What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-16 compared with 2020-08-14 · 375 added, 300 removed, 280 unchanged (71% of the section changed)

MANAGEMENT'S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis

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

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

Certain statements made or incorporated

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of

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

statements and related notes for the three and nine months ended September 30, 2020 and 2019 Certain statements made or incorporated

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

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

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

and are subject to the safe harbor created thereby.

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

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

the Securities Act of 1933, as amended,(the “Securities ACT”) and Section 21E of the Securities Exchange Act of 1934,

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

Forward-looking statements reflect intent,

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

future events and financial trends affecting us.

Words such as “anticipates,”

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“will”

and variations of these words or similar expressions

are intended to identify forward looking statements.

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

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

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

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

Therefore, our actual

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

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

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

In addition, any statements

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

assumptions, are forward looking statements.

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

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

that are difficult to predict.

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

forward-looking statements as a result of various factors.

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

section entitled “Item 1A.

Risk Factors”

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

results of operations, or financial condition.

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

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

Unless otherwise

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

of new information, future events or otherwise.

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

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

in our Annual Report on Form 10-K filed on April 1, 2019 and elsewhere in

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

Forward-looking

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

speak only as of the date of those documents.

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

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

In light of these

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

The management’s discussion and analysis

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

United States of America.

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

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

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

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

apparent from other sources.

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

is based on our financial statements, which have been prepared in accordance with U.S.

The preparation of these financial

statements requires us to make certain estimates and judgments that affect the reported amounts of assets, liabilities and expenses

and related disclosure of contingent assets and liabilities.

Management bases its estimates on historical experience and on various

other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments

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

Actual results may differ

from these estimates under different assumptions and conditions.

Genius Brands International, Inc.

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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,

(“POW!”) in which we agreed to form a 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 called “Stan Lee Universe, LLC”

and the Company are currently finalizing the details of the venture.

In addition, we act as licensing agent

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

In addition, we act as licensing agent for

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

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

Recent Financings

Recent Developments

January 2020 Warrant Exercise Agreement

On January 22, 2020, we entered into a

private transaction pursuant to a Warrant Agreement (the “Agreement”) with the holder of the Company’s existing

warrants (the “Original Warrants”).

The Original Warrants were originally issued on October 3, 2017, to purchase an

aggregate of 500,000 shares of the Common Stock (as defined below) at an exercise price of $3.90 per share and were to expire in

October 2022.

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

holder would exercise its Original Warrants in full and the Company would amend the Original Warrants to reduce the exercise price

thereof to $0.34 (the average closing price (as reflected on Nasdaq.com) of the Common Stock (as defined below) for the five trading

days immediately preceding the signing of the Agreement).

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

On January 22, 2020, we entered into a private

transaction pursuant to a Warrant Agreement (the “Agreement”) with the holder of the Company’s existing warrants

(the “Original Warrants”).

The Original Warrants were originally issued on October 3, 2017, to purchase an aggregate

of 500,000 shares of the Common Stock (as defined below) at an exercise price of $3.90 per share and were to expire in October

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

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

$0.34 (the average closing price (as reflected on Nasdaq.com) of the Common Stock (as defined below) for the five trading days

immediately preceding the signing of the Agreement).

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

March 2020 Secured Convertible Note and Warrant Private Placement

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per share (the “Placement Agent Warrants”).

The closing of the sale and issuance of

the 2020 Convertible Notes, the Warrants and the Placement Agent Warrants occurred on March 17, 2020 (the “Closing Date”).

The closing of the sale and issuance of the

2020 Convertible Notes, the Warrants and the Placement Agent Warrants occurred on March 17, 2020 (the “Closing Date”).

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

The Company agreed to hold a stockholder

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

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

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

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

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

limited exceptions described in the SPA, unless (A) Stockholder Approval has been obtained prior thereto and (B) (i) at least 75%

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

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

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

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

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

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

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

vote in favor of the proposals voted on at the Stockholder Meeting, and (iv) promptly securing the listing of certain shares issuable

pursuant to the transaction documents and maintaining the listing of the shares of Common Stock on an eligible market.

In addition, pursuant to the terms of the

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

The Company agreed to hold a stockholder meeting

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

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

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

Approval every 90 days until such approval is obtained, (ii) until the date that the 2020 Convertible Notes are no longer outstanding,

the Company will not issue, offer, sell or grant any equity or equity-linked security, subject to certain limited exceptions described

in the SPA, unless (A) Stockholder Approval has been obtained prior thereto and (B) (i) at least 75% of the gross proceeds in excess

of the first $2,000,000 of gross proceeds of all subsequent Financings consummated prior to the six month anniversary of the Closing

Date are first applied to the redemption of the 2020 Convertible Notes (pro-rata based on an Investor’s Purchase Price which

redemption may be waiver by an Investor and it will not increase the pro-rata percentage of any other Investors) or (ii) at least

75% of the gross proceeds of any such subsequent placement consummated after the six month anniversary of the Closing Date are

first applied to the redemption of the 2020 Convertible Notes (pro-rata), (iii) the Company shall use its best efforts to effectuate

the transactions contemplated by the Voting Agreements executed by the Company and the stockholders who hold in the aggregate approximately

40% of the outstanding shares of Common Stock which require that such stockholders vote in favor of the proposals voted on at the

Stockholder Meeting, and (iv) promptly securing the listing of certain shares issuable pursuant to the transaction documents and

maintaining the listing of the shares of Common Stock on an eligible market.

In addition, pursuant to the terms of the SPA,

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

Stockholder Approval:

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

The 2020 Convertible Notes provide that

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

The 2020 Convertible Notes provide that the

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

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

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

On or after the date Stockholder Approval

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

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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of Directors.

On May 15, 2020, the Company received the

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

As a result, the Conversion Price of the

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

In addition, existing warrant holders

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

their existing warrants’

On May 15, 2020, the Company received the necessary

Stockholder Approval in connection with the Nasdaq proposals described above.

As a result, the Conversion Price of the 2020 Convertible

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

In addition, existing warrant holders that participated

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

exercise prices reduced to $0.21.

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May 2020 Securities Purchase Agreements

On May 7, 2020, the Company entered into

a Securities Purchase Agreement with certain long standing investors (the “Investors”), pursuant to which the Company

On May 7, 2020, the Company entered into a

Securities Purchase Agreement with certain long standing investors (the “Investors”), pursuant to which the Company

agreed to issue and sell, in a registered direct offering by the Company directly to the Investors (the “Registered Offering”),

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The Registered Offering closed on May 8, 2020.

On May 8, 2020, the Company entered into

a Securities Purchase Agreement with certain long standing investors (the “Investors”), pursuant to which the Company

On May 8, 2020, the Company entered into a

Securities Purchase Agreement with certain long standing investors (the “Investors”), pursuant to which the Company

agreed to issue and sell, in a registered direct offering by the Company directly to the Investors (the “Registered Offering”),

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Warrant Exercises

Between May 18 and June 11, 2020, the Company

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

Investor Notes Payment

On June 23, 2020, the Company received

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

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.

October 2020 Securities Purchase Agreement

On October 28, 2020, the Company entered into the Purchase Agreement

with the Investors pursuant to which the Company agreed to issue and sell, in a registered director offering by the Company directly

to the Investors, an aggregate of 37,400,000 shares of our Common Stock and warrants to purchase up to 37,400,000 shares of our

Common Stock, at an offering price of $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 offering expenses.

November 2020

Letter of Intent

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.

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.

Coronavirus (COVID-19)

With respect to the ongoing and evolving coronavirus (“COVID-19”)

outbreak, which was designated as a pandemic by the World Health Organization on March 11, 2020, COVID-19 has caused substantial

disruption in international and U.S.

With respect to the ongoing and evolving coronavirus

(“COVID-19”) outbreak, which was designated as a pandemic by the World Health Organization on March 11, 2020, COVID-19

has caused substantial disruption in international and U.S.

economies and markets.

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

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

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

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

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

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

across the globe.

COVID-19 has had an adverse impact on the entertainment

industry and, if repercussions of COVID-19 are prolonged, could have a significant adverse impact on our business, which could

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

the office as needed.

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

our animation production partners.

With regard to content distribution, we have observed demand increases for streaming entertainment

services in 2020.

In terms of our consumer products business, we are starting to see some negative impact from COVID-19 as consumer

activity decelerates in the U.S.

and across the world.

Global supply chain issues had a negative impact on the timing of certain

toy releases.

The toy manufacturing business has experienced slowdowns related to global supply chain issues caused by the COVID

-19 outbreak.

Equally important, the retail toy business has suffered a slowdown and closures effecting toy sales.

New to market

brands are impacted more severely by a slowdown in physical retail sales.

Other consumer products licensees’

driven, by toy sales, so a there is a negative downstream effect across the industry.

If the COVID-19 outbreak is prolonged, we

will see a negative impact on our revenues.

The Company’s management cannot at this

point estimate the impact of COVID-19 on its business and no provision for COVID-19 is reflected in the accompanying financial

We will continue to actively monitor the situation and may take further actions that alter our business operations

as may be required by federal, state, local or foreign authorities, or that we determine are in the best interests of our employees,

customers, partners and stockholders.

It is not clear what the potential effects any such alterations or modifications may have

on our business, including the effects on our customers, suppliers or vendors, or on our financial results.

Results of Operations

Our summary results for the three months

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

Our summary results for the three months ended

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

Three Months Ended

June 30, 2020

June 30, 2019

September 30,

Licensing & Royalties

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Total Revenue

$ (3,195,004 )

Licensing and royalty revenue include items

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

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

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

During the three months ended September 30, 2020 compared to the three months ended September 30, 2019, this category increased

$25,311 or 15%.

Television & Home Entertainment revenue

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of the content to the customer.

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

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

deliveries of our Rainbow Rangers and Llama Llama properties .

Advertising sales are generated on the

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

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

as we continue to focus on growing this business.

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

Results of Operations

During the three months ended September 30, 2020 compared to the three months ended September 30,

2019, Television & Home Entertainment revenue decreased $3,116,036 or 99%, primarily due to the revenue generated from the

delivery of Llama Llama Season 2 to Netflix in September 2019 without comparable revenue recognition in the three months

ending September 30, 2020 .

Advertising sales are generated on the “Kartoon

Channel!”

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

Advertising sales decreased by $104,319

or 71%, during the three months ended September 30, 2020 compared to the three months ended September 30, 2019.

The increase is

due to our continued efforts to grow this revenue stream of our business.

Three Months Ended

June 30, 2020

June 30, 2019

September 30,

Marketing and Sales

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Interest Expense

Marketing and sales expenses decreased

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

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

Direct operating costs include costs of

our product sales, unamortizable post-production costs, film and television cost amortization expense, and participation expense

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

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

During the three

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

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

The increases

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

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

$ (1,418,584 )

Marketing and sales expenses increased $267,328,

or 274%, for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to an

increase in marketing and advertising expenses to promote the Rainbow Rangers property.

Direct operating costs include costs of our

product sales, unamortizable post-production costs, film and television cost amortization expense, and participation expense related

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

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

Direct operating costs for

the three months ended September 30, 2020 decreased $2,621,907, or 92%, compared to the three months ended September 30, 2019.

During the three months ended September 30, 2020, we recorded film and television cost amortization expense of $101,717 and participation

expense of $113,894 compared to expenses of $1,285,237 and $1,022,229, respectively, for the three months ended September 30, 2019.

The increases in film amortization and participation expenses were primarily related to the Llama Llama Season 2 property.

General and administrative expenses consist

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General and administrative

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

This increase was

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

Interest expense for the three months ended

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

This increase is due to the expensing of the debt

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

This was partially offset by reductions in the amortization

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

Our summary results for the six months

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

Six Months Ended

June 30, 2020

June 30, 2019

expenses for three months ended September 30, 2020 increased $949,444, or 45%, compared to the same period in 2019.

This increase

was primarily related to increases in stock based compensation and consulting fees.

Interest expense for the three months

ended September 30, 2020 decreased $13,449, or 44%, compared to the same period in 2019.

This decrease is due to the interest

expense related to the August 2018 Secured Convertible Notes.

Interest expense for the three months ended September 30, 2019

included interest and the amortization of the debt issue costs, the amortization of the debt discount related to the August

2018 Secured Convertible Notes, which were expensed in the first quarter of 2019.

Therefore, there was no amortization of

these costs in the three months ended September 30, 2020.

Our summary results for the nine months ended

September 30, 2020, and the nine months ended September 30, 2019 are below.

Nine Months Ended

September 30,

Licensing & Royalties

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Total Revenue

$ (3,984,781 )

Licensing and royalty revenue include items

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

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

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

Television & Home Entertainment

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

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

Fluctuations in Television & Home

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

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

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

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

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

territories in 2019.

There were no comparable deliveries in 2020.

Advertising sales are generated on the

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

Advertising sales increased

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

focus on growing this business.

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

Six Months Ended

June 30, 2020

June 30, 2019

During the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, this category decreased

$108,411, or 16%, primarily due to the revenue generated from Rainbow Rangers and Llama Llama properties.

