What changed in this filing

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Item 1. Financial Statements

2021-11-15 compared with 2021-08-16 · 723 added, 534 removed, 906 unchanged (58% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

As of June 30, 2021, and December 31, 2020

June 30, 2021

December 31, 2020

As of September 30, 2021, and December 31,

September 30,

Current Assets:

3 unchanged sentences

Accounts Receivable, net

Other Receivable

Prepaid Expenses and Other Assets

15 unchanged sentences

Deferred Revenue

Notes Payable

Payroll Protection Program

9 unchanged sentences

Contingent Earn Out

Notes Payable

Disputed Trade Payable

1 unchanged sentence

Stockholders’ Equity

Preferred Stock, $ 0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020

Common Stock, $ 0.001 par value, 400,000,000 shares authorized 300,791,335 and 258,438,514 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

Preferred Stock, $ 0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020

Common Stock, $ 0.001 par value, 400,000,000 shares authorized 300,791,335 and 258,438,514 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

Additional Paid in Capital

11 unchanged sentences

Condensed Consolidated Statements of Operations

Three and Six Months Ended June 30, 2021 and

June 30, 2020

Three and Nine Months Ended September 30, 2021

and September 30, 2020

Three Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Nine Months Ended

September 30,

Licensing & Royalties

16 unchanged sentences

Interest Income

Loss on Foreign Exchange

Warrant Revaluation Expense

( 208,760,698 )

( 212,228,659 )

Loss on Lease Termination

Realized Loss on Marketable Securities

Gain (Loss) on Foreign Exchange

Warrant Incentive Expense

( 69,138,527 )

Conversion Option Revaluation Expense

Warrant Revaluation Gain (Loss)

( 210,672,085 )

Conversion Option Revaluation Expense

( 171,835,729 )

5 unchanged sentences

( 383,603,874 )

( 384,949,171 )

Loss Before Income Tax Expense

15 unchanged sentences

Condensed Consolidated Statements of Comprehensive

Three and Six Months Ended June 30, 2021 and

June 30, 2020

Three and Nine Months Ended September 30, 2021

and September 30, 2020

Three Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Nine Months Ended

September 30,

$ ( 9,253,380 )

2 unchanged sentences

$ ( 391,101,155 )

Unrealized Loss on Marketable Securities

Net Unrealized Loss on Marketable Securities (1)

Net Realized Loss on Marketable Securities Included in Earnings

Foreign Currency Translation Adjustment

4 unchanged sentences

$ ( 391,101,155 )

Prior quarter amounts have been revised to correct an error in previously issued financial statements.

See Note 2 of the Notes

to unaudited Condensed Consolidated Financial Statements for further information.

The accompanying notes are an integral part of

1 unchanged sentence

Genius Brands International, Inc.

Consolidated Statements of Stockholders' Equity

Three and Six Months Ended June 30, 2021 and

June 30, 2020

Condensed Consolidated Statements of

Stockholders' Equity

Three and Nine Months Ended September 30, 2021

and September 30, 2020

Other Comprehensive

1 unchanged sentence

$ 588,500,680

Issued for ChizComm acquisition

From Warrant Exchange, net

of Common Stock for Services

$ ( 469,557,324 )

$ 119,196,677

Shares Issued for ChizComm acquisition

Proceeds From Warrant Exchange, net

Issuance of Common Stock for Services

Share Based Compensation

Warrant Incentive

Currency Translation Adjustment

Foreign Currency Translation Adjustment

( 76,258,943 )

Balance, March 31, 2021

$ 721,203,155

of Common Stock for Services

$ ( 545,816,267 )

$ 175,681,817

Issuance of Common Stock for Services

Share Based Compensation

Loss on Marketable Securities

Currency Translation Adjustment

Unrealized Loss on Marketable Securities (1)

Foreign Currency Translation Adjustment

( 7,394,648 )

Balance, June 30, 2021

$ 724,924,857

$ ( 553,210,915 )

$ 171,963,144

Share Based Compensation

Unrealized Loss on Marketable Securities

Foreign Currency Translation Adjustment

( 9,253,380 )

Balance, September 30, 2021

$ 730,477,723

$ ( 562,464,295 )

$ ( 337,252 )

$ 167,976,968

Other Comprehensive

Balance, December 31, 2019

24 unchanged sentences

$ ( 456,981,465 )

Issuance of Common Stock for Services

Share Based Compensation

Warrant Exercise

Warrants Issued for Services

( 2,007,209 )

Balance, September 30, 2020

$ ( 458,988,674 )

(1) Prior quarter amounts have been revised to correct

an error in previously issued financial statements.

See Note 2 of the Notes to unaudited Condensed Consolidated Financial Statements

for further information.

The accompanying notes are an integral part

2 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2021 and June 30,

June 30, 2021

June 30, 2020

Nine Months Ended September 30, 2021 and September

September 30, 2021

September 30, 2020

Cash Flows from Operating Activities:

4 unchanged sentences

Depreciation and Amortization Expense

Right of Use Asset Amortization

Amortization of Premium on Marketable Securities

Accretion of Discount on Secured Convertible Notes

1 unchanged sentence

Share Based Compensation Expense

Warrant Revaluation Expense

Lease Modification

Warrant Revaluation (Gain) Loss

Loss on Lease Termination

Conversion Option Revaluation Expense

Debt Discount in Excess of the Principal

Warrant Inducement Expense

Warrant Incentive Expense

Realized Loss on Marketable Securities

Decrease (Increase) in Operating Assets:

Accounts Receivable, net

Other Receivable

Inventory, net

Prepaid Expenses & Other Assets

( 1,134,977 )

Lease Deposits

1 unchanged sentence

( 4,809,700 )

( 1,789,000 )

Increase (Decrease) in Operating Liabilities:

Accounts Payable

( 2,886,249 )

Accrued Salaries & Wages

1 unchanged sentence

Participations Payable

Lease Liability

Due to Related Party

5 unchanged sentences

Investment in Stan Lee Universe, LLC

( 1,000,000 )

Cash Payment for ChizComm, net of cash acquired

2 unchanged sentences

( 305,387,221 )

Proceeds from Principal Collections on Marketable Securities

Proceeds from Sales of Marketable Securities

Investment in Intangible Assets, net

3 unchanged sentences

Cash Flows from Financing Activities:

Payments On Lease Liability

Proceeds from Sale of Securities Purchase Agreement, net

5 unchanged sentences

( 2,866,664 )

Proceeds from Notes Payable

Note Conversion Costs

1 unchanged sentence

( 1,099,713 )

( 1,585,220 )

Net Cash Provided by Financing Activities

9 unchanged sentences

Liability for Acquisition Earnout Shares

Senior Convertible notes were converted into 65,476,190

shares of Common Stock, 58,522,601 warrants were exercised on a cashless basis resulting in the issuance of 52,551,716 shares of Common Stock

Senior Convertible notes were converted into 65,476,190 shares of Common Stock, 58,522,601 warrants were exercised on a cashless basis resulting in the issuance of 52,551,716 shares of Common Stock

Warrant Derivative Liability

2 unchanged sentences

Genius Brands International, Inc.

Notes to Condensed Financial Statements

June 30, 2021 (unaudited)

Notes to Condensed Consolidated Financial

September 30, 2021 (unaudited)

Organization and Business

12 unchanged sentences

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.

The Company’s 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 the Company’s 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.

Another new offering is KC Pop Quiz , a live action game show featuring

kids as contestants.

The show is hosted by Casey Simpson, a prominent influencer and former Nickelodeon star.

Both KC Pop Quiz

and Superhero Kindergarten are 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.

The Company’s 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 the Company’s 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 the Company agreed to form an entity with POW!

to exploit certain

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

The entity is called “Stan Lee

Universe, LLC”.

to exploit certain rights in intellectual

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

The entity is called “Stan Lee Universe, LLC.”

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

This agreement

enables the Company 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 in

production on a new animated series starring Shaquille O’Neal called Shaq’s Garage .

This agreement enables the Company

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 in production on a new animated series

starring Shaquille O’Neal called Shaq’s Garage .

In addition, the Company acts 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

the Company’s existing licensing infrastructure to expand this brand into new product categories, new retailers, and new territories.

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

leveraging the Company’s existing licensing infrastructure to expand this brand into new product categories, new retailers, and

new territories.

The Company commenced operations in 2006, assuming

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

During the six months ended June 30, 2021, the

Company’s 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.

Cash in excess of immediate requirements

is invested in accordance with the Company’s investment policy, primarily with a view to liquidity and capital preservation.

available for sale securities, consisting principally of corporate and government debt securities stated at fair value, are also available

as a source of liquidity.

As more fully discussed in Note 3, on February

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

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

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

During the nine months ended September 30, 2021,

the Company’s cash and cash equivalents and marketable security positions increased by $ 29,768,161 .

Cash in excess of immediate

requirements is invested in accordance with the Company’s investment policy, primarily with a view for liquidity and capital preservation.

Accordingly, available-for-sale securities, consisting principally of corporate and government debt securities, and money market funds

classified as cash equivalents are also available as a source of liquidity.

During the nine months ended September 30, 2021, the Company

purchased marketable securities of $ 128,277,575 , net of redemptions during the period.

Historically, the Company has incurred net losses.

For the three months ended June 30, 2021 and June 30, 2020, the Company reported net losses of $ 7,383,978 and $ 383,258,002 , respectively.

For the six months ended June 30, 2021 and June 30, 2020, the Company reported net losses of $ 83,642,921 and $ 389,093,946 , respectively.

The Company reported net cash used in operating activities of $ 8,972,775 and $ 2,331,260 for the six months ended June 30, 2021 and June

For the three months ended September 30, 2021 and September 30, 2020, the Company reported net losses of $ 9,253,380 and $ 2,007,209 , respectively.

For the nine months ended September 30, 2021 and September 30, 2020, the Company reported net losses of $ 92,906,971 and $ 391,101,155 ,

respectively.

As of June 30, 2021, the Company had an accumulated deficit of $ 553,200,246 and total stockholders’ equity

of $ 171,621,715 .

As of June 30, 2021, the Company had current assets of $ 152,521,636 , including cash and cash equivalents of $ 58,372,335 ,

and current liabilities of $ 15,507,100 .

The Company had working capital of $ 137,014,536 as of June 30, 2021, compared to working capital

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

The Company reported net cash used in operating activities of $ 15,965,351 and $ 5,475,826 for the nine months ended September

30, 2021 and September 30, 2020, respectively.

As of September 30, 2021, the Company had an accumulated deficit of $ 562,464,295 and total

stockholders’ equity of $ 167,976,968 .

As of September 30, 2021, the Company had current assets of $ 143,046,171 , including cash and

cash equivalents of $ 4,884,149 and marketable securities of $ 125,340,336 , and current liabilities of $ 11,607,299 .

The Company had working

capital of $ 131,438,872 as of September 30, 2021, compared to working capital of $ 101,387,183 as of December 31, 2020.

On January 28, 2021, the Company entered into

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Ltd., acted as warrant solicitation agent

and received a cash fee of approximately $ 4.3 million.

and received a cash fee of approximately $ 4,286,844 .

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 the

Company was required to register the shares of common stock underlying the New Warrants for resale.

As more fully discussed in Note 3 on February

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

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

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

at an exercise price of $ 2.37 per share, exercisable immediately, 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).

was required to register the resale of the shares of common stock issuable upon exercise of the New Warrants.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated

balance sheet as of December 31, 2020 has been derived from audited statements.

The accompanying unaudited condensed consolidated

financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission.

Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles

(“US GAAP”) for complete financial statements and should be read in conjunction with the audited financial statements

and related footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with

the Securities and Exchange Commission on March 31, 2021.

The accompanying condensed consolidated financial

statements include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary

to state fairly the Condensed Consolidated Balance Sheets, Statements of Operations, Statements of Comprehensive Loss, Statements of Stockholders'

Equity, and Statements of Cash Flows for all periods presented.

Certain prior period amounts have been reclassified

for consistency with the current period presentation.

These relcassifications had no effect on the reported results of operations.

Correction of Error

During the third quarter of fiscal 2021, the Company

discovered an error in the unaudited Condensed Consolidated Statements of Comprehensive Loss and Condensed Consolidated Statement of Stockholder’s

Equity for the three months ended June 30, 2021.

The reported line item for Net Unrealized Loss on Marketable Securities improperly included

the amount of purchased and accrued interest.

As a result of this error, Other Comprehensive Loss was overstated by $352,098 for

the three and six months ended June 30, 2021.

Net Unrealized Loss on Marketable Securities was previously reported as $(509,625)

for the three months and six months ended June 30, 2021.

The error did not have a material impact on prior period Condensed Consolidated

Statement of Operations.

Corrected amounts are included in the comparative periods presented in this Form 10-Q.

The Company determined its operating segments

on the same basis that it assesses performance and makes operating decisions.

The Company principally operates in two distinct business

the Content Production & Distribution Segment which produces and distributes children’s content, and the Media &

Advertising Services Segment which provides media and advertising services.

These segments are reflective of how the Company’s Chief

Operating Decision Maker (“CODM”) reviews operating results for the purposes of allocating resources and assessing performance.

The Company has identified its Chief Executive Officer as the CODM.

The segments are organized around the products and services

provided to customers and represent the Company’s reportable segments.

Prior to the acquisition of

ChizComm Ltd., the Company’s operations were comprised of a single segment.

The accounting policies for each segment are the

same as for the Company as a whole.

Refer to Note 23 for additional information.

Principles of Consolidation

2 unchanged sentences

Productions LLC, Rainbow Rangers Productions LLC, Superhero Kindergarten LLC, ChizComm Beacon Media LLC, ChizComm Ltd., Stan Lee Universe

LLC and Shaq’s Garage Productions LLC.

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

LLC, Shaq’s Garage Productions LLC and KCPQ Productions LLC.

All significant inter-company balances and transactions have been eliminated

in consolidation.

The condensed consolidated financial statements

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Foreign exchange transaction

gains and losses are included in other income (expense), net in the consolidated statements of operations.

gains and losses are included in other income (expense), net in the condensed consolidated statements of operations.

Cash and Cash Equivalents

1 unchanged sentence

with initial maturities of three months or less to be cash equivalents.

As of June 30, 2021, and December 31, 2020, the Company had cash

and cash equivalents of $ 58,372,335 and $ 100,456,324 , respectively.

As of September 30, 2021, and December 31, 2020, the Company had

cash and cash equivalents of $ 4,884,149 and $ 100,456,324 , respectively.

During the three months ended September 30, 2021, the Company

transferred $ 2,600,000 of cash deposits from its investment account to money market funds, classified as cash equivalents on the consolidated

balance sheets.

Marketable Debt Securities

The Company purchases high

quality, investment grade securities from diverse issuers with a weighted average credit rating of AA/Aa2.

Management determines

the appropriate classification of securities at the time of purchase and reevaluates such designation as of each balance sheet date.

the Company classifies its investments in marketable securities as “available-for-sale” and records these investments at fair

The securities are available to support current operations and, accordingly, the Company classifies the investments as current

assets without regard to their contractual maturity.

quality, investment grade securities from diverse issuers.

Management determines the appropriate classification of securities at

the time of purchase and reevaluates such designation as of each balance sheet date.

Currently, the Company classifies its investments

in marketable securities as “available-for-sale” and records these investments at fair value.

The securities are available

to support current operations and, accordingly, the Company classifies the investments as current assets without regard to their contractual

Unrealized gains or losses

5 unchanged sentences

statements of operations.

The Company reports accrued

interest receivable separately from the available-for-sale securities and has elected not to measure an allowance for credit losses for

accrued interest receivables.

Uncollectible accrued interest is written off when the Company determines that no additional interest payments

will be received.

Approximately $ 514,099 in interest income was receivable as of September 30, 2021, classified within Other Receivables

on the condensed consolidated balance sheets.

Interest earned on investment

securities is reported in interest income, net of applicable adjustments for accretion of discounts and amortization of premiums accounted

for by the level yield method with no pre-payment anticipated.

Allowance for Doubtful Accounts

6 unchanged sentences

accounts appears doubtful.

The Company had an allowance for doubtful accounts of $ 54,840 as of June 30, 2021 and $ 43,676 as of December

The Company had an allowance for doubtful accounts of $ 119,754 as of September 30, 2021 and $ 43,676 as of December

Property and Equipment

4 unchanged sentences

lives, are charged to expense as incurred.

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

consolidated statement of operations.

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

statement of operations.

Right of Use Leased Assets

1 unchanged sentence

ASC 842, Leases , using the modified retrospective transition method applied at the effective date of the standard.

The Company determines at contract inception whether the arrangement

is a lease based on its ability to control a physically distinct asset and determines the classification of the lease as either operating

For all leases, the Company combines all components of the lease including related nonlease components as a single component.

Operating leases are reflected as operating right-of-use (“ROU”) assets and operating lease liabilities in the consolidated

balance sheets.

The Company determines at contract inception whether

the arrangement is a lease based on its ability to control a physically distinct asset and determines the classification of the lease

as either operating or finance.

For all leases, the Company combines all components of the lease including related nonlease components

as a single component.

