeo Drive, Suite 250, Beverly

Hills, CA 90212 pursuant to an 83-month sublease that commenced on February 4, 2019, 2019.

The subtenant will pay us rent of $422,321

annually, subject to annual escalations of 3.5%.

January 21, 2019, the Company entered into a sublease for the 6,969 square feet of general office space located at 131 South Rodeo

Drive, Suite 250, Beverly Hills, CA 90212 pursuant to an 83-month sublease that commenced on February 4, 2019, 2019.

Since on or about April 2020, the subtenant has failed to make any rent payments.

Consequently, the Company, which had been passing through the subtenant’s rental payments to the landlord declined to pay

the rent due.

The Company is engaged in ongoing discussions with both the subtenant and the landlord to resolve the default by

the subtenant.

will pay us rent of $422,321 annually, subject to annual escalations of 3.5%.

January 30, 2019, we 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 is scheduled to commence on August 1, 2019.

We will pay rent of

$392,316 annually, subject to annual escalations of 3.5%.

addition, the Company has contractual commitments for employment agreements of certain employees.

expenses incurred for operating leases during the three months ended March 31, 2020 and March 31, 2019 were $207,839 and $144,793,

respectively.

During the three months ended March 31, 2020 and March 31, 2019, we received sub-lease income of $121,070 and $115,230,

respectively.

following is a schedule of future minimum contractual obligations as of March 31, 2020, under the Company’s operating leases

and employment agreements:

On January 30, 2019, we 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 is scheduled to commence on August 1, 2019.

We will pay rent of $392,316 annually, subject to annual escalations

Due to the ongoing pandemic, the Company has not been able to lawfully enjoy the use of its office space and the majority

of the employees are working remotely.

Consequently, the Company has elected to defer the payment of rent.

We are currently in

ongoing discussions with our landlord regarding a rent deferral or possible abatement.

In addition, the Company has contractual

commitments for employment agreements of certain employees.

Rental expenses incurred for operating

leases during the three months ended June 30, 2020 and June 30, 2019 were $207,839 and $176,664, respectively.

Rental expenses

incurred for operating leases during the six months ended June 30, 2020 and June 30, 2019 were $415,678 and $321,457, respectively.

During the three months ended June 30, 2020, we received sub-lease income of $121,070.

During the six months ended June 30, 2019,

we received sub-lease income of $238,484.

The following is a schedule of future minimum contractual obligations

as of June 30, 2020, under the Company’s operating leases and employment agreements:

Operating Leases

Employment Contracts

Consulting Contracts

Related Party Transactions

April 21, 2016, the Company entered into a merchandising and licensing agreement with Andy Heyward Animation Art (“AHAA”),

whose principal is Andy Heyward, the Company’s Chief Executive Officer.

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.

No amounts were earned during the three months ended March 31, 2020 and 2019, under this

October 1, 2016, Llama Productions LLC entered into an animation production services agreement with Mr.

Heyward for services as

a producer for which he is to receive $186,000 through the course of production of the Company’s animated series Llama

From October 1, 2016 through December 31, 2017, Mr.

Heyward was paid $186,000.

August 31, 2018, Llama Productions LLC entered into an animation production services agreement with Mr.

Heyward for services as

a producer for which he is to receive $124,000 through the course of production of the Company’s animated series Llama

On April 21, 2016, the Company entered

into a merchandising and licensing agreement with Andy Heyward Animation Art (“AHAA”), whose principal is Andy Heyward,

the Company’s Chief Executive Officer.

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.

were earned during the three months ended March 31, 2020 and 2019, under this agreement as there were no revenue generated during

On August 31, 2018, Llama entered into

an animation production services agreement with Mr.

Heyward for services as a producer for which he is to receive $124,000 through

the course of production of the Company’s animated series Llama Llama.

As of December 31, 2019, Mr.

Heyward was paid $124,000.

No further amounts are due or paid during the three

months ended March 31, 2020.

to his employment agreement dated November 16, 2018, Mr.

Heyward is entitled to an Executive Producer fee of $12,400 per half

hour episode for each episode he provides services as an executive producer.

The first identified series under this employment

agreement is Rainbow Rangers.

was paid $124,000.

No further amounts are due or paid during the six months ended June 30, 2020.

Pursuant to his employment agreement dated

November 16, 2018, Mr.

Heyward is entitled to an Executive Producer fee of $12,400 per half hour episode for each episode he provides

services as an executive producer.

The first identified series under this employment agreement is Rainbow Rangers.

December 31, 2019, 26 half hours had been delivered and accordingly Mr.

Heyward was owed $322,400, which is included in the Due

To Related Party line item on our consolidated balance sheet.

The second identified series under this employment agreement is Rainbow

Rangers Season 2.

As of December 31, 2019, 13 half hours had been delivered and accordingly Mr.

owed $322,400, which is included in the Due To Related Party line item on our consolidated balance sheet.

The second identified

series under this employment agreement is Rainbow Rangers Season 2.

As of December 31, 2019, 13 half hours had been delivered

and accordingly Mr.

Heyward was owed $161,200, which is included in the Due To Related Party line item on our consolidated balance

Heyward was owed $161,200,

which is included in the Due To Related Party line item on our consolidated balance sheet.

Both of these amounts were paid on March

September 17, 2019, Mr.

Heyward purchased $500,000 of the August 2018 Secured Convertible Notes from another holder.

did not receive any proceeds from this transaction.

On September 17, 2019, Mr.

Heyward purchased

$500,000 of the August 2018 Secured Convertible Notes from another holder.

The Company did not receive any proceeds from this transaction.

October 2, 2019, Mr.

Heyward purchased 1,000,000 shares of Common Stock for an aggregate purchase price of $760,000, or $0.76

of March 31, 2020, Andy Heyward is owed $72,812 for reimbursable expenses which are included in the Due To Related Parties line

item on our condensed consolidated balance sheet.

Heyward purchased 1,000,000 shares of Common Stock for an aggregate purchase price of $760,000, or $0.76 per

On March 11, 2020, Mr.

Heyward purchased

$1,000,000 of the 2020 Convertible Notes with an original discount of $250,000.

On June 19, 2020, Mr.

Heyward received

5,658,474 shares of Common Stock upon the cashless exercise of 6,119,048 warrants.

On June 23 , 2020, Mr.

received 5,952,381 shares of Common Stock upon conversion of $1,250,000 of 2020 Convertible Notes.

As of June 30, 2020, Andy Heyward is owed

$91,006 for reimbursable expenses which are included in the Due To Related Parties line item on our condensed consolidated balance

Subsequent Events

Pursuant to FASB ASC 855, management has

evaluated all events and transactions that occurred from March 31, 2020 through the date of issuance of these financial statements.

During this period, we did not have any significant subsequent events, except as disclosed below:

May Securities Purchase Agreements

On May 7, 2020, the Company entered into

a Securities Purchase Agreement with certain long standing investors (the “Investors”), pursuant to which the Company

agreed to issue and sell, in a registered direct offering by the Company directly to the Investors (the “Registered Offering”),

an aggregate of 8,000,000 shares Common Stock at an offering price of $0.35 per share for gross proceeds of $2.8 million before

deducting the placement agent fees and offering expenses.

The Registered Offering closed on May 8, 2020.

On May 8, 2020, the Company entered into

a Securities Purchase Agreement with certain long standing investors (the “Investors”), pursuant to which the Company

agreed to issue and sell, in a registered direct offering by the Company directly to the Investors (the “Registered Offering”),

an aggregate of 12,000,000 shares Common Stock at an offering price of $0.454 per share for gross proceeds of $5.448 million before

deducting the placement agent fees and offering expenses.

The Registered Offering closed on May 12, 2020.

