What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-16 compared with 2021-11-15 · 336 added, 358 removed, 41 unchanged (94% of the section changed)

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

and related notes for the three and nine months ended September 30, 2021 and 2020.

Certain statements made or incorporated by reference

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

the approval of authorized personnel constitute forward looking statements within the meaning of Section 27A of the Securities Act of

1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are subject to the safe

harbor created thereby.

Forward-looking statements reflect intent, belief, current expectations, estimates or projections about, among

other things, our industry, management’s beliefs, and future events and financial trends affecting us.

Words such as “anticipates,”

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

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

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

any underlying assumptions, are forward looking statements.

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

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

that are difficult to predict.

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

statements as a result of various factors.

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

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

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

Forward-looking statements in this report speak only as of

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

and related notes for the three months ended March 31, 2022 and 2021.

Certain statements made or incorporated by reference in this report

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

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

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

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

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

Words such as “anticipates,” “expects,”

“intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will”

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

In addition, any statements

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

are forward looking statements.

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

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

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

as a result of various factors.

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

Risk Factors” in our Annual Report on Form 10-K filed on April 6, 2022 and elsewhere in this report, as well as other factors that

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

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

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

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

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

The management’s discussion and analysis

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

States of America.

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

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

Management bases its estimates

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

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

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

Genius Brands International, Inc.

“us,” “our,” or the “Company”) is a global content and brand management company that creates and licenses

multimedia content.

Led by experienced industry personnel, we distribute our content in all formats as well as a broad range of consumer

products based on our characters.

In the children's media sector, our portfolio features “content with a purpose” for toddlers

to tweens, which provides enrichment as well as entertainment.

New intellectual property titles include Stan Lee’s Superhero

Kindergarten produced with Stan Lee’s Pow!

Entertainment, and Oak Productions.

Arnold Schwarzenegger lends his voice as

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

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 our wholly-owned distribution outlet, Kartoon Channel!.

Other newer series include, the preschool property Rainbow Rangers , which debuted in November 2018 on Nickelodeon and which

was renewed for a second season and preschool property Llama Llama, which debuted on Netflix in January 2018 and was

renewed by Netflix for a second season.

Our library titles include the award-winning Baby Genius , adventure comedy Thomas

Edison's Secret Lab ® and Warren Buffett’s Secret Millionaires Club, created with and starring iconic

investor Warren Buffett, which is distributed across our Genius Brands Network on Comcast’s Xfinity on Demand, AppleTV, Roku, Amazon

Fire, YouTube, Amazon Prime, Cox, Dish, Sling and Zumo, as well as Connected TV.

In July 2020, we entered into a binding term sheet with

in which we agreed to form an entity with POW!

to exploit certain rights in intellectual property created by Stan Lee, as well

as the name and likeness of Stan Lee.

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

and the Company executed an Operating

Agreement for the joint venture, effective as of June 1, 2021.

This agreement enables us to assume the worldwide rights, in perpetuity,

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

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

develop and license multiple properties each year.

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

called Shaq’s Garage.

In addition, we act as licensing agent for Penguin

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

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

The Management’s

Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide readers of

our condensed consolidated financial statements with the perspectives of management.

This should allow the readers of this report to

obtain a comprehensive understanding of our businesses, strategies, current trends, and future prospects.

It should be noted that

the MD&A contains forward-looking statements that involve risks and uncertainties.

Genius Brands International,

(“we,” “us,” “our,” or the “Company”) is a global content and brand management company

that creates and licenses multimedia content.

Led by experienced industry personnel, we distribute our content primarily on television

and streaming platforms and license our properties for a broad range of consumer products based on our characters.

In the children's media

sector, our portfolio features “content with a purpose” for toddlers to tweens, which provides enrichment as well as entertainment.

New intellectual property titles include Stan Lee’s Superhero Kindergarten produced with Stan Lee’s Pow!

Entertainment

and Oak Productions.

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

Another new offering

Pop Quiz , a live action game show featuring kids as contestants.

The show is hosted by Casey Simpson, a prominent social

media influencer and former Nickelodeon star.

Pop Quiz and Superhero Kindergarten are being broadcast in the

United States on our wholly-owned advertisement supported video on demand (“AVOD”) and subscription video on demand (“SVOD”)

distribution outlet, the Kartoon Channel!.

Other newer series include, the preschool property Rainbow Rangers , which debuted

in November 2018 on Nickelodeon, and was renewed for a third season and preschool property Llama Llama , which debuted on Netflix

in January 2018 and was renewed by Netflix for a second season.

Our library titles include the award-winning Baby Genius, adventure comedy

Thomas Edison's Secret Lab® and Warren Buffett’s Secret Millionaires Club , created with and starring iconic investor

Warren Buffett, which is distributed across our Genius Brands Network on Comcast’s Xfinity on Demand, AppleTV, Roku, Amazon Fire,

YouTube, Amazon Prime, Cox, Dish, Sling and Zumo, as well as Connected TV.

We are in production on a new animated series starring Shaquille

O’Neal called Shaq’s Garage which we expect to debut during the fourth quarter of 2022.

In addition, we act as a licensing

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

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

Environmental, Social and Governance Strategy

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

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

As a global content company that

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

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

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

our success as a business.

We are committed to responsible, ethical and inclusionary business

practices as outlined below:

We are attempting to shape

culture, social attitudes and societal outcomes with our animated content and consumer products that touch the lives of young people and

their families.

As a global content company that reaches millions of people, we aim to be a positive force in the world.

We are committed to advancing

and strengthening our approach to environmental, social and governance (“ESG”) topics to help serve our partners, audiences,

employees and shareholders — and to enhance our success as a business.

We are committed to responsible,

ethical and inclusionary business practices as outlined below:

Human Capital Management

We aim to build a culture that attracts and retains

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

Our human capital management strategy is intended

to address the following areas:

As of March, 31, 2022, we

employed 79 full-time employees and 16 independent contractors.

We aim to build a culture

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

Our human capital management

strategy is intended to address the following areas:

A Culture of Diversity, Equity and Inclusion

We seek to foster a culture of diversity, equity

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

We strive to be an inclusionary workplace because

we believe that it strengthens our business.

We seek to foster a culture

of diversity, equity and inclusion through a range of partnerships, collaborations, programs and initiatives, some of which are described

We strive to be an inclusionary

workplace because we believe that it strengthens our business.

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

That role is responsible for both helping meet our hiring goals and reviewing the content we create.

Our board of directors is diverse:

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

Our diverse workforce is approximately 62% female.

That role is responsible

for both helping meet our hiring goals and reviewing the content we create.

Preventing Harassment and Discrimination

We have enacted policies addressing harassment,

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

We have enacted policies addressing

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

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

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Social Impact and Corporate Social Responsibility

We believe that the content we produce, primarily

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

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

social impacts.

We believe that the content

we produce, primarily directed at young people and their families, both reflects and influences how our young viewers perceive and understand

important issues.

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

to create positive social impacts.

By way of just a few examples:

in our show Rainbow

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

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

appreciated by moms and kids who deal with physical challenges.

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

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

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

Our mission statement says it all:

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

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

Recent Financings

On January 28, 2021, we entered into letter agreements

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

(the “Existing Warrants”) to purchase up to an aggregate of 39,740,500 shares of our common stock at their original exercise

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

We received approximately $61.6 million in gross proceeds.

The Special Equities

Group, a division of Bradley Woods & Co.

Ltd., acted as warrant solicitation agent and received a cash fee of approximately $4,286,844.

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).

We were required to register the resale of the shares of common stock

issuable upon exercise of the New Warrants.

in our show Rainbow Rangers , a diverse cast of girls works to save animals and protect the environment, while demonstrating the

power of teamwork;

in our Llama Llama series, we teach kindness and inclusion, and feature a differently abled character, which

we have been told is appreciated by moms and kids who deal with physical challenges.

In the earliest days of the COVID-19 pandemic, we

spread public service messages to keep our audiences safe and informed with animated shorts featuring the iconic voices from our series

including Warren Buffett from The Secret Millionaires Club and Jennifer Garner, the voice of Mama Llama from the Llama Llama

Our mission statement says

“Content with a Purpose.” Social justice, caring about the environment and modeling appropriate and inclusionary behavior

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

Acquisition of Wow Unlimited Media Inc.

On April 6, 2022, we completed

the acquisition of Wow Unlimited Media Inc.

(“WOW”), a corporation existing under the laws of the Province of British Columbia.

On October 26, 2021 our wholly-owned subsidiary, 1326919 B.C.

LTD., a corporation existing under the laws of the Province of British Columbia

and WOW, 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 .

We purchased 100% of WOW’s issued and outstanding shares

for approximately $38.3 million in cash and 11,057,000 shares of our common stock.

We have not completed

the 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.

Following the initial equity

investment in YFE during the fourth quarter of 2021, we participated in a mandatory tender offer for the remaining publicly traded shares

held by YFE shareholders.

Upon the expiration of the offer on February 14, 2022, we purchased an additional 2,637,717 shares of YFE at

2.00 EUROS per share or $5.7 million in the aggregate.

On March 9, 2022, bonds held by YFE shareholders, were converted into 2,574,000

shares of YFE common stock, 304,631 of which were purchased by us, at 2.00 EUROS per share or $0.6 million, increasing the number of YFE’s

outstanding shares and our ownership in YFE to 45.6% as of March 31, 2022.

Coronavirus (COVID-19)

With respect to the ongoing and evolving coronavirus

(“COVID-19”) outbreak, which was designated as a pandemic by the World Health Organization on March 11, 2020, COVID-19 has

caused substantial disruption in international and U.S.

economies and markets.

COVID-19 has had an adverse impact on the entertainment

industry and, if repercussions of COVID-19 are prolonged, could have a significant adverse impact on our business, which could be material.

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

return-to-work plan has been developed.

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

However, due to a recent surge in COVID-19 cases and the increased transmissibility of COVID-19 variants, the planned date for returning,

in-person, to the office is January 3, 2022.

To date, we believe that COVID-19 has started

to cause a negative impact on our business, including the effects on our customers, suppliers and vendors, which could have a negative

impact on our financial results.

Our management cannot at this point estimate the impact of COVID-19 on our business, and no provision

for COVID-19 is reflected in the accompanying financial statements.

However, with regard to content distribution, we have observed demand

increases for streaming entertainment services in 2021.

Supply chain issues are affecting the toy industry which may impact sales efforts

in our ChizComm Beacon Media subsidiary.

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

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

of our employees, customers, partners and stockholders.

We continue to work with our

stakeholders (including customers, employees, consumers, suppliers, business partners and local communities) to responsibly address this

global pandemic.

We will continue to monitor the situation and assess possible implications to our business and our stakeholders and will

take appropriate actions in an effort to mitigate adverse consequences.

We cannot assure you that we will be successful in any such mitigation

The extent to which the COVID-19 pandemic will continue to negatively impact our operations will depend on future developments

which are highly uncertain and cannot be predicted with confidence, including the duration of the pandemic, the emergence of new virus

variants, new information which may emerge concerning the severity of the COVID-19 pandemic, outbreaks occurring at any of our facilities,

the actions taken to control the spread of COVID-19 or treat its impact, and changes in worldwide and U.S.

economic conditions.

deteriorations in economic conditions, as a result of the COVID-19 pandemic or otherwise, could lead to a further or prolonged decline

in demand for our products and services and negatively impact our business.

It may also impact financial markets and corporate credit

markets which could adversely impact our access to financing or the terms of any such financing.

We cannot at this time predict the extent

of the impact of the COVID-19 pandemic and its resulting economic impact, but it could have a material adverse effect on our business,

financial position, results of operations and cash flows.

To the extent the COVID-19 pandemic adversely affects our business and financial

results, it may also have the effect of heightening many of the other risks described in “Item 1A.

Risk Factors” and elsewhere

in the 2021 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on April 6, 2022, such

as our ability to protect our information technology networks and infrastructure from unauthorized access, misuse, malware, phishing and

other events that could have a security impact as a result of our remote working environment or otherwise.

On March 15, 2022, we began

implementing our “Return to Office” plan.

We continue to be flexible with employee in-office requirements as we adjust to

COVID-19 outbreaks and employee preferences for remote work.

Results of Operations

Our summary results for the three months ended

September 30, 2021 and September 30, 2020 are below.

Our summary results for the

three months ended March 31, 2022, and March 31, 2021 are below.

Three Months Ended

September 30,

Licensing & Royalties

March 31, 2022

March 31, 2021

(in thousands, except percentages)

Media Advisory & Advertising Services

Television & Home Entertainment

Advertising Sales

Product Sales

Content Distribution

Licensing & Royalties

Total Revenue

Licensing and Royalties revenue include items for which we license

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

During the three

months ended September 30, 2021 compared to the three months ended September 30, 2020, Licensing and Royalties revenue decreased $108,912

The decrease was primarily due to the expiration of certain consumer product licenses that were not renewed.

Media Advisory & Advertising Services revenue

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

The increase of $1,181,792 was a result of the ChizComm

acquisition on February 1, 2021.

Television & Home Entertainment revenue is

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

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

in Television & Home Entertainment revenue occur period over period based on the achievement of revenue recognition criteria such

as the start of a license period and the delivery of the content to the customer.

During the three months ended September 30, 2021 compared

to the three months ended September 30, 2020, Television & Home Entertainment revenue increased $489,316, or 1,560%.

was primarily due to the recognition of revenue related to Stan Lee’s Superhero Kindergarten and Rainbow Rangers .

Advertising sales are generated on the Kid Genius

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

Advertising sales increased by $34,186 or

80%, during the three months ended September 30, 2021 compared to the three months ended September 30, 2020.

The increase was primarily

due to the addition of new licensed titles and revenue generated by Stan Lee’s Superhero Kindergarten .

Product sales are generated through Merch by Amazon

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

Product sales increased $1,075

or 326%, during the three months ended September 30, 2021 compared to the three months ended September 30, 2021.

Media Advisory & Advertising

Services revenue is a combination of client retainer fee-based services and media commissions generated by our wholly-owned subsidiary,

Beacon Media Group, which we acquired on February 1, 2021.

The increase of 31% represents an additional month of revenue recognized during

the first quarter of 2022 as compared to the first quarter of 2021.

Content Distribution revenue

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

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

Content Distribution also includes our advertising sales generated on our digital network, the Kartoon Channel!

in the form of

either flat rate promotions or advertising impressions served.

Fluctuations in Content Distribution

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

or advertisement to the customer.

Revenue related to our AVOD and SVOD, including advertising sales for the three months ended March 31,

2022, increased 198% as compared to the three months ended March 31, 2021, primarily due to the acquisition of Ameba, increasing revenue

by $0.2 million.

Royalties revenues are generated by the items in which we license the rights to our copyrights and trademarks of our brands and

those of the brands for which we act as a licensing agent.

Revenue related to our licensing and royalties for the three months ended

March 31, 2022 decreased 76% as compared to the three months ended March 31, 2021, primarily due to the expiration of certain

consumer product licenses that were not renewed.

Three Months Ended

September 30,

September 30, 2020

March 31, 2022

March 31, 2021

(in thousands, except percentages)

Marketing and Sales

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Interest Expense

Marketing and sales expenses increased $822,885,

or 226%, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, primarily due to an increase

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

Direct operating costs include costs of our product

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

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

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

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

film and television cost amortization expense of $249,141 and participation expense of $320,064 compared to expenses of $101,717 and $113,894,

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

The increases in direct operating costs for the three months ended September

30, 2021 compared to the three months ended September 30, 2020 is primarily due to increased amortization and participation expenses related

to revenues from the Rainbow Rangers property.

General and administrative expenses consist primarily

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

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

General and administrative expenses for

three months ended September 30, 2021 increased $6,841,895, or 225%, compared to the same period in 2020.

This increase was primarily

due to an increase in share-based compensation expense of approximately $5.1 million as a result of the CEO’s RSU modification and

consolidation of ChizComm expenses due to the ChizComm Acquisition on February 1, 2021.

ChizComm general and administrative expenses consist

primarily of salaries, employee benefits and rent.

Interest expense for the three months ended September

30, 2021 decreased $15,136, or 88%, compared to the same period in 2020.

The decrease is primarily due to the repayment of the outstanding

Production Facility balance under the Loan and Security Agreement on July 14, 2021.

Our summary results for the nine months ended

September 30, 2021 and September 30, 2020 are below.

Nine Months Ended

September 30,

September 30, 2020

Licensing & Royalties

Media Advisory & Advertising Services

Television & Home Entertainment

Advertising Sales

Product Sales

Total Revenue

Licensing and Royalties revenue include items

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

During the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, Licensing and Royalties revenue

increased $931,581, or 165%.

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

certain licensing rights during the second quarter.

Media Advisory & Advertising Services revenue

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

The increase of $2,906,5504 was a result of the ChizComm

acquisition on February 1, 2021.

Television & Home Entertainment revenue is

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

sale of DVDs for home entertainment through our partners.

Fluctuations in Television & Home Entertainment revenue occur period over

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

to the customer.

During the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, Television &

Home Entertainment revenue increased $262,283, or 64%.

The increase was primarily due to the recognition of revenue related to Stan

Lee’s Superhero Kindergarten and Rainbow Rangers .

