What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-17 compared with 2022-05-16 · 329 added, 230 removed, 147 unchanged (79% of the section changed)

MANAGEMENT'S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of our

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

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

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

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.

Organization and Nature of Business

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.

(“we,” “us,” “our,” or the “Company”) is a publicly traded (NASDAQ:GNUS) global content

and brand management company that creates, produces, licenses, and broadcasts, timeless and educational, multimedia animated content for

Led by experienced industry personnel, we distribute content primarily on streaming platforms and television and we license

our properties for a broad range of consumer products based on our characters.

We are a leading “work for hire” producer for

many of the streaming outlets and IP holders.

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

for toddlers to tweens, providing enrichment as well as entertainment.

Our programs along with those programs we acquire and/or license,

are being broadcast in the United States on our wholly-owned advertisement supported video on demand (“AVOD”) service, Kartoon

, and our subscription video on demand (“SVOD”) distribution outlets, Kartoon Channel!

Kidaverse and Ameba

These streaming services are available on Apple TV, Apple iOS, Android TV, Android mobile, Amazon Prime, Amazon Fire, Tubi, Roku,

Comcast, Cox, Dish/Sling, Zumo, Pluto, Samsung Smart TVs, LG Smart TVs, as well as YouTube, among other popular platforms.

owned and produced shows include Stan Lee’s Superhero Kindergarten starring Arnold Schwarzenegger, Llama Llama starring

Jennifer Garner, Rainbow Rangers, KC Pop Quiz , and the upcoming Shaq’s Garage starring Shaquille O’Neal, scheduled

to debut in the fourth quarter of 2022.

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.

We license our programs to

other services worldwide, in addition to the operation of our own channels, including but not limited to Netflix, HBO Max, Paramount+,

Nickelodeon, and satellite, cable and terrestrial broadcasters around the world.

Through our recent investment

in Germany’s Your Family Entertainment (“YFE”) , a publicly traded company on the Frankfurt Exchange (RTV-Frankfurt),

we have gained access to one of the largest animation catalogues in Europe with over 3,000 titles and a global distribution network which

currently covers over 60 territories, worldwide and which we are currently in the process of rebranding as Kartoon Channel!

We recently acquired WOW Unlimited

(“Wow”), and through that acquisition, we established an affiliate relationship with Mainframe Studios, which is

one of the largest animation producers in the world.

In addition, Wow owns Frederator Networks Inc.

(“Frederator”) and its

Channel Frederator Network , the largest animation focused multi-channel network on YouTube , with over 2,500 content creators

and currently averages over 1 billion views per month.

We own a select amount of

valuable IP, including among them a controlling interest in Stan Lee Universe (“SLU”), through which we control the name,

likeness, signature, and all consumer product and IP rights to Stan Lee (the “Stan Lee Assets”).

We plan to launch a Stan

Lee Centennial program of merchandise set to coincide with Stan Lee’s 100 th birthday on December 28, 2022.

We also own Beacon Media,

the largest media buying service for children in North America.

Beacon represents over 30 major toy companies, including Playmobile, Bandai

Toys, Bazooka, Moose Toys and JAKKS Pacific.

In addition, we recently acquired

the Canadian company Ameba TV (“Ameba”), which distributes a profitable SVOD channel for kids and is now expected to become

the backbone of the newly launched SVOD channel of Kartoon Channel!, Kartoon Channel!

The combination of ourselves, our investment in YFE, our acquired companies

Wow, Ameba and Beacon Media provides us with world class animation production studios, a catalogue representing thousands of hours of

premium global content for children, a broadcast system for delivering that content and an in-house Consumer Products Licensing infrastructure

to fully exploit the content.

Environmental, Social and Governance Strategy

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Human Capital Management

As of March, 31, 2022, we

employed 79 full-time employees and 16 independent contractors.

As of June 30, 2022, we employed

817 full-time employees and 90 independent contractors.

We aim to build a culture

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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.

the acquisition of Wow.

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.

LTD., a corporation existing under the laws of the

Province of British Columbia and Wow, entered into an Arrangement Agreement to effect 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 $38.3

million in cash and 11,057,085 shares of our common stock.

Following the initial equity

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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.

shares of YFE common stock, 304,631 of which were purchased by us, at 2.00 EUROS per share or $0.6 million.

On April 5, 2022, we exercised

our subscription rights to purchase an additional 914,284 shares of YFE’s common stock at 3.00 EUROS per share, or $2.7 million,

increasing the number of YFE’s outstanding shares to 6,857,132 and our ownership in YFE to 49.2% as of June 30, 2022.

Coronavirus (COVID-19)

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Our summary results for the

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

three months ended June 30, 2022 and June 30, 2021 are below.

Three Months Ended

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

(in thousands, except percentages)

Media Advisory & Advertising Services

Production Services Revenue

Content Distribution

Licensing & Royalties

Media Advisory & Advertising Services

Total Revenue

Production Services revenue

is generated specifically by Wow providing animation production services for the three months ended June 30, 2022, since the acquisition

of the Company at the start of the quarter.

Content Distribution revenue is generated from the distribution of

our properties for broadcast on television, video-on-demand (“VOD”) or 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

networks, the Kartoon Channel!

in the form of either flat rate promotions or advertising impressions served, SVOD revenues generated

by Ameba and revenue generated by Frederator on its multi-channel network.

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 during

the three months ended June 30, 2022, increased 6,218% as compared to the three months ended June 30, 2021, primarily due to the

acquisition of Ameba, Wow and Frederator, increasing revenue by $7.7 million.

Licensing & 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 June 30, 2022 increased

102% as compared to the three months ended June 30, 2021, due to entering an agreement for the licensing of certain Stan Lee Assets.

Media Advisory & Advertising

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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.

The increase of 11% during the three months ended June 30, 2022 as compared

to the three months ended June 30, 2021 represents new customers acquired, net of churn, during the period.

Three Months Ended

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

(in thousands, except percentages)

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General and Administrative

Interest Expense

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.

Total Expenses

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 activities.

The decrease in marketing and sales expenses for the three months ended June 30, 2022 as compared to the

three months ended June 30, 2021 was primarily due to a decrease in marketing and advertising expenses incurred to promote Kartoon

Amortization, including any

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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.

salaries and related expenses to the production services employees Mainframe and Frederator, 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

June 30, 2022 as compared to the three months ended June 30, 2021 was primarily due to the consolidation of service salaries and channel

expenses related to the Wow Acquisition.

General and Administrative 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 $8.0 million increase in

general and administrative expenses for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021 primarily

consisted of a $4.5 million increase in costs associated with the acquisition of Wow and Frederator and an increase share-based compensation

expense and the consolidation of Wow’s general and administrative expenses for the three months ended June 30, 2022.

Our summary results for the six months ended June

30, 2022 and June 30, 2021 are below.

Six Months Ended

June 30, 2022

June 30, 2021

(in thousands, except percentages)

Production Services Revenue

Content Distribution

Licensing & Royalties

Media Advisory & Advertising Services

Total Revenues

Production Services Revenue

is generated specifically by Wow providing animation production services for the six months ended June 30, 2022.

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, SVOD revenues generated by Ameba and revenue generated by Frederator on its multi-channel network.

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 six months ended June 30, 2022, increased 3,152% as compared

to the six months ended June 30, 2021 primarily due to the acquisition of Ameba, Wow and Frederator, increasing revenue by $7.7 million.

Licensing & 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 six months ended June 30, 2022 increased

80% as compared to the six months ended June 30, 2021 primarily due to entering an agreement for the licensing of certain Stan Lee Assets.

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 20% represents an additional month of revenue recognized during the six months ended June 30, 2022

as compared the six months ended June 30, 2021 and new customers acquired, net of churn during the period.

Six Months Ended

June 30, 2022

June 30, 2021

(in thousands, except percentages)

Marketing and Sales

Direct Operating Costs

General and Administrative

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.

Total Expenses

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 activities.

The decrease in marketing and sales expenses for the six months ended June 30, 2022 as compared to the six

months ended June 30, 2021 was primarily due to a decrease in marketing and advertising expenses incurred to promote the Kartoon Channel.

Amortization, including any

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

Expenses directly associated with the acquisition,

salaries and related expenses to the production services of Mainframe and Frederator, 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 six months ended June 30, 2022

as compared to the six months ended June 30, 2021 was primarily due to the consolidation of service salaries and channel expenses into

our financial statements related to the Wow Acquisition.

General and Administrative 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 $11.9 million increase in

general and administrative expenses for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 primarily

consisted of a $4.5 million increase in costs associated with the acquisition of Wow and Frederator, a $4.2 million increase in share-based

compensation expense, a $2.2 million increase related to an increase in salaries and wages, directors’ and officers’ insurance

and the consolidation of Wow’s general and administration expenses for the three months ended June 30, 2022.

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

Components of other income (expense), net are summarized

as follows (in thousands) :

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Gain (Loss) on Warrant Revaluation (a)

Loss on Foreign Exchange (b)

Loss on Marketable Securities Investments (c)

Gain (Loss) on Revaluation of Equity Investment in YFE(d)

Interest Income (e)

Warrant Incentive Expense (f)

Interest Expense (g)

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.

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.

For the three and six months ended June 30, 2022, loss on foreign exchange primarily relates to the foreign exchange loss on the investment in YFE’s equity securities accounted for under the fair value option.

For the three and six months ended June 30, 2021, loss on foreign exchange related to foreign currency denominated monetary transactions.

We started investing in marketable securities during the three months ended June 30, 2021.

The net realized loss on marketable securities recognized during the three and six months ended June 30, 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.

We did not incur any realized losses on marketable securities during the three and six months ended June 30, 2021.

The gain (loss) 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 (loss) is a result of the change in YFE’s stock price at the end of the current reporting period.

Interest Income received during the three and six months ended June 30, 2022 and 2021, primarily consists of cash interest received on the investments in marketable securities, net of 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.

Interest expense during the three and six months ended June 30, 2022 primarily consists of $0.2 million of interest incurred on our margin loan collateralized by our marketable security investments and $0.3 million of interest incurred on our production facilities loan and bank indebtedness assumed as part of the Wow Acquisition.

Liquidity and Capital Resources

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.

During the six months ended

June 30, 2022, our cash, cash equivalents and restricted cash decreased by $2.2 million.

The decrease was primarily due to cash used in

investment activities, inclusive of the Wow and Ameba acquisitions and the YFE investments, of $41.2 million, $17.7 million used for operational

activities, offset by $56.6 million of financing from the margin loan and production facilities and bank indebtedness assumed in the Wow

As of June 30, 2022, we held

marketable securities with a fair value of $97.4 million as available-for-sale, a decrease of $15.1 million as compared to December 31,

The available-for-sale securities, which consist principally of corporate and government debt securities, are also available as

a source of liquidity.

As our recent focus has been on expanding its business, excess cash and liquid investments have been utilized to

pay our margin loan down.

We borrowed an additional

$59.0 million from our investment margin account during the six months ended June 30, 2022 and repaid $4.5 million with cash received

from sales and/or redemptions of its marketable securities.

During the three months ended March 31, 2022, the borrowed amounts were used

to finance our additional investments in YFE and the closing of the acquisitions of Ameba and WOW, in each case pledging certain of our

marketable securities as collateral.

During the three months ended June 30, 2022, the additional borrowings of $3.2 million related to

the Company’s final obligated purchase of YFE shares and additional transactional costs in the acquisition of Wow.

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

The weighted average interest rate was 1.23% on an average margin loan balance of $55.7 million during the three months ended

June 30, 2022.

The weighted average interest rate was 0.98% on an average margin loan balance of $34.6 million during the six months

ended June 30, 2022.

We incurred interest expense of $201,160 during the six months ended June 30, 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.

Upon the acquisition of Wow,

we assumed certain credit facilities (the “Facilities”) with a Canadian bank.

The Facilities are comprised of:

million CAD ($3.9 million USD) revolving demand facility, (ii) an $8.0 million CAD ($6.2 million USD) equipment lease line, (iii) a treasury

risk management facility of up to $0.5 million CAD ($0.4 million USD) for foreign exchange forward contracts, and (iv) interim financing

facilities for specific production titles.

The Facilities are

guaranteed by us and the security reflects substantially all of our and our subsidiary guarantors tangible and intangible assets

subject to permitted encumbrances, including a combination of federal and provincial tax

credits, other government incentives, production service agreements and license agreements.

The Facilities are generally

repayable on demand and are subject to customary affirmative and negative covenants, default provisions, representations and

warranties and other terms and conditions.

Working Capital

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

As of June 30, 2022, we had current assets of $150.3 million, including

cash and cash equivalents of $7.8 million and marketable securities of $97.4 million and our current liabilities were $112.7 million.

We had working capital of $37.6 million as of June 30, 2022 as compared to working capital of $115.1 million as of December 31, 2021.

The decrease of $77.5 million in working capital as compared to December 31, 2021 was primarily due to the $54.7 million increase in our

margin loan balance and a $21.8 million increase due to the assumption of Wow’s current debt for interim production facilities and

bank loans upon the acquisition.

During the six months ended

June 30, 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 have the ability to borrow against license contracts, production service contracts, or refundable

tax credits receivable, entering into leases, the issuance of debentures, or the issuance of shares.

The Company manages liquidity risk

by continuously monitoring actual and forecasted cash flows, using lease financing and by maintaining revolving credit facilities.

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.

Comparison of Cash Flows for the Six Months

Ended June 30, 2022 and June 30, 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.

and restricted cash as of June 30, 2022 and 2021 was $7.5 million and $58.4 million, respectively.

Comparison of Cash Flows

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

(in thousands, except percentages)

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Operating Activities

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.

Cash used in operating activities

for the six months ended June 30, 2022 increased $8.8 million as compared to cash used during the six months ended June 30, 2021.

change in cash used in operating activities is primarily due to the increase in cash of $9.5 million used to pay down operating liabilities

as compared to the prior period, primarily due to the increase in liabilities from the acquisition of Wow.

Investing Activities

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.

for the six months ended June 30, 2022 decreased $48.1 million as compared to cash used during the six months ended June 30, 2021.

decrease in cash used for investing was primarily due to our investments in marketable securities of $80.9 million and the cash payment

to acquire ChizComm of $7.8 million during the six months ended June 30, 2021 compared to the cash used to acquire Wow and Ameba of $41.2

million, cash paid for our equity investment in YFE of $9.5 million, offset by proceeds from marketable securities of $10.0 million during

the six months ended June 30, 2022.

Financing Activities

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.

activities for the six months ended June 30, 2022 increased by $0.5 million as compared to cash provided during the six months ended June

The primary source of cash during the six months ended June 30, 2022 was the net proceeds borrowed from our margin loan of $54.5

million and $2.5 million from production loans, compared to the primary source of cash during the six months ended June 30, 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 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 $108.5 million as of

June 30, 2022, of which about $80.0 million, if the margin loan and interim production facilities are called, could be owed within one

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 Form 10-Q.

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.

As of June 30, 2022, we have

$5.8 million in commitments for capital expenditures, related to equipment leases.

Critical Accounting Policies

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Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

We have no off-balance sheet

arrangements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

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What changed 10-Q

Item 2. Management’s Discussion and Analysis