Stockholder Approval

Pursuant to the terms of the SPA, the 2020 Convertible Notes

and the Warrants, the Company agreed that the following will apply or become effective only following Stockholder Approval:

the conversion price of the 2020 Convertible Notes shall be reduced to $0.21 per share and may be further reduced to any amount

and for any period of time deemed appropriate by the board of directors of the Company, (2) the exercise price of the Warrants

shall be immediately reduced to $0.21 per share and may be further reduced to any amount and for any period of time deemed appropriate

by the board of directors of the Company, (3) the 2020 Convertible Notes and Warrants shall each have full ratchet anti-dilution

protection for subsequent financings (subject to certain exceptions), (4) existing warrant holders that participated in the Financing

(representing warrants to purchase an aggregate of 8,715,229 shares of Company Common Stock) will have their existing warrants’

exercise prices reduced to $0.21 and (5) the investors shall have a most favored nations right which provides that if the Company

enters into a subsequent financing, then the Investors (together with their affiliates) at their sole discretion shall have the

ability to exchange their 2020 Convertible Notes on a $1 for $1 basis into securities issued in the new transaction.

Additionally,

in the event that any warrants or options (or any similar security or right) issued in a subsequent financing include any terms

more favorable to the holders thereof (less favorable to the Company) than the terms of the Warrants, the Warrants shall be automatically

amended to include such more favorable terms.

On May 15, 2020, the Company received the

necessary Stockholder Approval in connection with the Nasdaq proposals described above.

As a result, the conversion price of the

2020 Convertible Notes and the exercise price of the Warrants were each reduced to $0.21.

In addition, existing warrant holders

that participated in the Financing (representing warrants to purchase an aggregate of 8,715,229 shares of Common Stock) also had

their existing warrants’

exercise prices reduced to $0.21.

Coronavirus (COVID-19)

With respect to the ongoing and evolving

coronavirus (COVID-19) outbreak, which was designated as a pandemic by the World Health Organization on March 11, 2020, the outbreak

has caused substantial disruption in international and U.S.

economies and markets.

The outbreak has potential to have an adverse

impact on the entertainment industry and, if repercussions of the outbreak are prolonged, could have a significant adverse impact

on our business, which could be material.

The Company’s management cannot at this point estimate the impact of the outbreak

on it’s business and no provision for this outbreak are reflected in the accompanying financial statements.

On June 8, 2020, the Company received $55,011

for the exercise of 16,670 warrants at $3.30 per share.

The shares were issued on July 21, 2020 accordingly the $55,011 is included

in accrued expenses at June 30, 2020.

On July 15, 2020, the Company issued 32,609

shares of Common Stock valued at $2.30 per share to a provider for marketing services.

On July 21, 2020, the Company entered into

a two-year production, marketing and sale of animation cells agreement with AHAA.

The Company will contribute characters which

are owned and/or controlled by the Company.

AHAA will be responsible for providing the funding for the project and the artwork

for the cells as well as all operational functions and costs.

AHAA will pay the Company a 15% royalty on all cell sales of any

Company owned or controlled property.

On July 22, 2020, the Company issued 124,449

shares of Common Stock valued at $2.30 per share to the same provider for marketing services.

On or about July 6, 2020, the

Company and POW!

entered into an agreement to form a joint venture to be called “Stan Lee Universe, LLC”

(the “JV”).

The JV will hold worldwide rights, on a perpetually renewing basis, to the name, physical likeness, and physical signature of Stan

Further, the JV will have access to the POW!

catalogue of intellectual property, created by Stan Lee, to exploit in live-action

and animated motion pictures, television, online, digital, publishing, comic book, and merchandising and licensing.

The agreement

is subject to due diligence and documentation.

As currently agreed, the Company will be the managing partner of the JV .

On August 6, 2020, the Board of Directors approved, subject to stockholder approval, a proposed amendment to the Company’s Articles of Incorporation, as amended, to increase the authorized number of shares of the Company’s common stock from 233,333,334 to 400,000,000 in order to enable the Company to efficiently take advantage of accretive opportunities, largely targeting acquisitions, which may arise and provide enriched shareholder value as the media industry undergoes a period of consolidation and the 2020 Incentive Plan, which (if approved by the Company’s stockholders) will replace the Company’s 2015 Amended Incentive Plan for all future equity-based incentive awards and enable the Company to attract, motivate, and retain qualified individuals upon whom its business and accretive growth strategy depends.

On July 21, 2020, 16,670 warrants

were exercised at $3.30 per share.

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