Television & Home Entertainment revenue

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

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

Fluctuations in Television & Home Entertainment revenue occur

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

of the content to the customer.

During the nine months ended September 30, 2020 compared to the nine months ended September 30,

2019, Television & Home Entertainment revenue decreased $3,883,135, or 90%, primarily due to the revenue generated from the

delivery of Llama Llama Season 2 to Netflix, delivery of Rainbow Rangers Season 1 to Viacom Media Networks and deliveries

to international territories in September 2019 without comparable revenue generated for the same period in 2020.

Advertising sales are generated on the “Kartoon

Channel!”

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

Advertising sales increased by $7,012,

or 4%, during the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

The increase is due

to our continued efforts to grow this revenue stream of our business.

Nine Months Ended

September 30,

Marketing and Sales

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Interest Expense

Marketing and sales expenses decreased

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

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

Direct operating costs include costs of

our product sales, unamortizable post-production costs, film and television cost amortization expense, and participation expense

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

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

During the six

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

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

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

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

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

Marketing and sales expenses increased $200,374,

or 49%, for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to an increase

in marketing and advertising expenses to promote the Rainbow Rangers property.

Direct operating costs include costs of our

product sales, unamortizable post-production costs, film and television cost amortization expense, and participation expense related

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

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

Direct operating costs for

the nine months ended September 30, 2020 decreased $3,042,215, or 77%, compared to the nine months ended September 30, 2019.

the nine months ended September 30, 2020, we recorded film and television cost amortization expense of $395,073 and participation

expense of $484,697 compared to September 30, 2019 expenses of $1,907,222 and $1,457,315, respectively, for the nine months ended

September 30, 2019.

The decreases in direct operating costs in the nine months ended September 30, 2020 compared to the same period

in the prior year reflect decreases in film amortization and participation expenses related to decreased revenues from the Llama

Llama Season 2 property.

General and administrative expenses consist

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General and administrative

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

This increase was

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

Interest expense for the six months ended

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

This increase is due to the expensing of the debt

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

expenses for the nine months ended September 30, 2020 increased $1,874,729, or 35%, compared to the same period in 2019.

This increase

was primarily related to increases stock based compensation and professional fees.

Interest expense for the nine months ended

September 30, 2020 increased $471,415, or 68%, compared to the same period in 2019.

This increase is due to the expensing of the

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

This was partially offset by reductions in the amortization

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Working Capital

As of June 30, 2020, we had current assets

As of September 30, 2020, we had current assets

of $54,864,958, including cash and cash equivalents, of $50,461,566, and current liabilities of $6,990,910, resulting in working

capital of $47,874,048, 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.

Prior to the Company’s successful capital

raises, the Company applied a loan pursuant to the PPP established under CARES Act as interpreted and applied by the SBA, an Agency

of the United States of America.

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

amount of $366,267.

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

Increases in working capital were the result

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

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

Comparison of Cash Flows for the Six

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

Our total cash, cash equivalents was

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

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 the SBA.

The Company reported the proceeds from the PPP loan as debt using the effective interest

Comparison of Cash Flows for the Nine Months

Ended September 30, 2020, and the Nine Months Ended September 30, 2019

Our total cash and cash equivalents were $50,461,566

and $633,561 at September 30, 2020, and September 30, 2019, respectively.

Comparison of Cash Flows

Six Months Ended

June 30, 2020

June 30, 2019

Nine Months Ended

September 30,

Cash used in operations

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Cash provided by financing activities

Increase in cash and cash equivalents

During the six months ended June 30, 2020,

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

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

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

Increase (decrease) in cash and cash equivalents

$ (2,451,465 )

During the nine months ended September 30,

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

shares for $44,755,671, net proceeds of $5,874,329 from warrant exercises and $3,600,000 from the collection of the Investor Notes.

The primary uses of cash during the nine months ended September 30, 2020, were $5,316,579 in operations, the repayment of the August

2018 Secured Convertible Notes of $2,866,664 and the repayment of the Production Facility of $1,585,220.

Operating Activities

Cash used in operating activities for the

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

Cash used in operating activities for the nine

months ended September 30, 2020 was $5,316,579 as compared to cash used in operating activities of $4,636,416 during the comparable

period in the prior year.

Investing Activities

Cash used in investing activities for the

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

Investing activities

include the purchase of furniture and equipment in 2019.

Cash used in investing activities for the nine

months ended September 30, 2020 was $554,926 as compared to a use of $26,976 for the nine months ended September 30, 2019.

activities include the $500,000 contribution to the Stan Lee Universe, LLC entity, the purchase of intangible assets and the purchase

of property and equipment.

Investing activities included the purchase of furniture and equipment for the same period in 2019.

Financing Activities

Cash provided by financing activities for

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

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

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

of the Investor Notes.

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

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

Cash provided by financing activities for the

nine months ended September 30, 2020 was $56,027,950 as compared to $2,211,927 cash provided in the comparable period in 2019.

During the nine months ended September 30, 2020, our primary sources of cash were the net proceeds from the 2020 Convertible Notes

of $6,098,000, the net sales of Common Shares for $44,755,671, net proceeds of $5,874,329 from warrant exercises and $3,600,000

from the collection of the Investor Notes.

The primary uses of cash during the nine months ended September 30, 2020, were the repayment

of the August 2018 Secured Convertible Notes of $2,866,664, the repayment of the Production Facility of $1,585,220 and production

costs for Rainbow Rangers Season 2.

Capital Expenditures

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

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

material commitments for capital expenditures.

Critical Accounting Policies

Our accounting policies are described in

the notes to the financial statements.

Our accounting policies are described in the

notes to the financial statements.

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

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Principles of Consolidation

The accompanying consolidated financial

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

as well as its interest in Stan Lee Comics, LLC (“Stan Lee Comics”).

All significant inter-company balances and transactions

have been eliminated in consolidation.

The accompanying consolidated financial statements

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

Rangers Productions.

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

Right of Use Leased Assets

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beginning of an interim or annual reporting period.

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

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

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

presented under existing guidance in accordance with ASC 840, Leases.

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 used this optional transition method.

As of January

1, 2019, management recorded lease liability of $2,071,903, right-of-use asset of $2,153,747, accumulated amortization of $124,070,

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

As of January 1, 2019, management recorded lease liability

of $2,071,903, right-of-use asset of $2,153,747, accumulated amortization of $124,070, a reversal of previously recorded deferred

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

Goodwill and Intangible Assets

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of delivery of the episodes.

We capitalize production costs for films

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

Accordingly, production costs are

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

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

We evaluate its capitalized production costs annually and limits recorded amounts

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

Additionally, for both episodic series

and films, from time to time, we develop additional content, improved animation and bonus songs/features for its existing content.

We capitalize production costs for films produced

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

Accordingly, production costs are capitalized

at actual cost and then charged against revenue quarterly as a cost of production based on the relative fair value of the film(s)

delivered and recognized as revenue.

We evaluate its capitalized production costs annually and limits recorded amounts by their

ability to recover such costs through expected future sales.

Additionally, for both episodic series and

films, from time to time, we develop additional content, improved animation and bonus songs/features for its existing content.

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

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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 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 the 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.

Revenue Recognition

On January 1, 2018, we adopted the new

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

revenue standard”) using the modified retrospective method applied to those contracts which were not completed as of January

On January 1, 2018, we adopted the new accounting

standard 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 Topic 605.

As a result of the change, beginning January

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

We sell advertising on our Kid Genius channel

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

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

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

For impressions served, we deliver a certain minimum number

of impressions on the channel to the advertiser for which the advertiser pays a contractual CPM per impression.

Impressions served

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

We recognize revenue related to product

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

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

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

We sell advertising on our ’Kartoon Channel!

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

For flat rate promotions with a fixed term, we recognize

revenue when all five revenue recognition criteria under Topic 606 are met.

For impressions served, we deliver a certain minimum

number of impressions on the channel to the advertiser for which the advertiser pays a contractual CPM per impression.

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

We recognize revenue related to product sales

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

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

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

Use of Estimates

The preparation of financial statements

in conformity with generally accepted accounting principles in the United States of America (“U.S.

GAAP”) requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent

assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during

the reporting periods.

The preparation of financial statements in

conformity with U.S.

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

liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the

reported amounts of revenues and expenses during the reporting periods.

Recent Accounting Pronouncements

In March 2019, the FASB issued ASU No.

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

and Other (“Subtopic 920-350”).

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

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

The amendments also require

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

The amendments

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

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

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

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

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.

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

periods within those fiscal years.

We adopted ASU 2019-02 in 2019.

The impact to our consolidated financial

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

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 No.

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.

The 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

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.

The Company 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.

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We have no off-balance sheet arrangements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis