What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-14 compared with 2020-05-18 · 533 added, 459 removed, 47 unchanged (95% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

following discussion and analysis of our results of operations, financial condition and liquidity and capital resources should

be read in conjunction with our financial statements and related notes for the three months ended March 31, 2020 and 2019.

statements made or incorporated by reference in this report and our other filings with the Securities and Exchange Commission,

in our press releases and in statements made by or with the approval of authorized personnel constitute forward looking statements

within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of

1934, as amended, or the Exchange Act, and are subject to the safe harbor created thereby.

Forward-looking statements reflect

intent, belief, current expectations, estimates or projections about, among other things, our industry, management’s beliefs,

and future events and financial trends affecting us.

MANAGEMENT'S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis

of our results of operations, financial condition and liquidity and capital resources should be read in conjunction with our financial

statements and related notes for the three and six months ended June 30, 2020 and 2019.

Certain statements made or incorporated

by reference in this report and our other filings with the Securities and Exchange Commission, in our press releases and in statements

made by or with the approval of authorized personnel constitute forward looking statements within the meaning of Section 27A of

the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act,

and are subject to the safe harbor created thereby.

Forward-looking statements reflect intent, belief, current expectations, estimates

or projections about, among other things, our industry, management’s beliefs, and future events and financial trends affecting

Words such as “anticipates,”

7 unchanged sentences

“will”

and variations of these words or similar expressions are intended to identify forward looking statements.

In addition, any statements

that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying

assumptions, are forward looking statements.

Although we believe the expectations reflected in any forward-looking statements

are reasonable, such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions

that are difficult to predict.

Therefore, our actual results could differ materially and adversely from those expressed in any

forward-looking statements as a result of various factors.

These differences can arise as a result of the risks described in the

section entitled “Item 1A.

and variations of these words or similar expressions

are intended to identify forward looking statements.

In addition, any statements that refer to expectations, projections or other

characterizations of future events or circumstances, including any underlying assumptions, are forward looking statements.

we believe the expectations reflected in any forward-looking statements are reasonable, such statements are not guarantees of future

performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict.

Therefore, our actual

results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors.

These differences can arise as a result of the risks described in the section entitled “Item 1A.

Risk Factors”

in our Annual Report on Form 10-K filed on March 30, 2020 and elsewhere in

this report, as well as other factors that may affect our business, results of operations, or financial condition.

Forward-looking

statements in this report speak only as of the date hereof, and forward looking statements in documents incorporated by reference

speak only as of the date of those documents.

Unless otherwise required by law, we undertake no obligation to publicly update

or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

In light of these

risks and uncertainties, we cannot assure you that the forward-looking statements contained in this report will, in fact, transpire.

management’s discussion and analysis is based on our financial statements, which have been prepared in accordance with accounting

principles generally accepted in the United States of America.

The preparation of these financial statements requires us to make

certain estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of

contingent assets and liabilities.

Management bases its estimates on historical experience and on various other assumptions that

are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying

values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates

under different assumptions and conditions.

Brands International, Inc.

Annual Report on Form 10-K filed on March 30, 2020 and elsewhere in this report, as well as other factors that may affect our business,

results of operations, or financial condition.

Forward-looking statements in this report speak only as of the date hereof, and

forward looking statements in documents incorporated by reference speak only as of the date of those documents.

Unless otherwise

required by law, we undertake no obligation to publicly update or revise these forward-looking statements, whether as a result

of new information, future events or otherwise.

In light of these risks and uncertainties, we cannot assure you that the forward-looking

statements contained in this report will, in fact, transpire.

The management’s discussion and analysis

is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the

United States of America.

The preparation of these financial statements requires us to make certain estimates and judgments that

affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities.

bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances,

the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily

apparent from other sources.

Actual results may differ from these estimates under different assumptions and conditions.

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.

2020 Warrant Exercise Agreement

January 22, 2020, we entered into a private transaction pursuant to a Warrant 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 the Company’s common stock, par value $0.001 per share

(the “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).

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

2020 Secured Convertible Note and Warrant Private Placement

March 11, 2020, we entered into a Securities Purchase Agreement (the “SPA”) with certain accredited investors (each

an “Investor”

and collectively, the “Investors”) pursuant to which we 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”

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

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 currently 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.

