What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-16 compared with 2021-05-18 · 308 added, 351 removed, 84 unchanged (89% of the section changed)

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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 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,”

“expects,”

“intends,”

“plans,”

“believes,”

“seeks,”

“estimates,”

“may,”

“will”

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

In addition, any statements

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

are forward looking statements.

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 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.

and related notes for the three and six months ended June 30, 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,”

“expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,”

“may,” “will” and variations of these words or similar expressions are intended to identify forward looking statements.

In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including

any underlying assumptions, are forward looking statements.

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

Risk Factors” 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

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

The management’s discussion and analysis

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

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Genius Brands International, Inc.

(“we,”

“us,”

“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 Stan Lee’s

Superhero Kindergarten produced with Stan Lee’s Pow!

(“we,” “us,” “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.

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,

Arnold Schwarzenegger lends his voice as the lead and is also an Executive Producer on the

The show is being broadcast in the United States on our wholly-owned distribution outlet, Kartoon Channel!.

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.

In July 2020, we entered into

a binding term sheet with POW, Inc.

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

to exploit certain rights in

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

The entity is called “Stan Lee

Universe, LLC”.

and the Company executed an Operating Agreement for the joint venture, effective as of June 1, 2021.

agreement enables 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.

also in production on a new animated series starring Shaquille O’Neal 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

Environmental, Social and Governance Strategy

We are attempting to shape culture, social attitudes and societal outcomes

with our animated content and consumer products that touch the lives of young people and their families.

As a global content company that

reaches millions of people, we aim to be a positive force in the world.

We are committed to advancing and strengthening our approach to environmental,

social and governance (“ESG”) topics to help serve our partners, audiences, employees and shareholders — and to enhance

our success as a business.

We are committed to responsible, ethical and inclusionary business

practices as outlined below:

Human Capital Management

We aim to build a culture that attracts and retains

the best employees and a workplace where everyone feels welcome, safe and inspired.

Our human capital management strategy is intended

to address the following areas:

A Culture of Diversity, Equity and Inclusion

We seek to foster a culture of diversity, equity

and inclusion through a range of partnerships, collaborations, programs and initiatives, some of which are described below.

We strive to be an inclusionary workplace because

we believe that it strengthens our business.

· In 2021, we created the role of Chief Diversity Officer.

That role is responsible for both helping meet our hiring goals and reviewing

the content we create.

· Our board of directors is diverse:

33.3% female and with representation from people of color and the LBGTQ community.

· Our diverse workforce is 59% female.

Preventing Harassment and Discrimination

We have enacted policies addressing harassment,

discrimination and other behaviors that could create a hostile workplace, some of which are described below.

· We make available to our employees, training on preventing sexual harassment, discrimination and retaliation.

· We expect employees to report any violations of Company policies, including sexual harassment, they witness.

Among other ways, employees

can report incidents of harassment using our anonymous complaint and reporting hotline.

Social Impact and Corporate Social Responsibility

We believe that the content we produce, primarily

directed at young people and their families, both reflects and influences how our young viewers perceive and understand important issues.

We endeavor to earn our viewers’ trust through a variety of practices, and we are focused on using our platforms to create positive

social impacts.

By way of just a few examples:

in our show Rainbow

Rangers , a diverse cast of girls works to save animals and protect the environment, while demonstrating the power of teamwork;

our Llama Llama series, we teach kindness and inclusion, and feature a differently abled character, which we have been told is

appreciated by moms and kids who deal with physical challenges.

In the earliest days of the COVID-19 pandemic, we spread public service

messages to keep our audiences safe and informed with animated shorts featuring the iconic voices from our series including Warren Buffett

from The Secret Millionaires Club and Jennifer Garner, the voice of Mama Llama from the Llama Llama series.

Our mission statement says it all:

with a Purpose.” Social justice, caring about the environment and modeling appropriate and inclusionary behavior for kids has been

part of our company for many years and we are constantly seeking ways to improve on what we have already been doing.

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.

On January 28, 2021, we 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 our common stock at their original exercise

price of $1.55 per share (the “Exercise”).

We 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 we were required to register the shares of common stock

underlying the New Warrants for resale.

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.

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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 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.

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

return-to-work plan has been developed.

We had announced a return to office date of September 7, 2021, for fully vaccinated employees.

However, due to a recent surge in COVID-19 cases and the increased transmissibility ofCOVID-19 variants, there may be a further delay

in returning, in-person, to the office.

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

impact from our animation production partners.

However, shipping logistical issues and increased expenses due to COVID-19 may impact our

consumer products partners and our projected advertising revenues.

With regard to content distribution, we have observed demand increases

for streaming entertainment services in 2021.

If there is a further resurgence and the COVID-19 outbreak is prolonged, we may see a negative

impact on our revenues.

Our management cannot at this point estimate the

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

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.

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

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

June 30, 2021 and the three months ended June 30, 2020 are below.

Three Months Ended

March 31, 2021

March 31, 2020

June 30, 2021

June 30, 2020

Licensing & Royalties

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Total Revenue

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%.

Media & Advertising Services revenue is a

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

Licensing and Royalties 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 June 30, 2021 compared to the three months ended June 30, 2020, Licensing and Royalties revenue increased $1,073,397 or 660%.

The increase was primarily due to proceeds received in conjunction with the mutually agreed termination of certain licensing rights.

Media Advisory & Advertising Services revenue

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

The increase of $971,324 was a result of the ChizComm acquisition

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Television & Home Entertainment revenue is

generated from distribution of our properties for broadcast on television, video-on-demand (“VOD”), or subscription video-on-demand

(“SVOD”) in domestic and international markets and the sale of DVDs for home entertainment through our partners.

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 June 30, 2021 compared

to the three months ended June 30, 2020, Television & Home Entertainment revenue decreased $258,285, or 79%.

The decrease was primarily

due to the recognition of revenue related to the delivery of Rainbow Rangers Season 2 in 2020.

There was no comparable delivery

during the same period 2021.

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 $4,255 or

6%, during the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

The decrease was primarily due to reduced

Ad impressions to drive an increase in market share and user growth.

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 $655 or 50%, during

the three months ended June 30, 2021 compared to the three months ended June 30, 2021.

Three Months Ended

June 30, 2021

June 30, 2020

Marketing and Sales

Direct Operating Costs

General and Administrative

Interest Expense

Marketing and sales expenses increased $1,412,326,

or 1,099%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, primarily due to an increase in

marketing and advertising expenses to promote Stan Lee’s Superhero Kindergarten and the Kartoon Channel!.

Direct operating costs include costs of our product

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

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

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

During the three months ended June 30, 2021, we recorded

film and television cost amortization expense of $553,562 and participation expense of $704,949 compared to expenses of $292,362 and $370,803,

respectively, for the three months ended June 30, 2020.

The increases in direct operating costs for the three months ended June 30, 2021

compared to the three months ended June 30, 2020 is primarily due to increased amortization and participation expenses related to 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 June 30, 2021 increased $4,737,317, or 200%, 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 directors’

and officers’ insurance.

Interest expense for the three months ended June

30, 2021 decreased $421,803, or 98%, compared to the same period in 2020.

This decrease was due to the repayment of the outstanding Senior

Secured Convertible Notes in 2020.

Our summary results for the six months ended June

30, 2021 and the three months ended June 30, 2020 are below.

Six Months Ended

June 30, 2021

June 30, 2020

Licensing & Royalties

Media Advisory & Advertising Services

Television & Home Entertainment

Advertising Sales

Product Sales

Total Revenue

Licensing and Royalties revenue include items

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

During the six months ended June 30, 2021 compared to the six months ended June 30, 2020, Licensing and Royalties revenue increased

$1,040,492, or 284%.

The increase was primarily due to proceeds received in conjunction with the mutually agreed termination of certain

licensing rights.

On April 7, 2021, we finalized a Mutual Termination Agreement with Mattel, Inc., with regard to Rainbow Rangers

The agreement allows us to contract with other companies for the design and manufacturing of Rainbow Rangers toys.

Media Advisory & Advertising Services revenue

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

The increase of $1,724,712 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

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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%.

During the six months ended June 30, 2021 compared to the six months ended June 30, 2020, Television & Home Entertainment

revenue decreased $227,031, or 60%.

The decrease was primarily due to the recognition of revenue related to the delivery of Rainbow

Rangers Season 2 in 2020.

There was no comparable delivery during the same period 2021.

Advertising sales are generated on the Kid Genius

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Advertising sales decreased by $26,450 or

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

18%, during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.

The decrease was primarily due to reduced

Ad impressions to drive an increase in market share and user growth.

Product sales are generated through Merch by Amazon

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Product sales decreased $673 or 37%, during

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

Three Months Ended

March 31, 2021

March 31, 2020

the six months ended June 30, 2021 compared to the six months ended June 30, 2021.

Six Months Ended

June 30, 2021

June 30, 2020

Marketing and Sales

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Marketing and sales expenses increased $1,901,454,

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.

or 788%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily due to an increase in marketing

and advertising expenses to promote Stan Lee’s Superhero Kindergarten and the Kartoon Channel!.

Direct operating costs include costs of our product

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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.

During the six months ended June 30, 2021, we recorded film

and television cost amortization expense of $658,369 and participation expense of $704,949 compared to expenses of $292,362 and $370,803,

respectively, for the six months ended June 30, 2020.

The increases in direct operating costs for the six months ended June 30, 2021 compared

to the six months ended June 30, 2020 is primarily due to increased amortization and participation expenses related to revenues from the

Rainbow Rangers property.

General and administrative expenses consist primarily

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General and administrative expenses for

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

the six months ended June 30, 2021 increased $9,908,563, or 240%, 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

to the acquisition of the ChizComm entities, increases in legal professional fees, share based compensation, rent expense and directors’

and officers’ insurance.

Interest expense for the six months ended June

30, 2021 decreased $1,134,100, or 98%, 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.

This decrease was due to the repayment of the outstanding

Senior Secured Convertible Notes in 2020.

Liquidity and Capital Resources

During the six months ended June 30, 2021, our

cash and cash equivalents and marketable security positions increased by $38,308,505, net.

Cash and cash equivalents were used to purchase

marketable securities of $80,902,119 during the six months ended June 30, 2021.

Working Capital

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

As of June 30, 2021, we had current assets of

$152,521,636, including cash and cash equivalents of $58,372,335, and current liabilities of $15,507,100, resulting in working capital

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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.

The increase of $35,627,353 in working capital

as compared to December 31, 2020, was primarily due to an increase in the our cash and cash equivalents and marketable security position,

offset by the change in net current assets and liabilities as a result of the acquisition of ChizComm.

During the six months ended June 30, 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

We believe that our current cash and cash equivalents balances and our investments in available for sale

marketable securities 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 Six Months

Ended June 30, 2021, and the Six Months Ended June 30, 2020

Our total cash and cash equivalents were $58,372,335

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

and $54,382,775 as of June 30, 2021 and June 30, 2020, respectively.

Comparison of Cash Flows

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

Cash used in operations

$ (5,855,273 )

$ (4,859,756 )

Cash used in investing activities

Cash provided by financing activities

Increase (decrease) in cash and cash equivalents

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.

(Decrease)/Increase in cash and cash equivalents

Operating Activities

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 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.

Cash used in operating activities for the six

months ended June 30, 2021 was $8,972,775 as compared to cash used in operating activities of $2,331,261 during the comparable period

in the prior year.

The increase in cash used in operating activities was primarily due to the increase 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

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

Cash used in investing activities for the six

months ended June 30, 2021 was $89,316,206 as compared to a use of $500 for the six months ended June 30, 2020.

The increase in cash used

for investing was primarily due to our investment in marketable securities of $80,902,119.

Investing activities also include the cash

paid, net of cash acquired from the ChizComm Acquisition of $7,788,877 which occurred on February 1, 2021.

Financing Activities

Cash provided by financing activities for the

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.

six months ended June 30, 2021 was $56,204,992 as compared to $56,409,414 of cash provided by the comparable period in 2020.

source of cash during the six months ended June 30, 2021 was the net proceeds of $57,264,656 from the warrant exercise during January

During the six months ended June 30, 2020, our primary sources of cash were the net sales of common shares for $44,755,672, net

proceeds from the 2020 Convertible Notes of $6,098,000, the net proceeds of $5,819,319 from warrant exercises and $3,600,000 from the

collection of the Investor Notes.

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.

As of June 30, 2021, we do not have any material

commitments for capital expenditures.

Critical Accounting Policies

Our accounting policies are described in the notes

to the financial statements.

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 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

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 $2,029,677, 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.

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

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.

Debt and Attached Equity-Linked Instruments

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

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,

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.

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

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 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.

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

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.

The preparation of the financial statements and

related disclosures in conformity with U.S.

generally accepted accounting principles and our discussion and analysis of our financial

condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported.

Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances,

the results of which form the basis for making judgments about the carrying values of assets and liabilities.

Actual results may differ

from these estimates, and such differences may be material.

Note 2, “Summary of Significant Accounting

Policies” in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the 2020

Form 10-K, and “Critical Accounting Policies and Estimates” in Part II, Item 7 of the 2020 Form 10-K describe the significant

accounting policies and methods used in the preparation of our condensed consolidated financial statements.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

Not applicable.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis