What changed in this filing

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Item 1A. Risk Factors

2021-03-31 compared with 2020-03-30 · 89 added, 162 removed, 383 unchanged (40% of the section changed)

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in this Form 10-K or elsewhere.

The following information should be read in conjunction with Part II, Item 7, “Management’s

Discussion and Analysis of Financial Condition and Results of Operations”

and the consolidated financial statements and related

notes beginning on Page F-1 of this Form 10-K.

Our business,

financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including

but not limited to those described below.

Any one or more of such factors could directly or indirectly cause our actual results

of operations and financial condition to vary materially from past or anticipated future results of operations and financial condition.

Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, results of

operations and stock price.

The following information should be read in conjunction with Part II, Item 7, “

Management’s

Discussion and Analysis of Financial Condition and Results of Operation s”

and the consolidated financial statements and

related notes beginning on Page F-1 of this Form 10-K.

You should consider

carefully the risks and uncertainties described below, in addition to other information contained in this Annual Report on Form

10-K, including our consolidated financial statements and related notes.

The risks and uncertainties described below are not the

only ones we face.

Our business, financial condition and operating results can be affected by a number of factors, whether currently

known or unknown, including but not limited to those described below.

Any one or more of such factors could directly or indirectly

cause our actual results of operations and financial condition to vary materially from past or anticipated future results of operations

and financial condition.

Any of these factors, in whole or in part, could materially and adversely affect our business, financial

condition, results of operations and stock price.

Because of the

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RISKS RELATING TO OUR BUSINESS

Coronavirus (COVID-19)

With respect to the ongoing and evolving

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

has caused substantial disruption in international and U.S.

Our business has been and may continue to be adversely affected

by the COVID-19 pandemic.

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.

The outbreak has potential to have an adverse

impact on the entertainment industry and, if repercussions of the outbreak are prolonged, could have a significant adverse impact

on our business, which could be material.

The Company’s management cannot at this point estimate the impact of the outbreak

on it’s business and no provision for this outbreak are reflected in the accompanying financial statements.

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.

The majority of our employees have been working remotely from home, with only a few individuals monitoring the office as needed.

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

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

If the COVID-19 outbreak is prolonged,

we will see a negative impact on our revenues.

Our management cannot at this point estimate

the impact of COVID-19 on our business and no provision for COVID-19 is reflected in the accompanying financial statements.

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.

We have incurred net losses since inception.

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For the year ended December 31, 2020, we generated net revenues

of $5,907,899 and incurred a net loss of $11,481,245, while for the previous year, we generated net revenue of $993,452 and incurred

a net loss of $9,003,901.

These losses, among other things, have had an adverse effect on our results of operations, financial

condition, stockholders’

of $2,482,127 and incurred a net loss of $401,669,805, while for the previous year, we generated net revenue of $5,907,899 and

incurred a net loss of $11,481,245.

These losses, among other things, have had an adverse effect on our results of operations,

financial condition, stockholders’

equity, net current assets and working capital.

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significant additional revenues or achieve profitability will depend upon numerous factors some of which are outside of our control.

We will need additional financing to

continue our operations.

If we are unable to obtain additional financing on acceptable terms, we will need to curtail or cease

our development plans and operations.

As of December 31, 2019, we had approximately

$305,000 of available cash, cash equivalents, and restricted cash.

Following various financings during the first quarter of 2020,

as of March 28, 2020, we had approximately $2.8 million of cash and cash equivalents.

Additional funds may be required to fund

operations and repay our outstanding debt which could be raised through the issuance of equity securities and/or debt financing.

There is no assurance that any type of financing on terms acceptable to us will be available or will otherwise occur.

Debt financing

must be repaid regardless of whether we generate revenues or cash flows from operations and may be secured by substantially all

of our assets.

Any equity financing or debt financing that requires the issuance of warrants or other equity securities to the

lender would cause the percentage ownership by our current stockholders to be diluted, which dilution may be substantial.

any additional equity securities issued may have rights, preferences or privileges senior to those of existing stockholders.

we obtain stockholder approval, any equity financing at a price below the then current conversion price of our March 2020 Secured

Convertible Notes or the exercise price of the March 2020 Warrants will result in an adjustment to the conversion price or exercise

price applicable to such securities, resulting in the potential issuance of additional shares of our common stock upon the conversion

or exercise of such securities, which would further dilute our other stockholders.

If we are not able to obtain sufficient

capital, we may then be forced to limit the scope of our operations.

capital, we may not be able to continue our growth.

We expect that as our business continues

to evolve, we will need additional working capital.

If adequate additional debt and/or equity financing is not available on reasonable

terms or at all, we may not be able to continue to expand our business, and we will have to modify our business plans accordingly.

to evolve and grow, we will need additional working capital.

If adequate additional debt and/or equity financing is not available

on reasonable terms or at all, we may not be able to continue to expand our business, and we will have to modify our business plans

These factors could have a material adverse effect on our future operating results and our financial condition.

If we reach a point where we are unable

to raise needed additional funds to continue as a going concern, we could be forced to cease our activities and dissolve our company.

In such an event, we will need to satisfy various creditors and other claimants, severance, lease termination and other dissolution-related

Our revenues and results of operations

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Any quarterly fluctuations that we report in the future may not match the expectations of market analysts and investors.

could cause the price of our common stock to fluctuate.

This could cause the price of our common stock to fluctuate.

Production cost will be amortized according

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As of March 30, 2021, our management team

and Board of Directors beneficially own or control (including conversions, options or warrants exercisable or convertible within

60 days) a combined 3,436,505 shares or 11.24-%, of our shares currently outstanding (including conversions, options or warrants

exercisable or convertible within 60 days).

Sales of significant amounts of shares held by our directors and executive officers,

or the prospect of these sales, could adversely affect the market price of our common stock.

Additionally, management has the ability

to control any proposals submitted to shareholders, including corporate actions and board changes which may not be in accordance

with the votes of other shareholders.

and board of directors (“Board of Directors”) beneficially own or control (including conversions, options or warrants

exercisable or convertible within 60 days) a combined 20,656,535 shares or 6.74%, of our shares currently outstanding (including

conversions, options or warrants exercisable or convertible within 60 days).

Sales of significant amounts of shares held by our

directors and executive officers, or the prospect of these sales, could adversely affect the market price of our common stock.

Additionally, management has the ability to control any proposals submitted to shareholders, including corporate actions and board

changes which may not be in accordance with the votes of other shareholders.

Litigation may harm our business or

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or stockholders could be very costly and disrupt business.

While disputes from time to time are not uncommon, we may not be able

to resolve such disputes on terms favorable to us.

We recently had a securities class action and derivative shareholder

action filed against us.

While disputes from time to time are not uncommon, we may not be able to resolve such disputes on terms

favorable to us.

Our vendors and licensees may be subject

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RISKS RELATING TO OUR COMMON STOCK

A substantial number of shares of our

common stock may be issued pursuant to the terms of the 2020 Convertible Notes, which could cause the price of our common stock

The 2020 Convertible Notes are convertible

into shares of our common stock at an initial conversion price of $1.375 per share, for an aggregate of 10,000,000 shares, or approximately

33.8% of our outstanding common stock as of March 29, 2020 (without taking into account the limitations on the conversion of the

2020 Convertible Notes as described elsewhere in this Report).

If we obtain stockholder approval, the 2020 Convertible Notes will

be convertible into shares of our common stock at a conversion price of $0.21 per share, for an aggregate of 65,476,190 shares,

or approximately 221.2% of our outstanding common stock as of March 29, 2020 (without taking into account the limitations on the

conversion of the 2020 Convertible Notes as described elsewhere in this Report).

Furthermore, the number of shares of common stock

to be issued may be substantially greater, if upon stockholder approval, the 2020 Convertible Notes are converted into shares of

common stock in accordance with the installment conversion process, each as described elsewhere in this Report.

In such case, the

number of shares of common stock issued will be determined based on a discount to the then current market price.

We cannot predict

the market price of our common stock at any future date, and therefore, we are unable to accurately forecast or predict the total

amount of shares that ultimately may be issued under the 2020 Convertible Notes.

The number of shares of common stock to be issued

also may be substantially greater if we voluntarily reduce the conversion price of the 2020 Convertible Notes as permitted under

the 2020 Convertible Notes (if stockholder approval is obtained).

The 2020 Convertible Notes likely will

be converted only at times when it is economically beneficially for the holder to do so, and we are entitled to make installment

conversions only at a price per share that is at a discount to the then current market price.

The issuance of these shares will

dilute our other equity holders, which could cause the price of our common stock to decline.

The requirement that we repay the 2020

Convertible Notes and interest thereon in cash under certain circumstances, and the restrictive covenants contained in the 2020

Convertible Notes, could adversely affect our business plan, liquidity, financial condition and results of operations.

We may be required to repay the 2020 Convertible

Notes and interest thereon in cash if we do not meet certain customary equity conditions (including minimum price and volume thresholds)

or in certain other circumstances.

For example, we will be required to repay the outstanding principal balance and accrued but

unpaid interest, if any, along with a premium, upon the occurrence of a Change of Control (as defined in the 2020 Convertible Notes).

In addition, the 2020 Convertible Notes contain restrictive covenants, including a cash burn covenant.

These obligations and covenants

could have important consequences on our business.

In particular, they could:

require us to dedicate a substantial portion of our cash flow from operations to payments on the 2020 Convertible Notes;

limit, among other things, our ability to borrow additional funds and otherwise raise additional capital, and our ability to conduct acquisitions, joint, ventures or similar arrangements, as a result of our obligations to make such payments and comply with the restrictive covenants in the 2020 Convertible Notes;

limit our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate;

increase our vulnerability to general adverse economic and industry conditions;

place us at a competitive disadvantage compared to our competitors that have lower fixed costs.

In the event we are required to repay the

2020 Convertible Notes in cash, we may seek to refinance the remaining balance, by either refinancing with the holders of the 2020

Convertible Notes, by raising sufficient funds through a sale of equity or debt securities or by obtaining a credit facility.

assurances can be given that we will be successful in making the required payments under the 2020 Convertible Notes, or in refinancing

our obligations on favorable terms, or at all.

Should we determine to refinance, it could be dilutive to shareholders.

If we are unable to make the required cash

payments, there could be a default under the 2020 Convertible Notes.

In such event, or if a default otherwise occurs under the

2020 Convertible Notes, including as a result of our failure to comply with the financial or other covenants contained therein,

the holders of the 2020 Convertible Note could require us to immediately repay the outstanding principal and interest on the 2020

Convertible Note in cash, plus a significant premium.

Our stock price

may be subject to substantial volatility, and stockholders may lose all or a substantial part of their investment.

Our stock price may be subject to substantial

volatility, and stockholders may lose all or a substantial part of their investment.

Our common stock

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letter from The Nasdaq Stock Market (“Nasdaq”) informing us that for the last 30 consecutive business days, the bid

price of the our Common Stock had closed below $1.00 per share, which is the minimum required closing bid price for continued listing

price of our Common Stock had closed below $1.00 per share, which is the minimum required closing bid price for continued listing

on The Nasdaq Capital Market pursuant to Listing Rule 5550(a)(2) (the “Rule”).

This notice has no immediate effect on

This notice had no immediate effect on

our Nasdaq listing or trading of its Common Stock.

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split if necessary.

If at any time before August 31, 2020,

the bid price of our Common Stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, we will regain

compliance with the Rule, and the matter will be closed.

If we do not meet the minimum bid requirement

during the additional 180-day grace period, Nasdaq will provide written notification to us that our Common Stock will be subject

to delisting.

At such time, we may appeal the delisting determination to a Panel.