Recent Financings

January 2020 Warrant Exercise Agreement

On January 22, 2020, we entered into a

private transaction pursuant to a Warrant 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 the 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).

We received approximately $170,000 from the exercise of the Original

March 2020 Secured Convertible Note and Warrant Private Placement

On March 11, 2020, we entered into a Securities

Purchase Agreement (the “SPA”) with certain accredited investors (each an “Investor”

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”).

Andy Heyward, our 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 Special Equities Group, LLC, a division of Bradley Woods & Co.

acted as placement agent and received warrants to purchase 6,547,619 shares at an exercise price of $0.26 per share (the “Placement

Agent Warrants”).

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

Company agreed to 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.

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 that certain Equity

Conditions 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.

Note is convertible, at the option of the Note 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.

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 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 “Investors”) pursuant to which we 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,

our 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 Special Equities Group, LLC, a division of Bradley

LTD, acted as placement agent and received warrants to purchase 6,547,619 shares at an exercise price of $0.26

per share (the “Placement Agent 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 “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,

The Company agreed to 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.

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.

In 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”

or similar agreement, whereby the Company may issue securities at a future determined price.

On March 16, 2020 the holders of the August

2018 Secured Convertible Notes were repaid in full including any outstanding interest.

The 2020 Convertible Notes provide that

the Company will repay the principal amount of the 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 that certain Equity Conditions 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.

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 (the “Conversion Price”);

provided, however, upon receipt of Stockholder Approval, the

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

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 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.

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 9,172,463 shares of Common Stock) also had

their existing warrants’

exercise prices reduced to $0.21.

2020 Securities Purchase Agreement

March 22, 2020, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain long standing

investors (the “Investors”), pursuant to which we agreed to issue and sell, in a registered direct offering by the

Company directly to the Investors, an aggregate of 4,000,000 shares of Common Stock, at an offering price of $0.2568 per share

for gross proceeds of approximately $1.0 million before deducting offering expenses.

2020 Securities Purchase Agreements

March 2020 Securities Purchase Agreement

On March 22, 2020, we entered into a Securities

Purchase Agreement (the “Purchase Agreement”) with certain long standing investors (the “Investors”), pursuant

to which we agreed to issue and sell, in a registered direct offering by the Company directly to the Investors, an aggregate of

4,000,000 shares of Common Stock, at an offering price of $0.2568 per share for gross proceeds of approximately $1.0 million before

deducting offering expenses.

May 2020 Securities Purchase Agreements

On May 7, 2020, the Company entered into

10 unchanged sentences

The Registered Offering closed on May 12, 2020.

of Operations

summary results for the three months ended March 31, 2020, and March 31, 2019 are below.

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.

Warrant Exercises

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.

Investor Notes Payment

On June 23, 2020, the Company received

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

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, COVID-19 has caused substantial

disruption in international and U.S.

economies and markets.

COVID-19 has had an adverse impact on the entertainment industry and,

if repercussions of COVID-19 are prolonged, could have a significant adverse impact on our business, which could be material.

majority of the Company’s employees have been working remotely from home, with only a few individuals monitoring the office

We have not experienced any disruption in our supply chain, nor have we experienced any negative impact from our production

We have observed demand increases for streaming entertainment service provided by our partners in the first half of 2020,

but we cannot estimate the impact COVID-19 will have in the future as business and consumer activity decelerates in the U.S.

across the globe.

Results of Operations

Our summary results for the three months

ended June 30, 2020 and the three months ended June 30, 2019 are below.

Three Months Ended

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

Licensing & Royalties

3 unchanged sentences

Total Revenue

and royalty revenue include items for which we license the rights to our copyrights and trademarks of our brands and those of

the brands for which we act as a licensing agent.

During the three months ended March 31, 2020 compared to the three months ended

March 31, 2019, Licensing and Royalty revenue decreased $146,821, or 42%, primarily due to the revenue generated from the Psycho

Bunny settlement in 2019 without comparable revenue in 2020.

& Home Entertainment revenue is generated from distribution of our properties for broadcast on television, VOD, or SVOD in

domestic and international markets and the sale of DVDs for home entertainment through our partners.

Fluctuations in Television

& Home Entertainment revenue occur period over period based on the achievement of revenue recognition criteria such as the

start of a license period and the delivery of the content to the customer.

During the three months ended March 31, 2020 compared

to the three months ended March 31, 2019, Television & Home Entertainment revenue decreased $797,890, or 94%, primarily due

to the revenue generated from the delivery of Rainbow Rangers to the Viacom Media Network in January 2019 without comparable

revenue in 2020.

sales are generated on the Kid Genius Cartoon Channel in the form of either flat rate promotions or advertising impressions served.

Advertising sales increased by $58,497, or 290%, during the three months ended March 31, 2020 compared to the three months ended

March 31, 2019 primarily due to the addition of new distribution partners, increased advertising impressions served and additional

ad campaigns.

This was a result of our efforts to continue to grow this area of the business through new distribution channels

and with new partners.

Licensing and royalty revenue include items

for which we license the rights to our copyrights and trademarks of our brands and those of the brands for which we act as a licensing

During the three months ended June 30, 2020 compared to the three months ended June 30, 2019, this category increased $13,100,

or 9%, primarily due to the revenue generated from Rainbow Rangers and Llama Llama properties.

Television & Home Entertainment revenue

is generated from distribution of our properties for broadcast on television, VOD, or SVOD in domestic and international markets

and the sale of DVDs for home entertainment through our partners.

Fluctuations in Television & Home Entertainment revenue occur

period over period based on the achievement of revenue recognition criteria such as the start of a license period and the delivery

of the content to the customer.

During the three months ended June 30, 2020 compared to the three months ended June 30, 2019, Television

& Home Entertainment revenue increased $30,790, or 10%, primarily due to the revenue generated from the international television

deliveries of our Rainbow Rangers and Llama Llama properties .

Advertising sales are generated on the

Kartoon Channel and Kid Genius Cartoon Channel in the form of either flat rate promotions or advertising impressions served.

sales increased by $52,835, or 302%, during the three months ended June 30, 2020 compared to the three months ended June 30, 2019,

as we continue to focus on growing this business.

The Kid Genius Cartoon Channel was rebranded the Kartoon Channel in June of 2020.

Results of Operations

Three Months Ended

March 31, 2020

March 31, 2019

June 30, 2020

June 30, 2019

Marketing and Sales

2 unchanged sentences

Interest Expense

and sales expenses increased $31,229, or 38%, for the three months ended March 31, 2020 compared to the three months ended March

31, 2019 primarily due to an increase in marketing and advertising expenses to promote the Rainbow Rangers property.

operating costs include costs of our product sales, unamortizable post-production 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

During the three months ended March 31, 2020, the Company recorded film and television cost amortization expense of

$106,614 and participation expense of $119,469 compared to expenses of $429,183 and $289,333, respectively, for the three months

ended March 31, 2019.

The decreases in direct operating costs for the three months ended March 31, 2020 compared to the prior

year reflect decreases in film amortization and participation expenses related to decreased revenues from the Rainbow Rangers

and administrative expenses consist primarily of salaries, employee benefits, share-based compensation related to stock options,

insurances, rent, depreciation and amortization as well as other professional fees related to finance, accounting, legal and investor

General and administrative expenses for three months ended March 31, 2020 increased $113,063, or 7%, compared to the

same period in 2019.

This increase was primarily related to increases in legal professional fees, rent expense, and bad debt,

offset by decreases in salaries and wages and administrative professional fees.

expense for the three months ended March 31, 2020 increased $191,801, or 36%, compared to the same period in 2019.

This increase

is due to the expensing of the debt discount in excess of principal related to the Senior Secured Convertible Notes.

partially offset by reductions in the amortization of the debt discount related to the $4,500,000 of Secured Convertible Notes,

and interest paid on the lower outstanding balance.

and Capital Resources

of March 31, 2020, we had current assets of $10,092,077, including cash and cash equivalents of $2,760,048, and current liabilities

of $19,290,901, resulting in negative working capital of $9,198,824, compared to negative working capital of $3,650,136 as of

December 31, 2019.

in working capital were the result of recording the warrant derivative liability, partially offset by the recording of the investor

receivable and the repayment of the Secured Convertible Notes.

We believe that our current cash and cash

equivalents balances are sufficient to support our operations for at least the next twelve months.

of Cash Flows for the Three Months Ended March 31, 2020, and March 31, 2019

total cash and cash equivalents was $2,760,048 and $4,030,354 at March 31, 2020, and 2019, respectively.

of Cash Flows

Three Months Ended

March 31, 2020

March 31, 2019

Marketing and sales expenses decreased

$98,182, or 43%, for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to the

Coronavirus related cancellation of several trade shows in the second quarter of 2020.

Direct operating costs include costs of

our product sales, unamortizable post-production 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.

During the three

months ended June 30, 2020, the Company recorded film and television cost amortization expense of $185,748 and participation expense

of $251,347 compared to expenses of $192,803 and $145,705, respectively, for the three months ended June 30, 2019.

The increases

in direct operating costs for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 is primarily

due to increased participation expenses related to revenues from the Rainbow Rangers property.

General and administrative expenses consist

primarily of salaries, employee benefits, share-based compensation related to stock options, insurances, rent, depreciation, and

amortization as well as other professional fees related to finance, accounting, legal and investor relations.

General and administrative

expenses for three months ended June 30, 2020 increased $812,223 or 52%, compared to the same period in 2019.

This increase was

primarily related to increases in salaries and related expenses, stock-based compensation expense, legal fees, and investor relations

Interest expense for the three months ended

June 30, 2020 increased $293,064, or 213%, compared to the same period in 2019.

This increase is due to the expensing of the debt

discount in excess of principal related to the 2020 Convertible Notes.

This was partially offset by reductions in the amortization

of the debt discount related to the $4,500,000 of 2020 Convertible Notes, and interest paid on the lower outstanding balance.

Our summary results for the six months

ended June 30, 2020, and the six months ended June 30, 2019 are below.

Six Months Ended

June 30, 2020

June 30, 2019

Licensing & Royalties

Television & Home Entertainment

Advertising Sales

Product Sales

Total Revenue

Licensing and royalty revenue include items

for which we license the rights to our copyrights and trademarks of our brands and those of the brands for which we act as a licensing

During the six months ended June 30, 2020 compared to the six months ended June 30, 2019, this category decreased $133,721,

or 27%, primarily due to lower revenues generated from Rainbow Rangers and Llama Llama properties.

Television & Home Entertainment

revenue is generated from distribution of our properties for broadcast on television, VOD, or SVOD in domestic and

international markets and the sale of DVDs for home entertainment through our partners.

Fluctuations in Television & Home

Entertainment revenue occur period over period based on the achievement of revenue recognition criteria such as the start of

a license period and the delivery of the content to the customer.

During the six months ended June 30, 2020 compared to the

six months ended June 30, 2019, Television & Home Entertainment revenue decreased $767,100, or 67%, primarily due to the

revenue generated from the delivery of Rainbow Rangers to the Viacom Media Network as well as international

territories in 2019.

There were no comparable deliveries in 2020.

Advertising sales are generated on the

Kid Genius Cartoon Channel in the form of either flat rate promotions or advertising impressions served.

Advertising sales increased

by $111,332, or 295%, during the six months ended June 30, 2020 compared to the six months ended June 30, 201, as we continue to

focus on growing this business.

The Kid Genius Cartoon Channel was rebranded the Kartoon Channel in June of 2020.

Six Months Ended

June 30, 2020

June 30, 2019

Marketing and Sales

Direct Operating Costs

General and Administrative

Interest Expense

Marketing and sales expenses decreased

$66,953, or 22%, for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to the Coronavirus

related cancellation of several trade shows in the second quarter of 2020

Direct operating costs include costs of

our product sales, unamortizable post-production 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.

During the six

months ended June 30, 2020, we recorded film and television cost amortization expense of $292,362 and participation expense of

$370,803 compared to June 30, 2019 expenses of $621,986 and $435,087, respectively, for the six months ended June 30, 2019.

decrease in direct operating costs in the six months ended June 30, 2020 compared to the same period in the prior year reflect

decreases in film amortization and participation expenses related to revenues generated from the delivery of Rainbow Rangers

to the Viacom Media Network as well as international territories in 2019.There were no comparable deliveries in 2020.

General and administrative expenses consist

primarily of salaries, employee benefits, share-based compensation related to stock options, insurances, rent, depreciation, and

amortization as well as other professional fees related to finance, accounting, legal and investor relations.

General and administrative

expenses for the six months ended June 30, 2020 increased $925,285 or 29%, compared to the same period in 2019.

This increase was

primarily related to increases in salaries and related expenses, stock-based compensation expense, legal fees, and investor relations

Interest expense for the six months ended

June 30, 2020 increased $484,865, or 73%, compared to the same period in 2019.

This increase is due to the expensing of the debt

discount in excess of principal related to the 2020 Convertible Notes.

This was partially offset by reductions in the amortization

of the debt discount related to the $4,500,000 of 2020 Convertible Notes, and interest paid on the lower outstanding balance.

Liquidity and Capital Resources

Working Capital

As of June 30, 2020, we had current assets

of $58,460,486, including cash and cash equivalents of $54,382,775, and current liabilities of $8,783,171, resulting in working

capital of $49,667,315, 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.

Increases in working capital were the result

of proceeds from the 2020 Convertible Notes, the five Securities Purchase Agreements and the proceeds from various warrant exercises.

The increase was partially offset by the repayments of the August 2018 Secured Convertible Notes and the production facility.

Comparison of Cash Flows for the Six

Months Ended June 30, 2020, and the Six Months Ended June 30, 2019

Our total cash, cash equivalents was

$54,382,775 and $2,631,334 at June 30, 2020, and June 30, 2019, respectively.

Comparison of Cash Flows

Six Months Ended

June 30, 2020

June 30, 2019

Cash used in operations

$ (2,331,261 )

$ (2,550,140 )

Cash used in investing activities

Cash provided by financing activities

Increase in cash

the three months ended March 31, 2020, our primary sources of cash were the net proceeds from the 2020 Convertible Notes of $6,098,000

and the net sales of common shares for $915,296, partially offset by the repayment of the August 2018 Secured Convertible Notes

of $2,866,664 and the repayment of the Production Facility of $797,609.

used in operating activities for the three months ended March 31, 2020 was $995,517 as compared to cash used in operating activities

of $1,213,240 during the comparable period in 2019.

used in investing activities for the three months ended March 31, 2020 was $0 as compared to a use of $4,423 for the three months

ended March 31, 2019.

Investing activities include the purchase of furniture and equipment in 2019.

provided by financing activities for the three months ended March 31, 2020 was $3,450,444 as compared to $2,162,991 cash provided

by the comparable period in 2019.

During the three months ended March 31, 2020, the sources of cash generated from financing activities

were the proceeds from the 2020 Convertible Notes of $6,098,000 and the net sales of common shares for $915,296, partially offset

by the repayment of the August 2018 Secured Convertible Notes of $2,866,664 and the repayment of the Production Facility of $797,609.

of March 31, 2020, we do not have any material commitments for capital expenditures.

Accounting Policies

accounting policies are described in the notes to the financial statements.

Below is a summary of the critical accounting policies,

among others, that management believes involve significant judgments and estimates used in the preparation of its financial statements.

of Consolidation

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

A Squared, Llama Productions and Rainbow Ranger Productions, 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.

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 $2,029,677,

Increase in cash and cash equivalents

During the six months ended June 30, 2020,

our primary sources of cash were the net proceeds from the 2020 Convertible Notes of $6,098,000, the net sales of common shares

for $44,755,672, net proceeds of $5,819,319 from warrant exercises and $3,600,000 from the collection of the Investor Notes.

primary uses of cash during the six months ended June 30, 2020, were $2,331,261 in operations, the repayment of the August 2018

Secured Convertible Notes of $2,866,664 and the repayment of the Production Facility of $1,202,313.

Operating Activities

Cash used in operating activities for the

six months ended June 30, 2020 was $2,331,261 as compared to cash used in operating activities of $2,550,140 during the comparable

period in the prior year.

Investing Activities

Cash used in investing activities for the

six months ended June 30, 2020 was $500 as compared to a use of $14,331 for the six months ended June 30, 2019.

Investing activities

include the purchase of furniture and equipment in 2019.

Financing Activities

Cash provided by financing activities for

the six months ended June 30, 2020 was $56,409,414 as compared to $2,110,779 cash provided by the comparable period in 2019 During

the six months ended June 30, 2020, our primary sources of cash were the net proceeds from the 2020 Convertible Notes of $6,098,000,

the net sales of common shares for $44,755,672, net proceeds of $5,819,319 from warrant exercises and $3,600,000 from the collection

of the Investor Notes.

The primary uses of cash during the six months ended June 30, 2020, were the repayment of the August 2018

Secured Convertible Notes of $2,866,664 and the repayment of the Production Facility of $1,202,313.

Capital Expenditures

As of June 30, 2020, we do not have any

material commitments for capital expenditures.

Critical Accounting Policies

Our accounting policies are described in

the notes to the financial statements.

Below is a summary of the critical accounting policies, among others, that management believes

involve significant judgments and estimates used in the preparation of its financial statements.

Principles of Consolidation

The accompanying consolidated financial

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

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.

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.

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.

We complete 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.

In accordance with FASB ASC 350 Intangible Assets, the costs of new product development and significant improvement

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

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

and Television Costs

capitalize 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.

We expense all capitalized costs that exceed the

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

capitalize 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.

We evaluate its capitalized production costs

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

Additionally,

for both episodic series and films, from time to time, we develop 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.

and Attached Equity-Linked Instruments

measure 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.

account 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, we account for the entire convertible

instrument including debt and the conversion feature as a liability.

analyze 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 our own stock.

If the instrument is not considered indexed

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

If the instrument considered indexed to our stock,

we analyze additional equity classification requirements per ASC 815-40 Contract’s in Entity’s Own Equity.

requirements are met the instrument is recorded as part of our 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, we also consider the bifurcation guidance for embedded derivatives per FASB ASC 815-15 Embedded Derivatives.

January 1, 2018, we 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, we began recognizing revenue related to licensed rights to exploit functional

IP in two ways.

For minimum guarantees, we will recognize fixed revenue upon delivery of content and the start of the license

For functional IP contracts with a variable component, we will estimate 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.

We 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.

sell advertising on our Kid Genius channel in the form of either flat rate promotions or impressions served.

For flat rate promotions

with a fixed term, we recognize revenue when all five revenue recognition criteria under FASB ASC 606 are met.

For impressions

served, we deliver 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 us on a monthly basis, and revenue is reported in the month the impressions

recognize 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.

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

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.

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.

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.

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 (“ASU”) 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 were 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 was

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

We adopted ASU 2017-11 in 2019.

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

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 periods within those fiscal years, beginning

after December 15, 2019 with early adoption permitted.

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.

We complete the annual goodwill and indefinite-lived intangible asset impairment tests at the end of each fiscal year.

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.

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.

In accordance

with FASB ASC 350 Intangible Assets, the costs of new product development and significant improvement to existing products are

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

Annual amortization of these

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

Film and Television Costs

We capitalize 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.

We expense all capitalized costs that exceed the initial market firm commitment revenue in the period

of delivery of the episodes.

We capitalize 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.

We evaluate its capitalized production costs annually and limits recorded amounts

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

Additionally, for both episodic series

and films, from time to time, we develop 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.

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.

Revenue Recognition

On January 1, 2018, we 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

As a result of the change, beginning January

1, 2018, we began recognizing revenue related to licensed rights to exploit functional IP in two ways.

For minimum guarantees,

we will recognize fixed revenue upon delivery of content and the start of the license period.

For functional IP contracts with

a variable component, we will estimate revenue such that it is probable there will not be a material reversal of revenue in future

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

We 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.

We sell advertising on our Kid Genius channel

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

For flat rate promotions with a fixed term, we recognize revenue

when all five revenue recognition criteria under FASB ASC 606 are met.

For impressions served, we deliver 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 us on a monthly basis, and revenue is reported in the month the impressions are served.

We recognize 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.

Use of Estimates

The preparation of financial statements

in conformity with generally accepted accounting principles in the United States of America (“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 consolidated financial statements and the reported amounts of revenues and expenses during

the reporting periods.

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

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 adopted ASU 2019-02 in 2019.

1 unchanged sentence

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.

We adopted ASU 2018-07 in 2019.

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

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 adopted ASU 2019-02 in 2019.

The impact 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 financial position, results of

operations, or cash flows.

Balance Sheet Arrangements

have no off-balance sheet arrangements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT

Not applicable.

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 2. Management’s Discussion and Analysis