What changed in this filing

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Item 3. Legal Proceedings

2025-03-31 compared with 2024-04-09 · 177 added, 49 removed, 12 unchanged (95% of the section changed)

Legal Proceedings

As of December 31, 2023, 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 as described below.

As previously disclosed, the Company, its Chief Executive Officer Andy Heyward, and its former Chief Financial Officer Robert Denton were named as defendants in a putative class action lawsuit filed in the U.S.

District Court for the Central District of California and styled In re Genius Brands International, Inc.

As of December 31, 2024, 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 as

described below.

Securities Litigation:

On February 4, 2025, the District

Court issued an order granting in part and denying in part the renewed motion to dismiss and denying Plaintiffs’ motion for leave

to file a sur-reply.

The District Court dismissed all claims against Mr.

Denton, and claims against the Company and Mr.

Heyward based

on all but one of the complained-of statements.

However, the District Court determined that Plaintiffs had adequately pled a Section 10(b)

claim based on March 2020 statements concerning the number of times that the Rainbow Rangers cartoon was airing on Nickelodeon.

the other alleged misstatements that were dismissed, and as to any claims against Mr.

Denton, the District Court granted Plaintiffs leave

to amend their pleading another time.

On March 3, 2025, Plaintiffs filed a Third Amended Complaint, seeking again to assert claims against

the Company and Mr.

Heyward related to the four alleged misstatements that survived the Ninth Circuit appeal;

they did not replead any

claims against Mr.

Defendants intend to file another motion to dismiss directed to the Third Amended Complaint.

Under a briefing

schedule that has been entered by the Court, that motion must be filed by April 14, 2025.

Briefing extends into late June, and a hearing

has been scheduled for July 14, 2025.

We cannot predict the outcome of the motion.

Meanwhile, as previously reported,

the parties elected to mediate the dispute, as well as the shareholder derivative actions referenced below in Item 2, before Phillips

The mediation was held December 9, 2024.

The case did not settle during the mediation.

In light of the District Court’s February

4, 2025, order, however, the mediator has reached out to the parties to determine whether there is a basis now to resolve the dispute.

While the Company has advised that it would like to settle the lawsuit, the mediator has not reported back concerning his discussions

with Plaintiffs’ counsel.

We cannot predict whether the parties will decide to continue with mediation or, if they do, whether they

will be able to reach a settlement of the case and of related shareholder derivative litigation on terms acceptable to the parties.

As previously disclosed, the

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

putative class action lawsuit filed in the U.S.

District Court for the Central District of California and styled In re Genius Brands International,

Securities Litigation, Master File No.

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

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

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

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.

Lead 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.

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.

After full briefing of the appeal, a panel of the Court of Appeals held oral argument on the appeal on November 6, 2023 and took the matter under submission.

On April 5, 2024, the Court of Appeals affirmed in part and reversed in part the district court's dismissal of the second amended complaint, remanding certain claims back to district court for further proceedings.

The Company cannot predict the outcome of the claims remanded for further proceedings or the timing of a decision with respect to such claims.

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

Cynthia Turner-Graham, Michael Hirsh and Stefan Piech), together with Messrs.

Heyward and Denton and former director Michael Klein, 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.

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 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.

In September 2021, lead plaintiffs

filed a second amended complaint, naming the same defendants.

The new complaint alleged again that the Company made numerous—depending

on how one counted, more than two dozen - 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.

Lead 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, the 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.

After a full briefing of the appeal, a panel of

the Court of Appeals held oral argument on the appeal on November 6, 2023, and took the matter under submission.

On April 5, 2024, the Appellate

Court issued its opinion, affirming in part and reversing in part the decision of the District Court.

The Appellate Court affirmed the

dismissal of certain claims pertaining to Company statements where it found that Plaintiffs failed to adequately plead a 10(b) cause of

action but reversed the lower court’s dismissal of claims related to four of the Company’s alleged misstatements, finding

that, in three of those instances, the Plaintiffs adequately pleaded loss causation, and in one instance adequately alleged a misleading

The Court of Appeals did not address other elements of any claims based on these four complained-of statements, noting that

the District Court should address those issues on remand.

The matter was remanded to

the District Court in May 2024.

By order entered June 4, 2024, the Court directed the defendants to file a renewed motion to dismiss on

a schedule to be proposed by the parties.

Consistent with that order, Defendants filed their renewed motion on July 29, 2024.

filed the opposition to the motion on September 16, 2024, and Defendants filed a reply brief on October 16, 2024.

The District Court subsequently

vacated the hearing on the renewed motion to dismiss (including plaintiffs’ motion for leave to file a sur-reply) that had been

scheduled for November 4, 2024, determining that the matter could be resolved by the Court based on the parties’ written submissions.

Shareholder Derivative

Since the Company’s

last quarterly report, there have been no developments in the shareholder derivative actions involving the Company.

Related to the securities

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

Cynthia Turner-Graham and Michael Hirsh), together with Messrs.

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

As previously

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

District Court for the Central District of California and styled

In re Genius Brands Stockholder Derivative Litigation , Case No.

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

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

Heyward, et al., Case No.

an action filed in the Los Angeles County

Superior Court captioned Ly, etc.

Heyward, et al.

and an additional case pending in the U.S.

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

Heyward, et al., Case No.

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

Heyward, et al.

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.

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 on January 11, 2022, in the U.S.

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

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 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 in late December 2021, and Mr.

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 litigation.

As the Company cannot predict the outcome of the securities litigation, it is likewise

unable to predict the outcome of the shareholder derivative lawsuits.

Section 16(b) Litigation:

As previously disclosed, the

Company is also a nominal defendant in an action filed on January 11, 2022, in the U.S.

District Court for the Southern District of New

York and styled Todd Augenbaum v.

Anson Investments Master Fund LP, et al.

1:22-cv-00249 AS.

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

in late December 2021, and Mr.

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

No Company officer or director is among the defendants.

The defendant investors in the action 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.

After full briefing, the court, by order entered March 30, 2023, granted the motion to dismiss with leave to amend.

No Company officer or director is

among the defendants.

The defendant investors filed motions to dismiss the action.

After full briefing, the court, by order entered March

30, 2023, granted the motion to dismiss with leave to amend.

Plaintiff subsequently filed his First Amended Complaint on May 1, 2023.

Defendants again moved to dismiss and briefing on that motion closed November 2, 2023.

At the first pretrial conference, held on November 16, 2023, the Court asked the parties to address the motion to dismiss.

Following the hearing, the Court requested supplemental letter briefs on one issue, which letters were submitted by the parties simultaneously just before Thanksgiving.

The motion is now under submission.

The Company cannot predict when or how the court will decide the motion, and we cannot predict the timing of any action.

Aside from the motions directed to the pleading, there has been no discovery or other proceedings in the case.

In all of the above-mentioned active proceedings, the Company has denied and continues to deny any wrongdoing and intends to defend the claims vigorously.

The Company maintains a program of directors’ and officers’ liability insurance that, subject to the insurers’ reservations of rights, has offset a portion of the costs of defending the securities class action litigation, and that the Company expects will afford coverage for some costs of the other shareholder litigation should any of those cases proceed.

Defendants moved to dismiss again.

After a full briefing and oral argument, the Court (with a new judge now sitting) denied the motion

to dismiss by order entered on January 24, 2024.

The parties then engaged in extensive fact discovery, which closed in October 2024.

parties proceeded with expert discovery.

Following the completion of expert discovery in December 2024, Plaintiff and the various Defendants

filed cross-motions for summary judgment in mid-January 2025.

Opposition papers on those motions were filed February 26, 2025.

are due March 26, 2025, with certain papers related to collateral motions due a week later.

The Court has not yet responded to the parties’

requests for argument on the cross-motions, and we cannot predict the outcome of the motions.

With those motions pending,

the parties met on March 11, 2025, to try to mediate the dispute before Phillips ADR.

The mediation was unsuccessful, and no further mediation

sessions are scheduled.

To the extent the case continues following disposition of the cross-motions for summary judgment, pre-trial proceedings

have concluded and the case will presumably proceed to trial.

As of this writing, the Court still has not set a trial date.

As previously

noted, Plaintiff seeks no relief from the Company;

indeed, he seeks monetary relief for the Company.

In any event, the Company cannot

predict the outcome of the case.

In connection with the Augenbaum

lawsuit, two of the investor groups named as defendants (the “demanding defendants”) have made a demand on the Company for

indemnification pursuant to terms of an indemnity provision of the securities purchase agreements under which they invested in the Company.

The Company believes the indemnity provision to be inapplicable and has rejected the demands.

The Company and the demanding defendants

have entered into standstill agreements and the parties have agreed to defer resolution of the indemnification matter pending resolution

of the underlying litigation.

In addition, the Company’s placement agent for the offerings at issue, Special Equities Group (“SEG”),

was subpoenaed by Mr.

Pursuant to its placement-agent agreement with the Company, which covers a relationship broader than

the offerings at issue, SEG demanded indemnification from the Company for its legal fees to comply with that subpoena.

While reserving

its rights, the Company believes that SEG has an indemnity claim under the governing placement agent agreement that likely has more merit

than the demanding defendants’ demands.

The Company cannot predict whether other parties may issue indemnification demands, or the

outcome of any future proceedings that might arise concerning the such demands.

Demand Letter:

The Company received a demand

letter from Dawson James Securities (“Dawson”) on or about April 22, 2024, alleging it was owed commissions and fees arising

from the Company’s offering of securities announced on April 18, 2024.

The Company disputes Dawson’s asserted entitlement

to commissions and fees.

In all of the above-mentioned

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

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

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

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

Mine Safety Disclosures

1 unchanged sentence

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-K

Item 3. Legal Proceedings