We would remain listed pending the Panel’s

There can be no assurance that, if we do appeal a subsequent delisting determination by the Staff to the Panel, that

such appeal would be successful.

On May 28, 2020, we received notification

from Nasdaq that the closing bid of our Common Stock had been trading at $1.00 per share or greater for the required ten-day period.

Accordingly, the Company had regained compliance with Listing Rule 5550(a)(2) and the matter was closed.

This current notification from Nasdaq has

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Rules adopted by the SEC pursuant to Section

404 of the Sarbanes-Oxley Act of 2002 require an annual assessment of internal controls over financial reporting, and for certain

issuers an attestation of this assessment by the issuer’s independent registered public accounting firm.

The standards that

must be met for management to assess the internal controls over financial reporting as effective are evolving and complex, and

require significant documentation, testing, and possible remediation to meet the detailed standards.

We expect to incur significant

expenses and to devote resources to Section 404 compliance on an ongoing basis.

It is difficult for us to predict how long it will

take or costly it will be to complete the assessment of the effectiveness of our internal control over financial reporting for

each year and to remediate any deficiencies in our internal control over financial reporting.

As a result, we may not be able to

complete the assessment and remediation process on a timely basis.

In addition, management’s assessment of internal controls

over financial reporting may identify weaknesses and conditions that need to be addressed in our internal controls over financial

reporting or other matters that may raise concerns for investors.

Any actual or perceived weaknesses and conditions that need

to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal

controls over financial reporting may have an adverse impact on the price of our common stock.

404 of the Sarbanes-Oxley Act of 2002 require an annual assessment of internal controls over financial reporting, and for certain issuers

an attestation of this assessment by the issuer’s independent registered public accounting firm.

The standards that must be met

for management to assess the internal controls over financial reporting as effective are evolving and complex, and require significant

documentation, testing, and possible remediation to meet the detailed standards.

We expect to incur significant expenses and to devote

resources to Section 404 compliance on an ongoing basis.

In addition, we are not subject to auditor attestation of internal controls

which may identify weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters

that may raise concerns for investors.

Any actual or perceived weaknesses and conditions that need to be addressed in our internal control

over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an

adverse impact on the price of our common stock.

We are authorized

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Additionally, as of March 30,

29, 2019, there are 2,047,619 shares of common stock underlying the Series A Convertible Preferred Stock that could be sold pursuant

As of the same date, there are 62,630,757 shares of common stock underlying outstanding warrants that could be sold

pursuant to Rule 144 to the extent permitted by any applicable vesting requirements as well as 928,263 shares of common stock underlying

registered warrants.

Lastly, as of March 29, 2019, there are 1,289,866 shares of common stock underlying outstanding options granted

and 877,801 shares reserved for issuance under our Genius Brands International, Inc.

Amended 2015 Incentive Plan, all of which

are unregistered but will become eligible for sale in the public market to the extent permitted by any applicable vesting requirements

and Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”).

Following the six month anniversary

of the issuance of the 2020 Convertible Notes, the shares of common stock issuable upon conversion of the 2020 Convertible Notes

become eligible to be sold pursuant to Rule 144.

2021, there are no shares of common stock underlying the Series A Convertible Preferred Stock that could be sold pursuant to Rule 144.

As of the same date, there are 5,406,465 shares of common stock underlying outstanding warrants that could be sold pursuant to Rule 144

to the extent permitted by any applicable vesting requirements as well as 40,105,500 shares of common stock underlying registered warrants.

Lastly, as of March 29, 2021, there are 9,731,176 shares of common stock underlying outstanding options granted, 9,128,796 shares of

common stock underlying outstanding restricted stock units (“RSUs”) and 13,307,695 shares reserved for issuance under our

Genius Brands International, Inc.

Amended 2020 Incentive Plan, all of which are unregistered but will become eligible for sale in the

public market to the extent permitted by any applicable vesting requirements and Rule 144 under the Securities Act of 1933, as amended

(the “Securities Act”).

Concentration of ownership among our

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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-K

Item 1A. Risk Factors