What changed in this filing

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Item 1. Legal Proceedings

2022-11-14 compared with 2022-08-17 · 90 added, 90 removed, 31 unchanged (85% of the section changed)

LEGAL PROCEEDINGS.

As of June 30, 2022, there

were no material pending legal proceedings to which the Company is a party or as to which any of its property is subject other than described

As previously disclosed, the

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

As of September 30, 2022,

there were no material pending legal proceedings to which the Company is a party or as to which any of its property is subject other

than described below.

As previously disclosed,

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

class action lawsuit filed in the U.S.

2 unchanged sentences

2:20-cv-07457 DSF (RAOx).

Initially, the lead plaintiffs alleged generally that the defendants

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

Lead plaintiffs alleged generally that the defendants violated

Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) by issuing allegedly false or misleading

statements about the Company, initially over an alleged class period running from March into early July 2020.

Plaintiffs sought unspecified

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

The defendants moved

to dismiss lead plaintiffs’ amended complaint;

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

but granted lead plaintiffs a further opportunity to plead a claim.

On September 27, 2021, the

damages on behalf of the alleged class of persons who invested in the Company’s common stock during the alleged class period.

moved to dismiss lead plaintiffs’ amended complaint;

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

complaint but granted lead plaintiffs a further opportunity to plead a claim.

On September 27, 2021,

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

The new complaint alleged that the Company made numerous

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

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

The lead plaintiffs again sought unspecified damages on behalf of the alleged

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

In November 2021, defendants

filed a motion to dismiss the second amended complaint.

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

in its entirety and with prejudice.

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

for the Ninth Circuit.

The new complaint alleged again that the Company made numerous

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

that extended into March 2021;

they again alleged that these misstatements violated Section 10(b) and 20(a) of the Exchange Act.

plaintiffs again sought unspecified damages on behalf of an alleged class of persons who invested in the Company’s common stock

during the expanded alleged class period.

In November 2021, defendants filed a motion to dismiss the second amended complaint.

15, 2022, the Court issued a decision dismissing the second amended complaint in its entirety and with prejudice.

On August 12, 2022,

lead plaintiffs filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit.

Briefing of the appeal is expected

to be extended into early 2023.

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

Related to the securities class action, the Company’s directors,

together with Messrs.

Heyward and Denton have been named as defendants in several putative stockholder derivative lawsuits.

As previously

disclosed, these include a consolidated proceeding pending in the U.S.

District Court for the Central District of California and styled In

re Genius Brands Stockholder Derivative Litigation , Case No.

Related to the

securities class action, the Company’s directors (other than Dr.

Cynthia Turner-Graham), together with Messrs.

Denton and former director Michael Klein, have been named as defendants in several putative stockholder derivative lawsuits.

previously disclosed, these include a consolidated proceeding pending in the U.S.

District Court for the Central District of

California and styled In re Genius Brands Stockholder Derivative Litigation , Case No.

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

an action filed in the Los Angeles County

Superior Court captioned Ly, etc.

Heyward, et al ., Case No.

and an additional case pending in the U.S.

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

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

Heyward, et al ., Case No.

additional case pending in the U.S.

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

al ., Case No.

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

While the allegations

and legal claims vary somewhat among the derivative actions, they all generally allege that the defendants breached fiduciary duties owed

to the Company.

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

Instead, as a stockholder derivative action,

the Company is named as a nominal defendant.

The plaintiffs, all alleged stockholders of the Company, purport to sue on behalf and for

the benefit of the Company.

Pursuant to agreements among the parties, the courts in all of the derivative lawsuits have stayed proceedings

pending the outcome of the securities class action.

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

on the shareholder derivative lawsuits.

The Company is also a nominal

defendant in an action filed January 11, 2022, in the U.S.

District Court for the Southern District of New York and styled Todd Augenbaum

While the allegations and legal claims vary somewhat among the derivative actions,

they all generally allege that the defendants breached fiduciary duties owed to the Company.

The plaintiffs, all alleged

stockholders of the Company, purport to sue on behalf and for the benefit of the Company.

Accordingly, the derivative plaintiffs

seek no recovery from the Company.

Instead, as a stockholder derivative action, the Company is named as a nominal defendant.

Pursuant to agreements among the parties, the courts in all of the derivative lawsuits have stayed proceedings pending the outcome

of the securities class action.

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

shareholder derivative lawsuits.

The Company is also a

nominal defendant in an action filed in January 2022 in the U.S.

District Court for the Southern District of New York and styled Todd

Anson Investments Master Fund LP, et al ., Case No.

1:22-cv-00249 VM.

The action, which again purports to be brought on behalf and

for the benefit of the Company, seeks the recovery under Section 16(b) of the Exchange Act of supposed short-swing profits allegedly realized

by roughly a dozen persons and entities that participated as investors in certain of the Company’s private placements of securities

Plaintiff Augenbaum, who purports to be a Company stockholder, filed his lawsuit after issuing a demand to the Company’s

Board of Directors asking that the Company sue the investor defendants.

The Company rejected the demand in late December 2021, and Mr.

The action, which again purports to be brought

on behalf and for the benefit of the Company, seeks the recovery under Section 16(b) of the Exchange Act of supposed short-swing

profits allegedly realized by roughly a dozen persons and entities that participated as investors in certain of the Company’s

private placements of securities in 2020.

Plaintiff Augenbaum, who purports to be a Company stockholder, filed his lawsuit after

issuing a demand to the Company’s Board of Directors asking that the Company sue the investor defendants.

The Company rejected

the demand, and Mr.

Augenbaum sued a few weeks later, as Section 16(b) permits him to do.

No Company officer or director is among the defendants.

The defendant

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

2022, and plaintiff has opposed the motions.

Briefing is scheduled to close on August 22, 2022.

There is otherwise no current activity

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

of the lawsuit more generally.

No Company officer or director is among

the defendants.

The defendant investors in the action requested and received court permission to file a motion to dismiss the

The motion was filed in July 2022, and the plaintiff has opposed it.

Thereafter, the Court ordered additional briefing on

the motion, which is currently scheduled to conclude in mid-November 2022.

There is otherwise no current activity in the case.

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

lawsuit more generally.

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

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

by which the investors acquired Company securities.

The Company believes the indemnification demands lack merit;

however, it is in discussions

with investors who have made demands.

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

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

agreements by which the investors acquired Company securities.

On January 18, 2022, the Company

was named as a defendant in a lawsuit filed in the Supreme Court of the State of New York, County of New York styled Harold Chizick and

Jennifer Chizick v.

was named as a defendant in a lawsuit filed in the Supreme Court of the State of New York, County of New York styled Harold Chizick

and Jennifer Chizick v.

Genius Brands International, Inc., ChizComm Ltd ., Index No.

650278/2022, alleging:

(1) breach of employment agreement,

(2) breach of duty of good faith, (3) constructive dismissal, (4) indemnification, (5) violation of the Employment Standards Act 2000

of Ontario, and (6) defamation.

(1) breach of employment

agreement, (2) breach of duty of good faith, (3) constructive dismissal, (4) indemnification, (5) violation of the Employment Standards

Act 2000 of Ontario, and (6) defamation.

On February 25, 2022, the Company filed a motion to dismiss on the ground that venue is improper.

Plaintiffs’ counsel has advised that they will be amending their complaint to address the arguments in the Company’s venue

Plaintiffs filed their Amended Complaint on March 17, 2022, adding a claim for Reformation of the Plaintiffs’ Employment

In response, plaintiffs’ counsel has advised that they will be amending their complaint to address the arguments in the Company’s

venue motion.

Plaintiffs filed an amended complaint on March 17, 2022, adding a claim for reformation of the plaintiffs’ employment

agreements to address the Company’s lack of venue argument and a claim for breach of escrow agreement regarding alleged release

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

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

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

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

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

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

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

on August 11, 2022.

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

On June 3, 2022, Plaintiffs

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

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

of shares held in escrow pursuant to the parties’ Purchase and Sale Agreement (the “PSA”).

On April 25, 2022, the Company

filed a motion for partial dismissal of the plaintiffs’ amended complaint seeking (1) dismissal of the plaintiffs’ claims

for indemnification and defamation and (2) a stay of plaintiffs’ claim for breach of escrow agreement pending the required arbitration

of this claim.

At the hearing on this motion to dismiss on June 14, 2022, the Company was successful in having (1) the indemnification

claim dismissed with prejudice and (2) the claim for breach of escrow agreement stayed pending arbitration of this claim before the American

Arbitration Association (“AAA”).

On June 3, 2022, plaintiffs commenced their AAA arbitration proceeding regarding their claim

for breach of escrow agreement by filing an arbitration demand.

On June 6, 2022, plaintiffs

4 unchanged sentences

to the escrowed shares) and the hearing on this emergency relief request occurred at the AAA offices in New York on June 24, 2022.

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

On October 3, 2022,

the parties reached a full and complete settlement of the New York state action and the AAA arbitration proceeding and both proceedings

have been dismissed with prejudice.

In all of the above-mentioned

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

What changed 10-Q

Item 1. Legal Proceedings