What changed in this filing

/stocks — the workspaceLOADING

Item 3. Legal Proceedings

2022-04-06 compared with 2021-03-31 · 110 added, 70 removed, 4 unchanged (98% of the section changed)

Legal Proceedings

As of December 31, 2020, there were no

material pending legal proceedings to which we are a party or as to which any of its property is subject other than described below.

As previously disclosed, on August 18, 2020, the Company and its Chief Executive Officer

Andy Heyward were named as defendants in a putative class action lawsuit filed in the U.S.

District Court for the Central District of

California and styled Salvador Verdin v.

Genius Brands International, Inc.

and Andy Heyward, Case No.

2:20-cv-07457-DDP-PJW.

later served with a similar lawsuit Sumit Garg v.

Genius Brands International, Inc.

and Andy Heyward, Case No.

2:20-cv-07764.

allege generally that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially false

or misleading statement regarding the Company’s business and business prospects, artificially inflating the Company’s stock

Plaintiff seeks unspecified damages on behalf of the alleged class.

The two above-referenced securities suits have been consolidated

into a single proceeding before Judge Fischer in the U.S.

District Court for the Central District of California.

The proceeding will

now be known as In re Genius Brands International, Inc.

Securities Litigation.

The amended complaint in this action was filed on February

On March 17, 2021, the defendants filed a motion to dismiss the amended complaint.

Briefing that motion is, by court-ordered

schedule, expected to extend into June 2021, with a hearing currently scheduled for July 5, 2021.

Pending resolution of the motion to

dismiss, neither discovery nor other substantive proceedings are expected.

Related to the securities class action,

the Company’s directors, Chief Executive Officer and Chief Financial Officer have been named as defendants in a putative

shareholder derivative lawsuit filed in September 2020 in the U.S.

District Court for the Central District of California and styled

Eduardo Correa, etc., v.

Andy Heyward, et.

al., Case No.

As of December 31, 2021, there

were no material pending legal proceedings to which the Company is a party or as to which any of its property is subject other than described

On June 16, 2021, the Company

was named as a defendant in a lawsuit filed in the U.S.

District Court for the Central District of California styled A Parent Media Co.

Genius Brands International, Inc., Case No.

2:21-CV-04897, alleging that the Company has infringed the plaintiff’s federally

registered trademarks KIDOODLE.TV, KIDOODLE and KIDOODLETV by sponsoring Google Ads in which the plaintiff’s trademarks appeared.

The parties entered into a confidential settlement agreement in November 2021, and the lawsuit was then dismissed with prejudice along

with the entry of a permanent injunction by the Court.

As previously disclosed, the

Company, its Chief Executive Officer, Andy Heyward, and its Chief Financial Officer, Robert Denton, are named as defendants in a putative

class action lawsuit filed in the U.S.

District Court for the Central District of California and styled In re Genius Brands International,

Securities Litigation, Master File No.

2:20-cv-07457 DSF (RAOx).

On November 20, 2020 a second case, Son

Ly, on behalf of Genius Brands International, Inc.

Andy Heyward;

11/20/2020 CNS Temporary No.

E167721482 , was filed in

a different court –

specifically the Los Angeles County Superior Court.

The suits make similar allegations, generally stating

that the defendants breached fiduciary duties owed to the Company by, among other things, causing the Company to issue the supposedly

false and misleading statements that underlie the Verdin securities litigation and thereby purportedly exposing the Company

to liability and damaging the Company in an unspecified amount.

No recovery is sought from the Company.

Instead, as a shareholder

derivative action, the Company is named as Nominal Defendant;

and plaintiff, an alleged stockholder of the Company, purports to

sue on behalf and for the benefit of the Company.

Pursuant to an agreement among the parties, the court has stayed proceedings

in the derivative litigations pending the outcome of anticipated motions to dismiss in the securities class action.

In all of the above-mentioned proceedings,

defendants have denied and continue to deny any wrongdoing and intend to defend the claims vigorously.

On July 7, 2020, we received a letter from a law firm alleging

that rights Genius Brands had licensed from POW!, LLC, through its the Stan Lee Universe, LLC joint venture, had already been sold

to another company, represented by that law firm.

The law firm alleged that the Company is, inter alia, interfering with their

contractual rights.

This matter was referred to our outside litigation counsel.

We have been informed that the matter is being

adjudicated in an arbitration and that the arbitrator issued a gag order preventing further communications from Plaintiff to 3 rd

As a result of COVID 19, the majority of

our employees started working remotely and we stopped paying rent in April of 2020.

On November 30, 2020, the landlord filed a

lawsuit demanding that the Company pay all past due rent.

On February 18, 2021 we entered into a settlement agreement with the

landlord whereby we agreed to pay $237,500 in full settlement of all claims and promised to resume paying the contractually agreed

rent in full starting March 1, 2021.

Initially, the lead plaintiffs alleged generally that the defendants

violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) by making materially false or

misleading statements regarding the Company’s business and business prospects, artificially inflating the Company’s stock

price during an alleged class period running from March 11, 2020, through July 5, 2020.

Plaintiffs sought unspecified damages on behalf

of the alleged class of persons who invested in our common stock during the alleged class period.

The defendants moved to dismiss lead

plaintiffs’ amended complaint;

and in a decision issued on August 30, 2021, the Court dismissed the amended complaint but granted

lead plaintiffs a further opportunity to plead a claim.

On September 27, 2021, the

lead plaintiffs filed a second amended complaint, naming the same defendants.

The new complaint alleges that the Company made numerous

false or misleading statements about the Company’s business and business prospects over an alleged class period running from March

11, 2020, through March 30, 2021, which they say violated Section 10(b) and 20(a) of the Exchange Act.

Lead plaintiffs also allege a “scheme

to defraud” during 2020 that involved several private placements of Company stock with an allegedly “insider” group

of investors that purportedly then issued press releases that inflated the stock price, after which these investors purportedly sold their

shares at higher prices.

None of these investors (save Mr.

Heyward, who is not alleged to have sold his shares) is named as a defendant

in the securities action.

The lead plaintiffs again seek unspecified damages on behalf of the alleged class—persons who invested

in the Company’s common stock during the newly alleged class period.

In November 2021, defendants filed a motion to dismiss the

second amended complaint, and the motion is fully briefed.

Argument on the motion was scheduled for March 21, 2022, on March 18, 2022,

the judge cancelled the hearing and will rule based on the parties’ written submissions.

The Company cannot predict the outcome

of the motion or the timing of a decision from the Court.

Pending resolution of the motion to dismiss, neither discovery nor other substantive

proceedings are occurring nor expected.

Related to the securities

class action, the Company’s directors, Chief Executive Officer and its Chief Financial Officer have been named as defendants in

several putative shareholder derivative lawsuits.

As previously disclosed, these include a consolidated proceeding pending in the U.S.

District Court for the Central District of California and styled In re Genius Brands Stockholder Derivative Litigation, Case

2:20-cv-08277 DSF (RAOx);

an action filed in the Los Angeles County Superior Court captioned Ly, etc.

Heyward, et al., Case No.

and an additional case pending in the U.S.

District Court for the District of Nevada, styled Miceli, etc.

al., Case No.

3:21-cv-00132-MMD-WGC.

While the allegations and legal claims vary somewhat among the derivative actions, they all

generally allege that the defendants breached fiduciary duties owed to the Company by, among other things, causing the Company to issue

the supposedly false and misleading statements that underlie the securities lawsuit, purportedly exposing the Company to liability and

damaging the Company in an unspecified amount.

By these derivative lawsuits, the plaintiffs seek no recovery from the Company.

as a shareholder derivative action, the Company is named as a nominal defendant.

The plaintiffs, all alleged stockholders of the Company,

purport to sue on behalf and for the benefit of the Company.

Pursuant to agreements among the parties, the courts in all of the derivative

lawsuits have stayed proceedings pending the outcome of the motion to dismiss in the securities action.

The Company is also a nominal

defendant in an action filed January 11, 2022, in the U.S.

District Court for the Southern District of New York and styled Todd Augenbaum

Anson Investments Master Fund LP, et al., Case No.

1:22-cv-00249 VM.

The action, which purports to be brought on behalf and for the

benefit of the Company, seeks the recovery under Section 16(b) of the Exchange Act of supposed short-swing profits allegedly realized

by roughly a dozen persons and entities that participated as investors in the Company’s March 11, 2020 offering of convertible debt

securities and warrants.

Plaintiff Augenbaum, who purports to be a Company stockholder, filed his lawsuit after issuing a demand to the

Company’s Board of Directors asking that the Company sue the investor defendants.

The Company rejected the demand in late December

2021, and Mr.

Augenbaum sued a few weeks later, as Section 16(b) permits him to do.

No Company officer or director is among the defendants.

The action is currently in its very early stages, with the parties currently negotiating a date for defendants’ initial responses

to the complaint.

The Company cannot predict the outcome of the lawsuit, but again notes that plaintiff seeks no relief against the Company.

On July 7, 2020, the Company

received a letter from a law firm alleging that rights that Genius Brands had licensed from POW!

LLC, through its joint venture, Stan

Lee Universe, LLC, had already been sold to another company, Proxima, represented by that law firm.

The law firm alleged that the Company

is, inter alia, interfering with Proxima’s contractual rights.

On or about November 4, 2021, POW!

and Proxima entered a binding

settlement agreement resolving all the claims made by Proxima.

On January 18, 2022, the Company

was named as a defendant in a lawsuit filed in the Supreme Court of the State of New York, County of New York styled Harold Chizick and

Jennifer Chizick v.

Genius Brands International, Inc., ChizComm Ltd., Index No.

650278/2022, alleging:

(1) breach of employment agreement,

(2) breach of duty of good faith, (3) constructive dismissal, (4) indemnification, (5) violation of the Employment Standards Act 2000

of Ontario, and (6) defamation.

On February 25, 2022, the Company filed a Motion to Dismiss on the ground that venue is improper.

Plaintiffs’ counsel has advised that they will be amending their complaint to address the arguments in the Company’s venue

Plaintiffs filed their Amended Complaint on March 17, 2022.

The case remains at the pleading stage and no trial date has been

In all of the above-mentioned

active proceedings, the Company has denied and continues to deny any wrongdoing and intends to defend the claims vigorously.

Mine Safety Disclosures

1 unchanged sentence

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

What changed 10-K

Item 3. Legal Proceedings