What changed in this filing

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Item 1. Legal Proceedings

2022-08-17 compared with 2022-05-16 · 79 added, 66 removed, 42 unchanged (78% of the section changed)

LEGAL PROCEEDINGS.

As of March 31, 2022, there

As of June 30, 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

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

class action lawsuit filed in the U.S.

3 unchanged sentences

Initially, the lead plaintiffs alleged generally that the defendants

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

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

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

Plaintiffs sought unspecified damages on behalf

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

The defendants moved to dismiss lead

plaintiffs’ amended complaint;

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

lead plaintiffs a further opportunity to plead a claim.

On September 27, 2021,

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

The new complaint alleges that the Company made numerous

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

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

Lead plaintiffs also allege a “scheme

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

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

shares at higher prices.

None of these investors (save Mr.

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

in the securities action.

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

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

In November 2021, defendants filed a motion to dismiss the

second amended complaint, and the motion is fully briefed.

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

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

violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”).

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 alleged that the Company made numerous

false or misleading statements about the Company’s business and business prospects over an expanded alleged class period, which

they say violated Section 10(b) and 20(a) of the Exchange Act.

The lead plaintiffs again sought 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.

On July 15, 2022, the Court issued a decision dismissing the second amended complaint

in its entirety and with prejudice.

On August 12, 2022, lead plaintiffs filed a notice of appeal to the United States Court of Appeals

for the Ninth Circuit.

The Company cannot predict the outcome of that appeal or the timing of a decision on it.

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);

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.

and an additional case pending in the U.S.

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

Heyward, et al ., Case No.

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

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

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

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

in an unspecified amount.

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

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.

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 securities class action.

The Company cannot predict the impact of the securities class action’s dismissal

on the shareholder derivative lawsuits.

The Company is also a nominal

3 unchanged sentences

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

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

5 unchanged sentences

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.

investors in the action requested and received court permission to file motions to dismiss the action, and motions were filed July 25,

2022, and plaintiff has opposed the motions.

Briefing is scheduled to close on August 22, 2022.

There is otherwise no current activity

The Company cannot predict the outcome of the motions to dismiss, the timing of court action on the requests, or the outcome

of the lawsuit more generally.

While the Company again notes that plaintiff seeks no relief against the Company, several of the defendant

investors have made demands on the Company that it indemnify their costs of defending the action, invoking provisions in the agreements

by which the investors acquired Company securities.

The Company believes the indemnification demands lack merit;

however, it is in discussions

with investors who have made demands.

The Company cannot predict the outcome of those discussions or the magnitude of any potential indemnification

On January 18, 2022, the Company

14 unchanged sentences

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.

the hearing on this Motion to Dismiss on June 14, 2022, the Company was successful in having (1) the Indemnification claim dismissed with

prejudice and (2) the claim for Breach of Escrow Agreement stayed pending arbitration of this claim before the American Arbitration Association

The Company’s Answer to the Amended Complaint with these two claims dismissed and stayed respectively is due

on August 11, 2022.

No trial date has been set and discovery continues in the case.

On June 3, 2022, Plaintiffs

commenced their AAA arbitration proceeding regarding their claim for Breach of Escrow Agreement by filing their Arbitration Demand.

parties are presently in the process of selecting an arbitrator in this proceeding.

On June 6, 2022, Plaintiffs

filed a Request for Emergency Relief in the AAA proceeding seeking a mandatory injunction to release the Company shares held in escrow

pending indemnification claims under the terms of the PSA.

The Company opposed this Emergency Relief Request on multiple grounds (including,

without limitation, the lack of any irreparable harm, the adequacy of money damages and the Company’s indemnification claim applicable

to the escrowed shares) and the hearing on this Emergency Relief Request occurred at the AAA offices in New York on June 24, 2022.

parties are still awaiting the ruling from the Emergency Arbitrator regarding this requested relief.

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.

There have been no material changes to the Risk

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

maintains a program of directors’ and officers’ liability insurance that, subject to the insurers’ reservations of rights,

has offset a portion of the costs of defending the securities class action litigation, and that the Company expects will afford coverage

for some costs of the other shareholder litigation should any of those cases proceed.

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