Operating leases are reflected as operating right of use (“ROU”) assets and operating lease liabilities

in the consolidated balance sheets.

The Company does not have any finance leases.

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To test for goodwill

impairment, the Company is required to estimate the fair market value of each of our reporting units, of which the Company has one.

impairment, the Company is required to estimate the fair market value of each of its reporting units, of which the Company has two.

the Company may use a variety of methods to estimate fair value for impairment testing, its primary method is discounted cash flows.

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When required, the Company also considers the

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

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

Film and Television Costs

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of delivery of the episodes.

The Company capitalizes production costs for films

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

Accordingly, production costs are

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

film(s) delivered and recognized as revenue.

The Company evaluates its capitalized production costs annually and limits recorded amounts

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

Additionally, for both episodic series and films,

from time to time, the Company develops additional content, improved animation and bonus songs/features for its existing content.

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

Additionally, for episodic series, from time to

time, the Company develops additional content, improved animation and bonus songs/features for its existing content.

After the initial

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

to existing products are expensed as incurred

Revenue Recognition

1 unchanged sentence

standard FASB ASC 606, Revenue from Contracts with Customers .

The Company has identified the following six material and distinct

The Company has identified the following seven material and distinct

performance obligations:

1 unchanged sentence

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.)

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).

Provide media and advertising services to clients.

Options to renew or extend a contract at fixed terms.

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(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.

Fixed fee advertising revenue generated from the Genius Brands Kartoon Channel!

Variable fee advertising revenue generated from the Genius Brands Kartoon Channel!

The Company recognizes 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 and 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.

The Company recognizes 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

based “Kartoon Channel!” in the form of either flat rate promotions or impressions served.

For flat rate promotions with a

fixed term, the Company recognizes revenue when all five revenue recognition criteria under FASB ASC 606 are met.

For impressions served,

the Company delivers a certain minimum number of impressions on the channel to the advertiser for which the advertiser pays a contractual

CPM per impression.

1 unchanged sentence

The Company provides media and advertising services

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

The Company also purchases advertising for clients

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

Advertising commissions are recognized

as revenue in the month the advertising is displayed.

Revenue is recognized when the services are performed.

When the Company purchases advertising for clients on linear and across

digital and streaming platforms and receives a commission, the commissions are recognized as revenue in the month the advertising is displayed.

The Company recognizes revenue related to product

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In the case of RSUs the fair value is calculated based on the Company’s underlying common stock on the date of grant.

The Company recognizes compensation expense

over the requisite service period ratably, using the graded attribution method, which is in-substance, recognizing multiple awards

based on the vesting schedule.

The Company recognizes compensation expense over

the requisite service period ratably, using the graded attribution method, which is in-substance, recognizing multiple awards based on

the vesting schedule.

The Company has elected to account for forfeitures when they occur.

The Company issues authorized

shares available for issuance under the 2015 and 2020 Plans upon employees’ exercise of their stock options.

The Company issues authorized shares available

for issuance under the 2015 and 2020 Plans upon employees’ exercise of their stock options.

Earnings Per Share

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Concentration of Risk

The Company’s cash is maintained at three

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

insured amount.

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

As of June 30, 2021, the Company had three accounts with an uninsured balance of $ 56,601,018 .

The Company maintains its cash in bank deposit

accounts which, at times, may exceed the Federal Deposit Insurance Corporation’s (“FDIC”) insured amount.

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

As of September 30, 2021,

the Company had three accounts with an uninsured balance in bank deposit accounts of $ 1,907,973 .

The Company has a managed account and a brokerage

account with a financial institution.

The managed account maintains our investments in marketable securities of $ 125,340,336 and bank

deposits held in a sweep program of $ 1,328,895 as of September 30, 2021.

The brokerage account holds $ 2,600,000 as of September 30, 2021.

Assets in the managed account and brokerage account are protected by the Securities Investor Protection Corporation (“SIPC”)

up to $500,000 (with a limit of $ 250,000 for cash).

In addition, the financial institution provides additional “excess of SIPC”

coverage which insures up to $1 billion.

As of September 30, 2021, the Company has not had account balances held at this financial institution

that exceed the insured balances.

The Company’s investment portfolio consists

of investment-grade securities diversified among security types, industries and issuers.

The investments are held and managed by a financial

institution that follows the Company’s investment policy.

The Company’s policy limits the amount of credit exposure to any

one security issue or issuer and the Company believes no significant concentration of credit risk exists with respect to these investments.

For the three months ended June 30, 2021, the

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

That customer accounted for 11 % of the total

As of June 30, 2021, the Company had two customers whose accounts receivable exceeded 10% of total consolidated accounts receivable.

The Company’s policy limits the amount

of credit exposure to any one security issue or issuer and the Company believes no significant concentration of credit risk exists with

respect to these investments.

For the three months ended September 30, 2021,

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

That customer accounted for 13 % of the

total revenue and 6 % of accounts receivable.

For the nine months ended September 30, 2021, the Company had one customer whose total revenue

exceeded 10% of the total consolidated revenue.

That customer accounted for 22 % of the total revenue and 0 % of accounts receivable.

of September 30, 2021, the Company had three customers whose accounts receivable exceeded 10% of total consolidated accounts receivable.

Those customers accounted for 59 % of accounts receivable.

For the six months ended June 30, 2021, the Company had one customer whose total

revenue exceeded 10% of the total consolidated revenue.

That customer accounted for 34 % of the total revenue.

For the three months ended June 30, 2020, the

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

That customer accounted for 46 % of the total

revenue and 13 % of accounts receivable.

For the three months ended September 30, 2020,

the Company had two customers whose total revenue exceeded 10% of the total consolidated revenue.

Those customers accounted for 24 % of

the total revenue and 16 % of accounts receivable.

One other customer accounted for 70 % of accounts receivable.

For the six months ended June 30,

2020, the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue.

That customer accounted for 29 %

of the total revenue and 13% of accounts receivable.

For the nine months ended

September 30, 2020, the Company had one customer whose total revenue exceeded 10% of the total consolidated revenue.

That customer accounted

for 23 % of the total revenue and 0 % of accounts receivable.

One other customer accounted for 70 % of accounts receivable.

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be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement

FASB ASC Topic 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value.

hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements)

and the lowest priority to unobservable inputs (level 3 measurements).

FASB ASC 820 establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value.

The hierarchy

gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and

the lowest priority to unobservable inputs (level 3 measurements).

These tiers include:

· Level 1 - Observable inputs such as quoted prices for identical instruments

in active markets;

· Level 2 - Inputs other than quoted prices in active markets that are either

directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar

instruments in markets that are not active;

· Level 3 - Unobservable inputs in which little or no market data exists, therefore

requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant

inputs or significant value drivers are unobservable.

Level 1 - Observable inputs such as quoted prices for identical instruments in active markets;

Level 2 - Inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active;

Level 3 - Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

The carrying amounts of cash, receivables, accounts

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

The carrying amount of the

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

or LIBOR rates plus an applicable spread.

The fair values of the available-for-sale securities

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The following table summarizes the marketable

securities measured at fair value by level within the fair value hierarchy as of June 30, 2021:

securities measured at fair value by level within the fair value hierarchy as of September 30, 2021:

Schedule of marketable security measured at fair value

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states and municipalities

Commercial paper

$ 125,340,336

Fair values were determined for each individual

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The Company did not have any financial assets

and liabilities measured at fair value on a non-recurring basis as of June 30, 2021 or December 31, 2020.

and liabilities measured at fair value on a non-recurring basis as of September 30, 2021 or December 31, 2020.

Business Combinations

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requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses.

16, 2019, the FASB approved a proposal to change the effective date of ASU No.

2016-13 for smaller reporting companies, such as the Company,

delaying the effective date to fiscal years beginning after December 31, 2022, including interim periods within those fiscal periods.

Early adoption is permitted for interim and annual reporting periods.

The Company is currently evaluating the effect that the ASU will

have on its consolidated financial statements and related disclosures.

16, 2019, the FASB issued ASU No.

2019-10, Financial Instruments-Credit Losses, Effective Dates approving a proposal to change

the effective date of ASU No.

2016-13 for smaller reporting companies, such as the Company, delaying the effective date to fiscal years

beginning after December 31, 2022, including interim periods within those fiscal periods.

Early adoption is permitted for interim and

annual reporting periods.

The Company is currently evaluating the effect that the ASU will have on its consolidated financial statements

and related disclosures.

In August 2020, the FASB issued ASU No.

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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

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.

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is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

The Company has adopted ASU No.

2020-06 starting January 1, 2021.

The impact to the Company’s consolidated financial position, results

of operations and cash flows was not material as the Company does not have any outstanding convertible instruments.

The Company has early adopted ASU No.

2020-06 starting January 1, 2021 on a modified retrospective basis.

The impact to the Company’s

consolidated financial position, results of operations and cash flows was not material as the Company does not have any convertible

instruments outstanding as of the beginning of the fiscal year.

In May 2021, the FASB issued ASU No.

Modification of Equity-Classified Written Call Options .

The update requires the issuer to treat a modification of an equity-classified

warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant.

guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of

the original warrant and issuance of a new warrant.

Under the amendments, an issuer should measure the effect of a modification as the

difference between the fair value of the modified warrant and the fair value of that warrant immediately before modification.

The recognition

of the modification depends on the nature of the transaction in which a warrant is modified, i.e., in connection with equity issuance,

debt origination, debt modification, or other.

For example, if a warrant is modified in connection with an equity issuance, the issuer

should recognize the increase (and disregard any decrease) in the warrant’s fair value as an equity issuance cost, which should

be charged against the gross proceeds of the offering.

The amendments are effective for public business entities for fiscal years beginning

after December 15, 2021, including interim periods within those fiscal years.

Early adoption is permitted, including interim periods within

those fiscal years.

The amendment would be applied prospectively to modifications that occur after the date of initial application.

Company will apply the amendment during the interim periods of fiscal year 2022 to any prospective modifications.

Various other accounting pronouncements have been

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the issued and outstanding equity interests of ChizComm Ltd., a corporation organized in Canada (“ChizComm Canada”), and ChizComm

USA Corp., a New Jersey corporation (“ChizComm USA” and, together with ChizComm Canada, “ChizComm”) (the “Acquisition”).

USA Corp., a New Jersey corporation (“ChizComm USA” and, together with ChizComm Canada, “ChizComm”) (the “ChizComm

Acquisition”).

The following

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transaction at closing consisted of $ 8.5 million in cash and 1,980,658 shares (the “Closing Shares”) of the Company’s

common stock with a value of approximately $3.5 million, both as subject

to certain purchase price adjustments.

Of the Closing Shares, 674,157 shares of common stock, with a value of approximately $ 1.2 million,

were deposited into an escrow account to cover potential post-closing indemnification obligations of Sellers under the Purchase Agreement.

Additionally, the Purchase Agreement also provides for the issuance of additional shares of common stock with an aggregate value of up

to $8.0 million that may be issued to the Sellers if certain EBITDA and performance levels are achieved within a four-year period commencing

on the date of the Purchase Agreement (Earn-Out).

The Acquisition

was approved by the board of directors of each Company.

Transaction costs incurred relating to this acquisition including legal and accounting

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

The acquisition expands the

Company’s revenue streams into media and advertising services.

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

805, Business Combinations .

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

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

method of accounting in accordance with ASC 805.

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

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

Fair values are determined based on the requirements of ASC

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

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

Of the Closing Shares,

674,157 shares of common stock, with a value of approximately $ 1.2 million, were deposited into an escrow account to cover potential post-closing

indemnification obligations of Sellers under the Purchase Agreement.

Additionally, the Purchase Agreement also provides for the issuance

of additional shares of common stock with an aggregate value of up to $8.0 million that may be issued to the Sellers if certain EBITDA

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

Acquisition was approved by the board of directors of each company.

Transaction costs incurred relating to this acquisition including

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

Acquisition expands the Company’s revenue streams into media and advertising services.

has determined that the ChizComm Acquisition constitutes a business acquisition as defined by ASC 805, Business Combinations .

the assets acquired and the liabilities assumed in the transaction were recorded at their estimated acquisition fair values, while transaction

costs associated with the acquisition were expensed as incurred pursuant to the purchase method of accounting in accordance with ASC 805.

The Company’s purchase price allocation was based on an evaluation of the appropriate fair values and represent managements best

estimate based on available data.

Fair values are determined based on the requirements of ASC 820, Fair Measurements and Disclosures .

arrangement meets the liability classification criteria outlined in ASC 480, Distinguishing Liabilities from Equity , as it is not

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

As of June 30, 2021, there were no material changes to the assumptions used

on the acquisition date to value the contingent consideration, therefore no change in value was recorded.

As of September 30, 2021, there were no material changes to the assumptions

used on the acquisition date to value the contingent consideration, therefore no change in value was recorded.

completed and finalized the purchase price allocation during the three months ended June 30, 2021.

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The identifiable intangible assets acquired of

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

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

economic life of 3 years.

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

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

Valuation Methodology

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The acquisition was treated for tax purposes as

a nontaxable transaction and as such, the historical tax basis of the acquired assets, net operating loss, and other tax attributes

of ChizComm will carryover.

As a result, no new goodwill for tax purposes was created in connection with the acquisition as there is no

step-up to the fair value of the underlying tax bases of the acquired net assets.

a nontaxable transaction and as such, the historical tax basis of the acquired assets, net operating loss, and other tax attributes of

ChizComm will carryover.

As a result, no new goodwill for tax purposes was created in connection with the acquisition as there is no step-up

to the fair value of the underlying tax bases of the acquired net assets.

The following supplemental pro forma information

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the beginning of the annual reporting period.

pro forma information as follows:

Supplemental pro forma information as follows:

Supplemental pro forma information

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Total Revenues

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The investments in marketable securities had an adjusted cost basis

of $80,902,119 and a market value of $80,392,494 as of June 30, 2021.

of $125,692,272 and a market value of $125,340,336 as of September 30, 2021.

Summary of Investment in marketable security

Adjusted Cost

Unrealized Loss

Unrealized Gain/(Loss)

Corporate Bonds

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states and municipalities

Commercial paper

$ 125,692,272

The Company reported the unrealized losses, net

of taxes, as a component of stockholders' equity.

The decline in fair value is largely due to changes in interest rates and other market

The Company has evaluated these securities and determined that no allowance is necessary based on the credit quality and the

low risk of loss due to the security type.

The fair value is expected to recover as the securities approach maturity.

$ ( 351,936 )

$ 125,340,336

The Company reported the net unrealized losses

in accumulated other comprehensive (loss) income, a component of stockholders' equity.

The decline in fair value is largely due to changes

in interest rates and other market conditions and is expected to recover as the securities approach maturity.

The Company has evaluated

these securities and determined that no allowance is necessary based on the credit quality and the low risk of loss due to the security

The Company has not yet held marketable securities in an unrealized loss position for greater than twelve months.

A net realized

loss of $24,779 related to the prepayment of principals for certain mortgage-backed securities was recorded in earnings during the three

months ended September 30, 2021.

The contractual maturities of the Company’s marketable investments

as of June 30, 2021 were as follows:

as of September 30, 2021 were as follows:

Summary of contractual maturity

Due after 1 year through five years

Due after 1 year through 5 years

$ 104,873,382

Due after 5 years through 10 years

Due after 10 years (a)

(a) Included within this category are municipal bonds with a fair value of $2,300,000 that the Company plans to sell within the next twelve months.

The Company may sell certain of its marketable debt securities prior

to their stated maturities for reasons including, but not limited to, managing liquidity, credit risk, duration and asset allocation.

The Company did not sell any securities during the three or six months

ended June 30, 2021, that resulted in gains or losses.

$ 125,340,336

Included within this category are municipal bonds with a fair value of $2,300,000 that the Company plans to sell within the next twelve months.

The Company may sell certain of its marketable

debt securities prior to their stated maturities for reasons including, but not limited to, managing liquidity, credit risk, duration

and asset allocation.

The Company did not sell any securities during the three or nine months

ended September 30, 2021, that resulted in material gains or losses.

Property and Equipment, Net

The Company has property and equipment as follows

as of June 30, 2021 and December 31, 2020:

as of September 30, 2021 and December 31, 2020:

Schedule of property and equipment, net

September 30,

Furniture and Equipment

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Property and Equipment, Net

During the three months ended June 30, 2021 and

2020, the Company recorded depreciation expense of $ 15,265 and $ 13,537 , respectively.

During the six months ended June 30, 2021 and 2020,

the Company recorded depreciation expense of $ 29,829 and $ 27,075 , respectively.

During the three months ended September 30, 2021

and 2020, the Company recorded depreciation expense of $ 23,665 and $ 10,206 , respectively.

During the nine months ended September 30, 2021

and 2020, the Company recorded depreciation expense of $ 53,494 and $ 37,281 , respectively.

Right of Use Leased Asset

Right of use asset consisted of the following

as of June 30, 2021 and December 31, 2020:

as of September 30, 2021 and December 31, 2020:

Schedule of right of use asset

September 30,

Office Lease Asset

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Right Of Use Asset, Gross

Office Lease Accumulated Amortization

Printer Lease Accumulated Amortization

Accumulated Amortization

Right Of Use Asset, Net

During the three months ended June 30, 2021 and

June 30, 2020, the Company recorded amortization expense of $ 82,668 and $ 109,458 , respectively.

During the six months ended June 30, 2021

and June 30, 2020, the Company recorded amortization expense of $ 128,905 and $ 217,704 , respectively.

ROU asset amortization during the three months

ended September 30, 2021 and September 30, 2020, was $ 82,323 and $ 89,412 , respectively.

ROU asset amortization during the nine months

ended September 30, 2021 and September 30, 2020, was $ 202,020 and $ 307,115 , respectively.

Film and Television Costs, Net

As of June 30, 2021, the Company had net

As of September 30, 2021, the Company had net

Film and Television Costs of $16,293,040, compared to $11,828,494 as of December 31, 2020.

The increase primarily relates to the

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

The increase primarily relates to the production

costs related to Stan Lee’s Superhero Kindergarten and KC Pop Quiz , offset by amortization of Rainbow Rangers Season

1&2 and Llama Llama Seasons 1 & 2 .

During the three months ended June 30, 2021 and

2020, the Company recorded Film and Television Cost amortization expense of $ 553,562 and $ 185,748 , respectively.

During the six months

ended June 30, 2021 and 2020, the Company recorded Film and Television Cost amortization expense of $ 658,369 and $ 292,363 , respectively.

During the three months ended September 30, 2021

and 2020, the Company recorded Film and Television Cost amortization expense of $ 249,141 and $ 101,716 , respectively.

During the nine months

ended September 30, 2021 and 2020, the Company recorded Film and Television Cost amortization expense of $ 907,511 and $3 95,073 , respectively.

The following table highlights the activity in

Film and Television Costs as of June 30, 2021, and December 31, 2020:

Film and Television Costs as of September 30, 2021, and December 31, 2020:

Schedule of film and television costs activity

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Film Amortization Expense

Film and Television Costs, Net as of June 30, 2021

( 1,073,154 )

Film and Television Costs, Net as of September 30, 2021

Goodwill and Intangible Assets, Net

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

in goodwill, representing the excess of the fair value of the consideration for the merger with A Squared over net identifiable

assets acquired.

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

determine if certain events warrant impairment to the goodwill asset.

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

goodwill, representing the excess of the fair value of the consideration for the merger with A Squared over net identifiable assets acquired.

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

warrant impairment to the goodwill asset.

As a result of the ChizComm acquisition, the consideration

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

Through June 30, 2021, the Company has not recognized any impairment on goodwill.

The following table represents details of our

goodwill balance:

Through September 30, 2021, the Company has not

recognized any impairment on goodwill.

The Company will perform its annual review of goodwill during the fourth quarter.

The following table summarizes the changes in

the carrying amount of goodwill by reportable segment:

Schedule of Goodwill

Content Production & Distribution

Media & Advertising Services

Goodwill as of December 31, 2020

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Foreign Currency Translation Adjustment

Goodwill as of June 30, 2021

Goodwill as of September 30, 2021

Intangible Assets, Net

The Company had the following intangible assets

as of June 30, 2021 and December 31, 2020:

as of September 30, 2021 and December 31, 2020:

Schedule of Intangible Asset

September 30,

Trademarks (a)

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Intangible Assets, Net

to FASB ASC 350-30-35, the Company reviews these intangible assets periodically to determine if the value should be retired or

impaired due to recent events.

During the three months ended June 30, 2021 and June 30, 2020, the Company recognized, $ 8,276

and $ 10,847 ,

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

During the six months

ended June 30, 2021 and June 30, 2020, the Company recognized, $ 11,131

and $ 21,638 ,

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

Pursuant to ASC 350-30, General Intangibles Other than Goodwill , the Company reviews these intangible assets periodically to determine if the value should be retired or impaired due to recent events.

During the three months ended September 30, 2021 and September 30, 2020, the Company recognized, $2,757 and $13,013, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets.

During the nine months ended September 30, 2021 and September 30, 2020, the Company recognized, $13,888 and $34,651, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets.

Amount represents fair value of the ChizComm and ChizComm Beacon Media Trade Names which have been determined to have an indefinite useful life.

Amount represents fair value of the ChizComm and ChizComm Beacon Media Customer Relationships with a useful life of 12 years.

Amortization expense for the three and six months ended June 30, 2021 was $ 129,277 and $ 214,610 , respectively.

Amortization expense for the three and nine months ended September 30, 2021 was $128,083 and $341,553, respectively.

Amount represents fair value of the Non-Compete agreements as part of the ChizComm acquisition.

The Non-Compete agreements have a useful life of 3 years.

Amortization expense for the three and six months ended June 30, 2021 was $5,053 and $8,386, respectively.

Expected future intangible asset amortization as of June

Amortization expense for the three and nine months ended September 30, 2021 was $5,006 and $13,350, respectively.

Expected future intangible asset amortization as of September 30,

2021 is as follows:

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Deferred Revenue

As of June 30, 2021 and December 31, 2020, the

Company had total short term and long term deferred revenue of $ 3,957,937 and $ 4,432,377 , respectively.

Deferred revenue includes both

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

royalties and (ii) fixed fee contracts.

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

have been met.

Included in the deferred revenue balance as of June 30, 2021 and December 31, 2020 is the $ 3,394,967 which is the remaining

balance from the total $ 3,489,583 advance against future royalty that Sony paid to the Company for both the foreign and domestic distribution

As of September 30, 2021 and December 31, 2020,

the Company had total short term and long term deferred revenue of $ 3,938,839 and $ 4,432,377 , respectively.

Deferred revenue includes

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

future royalties and (ii) fixed fee contracts.

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

criteria have been met.

Included in the deferred revenue balance as of September 30, 2021 and December 31, 2020 is the $ 3,369,695 which

is the remaining balance from the total $ 3,489,583 advance against future royalty that Sony paid to the Company for both the foreign and

domestic distribution rights.

Accrued Expenses, Salaries and Wages

As of June 30, 2021 and December 31, 2020, the

Company has the following current accrued liabilities:

As of September 30, 2021 and December 31, 2020,

the Company has the following current accrued liabilities:

Schedule of other accrued liabilities

September 30,

Other Accrued Expenses (a)

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Primarily represents accrued interest and legal fees.

Represents accrued salaries and wages and accrued vacation payable to employees as of June 30, 2021 and the year ended December 31, 2020.

Represents accrued salaries and wages and accrued vacation payable to employees as of September 30, 2021 and the year ended December 31, 2020.

Senior Secured Convertible Notes

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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 exercisable for a period of five years

at an initial exercise price of $ 0.26 per share (each a “Warrant” and collectively, the “Warrants”), for consideration

consisting of (i) a cash payment of $ 7,000,000 , and (ii) full recourse cash secured promissory notes payable by the Investors to the Company

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

Notes Principal”) (collectively, the “Financing”).

Andy Heyward, the Company’s Chairman and Chief Executive Officer,

participated as an Investor and invested $ 1,000,000 in connection with the Financing, all of which was paid at the closing and not pursuant

to an Investor Note.

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

LTD, acted as placement agent and received

warrants to purchase 6,547,619 shares at an exercise price of $ 0.26 per share (the “Placement Agent Warrants”).

the Company’s common stock exercisable for a period of five years at an initial exercise price of $ 0.26 per share (each a “Warrant”

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

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

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

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

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

The Special Equities Group, LLC, a division

of Bradley Woods & Co.

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

per share (the “Placement Agent Warrants”).

The closing of the sale and issuance of the 2020

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half-hour episodes comprised of thirty 11-minute programs that were delivered to Netflix in fall 2017.

The Facility is secured by the

license fees the Company will receive from Netflix for the delivery of the Series as well as the Company’s copyright in the Series.

The Facility has a term of 40 months and has an interest rate of either Prime plus 1% or one, three, or six-month LIBOR plus 3.25%.

a condition of the loan agreement with Bank Leumi, the Company deposited $1,000,000 into a cash account to be used solely to produce the

Additionally, the Facility contains certain standard affirmative and negative non-financial covenants such as maintaining certain

levels of production insurance and providing standard financial reports.

As of June 30, 2020, the Company was in compliance with these

On September 28, 2018, Llama entered into a Loan and Security Agreement

(the “Loan and Security Agreement”) with the Lender, pursuant to which the Lender agreed to make a secured loan in an aggregate

amount not to exceed $4,231,989 to Llama (the “Loan”).

The proceeds of the Loan will be used to pay the majority of the expenses

of producing, completing and delivering two 22-minute episodes and sixteen 11- minute episodes of the second season of the animated series

Llama Llama to be initially exhibited on Netflix.

To secure payment of the Loan, Llama has granted to the Lender a continuing security

interest in and against, generally, all of its tangible and intangible assets, which includes all seasons of the Llama Llama animated

Under the Loan and Security Agreement, Llama can request revolving loan advances under (a) the Prime Rate Loan facility and (b) the LIBOR Loan facility, each as further described in the Loan and Security Agreement attached as an exhibit hereto.

Prime Rate Loan advances shall bear interest, on the outstanding balance thereof, at a fluctuating per annum rate equal to 1.0% plus the Prime Rate (as such term is defined in the Loan and Security Agreement), provided that in no event shall the interest rate applicable to Prime Rate Loans be less than 4.0% per annum.

LIBOR Loan advances shall bear interest, on the outstanding balance thereof, for the period commencing on the funding date and ending on the date which is one (1), three (3) or six (6) months thereafter, at a per annum rate equal to 3.25% plus the LIBOR determined for the applicable Interest Period (as such terms are defined in the Loan and Security Agreement), provided that in no event shall the interest rate applicable to LIBOR Loans be less than 3.25% per annum.

As a condition of the loan agreement

with Bank Leumi, the Company deposited $1,000,000 into a cash account to be used solely to produce the Series.

On September 28, 2018, Llama entered into a Loan

and Security Agreement (the “Loan and Security Agreement”) with the Lender, pursuant to which the Lender agreed to make a

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

The proceeds of the Loan were used to

pay the majority of the expenses of producing, completing and delivering two 22-minute episodes and nineteen 11- minute episodes of the

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

To secure payment of the Loan, Llama has

granted to the Lender a continuing security interest in and against, generally, all of its tangible and intangible assets, which includes

all seasons of the Llama Llama animated series.

Under the Loan and Security Agreement, Llama could

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

Loan and Security Agreement.

The Maturity Date of the Prime Rate Loan facility and LIBOR Loan facility was June 30, 2021.

Interest rates on advances under the Loan and Security Agreement averaged 4.

25% as of June 30, 2020.

In addition, on September 28, 2018, Llama and

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under the Original Loan and Security Agreement.

As of June 30, 2021, the Company had gross

outstanding borrowing under the facility of $ 274,365 .

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

The outstanding balance was repaid on July 14, 2021.

As of December 31, 2020, the Company had gross

outstanding borrowings under the facility of $ 1,099,713 .

The outstanding balance of $ 274,365 was repaid on July 14, 2021.

Disputed Trade Payable

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

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

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

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

the Company assumed a $ 200,000 business loan that was entered into on October 15, 2019 .

The loan matures on September 15, 2026 , with payments

of $ 2,999 , plus interest at a rate of Prime plus 2.85 % per annum, due monthly.

As of September 30, 2021, the Company has an outstanding

balance of $ 116,195 , classified as a note payable within current and noncurrent liabilities on its consolidated balance sheets.

Stockholders’ Equity

As of June 30, 2021, the total number of authorized

shares of Common Stock was 400,000,000 .

On March 22, 2020, the Company entered into

a Securities Purchase Agreement (the “Purchase Agreement”) with certain long-standing investors (the

“Investors”), pursuant to which the Company agreed to issue and sell, in a registered direct offering by the Company

directly to the Investors (the “Registered Offering”), an aggregate of 4,000,000

shares of common stock at an offering price of $0.2568 per share for gross proceeds of approximately $ 1.0

million before deducting offering expenses.

As of September 30, 2021, the total number of

authorized shares of Common Stock was 400,000,000 .

On March 22, 2020, the Company entered into a

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

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

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

proceeds of approximately $ 1.0 million before deducting offering expenses.

The Registered Offering closed on March 25, 2020.

As of June 30, 2021 and December 31, 2020, there

were 300,791,335 and 258,438,514 shares of common stock outstanding, respectively.

As of September 30, 2021 and December 31, 2020,

there were 300,791,335 and 258,438,514 shares of common stock outstanding, respectively.

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

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liquidation preferences, conversion rights and preemptive rights.

There were no shares of preferred

stock outstanding as of June 30, 2021 and December 31, 2020.

There were no shares of preferred stock outstanding

as of September 30, 2021 and December 31, 2020.

Stock Options

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

During the three months ended June 30, 2021,

the Company granted options to purchase 253,636

shares of common stock to employees that fully

vest on January 24, 2024 and have a five-year term .

The Company also granted 20,000

options to purchase shares of common stock to a new member of the Board of Directors that vest

on June 24, 2022 and have a five-year term.

The shares have an option price of $ 1.98

During the three months ended June 30, 2021, the

Company granted options to purchase 253,636 shares of common stock to employees that fully vest on January 24, 2024 and have a five-year

The Company also granted 20,000 options to purchase shares of common stock to a new member of the Board of Directors that vest on

June 24, 2022 and have a five-year term.

The shares have an option price of $ 1.98 per share.

The Company did not grant any options during the

three months ended September 30, 2021.

The table below outlines the weighted average

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Expected life of options

The following table summarizes the changes in

the Company’s stock option plan during the six months ended June 30, 2021:

The following table summarizes the stock option

activity during the nine months ended September 30, 2021:

Schedule of stock option activity

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Outstanding at December 31, 2020

Outstanding at June 30, 2021

Unvested at June 30, 2021

Vested and exercisable June 30, 2021

During the three and six months ended June 30,

Outstanding at September 30, 2021

Unvested at September 30, 2021

Vested and exercisable September 30, 2021

During the three and nine months ended September

30, 2021, the Company recognized $ 915,374 and $ 2,836,339 , respectively in share-based compensation expense related to stock options.

the three and six months ended June 30, 2020, the Company recognized $ 328,497 and $ 352,311 , respectively in share-based compensation expense.

The unrecognized share-based compensation as of June 30, 2021 was $ 3,098,651 and will be recognized over a weighted average remaining

contractual life of 7.62 years.

The outstanding shares as of June 30, 2021 have an aggregated intrinsic value of $ 0 .

The weighted average

fair values per option granted for the six months ended June 30, 2021 was determined to be $ 2.36 .

the three and nine months ended September 30, 2020, the Company recognized $ 411,825 and $ 764,136 , respectively in share-based compensation

The unrecognized share-based compensation expense as of September 30, 2021 was $ 2,183,277 and will be recognized over a weighted

average remaining contractual life of 7.40 years.

The outstanding shares as of September 30, 2021 have an aggregated intrinsic value of

The weighted average fair values per option granted for the nine months ended September 30, 2021 was determined to be $ 2.36 .

Restricted Stock Units

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

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

Of such RSU’s,

7,500,000 were issued to Andy Heyward, the Company’s Chief Executive Officer (“CEO”) and were to vest in four equal

installments on the first, second, third and fourth anniversaries of December 7, 2020, subject to his continued employment (the “service-based

The CEO also received an additional 7,500,000 RSU’s that vested in four equal installments on the first, second,

third and fourth anniversaries of December 7, 2020, based on achievement of certain performance goals (the “performance-based awards”),

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

Of such RSUs, 7,500,000

were issued to Andy Heyward, the Company’s Chief Executive Officer (“CEO”) and were to vest in four equal installments

on the first, second, third and fourth anniversaries of December 7, 2020, subject to his continued employment (the “service-based

The CEO also received an additional 7,500,000 RSUs that vested in four equal installments on the first, second, third

and fourth anniversaries of December 7, 2020, based on achievement of certain performance goals (the “performance-based awards”),

which have not been established at the time the CEO and the Company entered into the arrangement, and subject to his continued employment.

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

shares of RSU’s with a fair market value of $ 74,193 .

On June 23, 2021, the Compensation Committee

of the Board of Directors amended the service-based awards granted to the CEO, such that 3,750,000 of such RSUs shall continue to

vest in four equal installments on the first, second, third and fourth anniversaries of December 7, 2020, subject to his continued

employment and the remaining 3,750,000 RSU’s shall be modified to vest based on performance or market conditions.

previously issued 7,500,000 performance-based awards, along with the 3,750,000 modified service-based awards, shall vest as

(i) 3,750,000 RSUs vest when the Company’s common stock closing sale price equals or exceeds $3.00 per share or

the Company’s market capitalization equals or exceeds $903,000,000 for 20 consecutive trading days;

(ii) 3,750,000 RSUs vest

when the Company’s common stock closing sale price equals or exceeds $3.50 per share or the Company’s market

capitalization equals or exceeds $1,053,500,000 for 20 consecutive trading days, and (iii) 3,750,000 RSUs vest when the

Company’s common stock closing sale price equals or exceeds $3.75 per share or the Company’s market capitalization

equals or exceeds $1,128,750,000 for 20 consecutive trading days (the “market conditions”).

In addition to the stock

price and market capitalization vesting conditions set forth above, such 11,250,000 RSUs may also vest in four equal installments on

the first, second, third and fourth anniversaries of December 7, 2020, based on achievement of certain operating performance-based

vesting conditions established by the Compensation Committee on June 23, 2021 and subject to his continued employment, adjusted

pro-ratably for vesting pursuant to the market conditions.

RSUs with a fair market value of $ 74,193 .

On June 23, 2021, the Compensation Committee of

the Board of Directors amended the service-based awards granted to the CEO, such that 3,750,000 of such RSUs shall continue to vest in

four equal installments on the first, second, third and fourth anniversaries of December 7, 2020, subject to his continued employment

and the remaining 3,750,000 RSUs shall be modified to vest based on performance or market conditions.

The previously issued 7,500,000

performance-based awards, along with the 3,750,000 modified service-based awards, shall vest as follows:

(i) 3,750,000 RSUs vest

when the Company’s common stock closing sale price equals or exceeds $3.00 per share or the Company’s market capitalization

equals or exceeds $903,000,000 for 20 consecutive trading days;

(ii) 3,750,000 RSUs vest when the Company’s common stock closing

sale price equals or exceeds $3.50 per share or the Company’s market capitalization equals or exceeds $1,053,500,000 for 20 consecutive

trading days, and (iii) 3,750,000 RSUs vest when the Company’s common stock closing sale price equals or exceeds $3.75 per share

or the Company’s market capitalization equals or exceeds $1,128,750,000 for 20 consecutive trading days (the “market conditions”).

In addition to the stock price and market capitalization vesting conditions set forth above, such 11,250,000 RSUs may also vest in four

equal installments on the first, second, third and fourth anniversaries of December 7, 2020, based on achievement of certain operating

performance-based vesting conditions established by the Compensation Committee on June 23, 2021 and subject to his continued employment,

adjusted pro-ratably for vesting pursuant to the market conditions.

As a result of these modifications, the RSUs subject to the market

conditions were valued at $ 15,649,700 with a derived service period of 12 months, using a Monte-Carlo simulation model.

resulted in a $ 221,665 increase in stock-based compensation for the three months ended June 30, 2021.

On June 24, 2021, the Company issued 213,636

shares of RSU’s with a fair market value of $ 422,999 .

On June 24, 2021, the Company issued 213,636 shares

of RSUs with a fair market value of $ 422,999 .

The following table summarizes the Company’s

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

RSU activity during the nine months ended September 30, 2021:

Schedule of restricted stock units

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Unvested at December 31, 2020

Unvested at June 30, 2021

During the three and six months ended June 30,

Unvested at September 30, 2021

During the three and nine months ended September

30, 2021, the Company recognized $ 4,637,492 and $ 8,283,848 , respectively, in share-based compensation expense related to RSU awards.

share-based compensation as of June 30, 2021 is $ 19,334,519 which will be recognized through the fourth quarter of 2024 assuming the underlying

grants are not cancelled or forfeited.

The Company has warrants outstanding to

purchase up to 45,511,965

shares as of June 30, 2021 and December 31, 2020.

The unvested share-based compensation as of September 30, 2021 is $ 14,697,027 which will be recognized through the fourth quarter of

2024, assuming the underlying grants are not cancelled or forfeited.

The Company has warrants outstanding to purchase

up to 45,511,965 shares as of September 30, 2021 and December 31, 2020.

On January 22, 2020, the Company entered into

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50,000 shares at an exercise price of $0.34 per share.

Pursuant to the SPA described in Note 11,

the Company issued to the note holders warrants to purchase 65,476,191

shares of common stock, exercisable for a period of 5 five years at an initial exercise price of $ 0.26

Pursuant to the SPA described in Note 11, the

Company issued to the note holders warrants to purchase 65,476,191 shares of common stock, exercisable for a period of 5 five years at an

initial exercise price of $ 0.26 per share.

The placement agent received warrants to purchase

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

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

Notes conversion option were determined using the Black-Scholes-Merton model with standard valuation inputs.

The valuation inputs as of March 17, 2020 included expected volatility of 89%, and annual interest rate of 0.66%.

The warrants were determined to be liability classified and adjusted

to fair value as of each reporting period.

As of June 30, 2021, warrants to purchase 892,857 shares were outstanding and re-valued at

$1,513,883, resulting in a net increase in liability of $316,814, as compared to December 31, 2020.

The change in value is recorded in

the Warrant Revaluation Expense line item within Net Other Income (Expense) on the consolidated statement of operations.

The fair values of derivative warrants attached to the 2020 Convertible Notes

and Notes conversion option were determined using the Black-Scholes-Merton option pricing model with standard valuation inputs.

The valuation

inputs as of June 30, 2021 included expected volatility of 103%, and annual interest rate of 0.61%.

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.

inputs as of March 17, 2020 included expected volatility of 89%, and annual interest rate of 0.66%.

The warrants were determined to be

liability classified and adjusted to fair value as of each reporting period.

As of September 30, 2021, warrants to purchase 892,857 shares

were outstanding and re-valued at $1,094,023, resulting in a net decrease in liability of $103,046, as compared to December 31, 2020.

The change in value is recorded in the Warrant Revaluation Gain (Loss) line item within Net Other Income (Expense) on the consolidated

statement of operations.

The valuation inputs as of September 30, 2021 included expected volatility of 107%, and annual interest rate

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 $4,286,844 million.

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

holders will receive new unregistered warrants to purchase up to an aggregate of 39,740,500 shares

of common stock (the “New Warrants”) at an exercise price of $2.37 per share and with an exercise period of five years

from the initial issuance date.

Pursuant to the Letter Agreements, the New Warrants are substantially in the form of the Existing

Warrants (except for customary legends and other language typical for an unregistered warrant, including the ability for the holder

of the New Warrant to make a cashless exercise if no resale registration statement covering the common stock underlying the New

Warrants is effective after six months), will be exercisable immediately, and will have a term of exercise of five years, The

Company registered the resale of the shares of common stock issuable upon exercise of the New Warrants.

The valuation inputs at

January 28, 2021 included expected volatility of 144%, and annual interest rate of 0.42%.

The fair value of these warrants was

determined to be $69,138,527 using the Black-Scholes option pricing model, which was recorded as a warrant incentive expense and

included in the calculation of the Net Loss per Common Share, based on the following assumptions:

Schedule of assumptions for warrant

Ltd., acted as warrant solicitation agent

and received a cash fee of $4,286,844.

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, exercisable immediately, 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).

The Company registered the

resale of the shares of common stock issuable upon exercise of the New Warrants.

The fair value of these warrants was determined to be

$69,138,527 using the Black-Scholes option pricing model and was recorded as Warrant Incentive Expense within Net Other Income (Expense)

on the condensed consolidated statement of operations, based on the following assumptions:

Schedule of assumptions for warrant activity

Exercise Price

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The following table summarizes the changes in

the Company’s outstanding warrants during the six months ended June 30, 2021:

the Company’s outstanding warrants during the nine months ended September 30, 2021:

Schedule of warrant activity

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Warrants Expired

Balance at June 30, 2021

$ 0.21 - 5.30

Balance at September 30, 2021

Exercisable December 31, 2020

$ 0.76 - 6.00

Exercisable June 30, 2021

$ 0.21 - 5.30

Exercisable September 30, 2021

The Company accounts for income taxes in accordance

with Accounting Standards Codification Topic 740 Income Taxes (“Topic 740”), which requires the recognition of deferred tax

liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the

financial statements or tax returns.

A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more

likely than not to be realized.

Topic 740 provides guidance on the accounting

for uncertainty in income taxes recognized in a company’s financial statements.

ASC 740 requires a company to determine whether

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

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

with ASC 740, Income Taxes (“ASC 740”), which requires the recognition of deferred tax liabilities and assets at currently

enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns.

A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized.

ASC 740 provides guidance on the accounting for

uncertainty in income taxes recognized in a company’s financial statements.

ASC 740 requires a company to determine whether it is

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

If the more-likely-than-not

threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.

The Company includes interest and penalties arising

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

As of June 30, 2021, and December

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

As of September 30, 2021, and

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

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

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ASC 842, Leases , using the modified retrospective transition method applied at the effective date of the standard.

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 June 30, 2021, weighted-average lease term

for operating leases equals to 72.72 months.

Weighted-average discount rate equals to 9.86 %.

On February 6, 2018, the Company entered into

an operating lease for 6,969 square feet of general office space at 131 South Rodeo Drive, Suite 250, Beverly Hills, CA 90212 pursuant

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

a reversal of previously recorded deferred rent of $ 37,920 and the increase in accumulated deficit of $ 4,306 for the operating lease entered

into on February 6, 2018, for 6,969 square feet of general office space at 131 South Rodeo Drive, Suite 250, Beverly Hills, CA 90212 pursuant

to a 91-month lease that commenced on May 25, 2018.

The Company pays rent of $364,130 annually, subject to annual escalations of 3.5%.

Effective January 21, 2019, the Company entered into a sublease for

the 6,969 square feet of general office space located at 131 South Rodeo Drive, Suite 250, Beverly Hills, CA 90212 pursuant to an 83-month

sublease that commenced on February 4, 2019.

The subtenant paid the Company rent of $422,321 annually, subject to annual escalations of

On September 11, 2020, the Company entered into a Surrender Agreement with the landlord which terminated

the 131 South Rodeo Dr.

The Company paid rent of $364,130 annually, subject to annual escalations of 3.5%.

Effective January 21, 2019, the Company entered

into an 83-month sublease for the 6,969 square feet of general office space, that commenced on February 4, 2019.

The subtenant paid the

Company rent of $422,321 annually, subject to annual escalations of 3.5%.

On September 11, 2020, the Company entered into a Surrender

Agreement with the landlord which terminated the 131 South Rodeo Dr.

lease agreement.

As a result, the Company recorded a decrease in the Right of Use asset, accumulated amortization,

and the lease liability of $ 2,142,863 , $ 465,124 and $ 1,760,302 respectively.

The termination of the lease resulted in a loss of $338,586.

As a result, the Company recorded a decrease in

the right-of-use asset, accumulated amortization, and the lease liability of $ 2,142,863 , $ 465,124 and $ 1,760,302 respectively.

The termination

of the lease resulted in a loss of $338,586.

Simultaneously, as part of the Surrender Agreement the Sublease was terminated.

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The Company pays rent of $392,316 annually, subject to annual escalations of 3.5%.

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

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

the Company assumed an operating lease that was entered into on May 19, 2019 for 6,845 square feet of general office space located at

245 Fairview Mall Drive, Suites 202 and 301, Toronto, Ontario M2J 4T1 pursuant to a 84 month lease which commenced on October 1, 2019.

245 Fairview Mall Drive, Suites 202 and 301, Toronto, Ontario M2J 4T1 pursuant to an 84-month lease which commenced on October 1, 2019.

The Company pays rent of $95,830 annually, subject to annual escalations 5% to 7%.

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

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

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

Company pays rent of $74,338 annually.

Also, as part of the ChizComm Acquisition, the Company

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

Boulevard, 11 th Floor, Mahawh, New Jersey pursuant to a 24-month lease which ended on May 1, 2021.

The Company paid rent

of $74,338 annually.

On March 2, 2021, the Company entered into an

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

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

The Company will pay $114,360 annually subject to annual escalations

to an 89-month lease which commenced on October 1, 2021.

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

As of September 30, 2021, the weighted-average

lease term for operating leases equals to 69 months.

Weighted-average discount rate equals to 8.32 %.

In addition, the Company has contractual commitments

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Rental expenses incurred for operating leases

during the three months ended June 30, 2021 and June 30, 2020 were $ 131,403 and $ 207,839 , respectively.

Rental expenses incurred for operating

leases during the six months ended June 30, 2021 and June 30, 2020 were $ 243,746 and $ 415,678 , respectively.

During the six months ended

June 30, 2021, the Company did not receive sub-lease income.

During the six months ended June 30, 2020, the Company received sub-lease

income of $ 238,484 .

during the three months ended September 30, 2021 and September 30, 2020 were $ 124,189 and $ 141,962 , respectively.

Rental expenses incurred

for operating leases during the nine months ended September 30, 2021 and September 30, 2020 were $ 367,935 and $ 557,640 , respectively.

During the nine months ended September 30, 2021, the Company did not receive sub-lease income.

During the nine months ended September

30, 2020, the Company received sub-lease income of $ 316,762 .

The following is a schedule of future minimum contractual obligations

as of June 30, 2021, under the Company’s operating leases and employment agreements:

as of September 30, 2021, under the Company’s operating leases and employment agreements:

Schedule of future minimum lease payments

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he provides services as an executive producer.

The third identified series under this employment agreement is Stan Lee’s

The fourth identified series under this employment agreement is Stan Lee’s

Superhero Kindergarten.

During the six months ended June 30, 2021, 11 half hours were delivered.

Accordingly, Mr.

Heyward is owed

$ 137,500 which is included in Due to Related Party on the Company’s condensed consolidated Balance Sheet.

Heyward is owed $ 175,000 which is included in Due to Related Party on the Company’s

condensed consolidated balance sheet.

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

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

During the three and six months ended

June 30, 2021, the Company earned $ 0 in royalties from this agreement.

As of June 30, 2021, Mr.

Heyward is owed

During the three and nine months ended

September 30, 2021, the Company earned $ 0 in royalties from this agreement.

As of September 30, 2021, Mr.

awarded $55,000 as a quarterly bonus and is owed $ 931

for reimbursable expenses which are included in Due to Related Party on the condensed consolidated balance sheet.

Segment Reporting

The Company has determined that it operates in

two operating segments, the production and distribution of children’s content and to provide media and advertising services.

The following table presents sales and earnings

within our two operating segments.

Schedule of Segment Reporting

The Company’s CODM uses revenue and

net earnings to evaluate the profitability and performance of each operating segment.

All other financial information is reviewed by the

CODM on a consolidated basis.

The CODM does not evaluate the operating segments using asset information and it is therefore not disclosed.

expenses directly attributable to each reportable segment is included in operating results for each segment.

However, the CODM does not

evaluate the expenses by operating segment and, therefore, it is not separately presented.

The following table presents the revenue and net

earnings within our two operating segments:

Segment information

by revenues and net earnings

Three Months Ended

Nine Months Ended

September 30,

Total Revenues:

Content Production & Distribution

1 unchanged sentence

Total Revenue

% of segment revenue

Content Production & Distribution

( 8,872,348 )

( 2,007,209 )

% of segment assets

( 91,702,308 )

$ ( 391,101,155 )

Media & Advertising Services

( 1,204,663 )

Total Operating Loss

( 9,253,380 )

( 2,007,209 )

$ ( 92,906,971 )

$ ( 391,101,155 )

Geographic Information

The following table provides information about disaggregated revenue

by geographic area:

Schedule of segments by geographic area

Three Months Ended

Nine Months Ended

September 30,

United States

Total Revenue

Subsequent Events

On July 20, 2021, Mr.

Heyward was paid a bonus

On July 20, 2021, the Company issued 176,101 shares

of the Company’s common stock valued at $1.55 per share to a production company for services.

On August 5, 2021, Mr.

On September 30, 2021, the Company entered into

a loan agreement and promissory with POW!

in which the Company loaned POW!

The loan bears interest at 9% and is due November

The loan was funded on October 12, 2021.

On October 5, 2021, Mr.

Heyward was paid $55,000

for accrued producer fees.

in bonuses, this amount was included in Due to Related Party on the Company’s condensed consolidated Balance Sheet as of September

On October 8, 2021 Mr.

Heyward was paid $175,000

for producer fees, this amount was included in Due to Related Party on the Company’s condensed consolidated Balance Sheet as of

September 30, 2021.

On October 22, 2021 Mr.

Heyward was paid $75,000

for producer fees.

On October 26, 2021, 1326919 B.C.

LTD., a corporation

existing under the laws of the Province of British Columbia and a wholly-owned subsidiary of the Company and Wow Unlimited Media Inc.

(“WOW”), a corporation existing under the laws of the Province of British Columbia, entered into an Arrangement Agreement

to effect a transaction among the parties by way of a plan of arrangement under the arrangement provisions of Part 9, Division 5 of the

Business Corporations Act , whereby the Company will purchase 100% of WOW’s issued and outstanding shares for $38.4 million

in cash and 11,000,000 shares of the Company’s common shares.

The acquisition will allow

the Company to expand its audience demographic into the lucrative teens and young adult marketplaces, provide additional content on Kartoon

and provide additional brands to be put through the consumer products and global distribution sales networks.

Since the acquisition

occurred after the reporting date but before the filing of this form 10-Q, the

Company has not completed its initial accounting for the business combination which will be accounted for using the acquisition method

of accounting.

The fair value of the assets and liabilities are still to be determined, which precludes the Company from reporting substantially

all the required disclosure including the supplemental pro forma information at this time.

On October 27, 2021, the Company issued 176,101

shares of the Company’s common stock valued at $1.59 per share for production services to an unrelated third party.

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

What changed 10-Q

Item 1. Financial Statements