What changed in this filing

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Item 1. Financial Statements

2020-11-16 compared with 2020-08-14 · 781 added, 614 removed, 830 unchanged (63% of the section changed)

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Condensed Consolidated Balance Sheets

As of June 30, 2020, and December 31,

June 30, 2020

As of September 30, 2020, and December 31,

September 30,

Current Assets:

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Accounts Receivable, net

Prepaid and Other Assets

Inventory, net

Prepaid Expenses and Other Assets

Total Current Assets

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Lease Deposits

Investment in Stan Lee Universe, LLC

Intangible Assets, net

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Stockholders’

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

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

Common Stock, $0.001 par value, 400,000,000 shares

authorized 219,029,900 and 21,877,724 shares issued and outstanding as of September 30, 2020 and December 31, 2019,

Additional Paid in Capital

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Genius Brands International, Inc.

Condensed Consolidated Statements of

Three and Six Months Ended June 30, 2020

and June 30, 2019

Condensed Consolidated Statements of Operations

Three and Nine Months Ended September 30,

2020 and September 30, 2019

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

Licensing & Royalties

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Loss on Extinguished Debt

Loss on Lease Termination

Warrant Revaluation Expense

(210,672,085 )

(212,228,659 )

Conversion Option Revaluation Expense

(171,835,729 )

Sub-Lease Income

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(383,603,874 )

(384,949,171 )

Loss Before Income Tax Expense

(391,101,155 )

(389,093,946 )

Income Tax Expense

(391,101,155 )

(389,093,946 )

Beneficial Conversion Feature on Preferred Stock

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Genius Brands International, Inc.

Condensed Consolidated Statements of

Comprehensive Loss

Three and Six Months Ended June 30, 2020

and June 30, 2019

Condensed Consolidated Statements of Comprehensive

Three and Nine Months Ended September 30,

2020 and September 30, 2019

Three Months Ended

Six Months Ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

$ (2,007,209 )

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Consolidated Statements of Stockholders'

Three and Six Months Ended June 30, 2020

and June 30, 2019

Preferred Stock

Three and Nine Months Ended September 30,

2020 and September 30, 2019

Additional Paid-In

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Value of Preferred Stock Conversion

Proceeds from Securities Purchase Agreement, Net

Proceeds From Warrant Exchange, net

Issuance of Common Stock for Services

Proceeds from Securities

Purchase Agreement, net

Proceeds From Warrant Exchange,

Issuance of Common Stock

Share Based Compensation

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(71,883,079 )

Proceeds from Securities Purchase Agreement, Net

Issuance of Common Stock for Services

Proceeds from Securities

Purchase Agreement, net

Issuance of Common Stock

Share Based Compensation

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(456,981,465 )

Proceeds from Securities

Purchase Agreement, net

Issuance of Common Stock

Share Based Compensation

Warrant Exercise

Warrants Issued For Services

September 30, 2020

$ 521,911,592

$ (458,988,674 )

Genius Brands International, Inc.

Consolidated Statements of Stockholders'

Equity (continued)

Three and Nine Months Ended September 30,

2020 and September 30, 2019

Additional Paid-In

Other Comprehensive

Balance, December 31, 2018

$ (50,702,486 )

Cumulative effect of adoption ASC 842

Warrants Issued As Part Of Debt Extinguishment

Cumulative effect of adoption

Warrants Issued As Part

Of Debt Extinguishment

Value Of Beneficial Conversion Feature

Proceeds from Securities Purchase Agreement, Net

Issuance of Common Stock for Services

Proceeds from Securities

Purchase Agreement, net

Issuance of Common Stock

Share Based Compensation

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(56,036,514 )

Issuance of Common Stock for Services

Issuance of Common Stock

Share Based Compensation

Balance, June 30, 2019

June 30, 2019

(57,751,666 )

The accompanying notes are an integral part

of these financial statements.

Issuance of Common Stock

Share Based Compensation

Value of Beneficial Conversion Feature

Warrants Issued As Part

Of Debt Extinguishment

Proceeds From Warrant Exchange,

Value of Warrant Inducement

September 30, 2019

$ (62,175,450 )

The accompanying notes are an integral part of these financial

Genius Brands International, Inc.

Condensed Consolidated Statements of

Six Months Ended June 30, 2020 and June

June 30, 2020

June 30, 2019

Condensed Consolidated Statements of Cash

Nine Months Ended September 30, 2020 and

September 30, 2019

September 30,

Cash Flows from Operating Activities:

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Stock Issued for Services

Share Based Compensation

Share Based Compensation Expense

Warrant Revaluation Expense

Loss on Extinguished Debt

Loss On Lease Termination

Loss On Extinguishment of Debt

Conversion Option Revaluation Expense

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Cash Flows from Investing Activities:

Investment in Intangible Assets, net

Investment in Stan Lee Universe, LLC

Investment in Intangible Assets

Investment in Property & Equipment

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Proceeds from Sale of Securities Purchase Agreement, net

Proceeds From Warrant Exercises

Proceeds From Warrant Exchange

Proceeds from Senior Secured Convertible Notes, net

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Net Cash Provided by Financing Activities

Net Increase/(Decrease) in Cash, Cash Equivalents

Net Increase/(Decrease) in Cash, Cash Equivalents, and Restricted Cash

Beginning Cash, Cash Equivalents, and Restricted Cash

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Beneficial Conversion Feature

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.

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

13,750,000.00

The accompanying notes are an integral part

of these financial statements.

Genius Brands International, Inc.

Notes to Condensed Financial Statements

June 30, 2020 (unaudited)

Notes to Condensed Consolidated Financial

September 30, 2020

Organization and Business

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“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”

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.

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

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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,

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 an entity with POW!

to exploit certain

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

The entity is called

“Stan Lee Universe, LLC”

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 ,

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,”

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,”

Genius,”

“123 Favorite Music”

and “Wee Worship,”

and all then existing productions under

those titles.

and all then existing productions under those titles.

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

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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’

Historically, the Company has incurred net

For the three months ended September 30, 2020 and September 30, 2019, the Company reported net losses of $2,007,209 and

$2,555,233, respectively.

For the nine months ended September 30, 2020 and September 30, 2019, the Company reported net losses

of $391,101,155 and $9,277,867, respectively.

The Company reported net cash used in operating activities of $5,316,579 and $4,636,416

for the nine months ended September 30, 2020, and September 30, 2019, respectively.

As of September 30, 2020, the Company had an

accumulated deficit of $458,988,674 and total stockholders’

equity of $63,136,830.

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.

At September 30, 2020, the Company had

current assets of $54,864,958, including cash and cash equivalents of $50,461,566 and current liabilities of $6,990,911.

had working capital of $47,874,047 as of September 30, 2020, compared to negative working capital of $3,650,136 as of December

Prior to the Company’s successful capital

raises, the Company applied for a loan pursuant to the Paycheck Protection Program (the “PPP”) established under the

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

Administration (the “SBA”).

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, 2021.

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.

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

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”)

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”).

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$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

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.

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

Secured Convertible Note and Warrant Private Placement

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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 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

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 2020 Convertible Notes

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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 2020 Convertible Notes.

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

according to the terms of the 2020 Convertible Notes.

Between June 10 and June 23, 2020, the 2020

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from the payment of the Investor Notes Principal.

Between July 21 and July 28, 2020, the Company

received $50,511, net of expenses, from the exercise of 16,670 warrants at an exercise price of $3.30 per share.

Summary of Significant Accounting Policies

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”).

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

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 accompanying condensed consolidated financial

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

LLC, Rainbow Rangers Productions LLC and its partially owned subsidiary Stan Lee Universe LLC.

All significant inter-company balances

and transactions have been eliminated in consolidation.

The condensed consolidated financial statements

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Use of Estimates

The preparation of financial statements

in conformity with U.S.

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

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of revenues and expenses during the reporting periods.

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,

Cash, Cash Equivalents, and Restricted Cash

The Company considers all highly liquid debt

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

As of September 30, 2020, and December 31,

2019, the Company had Cash and Cash Equivalents of $50,461,566 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.

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 $92,659 for September

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

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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.

both September 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.

Property and equipment are recorded at cost.

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

which range from two to seven years.

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

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

Gains and losses from any dispositions of property and

equipment are reflected in the condensed consolidated statement of operations.

Right of Use Leased Assets

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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.

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

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.

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

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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 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

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

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

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.

When required, the Company also considers

the bifurcation guidance for embedded derivatives per FASB ASC 815-15 Embedded Derivatives.

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.

The Company capitalizes production costs for

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

Accordingly, production

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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 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

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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).

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

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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

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

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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

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.

Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior

period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605 (“Topic

As a result of the change, beginning January

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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

The Company sells advertising on its App and

OTT based “Kartoon 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 are served.

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

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.

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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”

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.

During periods of net loss, all Common Stock equivalents

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

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

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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

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.

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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%

As of September 30, 2020, the Company had four accounts with an uninsured balance of $49,459,910.

For the three months ended September 30, 2020,

the Company had two customers whose total revenue exceeded 10% of the total consolidated revenue.

Those customers accounted for

24% of the total revenue and 16% of accounts receivable.

One other customer accounted for 70% 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.

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

That customer accounted for 23% of the total revenue and 0% of accounts receivable.

One other customer accounted for 70% of accounts

For three and nine months ended September 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 nine months ended September 30, 2019 respectively.

The Company had three customers that represented 75% of accounts receivable

as of September 30, 2019.

Fair value of financial instruments

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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.

amount of the Facility (as defined below) 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).

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

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).

These tiers include:

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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.

Subtopic 926-20 and 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 have prospectively adopted ASU 2016-18.

The impact to our consolidated financial

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

Various other accounting pronouncements

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

The impact to our consolidated

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

In August 2020, the FASB issued ASU

2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

The update simplifies the accounting

for convertible instruments by removing certain separation models in Subtopic 470-20, Debt—Debt with Conversion and Other

Options, for convertible instruments.

As part of the amendment, the embedded conversion features are no longer separated from

the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives

under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital.

FASB has eliminated the cash conversion and beneficial conversion feature models.

The FASB has also modified accounting rules

relating to application of the scope exception from derivative accounting.

The amendments revise the guidance in ASC 815-40-25-10, to remove three out of seven conditions from the settlement guidance, referred to as additional equity classification requirements.

Following the above amendments, more convertible debt instruments will be accounted for as a single liability measured at its

amortized cost and more convertible preferred stock will be accounted for as a single equity instrument measured at its historical

cost, as long as no features require bifurcation and recognition as derivatives.

The amendments are effective for public business

entities, excluding smaller reporting companies, for fiscal years beginning after December 15, 2021, including interim periods

within those fiscal years.

For all other entities, including smaller reporting companies the amendments are effective for fiscal

years beginning after December 15, 2023, including interim periods within those fiscal years.

Early adoption is permitted, but

no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

is in the process of assessing the impact of the amendments to Company’s consolidated financial statements.

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

The Company has property and equipment

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

The Company has property and equipment as follows

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

September 30,

Furniture and Equipment

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Property and Equipment, Net

During the three months ended June 30,

During the three months ended September 30,

2020 and 2019, the Company recorded depreciation expense of $10,206 and $9,378, respectively.

During the six months ended June

During the nine months ended September

30, 2020 and 2019, the Company recorded depreciation expense of $37,281 and $28,223, respectively.

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Right of use asset consisted of the following

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

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

September 30,

Office Lease Asset

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Right Of Use Asset, Net

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.

During the three months ended September 30,

2020, the Company recorded amortization expense of $89,412.

During the nine months ended September 30, 2020, the Company recorded

amortization expense of $307,115.

On September 15, 2020, the Company entered

into a Surrender Agreement with the landlord which terminated the lease agreement.

As a result, the Company recorded decreases

in the Right Of Use asset, accumulated amortization, and the lease liability of $2,142,863, $465,124 and $1,760,302 respectively.

The termination of the lease resulted in a loss of $85,676.

Film and Television Costs, Net

As of June 30, 2020, the Company had net

As of September 30, 2020, the Company had net

Film and Television Costs of $11,300,812, compared to $9,906,885 at December 31, 2019.

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

During the three months ended June 30,

During the three months ended September 30,

2020 and 2019, the Company recorded Film and Television Cost amortization expense of $101,716 and $1,285,237, 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 nine months ended September 30, 2020 and 2019, the Company recorded Film and Television Cost amortization expense of $395,073

and $1,907,222, respectively.

The following table highlights the activity

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

in Film and Television Costs of September 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 June 30, 2020

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

Investment In Stan Lee Universe

In July 2020, the Company and POW!

into an agreement to form an entity “Stan Lee Universe, LLC”

(the “SLU”).

SLU will hold worldwide rights,

on a perpetually renewing basis, to the name, physical likeness, and physical signature of Stan Lee.

Further, the SLU 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.

As currently agreed, the Company will be

the managing partner of the JV.

As part of the agreement the Company agreed

to contribute $2,000,000 in cash to SLU and $200,000 to in kind contribution of resources including office space equipment for

a 50% ownership in SKU.

The $2,000,000 cash contribution is payable in monthly payments of $250,000 starting August 2020.

will contribute for a 35% ownership

All right, title, and interest to the name, image, likeness, voice, signature, unique characteristics,

and other personality rights recognized under California Civil Code Section 3344.1, and similar laws, to Stan Lee.

All trademarks containing the “Stan Lee”

name, including but not limited to the trademark

“Stan Lee’s Superhero Kindergarten”

All copyrights and related contractual rights POW!

owns in or has rights to in the work entitled,

“Stan Lee’s Superhero Kindergarten”;

The websites and associated social media accounts operated under the name “TheRealStanLee”.

As an initial contribution and in exchange

for a 15% ownership in SLU, the individuals granted shall contribute certain ongoing services to the SLU.

The parties are in the process of finalizing

the SLU operating agreement.

As of September 30,2020, the Company has contributed

$500,000 to the entity.

Goodwill and Intangible Assets,

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warrant impairment to the Goodwill asset.

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

Through September 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:

The Company had the following intangible assets

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

September 30,

Trademarks (a)

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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.

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

During the three months ended September 30, 2020 and September 30, 2019, the Company recognized $13,013 and $9,456, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets.

During the nine months ended September 30, 2020 and September 30, 2019, the Company recognized $34,651 and $28,949, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets.

Expected future intangible asset amortization as of September 30,

2020 is as follows:

Deferred Revenue

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

As of September 30, 2020, and December 31,

2019, the Company had total short term and long term deferred revenue of $5,306,007 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

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.

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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.

Included in the deferred revenue balance as of September 30, 2020 and December 31, 2019 is

the $3,370,315 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 –

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

As of September 30, 2020, and December 31,

2019, the Company has the following current accrued liabilities:

September 30,

Other Accrued Expenses (a)

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Total Accrued Liabilities –

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.

Represents accrued interest, insurance liability, legal fees, and commissions.

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

Secured Convertible Notes

On August 17, 2018, the Company entered

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

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

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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.

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,

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2018 Secured Convertible Notes were repaid in full including interest.

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

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 occurred on March 17, 2020.

Senior Secured Convertible Notes

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 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 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

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:

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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

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”).

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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

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.

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.

The Company may require

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

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.

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

On the maturity date of the 2020 Convertible

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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”

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.

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.

Optional Redemption at Company’s Election

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

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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,

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

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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

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.

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 options.

Additionally,

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

During the three months ended September

30, 2020 the Company recognized a revaluation gain of $1,556,574 associated with the remaining detachable warrants.

Company’s interest expense associated

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

with the 2020 Convertible Notes was $0 and $ 1,033,666, respectively for the three and nine months ended September 30, 2020.

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

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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.

The amount of unamortized discount at September 30, 2020

The 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,

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Production Loan Facility

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 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

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.

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

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 reports.

of September 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”).

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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

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% per annum.

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 3.48% and

4.25% as of September 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 September 30, 2020, the Company had gross

outstanding borrowing under the facility of $1,506,519.

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Stockholders’

As of June 30, 2020, the total number of

authorized shares of Common Stock was 233,333,334.

As of September 30, 2020, the total number

of authorized shares of Common Stock was 400,000,000.

On January 8, 2020, the Company issued 43,077

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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.

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

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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.

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,

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

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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 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 Stock.

Between May 18 and June 24, 2020, the Company

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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,

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 received $55,011,

net of expenses, from the exercise of 16,670 warrants at an exercise price of $0.454.

On July 22, 2020, the Company issued 124,451

shares of Common Stock valued at $2.30 per share to a provider for marketing services

As of September 30, 2020, and December 31,

2019, there were 219,029,900 and 21,877,724 shares of Common Stock outstanding, respectively.

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may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

As of June 30, 2020 and December 31,

As of September 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.

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

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.

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Series A Convertible Preferred Stock at $0.21.

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

Between May 18 and June 24, 2020, the Company

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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

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Expected life of options

On September 1, 2020, the Company adopted the

Genius Brands International, Inc.

2020 Incentive Plan (the “2020 Plan”).

On August 4, 2020, the Board of Directors

voted to adopt the 2020 Plan.

The shares available for issuance under the 2020 Plan was approved by stockholders on August 27,

The 2020 Plan as approved by the stockholders increased the maximum number of shares available for issuance up to an aggregate

of 32,167,667 shares of Common Stock.

The following table summarizes the changes

in the Company’s stock option plan during the six months ended June 30, 2020:

in the Company’s stock option plan during the nine months ended September 30, 2020:

Options Outstanding Number Of Shares

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Options Expired

Balance at June 30, 2020

Balance at September 30, 2020

$ 1.99 - 10.00

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$ 1.99 - 9.00

Exercisable June 30, 2020

Exercisable September 30, 2020

$ 1.99 - 3.17

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

During the nine months ended September 30,

2019, the Company granted options to purchase 81,000 shares of Common Stock to certain officers and employees.

These stock options

vest on December 31, 2019.

The fair value of these options was determined to be $117,797 using the Black-Scholes option pricing

model based on the following assumptions:

Exercise Price

Dividend Yield

Risk-free interest rate

Expected life of options

During the nine months ended September 30,

2020, the Company recognized $764,136 in share-based compensation expense.

The unvested share-based compensation as of September

30, 2020 was $2,028,123, which will be recognized through the second quarter of 2023 assuming the underlying grants are not cancelled

or forfeited.

The Company has warrants outstanding to purchase

up to 5,257,538 and 11,124,405 shares as of September 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”).

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(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.

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

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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.

Stock at an exercise price of $2.12 per share and expired 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

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.

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Group, LLC, a division of Bradley Woods & Co.

LTD, acted as placement agent and will receive a cash fee of $35,280 and warrants

LTD, acted as placement agent and received 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.

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.

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

The New Warrants have an exercise price per share of $0.3004, which was the Nasdaq Official Closing Price on December 13,

On January 22, 2020, the Company entered

into the Private Transaction pursuant to the Agreement with the holder of the Company’s Original Warrants.

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

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$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

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).

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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.

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

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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

September 30, 2020, certain warrant holders exercised warrants for 29,000,526 shares of Common Stock at $0.21 per share in cash.

Certain other warrant holders exercised 41,508,189, warrants on a cashless basis, resulting in the issuance of 37,449,140 shares

of Common Stock.

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%.

Estimated fair value of warrants outstanding at September 30, 2020 was $1,622,995.

During the three months ended September 30, 2020 the Company recognized revaluation gain associated with all warrants issued to

the note holders and placement agent of $1,556,574.

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.

The valuation inputs used to value the warrants at March 31, 2020 included expected volatility of 89.91%,

and annual interest rate of 0.37%.

The valuation inputs for the warrants outstanding at September 30, 2020 included expected volatility

of 112.83%, and annual risk-free interest rate of .26%.

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.

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 September 30,

2020, certain warrant holders exercised 16,670 warrants for shares of Common Stock at $3.30 per share in cash.

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 issuance.

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.

The Company 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.

During the three and nine months

ended September 30, 2020, the Company recorded $1,327,646 and $1,847,160 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:

in the Company’s outstanding warrants during the nine months ended September 30, 2020:

Warrants Outstanding Number Of Shares

Exercise Prices Per Share

Weighted Average Remaining Contractual Life

Exercise Prices

Average Remaining Contractual Life

Weighted Average Exercise Price Per Share

Balance at December 31, 2019

$ 3.30 - 6.00

Warrants Granted

$ 0.21 - 1.39

Warrants Exercised

$ 0.21 - 5.30

Warrants Expired

Balance at June 30, 2020

$ 0.21 - 5.30

Balance at September 30, 2020

Exercisable December 31, 2019

$ 0.76 - 6.00

Exercisable June 30, 2020

$ 0.21 - 5.30

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.

Exercisable September 30, 2020

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

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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

of September 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 the

federal jurisdiction and in the state of California and Massachusetts.

The Company is currently subject to U.S.

state and local, or non-U.S.

federal, state

and local, or non-U.S.

income tax examinations by tax authorities since inception of the Company.

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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.

In July 2018, the FASB issued 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.

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.

As of September 30, 2020, weighted-average

lease term for operating leases equals to 81.91 months.

Weighted-average discount rate equals to 10%.

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%.

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 pay rent of $364,130 annually, subject to annual escalations of 3.5%.

On September 11, 2020, the parties to the lease

entered into a surrender agreement whereby the lease was terminated, and the office was turned back over to the landlord.

terms of the surrender agreement, the lease deposit of $325,000 was forfeited and the Company paid $25,000.

The surrender resulted

in a loss of $85,676.

On December 28, 2018, the Company entered into

a lease for 5,765 square feet of general office space at 8383 Wilshire Blvd., Suite 412, Beverly Hills, CA 90211 pursuant to a

6-month lease that commenced January 28, 2019.

We paid rent of $24,501 monthly through August 31, 2019.

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.

The subtenant will pay us rent of $422,321 annually,

subject to annual escalations of 3.5%.

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.

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.

Consequently,

the Company, which had been passing through the subtenant’s rental payments to the landlord declined to pay the rent due.

On September 11, 2020, the parties to the lease

entered into a surrender agreement whereby the lease was terminated, and the office was turned back over to the landlord.

terms of the surrender agreement, the sublease deposit of $131,000 was forfeited.

The surrender resulted in a loss of $256,384.

On January 30, 2019, the Company entered into

an operating lease for 5,838 square feet of general office space at 190 N.

Canon Drive, 4 th FL, Beverly Hills, CA 90210

pursuant to a 96-month lease that commenced on September 1, 2019.

We pay rent of $392,316 annually, subject to annual escalations

Due to government mandated “work-from-home”

orders pertaining to non-essential businesses, we are currently

in discussions with our landlord with regard to rent payments and have not paid rent since March 2020.

In addition, the Company has contractual commitments

for employment agreements of certain employees.

Rental expenses incurred for operating leases

during the three months ended September 30, 2020 and September 30, 2019 were $141,962 and $210,062, 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.

incurred for operating leases during the nine months ended September 30, 2020 and September 30, 2019 were $557,640 and $531,519,

respectively.

During the three months ended September 30, 2020, we received sub-lease income of $78,277.

During the nine months

ended September 30, 2020, we received sub-lease income of $316,762.

The following is a schedule of future minimum contractual obligations

as of June 30, 2020, under the Company’s operating leases and employment agreements:

as of September 30, 2020, under the Company’s operating leases and employment agreements:

Operating Leases

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Related Party Transactions

On April 21, 2016, the Company entered

into a merchandising and licensing agreement with Andy Heyward Animation Art (“AHAA”), whose principal is Andy Heyward,

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.

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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.

The agreement

was renegotiated and executed on more favorable terms to the Company on July 22, 2020.

No amounts were earned during the three

and nine months ended September 30, 2020 and 2019, under this agreement as there were no revenue generated during the periods.

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 Season 2.

As of December 31, 2019, Mr.

was paid $124,000.

No further amounts are due or paid during the six months ended June 30, 2020.

Heyward was paid

No further amounts are due or paid during the nine months ended September 30, 2020.

Pursuant to his employment agreement dated

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Both of these amounts were paid on March

As of September 30, 2020, 4 additional half hours had been delivered and accordingly Mr.

Heyward was owed $50,000, which

is included in the Due To Related Party line item on our consolidated balance sheet.

On September 17, 2019, Mr.

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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 per

The note and interest of $7,260 was repaid in March of 2020.

Heyward purchased 1,000,000 shares of Common Stock for an aggregate purchase price of $760,000, or $0.76 per share.

On March 11, 2020, Mr.

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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

Heyward received

5,952,381 shares of Common Stock upon conversion of $1,250,000 of 2020 Convertible Notes.

As of September 30, 2020, Andy Heyward is owed

$101,451 for reimbursable expenses which are included in the Due To Related Parties line item on our condensed consolidated balance

Subsequent Events

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.

On October 15, 2020, the

Company issued to an individual and his management company $500,000 in cash, 1,000,000 shares of the Company’s common

stock at $1.44 per share and 1,000,000 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 shares become freely

tradable, 50% upon the six-month anniversary of issuance and 50% upon one year of issuance.

The cash and 50% of the share

value are being paid an issued as an advance payment against participation amounts that will become due the individual upon

performance of the series.

The warrants have a 10-year term and.

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.

The Company anticipates the warrants will become exercisable by

December 31, 2020.

The warrants were valued at $1,260,269 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

The warrants are being accounted as non-employee compensation expense which will be recorded as prepaid publicity

expense over the expected exercise period.

On October 28, 2020, the Company, entered

into a Securities Purchase Agreement (the “Purchase Agreement”) with certain 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 “Offering”), an aggregate of 37,400,000 shares (the “Shares”) of Common Stock, and warrants (“Investor

Warrants”) to purchase up to 37,400,000 shares of our Common Stock (“Investor Warrant Shares”).

price was $1.55 per fixed combination of one share of common stock and a warrant to purchase one share of common stock, for gross

proceeds of approximately $57.9 million before deducting the placement agent fees and offering expenses.

The Company intends to

use the net proceeds of the Offering for certain accretive future acquisitions, and for our operations, including, but not limited

to, the development, production, distribution and marketing of animated content, including the recently announced Shaq’s

Garage, and associated licensed merchandise and general working capital.

The Investor Warrants have an exercise

price of $1.55 per share and are exercisable immediately on the date of issuance, and at any time thereafter up to five years from

the initial issuance date.

A holder will not have the right to exercise any portion of the Investor Warrant if the holder would

beneficially own in excess of 4.99% (or, at the election of the holder, 9.99%) of the outstanding Common Stock immediately after

exercise, except that upon notice from the holder to the Company, the holder may increase or decrease the beneficial ownership

limitation up to 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise, as

such percentage ownership is determined in accordance with the terms of the Investor Warrants, provided that any increase in such

beneficial ownership limitation shall not be effective until 61 days following notice from the holder to the Company.

The Offering closed on October 30, 2020.

The Special Equities Group, a division of Bradley Woods & Co.

Ltd., acted as placement agent and will receive (i) a cash fee

of approximately $4.1 million and (ii) warrants (“Placement Agent Warrants”

and together with Investor Warrants, the

“Warrants”) to purchase 2,618,000 shares of Common Stock.

The Placement Agent Warrants have the same form and terms

as the Investor Warrants.

In addition, the Company will pay the placement agent a cash fee equal to 7% of the aggregate gross proceeds

from the exercise of any Warrants.

The Company also reimbursed the lead Investor for $25,000 of its legal fees and expenses incurred

in connection with the Offering.

On November 15,

2020, the Company entered into a binding letter of intent (the “Letter of Intent”) with ChizComm Ltd., a corporation

organized in Canada (“ChizComm Canada”), and ChizComm USA Corp., a New Jersey corporation (“ChizComm USA”

and, together with ChizComm Canada, “ChizComm”).

The Company expects to acquire 100% of the equity interests of ChizComm

in exchange for (i) $8.5 million in cash and (ii) $3.5 million of shares of the Company’s unregistered common stock, at a

per share price equal to the closing price of the Company’s common stock on the day prior to the closing of the acquisition,

for a total $12 million transaction value (the “Transaction Value”).

As detailed in the Letter of Intent, $2 million

of the Transaction Value would be allocated to the acquisition of 2 million new subscribers for the Company’s Kartoon Channel!.

Further, ChizComm would be entitled to additional consideration of up to $8 million if the Company meets certain milestones following

the acquisition, as set out in the Letter of Intent.

The Company expects to negotiate and execute definitive agreements with ChizComm

and to consummate the transactions contemplated in the Letter of Intent in the first fiscal quarter of 2021.

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