What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-17 · 978 added, 810 removed, 1088 unchanged (62% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

June 30, 2022

December 31, 2021

September 30,

Current Assets:

4 unchanged sentences

Tax Credits Receivable

Note & Accounts Receivable from Related Party

Notes & Accounts Receivable from Related Party

Other Receivable

3 unchanged sentences

Property and Equipment, net

Right of Use Assets, net

Operating Lease Right of Use Assets, net

Finance Lease Right of Use Assets, net

Film and Television Costs, net

10 unchanged sentences

Bank Indebtedness

Lease Liability

Operating Lease Liability

Finance Lease Liability

Warrant Liability

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Deferred Revenue

Lease Liability

Operating Lease Liability

Finance Lease Liability

Contingent Earn Out

3 unchanged sentences

Stockholders’ Equity

Preferred Stock Series A, $ 0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Preferred Stock Series B, $ 0.001

share authorized, 0

shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Common Stock, $ 0.001 par value, 400,000,000 shares authorized 317,235,116 and 303,379,122 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Preferred Stock Series A, $ 0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Preferred Stock Series B, $ 0.001 par value, 1 share authorized, 1 share issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Common Stock, $ 0.001 par value, 400,000,000 shares authorized 318,097,275 and 303,379,122 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional Paid in Capital

Treasury Stock, 6,993 and 0 shares of common stock as of September 30, 2022 and December 31, 2021, respectively, at cost

Accumulated Deficit

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Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine months Ended

September 30,

Production Services

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Provision for Tax Expense

Net Income Attributable to Non-Controlling Interests

Net Loss (Income) Attributable to Non-Controlling Interests

Net Loss Attributable to Genius Brands International, Inc.

9 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine months Ended

September 30,

Other Comprehensive Income (Loss):

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Realized Losses on Marketable Securities Reclassified from AOCI into Earnings

Foreign Translation Adjustment

Foreign Currency Translation Adjustment

Total Other Comprehensive Loss

Total Comprehensive Net Loss

Comprehensive Income Attributable to Non-Controlling Interests

Comprehensive Income (Loss) Attributable to Non-Controlling Interests

Total Comprehensive Net Loss Attributable to Genius Brands International, Inc.

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(in thousands, except share data)

Other Comprehensive

Preferred Stock

Additional Paid-In

Treasury Stock

Accumulated Other Comprehensive

Balance, December 31, 2021

$ ( 595,848 )

Issuance of Common Stock for

Vested Restricted Stock Units

Issuance of Common Stock for Services

Issuance of Common Stock for Vested Restricted Stock Units

Share Based Compensation

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Shares Issued for Wow Acquisition

Fair Value of Replacement

Options Related to Wow Acquisition

Issuance of Common Stock for

Vested Restricted Stock Units

Fair Value of Replacement Options Related to Wow Acquisition

Issuance of Common Stock for Services

Issuance of Common Stock for Vested Restricted Stock Units

Share Based Compensation

Other Comprehensive Loss

Distributions to Non-Controlling

June 30, 2022

Distributions to Non-Controlling Interests

Net (Loss) Income

Balance, June 30, 2022

$ ( 613,720 )

Issuance of Common Stock for Vested Restricted Stock Units, Net of Shares Withheld for Taxes

Purchase of Treasury Stock Not Yet Settled

Share Based Compensation

Other Comprehensive Loss

Balance, September 30, 2022

$ ( 624,936 )

Preferred Stock

Additional Paid-In

Treasury Stock

Accumulated Other Comprehensive

Balance, December 31, 2020

$ ( 469,557 )

Shares Issued for ChizComm

Proceeds From Warrant Exchange,

Issuance of Common Stock for

Shares Issued for ChizComm acquisition

Proceeds From Warrant Exchange, net

Issuance of Common Stock for Services

Share Based Compensation

2 unchanged sentences

$ ( 545,816 )

Issuance of Common Stock for

Issuance of Common Stock for Services

Share Based Compensation

Other Comprehensive Loss

June 30, 2021

Balance, June 30, 2021

$ ( 553,211 )

Share Based Compensation

Other Comprehensive Loss

Balance, September 30, 2021

$ ( 562,464 )

The accompanying notes are an integral part of

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Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2022 and September

(in thousands)

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

Cash Flows from Operating Activities:

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Amortization of Premium on Marketable Securities

(Gain) on Revaluation of Equity Investment in Your Family Entertainment AG

(Gain) Loss on Foreign Currency Transactions

(Gain) Loss on Warrant Revaluation

Loss on Revaluation of Equity Investment in Your Family Entertainment AG

Loss on Foreign Currency Transactions

Gain on Warrant Revaluation

Interest Incurred on Debt

8 unchanged sentences

Film and Television Costs, net

Note Receivable from Related Party

Prepaid Expenses & Other Assets

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Due to Related Party

Other Noncurrent Liabilities

Other Liabilities

Net Cash Used in Operating Activities

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Investment in Marketable Securities

Note Receivable from Related Party

Proceeds from Principal Collections on Marketable Securities

8 unchanged sentences

Repayments of Production Facilities

Proceeds from Bank Loan

Capital Lease Payments

(Repayment)/Proceeds from Bank Indebtedness

Finance Lease Payments

Distributions to Noncontrolling Interests

Debt Issuance Costs

Repayment of Note Payable

Distributions to Non-Controlling Interest

(Repayment)/Proceeds from Note Payable

Shares Withheld for Taxes on Vested Restricted Shares

Repayment of Payroll Protection Program

8 unchanged sentences

FV of Replacement Options Granted Related to Wow Acquisition

Liability for Treasury Stock Not Yet Settled

Shares issued for ChizComm acquisition

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Notes to Condensed Consolidated Financial Statements

June 30, 2022

September 30, 2022

Organization and Business

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an in-house Consumer Products Licensing infrastructure to fully exploit the content.

On February 1, 2021, the Company,

through GBI Acquisition LLC, a New Jersey limited liability company, and 2811210 Ontario Inc., a company organized under the laws of the

Province of Ontario, two wholly-owned subsidiaries of the Company, purchased the outstanding equity

interests of ChizComm Ltd., a corporation organized in Canada, and ChizComm USA Corp., a New Jersey corporation.

During the fourth

quarter of 2021, the Company rebranded and renamed ChizComm Ltd.

to Beacon Communications

and ChizComm USA Corp.

to Beacon Media (collectively, the “Beacon Media Group”) .

On January 13, 2022, the Company

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April 5, 2022, the Company exercised its 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 the Company’s ownership

in YFE to 49.2 % as of June 30, 2022.

During the six months ended

June 30, 2022, the Company’s cash, cash equivalents and restricted cash decreased by $ 2.2

The decrease was primarily due to cash used in investment activities, inclusive of the Wow and Ameba acquisitions and

the YFE investments, totaling $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 Acquisition.

As of June 30, 2022, the

Company held marketable securities with a fair value of $ 97.4

EUROS per share, or $ 2.7 million , increasing the number of YFE’s outstanding shares to 6,857,132 .

As of September 30, 2022, the

Company’s ownership in YFE is 48.0 %.

During the nine months ended

September 30, 2022, the Company’s cash, cash equivalents and restricted cash decreased by $ 3.0 million .

The decrease was primarily

due to cash used in investment activities, inclusive of the Wow and Ameba acquisitions and the YFE investments, totaling $35.9 million,

$24.2 million used for operational activities, offset by $57.4 million of financing from the margin loan, production facilities and bank

indebtedness assumed in the Wow Acquisition.

As of September 30,

2022, the Company held marketable securities with a fair value of $ 89.9

million as available-for-sale, a decrease of $ 22.7

million as compared to December 31, 2021 primarily due to the Company selling $5.5 million

of its held securities during the period, a decrease in fair value of $4.5 million recorded as an unrealized loss, additional prepayments

of $4.4 million on principals for certain mortgage-backed securities and $0.5 million for continued amortization of premiums during the

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

as a source of liquidity.

As the Company’s recent focus has been on expanding its business, excess cash and liquid investments

have been utilized to pay the Company’s margin loan down.

The Company borrowed an additional

$ 59.0 million from its 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 six months ended June 30, 2022, the borrowed amounts were used

to finance the Company’s additional investments in YFE and the closing of the acquisitions of Ameba and Wow, in each case pledging

certain of its 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.

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 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.

The Company 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 the Company’s condensed consolidated balance sheets.

Upon the acquisition of

Wow, the Company assumed certain credit facilities (the “Facilities”) with a Canadian bank.

The Facilities are comprised

(i) a $ 5.0 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 the Company and the security reflects substantially all of the tangible and intangible assets of the Company and its

subsidiary guarantors 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

million as compared to December 31, 2021 primarily due to the Company selling $8.8 million of its held securities during the

period, a decrease in fair value of $6.4 million recorded as an unrealized loss, additional prepayment proceeds of $6.4 million on

principals for certain mortgage-backed securities, a realized loss of $0.2 million and $0.8 million of continued amortization of

premiums during the period.

The available-for-sale securities consist principally of corporate and government debt securities and

are also available as a source of liquidity.

The Company borrowed an

additional $ 63.2

million from its investment margin account during the nine months ended September 30, 2022 and repaid $ 7.8

million with cash received from sales and/or redemptions of its marketable securities.

During the nine months ended September

30, 2022, the borrowed amounts were used to finance the Company’s additional investments in YFE and the closing of the

acquisitions of Ameba and Wow, in each case pledging certain of its marketable securities as collateral.

During the three months

ended September 30, 2022, the additional borrowings of $ 4.2

million related to quarterly operational costs.

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 2.65 %

on an average margin loan balance of $ 61.2

million during the three months ended September 30, 2022.

The weighted average interest rate was 1.54 %

on an average margin loan balance of $ 43.4

million during the nine months ended September 30, 2022.

The Company incurred interest expense of $ 0.6

million during the nine months ended September 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 the Company’s condensed consolidated balance sheets.

Upon the acquisition of Wow,

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

The Facilities are comprised of:

a $ 5.0 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 the Company and the security reflects substantially

all of the tangible and intangible assets of the Company and its subsidiary guarantors 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.

Refer to Note 14 for additional details.

Historically, the Company has incurred net losses.

For the three months

ended June 30, 2022 and 2021, the Company reported net losses of $13.3 million and $7.4 million, respectively.

For the six months ended

June 30, 2022 and 2021, the Company reported net losses of $17.9 million and $83.7 million, respectively.

The Company reported net cash

used in operating activities of $17.7 million and $8.8 million for the six months ended June 30, 2022 and 2021, respectively.

30, 2022, the Company had an accumulated deficit of $613.7 million and total stockholders’ equity of $141.2 million.

30, 2022, the Company had current assets of $150.3 million, including cash and cash equivalents of $7.8 million and current liabilities

of $112.7 million.

The Company had working capital of $37.6 million as of June 30, 2022, compared to working capital of $115.1 million

as of December 31, 2021.

Historically, the Company

has incurred net losses.

For the three months ended September 30, 2022 and 2021, the Company reported net losses of $11.2 million and

$9.3 million, respectively.

For the nine months ended September 30, 2022 and 2021, the Company reported net losses of $29.1 million and

$92.9 million, respectively.

The Company reported net cash used in operating activities of $22.8 million and $16.0 million for the nine

months ended September 30, 2022 and 2021, respectively.

As of September 30, 2022, the Company had an accumulated deficit of $624.9 million

and total stockholders’ equity of $128.5 million.

As of September 30, 2022, the Company had current assets of $143.6 million, including

cash and cash equivalents of $7.1 million and current liabilities of $111.2 million.

The Company had working capital of $ 32.4 million

as of September 30, 2022, compared to working capital of $ 115.1 million as of December 31, 2021.

Summary of Significant Accounting Policies

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in two distinct business segments:

the Content Production & Distribution Segment which produces and distributes children’s content,

and the Media Advisory & Advertising Services Segment which provides media and advertising services.

These segments are reflective

of how the Company’s Chief Operating Decision Maker (“CODM”) reviews operating results for the purposes of allocating

resources and assessing performance.

the Content Production & Distribution Segment, which produces and distributes children’s

content, and the Media Advisory & Advertising Services Segment, which provides media and advertising services.

These segments are

reflective of how the Company’s Chief Operating Decision Maker (“CODM”) reviews operating results for the purposes of

allocating resources and assessing performance.

The Company has identified its Chief Executive Officer as the CODM.

The segments are organized around

the products and services provided to customers and represent the Company’s reportable segments.

Prior to the acquisition of the

Beacon Media Group (formerly “ChizComm”), the Company’s operations were comprised of a single segment.

The segments are organized

around the products and services provided to customers and represent the Company’s reportable segments.

Prior to the acquisition

of the Beacon Media Group (formerly “ChizComm”), the Company’s operations were comprised of a single segment.

The accounting policies for

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Principles of Consolidation and Basis of Presentation

The Company’s condensed consolidated financial statements include

the accounts of Genius Brands International, Inc.

The Company’s condensed

consolidated financial statements include the accounts of Genius Brands International, Inc.

and its wholly-owned subsidiaries.

The Company consolidates all majority-owned subsidiaries,

investments in entities in which it has controlling influence and variable interest entities where the Company has been determined to

be the primary beneficiary.

consolidates all majority-owned subsidiaries, investments in entities in which it has controlling influence and variable interest entities

where the Company has been determined to be the primary beneficiary.

Minority interests are recorded as non-controlling interests.

Non-consolidated investments are accounted for

using the equity method or the fair value option when the Company has the ability to significantly influence the operating decisions of

the investee.

When the Company does not have the ability to significantly influence the operating decisions of an investee, these equity

securities are classified as either marketable investment securities or other investments and recorded at fair value with changes recognized

within other Income (expense) on the consolidated statements of operations and comprehensive income (loss).

All significant intercompany

accounts and transactions have been eliminated in consolidation.

Non-consolidated

investments are accounted for using the equity method or the fair value option when the Company has the ability to significantly influence

the operating decisions of the investee.

When the Company does not have the ability to significantly influence the operating decisions

of an investee, these equity securities are classified as either marketable investment securities or other investments and recorded at

fair value with changes recognized within other Income (expense) on the consolidated statements of operations and comprehensive income

All significant intercompany accounts and transactions have been eliminated in consolidation.

Business Combinations

The Company accounts for

transactions that are classified as business combinations in accordance with the Financial Accounting Standards Boards’

(“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC

Once a business is acquired, the Company allocates the fair value of the purchase consideration to the tangible

assets, liabilities, and intangible assets acquired based on their estimated fair values.

The excess of the fair value of purchase

consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

As required, preliminary

fair values are determined upon acquisition, with the final determination of the fair values being completed within the one-year

measurement period from the date of acquisition.

The valuation of acquired assets and assumed liabilities requires significant

judgment and estimates, especially with respect to intangible assets.

The valuation of intangible assets requires that the Company

use valuation techniques such as the income approach.

The income approach includes the use of a discounted cash flow model, which

includes discounted cash flow scenarios and requires significant estimates such as future expected revenue, expenses, capital

expenditures and other costs, and discount rates.

The Company estimates the fair value based upon assumptions management believes to

be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Estimates associated with the accounting for acquisitions may change as additional information becomes available regarding the

assets acquired and liabilities assumed.

Acquisition-related expenses and any related restructuring costs are recognized separately

from the business combination and are expensed as incurred.

The Company accounts for transactions

that are classified as business combinations in accordance with the Financial Accounting Standards Boards’ (“FASB”)

Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”) .

Once a business

is acquired, the Company allocates the fair value of the purchase consideration to the tangible assets, liabilities, and intangible assets

acquired based on their estimated fair values.

The excess of the fair value of purchase consideration over the fair values of these identifiable

assets and liabilities is recorded as goodwill.

As required, preliminary fair values are determined upon acquisition, with the final determination

of the fair values being completed within the one-year measurement period from the date of acquisition.

The valuation of acquired assets

and assumed liabilities requires significant judgment and estimates, especially with respect to intangible assets.

The valuation of intangible

assets requires that the Company use valuation techniques such as the income approach.

The income approach includes the use of a discounted

cash flow model, which includes discounted cash flow scenarios and requires significant estimates such as future expected revenue, expenses,

capital expenditures and other costs, and discount rates.

The Company estimates the fair value based upon assumptions management believes

to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

associated with the accounting for acquisitions may change as additional information becomes available regarding the assets acquired and

liabilities assumed.

Acquisition-related expenses and any related restructuring costs are recognized separately from the business combination

and are expensed as incurred.

Variable Interest Entities

The Company holds an

interest in Stan Lee University (“SLU”), an entity that is considered a variable interest entity (“VIE”).

The variable interest relates to 50% ownership in the entity that is comprised of the Stan Lee Assets (as defined below) and that

requires additional financial support from the Company to continue operations.

The Company’s total net cash investment in SLU

as of June 30, 2022, is $ 0.8 million.

The Company is considered the primary beneficiary and is required to consolidate the VIE.

The Company holds an interest

in Stan Lee University (“SLU”), an entity that is considered a variable interest entity (“VIE”).

interest relates to 50% ownership in the entity that is comprised of the Stan Lee Assets (as defined below) and that requires additional

financial support from the Company to continue operations.

The Company’s total net cash investment in SLU as of September 30, 2022,

is $ 0.8 million .

In addition, the Company has incurred $ 0.4 million of costs incurred for marketing and operational services.

is considered the primary beneficiary and is required to consolidate the VIE.

In evaluating whether the

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the entity’s capital structure,

contractual rights to earnings (losses), subordination of our interests relative to those of other investors, contingent payments, as

well as other contractual arrangements that have the potential to be economically significant.

The evaluation of each of these factors

in reaching a conclusion about the potential significance of our economic interests is a matter that requires the exercise of professional

The Company continuously assesses whether it is the primary beneficiary of a variable interest entity as changes to existing

relationships or future transactions may result in the Company consolidating its collaborators or partners.

contractual rights to earnings (losses), subordination of the Company’s interests relative to those of other investors, contingent

payments, as well as other contractual arrangements that have the potential to be economically significant.

The evaluation of each of

these factors in reaching a conclusion about the potential significance of the Company’s economic interests is a matter that requires

the exercise of professional judgment.

The Company continuously assesses whether it is the primary beneficiary of a variable interest

entity as changes to existing relationships or future transactions may result in the Company consolidating its collaborators or partners.

Use of Estimates

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highly liquid debt instruments with initial maturities of three months or less to be cash equivalents.

As of June 30, 2022 and December

As of September 30, 2022 and December

31, 2021, the Company had cash and cash equivalents of $ 7.1 million and $ 2.1 million , respectively.

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or other incentives.

Estimated amounts

receivable in respect of refundable tax credits are recorded as an offset to the related production operating cost, or to investment

in film and television programming when the conditions for eligibility of production assistance based on the government’s

criteria are met, the qualifying expenditures are made and there is reasonable assurance of realization.

Determination of when and

if the conditions of eligibility have been met is based on management’s judgement, and the amount recognized is based on

management’s estimates of qualifying expenditures.

The ultimate collection of previously recorded estimates is subject to

ordinary course audits from the Canada Revenue Agency (“CRA”) and Provincial agencies.

Changes in administrative policies by the

CRA or subsequent review of eligibility documentation may impact the collectability of these estimates.

The Company continuously

reviews the results of these audits to determine if any circumstances arise that in management’s judgement would result in a

previously recognized amount to be considered no longer collectible.

The Company classifies the tax credits receivable as current based

on their normal operating cycle.

Government assistance, in the form of refundable tax credits, is relied upon as a key component of production

These amounts are claimed from the CRA through the submission of income tax returns and can take up to 18 to 24 months from

the date of the first tax credit dollar being earned to being received.

As this financing is fundamental to the Company’s ability

to produce animated productions and generate revenue in the normal course of business, the normal operating cycle for such assets is considered

to be a 12-to-24-month period, or the time it takes for the CRA to assess and refund the tax credits earned.

As of June 30, 2022, the Company had $ 25.9

million in current Tax Credit Receivables on its condensed consolidated balance sheet.

does not have an allowance on tax credits receivable as of June 30, 2022, based on historical experience and future expectations.

Estimated amounts receivable

in respect of refundable tax credits are recorded as an offset to the related production operating cost, or to investment in film and

television programming when the conditions for eligibility of production assistance based on the government’s criteria are met,

the qualifying expenditures are made and there is reasonable assurance of realization.

Determination of when and if the conditions of

eligibility have been met is based on management’s judgment, and the amount recognized is based on management’s estimates

of qualifying expenditures.

The ultimate collection of previously recorded estimates is subject to ordinary course audits from the Canada

Revenue Agency (“CRA”) and Provincial agencies.

Changes in administrative policies by the CRA or subsequent review of eligibility

documentation may impact the collectability of these estimates.

The Company continuously reviews the results of these audits to determine

if any circumstances arise that in management’s judgment would result in a previously recognized amount to be considered no longer

The Company classifies the

tax credits receivable as current based on their normal operating cycle.

Government assistance, in the form of refundable tax credits,

is relied upon as a key component of production financing.

These amounts are claimed from the CRA through the submission of income tax

returns and can take up to 18 to 24 months from the date of the first tax credit dollar being earned to being received.

As this financing

is fundamental to the Company’s ability to produce animated productions and generate revenue in the normal course of business, the

normal operating cycle for such assets is considered to be a 12-to-24-month period, or the time it takes for the CRA to assess and refund

the tax credits earned.

As of September 30,

2022, the Company had recorded $ 26.4

million in current tax credit receivables related to Wow’s film and television productions on its condensed

consolidated balance sheet.

The Company does not have an allowance on tax credits receivable as of September 30, 2022, based on

historical experience and future expectations.

Marketable Debt Securities

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to support current operations and, accordingly, the Company classifies the investments as current assets without regard to their contractual

Unrealized gains or losses on available-for-sale securities for which

the Company expects to fully recover the amortized cost basis are recognized in accumulated other comprehensive (loss) income, a component

of stockholders’ equity.

If the Company intends to sell a debt security, or it is more likely than not that it would be required

to sell a debt security before the recovery of its amortized cost basis, the entire difference between the security's amortized cost basis

and its fair value at the balance sheet date would be recognized as a loss in the condensed consolidated statements of operations.

The Company reports accrued

interest receivable separately from the available-for-sale securities and has elected not to measure an allowance for credit losses for

accrued interest receivables.

Uncollectible accrued interest is written off when the Company determines that no additional interest payments

will be received.

Approximately $ 0.4 million in interest income was receivable as of June 30, 2022 and classified within Other Receivables

on the condensed consolidated balance sheets.

Unrealized gains or losses

on available-for-sale securities for which the Company expects to fully recover the amortized cost basis are recognized in accumulated

other comprehensive (loss) income, a component of stockholders’ equity.

If the Company intends to sell a debt security, or it is

more likely than not that it would be required to sell a debt security before the recovery of its amortized cost basis, the entire difference

between the security's amortized cost basis and its fair value at the balance sheet date would be recognized as a loss in the condensed

consolidated statements of operations.

The Company reports

accrued interest receivable separately from the available-for-sale securities and has elected not to measure an allowance for credit

losses for accrued interest receivables.

Uncollectible accrued interest is written off when the Company determines that no

additional interest payments will be received.

Classified within Other Receivables on the condensed consolidated balance sheets,

approximately $ 0.4

million in interest income was receivable as of September 30, 2022 and December 31, 2021.

Interest earned on investment

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Allowance for Doubtful Accounts

Accounts receivable are presented on the balance sheets net of estimated

uncollectible amounts.

The carrying amounts of trade accounts receivable and unbilled accounts receivable represents the maximum credit

risk exposure of these assets.

The Company evaluates its accounts receivable balances on a quarterly basis to determine collectability

based on an assessment of past events, current economic conditions, and forecasts of future events.

The Company records an allowance for

estimated uncollectible accounts in an amount approximating anticipated losses.

Individual uncollectible accounts are written off against

the allowance when collection of the individual accounts appears doubtful.

The Company limits its exposure to this credit risk through a credit

approval process and credit monitoring procedures.

In addition, Wow’s contracts with customers usually require upfront and milestone

payments throughout the production process.

The Company’s customer base is mainly comprised of major Canadian, American, and worldwide

studios, distributors, broadcasters, toy companies and AVOD and SVOD platforms that have been customers for several years.

Accounts receivable are presented

on the balance sheets net of estimated uncollectible amounts.

The carrying amounts of trade accounts receivable and unbilled accounts

receivable represents the maximum credit risk exposure of these assets.

The Company evaluates its accounts receivable balances on a quarterly

basis to determine collectability based on an assessment of past events, current economic conditions, and forecasts of future events.

The Company records an allowance for estimated uncollectible accounts in an amount approximating anticipated losses.

Individual uncollectible

accounts are written off against the allowance when collection of the individual accounts appears doubtful.

The Company limits its exposure

to this credit risk through a credit approval process and credit monitoring procedures.

In addition, Wow’s contracts with customers

usually require upfront and milestone payments throughout the production process.

The Company’s customer base is mainly comprised

of major Canadian, American, and worldwide studios, distributors, broadcasters, toy companies and AVOD and SVOD platforms that have been

customers for several years.

Property and Equipment

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Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of

the assets, which range from two to seven years.

Maintenance, repairs, and renewals, which neither materially add to the value of the

assets nor appreciably prolong their lives, are charged to expense as incurred.

Gains and losses from any dispositions of property and

equipment are reflected in the consolidated statement of operations.

the assets, which range from two to ten years.

Maintenance, repairs, and renewals, which neither materially add to the value of the assets

nor appreciably prolong their lives, are charged to expense as incurred.

Gains and losses from any dispositions of property and equipment

are reflected in the consolidated statements of operations.

Right of Use Leased Assets

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all components of the lease including related nonlease components as a single component.

Operating leases are reflected as operating right

of use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets.

Operating lease ROU assets

and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As the Company’s

Operating leases are reflected as operating lease

right of use (“ROU”) assets and operating lease liabilities and finance leases are reflected as finance lease ROU assets and

finance lease liabilities in the consolidated balance sheets.

Lease ROU assets and liabilities

are recognized at commencement date based on the present value of lease payments over the lease term.

As the Company’s operating

leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement

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The Company estimates the incremental borrowing rate to reflect the profile of

collateralized borrowing over the expected term of the leases based on the information available at the later of the initial date of adoption,

or the lease commencement date.

collateralized borrowing over the expected term of the leases based on the information available on the lease commencement date or for

leases existing upon the date of initial adoption of ASC 842, the date of adoption.

The implicit rates within the Company’s existing

finance leases are determinable and therefore used to determine the present value of finance lease payments.

The operating lease ROU asset

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Lease expense is recognized

on a straight-line basis over the lease term in the consolidated statement of operations.

on a straight-line basis over the lease term in the consolidated statements of operations.

Lease incentives are recognized as a reduction

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costs for episodic series produced in accordance with FASB ASC 926-20, Entertainment-Films - Other Assets - Film Costs .

production costs are capitalized at actual cost and amortized using the individual-film-forecast-computation method, whereby these costs are amortized,

and participations costs are accrued based on the ratio of the current period’s revenues to management’s estimate of ultimate

revenue expected to be recognized from each production.

production costs are capitalized at actual cost and amortized using the individual-film-forecast-computation method, whereby these costs

are amortized, and participations costs are accrued based on the ratio of the current period’s revenues to management’s estimate

of ultimate revenue expected to be recognized from each production.

Due to the inherent uncertainties

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were no events or changes in circumstances that would indicate a change in fair value of productions and therefore the Company has not

recorded any impairment charges during the three or six months ended June 30, 2022.

The Company expenses all capitalized

costs that exceed the initial market firm commitment revenue in the period of delivery of the episodes.

Additionally, for episodic series,

from time to time, the Company develops additional content, improved animation and bonus songs/features for its existing content.

the initial release of the episodic series, the costs of significant improvement to existing products are capitalized while routine and

periodic alterations to existing products are expensed as incurred.

recorded any impairment charges during the nine months ended September 30, 2022 or 2021.

The Company expenses

all capitalized costs that exceed the initial market firm commitment revenue in the period of delivery of the episodes.

Additionally,

for episodic series, from time to time, the Company develops additional content, improved animation and bonus songs/features for its existing

After the initial release of the episodic series, the costs of significant improvement to existing products are capitalized while

routine and periodic alterations to existing products are expensed as incurred.

Goodwill and Intangible Assets

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also considers the bifurcation guidance for embedded derivatives per ASC 815-15, Embedded Derivatives .

Treasury stock

The Company records the repurchase

of shares of its common stock at cost on the trade date of the transaction.

These shares are considered treasury stock, which is a reduction

to stockholders’ equity.

Treasury stock is included in authorized and issued shares but excluded from outstanding shares.

Borrowing Costs

Borrowing costs related to

the issuance of interim production financing are recorded as a reduction to the carrying amount of interim production financing and measured

at amortized cost using the effective interest method.

Borrowing costs are recognized as part of interest expense in the condensed consolidated

statements operations or loss in the period in which they are incurred.

Borrowing costs directly attributable to the acquisition or production

of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale,

are added to the cost of those assets, until such time the assets are substantially ready for their intended use or sale.

recorded $ 0.3 million related to production financing during the three months ended June 30, 2022.

Borrowing costs relate

to the issuance of Wow’s interim production financing and are recorded as a reduction to the carrying amount of interim

production financing and measured at amortized cost using the effective interest method.

Borrowing costs are recognized as part of

interest expense in the condensed consolidated statements of operations in the period in which they are incurred.

Borrowing costs

directly attributable to the acquisition or production of qualifying assets, which are assets that necessarily take a substantial

period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time the assets are

substantially ready for their intended use or sale.

Upon the acquisition of Wow, the Company recorded $ 0.3

million and $ 0.6 million related to production financing during the three and nine months ended September 30, 2022, respectively.

Revenue Recognition

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services in a contract.

Judgement is required in determining the timing of whether the transfer of control occurs at a point in time or

Judgment is required in determining the timing of whether the transfer of control occurs at a point in time or

over time and is discussed below.

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Gross versus Net Revenue Presentation

The Company evaluates individual arrangements with third parties to

determine whether the Company acts as principal or agent under the terms.

To the extent that the Company acts as the principal in an arrangement,

revenues are reported on a gross basis, resulting in revenues and expenses being classified in their respective financial statement line

To the extent that the Company acts as the agent in an arrangement, revenues are reported on a net basis, resulting in revenues

being presented net of any expenses incurred in providing agency services.

Determining whether the Company acts as principal or agent

is based on an evaluation of which party has substantial risks and rewards of ownership under the terms of an arrangement.

The most significant

factors that the Company considers include identification of the primary obligor, as well as which party has credit risk, general and

inventory risk and the latitude or ability in establishing prices.

The Company evaluates individual

arrangements with third parties to determine whether the Company acts as principal or agent under the terms.

To the extent that the Company

acts as the principal in an arrangement, revenues are reported on a gross basis, resulting in revenues and expenses being classified in

their respective financial statement line items.

To the extent that the Company acts as the agent in an arrangement, revenues are reported

on a net basis, resulting in revenues being presented net of any expenses incurred in providing agency services.

Determining whether the

Company acts as principal or agent is based on an evaluation of which party has substantial risks and rewards of ownership under the terms

of an arrangement.

The most significant factors that the Company considers include identification of the primary obligor, as well as which

party has credit risk, general and inventory risk and the latitude or ability in establishing prices.

The Company has identified

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Provide animation production services.

License rights to exploit Functional Intellectual Property (“Functional Intellectual Property” or “functional IP” is defined as intellectual property that has significant standalone functionality, such as the ability be played or aired.

Functional Intellectual Property derives a substantial portion of its utility from its significant standalone functionality).

License rights to exploit Symbolic Intellectual Property (“Symbolic Intellectual Property” or “symbolic IP” is intellectual property that is not functional as it does not have significant standalone use and substantially all of the utility of symbolic IP is derived from its association with the entity’s past or ongoing activities, including its ordinary business activities, such as the Company’s licensing and merchandising programs associated with its animated content).

License rights to exploit Functional Intellectual Property (“functional IP” is defined as intellectual property that has significant standalone functionality, such as the ability be played or aired.

Functional IP derives a substantial portion of its utility from its significant standalone functionality).

License rights to exploit Symbolic Intellectual Property (“symbolic IP” is intellectual property that is not functional as it does not have significant standalone use and substantially all of the utility of symbolic IP is derived from its association with the entity’s past or ongoing activities, including its ordinary business activities, such as the Company’s licensing and merchandising programs associated with its animated content).

Provide media and advertising services to clients.

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month the impressions are served.

For subscription-based revenue, the Company recognizes revenue when customer downloads the mobile device

application and their credit card is charged.

Upon the acquisition of Wow, the Company generates advertising revenue

from Frederator’s owned and operated YouTube channels as well as revenues generated from the operation of its multi-channel

network on YouTube .

Revenue is recognized when services are provided in accordance with the Company’s agreement with YouTube,

the price is fixed or determinable, and collection of the related receivable is probable.

Receivables are usually collectable within 30

For subscription-based revenue, the Company recognizes revenue when a customer downloads the mobile

device application and their credit card is charged.

Upon the acquisition of Wow, the Company generates

advertising revenue from Frederator’s owned and operated YouTube channels as well as revenues generated from the operation

of its multi-channel network on YouTube .

Revenue is recognized when services are provided in accordance with the Company’s

agreement with YouTube, the price is fixed or determinable, and collection of the related receivable is probable.

Receivables are usually

collectable within 30 days.

Licensing & Royalties

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Product Sales

The Company recognizes revenue related to product sales when the Company

completes its performance obligation, which is when the goods are transferred to the buyer.

The Company recognizes revenue

related to product sales when the Company completes its performance obligation, which is when the goods are transferred to the buyer.

Media Advisory & Advertising

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When the Company purchases advertising for

clients on linear and across digital and streaming platforms and receives a commission, the commissions are recognized as revenue in

the month the advertising is displayed.

clients on linear and across digital and streaming platforms and receives a commission, the commissions are recognized as revenue in the

month the advertising is displayed.

Direct Operating Costs

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the United States are insured by the FDIC up to $250,000 per account and deposits in banks in Canada are insured by the CDIC up to $100,000

As of June 30, 2022, the Company had six accounts with an uninsured balance in bank deposit accounts of $ 1.8 million.

The Company has a managed

account and a brokerage account with a financial institution.

The managed account maintains the Company’s investments in marketable

securities of $ 97.4 million as of June 30, 2022.

The brokerage account did not hold any of the Company’s cash as of June 30, 2022.

Assets in the managed and brokerage account are protected by the Securities Investor Protection Corporation (“SIPC”) up to

$500,000 (with a limit of $ 250,000 for cash).

In addition, the financial institution provides additional “excess of SIPC”

coverage which insures up to $1 billion.

As of June 30, 2022 the Company has not had account balances held at this financial institution

that exceed the insured balances.

As of September 30, 2022, the Company had fifteen accounts with an uninsured balance in bank deposit accounts of $ 3.0

As of December 31, 2021, the Company had four accounts with an uninsured balance in bank deposit accounts of $ 1.1

The Company has a

managed account and a brokerage account with a financial institution.

The managed account maintains the Company’s investments

in marketable securities of $ 89.9

million and $ 112.5

million as of September 30, 2022 and December 31, 2021, respectively.

The brokerage account did not hold a material amount of

the Company’s cash as of September 30, 2022 or December 31, 2021.

Assets in the managed and brokerage account are protected by

the Securities Investor Protection Corporation (“SIPC”) up to $500,000 (with a limit of $ 250,000

In addition, the financial institution provides additional “excess of SIPC” coverage which insures up to $1

As of September 30, 2022 and December 31, 2021, the Company has not had account balances held at this financial institution

that exceeded the insured balances.

The Company also has an

account with a German bank that manages its foreign transactions with YFE.

The cash balance as of September 30, 2022 held at the

German institution was $ 2.7

Deposits in German banks are subject to a mandatory basic security amount up to $100,000 EURO.

In addition, the

institution is a member of the deposit protection fund for the German private banking industry that currently insures $ 5.5

million of each customer’s deposit account.

As of September 30, 2022 and December 31, 2021, the Company has not had account

balances held at this financial institution that exceeded the insured balances.

The Company’s investment

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For the three months

ended June 30, 2022, the Company had five customers, whose total revenue exceeded 10 % of total consolidated revenue.

ended September 30, 2022, the Company had four customers, whose total revenue exceeded 10 % of total consolidated revenue.

These customers

accounted for 83 % of total revenue.

For the nine months ended

September 30, 2022, the Company had four customers whose total revenue exceeded 10 % of total consolidated revenue.

These customers accounted

for 74 % of total revenue.

For the six months ended June

30, 2022, the Company had five customers whose total revenue exceeded 10 % of total consolidated revenue.

These customers accounted for

76.3 % of total revenue.

As of June 30, 2022, the Company had four customers whose total accounts receivable exceeded 10 % of total accounts

These customers accounted for 65.04 % of the total accounts receivable as of June 30, 2022.

As of September 30, 2022, the Company had two customers whose total accounts receivable exceeded 10 % of total

accounts receivable.

These customers accounted for 28 % of the total accounts receivable as of September 30, 2022.

For the three months ended

June 30, 2021, the Company had one customer whose total revenue exceeded 10 % of the total consolidated revenue.

September 30, 2021, the Company had one customer whose total revenue exceeded 10 % of the total consolidated revenue.

This customer accounted

for 13 % of total revenue.

For the six months ended June

30, 2021, the Company had one customer, whose total revenue exceeded 10 % of total consolidated revenue.

This customer accounted for 34 %

of total revenue.

As of June 30, 2021, the Company had two customers whose accounts receivable exceeded 10 % of total accounts receivable.

For the nine months ended

September 30, 2021, the Company had one customer, whose total revenue exceeded 10 % of total consolidated revenue.

This customer accounted

for 22 % of total revenue.

As of September 30, 2021, the Company had three customers whose accounts receivable exceeded 10 % of total accounts

Those customers accounted for 59 % of accounts receivable.

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customers and establishes allowances for any anticipated bad debt.

As of June 30, 2022 and December 31, 2021, the Company recorded an

allowance for bad debt of $ 67,897 and $ 22,080 , respectively.

As of September 30, 2022 and December 31, 2021, the Company recorded

an allowance for bad debt of $ 87,710 and $ 22,080 , respectively.

Fair value of Financial Instruments

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Financial instruments that

are not measured at fair value on the condensed consolidated statement of operations are represented by cash, receivables, payables, accrued

are not measured at fair value on the condensed consolidated statements of operations are represented by cash, receivables, payables, accrued

liabilities, bank indebtedness, the Company’s margin loan and interim production financing.

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The following table summarizes

the marketable securities measured at fair value by level within the fair value hierarchy as of June 30, 2022 (in thousands):

the marketable securities measured at fair value by level within the fair value hierarchy as of September 30, 2022 (in thousands):

Schedule of marketable security measured at fair value

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assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs and

include the Company’s contingent earn-out liability, goodwill and film and television costs as of June 30, 2022.

There were no significant

events that occurred or circumstances that resulted in an adjustment to the fair value of those assets and liabilities measured on a non-recurring

basis during the three months ended June 30, 2022.

include the Company’s contingent earn-out liability, goodwill and film and television costs as of September 30, 2022.

no significant events that occurred or circumstances that resulted in an adjustment to the fair value of those assets and liabilities

measured on a non-recurring basis during the nine months ended September 30, 2022.

Recent Accounting Pronouncements

The Company reviewed all recently

issued accounting pronouncements and concluded that they were not applicable or not expected to have a significant impact on the Company’s

condensed consolidated financial statements.

In June 2016, the FASB issued

Accounting Standards Update ("ASU") No.

2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326) .

ASU 2016-13 replaces the “incurred loss” credit losses framework with a new accounting standard that requires management's

measurement of the allowance for credit losses to be based on a broader range of reasonable and supportable information for lifetime

credit loss estimates.

The new model, referred to as the current expected credit loss (“CECL”) model, will apply to:

financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures.

This includes,

but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees.

The CECL model does not

apply to available-for-sale (“AFS”) debt securities.

For AFS debt securities with unrealized losses, entities will measure

credit losses in a manner similar to what they do today, except that the losses will be recognized as allowances rather than reductions

in the amortized cost of the securities.

The ASU also simplifies the accounting model for purchased credit-impaired debt securities and

2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating

the allowance for loan and lease losses.

On October 16, 2019, the FASB approved a proposal to change the effective date of ASU No.

for smaller reporting companies, such as the Company, delaying the effective date to fiscal years beginning after December 31, 2022,

including interim periods within those fiscal periods.

Early adoption is permitted for interim and annual reporting periods.

is currently evaluating the impact of the adoption of ASU 2016-13 on its consolidated financial statements but does not expect that the

adoption of this standard will have a material impact.

In October 2021, the FASB

issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with

Customers" (“ASU 2021-08”).

The standard requires an acquirer in a business combination to recognize and measure

contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, “Revenue from Contracts

with Customers,” as if it had originated the contracts.

The standard is effective for fiscal years, and interim periods within those

fiscal years, beginning after December 15, 2022.

Early adoption is permitted.

The Company adopted this ASU during the second quarter of

2022 and has incorporated this guidance in its evaluation of the accounting for the acquisition of Wow.

On January 13, 2022, the Company

completed the acquisition of Ameba, pursuant to a Stock Purchase Agreement (the “SPA”) by and between the Company and Tony

Havelka, a resident of the Province of Manitoba (the “Seller”), in which the Company acquired from the Seller all of the issued

and outstanding equity interests of Ameba.

Concurrently, pursuant to an Asset Purchase Agreement (the “APA”) by and among

the Company, the Seller and Tek Gear Inc., a corporation owned by the Seller, the Company acquired from the Seller a proprietary software

platform (the “Technology”) that powers the Ameba SVOD deliveries.

The transactions contemplated by the SPA and the APA are

referred to as the “Ameba Acquisition.”

Consideration paid by the

Company in the transaction at closing consisted of $ 3.8 million in cash, inclusive of $ 0.3 million

for a net working capital adjustment (the “NWC Adjustment”) pursuant to the SPA and $0.3 million in cash pursuant to the APA,

for total consideration of $ 4.1 million , or $ 3.9 million net of cash acquired, excluding transaction costs and subject to as described

in more detail below.

costs incurred relating to the Ameba Acquisition, including legal and accounting, totaled $ 0.1 million , which are included in general and

administrative expenses on the statements of operations.

The agreement provided for an adjustment to the purchase price based on an adjusted

net working capital (“NWC”) as defined in the agreement.

Ameba acquisition facilitates the Company’s expansion into SVOD with its technology and content essential to the launch of the ad-free

subscription-based Kartoon Channel!

Kidaverse platform.

The acquisition provides immediate benefit recognized through the content

available on the SVOD Ameba channel app, available for download on Amazon Fire TV, Roku, Xbox 360, Xumo, LG Smart TV, TiVo, VEWD, CINEMOOD

and iOS and Android devices.

Company has determined that the Ameba Acquisition constitutes a business acquisition as defined by ASC 805.

Accordingly, the assets acquired,

and the liabilities assumed in the transaction were recorded at their estimated acquisition fair values, while transaction costs associated

with the acquisition were expensed as incurred pursuant to the purchase method of accounting in accordance with ASC 805.

The Company’s

preliminary purchase price allocation was based on an evaluation of the available data to determine the appropriate fair values based

on the requirements of ASC 820 and represents managements best estimates.

following table summarizes the consideration paid, including the Net Working Capital Adjustment (in thousands):

Total purchase price consideration paid

SPA cash consideration at closing

APA cash consideration at closing

Net working capital adjustment

The net working capital

calculation was finalized as $ 268,657

and paid to the acquiree during the three months ended June 30, 2022, as determined by the Company and agreed upon by the

As of September 30, 2022,

the accounting for the acquisition is preliminary, as the Company is finalizing its valuation and determination of the intangible assets.

The Company has engaged a third-party valuation firm to assist with the purchase price allocation, which will be completed in subsequent

The preliminary purchase price

allocation is based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company on January 13,

2022 as follows (in thousands):

Assets acquired and liabilities assumed

Accounts Receivable

Prepaids Expenses

Digital Network

Accounts Payable and Accrued Expenses

Tax Liability

Total Consideration

The identifiable intangible

assets acquired of $ 3.1 million is comprised of $2.8 million for the Digital Network, Ameba TV, with a remaining economic life of 18 years,

$23,000 for Ameba’s trade name with a useful life of 3 years and $0.3 million for the SVOD technology with a remaining useful life

of approximately 3 years.

The $0.7 million in goodwill arising from the acquisition consists largely of the synergies expected from the

combined businesses, including the Company’s build-out of its technology for the expansion of the Kartoon Channel!

The goodwill was recorded to the Content Production & Distribution reporting unit and is not

deductible for tax purposes.

The valuation and allocation

of the preliminary purchase price shown in the above table was based upon a preliminary valuation and estimates and assumptions, especially

with respect to intangible assets, that are subject to change within the purchase price allocation period generally one year from the

acquisition date, including the Company’s evaluation of certain income tax positions, with corresponding adjustments to goodwill.

Valuation Methodology

digital network was valued by performing a discounted cash flow analysis.

This method includes discounting the projected cash flows associated

with the current digital network content, based primarily upon historical revenue and projections over its expected life and considers

the operating expenses and contributory asset charges associated with servicing such network.

Projected cash flows attributable to the

digital network was discounted to the present value at a rate commensurate with the perceived risk.

The useful life of the digital network

is estimated based primarily upon the present value of cash flows attributable to the digital network.

Ameba trade name was valued using the relief-from-royalty method.

This method is an income approach that estimates the portion of a company’s

earnings attributable to an asset based on the royalty rate the company would have paid for the use of the asset if it did not own it.

Royalty payments are estimated by applying a royalty rate to the prospective revenue attributable to the intangible asset.

The resulting

annual royalty payments are tax-affected and then discounted to present value.

The useful life of the trade name is based on the estimated

time it will take for the Company to rebrand the Ameba trade name and logo with the Company branded Kartoon Channel!

Kidaverse trade

The technology was valued

at cost as the Company determined that the cost approximated the fair value.

assumptions used in forecasting cash flows for each of the identified intangible assets included consideration of the following:

Historical performance including sales and profitability.

Expense estimates.

Contributory asset charges.

Estimated economic life of asset.

Acquisition of new customers.

Attrition of existing customers.

Wow Unlimited Media

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Studios and its subsidiary Frederator, are referred to as the “Wow Acquisition.”

Final consideration paid

by the Company in the transaction at closing consisted of $ 38.3

million in cash and 11,057,085 shares of the Company’s common stock, including 691,262 Exchangeable Shares, with a fair value

million, 2,409,515

options granted to employees of Wow with a fair value of previously vested options of $ 1.2

million, included in the purchase price, and $ 0.3

million for future services and $ 1.6

million in severance and bonuses to executives, for total consideration of $ 52.7

million, or $ 50.1

million net of cash acquired, excluding transaction costs as described in more detail below.

Final consideration paid by

the Company in the transaction at closing consisted of $ 38.3 million in cash and 11,057,085

shares of the Company’s common stock, including 691,262 Exchangeable Shares, with a fair value of $ 11.6 million , 2,409,515 options

granted to employees of Wow with a fair value of previously vested options of $ 1.2 million , included in the purchase price, and $ 0.3 million

for future services and $ 1.6 million in severance and bonuses to executives, for total consideration

of $ 52.7 million , or $ 50.1 million net of cash acquired, excluding transaction costs as described in more detail below.

costs incurred relating to the Wow Acquisition, including banks, legal and accounting, totaled $ 3.1 million , which is included in general

and administrative expenses on the statement of operations in the three months ended June 30, 2022.

The Company will also expense the

unvested replacement options, with a fair value of $ 0.3 million, as stock-based compensation expense over the remaining requisite service

period specified in the agreements.

and administrative expenses on the statements of operations for the nine months ended September 30, 2022.

The Company will also expense

the unvested replacement options, with a fair value of $ 0.3 million , as stock-based compensation expense over the remaining requisite

service period specified in the agreements.

Wow Acquisition facilitates the Company’s expansion as a global animation and children’s digital media company.

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financial growth.

Frederator, with its owned and operated channels on YouTube , will provide a distribution platform

to facilitate the global growth of Kartoon Channel !.

Frederator, with its owned and operated channels on YouTube , will provide a distribution platform to facilitate

the global growth of Kartoon Channel !.

Company has determined that the Wow Acquisition constitutes a business acquisition as defined by ASC 805.

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Severance Payments

As of June 30, 2022, the

accounting for the acquisition is preliminary, as the Company is finalizing its valuation and determination of the intangible assets.

As of September 30, 2022,

the accounting for the acquisition is preliminary, as the Company is finalizing its valuation and determination of the intangible assets.

The Company has engaged a third-party valuation firm to assist with the purchase price allocation, which will be completed in subsequent

The preliminary purchase

price allocation is based upon the estimate of the fair value of the assets acquired and the liabilities assumed by the Company on

April 6, 2022 as follows (in thousands):

Schedule of fair value of the assets acquired and the liabilities

The preliminary purchase price

allocation is based upon the estimate of the fair value of the assets acquired and the liabilities assumed by the Company on April 6,

2022 as follows (in thousands):

Schedule of fair value of the assets acquired and the liabilities assumed

Cash and cash equivalents

Accounts Receivable

Other Receivables

Prepaid Expenses and Other

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with respect to intangible assets, that are subject to change within the purchase price allocation period generally one year from the

acquisition date, including our evaluation of certain income tax positions, with corresponding adjustments to goodwill.

acquisition date, including the Company’s evaluation of certain income tax positions, with corresponding adjustments to goodwill.

Valuation Methodology

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The resulting annual royalty payments are tax-affected and then discounted to present value.

On January 13, 2022, the Company

completed the acquisition of Ameba, pursuant to a Stock Purchase Agreement (the “SPA”) by and between the Company and Tony

Havelka, a resident of the Province of Manitoba (the “Seller”), in which the Company acquired from the Seller all of the issued

and outstanding equity interests of Ameba.

Concurrently, pursuant to an Asset Purchase Agreement (the “APA”) by and among

the Company, the Seller and Tek Gear Inc., a corporation owned by the Seller, the Company acquired from the Seller a proprietary software

platform (the “Technology”) that powers the Ameba SVOD deliveries.

The transactions contemplated by the SPA and the APA are

referred to as the “Ameba Acquisition.”

Consideration paid by

the Company in the transaction at closing consisted of $ 3.8

million in cash, inclusive of $ 0.3

million for a net working capital adjustment (the “NWC Adjustment”) pursuant to the SPA and $0.3 million in cash

pursuant to the APA, for total consideration of $ 4.1

million, or $ 3.9

million net of cash acquired, excluding transaction costs and subject to as described in more detail below.

costs incurred relating to the Ameba Acquisition, including legal and accounting, totaled $ 0.1 million, which is included in general

and administrative expenses on the statement of operations.

The agreement provided for an adjustment to the purchase price based on an

adjusted net working capital (“NWC”) as defined in the agreement.

Ameba acquisition facilitates the Company’s expansion into SVOD with its technology and content essential to the launch of the ad-free

subscription-based Kartoon Channel!

Kidaverse platform.

The acquisition provides immediate benefit recognized through the content

available on the SVOD Ameba channel app, available for download on Amazon Fire TV, Roku, Xbox 360, Xumo, LG Smart TV, TiVo, VEWD, CINEMOOD

and iOS and Android devices.

Company has determined that the Ameba Acquisition constitutes a business acquisition as defined by ASC 805.

Accordingly, the assets acquired,

and the liabilities assumed in the transaction were recorded at their estimated acquisition fair values, while transaction costs associated

with the acquisition were expensed as incurred pursuant to the purchase method of accounting in accordance with ASC 805.

The Company’s

preliminary purchase price allocation was based on an evaluation of the available data to determine the appropriate fair values based

on the requirements of ASC 820 and represents managements best estimates.

following table summarizes the consideration paid, including the Net Working Capital Adjustment (in thousands):

Total purchase price consideration paid

SPA cash consideration at closing

APA cash consideration at closing

Net working capital adjustment

The net working capital

calculation was finalized as $ 268,657

during the three months ended June 30, 2022, as determined by the Company and agreed upon by the acquiree.

The amount was paid to the

acquiree on June 30, 2022.

As of June 30, 2022, the accounting

for the acquisition is preliminary, as the Company is finalizing its valuation and determination of the intangible assets.

has engaged a third-party valuation firm to assist with the purchase price allocation, which will be completed in subsequent quarters.

The preliminary purchase

price allocation is based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company on

January 11, 2022 as follows (in thousands):

Assets acquired and liabilities assumed

Accounts Receivable

Prepaids Expenses

Digital Network

Accounts Payable and Accrued Expenses

Tax Liability

Total Consideration

The identifiable intangible

assets acquired of $ 3.1 million is comprised of $2.8 million for the Digital Network, Ameba TV, with a remaining economic life of 18 years,

$24,000 for Ameba’s trade name with a useful life of 3 years and $0.3 million for the SVOD technology with a remaining useful life

of approximately 3 years.

The $0.7 million in goodwill arising from the acquisition consists largely of the synergies expected from the

combined businesses, including the Company’s build-out of its technology for the expansion of the Kartoon Channel!

The goodwill was recorded to the Content Production & Distribution reporting unit and is not

deductible for tax purposes.

The valuation and allocation

of the preliminary purchase price shown in the above table was based upon a preliminary valuation and estimates and assumptions, especially

with respect to intangible assets, that are subject to change within the purchase price allocation period generally one year from the

acquisition date, including our evaluation of certain income tax positions, with corresponding adjustments to goodwill.

Valuation Methodology

The digital network was

valued by performing a discounted cash flow analysis.

This method includes discounting the projected cash flows associated with the current

digital network content, based primarily upon historical revenue and projections over its expected life and considers the operating expenses

and contributory asset charges associated with servicing such network.

Projected cash flows attributable to the digital network was discounted

to the present value at a rate commensurate with the perceived risk.

The useful life of the digital network is estimated based primarily

upon the present value of cash flows attributable to the digital network.

Ameba trade name was valued using the relief-from-royalty method.

This method is an income approach that estimates the portion of a company’s

earnings attributable to an asset based on the royalty rate the company would have paid for the use of the asset if it did not own it.

Royalty payments are estimated by applying a royalty rate to the prospective revenue attributable to the intangible asset.

The resulting

annual royalty payments are tax-affected and then discounted to present value.

The useful life of the trade name is based on the estimated

time it will take for the Company to rebrand the Ameba trade name and logo with the Company branded Kartoon Channel!

Kidaverse trade

The technology was valued

The assumptions used in

forecasting cash flows for each of the identified intangible assets included consideration of the following:

Historical performance including sales and profitability.

Expense estimates.

Contributory asset charges.

Estimated economic life of asset.

Acquisition of new customers.

Attrition of existing customers.

Supplemental Pro Forma Information

The following unaudited supplemental

pro forma information summarizes the Company’s results of operations as if the acquisitions were completed at the beginning of the

periods presented (in thousands, except for share and per share data):

pro forma information summarizes the Company’s results of operations as if the acquisitions were completed at the beginning of

the periods presented (in thousands, except for share and per share data):

Supplemental pro forma information

Three Months Ended

Genius Brands Consolidated (including Wow and Ameba results)

June 30, 2022

June 30, 2021

June 30, 2021 (1)

June 30, 2021

Genius Brands Consolidated

(including Wow and Ameba results)

September 30,

Total Revenues

Net Income (Loss)

Net Loss per Common Share (Basic and Diluted)

Net Loss per Share of Common Stock (Basic and Diluted)

Weighted Average Shares Outstanding (Basic and Diluted)

Six Months Ended

Nine months Ended

Genius Brands Consolidated

(including Wow and Ameba results)

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

September 30, 2022

September 30, 2021

September 30, 2022 (1)

September 30, 2022

September 30, 2021 (1)

September 30, 2021

Total Revenues

Net Income (Loss)

Net Loss per Common Share (Basic and Diluted)

Net Loss per Share of Common Stock (Basic and Diluted)

Weighted Average Shares Outstanding (Basic and Diluted)

(1) The unaudited historical financial statements of Wow are not adjusted for conversion

GAAP from International Financial Reporting Standards, as the adjustments are immaterial to the periods presented.

(1) The unaudited historical financial statements of Wow

are not adjusted for conversion to U.S.

GAAP from International Financial Reporting Standards, as the adjustments are immaterial to the

periods presented.

Variable Interest Entity

In July 2020, the Company

entered into a binding term sheet with POW, Inc.

(“POW!”) in which the Company agreed to form an entity with POW!

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” (“SLU”).

and the Company executed an Operating Agreement for the joint venture, effective as

of June 1, 2021.

The purpose of the acquisition was to enable the Company 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 (the “Stan Lee Assets”), from which Genius Brands

plans to develop and license multiple properties each year.

In July 2020, the

Company entered into a binding term sheet with POW, Inc.

(“POW!”) in which the Company agreed to form an entity with

to exploit certain rights in intellectual property created by Stan Lee, as well as the name and likeness of Stan Lee.

entity is called “Stan Lee Universe, LLC” (“SLU”).

and the Company executed an Operating Agreement for

the joint venture, effective as of June 1, 2021, with activity commencing during the fourth quarter of 2021.

The purpose of the

acquisition was to enable the Company 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 (the “Stan Lee Assets”), from which Genius Brands plans to

develop and license multiple properties each year.

The Company contributed $ 2.0

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likeness, voice, physical characteristics, etc.

During the three months ended

June 30, 2022, SLU generated $ 2.4

million in net income, upon entering into a license agreement to license certain of the Stan Lee Assets.

The Company distributed

million to POW as their share of the non-controlling interest in SLU.

The Company’s investment in SLU, net of the cash received

from a distribution of $ 1.2

million, is $ 0.8

million as of June 30, 2022.

There were no changes in facts and circumstances that occurred during the three or six months ended

June 30, 2022 that would result in a re-evaluation of the VIE assessment.

During the three and nine

months ended September 30, 2022, SLU generated $ 46,947 and $ 2.3 million in net income, respectively.

During the nine months ended September

30, 2022, the Company distributed $ 1.2 million to POW as their share of the non-controlling interest in SLU.

The Company’s investment

in SLU, net of the cash received from a distribution of $ 1.2 million , is $ 0.8 million as of September 30, 2022.

In addition, the Company

has incurred $ 0.4 million of costs incurred for marketing and operational services.

There were no changes in facts

and circumstances that occurred during the three or nine months ended September 30, 2022 that would result in a re-evaluation of the VIE

Investment in Equity Interest

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Following the initial equity

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

shares held by YFE shareholders.

investment in YFE during the fourth quarter of 2021, the Company 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, the Company 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 the Company at 2.00 EUROS per share, or $0.6 million.

April 5, 2022, the Company exercised its 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 the Company’s ownership

in YFE to 49.2 % as of June 30, 2022.

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 the Company at 2.00 EUROS per share, or $0.6 million.

On April 5, 2022, the Company exercised its 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 .

As of September 30, 2022 and December 31, 2021, the Company’s ownership in YFE was 48.0 %

respectively.

The Company has elected to

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in YFE securities as of the end of each reporting period.

During the three months and six months ended June 30, 2022, the Company recorded

a loss of $ 2.5 million and a gain of $ 2.9 million, respectively, within other income (loss) on the Company’s condensed consolidated

statement of operations, net of a $ 1.1 million loss and a $ 1.3 million loss, respectively, due to the change in the foreign currency translation

rate during the three and six months ended June 30, 2022, respectively.

During the three and nine months ended September 30, 2022, the Company recorded

a total loss of $ 5.4 million and $ 3.8 million , respectively, within other income (expense) on the Company’s condensed consolidated

statements of operations.

The total loss includes $ 1.3 million and $ 2.6 million due to the change in the foreign currency translation rate

during the three and nine months ended September 30, 2022, respectively.

Wow has a 63% membership interest

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accounts for its marketable debt securities as available-for-sale and the securities are stated at fair value.

The investments in marketable securities

had an adjusted cost basis of $103.2 million and a market value of $97.4 million as of June 30, 2022.

The balances consisted of the following

securities (in thousands) :

The investments in marketable

securities had an adjusted cost basis of $97.5 million and a market value of $89.9 million as of September 30, 2022.

The balances consisted

of the following securities (in thousands) :

Summary of investment in marketable security

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states and municipalities

The Company reported the net unrealized losses in accumulated other

comprehensive (loss) income, a component of stockholders' equity.

The decline in fair value is largely due to changes in interest rates

and other market conditions and is expected to recover as the securities approach maturity.

The Company has evaluated these securities

and determined that no allowance is necessary based on the credit quality and the low risk of loss due to the security type.

holds sixty-three available-for-sale securities, all of which are in an unrealized loss position as of June 30, 2022.

The unrealized losses

and fair values of available-for-sale securities that have been in an unrealized loss position for a period greater than 12 months as

of June 30, 2022 are as follows:

The investments in marketable securities

had an adjusted cost basis of $113.8 million and a market value of $112.5 million as of December 31, 2021.

The balances consisted of the

following securities (in thousands) :

Adjusted Cost

Unrealized Gain/(Loss)

Corporate Bonds

Mortgage-Backed

agency and government sponsored securities

states and municipalities

Commercial paper

The Company reported the net

unrealized losses in accumulated other comprehensive (loss) income, a component of stockholders' equity.

The decline in fair value is

largely due to changes in interest rates and other market conditions and is expected to recover as the securities approach maturity.

Company has evaluated these securities and determined that no allowance is necessary based on the credit quality and the low risk of loss

due to the security type.

The Company holds sixty-two available-for-sale securities, all of which are in an unrealized loss position as

of September 30, 2022.

The unrealized losses and fair values of available-for-sale securities that have been in an unrealized loss position

for a period greater than 12 months as of September 30, 2022 are as follows (in thousands):

Schedule of unrealized losses and fair values of available for sale securities

Gross Unrealized Loss

Unrealized Loss

Corporate Bonds

2 unchanged sentences

states and municipalities

As of December 31, 2021, the Company had not yet held marketable securities

in an unrealized loss position for greater than twelve months.

A net realized loss of $ 36,332

and $ 159,624 related to the prepayment of principals for certain mortgage-backed securities was recorded in earnings during the three

and six months ended June 30, 2022, respectively.

The contractual maturities of the Company’s

marketable investments as of June 30, 2022 were as follows (in thousands) :

and nine months ended September 30, 2022, respectively.

The contractual maturities

of the Company’s marketable investments as of September 30, 2022 were as follows (in

Summary of contractual maturity

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risk, duration and asset allocation.

The Company did not sell any securities during

the three or six months ended June 30, 2022 that resulted in material gains or losses.

The Company did not sell any

securities during the three or nine months ended September 30, 2022 that resulted in material gains or losses.

Property and Equipment, Net

2 unchanged sentences

Schedule of property and equipment, net

June 30, 2022

December 31, 2021

September 30,

Furniture and Equipment

6 unchanged sentences

During the three months ended

June 30, 2022 and 2021, the Company recorded depreciation expense of $ 0.2 million and $ 82,688 , respectively.

During the six months ended

June 30, 2022 and 2021, the Company recorded depreciation expense of $ 0.2 million and $ 0.1 million, respectively.

September 30, 2022 and 2021, the Company recorded depreciation expense of $ 86,980 and $ 23,665 , respectively.

During the nine months ended

September 30, 2022 and 2021, the Company recorded depreciation expense of $ 0.2 million and $ 53,494 , respectively.

Right of Use Leased Assets

2 unchanged sentences

Schedule of right of use asset

June 30, 2022

December 31, 2021

September 30,

Office Lease Assets

4 unchanged sentences

During the three months ended

June 30, 2022 and 2021, the Company recorded ROU asset amortization expense of $ 0.7 million and $ 0.1 million, respectively.

six months ended June 30, 2022 and 2021, the Company recorded ROU asset amortization expense of $ 0.6 million and $ 0.2 million, respectively.

September 30, 2022 and 2021, the Company recorded ROU asset amortization expense of $ 0.7 million and $ 0.1 million , respectively.

the nine months ended September 30, 2022 and 2021, the Company recorded ROU asset amortization expense of $ 1.3 million and $ 0.2 million ,

respectively.

Film and Television Costs, Net

During the six months ended

June 30, 2022, Film and Television Costs increased by $ 14.0 million, net of amortization expense, as compared to December 31, 2021.

the $9.5 million acquired from the Wow Acquisition, Film and Television Costs increased $ 4.5 million during the six months ended June

30, 2022, primarily due to the production of Shaq’s Garage .

The increase is partially offset by amortization of Rainbow

Rangers and Superhero Kindergarten .

During the nine months

ended September 30, 2022, Film and Television Costs increased by $ 12.0

million , net of amortization expense, as compared to December 31, 2021.

Excluding the $7.3 million from the Wow Acquisition,

Film and Television Costs increased $ 4.4

million during the nine months ended September 30, 2022, primarily due to the production of Shaq’s Garage .

increase is partially offset by amortization of Rainbow Rangers and Superhero Kindergarten .

During the three months ended

June 30, 2022 and 2021, the Company recorded Film and Television Cost amortization expense of $ 2.2 million, $ 1.9 million of which amortized

by Wow, and $0.2 million, respectively.

During the six months ended June 30, 2022 and 2021, the Company recorded Film and Television Cost

amortization expense of $ 2.4 million, $ 1.9 million of which amortized by Wow, and $0.7 million, respectively.

September 30, 2022 and 2021, the Company recorded Film and Television Cost amortization expense of $ 2.8 million and $ 0.2 million , respectively.

During the nine months ended September 30, 2022 and 2021, the Company recorded Film and Television Cost amortization expense of $ 5.1 million

and $ 1.1 million , respectively.

The following table highlights

the activity in Film and Television Costs as of June 30, 2022 and December 31, 2021 (in thousands):

the activity in Film and Television Costs as of September 30, 2022 and December 31, 2021 (in thousands):

Schedule of film and television costs activity

5 unchanged sentences

Film Amortization Expense

Film and Television Costs, Net as of June 30, 2022

Foreign Currency Translation Adjustment

Film and Television Costs, Net as of September 30, 2022

Intangible Assets, Net and Goodwill

3 unchanged sentences

Intangible Assets, Net

Schedule of Intangible Asset

Schedule of intangible assets

Weighted Average Remaining Amortization Period

September 30,

Customer Relationships

2 unchanged sentences

Intangible Assets, Gross

Foreign Currency Translation Adjustment

Less Accumulated Amortization

Foreign Currency Translation Adjustment

Intangible Assets, Net

2 unchanged sentences

During the three months ended

June 30, 2022 and 2021, the Company recorded amortization expense of $ 0.9 million and $ 0.1 million, respectively.

During the three months

ended June 30, 2022 and 2021, the Company recorded amortization expense of $ 0.7 million and $ 0.2 million, respectively.

September 30, 2022 and 2021, the Company recorded amortization expense of $ 0.7 million and $ 0.1 million , respectively.

During the nine

months ended September 30, 2022 and 2021, the Company recorded amortization expense of $ 1.7 million and $ 0.4 million , respectively.

Pursuant to ASC 350-30, General

Intangibles Other than Goodwill , the Company reviews these intangible assets periodically to determine if the value should be

retired or impaired due to recent events.

There were no changes in events or circumstances during the three or six months ended June

Intangibles Other than Goodwill , the Company reviews these intangible assets periodically to determine if the value should be retired

or impaired due to recent events.

There were no changes in events or circumstances during the nine months ended September 30,

2022 that would indicate an impairment of the intangible assets.

As of December 31, 2021, the Company decided to discontinue the use

of the trade name acquired as part of the acquisition of Beacon Media Group (formerly ChizComm), resulting in a write-down of the full

book value of $3.4 million.

Expected future intangible asset amortization as

of June 30, 2022 is as follows (in thousands):

of September 30, 2022 is as follows (in thousands):

Expected future intangible asset amortization

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There were no events or changes in circumstances that would indicate an impairment

in goodwill during the six months ended June 30, 2022.

in goodwill during the nine months ended September 30, 2022.

The following table summarizes

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Foreign Currency Translation Adjustment

Goodwill as of June 30, 2022

Goodwill as of September 30, 2022

Deferred Revenue

As of June 30, 2022 and December

31, 2021, the Company had total short term and long term deferred revenue of $ 18.0 million and $ 3.9 million, respectively.

the deferred revenue balance as of June 30, 2022 is $ 13.1 million the Company assumed in the Wow Acquisition.

The deferred revenue balance

assumed represents cash received from customers for productions in progress.

As of September 30, 2022 and

December 31, 2021, the Company had total short term and long term deferred revenue of $ 14.2 million and $ 3.9 million , respectively.

in the deferred revenue balance as of September 30, 2022 is $ 10.6 million the Company assumed in the Wow Acquisition.

The deferred revenue

balance assumed represents cash received from customers for productions in progress.

Revenue is fully recognized upon production completion.

revenue also includes both (i) variable fee contracts with licensees and customers in which the Company had collected advances and minimum

guarantees against future royalties and (ii) fixed fee contracts.

The Company recognizes revenue related to these contracts when all revenue

recognition criteria have been met.

Deferred revenue also includes both (i) variable fee contracts with licensees and customers in which the Company had collected advances

and minimum guarantees against future royalties and (ii) fixed fee contracts.

The Company recognizes revenue related to these contracts

when all revenue recognition criteria have been met.

Supplemental Financial Statement

Other Income (Expense), Net

Components of other income (expense), net are summarized

as follows (in thousands) :

Schedule of Other Operating Cost and Expense, by Component

Components of other income (expense), net are

summarized as follows (in thousands) :

Schedule of other income (expense)

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine months Ended

September 30, 2022

September 30, 2021

September 30, 2022

September 30, 2021

Gain (Loss) on Warrant Revaluation (a)

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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.

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.

The gain 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 nine months ended September 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 nine months ended September 30, 2021 loss on foreign exchange related to foreign currency denominated monetary transactions.

The Company 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.

The Company 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 the Company’s 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 amortization of premiums.

The net realized loss on marketable securities recognized during the three and nine months ended September 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.

The loss on revaluation of the equity investment in YFE is the change in fair value recognized on the Company’s investments in YFE accounted for using the fair value option.

The 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 nine months ended September 30, 2022 and 2021 primarily consists of cash interest received on the investments in marketable securities, net 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 the Company’s margin loan collateralized by its marketable security investments and $0.3 million of interest incurred on its production facilities loan and bank indebtedness assumed as part of the Wow Acquisition.

Interest expense during the three and nine months ended September 30, 2022 primarily consists of $0.4 million and $0.6 million, respectively, of interest incurred on the Company’s margin loan collateralized by its marketable security investments and $0.3 million and $0.6 million, respectively, of interest incurred on its production facilities loan and bank indebtedness assumed as part of the Wow Acquisition.

Bank Indebtedness and Production Facilities

The Company assumed the following bank indebtedness

instruments and production facilities as part of the Wow Acquisition.

Revolving Demand Facility

Draws under the $5.0 million

CAD revolving demand facility can be made in Canadian or US dollars at the option of the Company by way of bank prime rate loans, Canadian

Bankers’ Acceptances, USD LIBOR, or letters of credit and can be repaid at any time without penalty and without notice and

are generally repayable on demand .

Canadian or US dollar bank prime borrowings bear interest at

a rate equal to bank prime plus 2.00% per annum.

For other draws under the revolving facility, the respective loans bear interest at a

rate equal to Canadian Bankers’ Acceptances or USD LIBOR plus 3.75% per annum.

As of June 30, 2022, the Company had an outstanding

balance of $2.7 million USD on the revolving demand facility, included as Bank Indebtedness within current liabilities on the Company’s

condensed consolidated balance sheet.

of June 30, 2022, the Company was in compliance with all covenants under the revolving demand facility.

Each transaction under the $8.0

million CAD equipment lease line has specific financing terms in respect of the leased equipment such as term, finance amount, rate, and

payment terms.

The finance rates for these equipment leases range from 4%- 4.5% with remaining lease terms of 17-31 months as of the Wow

Acquisition date.

The Company has recorded right of use assets and lease liabilities for the leased equipment acquired in respect of these

The Company has drawn down a total of $7.9 million CAD ($6.1 million USD), with an outstanding balance as of June 30, 2022 of $2.6

million CAD ($2.0 million USD), net of repayments, included within current and noncurrent Lease Liabilities on the Company’s condensed

consolidated balance sheet.

under the $5.0 million CAD revolving demand facility can be made in Canadian or US dollars at the option of the Company by way of bank

prime rate loans, Canadian Bankers’ Acceptances, USD LIBOR, or letters of credit and can be repaid at any time without penalty and

without notice and are generally repayable on demand .

Canadian or US dollar bank prime borrowings

bear interest at a rate equal to bank prime plus 2.00% per annum.

For other draws under the revolving facility, the respective loans bear

interest at a rate equal to Canadian Bankers’ Acceptances or USD LIBOR plus 3.75% per annum.

As of September 30, 2022, the Company

had an outstanding balance of $2.1 million USD on the revolving demand facility, included as Bank Indebtedness within current liabilities

on the Company’s condensed consolidated balance sheet.

of September 30, 2022, the Company was in compliance with all covenants under the revolving demand facility.

Equipment Lease Line

transaction under the $8.0 million CAD equipment lease line has specific financing terms in respect of the leased equipment such as

term, finance amount, rate, and payment terms.

The finance rates for these equipment leases range from 4%- 4.5% with remaining lease

terms of 17-31 months as of the Wow Acquisition date.

The Company has recorded right of use assets and lease liabilities for the

leased equipment acquired in respect of these draws.

The Company has drawn down a total of $7.9 million CAD ($6.0 million USD), with

an outstanding balance as of September 30, 2022 of $2.2 million CAD ($1.6 million USD), net of repayments, included within current

and noncurrent finance lease liabilities on the Company’s condensed consolidated balance sheet.

Treasury Risk Management Facility

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The maximum term for foreign exchange forward contracts and interest rate swaps is one year.

of June 30, 2022, there were no outstanding amounts drawn under the treasury risk management facility.

of September 30, 2022, there were no outstanding amounts drawn under the treasury risk management facility.

Financing Facilities

The Company’s interim financing facilities for specific productions

bear interest at rates ranging from bank prime plus 1.25% - 1.75% per annum.

The interim production financing facilities are generally

repayable on demand and are generally secured by a combination of federal and provincial tax credits, other government incentives, production

service agreements and license agreements.

As of June 30, 2022, the Company had an outstanding balance of $19.2 million USD recorded as

Production Facilities, net within current liabilities on the Company’s condensed consolidated balance sheet.

As of June 30, 2022, the

Company had an outstanding balance in its margin loan account of $ 61.1

million, an increase of $ 54.7

million as compared to December 31, 2021.

The Company borrowed an additional $ 59.0

million from its investment margin account during the six months ended June 30, 2022 and repaid $ 4.5

The Company’s interim

financing facilities for specific productions bear interest at rates ranging from bank prime plus 1.25% - 1.75% per annum.

production financing facilities are generally repayable on demand and are generally secured by a combination of federal and provincial

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

As of September 30, 2022, the Company

had an outstanding balance of $19.3 million USD recorded as Production Facilities, net within current liabilities on the Company’s

condensed consolidated balance sheet.

The Company borrowed an

additional $ 63.2

million from its investment margin account during the nine months ended September 30, 2022 and repaid $ 7.8

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 the Company’s additional investments in YFE and the closing of the acquisitions

of Ameba and WOW, in each case pledging certain of its marketable securities as collateral.

During the three months ended the additional

borrowings of $3.2 million related to the Companies final obligated purchase of YFE shares and transaction costs related to the Wow Acquisition.

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 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 of $34.6 million balance during the

six months ended June 30, 2022.

During the nine months ended September

30, 2022, the borrowed amounts were used to finance the Company’s additional investments in YFE and the closing of the

acquisitions of Ameba and Wow, in each case pledging certain of its marketable securities as collateral.

During the three months

ended September 30, 2022, the additional borrowings of $4.2 million were used for quarterly operational costs.

The interest 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 2.65% on an average margin loan balance of $61.2 million during the three months

ended September 30, 2022.

The weighted average interest rate was 1.54% on an average margin loan balance of $43.4 million during the

nine months ended September 30, 2022.

The Company incurred interest expense of $ 0.6

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 the Company’s

condensed consolidated balance sheets.

million during the nine months ended September 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 the Company’s condensed consolidated balance sheets.

Stockholders’ Equity

As of June 30, 2022, the total

number of authorized shares of common stock was 400,000,000 .

As of June 30, 2022, and December

31, 2021, there were 317,235,116 and 303,379,122 shares of common stock outstanding, respectively.

As of September 30, 2022,

the total number of authorized shares of common stock was 400,000,000 .

As of September 30, 2022,

and December 31, 2021, there were 318,097,275 and 303,379,122 shares of common stock outstanding, respectively.

On February 18, 2022, the

Company issued 350,000 shares of the Company’s common stock valued at $ 0.3 million to a nonemployee for productions services.

On February 24, 2022, the

Company issued 36,196 shares of the Company’s common stock valued at $ 65,515 which were held in escrow as part of the ChizComm acquisition.

On March 2, 2022, the Company

issued 350,000 shares of the Company’s common stock valued at $ 0.3 million to a consultant for advisory services.

On April 7, 2022, the Company

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on the ExchangeCo shares below under “Preferred Stock.”

On May 31, 2022, the Company

issued 736,667 shares of the Company’s common stock valued at $ 0.4 million to a nonemployee for productions services.

During the six months ended

June 30, 2022, the Company issued 1,676,046 shares of the Company’s common stock valued at $ 1.4 million representing delivery of

During the nine months ended

September 30, 2022, the Company issued 2,538,205 shares of the Company’s common stock valued at $ 1.6 million representing delivery

of vested RSUs.

Preferred Stock

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The Board of Directors is authorized, subject to any limitations

prescribed by law, without further vote or action by our stockholders, to issue from time-to-time shares of preferred stock in one or

Each series of preferred stock will have such number of shares, designations, preferences, voting powers, qualifications

and special or relative rights or privileges as shall be determined by our Board of Directors, which may include, among others, dividend

rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

prescribed by law, without further vote or action by the Company’s stockholders, to issue from time-to-time shares of preferred

stock in one or more series.

Each series of preferred stock will have such number of shares, designations, preferences, voting powers,

qualifications and special or relative rights or privileges as shall be determined by the Company’s Board of Directors, which may

include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

In connection with the Company’s

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The Voting Trustee is required to exercise each vote attached to the Special Voting Share only as directed by the

relevant holder of the underlying Genuis Shares and, in the absence of any instructions, will not exercise voting rights with respect

to the applicable shares.

As of June 30, 2022 and December

31, 2021, there were 0 shares of Series A Convertible Preferred Stock outstanding.

As of June 30, 2022 there was 1 share of Series B Preferred

Stock outstanding.

relevant holder of the underlying Company shares of common stock and, in the absence of any instructions, will not exercise voting rights

with respect to the applicable shares.

As of September 30, 2022

and December 31, 2021, there were 0 shares of Series A Convertible Preferred Stock outstanding.

As of September 30, 2022 and

December 31, 2021, there was 1 share of Series B Preferred Stock outstanding.

Treasury Stock

During the three months ended

September 30, 2022, 6,993 shares of common stock were withheld to cover withholding taxes owed by certain employees, all of which were

taken into treasury stock.

In addition, during the three

months ended September 30, 2022, the Company agreed to settle the lawsuit, Harold Chizick and Jennifer Chizick v.

Genius Brands International,

Inc., ChizComm Ltd, pursuant to a settlement agreement (the “Settlement Agreement”) dated October 6, 2022 (the “Settlement

Pursuant to the Settlement Agreement, the Company agreed to purchase the 419,336 non-escrow shares of common stock (the

“Settlement Shares”) that the Chizicks held as of the Settlement Date.

The Settlement Shares were purchased at the market

price of $ 0.68 per share, plus a premium of $ 1.31 per share, for a total purchase price of $ 834,479 .

As of September 30, 2022, the Company

recorded a liability within other current liabilities on the Company’s condensed consolidated balance sheet for the total purchase

price, and the Company recorded the cost based on the market price on the Settlement Date of $ 285,148 to additional paid in capital for

the share repurchase yet to be settled as of the balance sheet date.

The Company recorded the amount in excess of cost of $ 549,330 as

a legal expense within general and administrative expenses on the Company’s condensed consolidated statements of comprehensive income

Stock Options

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The 2020 Plan as approved by the stockholders increased the maximum number of shares available for issuance up to an aggregate

of 32,167,667 shares of common stock.

During the three months ended

March 31, 2022, the Company granted options to purchase 875,000 shares of common stock to employees with a fair market value of $ 603,750 .

The options were granted on March 17, 2022, with a three-year vesting period and a five-year term.

As part of the Wow Acquisition,

the Company granted replacement options to purchase 1,733,100 shares of the Company’s common stock to Wow employees who would continue

to provide services to the Company.

676,415 options to purchase common stock were also granted to certain departing Wow shareholders to

replace their previously vested Wow options.

of 32,167,667 shares of common stock, which does not include shares that the Company may issue related to acquisitions.

During the nine months ended

September 30, 2022, the Company granted options to purchase 1,985,294

shares of common stock to employees with a fair market value of $ 1.3

The options vest evenly over three years and expire five to ten years from grant date.

In addition, as part of

the Wow Acquisition, the Company granted replacement options to purchase 1,733,100

shares of the Company’s common stock to Wow employees who would continue to provide services to the Company.

options to purchase common stock were also granted to certain departing Wow shareholders to replace their previously vested Wow

These options were cancelled after 30 days of the grant date if not exercised.

The fair market

value of $ 1.5 million was determined utilizing assumptions as of the replacement date of April 6, 2022 and were valued using the BSM option

The fair market value of $ 1.5

million was determined utilizing assumptions as of the replacement date of April 6, 2022 and were valued using the BSM option

pricing model.

The number of shares granted was determined by using an exchange ratio calculated by a third party based on the intrinsic

value of the Wow common stock purchased as part of the acquisition and the value of the Company’s common stock as of the agreement

The number of shares granted was determined by using an exchange ratio calculated by a third party based on the

intrinsic value of the Wow common stock purchased as part of the acquisition and the value of the Company’s common stock as of

the agreement date.

The vesting terms of the replacement options remained the same as the Wow options for which they were exchanged.

All shares that

replaced previously vested Wow shares were included as part of the purchase price based on the calculated fair value on the acquisition

date of $ 1.2 million for 1,967,528 shares.

The remaining options to vest with a fair value of $ 0.3 million will be expensed over the remaining

requisite period.

The options expire within 3 years from the replacement option grant date or the original Wow option, whichever is greater.

During the three months ended

June 30, 2022, the Company also granted 500,000 options to purchase shares of common stock to a former employee of Wow, as a new employee

of the Company after the acquisition date.

The options vest evenly over three years and expire 10 years from the grant date of June 23,

All shares that replaced previously vested Wow shares were included as part of the purchase price based on the calculated fair value

on the acquisition date of $ 1.2

million for 1,967,528

The remaining options to vest with a fair value of $ 0.3

million will be expensed over the remaining requisite period.

The options expire within 3 years from the replacement option

grant date or the original Wow option, whichever is greater.

The fair value of the options

granted during the three months ended June 30, 2022 was calculated using the BSM option pricing model based on the following assumptions:

granted during the nine months ended September 30, 2022 were calculated using the BSM option pricing model based on the following assumptions:

Schedule of assumptions used

3/17/2022 Options

4/6/22 Replacement Options

6/23/22 Options

Exercise Price

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The following table summarizes

the stock option activity during the six months ended June 30, 2022:

the stock option activity during the nine months ended September 30, 2022:

Schedule of stock option activity

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( 1,082,915 )

Outstanding at June 30, 2022

Unvested at June 30, 2022

Vested and exercisable at June 30, 2022

Outstanding at September 30, 2022

Unvested at September 30, 2022

Vested and exercisable at September 30, 2022

During the three months ended

June 30, 2022 and 2021, the Company recognized $ 0.4 million and $ 0.8 million, respectively, in share-based compensation expense related

September 30, 2022 and 2021, the Company recognized $ 0.5 million and $ 0.9 million , respectively, in share-based compensation expense related

to stock options.

During the six months ended June 30, 2022 and 2021, the Company recognized $ 0.8 million and $ 1.9 million, respectively,

During the nine months ended September 30, 2022 and 2021, the Company recognized $ 1.3 million and $ 2.8 million , respectively,

in share-based compensation expense related to stock options.

The unrecognized share-based compensation expense related to stock options

at June 30, 2022 of $ 1.8 million will be recognized through the second quarter of 2025 based on the remaining vesting periods, assuming

at September 30, 2022 of $ 1.8 million will be recognized through the third quarter of 2025 based on the remaining vesting periods, assuming

the options are not cancelled or forfeited.

As of June 30, 2022 there was $ 159,311 of aggregate intrinsic value related to outstanding

As of September 30, 2022, there was $ 0 of aggregate intrinsic value related to outstanding

unvested options.

The weighted average fair value per option granted during the three months ended June 30, 2022 was $ 0.64 .

The weighted average fair value per option granted during the three months ended September 30, 2022 was $ 0.64 .

Restricted Stock Units

During the three months ended

March 31, 2022, the Company granted 300,000 RSUs to a nonemployee with a fair market value of $ 268,500 .

The RSUs were granted on March

17, 2022, with a three-year vesting period and a five-year term.

During the three months ended

June 30, 2022, the Company granted 469,677 fully vested RSUs to a nonemployee for production services with a fair market value of $ 286,806 .

The RSUs were granted on May 10, 2022 with a five-year term and recorded as part of capitalized production costs.

During the three months ended

June 30, 2022, the Company also granted 500,000 RSUs to a former employee of Wow, as a new employee of the Company after the acquisition

date, with a fair market value of $ 390,000 .

The RSUs were granted on June 23, 2022, with a three-year vesting period and a five-year term.

following table summarizes the Company’s RSU activity during the six months ended June 30, 2022:

During the nine months ended

September 30, 2022, the Company granted 1,086,667

fully vested RSUs to nonemployees with a fair market value of $ 1.0

million and 500,000 RSUs to an employee with a fair market value of $ 390,000

that vest evenly over three years.

The RSUs expire five years from date of grant.

Per terms of the restricted

stock agreements, for certain employees the Company paid the employee’s related taxes associated with the employee’s vested

stock and decreased the freely tradable shares issued to the employee by a corresponding value, resulting in a share issuance net of taxes

to the employee.

The value of the shares netted for employee taxes represents treasury stock repurchased.

An aggregate of 4,426,064 shares

of common stock were issued as a result of vested RSUs, of which, 6,993 shares of common stock were withheld to pay employee taxes upon

such vesting.

The Company recorded the cost of the withheld shares of $ 2,553 as treasury stock as of September 30, 2022.

The following table summarizes the Company’s

RSU activity during the nine months ended September 30, 2022:

Schedule of restricted stock units

5 unchanged sentences

Forfeited/Cancelled

Unvested at June 30, 2022

Unvested at September 30, 2022

During the three months ended

June 30, 2022 and 2021, the Company recognized $ 3.8 million and $ 0.8 million, respectively, in share-based compensation expense related

During the six months ended June 30, 2022 and 2021, the Company recognized $ 7.9 million and $ 1.9 million, respectively, in share-based

compensation expense related to RSUs.

The unrecognized share-based compensation expense related to RSUs at June 30, 2022 of $ 2.9 million,

will be recognized through the second quarter of 2025 based on the remaining vesting periods, assuming the underlying grants are not cancelled

or forfeited.

The Company has warrants outstanding

to purchase up to 45,511,965 shares of the Company’s common stock as of June 30, 2022, and December 31, 2021, with a total value

of $ 74.2 million, an average exercise price of $ 1.86 and average term of 5.5 years.

As of June 30, 2022, 892,857

September 30, 2022 and 2021, the Company recognized $ 0.3 million and $ 4.6 million , respectively, in share-based compensation expense related

During the nine months ended September 30, 2022 and 2021, the Company recognized $ 8.7 million and $ 8.3 million , respectively,

in share-based compensation expense related to RSUs.

The unrecognized share-based compensation expense related to RSUs at September 30,

2022 of $ 2.2 million will be recognized through the second quarter of 2025 based on the remaining vesting periods, assuming the underlying

grants are not cancelled or forfeited.

The Company had warrants outstanding

to purchase up to 44,843,429 shares and 45,511,965 of the Company’s common stock as of September 30, 2022 and December 31, 2021,

respectively with a total value of $ 74.1 million , a weighted average exercise price of $ 2.24 and a weighted average remaining term of

3.4 years as of September 30, 2022.

As of September 30, 2022,

892,857 liability classified derivative warrants to purchase shares of the Company’s common stock remained outstanding and are revalued

each reporting period.

As of June 30, 2022, the warrants were revalued at $0.6 million, resulting in a decrease of $ 0.3 million in liability

as compared to December 31, 2021.

The change in value is recorded within Net Other Income (Expense) on the condensed consolidated statement

of operations.

The valuation inputs as of June 30, 2022 included an expected volatility of 128 % and an annual interest rate of 2.97 %.

The Company did not have any

warrant activity during the three or six months ended June 30, 2022.

As of September 30, 2022, the warrants were revalued at $0.4 million, resulting in a decrease of $ 0.4 million in

liability as compared to December 31, 2021.

The change in value is recorded within net other income (expense) on the condensed consolidated

statements of operations.

The valuation inputs as of September 30, 2022 included an expected volatility of 99.97 % and an annual interest

rate of 4.23 %.

On August 11, 2022, 668,536

warrants expired.

The Company accounts for income

13 unchanged sentences

and penalties arising from the underpayment of income taxes in the statements of operation in the provision for income taxes.

As of September

30, 2022 and December 31, 2021, the Company had no accrued interest or penalties related to uncertain tax positions.

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The following is a schedule of future minimum contractual

obligations as of June 30, 2022 (in thousands) :

obligations as of September 30, 2022 (in thousands) :

Schedule of future minimum lease payments

Operating/Capital Leases

Operating Leases

Finance Leases

Employment Contracts

19 unchanged sentences

escalations of 2.5%.

On April 6, 2022, as

part of the Wow Acquisition, the Company assumed an operating lease for 45,119 square feet of general office space located at 2025

West Broadway, Suite 200, Vancouver, B.C., V6J 1Z6.

The right of use asset and lease liability were revalued on the acquisition date

based on the remaining lease term of 117 months with payments of $81,769 per month, subject to escalations of 7% each of the third

and fifth years.

The lease liability and right of use asset were determined to be $6.6 million, utilizing a discount rate of 11.5 %.

As part of the assumed office lease, the Company also assumed a parking lease for 80 parking spaces.

The parking lease was also

revalued utilizing the 11.5% discount rate.

With a remaining lease term of 117 months, paying $6,091 per month, the ROU asset and

lease liability were determined to be $ 0.5 million

as of the acquisition date.

Also, as part of the Wow Acquisition, the Company assumed various capital

equipment leases, the majority of which are under Master Line of Credit Agreements with certain banking institutions.

As the rates were

implicit in the leases, the Company determined that the carrying value of the leases as of the acquisition date equaled the fair value.

As determined by utilizing the implicit rate in the leases that ranged from 3.7%- 14.5% with remaining

lease terms of 10-33 months and monthly payments of $1,346-$57,362 as of the Wow Acquisition date .

The remaining capital lease

obligations of $ 3.5 million

as of the acquisition date was included as part of the Company’s

existing current and noncurrent lease liabilities on the Company’s condensed consolidated balance sheet upon consolidation.

As of June 30, 2022, the weighted-average

lease term for all of the

Company’s operating and capital leases was 82 months and the weighted-average discount rate on the leases was

On April 6, 2022, as part

of the Wow Acquisition, the Company assumed an operating lease for 45,119 square feet of general office space located at 2025 West Broadway,

Suite 200, Vancouver, B.C., V6J 1Z6.

The right of use asset and lease liability were revalued on the acquisition date based on the remaining

lease term of 117 months with payments of $81,769 per month, subject to escalations of 7% each of the third and fifth years.

liability and right of use asset were determined to be $6.6 million, utilizing a discount rate of 11.5 %.

As part of the assumed office

lease, the Company also assumed a parking lease for 80 parking spaces.

The parking lease was also revalued utilizing the 11.5% discount

With a remaining lease term of 117 months, paying $6,091 per month, the ROU asset and lease liability were determined to be $ 0.5

million as of the acquisition date.

Also, as part of the Wow

Acquisition, the Company assumed various equipment finance leases, the majority of which are under Master Line of Credit Agreements

with certain banking institutions.

As the rates were implicit in the leases, the Company determined that the carrying value of the

leases as of the acquisition date equaled the fair value.

As determined by utilizing the implicit rate in the leases that ranged

from 3.7%- 14.5% with remaining lease terms of 10-33 months and monthly payments of

$1,346-$57,362 as of the Wow Acquisition date .

The remaining finance lease obligations of $ 3.5

million as of the acquisition date was included as part of the Company’s existing current and noncurrent finance lease

liabilities on the Company’s condensed consolidated balance sheet upon consolidation.

As of September 30,

2022, the weighted-average lease term for the Company’s operating leases are 95

months and the weighted-average discount rate on the leases was 10.39 %.

As of September 30, 2022, the weighted-average lease term for the Company’s

finance leases are 27 months and the weighted-average discount rate on the leases was 5.11 %.

As of December 31, 2021, the

weighted-average lease term for operating leases was 70 months.

The weighted-average discount rate on the leases was 24.9 %.

Rental expenses incurred for

operating and capital leases during the three months ended June 30, 2022 and 2021 were $ 0.4 million and $ 0.1 million, respectively.

expenses incurred for operating and capital leases during the six months ended June 30, 2022 and 2021 were $ 0.6 million and $ 0.2 million,

respectively.

operating and finance leases during the three months ended September 30, 2022 and 2021 were $ 0.9 million and $ 0.1 million , respectively.

Rental expenses incurred for operating and finance leases during the nine months ended September 30, 2022 and 2021 were $ 2.0 million and

$ 0.4 million , respectively.

Other Funding Commitments

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Related Party Transactions

Pursuant to his

employment agreements dated December 7, 2020, Andy Heyward, the Company’s CEO, is entitled to an Executive Producer fee of

$12,500 per one-half hour episode for each episode he provides services as an executive producer .

During the nine months

ended September 30, 2022, Mr.

Heyward earned and the Company paid $ 0.6

million in producer fees.

During the nine months ended September 30, 2021, Mr.

Heyward earned $ 0.2 million in producer fees.

Heyward has also earned $ 55,000

as part of his quarterly discretionary bonus in each of the quarters of 2022 and 2021.

Pursuant to his employment

agreements dated December 7, 2020, Andy Heyward, the Company’s CEO, is entitled to an Executive Producer fee of $12,500 per one-half

hour episode for each episode he provides services as an executive producer .

During the six months ended June 30, 2022, Mr.

earned $ 0.6 million in producer fees.

Heyward was also paid $ 55,000 as part of his quarterly discretionary bonus during each of the

first and second quarters of 2022.

Pursuant to his employment agreement dated April 7, 2022, whereas Michael

Hirsh was appointed as the CEO of Wow and its Frederator and Mainframe Studio subsidiaries, a member of the Company’s Executive

Committee and a member of the Company’s Board of Directors, is entitled to an Executive Producer fee of $12,400 per one-half hour

for each episode of any audio-visual production produced by Wow and any of its subsidiaries during the term of his employment, up to 52

episodes per year .

During the six months ended June 30, 2022, Mr.

Hirsh did not yet earn any producer fees under the employment

On July 21, 2020, the Company

entered into a merchandising and licensing agreement with Andy Heyward Animation Art (“AHAA”), whose principal is Andy Heyward.

The Company entered into a customary merchandise license agreement with AHAA for the use of characters and logos related to Warren Buffett’s

Secret Millionaires Club and Stan Lee’s Mighty 7 in connection with certain products to be sold by AHAA.

and conditions of such license are customary within the industry, and the Company earns an arm-length industry standard royalty on all

sales made by AHAA utilizing the licensed content.

During the three months ended June 30, 2022, the Company earned $ 0 in royalties from

this agreement.

On September 30, 2021, the

Company entered into a Loan Agreement and Promissory Note with POW!

in the amount of $ 1,250,000 , accruing simple interest at the annualized

agreement dated April 7, 2022, whereas Michael Hirsh was appointed as the CEO of Wow and its Frederator and Mainframe Studio subsidiaries,

a member of the Company’s Executive Committee and a member of the Company’s Board of Directors, is entitled to an Executive

Producer fee of $12,400 per one-half hour for each episode of any audio-visual production produced by Wow and any of its subsidiaries

during the term of his employment, up to 52 episodes per year .

During the nine months ended September 30, 2022, Mr.

Hirsh did not

yet earn any producer fees under the employment agreement.

On July 21, 2020, the

Company entered into a merchandising and licensing agreement with Andy Heyward Animation Art (“AHAA”), whose principal

is Andy Heyward.

The Company entered into a customary merchandise license agreement with AHAA for the use of characters and logos

related to Warren Buffett’s Secret Millionaires Club and Stan Lee’s Mighty 7 in connection with certain

products to be sold by AHAA.

The terms and conditions of such license are customary within the industry, and the Company earns an

arm-length industry standard royalty on all sales made by AHAA utilizing the licensed content.

Since execution of the agreement, the

Company has earned $ 0

in royalties from this agreement.

On September 30, 2021,

the Company entered into a Loan Agreement and Promissory Note with POW!

in the amount of $ 1,250,000 ,

accruing simple interest at the annualized rate of 9 %.

The entire principal sum was required to be remitted to POW!’s client trust account of POW!’s legal counsel within 5

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The principal, plus interest must be repaid by no later than November 1, 2022.

Within the Loan Agreement,

it is stated that the proceeds of $1,000,000 are required to be used by POW!

to settle the arbitration against Stan Lee Studios (aka Proxima

Studios) and $250,000 shall be used to solely pay for the payment of legal costs and fees.

The principal amount was transferred to POW!

on October 12, 2021 and on or about November 4, 2021, POW and Proxima entered into a binding settlement agreement resolving all the claims

made by Proxima.

The loan has accrued interest of $ 52,442 as of June 30, 2022 recorded with the principal balance within Note Receivable

from Related Party on the Company’s condensed consolidated balance sheet.

Within the Loan

Agreement, it is stated that the proceeds of $1,000,000 are required to be used by POW!

to settle the arbitration against Stan Lee

Studios (aka Proxima Studios) and $250,000 shall be used to solely pay for the payment of legal costs and fees.

The principal amount

was transferred to POW!

on October 12, 2021 and on or about November 4, 2021, POW and Proxima entered into a binding settlement

agreement resolving all the claims made by Proxima.

The loan has accrued interest of $ 78,660

and $ 26,221 as of September 30, 2022 and December 31, 2021, respectively, recorded with the principal balance within Note Receivable

from Related Party on the Company’s condensed consolidated balance sheets.

In addition, pursuant to its joint venture with POW!

formation of the entity Stan Lee Universe, LLC, the Company included within Note Receivable from Related Party, the amount owed to the

Company related to the 50% non-controlling interest held by POW!.

and formation of the entity Stan Lee Universe, LLC, the Company included within Note Receivable from Related Party, the amount owed

to the Company related to the 50% non-controlling interest held by POW!.

During the three months ended

September 30, 2022, the Company and YFE completed an asset exchange transaction pursuant to a License and Distribution Agreement (the

“Agreement”) signed on June 27, 2022.

The Agreement includes multiple elements, including (i) broadcast rights and (ii) distribution

Stefan Piëch, a member of the Company’s Board of Directors since June 23, 2022, is the chief executive officer of YFE.

The Company currently has a 48.0 % economic ownership interest in YFE and Mr.

Piech has a 28.2 % economic ownership interest in YFE.

to the Agreement, the Company granted YFE the right to use certain of the Company’s programs to broadcast on YFE’s channels

in certain territories and in exchange, the Company shall be entitled to receive a flat fee of EUR 1,000,000 upon delivery of the programs.

In addition, YFE granted the Company the right to use certain of YFE’s programs to broadcast on the Company’s channels in

certain territories and in exchange, YFE shall be entitled to receive a flat fee of EUR 1,000,000 upon YFE’s delivery of the programs.

The rights between the parties were exchanged and invoices were generated and marked as paid without cash actually being exchanged between

the parties as it was agreed that the physical transfer of cash was unnecessary.

The EUR 1,000,000 was treated as an asset exchange and

was not included as part of revenue generated by the Company.

Each party granted to the other distribution rights to those same titles.

The distribution rights grant the Company the right to license the YFE titles to third parties within specific territories and YFE the

right to license the Company’s titles to third parties worldwide.

Each party will earn a commission of 30% from gross receipts of

titles distributed and reimbursement of up to 5 % of expenses incurred.

On July 19, 2022, the Company

entered into a Shareholder Loan Agreement with YFE in the amount of USD $ 1.3 million , accruing interest at the fixed annualized rate of

5 %, with successive interest periods of three months due on the last day of each calendar quarter.

The entire principal sum was required

to be remitted to YFE within 5 days of the effective date.

The principal, plus interest must be repaid by no later than June 30, 2026.

The loan has accrued interest of USD $ 11,639 as of September 30, 2022 recorded with the principal balance within Note Receivable from

Related Party on the Company’s condensed consolidated balance sheet.

Segment Reporting

The Company’s CODM uses

revenue and net earnings to evaluate the profitability and performance of each operating segment.

All other financial information is reviewed

by the CODM on a consolidated basis.

The CODM does not evaluate the operating segments using asset information and it is therefore

not disclosed.

All expenses directly attributable to each reportable segment is included in operating results for each segment.

the CODM does not evaluate the expenses by operating segment and, therefore, it is not separately presented.

The Company’s

CODM uses revenue and net earnings to evaluate the profitability and performance of each operating segment.

All other financial

information is reviewed by the CODM on a consolidated basis.

The CODM does not evaluate the operating segments using asset

information and it is therefore not disclosed.

All expenses directly attributable to each reportable segment is included in

operating results for each segment.

However, the CODM does not evaluate the expenses by operating segment and, therefore, it is not

separately presented.

The following table presents

the revenue and net earnings within the Company’s two operating segments for the three and six months ended June 30, 2022 and 2021

(in thousands) :

the revenue and net earnings within the Company’s two operating segments for the three and nine months ended September 30, 2022

and 2021 (in thousands) :

Segment information by revenues and net earnings

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine months Ended

September 30,

Total Revenues:

7 unchanged sentences

The following table provides

information about disaggregated revenue by geographic area for the three months ended June 30, 2022 and 2021 (in

information about disaggregated revenue by geographic area for the three and nine months ended September 30, 2022 and 2021 (in

Schedule of segments by geographic area

Three Months Ended

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

Nine months Ended

September 30,

Total Revenues:

3 unchanged sentences

Subsequent Events

On July 7, 2022, the Company

entered into an Equipment Master Lease Agreement with the Royal Bank of Canada, pursuant to which it opened a line of credit, in an amount

not to exceed $1.35 million CAD, to purchase leases for equipment for general use in operations.

The purchased leases will be accounted

for as capital leases with a term of 36 months and a base index rate of 4.47%.

On July 15, 2022, Andy Heyward

was paid $55,000 for his second quarter discretionary bonus.

On October 4, 2022, Andy Heyward

was paid $55,000 for his third quarter discretionary bonus.

On October 6, 2022, pursuant

to the Settlement Agreement, 419,336 shares of the Company’s common stock were purchased at the market price of $0.68 per share,

plus a premium of $1.31 per share, for a total purchase price of $834,479.

The cost of $285,148 was recorded as treasury stock.

On October 10, 2022, the Company

received a notification of exercise from a holder of certain warrants with a put option exercisable on October 25, 2022.

The put option

was exercisable for a fixed rate of $250,000 for the 500,000 warrants held.

The Company paid the amount on October 10, 2022.

On October 21, 2022, the Company

issued 100,000 shares of common stock to a nonemployee for vested RSUs valued at $62,000.

On November 1, 2022, Andy

Heyward was paid $50,000 for producer fees.

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. Financial Statements