What changed in this filing

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Item 1. Legal Proceedings

2022-05-16 compared with 2021-11-15 · 97 added, 88 removed, 11 unchanged (94% of the section changed)

LEGAL PROCEEDINGS.

As of September 30, 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 below.

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.

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 have agreed

to entry of a stipulation that the alleged conduct did in fact constitute trademark infringement;

however, because the number of consumer

impressions was small, the Company contends that the plaintiff’s damages are nominal or zero.

The case is scheduled for trial on

the issue of damages in December 2021.

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, Inc.

Litigation, Master File No.

As of March 31, 2022, 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

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).

In a consolidated amended complaint filed February 1, 2021, 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.

On March 17, 2021,

the defendants filed a motion to dismiss the amended complaint.

After full briefing, the Court took the motion under submission without

oral argument and, on August 30, 2021, issued a decision dismissing the amended complaint but granting the lead plaintiffs a further opportunity

to plead a claim if they filed a further amended complaint by September 27, 2021.

On September 27, 2021, the lead plaintiffs above

filed a second amended complaint, naming the same defendants.

The new complaint alleges that the Company made numerous false or misleading

statements over a class period running from March 11, 2020, through March 30, 2021.

The 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

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.

Other than Mr.

Heyward, who invested $1 million in a private offering at the beginning of the alleged class period

but who did not subsequently sell his shares, no member of the supposed investor group is identified or named as a defendant.

the lead plaintiffs again allege violations of Sections 10(b) and 20(a) of the Exchange Act and seek unspecified damages on behalf of

the alleged class—persons who invested in the Company’s common stock during the newly alleged class period.

Defendants intend

to file a motion to dismiss the second amended complaint, and under a Court-ordered briefing schedule, that motion is to be filed by November

The briefing schedule on the motion to dismiss extends into the first quarter of 2022.

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 Chief Financial Officer have been named as defendants in several putative shareholder derivative

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.

Shortly before a scheduled argument on the motion, the court cancelled the

hearing and is expected to 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, together with Messrs.

Heyward and Denton have been named as defendants in several putative

stockholder 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 No.

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

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

Heyward, et al.

and an additional

case pending in the U.S.

District Court for

the Central District of California and styled In re Genius Brands Stockholder Derivative Litigation, Case No.

2:20-cv-08277

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

Heyward, et al., Case No.

an additional case pending in the U.S.

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

1 unchanged sentence

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.

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.

Instead, 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.

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.

This matter was referred to our outside litigation counsel.

The Company has 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 third parties.

On or about November 4, 2021, POW!

and Proxima entered a binding settlement agreement resolving

all the claims made by Proxima.

In all of the above-mentioned proceedings, the

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

Instead, as a stockholder 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 again 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 certain of the Company’s private placements of securities

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 defendant

investors in the action have requested court permission to file motions to dismiss the action, as that court’s rules contemplate.

These requests are currently pending;

there is otherwise no current activity in the case.

The Company cannot predict the outcome of the

requests to file the motions to dismiss, the timing of court action on the requests, or the outcome of the lawsuit more generally, but

again notes that plaintiff seeks no relief against the Company.

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, adding a claim for Reformation of the Plaintiffs’ Employment

Agreements to address the Company’s lack of venue argument and a claim for Breach of Escrow Agreement regarding alleged release

of shares held in escrow pursuant to the parties’ Purchase and Sale Agreement.

On April 25,2022, the Company filed a Motion for

Partial Dismissal of the Plaintiffs’ Amended Complaint seeking (1) dismissal of Plaintiffs’ claims for Indemnification and

Defamation and (2) a stay of Plaintiffs’ claim for Breach of Escrow Agreement pending the required arbitration of this claim.

Motion has not yet been ruled on and the case remains at the pleading stage with no trial date set.

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.

RISK FACTORS.

1 unchanged sentence

Factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

UNREGISTERED SALES OF EQUITY SECURITIES

AND USE OF PROCEEDS.

DEFAULTS UPON SENIOR SECURITIES.

MINE SAFETY DISCLOSURES.

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 1. Legal Proceedings