Advertising sales are generated on the Kid Genius

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

Advertising sales increased by $7,736 or

4%, during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020.

The increase was primarily due

to the addition of new licensed titles and revenue generated by Stan Lee’s Superhero Kindergarten .

Product sales are generated through Merch by Amazon

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

Product sales increased $402

or 19%, during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2021.

Nine Months Ended

September 30,

September 30, 2020

Marketing and Sales

Direct Operating Costs

Marketing and Sales expenses consist primarily

of advertising expenses and certain payments made to our marketing partners.

Advertising expenses include promotional activities such

as digital and television advertising.

Marketing expenses also include payroll and related expenses for personnel that support marketing

The decrease in marketing and sales expenses for the three months ended March 31, 2022 as compared to the three months ended

March 31, 2021 was primarily due to a decrease in marketing and advertising expenses incurred to promote Stan Lee’s Superhero

Kindergarten.

Amortization, including any

impairments of film and television costs makes up the majority of our Direct Operating Costs.

Expenses directly associated with the acquisition,

licensing and production of content, such as participation expenses related to agreements with various animation studios, post-production

studios, writers, directors, musicians or other creative talent with which we are obligated to share net profits of the properties on

which they have rendered services and costs of our product sales make up the remainder of Direct Operating Costs.

The increase in direct

operating costs for the three months ended March 31, 2022, as compared to the three months ended March 31, 2021, was primarily due to

the consolidation of Ameba’s royalty expense into our financial statements related to the Ameba Acquisition.

General and Administrative

Interest Expense

Marketing and sales expenses increased $2,724,790,

or 450%, for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020, primarily due to an increase

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

Direct operating costs include costs of our product

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

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

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

During the nine months ended September 30, 2021, we recorded

film and television cost amortization expense of $907,511 and participation expense of $1,025,012 compared to expenses of $395,073 and

$484,697, respectively, for the nine months ended September 30, 2020.

The increases in direct operating costs for the nine months ended

September 30, 2021 compared to the nine months ended September 30, 2020 is primarily due to increased amortization and participation expenses

related to revenues from the Rainbow Rangers property.

General and administrative expenses consist primarily

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

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

General and administrative expenses for

the nine months ended September 30, 2021 increased $16,758,728, or 234%, compared to the same period in 2020.

The increase is primarily

related to the acquisition of the ChizComm entities, increases in legal professional fees, increase in share-based compensation expense

related to the modification of the CEO’s RSUs, rent expense and directors’ and officers’ insurance.

Interest expense for the nine months ended September

30, 2021 decreased $1,149,236, or 98%, compared to the same period in 2020.

The decrease is primarily due to the repayment of the outstanding

Production Facility balance under the Loan and Security Agreement on July 14, 2021.

expenses primarily consist of payroll and related expenses, share-based compensation related to our equity compensation plan, rent, depreciation

of our property and equipment and amortization of our intangible assets, as well as professional fees and other general corporate expenses.

The $3.9 million increase in general and administrative expenses for the three months ended March 31, 2022, as compared to the three months

ended March 31, 2021, primarily consisted of a $1.9 million increase in share-based compensation expense primarily due to the modification

of our Chief Executive Officer’s RSUs, a $1.2 million increase related to an increase in salaries and wages, directors’

and officers’ insurance and a $0.8 million increase in legal professional fees.

Interest expense for the three

months ended March 31, 2022, increased as compared to the three months ended March 31, 2021, primarily due to the interest incurred on

our margin loan balance and the restricted cash balance sitting in an escrow account for future YFE financings.

Other Income (Expense), Net

Components of other income (expense), net are

summarized as follows (in thousands):

Three Months Ended March 31,

Gain (Loss) on Warrant Revaluation

Loss on Foreign Exchange

Loss on Marketable Securities Investments

Gain on Revaluation of Equity Investment in YFE

Interest Income

Warrant Incentive Expense

Net Other Income (Expense)

The gain (loss) on warrant

revaluation is related to the change in fair value of outstanding warrants that were determined to be derivative liabilities attached

to previously issued and converted convertible notes.

The foreign exchange

gains and losses are due to foreign currency denominated transactions, including the foreign exchange loss on the investment in YFE’s

equity securities accounted for under the fair value option.

We started investing in marketable

securities during the year ended December 31, 2021.

The net realized loss on marketable securities recognized during the three months

ended March 31, 2022 reflects the loss in the investments in available-for-sale securities that will not be recovered due to prepayments

of principals on certain mortgage-backed securities.

The gain on revaluation of

the equity investment in YFE, is the change in fair value recognized on our investments in YFE accounted for using the fair value option.

The gain is a result of the difference in the original cost of the YFE investments and the updated fair value based on YFE’s stock

price at the end of the current reporting period.

Interest Income during

the three months ended March 31, 2022, primarily consists of cash interest of $0.5 million received on the investments in marketable

securities, net of $0.3 million for amortization of premiums.

The Warrant Incentive Expense

is related to the fair value of new warrants that were issued in 2021 to certain existing warrant holders in exchange for previously issued

outstanding warrants.

Liquidity and Capital Resources

During the nine months ended September 30, 2021,

our cash and cash equivalents and marketable security positions increased by $29,768,161.

Cash in excess of immediate requirements is

invested in accordance with our 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, we purchased marketable securities of $128,277,575,

net of redemptions during the period.

During the three months

ended March 31, 2022, our cash and cash equivalents (excluding restricted cash) increased by $47.8 million.

Of this amount, $43.3

million, including transactional costs, was borrowed and transferred from our investment margin account to subsequently finance the

WOW acquisition, as noted above.

As of March 31, 2022, we held

marketable securities with a fair value of $101.3 million as available-for-sale, a decrease of $11.2 million during the three months ended

March 31, 2022.

Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view for

liquidity and capital preservation.

Accordingly, the available-for-sale securities, consisting principally of corporate and government

debt securities, are also available as a source of liquidity.

During the three months ended

March 31, 2022, we borrowed an additional $59.6 million from our investment margin account and repaid $8.2 million with cash received

from sales and/or redemptions of our marketable securities.

The borrowed amounts were used to finance our additional investments in YFE

and the closing of our acquisition of WOW, in each case pledging certain of our marketable securities as collateral.

The interest rate

for these investment margin account borrowings fluctuates based on the Federal Funds Rate plus 0.65% with interest only payable monthly.

The weighted average interest rate was 0.72% and the average balance of the borrowings was $13.6 million as of March 31, 2022.

interest expense of $21,846 during the three months ended March 31, 2022.

The investment margin account borrowings do not mature

but are payable on demand as the custodian can issue a margin call at any time, therefore the margin loan is recorded as a current liability

on our condensed consolidated balance sheets.

We have the ability to borrow up to 66% of the balance held in marketable securities, with

the option to increase its borrowing capacity, if needed.

As of March 31, 2022, the outstanding balance of the margin loan was $57.8 million,

or 57% of the balance held in marketable securities.

Working Capital

Historically, we have incurred net losses.

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

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

We 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, we had an accumulated deficit of $562,464,295 and total stockholders’ equity of

$167,976,968.

As of September 30, 2021, we 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.

We 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.

The increase of $30,051,689 in working capital

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

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

During the nine months ended September 30, 2021,

we met our immediate cash requirements through existing cash balances.

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

for services and compensation.

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

marketable securities are sufficient to support our operations for at least the next twelve months.

To meet our short and long-term liquidity

needs, we expect to use existing cash balances.

Comparison of Cash Flows for the Nine Months

Ended September 30, 2021, and the Nine Months Ended September 30, 2020

Our total cash and cash equivalents were $4,884,149

and $50,461,566 as of September 30, 2021 and September 30, 2020, respectively.

As of March 31, 2022, we had

current assets of $164.3 million, including cash and cash equivalents of $49.8 million and marketable securities of $101.3 million and

our current liabilities were $68.9 million.

We had working capital of $95.4 million as of March 31, 2022 as compared to working capital

of $115.1 million as of December 31, 2021.

The decrease of $19.7 million in working capital as compared to December 31, 2021 was primarily

due to the $7.8 million increase in our margin loan balance, including the offset of transfer to cash and pay down from our marketable

securities and a decrease in the accounts receivable balance of $4.2 million.

During the three months ended

March 31, 2022, we met our immediate cash requirements through existing cash balances.

Additionally, we used equity and equity-linked

instruments to pay for services and compensation.

We believe that our current cash and cash equivalents balances and our investments in

available for sale marketable securities are sufficient to support our operations for at least the next twelve months.

To meet our short

and long-term liquidity needs, we expect to use existing cash and marketable securities balances.

Comparison of Cash Flows for the Three Months

Ended March 31, 2022, and March 31, 2021

Our total cash, cash equivalents

and restricted cash as of March 31, 2022 and 2021 was $52.8 million and $100.5 million, respectively.

Comparison of Cash Flows

Nine Months Ended

September 30, 2021

September 30, 2020

Cash used in operations

Three Months Ended

March 31, 2022

March 31, 2021

(in thousands, except percentages)

Cash Used in Operating Activities

Cash Used in Investing Activities

Cash Provided by Financing Activities

(Decrease)/Increase in cash and cash equivalents

Effect of Exchange Rate Changes on Cash

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

Operating Activities

Cash used in operating activities for the nine

months ended September 30, 2021 was $15,965,351 as compared to cash used in operating activities of $5,475,826 during the comparable period

in the prior year.

The increase in cash used in operating activities was primarily due to an increase in professional fees, marketing

expenses, D&O insurance and salaries.

Cash used in operating activities for the three

months ended March 31, 2022 decreased $0.3 million as compared to cash used during the three months ended March 31, 2021.

in cash used in operating activities is primarily due to the change in cash receipts and cash payments due to the timing of the acquisition

and consolidation of Beacon Media Group into our financial statements on February 1, 2021.

Investing Activities

Cash used in investing activities for the nine

months ended September 30, 2021 was $135,521,695 as compared to a use of $554,926 for the nine months ended September 30, 2020.

in cash used for investing was primarily due to our net investments in marketable securities of $128,277,575.

Investing activities also

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

Cash used in investing activities

for the three months ended March 31, 2022 decreased $4.9 million as compared to cash used during the three months ended March 31, 2021.

The decrease in cash used for investing was primarily due to our proceeds from marketable securities of $7.4 million, offset by our investments

in YFE of $6.6 million and acquisition of Ameba for $3.9 million compared to the total investment in ChizComm of $7.8 million.

Financing Activities

Cash provided by financing activities for the

nine months ended September 30, 2021 was $55,914,871 as compared to $56,187,197 of cash provided by the comparable period in 2020.

primary source of cash during the nine months ended September 30, 2021 was the net proceeds of $57,264,656 from the warrant exercise during

January 2021.

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

net proceeds from the 2020 Convertible Notes of $6,098,000, the net proceeds of $5,874,329 from warrant exercises and $3,600,000 from

the collection of the Investor Notes.

Capital Expenditures

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

commitments for capital expenditures.

Cash provided by financing

activities for the three months ended March 31, 2022 decreased by $5.6 million as compared to cash provided during the three months ended

March 31, 2021.

The primary source of cash during the three months ended March 31, 2022, was the net proceeds borrowed from our margin

loan of $51.4 million, compared to the primary source of cash during the three months ended March 31, 2021 of $57.3 million from the warrant

exercise during January 2021.

Material Cash Requirements

We have entered into arrangements

that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods.

Our material cash requirements

from known contractual and other obligations primarily relate to our debt and lease obligations and our employment and consulting contracts.

The aggregate amount of future minimum purchase obligations under these agreements over the period of next five years is approximately

$67.6 million as of March 31, 2022, of which $61.2 million is expected to be paid within one year.

For additional information on our contractual

commitments and timing of future payments, see Note 21, to the condensed consolidated financial statements included in this Report on

In addition to our contractual

commitments as of March 31, 2022, the Company has entered into strategic acquisitions and investments to grow our business that have and/or

will result in material cash requirements, including our subsequent closing of our acquisition of WOW and our additional equity investments

We plan to utilize our liquidity

(as described above) to fund our material cash requirements.

As of March 31, 2022, we do

not have any material commitments for capital expenditures.

Critical Accounting Policies

The preparation of the financial statements and

related disclosures in conformity with U.S.

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

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

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

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

Actual results may differ

from these estimates, and such differences may be material.

Note 2, “Summary of Significant Accounting

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

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

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

The preparation of the financial

statements and related disclosures in conformity with U.S.

generally accepted accounting principles and our discussion and analysis of

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

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

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

results may differ from these estimates, and such differences may be material.

Note 2, “Summary of

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

II, Item 8 of the 2021 Annual Report on Form 10-K, and “Critical Accounting Policies and Estimates” in Part II, Item 7 of

the 2021 Annual Report on Form 10-K describe the significant accounting policies and methods used in the preparation of our condensed

consolidated financial statements.

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK.

Not applicable.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis