What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-18 compared with 2020-11-16 · 360 added, 580 removed, 75 unchanged (93% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of

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

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

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

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

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

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

Forward-looking statements reflect intent,

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

future events and financial trends affecting us.

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of our

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

and related notes for the three months ended March 31, 2021 and 2020.

Certain statements made or incorporated by reference in this report

and our other filings with the Securities and Exchange Commission, in our press releases and in statements made by or with the approval

of authorized personnel constitute forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,

and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are subject to the safe harbor created thereby.

Forward-looking statements reflect intent, belief, current expectations, estimates or projections about, among other things, our industry,

management’s beliefs, and future events and financial trends affecting us.

Words such as “anticipates,”

9 unchanged sentences

In addition, any statements

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

assumptions, are forward looking statements.

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

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

that are difficult to predict.

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

forward-looking statements as a result of various factors.

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

section entitled “Item 1A.

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

are forward looking statements.

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

statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult

Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements

as a result of various factors.

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

Risk Factors”

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

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

Forward-looking

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

speak only as of the date of those documents.

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

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

In light of these

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

in our Annual Report on Form 10-K filed on March 31, 2021 and elsewhere in this report, as well as other factors that

may affect our business, results of operations, or financial condition.

Forward-looking statements in this report speak only as of the

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

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

of new information, future events or otherwise.

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

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

The management’s discussion and analysis

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

The preparation of these financial

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

and related disclosure of contingent assets and liabilities.

Management bases its estimates on historical experience and on various

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

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

Actual results may differ

from these estimates under different assumptions and conditions.

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

States of America.

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

amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities.

Management bases its estimates

on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which

form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

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

Genius Brands International, Inc.

2 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”

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

Our library titles include the award winning Baby Genius , adventure comedy Thomas Edison's Secret Lab®

and Warren Buffett's Secret Millionaires Club , created with and starring iconic investor Warren Buffett, which is distributed

across our Genius Brands Network on Comcast’s Xfinity on Demand, AppleTV, Roku, Amazon Fire, YouTube, Amazon Prime, Cox,

Dish, Sling and Zumo as well as Connected TV.

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

Kindergarten with Stan Lee’s Pow!

Entertainment, Oak Productions and Alibaba.

Arnold Schwarzenegger lends his voice

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

The show will be broadcast in the United States on Amazon Prime and

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

In July, 2020, the Company entered into a binding term sheet

with POW, Inc.

(“POW!”) in which we agreed to form a entity with POW!

to exploit certain rights in intellectual property

created by Stan Lee, as well as the name and likeness of Stan Lee.

The entity called “Stan Lee Universe, LLC”

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

In addition, we act as licensing agent for

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

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

Recent Developments

January 2020 Warrant Exercise Agreement

On January 22, 2020, we entered into a private

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

(the “Original Warrants”).

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

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

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

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

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

immediately preceding the signing of the Agreement).

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

March 2020 Secured Convertible Note and Warrant Private Placement

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 Note”

and collectively, the “Investor Notes”) in the

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

Andy Heyward,

our Chairman and Chief Executive Officer, participated as an Investor and invested $1,000,000 in connection with the Financing,

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

The Special Equities Group, LLC, a division of Bradley

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

per share (the “Placement Agent Warrants”).

The closing of the sale and issuance of the

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

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

The Company agreed to hold a stockholder meeting

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In addition, pursuant to the terms of the SPA,

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

Stockholder Approval:

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

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

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

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

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

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

Company Common Stock) will have their existing warrants’

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

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

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

basis into securities issued in the new transaction.

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

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

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

In addition, for as long as any 2020 Convertible

Notes or Warrants remain outstanding, the Company will not (i) issue or sell any rights, warrants or options to subscribe for or

purchase Common Stock or directly or indirectly convertible into or exchangeable or exercisable for Common Stock at a price which

varies or may vary with the market price of the Common Stock, including by way of one or more reset(s) to any fixed price, unless

the conversion, exchange or exercise price of any such security cannot be less than the then applicable Conversion Price with respect

to the Common Stock into which any 2020 Convertible Notes are convertible or redeemable or the then applicable Exercise Price (as

defined in the Warrants) with respect to the Common Stock into which any Warrant is exercisable or (ii) enter into, or effect any

transaction under, any agreement, including, but not limited to, an equity line of credit, an “at-the-market”

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

On March 16, 2020 the holders of the August

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

The 2020 Convertible Notes provide that the

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

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

(each an “Installment Date”).

On each Installment Date, assuming that certain Equity Conditions are met and Stockholder

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

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

of the installment amount in cash.

Each 2020 Convertible Note is convertible,

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

in the 2020 Convertible Notes (the “Conversion Price”);

provided, however, upon receipt of Stockholder Approval, the

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

On or after the date Stockholder Approval is

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

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

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

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

Any such adjustment

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

Upon Stockholder

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

of Directors.

On May 15, 2020, the Company received the necessary

Stockholder Approval in connection with the Nasdaq proposals described above.

As a result, the Conversion Price of the 2020 Convertible

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

In addition, existing warrant holders that participated

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

exercise prices reduced to $0.21.

March 2020 Securities Purchase Agreement

On March 22, 2020, we entered into a Securities

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

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

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

deducting offering expenses.

May 2020 Securities Purchase Agreements

On May 7, 2020, the Company entered into a

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

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

an aggregate of 8,000,000 shares Common Stock at an offering price of $0.35 per share for gross proceeds of $2.8 million before

deducting the placement agent fees and offering expenses.

The Registered Offering closed on May 8, 2020.

On May 8, 2020, the Company entered into a

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

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

an aggregate of 12,000,000 shares Common Stock at an offering price of $0.454 per share for gross proceeds of $5.448 million before

deducting the placement agent fees and offering expenses.

The Registered Offering closed on May 12, 2020.

On May 18, 2020, we entered into a Securities

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

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

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

$9.0 million before deducting offering expenses.

On May 28, 2020, we entered into a Securities

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

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

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

$30.0 million before deducting offering expenses.

Warrant Exercises

During the three months ended September 30,

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

October 2020 Securities Purchase Agreement

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

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

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

Common Stock, at an offering price of $1.55 per fixed combination of one share of Common Stock and a warrant to purchase one share

of Common Stock for gross proceeds of approximately $57.9 million before deducting offering expenses.

November 2020

Letter of Intent

On November 15, 2020, the Company entered into a binding letter

of intent (the “Letter of Intent”) with ChizComm Ltd., a corporation organized in Canada (“ChizComm Canada”),

and ChizComm USA Corp., a New Jersey corporation (“ChizComm USA”

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

The Company expects to acquire 100% of the equity interests of ChizComm in exchange for (i) $8.5 million in cash and (ii) $3.5

million of shares of the Company’s unregistered common stock, at a per share price equal to the closing price of the Company’s

common stock on the day prior to the closing of the acquisition, for a total $12 million transaction value (the “Transaction

Value”).

As detailed in the Letter of Intent, $2 million of the Transaction Value would be allocated to the acquisition of

2 million new subscribers for the Company’s Kartoon Channel!.

Further, ChizComm would be entitled to additional consideration

of up to $8 million if the Company meets certain milestones following the acquisition, as set out in the Letter of Intent.

Company expects to negotiate and execute definitive agreements with ChizComm and to consummate the transactions contemplated in

the Letter of Intent in the first fiscal quarter of 2021.

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,

and the Company are finalizing the details of the venture.

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.

Recent Financings

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 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), 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.

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.

(“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

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

the office as needed.

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

our animation production partners.

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

services in 2020.

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

activity decelerates in the U.S.

and across the world.

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

toy releases.

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

-19 outbreak.

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

New to market

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

Other consumer products licensees’

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

If the COVID-19 outbreak is prolonged, we

will see a negative impact on our revenues.

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 underdevelopment 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

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

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

customers, partners and stockholders.

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

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

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.

Results of Operations

Our summary results for the three months ended

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

March 31, 2021, and March 31, 2020 are below.

Three Months Ended

September 30,

March 31, 2021

March 31, 2020

Licensing & Royalties

Media Advisory & Advertising Services

Television & Home Entertainment

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Total Revenue

$ (3,195,004 )

Licensing and royalty revenue include items

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

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

Licensing and royalty revenue include items for

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

During the three months ended March 31, 2021 compared to the three months ended March 31, 2020, Licensing and Royalty revenue decreased

$32,905, or 16%.

Television & Home Entertainment revenue

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

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

Fluctuations in Television & Home Entertainment revenue occur

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

of the content to the customer.

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

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

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

ending September 30, 2020 .

Advertising sales are generated on the “Kartoon

Channel!”

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

Advertising sales decreased by $104,319

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

The increase is

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

Media & Advertising Services revenue is a

combination of client retainer fee-based services and media commissions.

The increase of $753,388 was a result of the ChizComm acquisition

on February 1, 2021.

Television & Home Entertainment revenue is

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

sale of DVDs for home entertainment through our partners.

Fluctuations in Television & Home Entertainment revenue occur period over

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

to the customer.

During the three months ended March 31, 2021 compared to the three months ended March 31, 2020, Television & Home

Entertainment revenue increased $31,254, or 60%.

Advertising sales are generated on the Kid Genius

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

Advertising sales decreased by $22,195 or

28%, during the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

Product sales are generated through Merch by Amazon

and consist of on-demand printed t-shirt sales for the Llama Llama and Rainbow Rangers brands.

Product sales decreased $18 or 4%, during

the three months ended March 31, 2021 compared to the three months ended March 31, 2021.

Three Months Ended

September 30,

Marketing and Sales

Direct Operating Costs

General and Administrative

Interest Expense

$ (1,418,584 )

Marketing and sales expenses increased $267,328,

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

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

Direct operating costs include costs of our

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

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

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

Direct operating costs for

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

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

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

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

General and administrative expenses consist

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

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

General and administrative

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

This increase

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

Interest expense for the three months

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

This decrease is due to the interest

expense related to the August 2018 Secured Convertible Notes.

Interest expense for the three months ended September 30, 2019

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

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

Therefore, there was no amortization of

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

Our summary results for the nine months ended

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

Nine Months Ended

September 30,

Licensing & Royalties

Television & Home Entertainment

Advertising Sales

Product Sales

Total Revenue

$ (3,984,781 )

Licensing and royalty revenue include items

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

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

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

Television & Home Entertainment revenue

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

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

Fluctuations in Television & Home Entertainment revenue occur

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

of the content to the customer.

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

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

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

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

Advertising sales are generated on the “Kartoon

Channel!”

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

Advertising sales increased by $7,012,

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

The increase is due

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

Nine Months Ended

September 30,

March 31, 2021

March 31, 2020

Marketing and Sales

3 unchanged sentences

Marketing and sales expenses increased $489,128,

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

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

Direct operating costs include costs of our

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

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

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

Direct operating costs for

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

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

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

September 30, 2019.

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

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

Llama Season 2 property.

General and administrative expenses consist

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

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

General and administrative

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

This increase

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

Interest expense for the nine months ended

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

This increase is due to the expensing of the

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

This was partially offset by reductions in the amortization

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

or 434%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to an increase in marketing

and advertising expenses to promote Stan Lee’s Superhero Kindergarten.

Direct operating costs include costs of our product

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

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

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

During the three months ended March 31, 2021, we recorded

film and television cost amortization expense of $117,947 and participation expense of $124,513 compared to expenses of $106,614 and $119,469,

respectively, for the three months ended March 31, 2020.

The increases in direct operating costs for the three months ended March 31,

2021 compared to the prior year period reflect decreases in film amortization and participation expenses related to decreased revenues

from the Rainbow Rangers property.

General and administrative expenses consist primarily

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

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

General and administrative expenses for

three months ended March 31, 2021 increased $5,171,245, or 293%, compared to the same period in 2020.

This increase was primarily related

to the acquisition of the ChizComm entities, increases in legal professional fees, share based compensation, rent expense, and bad debt.

Interest expense for the three months ended March

31, 2021 decreased $712,297, or 99%, compared to the same period in 2020.

This decrease was due to the expensing of the debt discount

in excess of principal related to the Senior Secured Convertible Notes in 2020.

Liquidity and Capital Resources

Working Capital

As of September 30, 2020, we had current assets

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

capital of $47,874,048, compared to negative working capital of $3,650,136 as of December 31, 2019.

Prior to the Company’s successful capital

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

of the United States of America.

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

amount of $366,267.

The loan has an interest rate of one percent (1%) per year and matures on April 19, 2021.

The loan may be eligible,

in whole or in part, for forgiveness pursuant to the PPP.

The Company shall apply to the lender for loan forgiveness in accordance

with the PPP as implemented by the SBA.

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

Comparison of Cash Flows for the Nine Months

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

As of March 31, 2021, we had current assets of

$159,186,104, including cash and cash equivalents of $143,612,749, and current liabilities of $15,341,320, resulting in working capital

of $143,844,784.

As of December 31, 2020, we had current assets of $108,566,089, including cash and cash equivalents of $100,456,324,

and current liabilities of $7,178,906, resulting in working capital of $101,387,183.

Increases in working capital resulted from increases

in cash and accounts receivable.

During the three months ended March 31, 2021,

we met our immediate cash requirements through existing cash balances.

Additionally, we used equity and equity-linked instruments to pay

for services and compensation.

We believe that our current cash and cash equivalents balances are sufficient to support our operations

for at least the next twelve months.

To meet our short and long-term liquidity needs, we expect to use existing cash balances.

Comparison of Cash Flows for the Three Months

Ended March 31, 2021, and March 31, 2020

Our total cash and cash equivalents were $143,612,749

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

and $2,760,048 at March 31, 2021, and 2020, respectively.

Comparison of Cash Flows

Nine Months Ended

September 30,

Three Months Ended

March 31, 2021

March 31, 2020

Cash used in operations

4 unchanged sentences

Increase (decrease) in cash and cash equivalents

$ (2,451,465 )

During the nine months ended September 30,

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

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

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

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

During the three months ended March 31, 2021,

our primary sources of cash were the net proceeds from the January warrant exercise of $57,264,656, partially offset by the repayment

of the Production Facility of $411,702.

Operating Activities

Cash used in operating activities for the nine

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

period in the prior year.

Cash used in operating activities for the three

months ended March 31, 2021 was $5,855,273 as compared to cash used in operating activities of $995,517 during the comparable period in

The increase in cash used in operating activities was primarily due to the increases in the net loss, in stock-based compensation

expense, accounts receivable (primarily due to the ChizComm Acquisition) and film and television costs.

These increases were partially

offset by increases in accounts payable (primarily due to the ChizComm acquisition).

Investing Activities

Cash used in investing activities for the nine

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

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

of property and equipment.

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

Cash used in investing activities for the three

months ended March 31, 2021 was $8,055,852 as compared to a use of $0 for the three months ended March 31, 2020.

Investing activities

include the cash portion of the ChizComm Acquisition of $8,500,000 which occurred on February 1, 2021.

Financing Activities

Cash provided by financing activities for the

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

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

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

from the collection of the Investor Notes.

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

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

costs for Rainbow Rangers Season 2.

three months ended March 31, 2021 was $57,067,550 as compared to $3,450,444 cash provided by the comparable period in 2020.

is primarily attributable to the net proceeds from the January 28, 2021 warrant exercise of $57,264,656.

Capital Expenditures

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

material commitments for capital expenditures.

As of March 31, 2021, we do not have any material

commitments for capital expenditures except for the purchase of furniture and equipment which is estimated to be $180,000.

Critical Accounting Policies

Our accounting policies are described in the

notes to the financial statements.

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

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

Our accounting policies are described in the notes

to the financial statements.

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

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

Principles of Consolidation

The accompanying consolidated financial statements

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

Rangers Productions.

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

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

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

All significant inter-company balances and

transactions have been eliminated in consolidation.

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 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 January 1, 2019, management recorded

lease liability of $2,071,903, right-of-use asset of $2,029,677, a reversal of previously recorded deferred rent of $37,920 and the increase

in accumulated deficit of $4,306.

Goodwill and Intangible Assets

Goodwill represents the excess of purchase

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

In accordance

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

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

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

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

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

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

the applicable discount rates.

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

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

in future periods.

Other intangible assets have been acquired,

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

In accordance

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

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

Annual amortization of these

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

Goodwill represents the excess of purchase price

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

In accordance with

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

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

We complete the annual

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

To test for goodwill impairment, we are

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

While we may use a variety of methods

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

We estimate future cash flows and allocations

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

Changes to our judgments

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

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

Other intangible assets have been acquired, either

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

In accordance with FASB

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

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

Annual amortization of these intangible assets is computed

based on the straight-line method over the remaining economic life of the asset.

Film and Television Costs

We capitalize production costs for episodic

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

Accordingly, production costs

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

over the period of commitment.

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

of delivery of the episodes.

We capitalize production costs for 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.

Accordingly, production costs are capitalized at actual

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

recognized as revenue.

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

costs through expected future sales.

Additionally, for both episodic series and films,

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

After the initial

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

alterations to existing products are expensed as incurred.

Debt and Attached Equity-Linked Instruments

The Company measures issued debt on an amortized

cost basis, net of debt premium/discount and debt issuance costs amortized using the effective interest rate method or the straight-line

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

The Company accounts for the proceeds from

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

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

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

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

conversion feature as a liability.

The Company analyzes freestanding equity-linked

instruments including warrants attached to debt to conclude whether the instrument meets the definition of the derivative and whether

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

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

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

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

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

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

relative fair value with no subsequent re-measurement.

When the equity classification requirements are not met, the instrument

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

When required, the Company also considers the

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

We measure issued debt on an amortized cost basis,

net of debt premium/discount and debt issuance costs amortized using the effective interest rate method or the straight-line method when

the latter does not lead to materially different results.

We account for the proceeds from the issuance

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

Pursuant to FASB ASC 470-20,

the intrinsic value of the embedded conversion feature (beneficial conversion interest), which is in the money on the commitment date

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

When the conversion option

is not separated, we account for the entire convertible instrument including debt and the conversion feature as a liability.

We analyze freestanding equity-linked instruments

including warrants attached to debt to conclude whether the instrument meets the definition of the derivative and whether it is considered

indexed to our own stock.

If the instrument is not considered indexed to our stock, it is classified as an asset or liability recorded

at fair value.

If the instrument considered indexed to our stock, we analyze additional equity classification requirements per ASC 815-40

Contract’s in Entity’s Own Equity.

When the requirements are met the instrument is recorded as part of our equity, initially

measured based on its relative fair value with no subsequent re-measurement.

When the equity classification requirements are not met,

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

When required, we also consider the bifurcation

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

Revenue Recognition

On January 1, 2018, we adopted the new accounting

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

the modified retrospective method applied to those contracts which were not completed as of January 1, 2018.

Results for reporting

periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue

to be reported in accordance with our historic accounting under Topic 605.

The Company accounts for revenue according to

standard ASC 606 (Topic 606).

The Company has identified the following six material and distinct performance obligations:

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,

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

For minimum guarantees,

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

For functional IP contracts with

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

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.

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

We began recognizing

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.

We sell advertising on our ’Kartoon Channel!

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

For flat rate promotions with a fixed term, we recognize

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

For impressions served, we deliver a certain minimum

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

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

We recognize revenue related to product sales

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

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

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

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

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

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

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 consolidated financial statements and the

reported amounts of revenues and expenses during the reporting periods.

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.

Recent Accounting Pronouncements

In March 2019, the FASB issued ASU No.

Subtopic 920-350.

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

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

The amendments also require that an entity reassess

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

The amendments in this update require

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

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

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

periods within those fiscal years.

We adopted ASU 2019-02 in 2019.

The impact to our consolidated financial position, results of

operations and cash flows were not material.

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 adopted ASU

2019-02 in 2019.

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

In August 2020, the FASB issued ASU No.

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

The update simplifies the accounting for

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

for convertible instruments.

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

for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815,

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

The FASB has eliminated

the cash conversion and beneficial conversion feature models.

The FASB has also modified accounting rules relating to application

of the scope exception from derivative accounting.

The amendments revise the guidance in ASC 815-40-25- 10, to remove three out

of seven conditions from the settlement guidance, referred to as additional equity classification requirements.

Following the above

amendments, more convertible debt instruments will be accounted for as a single liability measured at its amortized cost and more

convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no

features require bifurcation and recognition as derivatives.

The amendments are effective for public business entities, excluding

smaller reporting companies, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal

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

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

Early adoption is permitted, but no earlier than fiscal

years beginning after December 15, 2020, including interim periods within those fiscal years.

The Company is in the process of

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

Various other accounting pronouncements have

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

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

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.

The Company is

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

Various other accounting pronouncements have been

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

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

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis