What changed in this filing

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Item 1. Financial Statements

2021-05-18 compared with 2020-11-16 · 1047 added, 1294 removed, 317 unchanged (88% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

As of September 30, 2020, and December 31,

September 30,

As of March 31, 2021, and December 31, 2020

March 31, 2021

December 31, 2020

Current Assets:

Cash and Cash Equivalents

$ 143,612,749

$ 100,456,324

Accounts Receivable, net

Inventory, net

Prepaid Expenses and Other Assets

4 unchanged sentences

Lease Deposits

Investment in ChizComm

Investment in Stan Lee Universe, LLC

Intangible Assets, net

$ 205,792,963

$ 134,201,074

LIABILITIES AND STOCKHOLDERS’

4 unchanged sentences

Deferred Revenue

Secured Convertible Notes, net

Payroll Protection Program

8 unchanged sentences

Production Facility, net

Contingent Earn Out

Disputed Trade Payable

1 unchanged sentence

Stockholders’

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,

Preferred Stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

Common Stock, $0.001 par value, 400,000,000 shares authorized 300,321,658 and 258,438,514 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

Additional Paid in Capital

2 unchanged sentences

(469,557,324 )

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Loss

Total Stockholders' Equity

Total Liabilities and Stockholders’

The accompanying notes are an integral part

of these financial statements.

$ 205,792,963

$ 134,201,074

The accompanying notes are an integral part of

these financial statements.

Genius Brands International, Inc.

Condensed Consolidated Statements of Operations

Three and Nine Months Ended September 30,

2020 and September 30, 2019

Three Months Ended March 31, 2021 and March

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

March 31, 2021

March 31, 2020

Licensing & Royalties

Media Advisory & Advertising Services

Television & Home Entertainment

10 unchanged sentences

Interest Income

Loss on Extinguished Debt

Loss on Lease Termination

Loss on Foreign Exchange

Warrant Revaluation Expense

(210,672,085 )

Conversion Option Revaluation Expense

Warrant Incentive Expense

(69,138,527 )

6 unchanged sentences

Income Tax Expense

(391,101,155 )

Beneficial Conversion Feature on Preferred Stock

Net Loss Applicable to Common Shareholders

$ (2,007,209 )

Net Loss Before Foreign Translation Adjustment

(76,258,943 )

Foreign Translation Adjustment

$ (76,259,218 )

2 unchanged sentences

Weighted Average Shares Outstanding (Basic and Diluted)

The accompanying notes are an integral part

of these financial statements.

The accompanying notes are an integral part of

these financial statements.

Genius Brands International, Inc.

Condensed Consolidated Statements of Comprehensive

Three and Nine Months Ended September 30,

2020 and September 30, 2019

Three months ended March 31, 2021 and March

Three Months Ended

Nine Months Ended

September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019

$ (2,007,209 )

$ (2,555,233 )

March 31, 2021

March 31, 2020

$ (76,258,943 )

$ (5,835,944 )

Beneficial Conversion Feature on Preferred Stock

Foreign Translation Adjustment

Comprehensive Net Loss to Common Shareholders

1 unchanged sentence

$ (5,835,944 )

$ (391,101,155 )

$ (11,286,774 )

The accompanying notes are an integral part

of these financial statements.

The accompanying notes are an integral part of

these financial statements.

Genius Brands International, Inc.

Consolidated Statements of Stockholders'

Three and Nine Months Ended September 30,

2020 and September 30, 2019

Additional Paid-In

Other Comprehensive

Condensed Consolidated Statements of Stockholders'

Three Months Ended March 31, 2021 and Three

Months Ended March 31, 2020

Paid-In Capital

Comprehensive Loss

Balance, December 31, 2019

1 unchanged sentence

Value of Preferred Stock Conversion

Proceeds from Securities

Purchase Agreement, net

Proceeds From Warrant Exchange,

Issuance of Common Stock

Proceeds from Securities Purchase Agreement, Net

Proceeds from Warrant Exchange, net

Issuance of Common Stock for Services

Share Based Compensation

1 unchanged sentence

$ (71,883,079 )

Proceeds from Securities

Purchase Agreement, net

Issuance of Common Stock

Share Based Compensation

Value of Preferred Stock Conversion

Derivative Liability Adjustment

Note Conversion

Warrant Exercise

Warrant Revaluation

Warrants Issued For Services

Balance, December 31, 2020

$ 588,500,680

$ (469,557,324 )

Balance, June 30, 2020

$ 119,196,677

Proceeds from Securities

Purchase Agreement, net

Issuance of Common Stock

Shares Issued for ChizComm acquisition

Proceeds from Warrant Exchange, net

Issuance of Common Stock for Services

Share Based Compensation

Warrant Exercise

Warrants Issued For Services

September 30, 2020

$ 521,911,592

Warrant Incentive

Foreign Translation Adjustment

(76,258,943 )

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

(76,258,943 )

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

Share Based Compensation

Value of Beneficial Conversion Feature

Balance, March 31, 2021

$ 721,203,155

Issuance of Common Stock

Share Based Compensation

June 30, 2019

$ (545,816,267 )

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

$ 175,681,817

The accompanying notes are an integral part of these financial

The accompanying notes are an integral part of

these financial statements.

Genius Brands International, Inc.

Condensed Consolidated Statements of Cash

Nine Months Ended September 30, 2020 and

September 30, 2019

September 30,

Condensed Consolidated Statements of Cash Flows

Three months ended March 31, 2021 and March

March 31, 2021

March 31, 2020

Cash Flows from Operating Activities:

8 unchanged sentences

Warrant Revaluation Expense

Loss On Lease Termination

Loss On Extinguishment of Debt

Conversion Option Revaluation Expense

Lease Modification

Debt Discount in Excess of the Principal

Warrant Incentive Expense

Decrease (Increase) in Operating Assets:

Accounts Receivable, net

Other Receivable

Inventory, net

Prepaid Expenses & Other Assets

11 unchanged sentences

Investment in Stan Lee Universe, LLC

Investment in Intangible Assets

Cash Payment for ChizComm, net of cash acquired

Investment in Property & Equipment

1 unchanged sentence

Cash Flows from Financing Activities:

Payments On Lease liability

Increase in Lease Liability, net of Payments

Proceeds from Sale of Securities Purchase Agreement, net

Proceeds From Warrant Exchange

Proceeds from Warrant Exchange, net

Proceeds from Senior Secured Convertible Notes, net

Proceeds from Payroll Protection Program

Collection Of Investor Notes

Repayment of Secured Convertible Notes

Note Conversion Costs

Repayment of Production Facility, net

Net Cash Provided by Financing Activities

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

Beginning Cash, Cash Equivalents, and Restricted Cash

Ending Cash, Cash Equivalents, and Restricted Cash

Net Increase in Cash and Cash Equivalents

Beginning Cash and Cash Equivalents

Ending Cash and Cash Equivalents

$ 143,612,749

Supplemental Disclosures of Cash Flow Information:

1 unchanged sentence

Schedule of Non-Cash Financing and Investing Activities

Issuance of Common Stock for production services

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

13,750,000.00

The accompanying notes are an integral part

of these financial statements.

Shares issued for ChizComm acquisition

Liability for Acquisition Earnout Shares

Warrant Derivative Liability

The accompanying notes are an integral part of

these financial statements.

Genius Brands International, Inc.

Notes to Condensed Consolidated Financial

September 30, 2020

Notes to Condensed Consolidated Financial Statements

March 31, 2021 (unaudited)

Organization and Business

4 unchanged sentences

“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.

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

Kindergarten with Stan Lee’s Pow!

Entertainment, Oak Productions and Alibaba.

Arnold Schwarzenegger lends his

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

The show will be broadcast in the United States on Amazon

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

In July, 2020, the Company entered into a

binding term sheet with POW, Inc.

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”

to tweens, which provides enrichment as well as entertainment.

New intellectual property titles include Stan Lee’s Superhero

Kindergarten produced with Stan Lee’s Pow!

Entertainment, and Oak Productions.

Arnold Schwarzenegger lends his voice as

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

The show is being broadcast in the United States on the Company’s wholly

owned distribution outlet, Kartoon Channel!.

Other newer series 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.

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”

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 ,

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

This agreement will enable us to assume the worldwide rights, in perpetuity,

to the name, physical likeness, physical signature, live-action and animated motion picture, television, online, digital, publishing,

comic book, merchandising and licensing rights to Stan Lee and over 100 original Stan Lee creations, from which Genius Brands plans to

develop and license multiple properties each year.

The Company is also developing a new animated series starring the voice of Shaquille

O’Neil called Shaq’s Garage .

In addition, we act as licensing agent for Penguin

Young Readers, a division of Penguin Random House LLC which 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,”

Genius,”

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,”

“123 Favorite Music”

1 unchanged sentence

and all then existing productions under those titles.

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

In 2011, the Company

reincorporated in Nevada and changed its name to Genius Brands International, Inc.

(the “Reincorporation”).

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

In connection

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

In 2013, the Company entered into an Agreement

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

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

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

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

Historically, the Company has incurred net

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

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

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

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

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

Historically, the Company has incurred net losses.

For the three months ended March 31, 2021 and March 31, 2020, the Company reported net losses of $76,258,943 and $5,835,944, respectively.

The Company reported net cash used in operating activities of $5,855,273 and $995,517 for the three months ended March 31, 2021 and March

31, 2020, 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 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

Warrant Exercise Agreement

On January 22, 2020, the Company entered into

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

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

The Original Warrants were originally

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

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

Pursuant to the Agreement, the holder of the

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

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

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

(the “Amended Exercise Price”).

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

Secured Convertible Note and Warrant Private Placement

On March 11, 2020, the Company and certain

accredited investors (each an “Investor”

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

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

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

and collectively, the “2020 Convertible

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

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

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

and collectively, the

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

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

and collectively, the “Investor

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

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

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

The closing of the sale and issuance of the

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

March 17, 2020 (the “Closing Date”).

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

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

2020 Convertible Notes can be converted at

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

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

(the “Conversion Price”).

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

the Nasdaq proposals described below in Note 10.

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

each reduced to $0.21.

The 2020 Convertible Notes can be converted

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

85% of the average of the five lowest daily weighted average prices of 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

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

March 2020 Securities Purchase Agreement

On March 22, 2020, we entered into a Securities

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

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

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

May 2020 Securities Purchase Agreements

On May 7, 2020, we entered into a Securities

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

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

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

$2.8 million before deducting offering expenses.

On May 8, 2020, we entered into a Securities

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

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

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

$5.448 million before deducting offering expenses.

On May 18, 2020, we entered into a Securities

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

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

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

$9.0 million before deducting offering expenses.

On May 28, 2020, we entered into a Securities

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

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

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

$30.0 million before deducting offering expenses.

Between May 18 and June 11, 2020, the Company

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

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

from the payment of the Investor Notes Principal.

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.

As of March 31, 2021, the Company had an accumulated deficit of $545,816,267 and total stockholders’

of $175,681,817.

At March 31, 2021, the Company had current assets of $159,186,104, including cash and cash equivalents of $143,612,749

and current liabilities of $15,341,320.

The Company had working capital of $143,844,784 as of March 31, 2021, compared to working capital

of $101,387,183 as of December 31, 2020.

On January 28, 2021,

the Company entered into letter agreements (the “Letter Agreements”) with certain existing institutional and accredited investors

to exercise certain outstanding warrants (the “Existing Warrants”) to purchase up to an aggregate of 39,740,500 shares of

the Company’s common stock at their original exercise price of $1.55 per share (the “Exercise”).

The Company received

approximately $61.6 million in gross proceeds.

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

Ltd., acted as warrant

solicitation agent and received a cash fee of approximately $4.3 million.

In consideration for the exercise of the Existing Warrants for

cash, the exercising holders received new unregistered warrants to purchase up to an aggregate of 39,740,500 shares of common stock (the

“New Warrants”) at an exercise price of $2.37 per share and with an exercise period of five years from the initial issuance

Pursuant to the Letter Agreements, the New Warrants are substantially in the form of the Existing Warrants (except for customary

legends and other language typical for an unregistered warrant, including the ability for the holder of the New Warrant to make a cashless

exercise if no resale registration statement covering the common stock underlying the New Warrants is effective after six months), were

exercisable immediately, and have a term of exercise of five years, and the Company was required to register for resale the shares of

common stock underlying the New Warrants.

As more fully discussed in Note 3 on February

1, 2021, the Company through GBI Acquisition LLC, a New Jersey limited liability company, and 2811210 Ontario Inc., a company organized

under the laws of the Province of Ontario , two wholly owned subsidiaries of the Company, purchased the outstanding

equity interests of ChizComm Ltd., a corporation organized in Canada and ChizComm USA Corp., a New Jersey corporation.

Summary of Significant Accounting Policies

3 unchanged sentences

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, 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

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

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

The accompanying condensed consolidated

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

Entertainment LLC, Llama Productions LLC, Rainbow Rangers Productions LLC, Superhero Kindergarten LLC, ChizComm Beacon Media LLC and

ChizComm Ltd.

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

The financial statements have been prepared using

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

Codification (“ASC”) 805 Business Combinations.

Use of Estimates

The preparation of financial statements in

conformity with U.S.

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

liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts

of revenues and expenses during the reporting periods.

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.

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 financial statements and the reported amounts 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 March 31, 2021, and December 31, 2020, the Company had Cash

and Cash Equivalents of $143,612,749 and $100,456,324, respectively.

Allowance for Doubtful Accounts

2 unchanged sentences

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

valued and saleable.

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

both September 30, 2020 and December 31, 2019.

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 $117,087 for March 31, 2021 and $43,676 as of December

Property and Equipment

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.

on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from two

to seven years.

Maintenance, repairs, and renewals, which neither materially add to the value of the assets nor appreciably prolong their

lives, are charged to expense as incurred.

Gains and losses from any dispositions of property and equipment are reflected in the statement

of operations.

Right of Use Leased Assets

In February 2016, the FASB issued Accounting

Standards Update 2016-02, “Leases.”

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

from leases on the balance sheet.

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

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

The new guidance

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

The amendments should be applied at the

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

beginning of an interim or annual reporting period.

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

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

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

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

In February 2016, the FASB issued Accounting Standards

Update 2016-02, “Leases.”

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

the balance sheet.

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

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

The new guidance is effective for annual

and interim reporting periods beginning after December 15, 2018.

The amendments should be applied at the beginning of the earliest period

presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting

In July 2018, the FASB issued

ASU 2018-11, Leases (Topic 842), Targeted Improvements, which allows for an additional optional transition method where comparative

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

under existing guidance in accordance with ASC 840, Leases.

Management used this optional transition method.

As of January

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

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

As of February 1, 2021,

as a result of the ChizComm acquisition, management recorded lease liability of $380,050, right-of-use asset of $380,050.

Goodwill and Intangible Assets

Goodwill represents the excess of purchase

price over the estimated fair value of net assets acquired in business combinations accounted for by the purchase method.

In accordance

with FASB ASC 350 Intangibles Goodwill and Other, goodwill and certain intangible assets are presumed to have indefinite useful

lives and are thus not amortized, but subject to an impairment test annually or more frequently if indicators of impairment arise.

The Company completes the annual goodwill and indefinite-lived intangible asset impairment tests at the end of each fiscal year.

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

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

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

regarding the applicable discount rates.

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

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

assets in future periods.

Other intangible assets have been acquired,

either individually or with a group of other assets, and were initially recognized and measured based on fair value.

Annual amortization

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

Goodwill represents the excess of purchase price

over the estimated fair value of net assets acquired in business combinations accounted for by the purchase method.

In accordance with

FASB ASC 350 Intangibles Goodwill and Other, goodwill and certain intangible assets are presumed to have indefinite useful lives and are

thus not amortized, but subject to an impairment test annually or more frequently if indicators of impairment arise.

The Company completes

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

To test for goodwill impairment,

we are required to estimate the fair market value of each of our reporting units, of which we have one.

While we may use a variety of

methods to estimate fair value for impairment testing, our primary method is discounted cash flows.

We estimate future cash flows and

allocations of certain assets using estimates for future growth rates and our judgment regarding the applicable discount rates.

to our judgments and estimates could result in a significantly different estimate of the fair market value of the reporting units, which

could result in an impairment of goodwill or indefinite lived intangible assets in future periods.

Other intangible assets have been acquired, either

individually or with a group of other assets, and were initially recognized and measured based on fair value.

Annual amortization of these

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

Debt and Attached Equity-Linked Instruments

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method when the latter does not lead to materially different results.

The Company accounts for the proceeds from

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

The Company accounts for the proceeds from the

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

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

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

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

conversion feature as a liability.

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

as a liability.

The Company analyzes freestanding equity-linked

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

If the instrument is not considered indexed to Company’s stock,

it is classified as an asset or liability recorded at fair value.

If the instrument considered indexed to Company’s stock,

the Company analyzes additional equity classification requirements per ASC 815-40 Contract’s in Entity’s Own Equity.

When the requirements are met the instrument is recorded as part of the Company’s equity, initially measured based on its

relative fair value with no subsequent re-measurement.

When the equity classification requirements are not met, the instrument

is recorded as an asset or liability and is measured at fair value with subsequent changes in fair value recorded in earnings.

If the instrument is not considered indexed to Company’s stock, it is

classified as an asset or liability recorded at fair value.

If the instrument considered indexed to Company’s stock, the Company

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

When the requirements

are met, the instrument is recorded as part of the Company’s equity, initially measured based on its relative fair value with no

subsequent re-measurement.

When the equity classification requirements are not met, the instrument is recorded as an asset or liability

and is measured at fair value with subsequent changes in fair value recorded in earnings.

When required, the Company also considers the

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Film and Television Costs

The Company capitalizes production costs for

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

Accordingly, production

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

over the period of commitment.

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

in the period of delivery of the episodes.

The Company capitalizes production costs for

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

Accordingly, production costs

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

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

The Company evaluates its capitalized production costs annually and limits

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

In March 2019, the FASB issued ASU No.

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

and Other (Subtopic 920-350).

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

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

The amendments also require that an entity

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

The amendments in this update

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

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

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

interim periods within those fiscal years.

We have prospectively adopted ASU 2019-02.

The impact to our consolidated financial

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

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

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

We capitalize production costs for episodic series

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

Accordingly, production costs are capitalized

at actual cost and then charged against revenue based on the initial market revenue evidenced by a firm commitment over the period of

We expense all capitalized costs that exceed the initial market firm commitment revenue in the period of delivery of the episodes.

We capitalize production costs for films produced

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

Accordingly, production costs are capitalized at

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

and recognized as revenue.

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

such costs through expected future sales.

Additionally, for both episodic series and films,

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

After the initial

release of the film or episodic series, the costs of significant improvement to existing products are capitalized while routine and periodic

alterations to existing products are expensed as incurred.

Revenue Recognition

On January 1, 2018, the Company adopted the

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

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

as of January 1, 2018.

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

The Company accounts

for revenue according to standard ASC 606 (Topic 606).

The Company has identified the following six material and distinct performance

License rights to exploit Functional Intellectual Property (Functional Intellectual Property or “functional IP”

is defined as intellectual property that has significant standalone functionality, such as the ability be played or aired.

Functional intellectual property derives a substantial portion of its utility from its significant standalone functionality.)

License rights to exploit Symbolic Intellectual Property (Symbolic Intellectual Property or “symbolic IP”

is intellectual property that is not functional as it does not have significant standalone use and substantially all of the utility of symbolic IP is derived from its association with the entity’s past or ongoing activities, including its ordinary business activities, such as the Company’s licensing and merchandising programs associated with its animated content.)

Options to renew or extend a contract at fixed terms.

(While this performance obligation is not significant for the Company’s current contracts, it could become significant in the future.)

Options on future seasons of content at fixed terms.

(While this performance obligation is not significant for the Company’s current contracts, it could become significant in the future.)

Fixed fee advertising revenue generated from the Genius Brands Network

Variable fee advertising revenue generated from the Genius Brands Network

As a result of the change, beginning January 1,

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

For minimum guarantees,

the Company recognizes fixed revenue upon delivery of content and the start of the license period.

For functional IP contracts

with a variable component, the Company estimates revenue such that it is probable there will not be a material reversal of revenue

in future periods.

For minimum guarantees, the

Company recognizes fixed revenue upon delivery of content and the start of the license period.

For functional IP contracts with a variable

component, the Company estimates revenue such that it is probable there will not be a material reversal of revenue in future periods.

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

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

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

of the license.

The Company sells advertising on its App and

OTT based “Kartoon Channel!

The Company began recognizing

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

Although it has a different recognition

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

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.

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 provides media and advertising services

Revenue is recognized in the month that the services are performed.

The Company also purchases advertising for clients

on linear and across digital and streaming platforms and receives a commission on these purchases.

Advertising commissions are recognized

as revenue in the month the advertising is displayed.

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.

sales when we complete our performance obligation, which is when the goods are transferred to the buyer.

Direct Operating Costs

Direct operating costs include costs of our

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

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

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

Direct operating costs include costs of our product

sales, non-capitalizable film costs, film and television cost amortization expense, and participation expense related to agreements with

various animation studios, post-production studios, writers, directors, musicians or other creative talent with which we are obligated

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

Share-Based Compensation

As required by FASB ASC 718 - Stock Compensation,

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

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

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

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

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

Black-Scholes calculation as of the date of grant.

The Company has elected to use the graded attribution method for awards which are in-substance,

multiple awards based on the vesting schedule.

The Company’s accounting policy elected for forfeitures is not to estimate the number

of awards that are expected to vest.

Instead, the Company accounts for forfeitures when they occur.

The Company issues authorized

shares available for the issuance under the 2015 and 2020 Plans upon employees’

exercise of their stock options.

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”

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.

Deferred income tax assets and liabilities

are recognized based on differences between the financial statement and tax basis of assets and liabilities using presently enacted

At each balance sheet date, the Company evaluates the available evidence about future taxable income and other possible

sources of realization of deferred tax assets and records a valuation allowance that reduces the deferred tax assets to an amount

that represents management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized.

During periods of net loss, all common stock equivalents are excluded from the diluted

EPS calculation because they are antidilutive.

Deferred income tax assets and liabilities are

recognized based on differences between the financial statement and tax basis of assets and liabilities using presently enacted tax rates.

At each balance sheet date, the Company evaluates the available evidence about future taxable income and other possible sources of realization

of deferred tax assets and records a valuation allowance that reduces the deferred tax assets to an amount that represents management’s

best estimate of the amount of such deferred tax assets that more likely than not will be realized.

Concentration of Risk

The Company’s cash is maintained at three

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

(“FDIC”) insured amount.

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

up to $250,000 per account.

As of 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.

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.

The Company’s cash is maintained at two

financial institutions and from time to time the balances for this account exceed the Federal Deposit Insurance Corporation’s (“FDIC”)

insured amount.

Balances on interest bearing deposits at banks in the United States are insured by the FDIC up to $250,000 per account.

As of March 31, 2020, the Company had six accounts with an uninsured balance of $142,111,746.

For the three months ended March 31, 2021, the

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

That customer was responsible for 11%

to total revenue.

The Company had four customers whose accounts receivable exceeded 10% of total accounts receivable.

Those customers

accounted for 69% of accounts receivable.

For the three months ended March 31, 2020, the Company had two customers whose total revenue

exceeded 10% of the total consolidated revenue.

These customers accounted for 22% of total revenue and two other customers represented

92% of accounts receivable.

Fair value of financial instruments

The carrying amounts of cash, receivables,

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

amount of the 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.

The carrying amounts of cash, receivables, accounts

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

The carrying amount of the

Production Loan Facility approximates fair value since the debt carries a variable interest rate that is tied to either the current Prime

or LIBOR rates plus an applicable spread.

We previously adopted FASB ASC 820 for financial

instruments measured at fair value on a recurring basis.

FASB ASC 820 defines fair value, establishes a framework for measuring fair value

in accordance with U.S.

GAAP and expands disclosures about fair value measurements.

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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).

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.

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.

In August 2020, the FASB issued ASU

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

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

of films by removing the content distinction for capitalization.

The amendments also require that an entity reassess estimates of the

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

The amendments in this update require that an entity test a film

or license agreement for program material within the scope of Subtopic 920-350 for impairment at a film group level when the film or license

agreement is predominantly monetized with other films and/or license agreements.

For public business entities, the amendments in this

update are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years.

We have prospectively

adopted ASU 2016-18.

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

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.

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.

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

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

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.

We have prospectively

adopted ASU No.

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 industries

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

Business Combinations

We allocate the fair

value of the purchase consideration of a business acquisition to the tangible assets, liabilities, and intangible assets acquired based

on their estimated fair values.

The excess of the fair value of purchase consideration over the fair values of these identifiable assets

and liabilities is recorded as goodwill.

The valuation of acquired assets and assumed liabilities requires significant judgment and estimates,

especially with respect to intangible assets.

The valuation of intangible assets requires that we use valuation techniques such as the

income approach.

The income approach includes the use of a discounted cash flow model, which includes discounted cash flow scenarios and

requires significant estimates such as future expected revenue, expenses, capital expenditures and other costs, and discount rates.

estimate the fair value based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable and,

as a result, actual results may differ from estimates.

Estimates associated with the accounting for acquisitions may change as additional

information becomes available regarding the assets acquired and liabilities assumed.

Acquisition-related expenses and any related restructuring

costs are recognized separately from the business combination and are expensed as incurred.

Foreign Currency Translation

The Company considers the

dollar to be its functional currency for its United States based operations.

The Company considers the Canadian dollar to be its

functional currency for its Canada based operation.

Accordingly, monetary assets and liabilities denominated in foreign currencies are

translated into U.S.

dollars at the exchange rate in effect at the balance sheet date and non-monetary assets and liabilities are translated

at the exchange rates in effect at the time of acquisition or issue.

Revenues and expenses are translated at rates approximating the exchange

rates in effect at the time of the transactions.

All exchange gains and losses are included in operations.

Acquisition of ChizComm Entities

On February 1, 2021, the Company through GBI Acquisition

LLC, a New Jersey limited liability company, and 2811210 Ontario Inc., a company organized under the laws of the Province of Ontario , two

wholly owned subsidiaries of the Company, closed its previously announced acquisition pursuant to a Purchase and Sale Agreement (the “

Agreement ”) with (i) Harold Aaron Chizick, (ii) Jennifer Mara Chizick, (iii) Wishing Thumbelina Inc.

Wishing Thumbelina ”),

and (iv) Harold Aaron Chizick and Jennifer Mara Chizick, the trustees of The Chizsix (2019) Family Trust for and on behalf of Harold Aaron

Chizick, Jennifer Mara Chizick and Jay Mark Sonshine, trustees of The Chizsix (2019) Family Trust, (the “

Trustees ”)

(each a “

Seller ”

and, collectively, “

Sellers ”), pursuant to which the Company acquired from the

Sellers all of the issued and outstanding equity interests of 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 “

Acquisition ”).

Total consideration paid by the Company in the

transaction at closing consisted of $8.5 million in cash and 1,980,658 shares (the “

Shares ”) of the Company’s common stock, $0.001 par value per share (the “

Common Stock ”)

with a value of approximately $3.5 million, both as subject to certain purchase price adjustments.

Of the Closing Shares, 674,157 shares

of Common Stock, with a value of approximately $1.2 million, were deposited into an escrow account to cover potential post-closing indemnification

obligations of Sellers under the Purchase Agreement.

Additionally, the Purchase Agreement also provides for the issuance of additional

shares of Common Stock with an aggregate value of up to $8.0 million that may be issued to the Sellers if certain EBITDA and performance

levels are achieved within a four-year period commencing on the date of the Purchase Agreement (Earn-Out).

The Acquisition

was approved by the board of directors of each Company.

Transaction costs incurred relating to this acquisition including legal and accounting

totaled $539,806, which is included in general and administrative expenses on the statement of operations.

The acquisition expands the

Company’s revenue streams into media and advertising services.

has determined that the Acquisition constitutes a business acquisition as defined by Accounting Standards Codification (“ASC”)

805, Business Combinations.

Accordingly, the assets acquired and the liabilities assumed in the transaction were recorded at their estimated

acquisition fair values, while transaction costs associated with the acquisition were expensed as incurred pursuant to the purchase method

of accounting in accordance with ASC 805.

The Company’s purchase price allocation was based on an evaluation of the appropriate

fair values and represent managements best estimate based on available data.

Fair values are determined based on the requirements of ASC

820, Fair Measurements and Disclosures (“ASC 820”).

arrangement meets the liability classification criteria outlined in ASC 480, “Distinguishing Liabilities from Equity”, as

it is not indexed to the Company’s own shares and is classified as a liability in the accompanying balance sheet.

Liability classified

contingent consideration is measured initially at the fair value on the acquisition date and is remeasured at each reporting period.

differences between the estimated fair value of the Earn-Out recorded at the acquisition date and the remeasurement date will be reflected

as a charge or credit, as applicable, in the statement of operations.

The following

table summarizes the fair value of the purchase price consideration paid to acquire ChizComm:

Cash consideration at closing

Equity consideration at closing

Fair value of Earn-Out shares

The preliminary purchase price allocation was

based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in connection with the acquisition

The accounting for the acquisition at March 31, 2021 is preliminary as the Company is finalizing its valuation and determination

of it’s intangible assets and contingent consideration and expects to be finalized in subsequent quarters.

The Company has engaged

a third party valuation firm to assist with the purchase price allocation which will be completed in subsequent quarters.

The identifiable intangible assets acquired of

$9,630,000 was composed of $3,430,000 for ChizComm’s trade name with an indefinite remaining economical life, $6,140,000 for ChizComm’s

customer base with a remaining useful life of approximately 12 years, and $60,000 for ChizComm’s non-compete agreements with a remaining

economic life of 3 years.

Management is responsible for determining the

fair value of the identifiable assets acquired as of the effective Date.

Management considered a number of factors, including reference

to an analysis under ASC 805 solely for the purpose of allocating the purchase price to the assets acquired.

Valuation Methodology

Customer relationships

for ChizComm were valued by performing a discounted cash flow analysis using the multiperiod excess earnings method.

This method includes

discounting the projected cash flows associated with existing customers based primarily upon customer turnover data over its expected

life and considers the operating expenses and contributory asset charges associated with servicing such existing customers.

cash flows attributable to the customer relationships were discounted to their present value at a rate commensurate with the perceived

The useful lives of customer relationships are estimated based primarily upon the present value of cash flows attributable to the

customer relationships.

Trademarks and trade

names for ChizComm were valued using the relief-from-royalty method.

This method is an income approach that estimates the portion of a

company’s earnings attributable to an asset based on the royalty rate the company would have paid for the use of the asset if it

did not own it.

Royalty payments are estimated by applying a royalty rate to the prospective revenue attributable to the intangible asset.

The resulting annual royalty payments are tax-affected and then discounted to present value.

Non-compete agreements

were valued using a with and without method.

Under this method, estimated prospective financial information (“PFI”) is calculated

with the existence and ownership of an intangible asset and compared to the PFI in the absence of the ownership of the intangible asset.

The after-tax differential PFI attributable to the intangible asset is then discounted to its present value.

Assumptions used in forecasting

cash flows for each of the identified intangible assets included consideration of the following:

Historical performance including sales and profitability.

Business prospects and industry expectations.

Estimated economic life of asset.

Acquisition of new customers.

Attrition of existing customers.

The acquisition was treated for tax purposed as

a nontaxable transaction and as such, the historical tax bases of the acquired tax bases of the acquired assets, net operating loose,

and other tax attributes of ChizComm will carryover.

As a result, no new goodwill for tax purposes was created on connection with the

acquisition as there is no step-up to the fair value of the underlying tax bases of the acquired net assets.

The preliminary purchase price allocation was

based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in connection with the acquisition

of ChizComm, as follows:

Accounts Receivable

Prepaids Expenses

Lease Deposits

Customer Relationships

Non-Compete Agreements

Accounts Payable and Accrued Expenses

Payroll Tax Liability

Total Consideration

Supplemental Pro Forma Information (Unaudited)

The following supplemental pro forma information

summarizes our results of operations for the periods presented, as if we completed the acquisition of ChizComm on the beginning of the

period presented.

Supplemental proforma information as follows:

Three Months Ended

March 31, 2021

March 31, 2020

Total Revenues

Net Loss Applicable to Common Shareholders

(76,885,359 )

Net Loss per Common Share (Basic and Diluted)

Weighted Average Shares Outstanding (Basic and Diluted)

Property and Equipment, Net

The Company has property and equipment as follows

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

September 30,

as of March 31, 2021 and December 31, 2020:

March 31, 2021

December 31, 2020

Furniture and Equipment

4 unchanged sentences

Property and Equipment, Net

During the three months ended September 30,

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

During the nine months ended September

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

During the three months ended March 31, 2021 and

2020, the Company recorded depreciation expense of $14,564 and $44,942, respectively.

Right of Use Leased Asset

As of February 1, 2021, as a result of the Acquisition,

management recorded lease liability and right-of-use asset of $380,050.

Right of use asset consisted of the following

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

September 30,

as of March 31, 2021 and December 31, 2020:

March 31, 2021

December 31, 2020

Office Lease Asset

4 unchanged sentences

Right of Use Asset, Net

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.

During the three months ended March 31, 2021

and 2020, the Company recorded amortization expense of $46,237 and $108,245 respectively.

Film and Television Costs, 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.

The increase primarily relates to the production

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

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

During the three months ended September 30,

2020 and 2019, the Company recorded Film and Television Cost amortization expense of $101,716 and $1,285,237, 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 September 30, 2020 and December 31, 2019:

As of March 31, 2021, the Company had net Film

and Television Costs of $13,106,729, compared to $11,828,494 at December 31, 2020.

The increases primarily relates to the development

costs related to Stan Lee’s Superhero Kindergarten offset by amortization of Rainbow Rangers Season 1 and Llama

Llama Seasons 1 & 2 .

During the three months ended March 31, 2021 and

2020, the Company recorded Film and Television Cost amortization expense of $117,947 and $979,598, respectively.

The following table highlights the activity in

Film and Television Costs of March 31, 2021, and December 31, 2020:

Film and Television Costs, Net as of December 31, 2019

Additions to Film and Television Costs

Capitalized Interest

Film Amortization Expense

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Additions to Film and Television Costs

Capitalized Interest

Film Amortization Expense

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,

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

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

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

warrant impairment to the Goodwill asset.

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

Film and Television Costs, Net as of March 31, 2021

Goodwill and Intangible Assets, Net

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

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

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

to the Goodwill asset.

As a result of the ChizComm acquisition, the consideration

exceeded the fair value of the assets acquired by $9,607,027.

Accordingly, this amount was recorded as Goodwill at the time of the acquisition.

Through March 31, 2021, the Company has not recognized any impairment to Goodwill.

The following table represents details of our

goodwill balance:

Goodwill as of December 31, 2020

Acquisition of ChizComm Entities

Goodwill as of March 31, 2021

Intangible Assets, Net

The Company had the following intangible assets

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

September 30,

as of March 31, 2021, and December 31, 2020:

March 31, 2021

December 31, 2020

Trademarks (a)

Trade Name (b)

Customer Relations (c)

Non-Compete (d)

Other Intangible Assets (a)

Intangible Assets, Gross

Less Accumulated Amortization (b)

Less Accumulated Amortization (e)

Intangible Assets, Net

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

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,

(a) 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.

(b) Amount represents fair value of the ChizComm and ChizComm Beacon Media trade names which have determined

to have an indefinite useful life.

life of 12 years.

Amortization expense for the three months ended March 31, 2021 was $85,333.

(d) Amount represents fair value of the Non-compete agreements as part of the ChizComm acquisition.

The non-compete

agreements have a useful life of 3 years.

Amortization expense for the three months ended March 31, 2021 was $3,333.

(e) During the three months ended March 31, 2021 and March 31, 2020, the Company recognized, $2,855 and $10,791,

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

Expected future intangible asset amortization as of March 31, 2021

is as follows:

Deferred Revenue

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

against future royalties and (ii) fixed fee contracts.

The Company recognizes revenue related to these contracts when all revenue

recognition criteria have been met.

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

2019, the Company has the following current accrued liabilities:

September 30,

As of March 31, 2021, and December 31, 2020, the

Company had total short term and long term deferred revenue of $4,528,503 and $4,432,377, respectively.

Deferred revenue includes both

(i) variable fee contracts with licensees and customers in which the Company had collected advances and minimum guarantees against future

royalties and (ii) fixed fee contracts.

The Company recognizes revenue related to these contracts when all revenue recognition criteria

have been met.

Included in the deferred revenue balance as of March 31, 2021 and December 31, 2020 is the $3,370,284 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

Accrued Expenses, Salaries and

Wages –

As of March 31, 2021, and December 31, 2020, the

Company has the following current accrued liabilities:

March 31, 2021

December 31, 2020

Other Accrued Expenses (a)

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Total Accrued Liabilities –

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.

Represents accrued interest and legal fees.

Represents accrued salaries and wages and accrued vacation payable to employees as of March 31, 2021 and the year ended December 31, 2020

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

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

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

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

We received approximately $4,500,000

in gross proceeds from the Offering.

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

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

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

We received approximately $4,500,000 in gross

proceeds from the Offering.

The August 2018 Secured Convertible Notes were

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

August 2018 Purchase Agreement.

During the three months ended March 31, 2020,

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

In conjunction with the February 2019 Offering

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

Waiver and Consent Agreement,”

with certain holders of our August 2018 Secured Convertible Notes.

Pursuant to the Amendment,

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

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

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

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

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

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

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

in accordance with ASC-470-50-40.

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

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

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

On March 16, 2020, the holders of the August

2018 Secured Convertible Notes were repaid in full including interest.

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.

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

2018 Purchase Agreement.

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

Senior Secured Convertible Notes and Warrant Private Placement

On March 11, 2020, we entered into a Securities

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

and collectively, the “Investors”)

pursuant to which we agreed to sell and issue (1) Senior Secured Convertible Notes to the Investors in the aggregate principal amount

of $13,750,000 (each, a “Note”

and collectively, the “2020 Convertible Notes”) and $11,000,000 funding amount

(reflecting an original issue discount of $2,750,000) and (2) warrants to purchase 65,476,190 shares of the Company’s common stock,

par value $0.001 per share (the “Common Stock”), exercisable for a period of five years at an initial exercise price of $0.26

per share (each a “Warrant”

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

of $7,000,000, and (ii) full recourse cash secured promissory notes payable by the Investors to the Company (each, an “Investor

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

(collectively, the “Financing”).

Andy Heyward, our Chairman and Chief Executive Officer, participated as an Investor and invested

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

The Special Equities

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

LTD, acted as placement agent and received warrants to purchase 6,547,619 shares at

an exercise price of $0.26 per share (the “Placement Agent Warrants”).

The closing of the sale and issuance of the 2020

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.

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

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

The Company held a stockholder meeting 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”).

In addition, pursuant to the terms of the SPA,

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

Stockholder Approval:

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

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

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

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

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

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

Company Common Stock) will have their existing warrants’

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

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

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

basis into securities issued in the new transaction.

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

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

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

On May 15, 2020, the Company received necessary

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

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

amount and for any period of time deemed appropriate by the board of directors of the Company (the “Board of Directors”),

(2) the exercise price of the Warrants shall be immediately reduced to $0.21 per share and may be further reduced to any amount and for

any period of time deemed appropriate by the Board of Directors, (3) the 2020 Convertible Notes and Warrants shall each have full ratchet

anti-dilution protection for subsequent financings (subject to certain exceptions), (4) existing warrant holders that are participating

in the Financing (representing warrants to purchase an aggregate of 8,715,229 shares of Company Common Stock) will have their existing

warrants’

exercise prices reduced to $0.21 and (5) the investors shall have a most favored nations right which provides that if

the Company enters into a subsequent financing, then the Investors (together with their affiliates) at their sole discretion shall have

the ability to exchange their 2020 Convertible Notes on a $1 for $1 basis into securities issued in the new transaction.

Additionally,

in the event that any warrants or options (or any similar security or right) issued in a subsequent financing include any terms more favorable

to the holders thereof (less favorable to the Company) than the terms of the Warrants, the Warrants shall be automatically amended to

include such more favorable terms.

On March 16, 2020, the holders of the August 2018 Secured Convertible Notes were repaid in full including

any outstanding interest.

On May 15, 2020, the Company received the necessary

Stockholder Approval in connection with the Nasdaq proposals described above.

1 unchanged sentence

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’

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.

Amortization of Principal

The 2020 Convertible Notes provide that the

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

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

(each an “Installment Date”).

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

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

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

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

Any holder of a 2020 Convertible Note may,

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

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

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

Stock or a combination thereof.

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

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

If the Company fails to redeem the Company

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

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

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

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

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

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

Price as in effect on the applicable Installment Date.

Subject to certain beneficial ownership limitations,

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

part, by the Investor into Common Stock.

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

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

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

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

Payment of Investor’s Notes

The Company will receive the applicable portion

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

The Investors may, at their

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

The Investor Notes are also subject to mandatory

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

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

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

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

The Company reports the Investor Notes and

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

as an asset and a liability, respectively.

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

Each 2020 Convertible Note is convertible,

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

in the 2020 Convertible Notes;

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

to adjustment as provided in the 2020 Convertible Notes.

On or after the date Stockholder Approval is

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

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

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

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

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

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

by the Board of Directors.

The Company classified the detachable warrants

as derivative financial liabilities that are recorded at fair value on a recurring basis separately from debt.

The Company classified

investors’

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

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

On May 15, 2020 stockholders of the Company

approved the reduction of the Conversion Price to $0.21.

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

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

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

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

As part of the conversion accounting, the Company increased

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

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

The Company estimated that the fair value of

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

2020 were immaterial.

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

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

The estimated fair value of the investor’s conversion options associated

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

The Company estimated that the fair

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

During the three months ended June 30, 2020,

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

The discount is mainly

attributable to detachable warrants and 20% original issuance discount.

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,

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

Between June 10 and June 23, 2020, the 2020

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

Between June 19 and June 23, 2020, the Convertible

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

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.

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”).

The proceeds of the Loan

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

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

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

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

Under the Loan and Security Agreement, Llama

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

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

Prime Rate Loan advances shall bear interest, on the outstanding

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

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

On August 8, 2016, Llama Productions, LLC closed

a $5,275,000 multiple draw-down, secured, non-recourse, non-revolving credit facility (the “Facility”) with Bank Leumi USA

to produce its animated series Llama Llama , (the “Series”) which is configured as fifteen half-hour episodes comprised

of thirty 11-minute programs that were delivered to Netflix in fall 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 March 31, 2020, the Company was in compliance with these covenants.

On September 28, 2018, Llama Productions LLC entered

into a Loan and Security Agreement (the “Loan and Security Agreement”) with Bank Leumi USA (the “Lender”), pursuant

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

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

sixteen 11- minute episodes of the second season of the animated series Llama Llama to be initially exhibited on Netflix.

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

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

Under the Loan and Security Agreement, Llama can

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

Loan and Security Agreement attached as an exhibit hereto.

Prime Rate Loan advances shall bear interest, on the outstanding balance thereof,

at a fluctuating per annum rate equal to 1.0% plus the Prime Rate (as such term is defined in the Loan and Security Agreement), provided

that in no event shall the interest rate applicable to Prime Rate Loans be less than 4.0% per annum.

LIBOR Loan advances shall bear interest,

on the outstanding balance thereof, for the period commencing on the funding date and ending on the date which is one (1), three (3) or

six (6) months thereafter, at a per annum rate equal to 3.25% plus the LIBOR determined for the applicable Interest Period (as such terms

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

3.25% per annum.

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

Interest rates on advances

under the Loan and Security Agreement were 4.25% as of March 31, 2021.

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.

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

the facility of $3,091,739.

Lender entered into Amendment No.

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

(the “Amendment”).

Pursuant to the Amendment, the original Loan and Security Agreement, dated as of August 8, 2016 and amended

as of November 7, 2017 (the “Original Loan and Security Agreement”), was amended to (i) reduce the loan commitment thereunder

to $1,768,010, and (ii) include the Llama Llama season two obligations under the Loan and Security Agreement as obligations under

the Original Loan and Security Agreement.

As of March 31, 2021, the Company had gross outstanding

borrowing under the facility of $688,011.

As of December 31, 2020, the Company had gross outstanding borrowing under the facility of $1,099,713.

Disputed Trade Payable

As part of the merger in 2013, the Company

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

disputes the basis for this liability.

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

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

As part of the merger in 2013, the Company assumed

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

The Company disputes

the basis for this liability.

As of December 31, 2017, the Company believes that the statute of limitations applicable to the assertion

of any legal claim relating to the collection of these liabilities has expired and therefore believes this liability is not owed.

Payroll Protection Program Loan

On April 30, 2020, the Company received loan proceeds

in the amount of $366,267 under the Paycheck Protection Program (“PPP”) which was established as part of the Coronavirus Aid,

Relief and Economic Security (“CARES”) Act and is administered through the Small Business Administration (“SBA”).

The PPP provides loans to qualifying businesses in amounts up to 2.5 times their average monthly payroll expenses and was designed to

provide a direct financial incentive for qualifying businesses to keep their workforce employed during the Coronavirus crisis.

are uncollateralized and guaranteed by the SBA and are forgivable after a “covered period”

(eight or twenty-four weeks) as

long as the borrower maintains its payroll levels and uses the loan proceeds for eligible expenses, including payroll, benefits, mortgage

interest, rent, and utilities.

The forgiveness amount will be reduced if the borrower terminates employees or reduces salaries and wages

more than 25% during the covered period.

Any unforgiven portion is payable over 2 years if issued before, or 5 years if issued after,

June 5, 2020 at an interest rate of 1% with payments deferred until the SBA remits the borrower’s loan forgiveness amount to the

lender, or, if the borrower does not apply for forgiveness, ten months after the end of the covered period.

PPP loan terms provide for

customary events of default, including payment defaults, breaches of representations and warranties, and insolvency events and may be

accelerated upon the occurrence of one or more of these events of default.

Additionally, PPP loan terms do not include prepayment penalties.

The Company repaid the loan, including interest of $3,452 on April 28, 2021.

Stockholders’

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

shares of Common Stock valued at $0.65 per share to a provider for investor relations services.

On January 15, 2020, the Company issued 3,171,428

shares of Common Stock in exchange for 667 shares of Preferred Stock at a conversion price of $0.21 per share.

On January 22, 2020, the Company entered into

the Private Transaction pursuant to the Agreement with the holder of the Original Warrants.

The Original Warrants were originally

issued on October 3, 2017, to purchase an aggregate of 500,000 shares of Common Stock, at an exercise price of $3.90 per share

and were to expire in October 2022.

Pursuant to the Agreement, the holder of the

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

Company would amend the Original Warrants to reduce the exercise price thereof to the Amended Exercise Price.

The Company received

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

On March 22, 2020, the Company entered into

the Purchase Agreement with the Investors, pursuant to which the Company agreed to issue and sell, in the Registered Offering,

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

million before deducting offering expenses.

As of March 31, 2021, the total number of authorized

shares of common stock was 400,000,000.

On March 22, 2020, the Company entered into a

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

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

“Registered Offering”), an aggregate of 4,000,000 shares Common Stock at an offering price of $0.2568 per share for gross

proceeds of approximately $1.0 million before deducting offering expenses.

The Registered Offering closed on March 25, 2020.

On May 7, 2020, we entered into a Securities

Purchase Agreement with the May 7 th Investors, pursuant to which we agreed to issue and sell, in a registered direct

offering by the Company directly to the May 7 th Investors, an aggregate of 8,000,000 shares of our Common Stock,

at an offering price of $0.35 per share for gross proceeds of approximately $2.8 million before deducting offering expenses.

On May 8, 2020, we entered into a Securities

Purchase Agreement with the May 8 th Investors, pursuant to which we agreed to issue and sell, in a registered direct

offering by the Company directly to the May 8 th Investors, an aggregate of 12,000,000 shares of our Common Stock,

at an offering price of $0.454 per share for gross proceeds of approximately $5.448 million before deducting offering expenses.

On May 18, 2020, we entered into a Securities

Purchase Agreement with the May 18 th Investors, pursuant to which we agreed to issue and sell, in a registered

direct offering by the Company directly to the May 18 th Investors, an aggregate of 7,500,000 shares of our Common

Stock, at an offering price of $1.20 per share for gross proceeds of approximately $9.0 million before deducting offering expenses.

On May 28, 2020, we entered into a Securities

Purchase Agreement with the May 28 th Investors, pursuant to which we agreed to issue and sell, in a registered

direct offering by the Company directly to the May 28 th Investors, an aggregate of 20,000,000 shares of our Common

Stock, at an offering price of $1.50 per share for gross proceeds of approximately $30.0 million before deducting offering expenses.

Between May 18 and June 11, 2020, the Company

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

Between May 15 and June 19, 2020 certain warrant

holders exercised 50,014,895 warrants in cashless transactions resulting in the issuance of 45,000,428 shares of Common Stock.

Between May 18 and June 24, 2020, the Company

issued 1,571,430 shares of Common Stock in exchange for 330 shares of Preferred Stock at a conversion price of $0.21 per share.

On June 22, 2020, the Company issued 49,610

shares of Common Stock valued at $3.85 per share to a provider for investor relations services.

Between June 10 and June 23, 2020, the 2020

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

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.

As of March 31, 2021, and December 31, 2020, there

were 300,321,658 and 258,438,514 shares of common stock outstanding, respectively.

Preferred Stock

The Company has 10,000,000 shares of preferred

stock authorized with a par value of $0.001 per share (the “Preferred Stock”).

The Board of Directors is authorized,

subject to any limitations prescribed by law, without further vote or action by our stockholders, to issue from time to time shares

of Preferred Stock in one or more series.

Each series of Preferred Stock will have such number of shares, designations, preferences,

voting powers, qualifications and special or relative rights or privileges as shall be determined by our Board of Directors, which

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

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.

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.

stock authorized with a par value of $0.001 per share.

The Board of Directors is authorized, subject to any limitations prescribed by

law, without further vote or action by our stockholders, to issue from time to time shares of preferred stock in one or more series.

series of preferred stock will have such number of shares, designations, preferences, voting powers, qualifications and special or relative

rights or privileges as shall be determined by our Board of Directors, which may include, among others, dividend rights, voting rights,

liquidation preferences, conversion rights and preemptive rights.

As of March 31, 2021, and December 31, 2020, there

were 0 and 0 shares of Series A Convertible Preferred Stock outstanding respectively.

On May 12, 2014, the Board of Directors authorized

the designation of a class of preferred stock as “Series A Convertible Preferred Stock.”

On May 14, 2014, the Company filed

the Certificate of Designation, Preferences and Rights of the 0% Series A Convertible Preferred Stock (the “Certificate of Designations”)

with the Secretary of State of the State of Nevada.

Each share of the Series A Convertible Preferred

Stock is convertible into shares of Common Stock, based on a conversion calculation equal to the Base Amount divided by the conversion

The Base Amount is defined as the sum of (i) the aggregate stated value of the Series A Convertible Preferred Stock to be converted

and (ii) all unpaid dividends thereon.

The stated value of each share of the Series A Convertible Preferred Stock is $1,000 and the initial

conversion price is $6.00 per share, subject to adjustment in the event of stock splits, dividends and recapitalizations.

Additionally,

in the event the Company issues shares of its common stock or common stock equivalents at a per share price that is lower than the conversion

price then in effect, the conversion price shall be adjusted to such lower price, subject to certain exceptions.

The Company is prohibited

from effecting a conversion of the Series A Convertible Preferred Stock to the extent that as a result of such conversion, the investor

would beneficially own more than 9.99% in the aggregate of the issued and outstanding shares of the Company’s common stock, calculated

immediately after giving effect to the issuance of shares of common stock upon conversion of the Series A Convertible Preferred Stock.

The shares of Series A Convertible Preferred Stock possess no voting rights.

On November 20, 2019, we entered into a settlement

agreement and release (“Settlement Agreement”) with certain holders of our Series A Convertible Preferred Stock (each,

a “Preferred Holder”

and collectively, the “Preferred Holders”) constituting 58% of the outstanding Series

A Preferred Stock in connection with a dispute that arose between the parties with respect to certain rights under the Certificate

of Designations.

Pursuant to the Settlement Agreement, we agreed to adjust the conversion price of the Series A Convertible Preferred

Stock to $0.21 and the parties agreed to terminate and deem null and void that certain Securities Purchase Agreement, dated as

of May 14, 2014, by and among the Preferred Holders and the other parties signatories thereto, with respect to the Preferred Holders.

The Preferred Holders, constituting the holders of at least a majority of the outstanding Preferred Shares (the “Required

Holders”), agreed and consented to an amendment and restatement of the Certificate of Designations.

The parties also agreed

to customary releases and a covenant not to sue as further contained in the Settlement Agreement.

Accordingly, on November 21,

2019, we filed an Amended and Restated Certificate of Designation (the “Amended and Restated Certificate”) for our

Series A Convertible Preferred Stock.

The amendments, among other things, had the effect of setting the conversion price of the

Series A Convertible Preferred Stock at $0.21.

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

agreement and release (“Settlement Agreement”) with certain holders of our Series A Convertible Preferred Stock (each, a “Preferred

Holder”

and collectively, the “Preferred Holders”) constituting 58% of the outstanding Series A Preferred Stock in connection

with a dispute that arose between the parties with respect to certain rights under the Certificate of Designations.

Pursuant to the Settlement

Agreement, we agreed to adjust the conversion price of the Series A Convertible Preferred Stock to $0.21 and the parties agreed to terminate

and deem null and void that certain Securities Purchase Agreement, dated as of May 14, 2014, by and among the Preferred Holders and the

other parties signatories thereto, with respect to the Preferred Holders.

The Preferred Holders, constituting the holders of at least

a majority of the outstanding Preferred Shares (the “Required Holders”), agreed and consented to an amendment and restatement

of the Certificate of Designations.

The parties also agreed to customary releases and a covenant not to sue as further contained in the

Settlement Agreement.

Accordingly, on November 21, 2019, we filed an Amended and Restated Certificate of Designation (the “Amended

and Restated Certificate”) for our Series A Convertible Preferred Stock.

The amendments, among other things, had the effect of setting

the conversion price of the Series A Convertible Preferred Stock at $0.21.

Between November 21, 2019 and December 10, 2019,

the Company issued 3,804,766 shares of the Common Stock in exchange for 798 shares of preferred Stock at a conversion price of $0.21 per

On January 9, 2020, the Company issued 3,171,428

shares of the Common Stock in exchange for 666 shares of preferred Stock at a conversion price of $0.21 per share.

Between May 18 and June 24, 2020, the Company

issued 1,571,428 shares of Common Stock in exchange for 330 shares of Series A Convertible Preferred Stock at a conversion price

of $0.21 per share.

issued 1,571,428 shares of Common Stock in exchange for 330 shares of Series A Convertible Preferred Stock at a conversion price of $0.21

On November 17, 2020, the Company issued 476,190

shares of Common Stock in exchange for 100 shares of Series A Convertible Preferred Stock at a conversion price of $0.21 per share.

On January 6, 2021, the Company issued 25,000

shares of the Company’s common stock valued at $1.40 per share for marketing services.

On January 21, 2021,

the Company issued 136,986 shares of the Company’s common stock valued at $1.46 per share for marketing services.

On February 1, 2021,

the Company issued 1,932,163 shares of the Company’s common stock valued at $1.78 per share as partial consideration for the ChizComm

On February 4, 2021,

the Company issued 48,495 shares of the Company’s common stock valued at $1.81 per share as partial consideration for the ChizComm

Stock Options

On September 18, 2015, the Company adopted

the Genius Brands International, Inc.

On September 18, 2015, the Company adopted the

Genius Brands International, Inc.

2015 Incentive Plan (the “2015 Plan”).

The 2015 Plan was approved by the Company’s

stockholders in September 2015.

The 2015 Plan as approved by the stockholders authorized the issuance up to an aggregate of 150,000

shares of Common Stock.

On December 14, 2015, the Board of Directors voted to amend the 2015 Plan to increase the total number

of shares that can be issued under the 2015 Plan by 1,293,334 from 150,000 shares to 1,443,334 shares.

The increase in shares available

for issuance under the 2015 Plan was approved by stockholders on February 3, 2016.

On May 18, 2017, the Board of Directors voted

to amend the 2015 Plan to increase the total number of shares that can be issued under the 2015 Plan by 223,333 shares from 1,443,334

shares to an aggregate of 1,667,667 shares.

The increase in shares available for issuance under the 2015 Plan was approved by the

stockholders on July 25, 2017.

On September 6, 2018, the Board of Directors voted to amend the 2015 Plan to increase the total

number of shares that can be issued under the 2015 Plan by 500,000 shares from 1,667,667 shares to an aggregate of 2,167,667 shares.

The increase in shares available for issuance under the 2015 Plan was approved by the Company’s stockholders on October 2,

On June 25, 2020, the Company granted options

to purchase 185,000 shares of Common Stock to certain employees and granted options to purchase 445,000 shares of Common Stock

to consultants for services.

These stock options generally vest in three years.

The fair value of these options was determined

to be $2,649,379 using the Black-Scholes option pricing model based on the following assumptions:

Exercise Price

$2.61 - $10.00

Dividend Yield

Risk-free interest rate

Expected life of options

The total number of shares that can be issued under

the 2015 Plan is 2,167,667 shares.

On September 1, 2020, the Company adopted the

1 unchanged sentence

2020 Incentive Plan (the “2020 Plan”).

On August 4, 2020, the Board of Directors

voted to adopt 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, 2020.

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 nine months ended September 30, 2020:

Options Outstanding Number Of Shares

Exercise Prices Per Share

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price Per Share

Aggregate Intrinsic Value

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.

During the three months ended March 31, 2021,

the Company granted options to purchase 520,000 shares of common stock to employees and granted to each of the members of the Board of

Directors 20,000 options to purchase shares of the Company’s Common Stock with an option price of $3.06 per share.

The options vest

on January 27, 2022 and have a five-year term.

The fair value of these options was determined to be $1,801,800 using the Black-Scholes

option pricing model based on the following assumptions:

Exercise Price

Dividend Yield

Risk-free interest rate

Expected life of options

The following table summarizes the changes in

the Company’s stock option plan during the three months ended March 31, 2021:

Exercise Price Per Share

Balance at December 31, 2020

1 unchanged sentence

Options Granted

$ 2.61 - 10.00

Options Exercised

1 unchanged sentence

Options Expired

Balance at September 30, 2020

Balance at March 31, 2021

$ 1.39 - 10.00

1 unchanged sentence

$ 1.39 - 9.00

Exercisable September 30, 2020

Exercisable March 31, 2021

$ 1.39 - 3.17

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.

During the three months ended March 31, 2021,

and March 31, 2020, the Company recognized $1,158,624 and $23,814, respectively in share-based compensation expense.

The unvested share-based

compensation as of March 31, 2021 was $4,510,315, which will be recognized through the fourth quarter of 2023 assuming the underlying

grants are not cancelled or forfeited.

Restricted Stock Units

On December 7, 2020, the Company granted 9,075,000

shares of Restricted Stock Units (RSU’s) with a fair market value of $12,614,250 to certain employees and officers.

On February 1, 2021, the Company issued 53,763

shares of Restricted Stock Units (RSU’s) with a fair market value of $82,594.

The following table summarizes the Company’s

restricted stock issuance during the three months ended December 31, 2020:

Outstanding Number Of

Contractual Life

Balance at December 31, 2020

RSUs Exercised

RSUs Cancelled

Balance at March 31, 2021

$ 1.38 - 1.39

Exercisable December 31, 2019

Exercisable March 31, 2021

During the quarter ended March 31, 2021, the Company

recognized $1,414,524 in share-based compensation expense.

The unvested share-based compensation as of March 31, 2021 is $8,734,200 which

will be recognized through the fourth quarter of 2024 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”).

The Company received $1,757,552 in net proceeds from this offering.

Each share of Common Stock was accompanied

by a registered warrant to purchase one share of Common Stock at an exercise price of $2.12.

Each share of Common Stock and accompanying

registered warrant were sold at a combined purchase price of $2.12.

The shares of Common Stock and registered warrants were purchased

together and were issued separately and were immediately separable upon issuance.

In a concurrent private placement, the Company

also sold to the purchaser in the February 2019 Offering, warrants to purchase up to 945,894 shares of our Common Stock, or the

private warrants.

In connection with the February 2019 Offering

and concurrent private placement, we entered into the Amendment, Waiver and Consent Agreement with certain holders of our August

2018 Secured Convertible Notes.

Pursuant to the Amendment, Waiver and Consent Agreement, such holders agreed to amend the notes

purchase agreement, waive any applicable rights and remedies under the notes purchase agreement, and consent to the February 2019

Offering and concurrent private placement.

In consideration for such Amendment, Waiver and Consent Agreement, we agreed to issue

such holders warrants to purchase up to an aggregate amount of 1,800,000 shares of our Common Stock.

Such warrants have an exercise

price of $2.55 per share, will become exercisable commencing six months and one day from the date of issuance and will expire five

(5) years from the date of issuance.

The allocation of carrying basis between the

Warrants issued and the August 2018 Secured Convertible Notes was determined based on relative valuation.

The carrying basis attributable

to the Warrants to acquire Common Stock was $1,287,962 and was calculated using the Black-Scholes option pricing model.

On July 22, 2019, the Company entered into

an amendment, waiver and consent agreement (the “Amendment, Waiver and Consent”) with certain holders constituting

(i) a majority-in-interest of the holders of the August 2018 Secured Convertible Notes and (ii) 51% in interest of the shares of

Common Stock issued pursuant to a securities purchase agreement, dated as of January 8, 2018, by and among the Company and the

purchasers identified on the signature pages thereto (the “January 2018 Purchase Agreement”).

Pursuant to the Amendment,

Waiver and Consent, such holders have agreed to (i) amend the definition of “Exempt Issuance”

in each of the August

2018 Purchase Agreement and January 2018 Purchase Agreement to include an agreement to issue or announce the issuance or proposed

issuance of Common Stock or Common Stock Equivalents (as that term is defined in each of the August 2018 Purchase Agreement and

January 2018 Purchase Agreement) in a public offering for an effective per share purchase price of Common Stock of less than $2.50

(the “Offering”), (ii) waive any applicable rights and remedies under the August 2018 Purchase Agreement and January

2018 Purchase Agreement, and (iii) consent to the Offering.

In consideration for the Amendment, Waiver and Consent, the Company

agreed to reduce the conversion price of the Notes from $2.50 per share of Common Stock to $1.515 (the “Note Amendment”)

and issue all of the purchasers under the August 2018 Purchase Agreement warrants to purchase up to an aggregate of 1,800,000 shares

of our Common Stock (the “Waiver Warrants”).

The Waiver Warrants will have an exercise price of $1.14 per share, will

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

On September 18, 2019, the Company entered

into a private transaction (the “2019 Private Transaction”) pursuant to the Agreement with the holder of the Original

The Original Warrants were originally issued on February 19, 2019, to purchase an aggregate of 945,894 shares of Common

Stock at an exercise price of $2.12 per share and 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

Stock at an exercise price of $0.76 per share.

Each Warrant will be immediately exercisable on the date of its issuance and will

expire five years from the date it becomes exercisable.

Subject to limited exceptions, a holder of a Warrant will not have the

right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of

4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise.

The Special Equities

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

LTD, acted as placement agent and 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.

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,

up to 45,511,965 and 45,511,965 shares as of March 31, 2021 and December 31, 2020, respectively.

On January 22, 2020, the Company entered into

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

The Original Warrants

were originally issued on October 3, 2017, to purchase an aggregate of 500,000 shares of Common Stock, at an exercise price of

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

Pursuant to the Agreement, the holder of the

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

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

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

The Company received

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

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

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

The Original Warrants were originally issued

on October 3, 2017, to purchase an aggregate of 500,000 shares of Common Stock, at an exercise price of $3.90 per share and were to expire

in October 2022.

Pursuant to the Agreement, the holder of the Original

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

the Original Warrants to reduce the exercise price thereof to $0.34 (the average closing price of the common stock (as reflected on Nasdaq.com)

for the five trading days immediately preceding the signing of the Agreement) (the “Amended Exercise Price”).

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

The placement agent received warrants to purchase

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Pursuant to the SPA described in Note 11, the

Company issued to the note holders warrants to purchase 65,476,191 shares of Common Stock, exercisable for a period of five years

at an initial exercise price of $0.26 per share.

The placement agent received warrants to purchase

6,547,619 shares at an exercise price of $0.26 per share.

On May 15, 2020 stockholders of the Company

approved the reduction in warrants exercise price for the 2020 Convertible Notes holders to $0.21.

During the three months ended

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 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 nine months ended September 30, 2020:

Warrants Outstanding Number Of Shares

Company issued to the note holders warrants to purchase 65,476,191 shares of Common Stock, exercisable for a period of five years at an

initial exercise price of $0.26 per share.

The placement agent received warrants to purchase 6,547,619 shares

at an exercise price of $0.26 per share.

The fair values of derivative warrants attached to 2020 Convertible Notes and Notes conversion

option were determined based on Level 3 inputs, using the Black-Scholes-Merton model with standard valuation inputs.

The valuation

inputs at March 17, 2020 included expected volatility of 88.98%, and annual interest rate of 0.66%.

On January 28, 2021, the Company entered into

letter agreements (the “Letter Agreements”) with certain existing institutional and accredited investors to exercise certain

outstanding warrants (the “Existing Warrants”) to purchase up to an aggregate of 39,740,500 shares of the Company’s

common stock at their original exercise price of $1.55 per share (the “Exercise”).

The Company received approximately $61.6

million in gross proceeds.

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

Ltd., acted as warrant solicitation agent

and received a cash fee of approximately $4.3 million.

In consideration for the exercise of the Existing Warrants for cash, the exercising

holders will receive new unregistered warrants to purchase up to an aggregate of 39,740,500 shares of common stock (the “New Warrants”)

at an exercise price of $2.37 per share and with an exercise period of five years from the initial issuance date.

Pursuant to the Letter

Agreements, the New Warrants are substantially in the form of the Existing Warrants (except for customary legends and other language typical

for an unregistered warrant, including the ability for the holder of the New Warrant to make a cashless exercise if no resale registration

statement covering the common stock underlying the New Warrants is effective after six months), will be exercisable immediately, and will

have a term of exercise of five years, The Company registered the New Warrants.

The valuation inputs at January 28, 2021 included expected

volatility of 143.85%, and annual interest rate of 0.42%.

The fair value of these warrants was determined to be $69,138,527 using the

Black-Scholes option pricing model, which was recorded as a warrant incentive expense and included in the calculation of the Net Loss

per Common Share, based on the following assumptions:

Exercise Price

Dividend Yield

Risk-free interest rate

Expected life of options

The following table summarizes the changes in

the Company’s outstanding warrants during the three months ended March 31, 2021:

Exercise Prices

Average Remaining Contractual Life

Weighted Average Exercise Price Per Share

Contractual Life

Exercise Price

Balance at December 31, 2020

$ 0.21 - 5.30

Warrants Granted

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Warrants Expired

Balance at September 30, 2020

Balance at March 31, 2021

$ 0.21 - 5.30

Exercisable December 31, 2019

Exercisable September 30, 2020

$ 0.76 - 6.00

Exercisable December 31, 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.

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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it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position.

If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the

financial statements.

The Company includes interest and penalties

arising from the underpayment of income taxes in the consolidated statements of operation in the provision for income taxes.

of 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 more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial

The Company includes interest and penalties arising

from the underpayment of income taxes in the statements of operation in the provision for income taxes.

As of March 31, 2021, and December

31, 2020, the Company had no accrued interest or penalties related to uncertain tax positions.

The Company files income tax returns in the U.S.

federal jurisdiction and in the state of California and Massachusetts, and New Jersey.

The Company is currently subject to U.S.

federal, state

and local, or non-U.S.

state and local, or non-U.S.

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

Genius Brands International, Inc.

is subject to

US income taxes on a stand-alone basis.

Genius Brands International, Inc.

and ChizComm Canada file separate stand-alone tax returns in

each jurisdiction in which they operate.

ChizComm Canada is a corporation operating in Canada and is subject to Canadian income taxes

on its stand-alone taxable income.

Commitment and Contingencies

In February 2016, the FASB issued Accounting

Standards Update 2016-02, “Leases.”

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

from leases on the balance sheet.

For practically all leases, a lessee should recognize in the statement of financial position

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

asset for the lease term.

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

In July 2018, the FASB issued 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 February 2016, the FASB issued Accounting Standards

Update 2016-02, “Leases.”

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

the balance sheet.

For practically all leases, a lessee should recognize in the statement of financial position a liability to make lease

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

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

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

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

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

guidance in accordance with ASC 840, Leases.

Management will use this optional transition method.

As of January 1, 2019, management recorded lease liability

of $2,071,903, right-of-use asset of $2,153,747, 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.

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 March 31, 2021, weighted-average lease term

for operating leases equals to 74.70 months.

Weighted-average discount rate equals to 9.86%.

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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

1 unchanged sentence

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.

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.

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

escalations of 3.5%.

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 commenced on August 1, 2019.

We will pay rent of $392,316 annually, subject to annual escalations of 3.5%.

On February 1, 2021,

as part of the Acquisition, the Company assumed an operating lease that entered into on May 19, 2019 for 6845 square feet of general office

space located at 245 Fairview Mall Drive, Suites 202 and 301, Toronto, Ontario M2J 4T1 pursuant to a 84 month lease which commenced on

October 1, 2019.

We pay rent of $95,830 annually, subject to annual escalations 5% to 7%.

On February 1, 2021, as part of the Acquisition,

the Company assumed an operating lease that entered into on April 30, 2019 for 3,379 square feet of general office space located at One

International Boulevard, 11 th Floor, Mahawh, New Jersey pursuant to a 24 month lease which commenced on May 1, 2019.

rent of $74,338 annually.

On March 2, 2021, the Company entered into an

operating lease for 4,765 square feet of general office space located at 1050 Wall Street West, Suite 665, Lyndhurst NJ, 07071 pursuant

to a 89 month lease which is expected to commence on August 1, 2021.

We will pay $114,360 annually subject to annual escalations of 2.5%.

In addition, the Company has contractual commitments

1 unchanged sentence

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 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.

during the three months ended March 31, 2021 and March 31, 2020 were $112,343 and $207,839, respectively.

During the three months ended

March 31, 2021 and March 31, 2020, we received sub-lease income of $0 and $121,070, respectively.

The following is a schedule of future minimum contractual obligations

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

as of March 31, 2021, under the Company’s operating leases and employment agreements:

Operating Leases

2 unchanged sentences

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,

the Company’s Chief Executive Officer.

The Company entered into a customary merchandise license agreement with AHAA for the

use of characters and logos related to Warren Buffett’s Secret Millionaires Club and Stan Lee’s Mighty 7

in connection with certain products to be sold by AHAA.

The terms and conditions of such license are customary within the industry,

and the Company earns an arm-length industry standard royalty on all sales made by AHAA utilizing the licensed content.

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.

Heyward was paid

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

Pursuant to his employment agreement dated

November 16, 2018, Mr.

Heyward is entitled to an Executive Producer fee of $12,400 per half hour episode for each episode he provides

services as an executive producer.

Pursuant to his employment agreements dated November

16, 2018 and November 16, 2020, Mr.

Heyward is entitled to an Executive Producer fee of $12,400 per half hour episode for each episode

he provides services as an executive producer.

The first identified series under this employment agreement is Rainbow Rangers.

December 31, 2019, 26 half hours had been delivered and accordingly Mr.

Heyward was owed $322,400, which is included in the Due

To Related Party line item on our consolidated balance sheet.

The second identified series under this employment agreement is Rainbow

Rangers Season 2.

As of December 31, 2019, 13 half hours had been delivered and accordingly Mr.

Heyward was owed $161,200,

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

Both of these amounts were paid on March

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.

Heyward purchased

$500,000 of the August 2018 Secured Convertible Notes from another holder.

The Company did not receive any proceeds from this transaction.

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.

the year ended December 31, 2020, 13 half hours had been delivered and accordingly Mr.

Heyward was paid $161,200.

The second identified

series under this employment agreement is Rainbow Rangers Season 2.

During the year ended December 31, 2020, 26 half hours had

been delivered and accordingly Mr.

Heyward was paid $322,400.

On July 21, 2020, the Company entered into a merchandising

and licensing agreement with Andy Heyward Animation Art (“AHAA”), whose principal is Andy Heyward, the Company’s Chief

Executive Officer.

The Company entered into a customary merchandise license agreement with AHAA for the use of characters and logos related

to Warren Buffett’s Secret Millionaires Club and Stan Lee’s Mighty 7 in connection with certain products to

be sold by AHAA.

The terms and conditions of such license are customary within the industry, and the Company earns an arm-length industry

standard royalty on all sales made by AHAA utilizing the licensed content.

During the three months ended March 31, 2021, the Company earned

$0 in royalties from this agreement.

On March 11, 2020, Mr.

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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

On December 7, 2020, Mr.

Heyward’s was granted

7,500,000 Restricted Stock Units vest 1,875,000 on each of the next four anniversary dates.

Heyward was also granted 7,500,000 Performance

Based Restricted Stock Units that, if awarded, vest 1,875,000 on each of the next four anniversary dates.

On December 7, 2020, Mr.

Heyward’s was granted

5,000,000 options to purchase shares of the Company’s Common Stock at $1.39 per share.

The options vest on the grant date.

During the year ended December 31, 2020, Mr.

was paid a bonus of $73,528, $11,370 in interest on the Senior Convertible Notes and $3,000 in board fees for his attendance at the unscheduled

board meetings.

During the year ended December 31, 2020, the Company

paid $380,989 for security at Mr.

Heyward’s residence.

As of March 31, 2021, Mr.

Heyward is owed $1,349

for reimbursable expenses which are included in the Due To Related Parties line item on our condensed consolidated balance sheet.

Segment Reporting

The Company has determined that it operates in

two operating segments, the production and distribution of children’s content and provides media and advertising services.

The following table presents sales and earnings

within our two operating segments.

Content Production & Distribution

Media & Advertising Services

Total Revenue

% of segment revenue

$ 198,387,023

$ 205,792,963

% of segment assets

Subsequent Events

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.

Pursuant to FASB ASC 855, management has evaluated

all events and transactions that occurred from March 31, 2021 through the date of issuance of these financial statements.

period, we did not have any significant subsequent events, except as disclosed below:

On April 7, 2021, the Company finalized a Mutual Termination Agreement

with Mattel, Inc., with regard to its Rainbow Rangers property.

The agreement allows the Company to contract with other companies for

the design, manufacturing of Rainbow Rangers toys.

April 14, 2021, Mr.

Heyward was paid a bonus

On April 28, 2021, the Company repaid the Payroll

Protection Program loan, including interest which totaled $369,779.

On May 14, 2021, the Company issued 469,677 shares

of the Company’s common stock valued at $1.55 per share for production services.

Coronavirus (COVID-19)

With respect to the ongoing and evolving coronavirus

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

caused substantial disruption in international and U.S.

economies and markets.

COVID-19 has had an adverse impact on the entertainment

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

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

A return-to-work plan for the Company is under development and is expected to be implemented, on a phased in basis, commencing

in June of 2021.

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.

If there is a resurgence and the COVID-19 outbreak is prolonged, we may 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 statements.

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.

To date, we believe that COVID-19 has not caused a material negative impact on our business, including the effects on

our customers, suppliers or vendors, or on our financial results.

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