UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2021~~2022

o~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to___________

Commission file number: ~~001-37950~~000-54389

GENIUS BRANDS INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Nevada		20-4118216
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

~~190 N Canon Dr.~~
~~Beverly Hills~~, ~~California~~		~~90210~~
~~(Address of principal executive offices)~~		~~(Zip Code)~~

190 N. Canon Dr., 4^th Floor

Beverly Hills, CA90210

(Address of principal executive offices and zip code)

310-273-4222

(Registrant’s telephone number, including area code)

~~(Former name, former address and former fiscal year, if changed since last report)~~____________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	GNUS	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐ No ☒

~~Indicate~~As of August 15, 2022, the ~~number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:~~registrant had ~~300,967,436~~317,235,116 shares of common stock, $0.001 par value ~~$0.001~~ per share, ~~were outstanding as of August 16, 2021.~~outstanding.

GENIUS BRANDS INTERNATIONAL, INC.

FORM 10-Q

For the Quarterly Period Ended June 30, ~~2021~~2022

Table of Contents

PART I - FINANCIAL INFORMATION	13

Item 1. Financial ~~Statements.~~Statements (Unaudited)	13

Condensed Consolidated Balance Sheets	3

Condensed Consolidated Statements of Operations	4

Condensed Consolidated Statements of Comprehensive Income (Loss)	5

Condensed Consolidated Statements of Stockholders’ Equity	6

Condensed Consolidated Statements of Cash Flows	7

Notes to Condensed Consolidated Financial Statements	8

Item 2. Management's Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations	3145

Item 3. Quantitative and Qualitative Disclosures about Market ~~Risk.~~Risk	3857

Item 4. Controls and ~~Procedures.~~Procedures	3857

PART II - OTHER INFORMATION	3959

Item 1. Legal ~~Proceedings.~~Proceedings	3959

Item 1A. Risk ~~Factors.~~Factors	3961

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds	4062

Item 3. Defaults Upon Senior ~~Securities.~~Securities	4062

Item 4. Mine Safety ~~Disclosures.~~Disclosures	4062

Item 5. Other ~~Information.~~Information	4062

Item 6. ~~Exhibits.~~Exhibits	4062

SIGNATURES	4163

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

Genius Brands International, Inc.

Condensed Consolidated Balance Sheets

~~As of June 30, 2021,~~(in thousands, except share and ~~December 31, 2020~~

ASSETS June 30, 2021 December 31, 2020
(unaudited)
Current Assets:
Cash and Cash Equivalents $ 58,372,335 $ 100,456,324
Investment in Marketable Securities (amortized cost of $80,902,119) 80,392,494 0
Accounts Receivable, net 5,986,844 1,731,373
Prepaid Expenses and Other Assets 7,769,963 6,378,392
Total Current Assets 152,521,636 108,566,089

Property and Equipment, net 333,898 95,828
Right of Use Assets, net 2,299,230 1,972,364
Film and Television Costs, net 14,972,446 11,828,494
Lease Deposits 78,739 43,001
Investment in ChizComm 0 300,798
Investment in Stan Lee Universe, LLC 1,500,000 1,000,000
Intangible Assets, net 9,518,769 28,694
Goodwill 19,995,036 10,365,806
Total Assets $ 201,219,754 $ 134,201,074

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable $ 8,413,030 $ 785,526
Accrued Expenses 151,345 408,459
Participations Payable 3,823,742 3,160,016
Deferred Revenue 775,996 684,129
Payroll Protection Program 0 366,267
Warrant Derivative Liability 1,513,883 1,197,068
Lease Liability 219,858 146,099
Due to Related Party 139,006 2,420
Accrued Salaries and Wages 470,240 428,922
Total Current Liabilities 15,507,100 7,178,906

Long Term Liabilities:
Deferred Revenue 3,181,941 3,748,248
Lease Liability 2,499,633 2,052,530
Production Facility, net 274,365 1,099,713
Contingent Earn Out 7,210,000 0
Disputed Trade Payable 925,000 925,000
Total Liabilities 29,598,039 15,004,397

Stockholders’ Equity
Preferred Stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020 0 0
Common Stock, $0.001 par value, 400,000,000 shares authorized 300,791,335 and 258,438,514 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively 300,792 258,439
Additional Paid in Capital 724,924,857 588,500,680
Accumulated Deficit (553,200,246 ) (469,557,324 )
Accumulated Other Comprehensive Loss (403,688 ) (5,118 )
Total Stockholders' Equity 171,621,715 119,196,677

Total Liabilities and Stockholders’ Equity $ 201,219,754 $ 134,201,074

~~The accompanying notes are an integral part of these financial statements.~~ per share data)

~~Genius Brands International, Inc.~~

~~Condensed Consolidated Statements of Operations~~

~~Three and Six Months Ended June 30, 2021 and June 30, 2020~~

~~(unaudited)~~

Three Months Ended Six Months Ended
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Revenues:
Licensing & Royalties $ 1,236,156 $ 162,759 $ 1,406,616 $ 366,124
Media Advisory & Advertising Services 971,324 0 1,724,712 0
Television & Home Entertainment 67,959 326,244 151,430 378,461
Advertising Sales 66,102 70,357 122,564 149,014
Product Sales 664 1,319 1,146 1,819
Total Revenues 2,342,205 560,679 3,406,469 895,418

Operating Expenses:
Marketing and Sales 1,540,882 128,556 2,142,710 241,256
Direct Operating Costs 1,269,301 440,015 1,517,767 667,521
General and Administrative 7,106,151 2,368,834 14,039,979 4,131,416
Total Operating Expenses 9,916,334 2,937,405 17,700,456 5,040,193

Loss from Operations (7,574,129 ) (2,376,726 ) (14,293,988 ) (4,144,775 )

Other Income (Expense):
Interest Income 84,701 28,342 131,885 28,342
Loss on Foreign Exchange (4,809 ) 0 (7,968 ) 0
Warrant Revaluation Expense 119,062 (208,760,698 ) (316,814 ) (212,228,659 )
Warrant Incentive Expense 0 0 (69,138,527 ) 0
Conversion Option Revaluation Expense 0 (171,835,729 ) 0 (171,835,729 )
Sub-Lease Income 0 117,415 0 238,484
Interest Expense (8,803 ) (430,606 ) (17,509 ) (1,151,609 )
Net Other Income (Expense) 190,151 (380,881,276 ) (69,348,933 ) (384,949,171 )

Loss Before Income Tax Expense (7,383,978 ) (383,258,002 ) (83,642,921 ) (389,093,946 )

Income Tax Expense 0 0 0 0

Net Loss Applicable to Common Shareholders $ (7,383,978 ) $ (383,258,002 ) $ (83,642,921 ) $ (389,093,946 )

Net Loss per Common Share (Basic and Diluted) $ (0.02 ) $ (4.88 ) $ (0.28 ) $ (15.76 )

Weighted Average Shares Outstanding (Basic and Diluted) 300,646,819 78,503,414 293,969,462 24,690,154


	June 30, 2022			December 31, 2021
	(unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents	$	7,816		$	2,058
Restricted Cash		0			8,002
Investments in Marketable Securities (amortized cost of $103,155)		97,428			112,523
Accounts Receivable, net		9,508			7,632
Tax Credits Receivable		25,892			0
Note & Accounts Receivable from Related Party		1,405			1,276
Other Receivable		2,932			969
Prepaid Expenses and Other Assets		5,342			3,725
Total Current Assets		150,323			136,185

Noncurrent Assets:
Property and Equipment, net		2,564			449
Right of Use Assets, net		12,014			2,785
Film and Television Costs, net		16,900			2,940
Investment in Your Family Entertainment AG		17,840			6,695
Intangible Assets, net		35,661			9,733
Goodwill		36,720			15,227
Other Assets		320			69
Total Assets	$	272,342		$	174,083

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable	$	4,279		$	7,192
Participations Payable		4,571			2,438
Accrued Expenses		1,121			535
Accrued Salaries and Wages		2,712			799
Deferred Revenue		13,396			432
Margin Loan		61,052			6,392
Production Facilities, net		19,115			0
Bank Indebtedness		2,718			–
Lease Liability		3,098			664
Warrant Liability		586			855
Due to Related Party		0			63
Other Current Liabilities		100			1,761
Total Current Liabilities		112,748			21,131

Noncurrent Liabilities:
Deferred Revenue		4,564			3,492
Lease Liability		9,579			2,460
Contingent Earn Out		1,345			1,340
Other Noncurrent Liabilities		1,019			1,007
Total Liabilities	$	129,255		$	29,430

Commitments and contingent liabilities (Note 21)
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		0			0
Preferred Stock Series B, $0.001 par value, 1 share authorized, 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		0			0
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		317			303
Additional Paid in Capital		761,737			739,495
Accumulated Deficit		(613,720	)		(595,848	)
Accumulated Other Comprehensive Loss		(7,133	)		(1,221	)
Total Genius Brands International, Inc. Stockholders' Equity		141,201			142,729
Non-Controlling Interests in Consolidated Subsidiaries		1,886			1,924
Total Stockholders' Equity		143,087			144,653

Total Liabilities and Stockholders’ Equity	$	272,342		$	174,083

The accompanying notes are an integral part of these financial statements.

~~Genius Brands International, Inc.~~

~~Condensed Consolidated Statements of Comprehensive Loss~~

~~Three and Six Months Ended June 30, 2021 and June 30, 2020~~

~~(unaudited)~~

Three Months Ended Six Months Ended
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Net Loss $ (7,383,978 ) $ (383,258,002 ) $ (83,642,921 ) $ (389,093,946 )
Unrealized Loss on Marketable Securities (509,625 ) 0 (509,625 ) 0
Foreign Currency Translation Adjustment 111,330 0 111,055 0
Comprehensive Net Loss $ (7,782,273 ) $ (383,258,002 ) $ (84,041,491 ) $ (389,093,946 )

~~The accompanying notes are an integral part of these financial statements.~~

Genius Brands International, Inc.

Condensed Consolidated Statements of ~~Stockholders' Equity~~Operations

~~Three~~(in thousands, except share and ~~Six Months Ended June 30, 2021 and June 30, 2020~~per share data)

(unaudited)

Common Stock Preferred Stock
Additional
Paid-In
Accumulated Other Comprehensive
Shares Amount Shares Amount Capital Deficit Loss Total
Balance, December 31, 2020 258,438,514 $ 258,439 – $ – $ 588,500,680 $ (469,557,324 ) $ (5,118 ) $ 119,196,677

Shares Issued for ChizComm acquisition 1,980,658 1,981 – – 3,525,046 – – 3,527,027
Proceeds From Warrant Exchange, net 39,740,500 39,740 – – 57,224,916 – – 57,264,656
Issuance of Common Stock for Services 161,986 162 – – 240,838 – – 241,000
Share Based Compensation – – – – 2,573,148 – – 2,573,148
Warrant Incentive – – – – 69,138,527 – – 69,138,527
Foreign Currency Translation Adjustment – – – – – – (275 ) (275 )
Net Loss – – – – – (76,258,943 ) – (76,258,943 )

Balance, March 31, 2021 300,321,658 $ 300,322 – $ – $ 721,203,155 $ (545,816,267 ) $ (5,393 ) $ 175,681,817

Issuance of Common Stock for Services 469,677 470 – – 727,530 – – 728,000
Share Based Compensation – – – – 2,994,172 – – 2,994,172
Unrealized Loss on Marketable Securities – – – – – – (509,625) (509,625)
Foreign Currency Translation Adjustment – – – – – – 111,330 111,330
Net Loss – – – – – (7,383,978 ) – (7,383,978 )

Balance, June 30, 2021 300,791,335 $ 300,792 – $ – $ 724,924,857 $ (553,200,246 ) $ (403,688 ) $ 171,621,715

Balance, December 31, 2019 21,877,724 $ 21,878 1,097 $ 1 $ 75,117,076 $ (66,047,135 ) $ (5,118 ) $ 9,086,702

Value of Preferred Stock Conversion 3,171,428 3,172 (667 ) (1 ) (3,171 ) – – –
Proceeds from Securities Purchase Agreement, Net 4,000,000 4,000 – – 911,296 – – 915,296
Proceeds From Warrant Exchange, net 500,000 500 – – 169,500 – – 170,000
Issuance of Common Stock for Services 43,077 43 – – 27,957 – – 28,000
Share Based Compensation – – – – 23,814 – – 23,814
Net Loss – – – – – (5,835,944 ) – (5,835,944 )

Balance, March 31, 2020 29,592,229 $ 29,593 430 $ – $ 76,246,472 $ (71,883,079 ) $ (5,118 ) $ 4,387,868

Proceeds from Securities Purchase Agreement, Net 47,500,000 47,500 – – 43,792,875 – – 43,840,375
Issuance of Common Stock for Services 49,610 50 – – 190,950 – – 191,000
Share Based Compensation – – – – 328,497 – – 328,497
Value of Preferred Stock Conversion 1,571,430 1,571 (330 ) – (1,571 ) – – –
Derivative Liability Adjustment – – – – 171,835,729 – – 171,835,729
Note Conversion 65,476,190 65,476 – – (120,662 ) – – (55,186 )
Warrant Exercise 74,666,711 74,667 – – 8,159,358 (1,840,384 ) – 6,393,641
Warrant Revaluation – – – – 219,034,621 – – 219,034,621
Warrants Issued for Services – – – – 519,513 – – 519,513
Net Loss – – – – – (383,258,002 ) – (383,258,002 )

Balance, June 30, 2020 218,856,170 $ 218,857 100 $ – $ 519,985,782 $ (456,981,465 ) $ (5,118 ) $ 63,218,056


	Three Months Ended						Six Months Ended
	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Revenues:
Production Services	$	10,018		$	0		$	10,018		$	0
Content Distribution		8,529			135			8,942			275
Licensing & Royalties		2,495			1,236			2,536			1,407
Media Advisory & Advertising Services		1,082			971			2,067			1,724
Total Revenues		22,124			2,342			23,563			3,406

Operating Expenses:
Marketing and Sales		972			1,541			1,132			2,143
Direct Operating Costs		14,648			1,269			14,992			1,518
General and Administrative		15,105			7,106			25,962			14,039
Total Operating Expenses		30,725			9,916			42,086			17,700

Loss from Operations		(8,601	)		(7,574	)		(18,523	)		(14,294	)

Other Income (Expense):
Interest Expense		(418	)		(9	)		(473	)		(18	)
Other Income (Expense), Net		(3,131	)		189			2,286			(69,341	)
Net Other Income (Expense)		(3,549	)		180			1,813			(69,359	)

Loss Before Income Tax Expense		(12,150	)		(7,394	)		(16,710	)		(83,653	)

Provision for Tax Expense		0			0			0			0

Net Loss		(12,150	)		(7,394	)		(16,710	)		(83,653	)

Net Income Attributable to Non-Controlling Interests		(1,193	)		0			(1,162	)		0

Net Loss Attributable to Genius Brands International, Inc.	$	(13,343	)	$	(7,394	)	$	(17,872	)	$	(83,653	)

Net Loss per Share (Basic)	$	(0.04	)	$	(0.02	)	$	(0.06	)	$	(0.28	)
Net Loss per Share (Diluted)	$	(0.04	)	$	(0.02	)	$	(0.06	)	$	(0.28	)

Weighted Average Shares Outstanding (Basic)		315,519,907			300,646,819			309,682,010			293,969,462
Weighted Average Shares Outstanding (Diluted)		315,519,907			300,646,819			309,682,010			293,969,462

The accompanying notes are an integral part of these financial statements.

Genius Brands International, Inc.

Condensed Consolidated Statements of ~~Cash Flows~~Comprehensive Loss

~~Six Months Ended June 30, 2021 and June 30, 2020~~(in thousands)

(unaudited)

June 30, 2021 June 30, 2020
Cash Flows from Operating Activities:
Net Loss $ (83,642,921 ) $ (389,093,946 )

Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Amortization of Film and Television Costs 759,989 292,362
Depreciation and Amortization Expense 392,861 266,417
Accretion of Discount on Secured Convertible Notes 0 (7,288 )
Bad Debt (11,164 ) 99,792
Stock Issued for Services 41,000 219,000
Share Based Compensation Expense 5,567,320 352,311
Warrant Revaluation Expense 316,814 212,228,659
Lease Modification (66,859 ) 0
Conversion Option Revaluation Expense 0 171,835,729
Debt Discount in Excess of the Principal 0 1,031,852
Warrant Inducement Expense 69,138,527 0

Decrease (Increase) in Operating Assets:
Accounts Receivable, net 1,906,261 974,524
Inventory, net 0 9,277
Prepaid Expenses & Other Assets (1,134,977 ) (300,662 )
Lease Deposits (23,348 ) 0
Film and Television Costs, net (3,175,941 ) (381,777 )

Increase (Decrease) in Operating Liabilities:
Accounts Payable 921,952 126,144
Accrued Salaries & Wages 41,318 69,800
Deferred Revenue (474,440 ) 62,290
Participations Payable 663,726 282,406
Due to Related Party 136,586 (493,309 )
Accrued Expenses (329,479 ) 95,159
Net Cash Used in Operating Activities (8,972,775 ) (2,331,260 )

Cash Flows from Investing Activities:
Investment in Stan Lee Universe, LLC (500,000 ) 0
Cash Payment for ChizComm, net of cash acquired (7,788,877 ) 0
Investment in Marketable Securities (80,902,119 ) 0
Investment in Intangible Assets, net (5,000 ) (500 )
Investment in Property & Equipment (120,210 ) 0
Net Cash Used in Investing Activities (89,316,206 ) (500 )

Cash Flows from Financing Activities:
Payments On Lease Liability 131,951 (105,680 )
Proceeds from Sale of Securities Purchase Agreement, net 0 44,755,671
Proceeds From Warrant Exchange 57,264,656 5,819,319
Proceeds from Senior Secured Convertible Notes, net 0 6,098,000
(Repayment)/Proceeds from Payroll Protection Program (366,267 ) 366,267
Collection Of Investor Notes 0 3,600,000
Repayment of Secured Convertible Notes 0 (2,866,664 )
Note Conversion Costs 0 (55,186 )
Repayment of Production Facility, net (825,348 ) (1,202,313 )
Net Cash Provided by Financing Activities 56,204,992 56,409,414

Net (Decrease)/Increase in Cash and Cash Equivalents (42,083,989 ) 54,077,654
Beginning Cash and Cash Equivalents 100,456,324 305,121
Ending Cash and Cash Equivalents $ 58,372,335 $ 54,382,775


	Three Months Ended						Six Months Ended
	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021
Net Loss	$	(12,150	)	$	(7,394	)	$	(16,710	)	$	(83,653	)
Other Comprehensive Income (Loss):
Change in Unrealized Losses on Marketable Securities		(1,095	)		(158	)		(4,595	)		(158	)
Realized Losses on Marketable Securities Reclassified from AOCI into Earnings		44			0			123			0
Foreign Translation Adjustment		(1,477	)		111			(1,440	)		111
Total Other Comprehensive Loss		(2,528	)		(47	)		(5,912	)		(47	)
Total Comprehensive Net Loss		(14,678	)		(7,441	)		(22,622	)		(83,700	)
Less: Comprehensive Income Attributable to Non-Controlling Interests		(1,193	)		0			(1,162	)		0
Total Comprehensive Net Loss Attributable to Genius Brands International, Inc.	$	(15,871	)	$	(7,441	)	$	(23,784	)	$	(83,700	)

Supplemental Disclosures of Cash Flow Information:
Cash Paid for Interest $ 0 $ 468,468

Schedule of Non-Cash Financing and Investing Activities

Issuance of common stock for services $ 969,000 $ 0
Shares issued for ChizComm acquisition $ 3,527,027 $ 0
Liability for Acquisition Earnout Shares $ 7,210,000 $ 0
Senior Convertible notes were converted into 65,476,190 shares of Common Stock, 58,522,601 warrants were exercised on a cashless basis resulting in the issuance of 52,551,716 shares of Common Stock $ 0 $ 13,750,000
Warrant Derivative Liability $ 0 $ 10,229,852

The accompanying notes are an integral part of these financial statements.

Genius Brands International, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(in thousands, except share data)

(unaudited)


	Common Stock			Preferred Stock			Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Non- Controlling
	Shares	Amount		Shares	Amount		Capital			Deficit			Loss			Interest			Total
Balance, December 31, 2021	303,379,122	$	303	–	$	–	$	739,495		$	(595,848	)	$	(1,221	)	$	1,924		$	144,653

Issuance of Common Stock for Services	386,196		–	–		–		311			–			–			–			311
Issuance of Common Stock for Vested Restricted Stock Units	603,648		1	–		–		(1	)		–			–			–			–
Share Based Compensation	–		–	–		–		4,491			–			–			–			4,491
Other Comprehensive Loss	–		–	–		–		–			–			(3,384	)		–			(3,384	)
Net Loss	–		–	–		–		–			(4,531	)		–			(31	)		(4,562	)

Balance, March 31, 2022	304,368,966	$	304	–	$	–	$	744,296		$	(600,379	)	$	(4,605	)	$	1,893		$	141,509

Shares Issued for Wow Acquisition	11,057,085		11	1		–		11,543			–			–			–			11,554
Fair Value of Replacement Options Related to Wow Acquisition	–		–	–		–		1,213			–			–			–			1,213
Issuance of Common Stock for Services	736,667		1	–		–		441			–			–			–			442
Issuance of Common Stock for Vested Restricted Stock Units	1,072,398		1	–		–		(1	)		–			–			–			–
Share Based Compensation	–		–	–		–		4,245			–			–			–			4,245
Other Comprehensive Loss	–		–	–		–		–			–			(2,528	)		–			(2,528	)
Distributions to Non-Controlling Interests	–		–	–		–		–			–			–			(1,200	)		(1,200	)
Net (Loss) Income	–		–	–		–		–			(13,341	)		–			1,193			(12,148	)

Balance, June 30, 2022	317,235,116	$	317	1	$	–	$	761,737		$	(613,720	)	$	(7,133	)	$	1,886		$	143,087



Balance, December 31, 2020	258,438,514	$	258	–	$	–	$	588,501		$	(469,557	)	$	(5	)	$	–		$	119,197

Shares Issued for ChizComm acquisition	1,980,658		2	–		–		3,525			–			–			–			3,527
Proceeds From Warrant Exchange, net	39,740,500		40	–		–		57,225			–			–			–			57,265
Issuance of Common Stock for Services	161,986		–	–		–		241			–			–			–			241
Share Based Compensation	–		–	–		–		2,573			–			–			–			2,573
Warrant Incentive	–		–	–		–		69,138			–			–			–			69,138
Net Loss	–		–	–		–		–			(76,259	)		–			–			(76,259	)

Balance, March 31, 2021	300,321,658	$	300	–	$	–	$	721,203		$	(545,816	)	$	(5	)	$	–		$	175,682

Issuance of Common Stock for Services	469,677		1	–		–		728			–			–			–			729
Share Based Compensation	–		–	–		–		2,994			–			–			–			2,994
Other Comprehensive Loss	–		–	–		–		–			–			(47	)		–			(47	)
Net Loss	–		–	–		–		–			(7,395	)		–			–			(7,395	)

Balance, June 30, 2021	300,791,335	$	301	–	$	–	$	724,925		$	(553,211	)	$	(52	)	$	–		$	171,963

The accompanying notes are an integral part of these financial statements.

Genius Brands International, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	June 30, 2022			June 30, 2021
Cash Flows from Operating Activities:
Net Loss	$	(16,710	)	$	(83,653	)

Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Amortization of Film and Television Costs		2,253			760
Depreciation and Amortization of Property, Equipment & Intangible Assets		1,103			301
Amortization of Right of Use Asset		700			92
Share Based Compensation Expense		8,736			5,567
Amortization of Premium on Marketable Securities		545			0
(Gain) on Revaluation of Equity Investment in Your Family Entertainment AG		(2,901	)		0
(Gain) Loss on Foreign Currency Transactions		1,296			0
(Gain) Loss on Warrant Revaluation		(269	)		317
Interest Incurred on Debt		422			0
Realized Loss on Marketable Securities		123			0
Warrant Incentive Expense		0			69,139
Stock Issued for Services		312			41
Other		51			(81	)

Decrease (Increase) in Operating Assets:
Accounts Receivable, net		6,078			1,906
Other Receivables		384			0
Tax Credits Earned (less capitalized)		(4,247	)		0
Tax Credits Received		1,702			0
Film and Television Costs, net		(6,015	)		(3,176	)
Note Receivable from Related Party		(128	)		0
Prepaid Expenses & Other Assets		(469	)		(1,158	)

Increase (Decrease) in Operating Liabilities:
Accounts Payable		(4,439	)		922
Accrued Salaries & Wages		338			41
Accrued Expenses		(2,250	)		(329	)
Accrued Production Costs		(1,658	)		0
Participations Payable		1,283			664
Deferred Revenue		(3,455	)		(474	)
Lease Liability		(352	)		143
Due to Related Party		(63	)		137
Other Noncurrent Liabilities		(42	)		0
Net Cash Used in Operating Activities		(17,672	)		(8,841	)

Cash Flows from Investing Activities:
Cash Payment for Wow, net of Cash Acquired		(37,311	)		0
Cash Payment for Equity Investment in YFE		(9,540	)		0
Cash Payment for Ameba, net of Cash Acquired		(3,893	)		0
Cash Payment for ChizComm, net of cash acquired		0			(7,789	)
Investment in Stan Lee Universe, LLC		0			(500	)
Investment in Marketable Securities		0			(80,902	)
Proceeds from Principal Collections on Marketable Securities		4,420			0
Proceeds from Sales of Marketable Securities		5,536			0
Purchase of Property & Equipment		(401	)		(125	)
Investment in Intangible Assets		(22	)		0
Net Cash Used in Investing Activities		(41,211	)		(89,316	)

Cash Flows from Financing Activities:
Proceeds from Margin Loan		58,980			0
Repayments of Margin Loan		(4,522	)		0
Proceeds from Production Facilities		4,330			0
Repayments of Production Facilities		(1,795	)		(825	)
Proceeds from Bank Loan		1,291			0
Capital Lease Payments		(442	)		0
Debt Issuance Costs		(40	)		0
Repayment of Note Payable		(9	)		0
Distributions to Non-Controlling Interest		(1,200	)		0
Repayment of Payroll Protection Program		0			(367	)
Proceeds from Warrant Exchange, net		0			57,265
Net Cash Provided by Financing Activities		56,593			56,073

Effect of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash		46			0

Net Increase/(Decrease) in Cash, Cash Equivalents and Restricted Cash		(2,244	)		(42,084	)
Beginning Cash, Cash Equivalents and Restricted Cash		10,060			100,456
Ending Cash, Cash Equivalents and Restricted Cash	$	7,816		$	58,372

Schedule of Non-Cash Financing and Investing Activities
Shares issued for Wow Acquisition	$	11,554		$	0
FV of Replacement Options Granted Related to Wow Acquisition	$	1,213		$	0
Shares issued for ChizComm acquisition	$	0		$	3,527
Liability for Acquisition Earnout Shares	$	0		$	7,210
Issuance of Common Stock for Services	$	0		$	969

The accompanying notes are an integral part of these financial statements.

Genius Brands International, Inc.

Notes to Condensed Consolidated Financial Statements

June 30, ~~2021~~ 2022

(unaudited)

Note 1: Organization and Business

Organization and Nature of Business

Genius Brands International, Inc. (“we,” “us,” “our,” or the “Company”) is a publicly traded (NASDAQ:GNUS) global content and brand management company that creates, produces, licenses, and ~~licenses~~broadcasts timeless and educational, multimedia ~~content.~~animated content for children. Led by experienced industry personnel, ~~we distribute our~~the Company distributes its content ~~in all formats as well as~~primarily on streaming platforms and television and licenses its properties for a broad range of consumer products based on ~~our~~the Company’s characters. The Company is a leading “work for hire” producer for many of the streaming outlets and IP holders. In the ~~children's~~children’s media sector, ~~our~~the Company’s portfolio features “content with a purpose” for toddlers to tweens, ~~which provides~~providing enrichment as well as entertainment. ~~New intellectual property titles include~~ ~~Stan Lee’s Superhero Kindergarten~~ ~~produced~~The Company’s programs, along with ~~Stan Lee’s Pow! Entertainment, and Oak Productions. Arnold Schwarzenegger lends his voice as the lead and is also an Executive Producer on the series. The show is~~those programs it acquires and/or licenses, are being broadcast in the United States on the Company’s wholly-owned ~~distribution outlet,~~ advertisement supported video on demand (“AVOD”) service, Kartoon Channel!~~. Other newer series include, the preschool property~~ ~~Rainbow Rangers~~, ~~which debuted in November 2018~~and its subscription video on ~~Nickelodeon~~demand (“SVOD”) distribution outlets, Kartoon Channel! Kidaverse, and ~~which was renewed for a second season~~Ameba TV. These streaming services are available on Apple TV, Apple iOS, Android TV, Android mobile, Amazon Prime, Amazon Fire, Tubi, Roku, Comcast, Cox, Dish/Sling, Zumo, Pluto, Samsung Smart TVs, LG Smart TVs, as well as YouTube, among other popular platforms. The Company’s in-house owned and ~~preschool property~~produced shows include Stan Lee’s Superhero Kindergarten starring Arnold Schwarzenegger, Llama Llama ~~which debuted on Netflix~~starring Jennifer Garner, Rainbow Rangers, KC Pop Quiz, and the upcoming Shaq’s Garage starring Shaquille O’Neal, scheduled to debut in ~~January 2018 and was renewed by Netflix for a second season.~~the fourth quarter of 2022. The Company’s library titles include the award-winning Baby Genius, adventure comedy Thomas ~~Edison's~~Edison’s Secret ~~Lab~~®Lab®, and Warren Buffett’s Secret Millionaires Club, created with and starring iconic investor Warren Buffett, which is distributed across the Company’s Genius Brands Network on Comcast’s Xfinity on Demand, AppleTV, Roku, Amazon Fire, YouTube, Amazon Prime, Cox, Dish, Sling and Zumo, as well as Connected TV. 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! to exploit 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”. POW! and the Company executed an Operating Agreement for the joint venture, effective as of June 1, 2021. This agreement enables 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, from which Genius Brands plans to develop and license multiple properties each year. The Company is in production on a new animated series starring Shaquille O’Neal called ~~Shaq’s Garage~~.

~~In addition, the Company acts as licensing agent for Penguin Young Readers, a division of Penguin Random House LLC which owns or controls the underlying rights to~~ ~~Llama Llama~~~~, leveraging the Company’s existing licensing infrastructure to expand this brand into new product categories, new retailers, and new territories.~~Buffett.

The Company ~~commenced operations~~also licenses its programs to other services worldwide, in ~~2006, assuming all~~addition to the ~~rights and obligations~~operation of its ~~then Chief Executive Officer, under an Asset Purchase Agreement between~~own channels, including but not limited to Netflix, HBO Max, Paramount+, Nickelodeon, and satellite, cable and terrestrial broadcasters around the ~~Company~~world.

Through the Company’s recent investment in Germany’s Your Family Entertainment (“YFE”), a publicly traded company on the Frankfurt Exchange (RTV-Frankfurt), it has gained access to one of the largest animation catalogues in Europe with over 3,000 titles, and ~~Genius Products, Inc., in~~a global distribution network, which currently covers over 60 territories worldwide and, which the Company obtained all rights, copyrights, and trademarks to the brands “Baby Genius,” “Kid Genius,” “123 Favorite Music” and “Wee Worship,” and all then existing productions under those titles. In 2011, the Company reincorporatedis currently in ~~Nevada and changed its name to Genius Brands International, Inc. (the “Reincorporation”)~~process of rebranding as Kartoon Channel! Worldwide. ~~In connection with the Reincorporation, the Company changed its trading symbol to “GNUS.”~~

~~In 2013, the~~The Company ~~entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) with A Squared Entertainment LLC, a Delaware limited liability company~~also recently acquired WOW Unlimited Media Inc. (“~~A Squared”), A Squared Holdings LLC, a California limited liability company and sole member of A Squared (the “Parent Member”~~Wow”), and ~~A2E Acquisition LLC, its newly formed, wholly-owned Delaware subsidiary (“Acquisition Sub”). Upon closing~~through that acquisition, established an affiliate relationship with Mainframe Studios, which is one of the ~~transactions, A Squared, as~~largest animation producers in the ~~surviving entity, became a wholly-owned subsidiary of~~world. In addition, Wow owns Frederator Networks Inc. (“Frederator”) and its Channel Frederator Network, the ~~Company.~~largest animation focused multi-channel network on YouTube, with over 2,500 content creators and currently averages over 1 billion views per month.

~~Liquidity~~

~~During the six months ended June 30, 2021, the Company’s cash and cash equivalents and marketable security positions increased by $38,308,505, net. Cash and cash equivalents were used to purchase marketable securities of $80,902,119~~ during the six months ended June 30, 2021. Cash in excess of immediate requirements is invested in accordance with the Company’s investment policy, primarily with a view to liquidity and capital preservation. Accordingly, available for sale securities, consisting principally of corporate and government debt securities stated at fair value, are also available as a source of liquidity.

~~Historically, the Company has incurred net losses. For the three months ended June 30, 2021 and June 30, 2020, the Company reported net losses of $7,383,978~~ ~~and $383,258,002, respectively. For the six months ended June 30, 2021 and June 30, 2020, the Company reported net losses of $83,642,921~~ ~~and $389,093,946, respectively.~~ The Company ~~reported net cash used~~owns a select amount of valuable IP, including among them a controlling interest in ~~operating activities of $8,972,775~~Stan Lee Universe (“SLU”), through which it controls the name, likeness, signature, and $~~2,331,260~~ ~~for the six months ended June 30, 2021~~all consumer product and ~~June 30, 2020, respectively. As of June 30, 2021, the Company had an accumulated deficit of $553,200,246~~ ~~and total stockholders’ equity of $171,621,715. As of June 30, 2021, the Company had current assets of $152,521,636, including cash and cash equivalents of $58,372,335, and current liabilities of $15,507,100. The Company had working capital of $137,014,536~~ ~~as of June 30, 2021, compared~~IP rights to ~~working capital of $101,387,183~~ ~~as of December 31, 2020.~~

~~On January 28, 2021, the Company entered into letter agreements~~Stan Lee (the ~~“Letter Agreements”) with certain existing institutional and accredited investors to exercise certain outstanding warrants (the “Existing Warrants”) to purchase up to an aggregate of~~ ~~39,740,500~~ ~~shares of the Company’s common stock at their original exercise price of $1.55~~ ~~per share (the “Exercise”~~“Stan Lee Assets”). The Company ~~received approximately $61.6~~ ~~million~~plans to launch a Stan Lee Centennial program of merchandise set to coincide with Stan Lee’s 100^th birthday on December 28, 2022.

The Company also owns Beacon Media, the largest media buying service for children in ~~gross proceeds. The Special Equities Group,~~North America. Beacon represents over 30 major toy companies, including Playmobile, Bandai Toys, Bazooka, Moose Toys, and JAKKS Pacific.

In addition, the Company recently acquired the Canadian company Ameba TV (“Ameba”), which distributes a ~~division of Bradley Woods & Co. Ltd., acted as warrant solicitation agent~~profitable SVOD channel for kids and ~~received a cash fee of approximately $4.3~~ ~~million. In consideration for~~is now expected to become the ~~exercise~~backbone of the ~~Existing Warrants for cash, the exercising holders received new unregistered warrants to purchase up to an aggregate~~newly launched SVOD channel of ~~39,740,500~~ ~~shares of common stock (the “New Warrants”) at an exercise price of $2.37~~ ~~per share and with an exercise period of five years from the initial issuance date. Pursuant to the Letter Agreements, the New Warrants are substantially in the form~~Kartoon Channel!, Kartoon Channel! Kidaverse.

The combination of the ~~Existing Warrants (except for customary legends~~Company, its investment in YFE, its acquired companies Wow, Ameba and other language typical for an unregistered warrant, including the ability for the holder of the New Warrant to make a cashless exercise if no resale registration statement covering the common stock underlying the New Warrants is effective after six months), were exercisable immediately, andBeacon Media provide the Company ~~was required~~with world class animation production studios, a catalogue representing thousands of hours of premium global content for children, a broadcast system for delivering that content and an in-house Consumer Products Licensing infrastructure to ~~register~~fully exploit the ~~shares of common stock underlying the New Warrants for resale.~~content.

~~As more fully discussed in Note 3 on~~Recent Investments

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 completed its acquisition of the issued and outstanding shares of Ameba and gained access to its kid-safe SVOD platform technology and 13,000 episodes of content. Refer to Note 3 for additional details.

On April 6, 2022, the Company completed its acquisition of Wow. On October 26, 2021, the Company’s wholly-owned subsidiary, 1326919 B.C. LTD., a corporation existing under the laws of the Province of British Columbia and Wow, entered into an Arrangement Agreement to effect a plan of arrangement under the arrangement provisions of Part 9, Division 5 of the Business Corporations Act. The Company purchased 100% of Wow’s issued and outstanding shares for approximately $38.3 million in cash and 11,057,000 shares of the Company’s common stock. Refer to Note 3 for additional details.

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. 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. 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 and the Company’s ownership in YFE to 49.2% as of June 30, 2022.

Liquidity

During the six months ended June 30, 2022, the Company’s cash, cash equivalents and restricted cash decreased by $2.2 million. The decrease was primarily due to cash used in investment activities, inclusive of the Wow and Ameba acquisitions and the YFE investments, 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 million as available-for-sale, a decrease of $15.1 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 period. 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. 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 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 notmature 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: (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 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. As of June 30, 2022, the Company had an accumulated deficit of $613.7 million and total stockholders’ equity of $141.2 million. As of June 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.

Note 2: Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated balance sheet as of December 31, 2021 has been derived from audited statements. The accompanying unaudited condensed consolidated financial statements have been prepared ~~in accordance with~~pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles ~~generally accepted~~(“US GAAP”) for complete financial statements and should be read in conjunction with the audited financial statements and related footnotes included in the ~~United States~~Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on April 6, 2022.

The accompanying condensed consolidated financial statements include, in the opinion of ~~America (“U.S. GAAP”).~~management, all adjustments (consisting of normal recurring adjustments and reclassifications) necessary to state fairly the Condensed Consolidated Balance Sheets, Statements of Operations, Statements of Comprehensive Loss, Statements of Stockholders' Equity, and Statements of Cash Flows for all periods presented.

Certain prior period amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations.

Segments

The Company determined its operating segments on the same basis that it assesses performance and makes operating decisions. The Company principally operates 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 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 accounting policies for each segment are the same as for the Company as a whole. Refer to Note 22 for additional information.

Principles of Consolidation and Basis of Presentation

The ~~accompanying~~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, ~~A Squared Entertainment LLC, Llama Productions LLC, Rainbow Rangers Productions LLC, Superhero Kindergarten LLC, ChizComm Beacon Media LLC, ChizComm Ltd., Stan Lee Universe LLC~~investments in entities in which it has controlling influence and ~~Shaq’s Garage Productions LLC.~~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 ~~inter-company balances~~intercompany accounts and transactions have been eliminated in consolidation.

Business Combinations

The ~~condensed consolidated financial statements have been prepared using the acquisition method of accounting~~Company accounts for transactions that are classified as business combinations in accordance with the Financial Accounting Standards ~~Board~~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 ~~ASC 810~~ 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.

~~Consolidation~~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.

In evaluating whether the Company has the power to direct the activities of a VIE that most significantly impact its economic performance, the Company considers the purpose for which the VIE was created, the importance of each of the activities in which it is engaged and the Company’s decision-making role, if any, in those activities that significantly determine the entity’s economic performance as compared to other economic interest holders. This evaluation requires consideration of all facts and circumstances relevant to decision-making that affects the entity’s future performance and the exercise of professional judgment in deciding which decision-making rights are most important.

In determining whether the Company has the right to receive benefits or the obligation to absorb losses that could potentially be significant to the VIE, the Company evaluates all of its economic interests in the entity, regardless of form (debt, equity, management and servicing fees, and other contractual arrangements). This evaluation considers all relevant factors of the entity’s design, including: 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 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

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Foreign Currency

The Company considers the U.S. dollar to be its functional currency for its United States based operations. The Company considers the Canadian dollar to be its functional currency for its Canada based ~~operation.~~operations. Accordingly, the financial information is translated from the Canadian dollar to the U.S. dollar for inclusion in the Company’s consolidated financial statements. Revenue and expenses are translated at average exchange rates prevailing during the period, and assets and liabilities are translated at exchange rates in effect at the balance sheet date. Resulting translation adjustments are included as a component of accumulated other comprehensive income (loss), net in stockholders’ equity.

Foreign exchange transaction gains and losses are included in other income (expense), net in the condensed consolidated statements of operations.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments with initial maturities of three months or less to be cash equivalents. As of June 30, ~~2021,~~2022 and December 31, ~~2020,~~2021, the Company had cash and cash equivalents of $~~58,372,335~~7.8 million and $~~100,456,324~~2.1, million, respectively.

Tax Credits Receivable

The Federal and certain Provincial governments in Canada provide programs that are designed to assist film and television production in the form of refundable tax credits 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 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 June 30, 2022, the Company had $25.9 million in current Tax Credit Receivables on its condensed consolidated balance sheet. The Company does not have an allowance on tax credits receivable as of June 30, 2022, based on historical experience and future expectations.

Marketable Debt Securities

The Company purchases high quality, investment grade securities from diverse ~~issuers with a weighted average credit rating of AA/Aa2.~~issuers. Management determines the appropriate classification of securities at the time of purchase and reevaluates such designation as of each balance sheet date. Currently, the Company classifies its investments in marketable securities as “available-for-sale” and records these investments at fair value. The securities are available to support current operations and, accordingly, the Company classifies the investments as current assets without regard to their contractual maturity.

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.

Interest earned on investment securities is reported in interest income, net of applicable adjustments for accretion of discounts and amortization of premiums accounted for by the level yield method with no pre-payment anticipated.

Equity-Method Investments

When the Company does not have a controlling financial interest in an entity but can exert significant influence over the entity’s operating and financial policies, the investment is accounted for either (i) under the equity method of accounting or (ii) at fair value by electing the fair value option available under U.S. GAAP. Significant influence generally exists when the firm owns 20% to 50% of the entity’s common stock or in-substance common stock.

In general, the Company accounts for investments acquired at fair value. See Note 5 for further information about the Company’s investment in YFE’s equity securities accounted for under the fair value option.

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 ~~assesses~~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 based on historical experience and future expectations.~~losses. Individual uncollectible accounts are written off against the allowance when collection of the individual accounts appears doubtful.

The Company ~~had an allowance~~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 ~~doubtful accounts of $54,840~~ ~~as of June 30, 2021 and $43,676~~ ~~as of December 31, 2020.~~several years.

Property and Equipment

Property and equipment are recorded at cost. 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 ~~condensed~~ consolidated statement of operations.

Right of Use Leased Assets

~~Effective January 1, 2019, the Company adopted ASC 842,~~ ~~Leases~~~~, using the modified retrospective transition method applied at the effective date of the standard.~~

The Company determines at contract inception whether the arrangement is a lease based on its ability to control a physically distinct asset and determines the classification of the lease as either operating or ~~finance.~~finance under FASB ASC 842, Leases (“ASC 842”). For all leases, the Company combines all components of the lease including related nonlease components as a single component. Operating leases are reflected as operating ~~right-of-use~~right of use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. ~~The Company does not have any finance leases.~~

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 leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. 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.

The operating lease ROU asset also includes any lease payments made prior to lease commencement date and excludes lease incentives. Lease terms may include options to extend or terminate the lease when the Company is reasonably certain that it will exercise the option. Lease expense is recognized on a straight-line basis over the lease term in the consolidated statement of operations. Lease incentives are recognized as a reduction to the lease expense on a straight-line basis over the underlying lease term.

Film and Television Costs

The Company capitalizes production costs for episodic series produced in accordance with FASB ASC 926-20, Entertainment-Films - Other Assets - Film Costs. Accordingly, 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 involved in making such estimates of ultimate revenues and expenses, these estimates have differed in the past from actual results and are likely to differ to some extent in the future from actual results. In addition, in the normal course of the Company’s business, some titles are more successful or less successful than anticipated. Management reviews its ultimate revenue for productions in development and cost estimates on a title-by-title basis, when an event or change in circumstances indicates that the fair value of the production may be less than its unamortized cost. This may result in a change in the rate of amortization of film costs and participations and/or a write-down of all or a portion of the unamortized costs of the film or television production to its estimated fair value.

These write-downs are included in amortization expense within Direct Operating Expenses on the Company’s condensed consolidated statements of operations. There 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. 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

Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired in business combinations accounted for by the acquisition method. In accordance with FASB ASC 350, Intangibles Goodwill and Other, goodwill and certain intangible assets are presumed to have indefinite useful lives and are thus not amortized, but subject to an impairment test annually or more frequently if indicators of impairment arise. The Company completes the annual goodwill and indefinite-lived intangible asset impairment tests at the end of each fiscal year. To test for goodwill impairment, the Company may elect to perform a qualitative assessment to determine whether it is ~~required to estimate~~more likely than not that the fair ~~market~~ value of ~~each of our~~a reporting ~~units,~~unit, of which the Company has ~~one. While~~two, is less than its carrying value. If impairment is indicated in the ~~Company may use~~qualitative assessment, or, if management elects to initially perform a ~~variety~~quantitative assessment of ~~methods to estimate~~goodwill, the impairment test uses a one-step approach. The fair value ~~for impairment testing,~~of a reporting unit is compared with its ~~primary method is discounted cash flows. The Company estimates future cash flows and allocations of certain assets using estimates for future growth rates and judgment regarding~~carrying amount, including goodwill. If the ~~applicable discount rates. Changes to judgments and estimates could result in a significantly different estimate of the~~ fair ~~market~~ value of the reporting ~~units,~~unit exceeds its carrying amount, goodwill of the reporting unit is not impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment charge would be recognized for the amount by which the carrying amount exceeds the reporting unit's fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

Changes in future results, assumptions, and estimates after the measurement date may lead to an outcome where additional impairment charges would be required in future periods. Specifically, actual results may vary from the Company’s forecasts and such variations may be material and unfavorable, thereby triggering the need for future impairment tests where the conclusions may differ in reflection of prevailing market conditions. Further, continued adverse market conditions could result in anthe recognition of additional impairment if the Company determines that the fair values of ~~goodwill or indefinite lived intangible assets in future periods.~~its reporting units have fallen below their carrying values.

Other intangible assets have been acquired, either individually or with a group of other assets, and were initially recognized and measured based on fair value. Annual amortization of these intangible assets is computed based on the straight-line method over the remaining economic life of the asset.

Debt and Attached Equity-Linked Instruments

The Company measures issued debt on an amortized cost basis, net of debt premium/discount and debt issuance costs amortized using the effective interest rate method or the straight-line method when the latter does not lead to materially different results.

The Company analyzes freestanding equity-linked instruments including warrants attached to debt to conclude whether the instrument meets the definition of the derivative and whether it is considered indexed to the Company’s own stock. If the instrument is not considered indexed to the Company’s stock, it is classified as an asset or liability recorded at fair value. If the instrument is considered indexed to the Company’s stock, the Company analyzes additional equity classification requirements per FASB ASC 815-40, Contract’s in Entity’s Own Equity. When the requirements are met, the instrument is recorded as part of the Company’s equity, initially measured based on its relative fair value with no subsequent re-measurement. When the equity classification requirements are not met, the instrument is recorded as an asset or liability and is measured at fair value with subsequent changes in fair value recorded in earnings.

When required, the Company also considers the bifurcation guidance for embedded derivatives per ~~FASB~~ ASC 815-15, Embedded Derivatives.

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

1016

~~Film and Television Costs~~

~~The Company capitalizes production costs for episodic series produced in accordance with FASB ASC 926-20,~~ ~~Entertainment-Films - Other Assets - Film Costs~~. Accordingly, production costs are capitalized at actual cost and then charged against revenue based on the initial market revenue evidenced by a firm commitment over the period of commitment. The Company expenses all capitalized costs that exceed the initial market firm commitment revenue in the period of delivery of the episodes.

~~The Company capitalizes production costs for films produced in accordance with FASB ASC 926-20,~~ ~~Entertainment - Films - Other Assets - Film Costs~~. Accordingly, production costs are capitalized at actual cost and then charged against revenue quarterly as a cost of production based on the relative fair value of the film(s) delivered and recognized as revenue. The Company evaluates its capitalized production costs annually and limits recorded amounts by their ability to recover such costs through expected future sales.

Additionally, for both episodic series and films, from time to time, the Company develops additional content, improved animation and bonus songs/features for its existing content. After the initial release of the film or episodic series, the costs of significant improvement to existing products are capitalized while routine and periodic alterations to existing products are expensed as incurred

Revenue Recognition

The Company accounts for revenue according to standard FASB ASC 606, Revenue from Contracts with Customers (“ASC 606”).

Revenue is measured based on the consideration specified in a contract with a customer. Revenue is recognized when a customer obtains control of the products or services in a contract. Judgement 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. The Company evaluates each contract to identify separate performance obligations as a contract with a customer may have one or more performance obligations. Consideration in a contract with multiple performance obligations is allocated to the separate performance obligations based on their stand-alone selling prices. If a stand-alone selling price is not determinable, the Company estimates the stand-alone selling price using an adjusted market assessment approach. The Company’s main sources of revenue are derived from animation production services provided to third parties, the sale of licenses for the distribution of films and television programs, advertising revenues, and merchandising and licensing sales.

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 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 the following ~~six~~ material and distinct performance ~~obligations:~~obligations.

Provide animation production services.

License rights to exploit Functional Intellectual Property ~~(Functional~~(“Functional Intellectual ~~Property~~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~~Intellectual Property derives a substantial portion of its utility from its significant standalone ~~functionality.)~~functionality).

License rights to exploit Symbolic Intellectual Property ~~(Symbolic~~(“Symbolic Intellectual ~~Property~~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.)~~content).


	·	Provide media and advertising services to clients.

	·	Fixed and variable fee advertising and subscription-based revenue generated from the Genius Brands Kartoon Channel! and the Frederator owned and operated YouTube channels.

	·	Options to renew or extend a contract at fixed terms. (While this performance obligation is not significant for the Company’s current contracts, it could become significant in the ~~future.)~~future).

Options on future seasons of content at fixed terms. (While this performance obligation is not significant for the Company’s current contracts, it could become significant in the ~~future.)~~

~~Fixed fee advertising revenue generated from the Genius Brands Network~~

~~Variable fee advertising revenue generated from the Genius Brands Network~~future).

Production Services

Animation Production Services

For revenue from animation production services, the customer controls the output throughout the production process. Each production is made to an individual customer’s specifications and if the contract is terminated by the customer, the Company is entitled to be reimbursed for any costs incurred to date, and for any prepaid commitments made, plus the agreed contractual mark-up. Revenue and the associated costs of such contracts are recognized over time on a percentage of completion basis - i.e. as the project is being produced, prior to it being delivered to the customer. The percentage-of-completion is calculated based upon the proportion of costs incurred cumulatively to total expected costs. Changes in revenue recognized as a result of adjustments to total expected costs are recognized in profit or loss on a prospective basis. Invoices related to these projects are issued based on the ~~change, beginning January 1, 2018,~~achievement of milestones during the project or other contractual terms. The difference between contractual payments received and revenue recognized is recorded as deferred revenue when receipts exceed revenue. When revenue exceeds milestone billings, the Company ~~began recognizing~~recognizes this difference as unbilled accounts receivable. Unbilled accounts receivable is transferred to accounts receivable when the Company has an unconditional right to consideration.

When the outcome of an arrangement cannot be estimated reliably, revenue is recognized only to the extent of the expenses incurred that are recoverable.

Content Distribution

Film and Television Licensing

The Company recognizes revenue related to licensed rights to exploit functional IP in two ~~ways. For~~ways; for minimum guarantees, the Company recognizes fixed revenue upon delivery of content and the start of the license ~~period. For~~period and for functional IP contracts with a variable component, the Company estimates revenue such that it is probable there will not be a material reversal of revenue in future periods. ~~Revenue under these types of contracts was previously recognized when royalty statements were received.~~ The Company ~~began recognizing~~recognizes revenue related to licensed rights to exploit symbolic IP substantially similarly to functional IP. Although it has a different recognition pattern from functional IP, the valuation method is substantially the same, depending on the nature of the license.

Invoices related to these projects are issued based on the achievement of milestones during the project or other contractual terms. The difference between contractual payments received and revenue recognized is recorded as deferred revenue when receipts exceed revenue. When revenue exceeds milestone billings, the Company recognizes this difference as unbilled accounts receivable. Unbilled accounts receivables are transferred to accounts receivable when the Company has an unconditional right to consideration.

Advertising revenues

The Company sells advertising and subscriptions on its ~~App~~wholly-owned AVOD service, Kartoon Channel!, and ~~OTT based “Kartoon~~its SVOD distribution outlets, Kartoon Channel! Kidaverse, and Ameba TV. Advertising sales are generated in the form of either flat rate promotions or advertising impressions served. For flat rate promotions with a fixed term, the Company recognizes revenue when all five revenue recognition criteria under ~~FASB~~ ASC 606 are met. For impressions served, the Company delivers a certain minimum number of impressions on the channel to the advertiser for which the advertiser pays a contractual CPM per impression. Impressions served are reported to the Company on a monthly basis, and revenue is reported in the 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 days.

Licensing & Royalties

Merchandising and licensing

The Company ~~provides media~~enters into merchandising and ~~advertising services~~licensing agreements that allow customers to ~~clients. Revenue~~produce merchandise utilizing certain of the Company’s intellectual property. For minimum guaranteed amounts that make up a contract, revenue is recognized over time, over the term of the license period commencing on the date at which the customer can use and benefit from the licensed content. Variable consideration in ~~the month that the services are performed.~~

~~The Company also purchases advertising for clients on linear~~excess of non-refundable guaranteed amounts, such as royalties and ~~across digital and streaming platforms and receives a commission on these purchases. Advertising commissions~~other contractual payments are recognized as revenue inwhen the ~~month~~amounts are known and become due provided collectability is reasonably assured. Invoices are issued based on the ~~advertising is displayed.~~contractual terms of an agreement and are usually payable within 30-45 days.

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.

Media Advisory & Advertising Services

Media and Advertising Services

The Company provides media and advertising services to clients. Revenue is recognized when the services are performed. 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.

Direct Operating Costs

Direct operating costs include costs of the Company’s product sales, non-capitalizable film costs, film and television cost amortization expense, impairment expenses related to film and television costs, and participation expense related to agreements with various animation studios, post-production studios, writers, directors, musicians or other creative talent with which the Company is obligated to share net profits of the properties on which they have rendered services. Upon the acquisition of Wow, the Company also includes salaries and related service production employee costs as part of its direct operating costs.

Share-Based Compensation

The Company issues stock-based awards to employees and non-employees that are generally in the form of stock options or restricted stock units (“RSUs”). Share-based compensation cost is recorded for all options and awards of ~~non-vested~~unvested stock based on the grant-date fair value of the award.

The fair value of stock options is estimated at the date of grant using the ~~Black-Scholes~~Black-Scholes-Merton (“BSM”) option pricing model, which requires management to make assumptions with respect to the fair value on the grant date. The assumptions are as follows: (i) the expected term assumption of the award is based on the Company’s historical exercise and post-vesting behavior (ii) the expected volatility assumption is based on historical and implied volatilities of the Company’s common stock calculated based on a period of time generally commensurate with the expected term of the award; (iii) the risk-free interest rates are based on the implied yield available on U.S. treasury zero-coupon issues with an equivalent expected term; (iv) and the expected dividend yields of the Company’s stock are based on history and expectations of future dividends payable. In the case of RSUs the fair value is calculated based on the Company’s underlying common stock on the date of grant.

The Company recognizes compensation expense over the requisite service period ratably, using the graded attribution method, which is in-substance, recognizing multiple awards based on the vesting schedule. The Company has elected to account for forfeitures when they occur. The Company issues authorized shares available for issuance under the Company’s 2015 Incentive Plan and the Company’s 2020 ~~Plans~~Incentive Plan upon employees’ exercise of their stock options.

Earnings Per Share

Basic earnings (loss) per share of common ~~share~~stock (“EPS”) is calculated by dividing net income (loss) applicable to common ~~shareholders~~stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted EPS is calculated by dividing net income (loss) applicable to common ~~shareholders~~stockholders by the weighted average number of shares of common stock outstanding, plus the assumed exercise of all dilutive securities using the treasury stock or “as converted” method, as appropriate. During periods of net loss, all common stock equivalents are excluded from the diluted EPS calculation because they are antidilutive.

Income Taxes

Deferred income tax assets and liabilities are recognized based on differences between the financial statement and tax basis of assets and liabilities using presently enacted tax rates. At each balance sheet date, the Company evaluates the available evidence about future taxable income and other possible sources of realization of deferred tax assets and records a valuation allowance that reduces the deferred tax assets to an amount that represents management’s best estimate of the amount of such deferred tax assets that more likely than not will be realized.

Concentration of Risk

The ~~Company’s~~Company maintains its cash ~~is maintained~~in bank deposit accounts which, at ~~three financial institutions and from time to time the balances for this account~~times, may exceed the Federal Deposit Insurance Corporation’s (“FDIC”) or the Canadian Deposit Insurance Corporation’s (“CDIC”) insured ~~amount.~~amounts. Balances on interest bearing deposits at banks in the United States are insured by the FDIC up to $~~250,000~~$250,000 per ~~account.~~account and deposits in banks in Canada are insured by the CDIC up to $100,000 CAD. As of June 30, ~~2021,~~2022, the Company had ~~three~~six accounts with an uninsured balance in bank deposit accounts of $~~56,601,018~~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.

The Company’s investment portfolio consists of investment-grade securities diversified among security types, industries and issuers. ~~The investments are held and managed by a financial institution that follows the Company’s investment policy.~~ The Company’s policy limits the amount of credit exposure to any one security issue or issuer and the Company believes no significant concentration of credit risk exists with respect to these investments.

For the three months ended June 30, 2022, the Company had five customers, whose total revenue exceeded 10% of total consolidated revenue. These customers accounted for 81.25% 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 receivable. These customers accounted for 65.04% of the total accounts receivable as of June 30, 2022.

For the three months ended June 30, 2021, the Company had one customer whose total revenue exceeded ~~10%~~10% of the total consolidated revenue. ~~That~~This customer accounted for 1147% of ~~the~~ total revenue. ~~As of June 30, 2021, the Company had two customers whose accounts receivable exceeded 10% of total consolidated accounts receivable. Those customers accounted for~~ 62~~% of accounts receivable.~~

For the six months ended June 30, 2021, the Company had one customer, whose total revenue exceeded ~~10%~~10% of ~~the~~ total consolidated revenue. ~~That~~This customer accounted for 34% of ~~the~~ total revenue.

~~For the three months ended~~ As of June 30, ~~2020,~~2021, the Company had ~~one customer~~two customers whose accounts receivable exceeded 10% of total ~~revenue exceeded 10% of the total consolidated revenue. That customer~~accounts receivable. Those customers accounted for 46~~% of the total revenue and~~ 1362% of accounts receivable. ~~One other customer accounted~~

There is significant financial risk associated with a dependence upon a small number of customers. The Company periodically assesses the financial strength of these customers and establishes allowances for 56%any anticipated bad debt. As of ~~accounts receivable. For the six months ended~~ June 30, ~~2020,~~2022 and December 31, 2021, the Company ~~had one customer whose total revenue exceeded 10%~~recorded an allowance for bad debt of ~~the total consolidated revenue. That customer accounted for~~ $2967,897~~% of the total revenue~~ and ~~13% of accounts receivable. One other customer accounted for~~ $5622,080~~% of accounts receivable.~~, respectively.

Fair value of ~~financial instruments~~Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC ~~Topic~~ 820,Fair Value Measurement (“ASC 820”) establishes a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities ~~(level~~(Level 1 measurements) and the lowest priority to unobservable inputs ~~(level~~(Level 3 measurements). These tiers include:

Level 1 - Observable inputs such as quoted prices for identical instruments in active markets;

Level 2 - Inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

Level 3 - Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

Financial instruments that are not measured at fair value on the condensed consolidated statement of operations are represented by cash, receivables, payables, accrued liabilities, bank indebtedness, the Company’s margin loan and interim production financing.

The carrying amounts of cash, restricted cash, receivables, ~~accounts payable, and~~payables, accrued liabilities, bank indebtedness and the Company’s margin loan approximate fair value due to the short-term ~~maturity~~nature of the instruments. The ~~carrying amount~~fair values of the ~~Production Loan Facility approximates~~Company’s liability-classified derivative warrants are revalued at the end of each reporting period determined using the BSM model (Level 2) with standard valuation inputs. Refer to Note 19 for additional details. The investment in YFE is also revalued at the end of each reporting period based on the trading price of YFE (Level 1). Refer to Note 5 for additional details. Upon acquisition of Wow, the Company assumed foreign currency forward contracts that are not traded in active markets. These are fair ~~value since~~valued using observable forward exchange rates at the ~~debt carries a variable~~measurement dates and interest ~~rate that is tied~~rates corresponding to ~~either~~ the ~~current Prime or LIBOR rates plus an applicable spread.~~maturity of the contracts.

The fair values of the available-for-sale securities are generally based on quoted market prices, where available. These fair values are obtained primarily from third-party pricing services, which generally use Level I1 or Level II2 inputs for the determination of fair value to facilitate fair value measurements and disclosures. Level II2 securities primarily include corporate securities, securities from states, municipalities and political subdivisions, mortgage-backed securities, United States Government securities, foreign government securities, and certain other asset-backed securities. For securities not actively traded, the pricing services may use quoted market prices of comparable instruments or a variety of valuation techniques, incorporating inputs that are currently observable in the markets for similar securities.

The following table summarizes the marketable securities measured at fair value by level within the fair value hierarchy as of June 30, ~~2021:~~ 2022 (in thousands):

Schedule of marketable security measured at fair value
	Level 1		Level 2		Total Fair Value		Level 1		Level 2		Total Fair Value
Marketable investments:
Corporate Bonds	$	0	$	45,254,451	$	45,254,451	$	31,129	$	11,897	$	43,026
U.S. Treasury		5,964,342		0		5,964,342		23,194		0		23,194
Mortgage-Backed								0		6,197		6,197
U.S. agency and government sponsored securities		0		5,294,277		5,294,277		0		12,504		12,504
U.S. states and municipalities		0		11,150,277		11,150,277		0		11,079		11,079
Asset-Backed		0		12,729,147		12,729,147		0		1,428		1,428
Total	$	5,964,342	$	74,428,151	$	80,392,494	$	54,323	$	43,105	$	97,428

Fair values were determined for each individual security in the investment portfolio. The Company’s marketable securities are considered to be available-for-sale investments as defined under FASB ASC 320, Investments – Debt and Equity Securities. There were no impairment charges recorded for the marketable securities. Refer to Note 4 for additional details. The fair values of the derivative warrants attached to the 2020 Convertible Notes were determined using the Black-Scholes-Merton model (Level 2) with standard valuation inputs. Refer to Note 18 for additional details. The fair value of the contingent earn-out liability was valued using Level 3 inputs. Refer to Note 36 for additional details.

~~The Company did not have any financial~~Financial and nonfinancial assets and liabilities measured ~~at fair value~~ 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, ~~2021~~2022. There were no significant events that occurred or ~~December 31, 2020.~~

~~Business Combinations~~

~~The Company allocates~~circumstances that resulted in an adjustment to the fair value of the purchase consideration of a business acquisition 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 identifiablethose assets and liabilities is recorded as goodwill. 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 thatmeasured on a non-recurring basis during 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.three months ended June 30, 2022.

1422

Recent Accounting Pronouncements

~~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: (1) 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 loans. ASU No. 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. 2016-13 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. The Company ~~is currently evaluating the effect that the ASU will have on its consolidated financial statements and related disclosures.~~

~~In August 2020, the FASB~~reviewed all recently issued ~~ASU No. 2020-06,~~ ~~Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity~~. The update simplifies the accounting for convertible instruments by removing certain separation models in Subtopic 470-20, Debt—Debt with Conversion and Other Options, for convertible instruments. As part of the amendment, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. The FASB has eliminated the cash conversion and beneficial conversion feature models. The FASB has also modified accounting rules relating to application of the scope exception from derivative accounting. The amendments revise the guidance in ASC 815-40-25-10, to remove three out of seven conditions from the settlement guidance, referred to as additional equity classification requirements. Following the above amendments, more convertible debt instruments will be accounted for as a single liability measured at its amortized cost and more convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no features require bifurcation and recognition as derivatives. The amendments are effective for public business entities, excluding smaller reporting companies, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, including smaller reporting companies the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company has adopted ASU No. 2020-06 starting January 1, 2021. The impact to the Company’s consolidated financial position, results of operations and cash flows was not material as the Company does not have any outstanding convertible instruments.

~~Various other~~ accounting pronouncements ~~have been recently issued, most of which represented technical corrections to the accounting literature~~and concluded that they were not applicable or ~~were applicable to specific industries and are~~ not expected to have a ~~material effect~~significant impact on the Company’s condensed consolidated financial ~~position, results of operations, or cash flows.~~statements.

Note 3: ~~Acquisition of ChizComm Entities~~Acquisitions

Wow Unlimited Media

On ~~February 1,~~April 6, 2022, the Company completed the acquisition of Wow. On October 26, 2021, the ~~Company through GBI Acquisition LLC, a New Jersey limited liability company, and 2811210 Ontario Inc.~~Company’s wholly-owned subsidiary, 1326919 B.C. LTD., a ~~company organized~~corporation existing under the laws of the Province of ~~Ontario, two wholly-owned subsidiaries~~British Columbia and Wow, entered into an Arrangement Agreement to effect a plan of arrangement under the arrangement provisions of Part 9, Division 5 of the Business Corporations Act. The Company closed its previously announced acquisition pursuant to a Purchase and Sale Agreement (the “Purchase Agreement”) with (i) Harold Aaron Chizick, (ii) Jennifer Mara Chizick, (iii) Wishing Thumbelina Inc. (“Wishing Thumbelina”), and (iv) Harold Aaron Chizick and Jennifer Mara Chizick, the trusteespurchased 100% of The Chizsix (2019) Family Trust for and on behalf of Harold Aaron Chizick, Jennifer Mara Chizick and Jay Mark Sonshine, trustees of The Chizsix (2019) Family Trust, (the “Trustees”) (each a “Seller” and, collectively, “Sellers”), pursuant to which the Company acquired from the Sellers all of the issued and outstanding ~~equity interests~~shares of ~~ChizComm Ltd., a corporation organized~~Wow for $38.3 million in ~~Canada (“ChizComm Canada”),~~cash and ~~ChizComm USA Corp., a New Jersey corporation (“ChizComm USA”~~11,057,085 shares of the Company’s common stock, including Wow’s subsidiary Frederator. The plan of arrangement and final agreement, together with ~~ChizComm Canada, “ChizComm”) (the “Acquisition”).~~

the acquisition of Wow’s Mainframe Studios and its subsidiary Frederator, are referred to as the “Wow Acquisition.”

~~The following table summarizes the fair value of the purchase price consideration paid to acquire ChizComm:~~

Total purchase price consideration paid
Amount
Cash consideration at closing $ 8,500,000
Equity consideration at closing 3,527,027
Fair value of Earn-Out shares 7,210,000
Total $ 19,237,027
~~Total~~Final consideration paid by the Company in the transaction at closing consisted of $~~8.5~~38.3 million in cash and ~~1,980,658~~11,057,085 shares ~~(the “Closing Shares”)~~ of the Company’s common stock, including 691,262 Exchangeable Shares, with a fair value of ~~approximately $3.5~~$11.6 million, ~~both as subject~~2,409,515 options granted to ~~certain purchase price adjustments. Of the Closing Shares,~~ ~~674,157~~ ~~shares~~employees of ~~common stock,~~Wow with a fair value of ~~approximately~~previously vested options of $1.2 million, ~~were deposited into an escrow account~~included in the purchase price, and $0.3 million for future services and $1.6 million in severance and bonuses to ~~cover potential post-closing indemnification obligations~~executives, for total consideration of ~~Sellers under the Purchase Agreement. Additionally, the Purchase Agreement also provides for the issuance~~$52.7 million, or $50.1 million net of additional shares of common stock with an aggregate value of up to $8.0 million that may be issued to the Sellers if certain EBITDA and performance levels are achieved within a four-year period commencing on the date of the Purchase Agreement (Earn-Out).cash acquired, excluding transaction costs as described in more detail below.

~~The Acquisition was approved by the board of directors of each Company.~~ Transaction costs incurred relating to ~~this acquisition~~the Wow Acquisition, including banks, legal and accounting, totaled $~~539,806~~3.1, million, which is included in general and administrative expenses on the statement of ~~operations.~~operations in the three months ended June 30, 2022. The ~~acquisition expands~~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.
The Wow Acquisition facilitates the Company’s ~~revenue streams~~expansion as a global animation and children’s digital media company. With Wow’s content, ongoing production projects and the addition of two studios that can also be leveraged for in-house production of the Company’s properties, will drive cost synergies, facilitate further expansion into ~~media~~the global children’s entertainment market and ~~advertising services.~~strengthen financial growth. Frederator, with its owned and operated channels on YouTube, will provide a distribution platform to facilitate the global growth of Kartoon Channel!.

The Company has determined that the Wow Acquisition constitutes a business acquisition as defined by ~~Accounting Standards Codification (“ASC”) 805,~~ ~~Business Combinations~~.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 ~~and represent managements best estimate based on available data. Fair values are determined~~ based on the requirements of ASC 820 ~~Fair Measurements~~ and ~~Disclosures (“ASC 820”).~~represents managements best estimates.
~~The Earn-Out arrangement meets the liability classification criteria outlined in ASC 480,~~ ~~Distinguishing Liabilities from Equity~~, as it is not indexed to the Company’s own shares and is classified as a liability in the accompanying balance sheet. Liability classified contingent consideration is measured initially at the fair value on the acquisition date and is remeasured at each reporting period. Subsequent differences between the estimated fair value of the Earn-Out recorded at the acquisition date and the remeasurement date will be reflected as a charge or credit, as applicable, in the statement of operations. As of June 30, 2021, there were no material changes to the assumptions used on the acquisition date to value the contingent consideration, therefore no change in value was recorded.
The Company completed and finalized the purchase price allocation during the three months ended June 30, 2021. The Company recorded assets acquired and liabilities assumed at their respective fair values. The following table summarizes the final fair value of assets acquired and liabilities assumed:
Assets acquired and liabilities assumed
Cash $ 711,123
Accounts Receivable 6,150,919
Prepaid Expenses 56,594
Lease Deposits 12,390
Fixed Assets 147,689
Trade Name 3,430,000
Customer Relationships 6,140,000
Non-Compete Agreements 60,000
Goodwill 9,607,027
Accounts Payable and Accrued Expenses (7,006,350 )
Payroll Tax Liability (72,365 )

Total Consideration $ 19,237,027

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The following table summarizes the consideration paid:
Schedule of Total purchase price consideration paid
Amount
Cash $ 38,310
Genius Common Stock Issued 10,832
Shares Issued Exchangeable for Genius Common Stock 722
Stock Option Value of Replacement Options- Pre-Combination Vested Options 1,213
Severance Payments 1,044
Bonuses 529
Total $ 52,650
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. The Company 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 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 $ 2,573
Accounts Receivable 34,237
Prepaid Expenses and Other 1,245
Property and Equipment 1,936
ROU Assets 10,311
IP (In-Process) 4,600
IP (Proprietary Productions) 5,684
Tradename 7,631
Customer Relationships 16,064
Networks and Platforms 803
Goodwill 21,399
Accounts Payable (1,547 )
Participations Payable (1,380 )
Bank Debt (1,475 )
Accrued Liabilities (3,825 )
Interim Production Facilities (16,930 )
Deferred Revenue (18,080 )
Lease Liabilities (10,614 )
Other Liabilities (60 )
Total Consideration $ 52,650
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The identifiable intangible assets acquired of $~~9,630,000~~34.8 ~~was composed~~million is comprised of $16.1 million for Customer Relationships, with remaining economic lives of 8 years, $10.3 million for IP Content including completed productions and productions in progress, that is included as part of Film and Television costs on the condensed consolidated balance sheet and will be amortized as such, Tradenames for $~~3,430,000~~7.6 ~~for ChizComm’s trade name~~million, with an indefinite ~~remaining economical~~ life and Networks and Platforms of $~~6,140,000~~0.8 ~~for ChizComm’s customer base with a remaining useful life of approximately~~ 12 ~~years, and $60,000~~ ~~for ChizComm’s non-compete agreements~~million, with a remaining economic life of 316 years. The goodwill of $21.4 million arising from the acquisition consists largely of the synergies expected from the combined businesses, including the Company’s ability to produce its content in-house utilizing the acquired studios and expansion of the Kartoon Channel! platform. 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

~~Customer relationships for ChizComm~~The Networks and Platforms were valued by performing a discounted cash flow analysis, ~~using~~specifically the ~~multiperiod~~multi-period excess earnings method. This method ~~includes discounting~~involves quantifying the ~~projected~~amount of residual (or excess) cash flows ~~associated with existing customers~~generated by the current digital network content, based primarily upon ~~customer turnover data~~historical revenue and projections over its expected life, and considers the operating expenses and contributory asset charges associated with servicing such ~~existing customers.~~network. Projected cash flows attributable to the ~~customer relationships were~~networks are discounted to ~~their~~ present value at a rate commensurate with the perceived risk. The significant assumptions used in this model included the customer attrition rate, acquisition rate of new customers, weighted average cost of capital, and expense estimates. The useful ~~lives~~life of ~~customer relationships are~~the networks is estimated based primarily upon the present value of cash flows attributable to the ~~customer relationships.~~digital network. The significant assumptions used in this method included the royalty rate and weighted average cost of capital.

~~Trademarks~~
The Tradenames were valued using the relief-from-royalty method. The relief-from-royalty method is one of the methods under the income approach wherein estimates of a company’s earnings attributable to the intangible asset are 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.
Ameba
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.
Transaction 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.
25
The 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.
The 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.
The following table summarizes the consideration paid, including the Net Working Capital Adjustment (in thousands):
Total purchase price consideration paid
Amount
SPA cash consideration at closing $ 3,500
APA cash consideration at closing 300
Net working capital adjustment 269
Total $ 4,069
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. The Company 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
Cash $ 176
Accounts Receivable 238
Prepaids Expenses 25
Trade Name 23
Digital Network 2,804
Technology 300
Goodwill 673
Accounts Payable and Accrued Expenses (140 )
Tax Liability (30 )
Total Consideration $ 4,069
26
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 ~~names~~name with a useful life of 3 years and $0.3 million for ~~ChizComm were~~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! platform. 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.
The 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 name.

~~Non-compete agreements were~~The technology was valued using a with and without method. Under this method, estimated prospective financial information (“PFI”) is calculated with the existence and ownership of an intangible asset and compared to the PFI in the absence of the ownership of the intangible asset. The after-tax differential PFI attributable to the intangible asset is then discounted to its present value.at cost.

~~Assumptions~~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.

· ~~Business prospects and industry expectations.~~Expense estimates.
· Contributory asset charges.

· Estimated economic life of asset.

· Acquisition of new customers.

· Attrition of existing customers.

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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):
Supplemental pro forma information
Three Months Ended
Genius Brands Consolidated (including Wow and Ameba results) Wow Ameba
June 30, 2022 June 30, 2021 June 30, 2021⁽¹⁾ June 30, 2021

Total Revenues $ 22,124 $ 17,246 $ 14,732 $ 172

Net Income (Loss) $ (13,343 ) $ (6,933 ) $ 374 $ 87

Net Loss per Common Share (Basic and Diluted) $ (0.04 ) $ (0.02 ) $ 0 $ 0

Weighted Average Shares Outstanding (Basic and Diluted) 315,519,907 300,646,819 0 0

Six Months Ended

Genius Brands Consolidated
(including Wow and Ameba results)
Wow Ameba Wow Ameba
June 30, 2022 June 30, 2021 June 30, 2022⁽¹⁾ June 30, 2022 June 30, 2021⁽¹⁾ June 30, 2021

Total Revenues $ 41,667 $ 30,192 $ 35,810 $ 849 $ 26,453 $ 333

Net Income (Loss) $ (16,926 ) $ (82,070 ) $ 1,154 $ (32 ) $ 1,418 $ 165

Net Loss per Common Share (Basic and Diluted) $ (0.05 ) $ (0.28 ) $ 0 $ 0 $ 0 $ 0

Weighted Average Shares Outstanding (Basic and Diluted) 309,682,010 293,969,462 0 0 0 0
⁽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.
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Note 4: 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! to exploit 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”). POW! 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.
The Company contributed $2.0 million to obtain 50% of SLU’s voting equity and POW, for the remaining 50%, contributed the specified intangible assets associated with the Stan Lee Assets. POW will retain certain rights in the transferred intangible assets, namely existing the rights/obligations arising from current licensing agreements. Under ASC 805, the Company determined that the value of SLU was wholly attributable to the Stan Lee Assets and would be accounted for as an asset acquisition. The acquisition cost of $2.0 million was ~~treated for tax purposes as a nontaxable transaction and as such,~~equivalent to the ~~historical tax basis~~value of the acquired assets, net operating loss, and other tax attributes of ChizComm will carryover. As a result, no new goodwill for tax purposes was created in connection with the acquisition as there is no step-up toStan Lee Assets contributed by POW. Therefore, the fair value of the ~~underlying tax bases~~consideration paid by the entity of $2.0 million and the fair value of the ~~acquired net assets.~~50% non-controlling interest approximated a total of $4.0 million.

Pursuant to the guidance under ASC 810, the Company concluded that SLU qualifies as a variable interest entity (“VIE”). The ~~following supplemental pro forma information summarize~~Company consolidates the ~~Company’s~~ results of ~~operations for~~SLU as it was determined that the ~~current reporting period,~~Company is the primary beneficiary due to having the power through the collaboration to direct the activities that most significantly impact the entity’s economic performance and the Company is required to fund over half of the economic support of the entity. Accordingly, the Company recorded the total fair value of the Stan Lee Assets in SLU of $4.0 million, as ifan intangible asset to be amortized over the duration of 70 years, the life of the publicity rights related to Stan Lee’s name, 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 $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 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.
Note 5: Investment in Equity Interest
On December 1, 2021, the Company completed ~~the acquisition as~~a $6.8 million investment in YFE. In exchange for $3.4 million in cash and 2,281,269 shares of the ~~beginning~~Company’s common stock (valued at approximately $3.4 million), the Company received 3,000,000 shares of ~~the annual reporting period.~~
~~Supplemental pro forma information~~ ~~as follows:~~

Three Months Ended Six Months Ended
June 30,
2021 June 30,
2020 June 30,
2021 June 30,
2020
Total Revenues $ 2,342,205 $ 1,293,956 $ 4,758,768 $ 6,963,704

Net Loss (7,383,978 ) (383,624,941 ) (84,269,062 ) (391,305,960 )

Net Loss per Common Share (Basic and Diluted) $ (0.02 ) $ (4.89 ) $ (0.29 ) $ (15.85 )

Weighted Average Shares Outstanding (Basic and Diluted) 300,646,819 78,503,414 293,969,462 24,690,154
YFE’s common stock.

1729
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. 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. 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 and the Company’s ownership in YFE to 49.2% as of June 30, 2022.
The Company has elected to apply the fair value option for its investment in YFE (Level 1) as YFE is a publicly traded company on the Frankfurt Exchange, therefore its trading price is readily available and relied upon by investors. The Company recognizes changes in the fair value of its investment in YFE as unrealized gains (losses), net in the accompanying consolidated statements of operations with other income (loss), net.
The Company revalues the investment 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.
Wow has a 63% membership interest in Ratchet Productions, LLC ("RPLLC"), a privately-owned company registered in Colorado. Wow accounts for its interest using the equity method of accounting. Prior to the Wow Acquisition, in 2016, Wow determined that its investment in RPLLC was impaired and reduced its investment to $0. As the investment has been $0, and remains as such, there has been no impact on the Company’s financial statements for the membership interest in RPLLC.

Note 4:6: Marketable Securities

The Company classifies and 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 ~~$80,902,119~~$103.2 million and a market value of ~~$80,392,494~~$97.4 million as of June 30, ~~2021.~~2022. The balances consisted of the following securities (in thousands):
Summary of Investment in marketable security
Adjusted Cost Unrealized Loss Fair Value Adjusted Cost Unrealized Gain/(Loss) Fair Value
Corporate Bonds $ 45,625,483 $ (371,032 ) $ 45,254,451 $ 45,446 $ (2,420 ) $ 43,026
U.S. Treasury 5,997,340 (32,998 ) 5,964,342 24,281 (1,087 ) 23,194
Mortgage-Backed 6,610 (413 ) 6,197
U.S. agency and government sponsored securities 5,300,463 (6,186 ) 5,294,277 13,529 (1,025 ) 12,504
U.S. states and municipalities 11,231,747 (81,470 ) 11,150,277 11,836 (757 ) 11,079
Asset-Backed 12,747,086 (17,939 ) 12,729,147 1,453 (25 ) 1,428
Total $ 80,902,119 $ (509,625 ) $ 80,392,494 $ 103,155 $ (5,727 ) $ 97,428
30

The Company reported the net unrealized losses ~~net of taxes, as~~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.~~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. The Company 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 ~~value is expected~~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:
Schedule of Unrealized losses and fair values of available for sale securities
Gross Unrealized Loss Fair Value
Corporate Bonds $ (1,328 ) $ 24,698
U.S. Treasury (823 ) 18,518
Mortgage-Backed (358 ) 4,604
U.S. agency and government sponsored securities (871 ) 10,717
U.S. states and municipalities (591 ) 8,341
Asset-Backed (24 ) 1,429
Total $ (3,995 ) $ 68,307
A net realized loss of $44,241 and $123,291 related to ~~recover as~~ the prepayment of principals for certain mortgage-backed securities ~~approach maturity.~~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, ~~2021~~2022 were as ~~follows:~~ follows (in thousands):
Summary of contractual maturity
Fair Value
Due after 1 year through five years $ 70,408,695
Due after 5 years through 10 years 2,074,020
Due after 10 years (a) 7,909,779
Total $ 80,392,494
~~(a)~~ ~~Included within this category are municipal bonds with a fair value of $2,300,000 that the Company plans to sell within the next twelve months.~~
Summary of contractual maturity
Fair Value
Due within 1 year $ 11,763
Due after 1 year through 5 years 73,413
Due after 5 years through 10 years 4,218
Due after 10 years 8,034
Total $ 97,428

The Company may sell certain of its marketable debt securities prior to their stated maturities for reasons including, but not limited to, managing liquidity, credit risk, duration and asset allocation.

The Company did not sell any securities during the three or six months ended June 30, ~~2021,~~2022 that resulted in material gains or losses.
31

Note 5:7: Property and Equipment, Net

The Company has property and equipment as follows ~~as of June 30, 2021 and December 31, 2020:~~ (in thousands):
Schedule of property and equipment, net

June 30,
2021

December 31,
2020

Furniture and Equipment $ 124,585 $ 19,419
Computer Equipment 231,097 168,122
Leasehold Improvements 43,485 14,182
Software 115,622 68,152
Production Equipment 23,017 0
Property and Equipment, Gross 537,806 269,875
Less Accumulated Depreciation (203,908 ) (174,047 )
Property and Equipment, Net $ 333,898 $ 95,828
18
Schedule of property and equipment, net
June 30, 2022 December 31, 2021
Furniture and Equipment $ 199 $ 181
Computer Equipment 283 173
Leasehold Improvements 2,130 44
Software 235 177
Production Equipment 23 23
Property and Equipment, Gross 2,870 598
Less Accumulated Depreciation (306 ) (149 )
Property and Equipment, Net $ 2,564 $ 449

During the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company recorded depreciation expense of $~~15,265~~0.2 million and $~~13,537~~82,688, respectively. During the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company recorded depreciation expense of $~~29,829~~0.2 million and $~~27,075~~0.1, million, respectively.

Note 6:8: Right of Use Leased ~~Asset~~Assets

Right of use ~~asset~~assets consisted of the following ~~as of June 30, 2021 and December 31, 2020:~~(in thousands):
Schedule of right of use asset

June 30,
2021

December 31,
2020

Office Lease Asset $ 2,700,864 $ 2,245,093
Printer Lease Asset 12,374 12,374
Right Of Use Asset, Gross 2,713,238 2,257,467

Office Lease Accumulated Amortization (402,403 ) (274,980 )
Printer Lease Accumulated Amortization (11,605 ) (10,123 )
Right Of Use Asset, Net $ 2,299,230 $ 1,972,364
Schedule of right of use asset
June 30, 2022 December 31, 2021
Office Lease Assets $ 10,095 $ 3,351
Equipment Lease Assets 3,236 13
Right of Use Assets, Gross 13,331 3,364

Accumulated Amortization (1,317 ) (579 )
Right of Use Assets, Net $ 12,014 $ 2,785

During the three months ended June 30, ~~2021~~2022 and ~~June 30, 2020,~~2021, the Company recorded ROU asset amortization expense of $~~82,668~~0.7 million and $~~109,458~~0.1, million, respectively. During the six months ended June 30, ~~2021~~2022 and ~~June 30, 2020,~~2021, the Company recorded ROU asset amortization expense of $~~128,905~~0.6 million and $~~217,704~~0.2, million, respectively.
32

Note 7:9: Film and Television Costs, Net

~~As of~~During the six months ended June 30, ~~2021, the Company had net~~2022, Film and Television Costs increased by $14.0 million, net of ~~$14,972,446,~~amortization expense, as compared to ~~$11,828,494 as of~~ December 31, ~~2020.~~2021. Excluding 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 ~~primarily relates to the development costs related to~~ ~~Stan Lee’s Superhero Kindergarten~~is partially offset by amortization of Rainbow Rangers ~~Season 1~~and ~~Llama Llama Seasons 1 & 2~~Superhero Kindergarten.

During the three months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company recorded Film and Television Cost amortization expense of $~~553,562~~2.2 million, $1.9 million of which amortized by Wow, and $~~185,748~~,$0.2 million, respectively. During the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company recorded Film and Television Cost amortization expense of $~~658,369~~2.4 million, $1.9 million of which amortized by Wow, and $~~292,363~~,$0.7 million, respectively.

The following table highlights the activity in Film and Television Costs as of June 30, ~~2021,~~2022 and December 31, ~~2020:~~ 2021 (in thousands):
Schedule of film and television costs activity
Total
Film and Television Costs, Net as of December 31, 2019 $ 9,906,885
Additions to Film and Television Costs 2,901,207
Film Amortization Expense (979,598 )
Film and Television Costs, Net as of December 31, 2020 11,828,494
Additions to Film and Television Costs 3,903,941
Film Amortization Expense (759,989 )
Film and Television Costs, Net as of June 30, 2021 $ 14,972,446
Schedule of film and television costs activity
Film and Television Costs, Net as of December 31, 2020 $ 11,828
Additions to Film and Television Costs 10,650
Film Amortization Expense (19,538 )
Film and Television Costs, Net as of December 31, 2021 2,940
Additions to Film and Television Costs 16,213
Film Amortization Expense (2,253 )
Film and Television Costs, Net as of June 30, 2022 $ 16,900

19
Note 8:10: ~~Goodwill and~~ Intangible Assets, Net and Goodwill
~~Goodwill~~
In 2013, the Company recognized $10,365,806 in goodwill, representing the excess of the fair value of the consideration for the merger with A Squared over net identifiable assets acquired. Pursuant to FASB ASC 350-20, ~~Goodwill~~ ~~is not subject to amortization but is subject to annual review to determine if certain events warrant impairment to the goodwill asset.~~
As a result of the ChizComm acquisition, the consideration exceeded the fair value of the assets acquired by $9,607,027. Accordingly, this amount was recorded as goodwill at the time of the acquisition. Through June 30, 2021, the Company has not recognized any impairment on goodwill.
~~The following table represents details of our goodwill balance:~~
Schedule of Goodwill
Total
Goodwill as of December 31, 2020 $ 10,365,806
Acquisition of ChizComm Entities 9,607,027
Foreign Currency Translation Adjustment 22,203
Goodwill as of June 30, 2021 $ 19,995,036

Intangible Assets, Net

The Company had the following intangible assets ~~as of June 30, 2021 and December 31, 2020:~~ (in thousands) with their weighted average remaining amortization period (in years):
Schedule of Intangible Asset

June 30,
2021

December 31,
2020

Trademarks (a) $ 129,831 $ 129,831
Trade Name (b) 3,430,000 0
Customer Relations (c) 6,140,000 0
Non-Compete (d) 60,000 0
Other Intangible Assets (a) 304,028 299,028
Intangible Assets, Gross 10,063,859 428,859
Foreign Currency Translation Adjustment 89,202 0
Less Accumulated Amortization (634,292 ) (400,165 )
Intangible Assets, Net $ 9,518,769 $ 28,694
Intangible Assets, Net
Schedule of Intangible Asset
Weighted Average Remaining Amortization Period
June 30,
2022

December 31,
2021

Customer Relationships 9 $ 22,205 $ 6,120
Digital Networks 17 3,607 0
Trade names 69 11,654 4,000
Technology 3 300 0
Non-Compete 2 60 60
Other Intangible Assets (a) 2 323 301
Intangible Assets, Gross 38,149 10,481

Foreign Currency Translation Adjustment (786 ) 24
Less Accumulated Amortization (1,702 ) (772 )
Intangible Assets, Net $ 35,661 $ 9,733
__________________
(a) ~~Pursuant to FASB ASC 350-30-35,~~Represents the ~~Company reviews these~~remaining unamortized logo and website intangible assets ~~periodically to determine if the value should be retired or impaired due to recent events. During the three months ended June 30, 2021 and June 30, 2020, the Company recognized, $8,276~~ ~~and $10,847, respectively, in amortization expense~~ related to the ~~Trademarks, Product Masters, and Other Intangible Assets. During the six months ended June 30, 2021 and June 30, 2020, the Company recognized, $11,131~~ ~~and $21,638, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets.~~
~~(b)~~ ~~Amount represents fair value of the ChizComm and ChizComm Beacon Media Trade Names which have been determined to have an indefinite useful life.~~
~~(c)~~ ~~Amount represents fair value of the ChizComm and ChizComm Beacon Media Customer Relationships~~merger with ~~a useful life of 12 years. Amortization expense for the three and six months ended June 30, 2021 was $129,277~~ ~~and $214,610, respectively.~~
~~(d)~~ Amount represents fair value of the Non-Compete agreements as part of the ChizComm acquisition. The Non-Compete agreements have a useful life of 3 years. Amortization expense for the three and six months ended June 30, 2021 was $5,053 and $8,386, respectively.A Squared.

33
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.
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 30, 2022 that would indicate an impairment of the intangible assets.
Expected future intangible asset amortization as of June 30, ~~2021~~2022 is as ~~follows:~~follows (in thousands):
Expected future intangible asset amortization
Fiscal Year:
2022 $ 1,427
2023 2,851
2024 2,827
2025 2,720
2026 2,712
Thereafter 23,124
Total $ 35,661
Goodwill
In 2013, the Company recognized $10.4 million in goodwill, as a result of the merger with A Squared. During the first quarter of 2021, the Company recognized $9.6 million in goodwill, as a result of the acquisition of the Beacon Media Group (formerly ChizComm), which was subsequently determined to be impaired as of December 31, 2021, resulting in an impairment charge of $4.8 million and a goodwill balance of $4.9 million.

Expected future intangible asset amortization
Fiscal Year:
Remaining 2021 $ 276,655
2022 552,963
2023 549,018
2024 524,678
Thereafter 4,185,455
Total $ 6,088,769
As a result of the Ameba Acquisition during the first quarter of 2022, the Company recorded goodwill of $0.7 million as determined to be the amount in excess of the fair value of the assets acquired and liabilities assumed in the acquisition. The goodwill recorded for the Ameba Acquisition was allocated to the Content Production and Distribution reportable segment.

As a result of the Wow Acquisition during the second quarter of 2022, the Company recorded goodwill of $21.4 million as determined to be the amount in excess of the fair value of the assets acquired and liabilities assumed in the acquisition. The goodwill recorded for the Wow Acquisition was allocated to the Content Production and Distribution reportable segment.
As Beacon Communications and Wow are incorporated as Canadian companies with CAD being their functional currency, goodwill will change each period due to currency exchange differences.
The Company will perform its annual review of goodwill during the fourth quarter of 2022. There were no events or changes in circumstances that would indicate an impairment in goodwill during the six months ended June 30, 2022.

2034

The following table summarizes the changes in the carrying amount of goodwill by reportable segment (in thousands):
Schedule of Goodwill
Content Production & Distribution Media Advisory & Advertising Services Total
Goodwill as of December 31, 2021 $ 10,366 $ 4,861 $ 15,227
Acquisition of Ameba 673 0 673
Acquisition of Wow 21,398 0 21,398
Foreign Currency Translation Adjustment (558 ) (20 ) (578 )
Goodwill as of June 30, 2022 $ 31,879 $ 4,841 $ 36,720

Note 9:11: Deferred Revenue

As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had total short term and long term deferred revenue of $~~3,957,937~~18.0 million and $~~4,432,377~~3.9, million, respectively. Included in 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. Revenue is fully recognized upon production completion. 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. ~~Included in the deferred revenue balance as of June 30, 2021 and December 31, 2020 is the $3,394,967~~ ~~which is the remaining balance from the total $3,489,583~~ ~~advance against future royalty that Sony paid to the Company for both the foreign and domestic distribution rights.~~

Note ~~10:~~12: ~~Accrued Expenses, Salaries and Wages – Current~~Supplemental Financial Statement Information

AsOther Income (Expense), Net
Components of ~~June 30, 2021 and December 31, 2020, the Company has the following current accrued liabilities:~~
Schedule of other accrued liabilities

June 30,
2021

December 31,
2020

Other Accrued Expenses (a) $ 151,345 $ 408,459
Accrued Salaries and Wages (b) 470,240 428,922
Total Accrued Liabilities – Current $ 621,585 $ 837,381
~~(a)~~ ~~Primarily represents accrued interest and legal fees.~~
~~(b)~~ ~~Represents accrued salaries and wages and accrued vacation payable to employees as of June 30, 2021 and the year ended December 31, 2020.~~
~~Note 11:~~other income (expense), net are summarized as follows ~~Senior Secured Convertible Notes~~(in thousands):

On March 11, 2020, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain accredited investors (each an “Investor” and collectively, the “Investors”) pursuant to which the Company agreed to sell and issue (1) Senior Secured Convertible Notes to the Investors in the aggregate principal amount of $1~~3,750,000~~ ~~(each, a “Note” and collectively, the “2020 Convertible Notes”) and $11,000,000~~ ~~funding amount (reflecting an original issue discount of $2,750,000) and (2) warrants to purchase~~ ~~65,476,190~~ ~~shares of the Company’s common stock exercisable for a period of five years at an initial exercise price of $0.26~~ ~~per share (each a “Warrant” and collectively, the “Warrants”), for consideration consisting of (i) a cash payment of $7,000,000, and (ii) full recourse cash secured promissory notes payable by the Investors to the Company (each, an “Investor Note” and collectively, the “Investor Notes”) in the principal amount of $4,000,000~~ ~~(the “Investor Notes Principal”) (collectively, the “Financing”). Andy Heyward, the Company’s Chairman and Chief Executive Officer, participated as an Investor and invested $1,000,000~~ in connection with the Financing, all of which was paid at the closing and not pursuant to an Investor Note. The Special Equities Group, LLC, a division of Bradley Woods & Co. LTD, acted as placement agent and received warrants to purchase ~~6,547,619~~ ~~shares at an exercise price of $0.26~~ ~~per share (the “Placement Agent Warrants”).~~
The closing of the sale and issuance of the 2020 Convertible Notes, the Warrants and the Placement Agent Warrants occurred on March 17, 2020 (the “Closing Date”). The maturity date of the 2020 Convertible Notes was September 30, 2021 and the maturity date of the Investor Notes was March 11, 2060.
The Company held a stockholder meeting to approve the issuance of shares of common stock issuable under the 2020 Convertible Notes and pursuant to the terms of the SPA for the purposes of compliance with the stockholder approval rules of The Nasdaq Stock Market (“Stockholder Approval”).
Schedule of Other Operating Cost and Expense, by Component
Three Months Ended
Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Gain (Loss) on Warrant Revaluation (a) $ 227 $ 119 $ 269 $ (317 )
Loss on Foreign Exchange (b) (1,073 ) (5 ) (1,262 ) (7 )
Loss on Marketable Securities Investments (c) (44 ) 0 (123 ) 0
Gain (Loss) on Revaluation of Equity Investment in YFE(d) (2,494 ) 0 2,901 0
Interest Income (e) 253 75 501 122
Warrant Incentive Expense (f) 0 0 0 (69,139 )
Interest Expense (g) (418 ) (9 ) (473 ) (18 )
Net Other Income (Expense) $ (3,549 ) $ 180 $ 1,813 $ (69,359 )

2135

(a) 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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.
(f) 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.
(g) 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.
~~In addition, pursuant to~~
Note 14: Bank Indebtedness and Production Facilities
Revolving Demand Facility
Draws under the ~~terms of~~$5.0 million CAD revolving demand facility can be made in Canadian or US dollars at the SPA, the 2020 Convertible Notes and the Warrants, the Company agreed that the following will apply or become effective only following Stockholder Approval: (1) the conversion price of the 2020 Convertible Notes shall be reduced to $~~0.21~~ ~~per share and may be further reduced to any amount and for any period of time deemed appropriate by the board of directors~~option of the Company ~~(the “Board~~by way of ~~Directors”), (2)~~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 ~~exercise price of~~revolving facility, the ~~Warrants shall be immediately reduced~~respective loans bear interest at a rate equal to $0.21 per share and may be further reduced to any amount and for any period of time deemed appropriate by the Board of Directors, (3) the 2020 Convertible Notes and Warrants shall each have full ratchet anti-dilution protection for subsequent financings (subject to certain exceptions), (4) existing warrant holders that are participating in the Financing (representing warrants to purchase an aggregate of ~~8,715,229~~ shares of Company common stock) will have their existing warrants’ exercise prices reduced to $0.21 and (5) the investors shall have a most favored nations right which provides that if the Company enters into a subsequent financing, then the Investors (together with their affiliates) at their sole discretion shall have the ability to exchange their 2020 Convertible Notes on a $1 for $1 basis into securities issued in the new transaction. Additionally, in the event that any warrantsCanadian Bankers’ Acceptances or options (or any similar security or right) issued in a subsequent financing include any terms more favorable to the holders thereof (less favorable to the Company) than the terms of the Warrants, the Warrants shall be automatically amended to include such more favorable terms. On March 16, 2020, the holders of the August 2018 Secured Convertible Notes were repaid in full including any outstanding interest.
On May 15, 2020, the Company received the necessary Stockholder Approval in connection with the Nasdaq proposals described above. As a result, the Conversion Price of the 2020 Convertible Notes and the exercise price of the Warrants were each reduced to $0.21. In addition, existing warrant holders that participated in the Financing (representing warrants to purchase an aggregate of ~~9,172,463~~ ~~shares of Common Stock) also had their existing warrants’ exercise prices reduced to $0.21.~~
~~On June 23, 2020, the Company received $3,600,000, net of expenses, from the payment of the Investor Notes Principal.~~
~~Between June 19 and June 23, 2020, the Convertible Notes were converted and repaid through the issuance of~~ ~~65,476,190~~ ~~shares of common stock.~~
~~Note 12:~~ ~~Production Loan Facility~~
On ~~August 8, 2016~~, Llama Productions LLC (“Llama”) closed a $5,275,000 multiple draw-down, secured, non-recourse, non-revolving credit facility (the “Facility”) with Bank Leumi USA (the “Lender”) to produce its animated series ~~Llama Llama~~, (the “Series”) which is configured as fifteen half-hour episodes comprised of thirty 11-minute programs that were delivered to Netflix in fall 2017. The Facility is secured by the license fees the Company will receive from Netflix for the delivery of the Series as well as the Company’s copyright in the Series. The Facility has a term of 40 ~~months and has an interest rate of~~ ~~either Prime plus 1% or one, three, or six-month~~USD LIBOR plus ~~3.25%.~~ As a condition of the loan agreement with Bank Leumi, the Company deposited $1,000,000 into a cash account to be used solely to produce the Series. Additionally, the Facility contains certain standard affirmative and negative non-financial covenants such as maintaining certain levels of production insurance and providing standard financial reports.3.75% per annum. As of June 30, ~~2020,~~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.
As of June 30, 2022, the Company was in compliance with ~~these covenants.~~all covenants under the revolving demand facility.
On September 28, 2018, Llama entered into a Loan and Security Agreement (the “Loan and Security Agreement”) with the Lender, pursuant to which the Lender agreed to make a secured loan in an aggregate amount not to exceed $4,231,989 to Llama (the “Loan”). The proceeds of the Loan will be used to pay the majority of the expenses of producing, completing and delivering two 22-minute episodes and sixteen 11- minute episodes of the second season of the animated series
~~Llama Llama~~Equipment Lease Line to be initially exhibited on Netflix. To secure payment of the Loan, Llama has granted to the Lender a continuing security interest in and against, generally, all of its tangible and intangible assets, which includes all seasons of the ~~Llama Llama~~ ~~animated series.~~

~~Under~~Each transaction under the ~~Loan~~$8.0 million CAD equipment lease line has specific financing terms in respect of the leased equipment such as term, finance amount, rate, and ~~Security Agreement, Llama can request revolving loan advances under (a)~~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 ~~Prime Rate Loan facility~~Wow Acquisition date. The Company has recorded right of use assets and (b) the LIBOR Loan facility, each as further described in the Loan and Security Agreement attached as an exhibit hereto. Prime Rate Loan advances shall bear interest, on the outstanding balance thereof, at a fluctuating per annum rate equal to 1.0% plus the Prime Rate (as such term is defined in the Loan and Security Agreement), provided that in no event shall the interest rate applicable to Prime Rate Loans be less than 4.0% per annum. LIBOR Loan advances shall bear interest, on the outstanding balance thereof,lease liabilities for the ~~period commencing on the funding date and ending on the date which is one (1)~~leased equipment acquired in respect of these draws. The Company has drawn down a total of $7.9 million CAD ($6.1 million USD), three (3) or six (6) months thereafter, at a per annum rate equal to 3.25% plus the LIBOR determined for the applicable Interest Period (as such terms are defined in the Loan and Security Agreement), provided that in no event shall the interest rate applicable to LIBOR Loans be less than 3.25% per annum. The Maturity Date of the Prime Rate Loan facility and LIBOR Loan facility was June 30, 2021. Interest rates on advances under the Loan and Security Agreement averaged 4.~~25%~~with an outstanding balance as of June 30, ~~2020.~~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.

Treasury Risk Management Facility
Advances under the treasury risk management facility are subject to market rates as determined by the lender’s treasury department or derivatives group at the time of the drawdown request. The maximum term for foreign exchange forward contracts and interest rate swaps is one year.

As of June 30, 2022, there were no outstanding amounts drawn under the treasury risk management facility.
Interim 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.
2236

~~In addition, on September 28, 2018, Llama and the Lender entered into Amendment No. 2 to the~~
Note 15: Margin Loan and Security Agreement, effective as of August 27, 2018, by and between Llama and the Lender (the “Amendment”). Pursuant to the Amendment, the original Loan and Security Agreement, dated as of August 8, 2016 and amended as of November 7, 2017 (the “Original Loan and Security Agreement”), was amended to (i) reduce the loan commitment thereunder to $1,768,010, and (ii) include the ~~Llama Llama~~ ~~season two obligations under the Loan and Security Agreement as obligations under the Original Loan and Security Agreement.~~

As of June 30, ~~2021,~~2022, the Company had ~~gross~~an outstanding ~~borrowing under the facility~~balance in its margin loan account of $~~274,365~~61.1 ~~. As~~million, an increase of $54.7 million as compared to December 31, ~~2020,~~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 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. The Company ~~had gross outstanding borrowing under the facility~~incurred interest expense of $~~1,099,713~~201,160 .during the six months ended June 30, 2022. The ~~outstanding~~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 ~~was repaid on July 14, 2021.~~sheets.
~~Note 13:~~ ~~Disputed Trade Payable~~
~~As part of the merger in 2013, the Company assumed certain liabilities from a previous member of A Squared which has claimed certain liabilities totaling $925,000~~. The Company disputes the basis for this liability. As of December 31, 2017, the Company believed that the statute of limitations applicable to the assertion of any legal claim relating to the collection of these liabilities has expired and therefore believes this liability is not owed.
~~Note 14:~~ ~~Payroll Protection Program Loan~~
~~On April 30, 2020, the Company received loan proceeds in the amount of $366,267~~ under the Paycheck Protection Program (“PPP”) which was established as part of the Coronavirus Aid, Relief and Economic Security (“CARES”) Act and is administered through the Small Business Administration (“SBA”). The Company repaid the loan, including interest of $3,452 on April 28, 2021.

Note ~~15:~~16: Stockholders’ Equity

Common Stock

As of June 30, ~~2021,~~2022, the total number of authorized shares of ~~Common Stock~~common stock was 400,000,000.
On March 22, 2020, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain long-standing investors (the “Investors”), pursuant to which the Company agreed to issue and sell, in a registered direct offering by the Company directly to the Investors (the “Registered Offering”), an aggregate of ~~4,000,000~~ ~~shares of common stock at an offering price of $0.2568 per share for gross proceeds of approximately $1.0~~ ~~million before deducting offering expenses. The Registered Offering closed on March 25, 2020.~~

As of June 30, ~~2021~~2022, and December 31, ~~2020,~~2021, there were ~~300,791,335~~317,235,116 and ~~258,438,514~~303,379,122 shares of common stock outstanding, respectively.

On ~~January 6, 2021,~~February 24, 2022, the Company issued ~~25,000~~36,196 shares of the Company’s common stock valued at $~~1.40~~65,515 ~~per share for marketing services.~~which were held in escrow as part of the ChizComm acquisition.

On ~~January 21, 2021,~~March 2, 2022, the Company issued ~~136,986~~350,000 shares of the Company’s common stock valued at $~~1.46~~0.3 ~~per share~~million to a consultant for ~~marketing~~advisory services.

On ~~February 1, 2021,~~April 7, 2022, the Company issued ~~1,932,163~~10,365,823 shares of the Company’s common stock valued at $~~1.78~~10.8 ~~per share~~million related to the Wow Acquisition, as ~~partial consideration for~~part of the ~~ChizComm acquisition.~~purchase price. Also included as part of the Wow Acquisition, the Company has issued 691,262 shares, valued at $0.7 million, which will be exchanged at a future redemption date upon tender of ExchangeCo (as defined below) shares as specified in the agreement. See additional information on the ExchangeCo shares below under “Preferred Stock.”

On ~~February 4, 2021,~~May 31, 2022, the Company issued ~~48,495~~736,667 shares of the Company’s common stock valued at $~~1.81~~0.4 ~~per share as partial consideration~~million to a nonemployee for ~~the ChizComm acquisition.~~productions services.

~~On May 14, 2021,~~During the six months ended June 30, 2022, the Company issued ~~469,677~~1,676,046 shares of the Company’s common stock valued at $~~1.55~~1.4 ~~per share for production services.~~million representing delivery of vested RSUs.

23
Preferred Stock

The Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001 per share. 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 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 our Board of Directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

~~There were no~~
37
In connection with the Company’s acquisition of Wow, certain eligible Canadian shareholders, noteholders and optionholders of Wow elected to receive the Exchangeable Shares in the capital of the Wow Exchange Co. Inc. (“ExchangeCo”) instead of shares of ~~preferred~~the Company’s common stock ~~outstanding~~to which they were otherwise entitled.
The shares of ExchangeCo are exchangeable into shares of the Company’s common stock in accordance with their terms. Holders of the ExchangeCo shares are entitled to defined voting rights (the “Voting Rights”) in the Company pursuant to a voting and exchange trust agreement (the “Voting Agreement”) dated April 6, 2022 between the Company, ExchangeCo, 1329258 B.C. Ltd. and Computershare Trust Company of Canada (the “Voting Trustee”). The Voting Trustee holds a single share of Series B Preferred Stock in the capital of the Company (the “Special Voting Share”), which grants the Voting Trustee that number of votes at the meetings of the Company’s shareholders as is equal to the number of shares of the Company’s common stock that at such time have not been delivered pursuant to the tender of ExchangeCo shares. 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, ~~2021~~2022 and December 31, ~~2020.~~
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.

Note ~~16:~~17: Stock Options

On September 18, 2015, the Company adopted the Genius Brands International, Inc. 2015 Incentive Plan (the “2015 Plan”). The total number of shares that can be issued under the 2015 Plan is2,167,667 shares.

On September 1, 2020, the Company adopted the Genius Brands International, Inc. 2020 Incentive Plan (the “2020 Plan”). On August 4, 2020, the Board of Directors voted to adopt the 2020 Plan. The shares available for issuance under the 2020 Plan was approved by stockholders on August 27, 2020. 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, ~~2021,~~2022, the Company granted options to purchase ~~520,000~~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 ~~granted to each~~a five-year term.
As part of the ~~members of~~Wow Acquisition, the ~~Board of Directors~~ ~~20,000~~Company granted replacement options to purchase1,733,100 shares of the Company’s common stock ~~with an option price~~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. These options were cancelled after 30 days of the grant date if not exercised. The fair market value of $~~3.06~~1.5 ~~per share.~~ 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 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 ~~vest on January 27, 2022 and have a five-year term.~~expire within 3 years from the replacement option grant date or the original Wow option, whichever is greater.
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During the three months ended June 30, ~~2021,~~2022, the ~~Company granted options to purchase~~ ~~253,636~~ ~~shares of common stock to employees that~~ ~~fully vest on January 24, 2024 and have a five-year term. The~~ Company also granted ~~20,000~~500,000 options to purchase shares of common stock to a former employee of Wow, as a new ~~member~~employee of the ~~Board~~Company after the acquisition date. The options vest evenly over three years and expire 10 years from the grant date of ~~Directors that~~ ~~vest on~~ June ~~24, 2022 and have a five-year term.~~ ~~The shares have an option price of $1.98~~ ~~per share.~~23, 2022.
24

The ~~table below outlines~~fair value of the ~~weighted average assumptions for~~ options granted during the three months ended ~~March 31, 2021 and~~ June 30, ~~2021:~~2022 was calculated using the BSM option pricing model based on the following assumptions:
Schedule of assumptions used
March 31, 2021 June 30, 2021
Exercise Price $ 3.06 $ 1.98
Dividend Yield 0% 0%
Volatility 143% 101%
Risk-free interest rate 0.41% 0.90%
Expected life of options 5.0 years 5.0 years
Schedule of assumptions used
3/17/2022 Options 4/6/22 Replacement Options 6/23/22 Options
Exercise Price $0.90 $0.51-$1.66 $0.78
Dividend Yield 0% 0% 0%
Volatility 104% 114%-123% 113%
Risk-free interest rate 0.41% 2.67%-2.70% 3.14%
Expected life of options 5.0 years 3.0-4.3 years 5.0 years

The following table summarizes the ~~changes in the Company’s~~ stock option ~~plan~~activity during the six months ended June 30, ~~2021:~~ 2022:
Schedule of stock option activity
Number of Shares Weighted- Average Remaining Contractual Life Weighted- Average Exercise Price
Outstanding at December 31, 2020 9,116,176 1.69 $ 1.69
Granted 933,636 4.70 $ 2.74
Exercised – – $ –
Forfeited 150,000 4.26 $ 2.82
Expired – – $ –
Outstanding at June 30, 2021 9,899,812 8.55 $ 1.76

Unvested at June 30, 2021 3,280,303 $ 2.32
Vested and exercisable June 30, 2021 6,619,509 $ 1.48
Schedule of stock option activity
Number of Shares Weighted- Average Remaining Contractual Life Weighted- Average Exercise Price
Outstanding at December 31, 2021 10,197,312 7.96 $ 1.75
Granted 3,784,515 4.33 $ 1.11
Exercised 0 – $ 0
Forfeited/Cancelled (1,026,915 ) 3.30 $ 1.54
Expired 0 – $ 0
Outstanding at June 30, 2022 12,954,912 6.88 $ 1.55

Unvested at June 30, 2022 3,775,901 6.48 $ 1.43
Vested and exercisable at June 30, 2022 9,179,011 7.05 $ 1.61

During the three ~~and six~~ months ended June 30, 2022 and 2021, the Company recognized $~~762,341~~0.4 million and $~~1,920,965~~0.8, million, respectively, in share-based compensation expense related to stock options. During the ~~three and~~ six months ended June 30, ~~2020,~~2022 and 2021, the Company recognized $~~328,497~~0.8 million and $~~352,311~~1.9, million, respectively, in share-based compensation ~~expense.~~expense related to stock options. The unrecognized share-based compensation asexpense 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 the options are not cancelled or forfeited. As of June 30, ~~2021~~2022 there was $~~3,098,651~~159,311 ~~and will be recognized over a weighted average remaining contractual life~~ of ~~7.62~~ ~~years. The outstanding shares as of June 30, 2021 have an aggregated~~aggregate intrinsic value ~~of $~~0.related to outstanding unvested options. The weighted average fair ~~values~~value per option granted ~~for~~during the ~~six~~three months ended June 30, ~~2021~~2022 was ~~determined to be~~ $~~2.36~~0.64.
39

Note ~~17:~~18: Restricted Stock Units

~~On December 7, 2020,~~During the three months ended March 31, 2022, the Company granted ~~9,075,000~~300,000 ~~shares of Restricted Stock Units (RSU’s)~~RSUs to a nonemployee with a fair market value of $~~12,614,250~~268,500 ~~to certain employees and officers. Of such RSU’s,~~ ~~7,500,000~~ were issued to Andy Heyward, the Company’s Chief Executive Officer (“CEO”) and were to vest in four equal installments on the first, second, third and fourth anniversaries of December 7, 2020, subject to his continued employment (the “service-based awards”). The ~~CEO also received an additional~~ ~~7,500,000~~ ~~RSU’s that vested in four equal installments~~RSUs were granted on ~~the first, second, third~~March 17, 2022, with a three-year vesting period and fourth anniversaries of December 7, 2020, based on achievement of certain performance goals (the “performance-based awards”), which have not been established at the time the CEO and the Company entered into the arrangement, and subject to his continued employment. As the performance conditions have not been established for the performance-based awards, a ~~grant date was not yet established.~~five-year term.

~~On February 1, 2021,~~During the three months ended June 30, 2022, the Company ~~issued~~granted ~~53,763~~469,677 ~~shares of RSU’s~~fully vested RSUs to a nonemployee for production services with a fair market value of $~~74,193~~286,806. The RSUs were granted on May 10, 2022 with a five-year term and recorded as part of capitalized production costs.

On June 23, 2021, the Compensation Committee of the Board of Directors amended the service-based awards granted to the CEO, such that 3,750,000 of such RSUs shall continue to vest in four equal installments on the first, second, third and fourth anniversaries of December 7, 2020, subject to his continued employment and the remaining 3,750,000 RSU’s shall be modified to vest based on performance or market conditions. The previously issued 7,500,000 performance-based awards, along with the 3,750,000 modified service-based awards, shall vest as follows: (i) 3,750,000 RSUs vest when the Company’s common stock closing sale price equals or exceeds $3.00 per share or the Company’s market capitalization equals or exceeds $903,000,000 for 20 consecutive trading days; (ii) 3,750,000 RSUs vest when the Company’s common stock closing sale price equals or exceeds $3.50 per share or the Company’s market capitalization equals or exceeds $1,053,500,000 for 20 consecutive trading days, and (iii) 3,750,000 RSUs vest when the Company’s common stock closing sale price equals or exceeds $3.75 per share or the Company’s market capitalization equals or exceeds $1,128,750,000 for 20 consecutive trading days (the “market conditions”). In addition to the stock price and market capitalization vesting conditions set forth above, such 11,250,000 RSUs may also vest in four equal installments on the first, second, third and fourth anniversaries of December 7, 2020, based on achievement of certain operating performance-based vesting conditions established by the Compensation Committee on June 23, 2021 and subject to his continued employment, adjusted pro-ratably for vesting pursuant to the market conditions. As a result of these modifications, the RSUs subject to the market conditions were valued at $~~15,649,700~~ ~~with a derived service period of 12 months, using a Monte-Carlo simulation model. This resulted in a $221,665~~ ~~increase in stock-based compensation for~~During the three months ended June 30, ~~2021.~~
~~On June 24, 2021,~~2022, the Company ~~issued~~also granted ~~213,636~~500,000 ~~shares~~RSUs to a former employee of ~~RSU’s~~Wow, as a new employee of the Company after the acquisition date, with a fair market value of $~~422,999~~390,000. The RSUs were granted on June 23, 2022, with a three-year vesting period and a five-year term.
25

The following table summarizes the Company’s ~~restricted stock issuance~~RSU activity during the six months ended ~~December 31, 2020:~~June 30, 2022:
Schedule of restricted stock units
Restricted Stock Units Weighted-
Average
Grant Date Fair Value
Per Share Restricted Stock Units
Weighted-
Average Remaining Contractual Life

Weighted-
Average Grant Date Fair Value per Share

Unvested at December 31, 2020 9,075,000 $ 1.39
Unvested at December 31, 2021 15,383,234 4.34 $ 1.40
Granted 267,399 $ 1.86 1,269,677 4.84 $ 0.74
Vested – $ – (3,371,311 ) 4.10 $ 1.29
Forfeited – $ –
Unvested at June 30, 2021 9,342,399 $ 1.40
Forfeited/Cancelled 0 – $ 0
Unvested at June 30, 2022 13,281,600 3.88 $ 1.36

During the three ~~and six~~ months ended June 30, 2022 and 2021, the Company recognized $~~2,231,833~~3.8 million and $~~3,646,356~~0.8, million, respectively, in share-based compensation expense related to ~~RSU awards. The unvested~~RSUs. 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 ~~as of~~expense related to RSUs. The unrecognized share-based compensation expense related to RSUs at June 30, ~~2021 is~~2022 of $~~19,334,519~~2.9 ~~which~~million, will be recognized through the ~~fourth~~second quarter of ~~2024~~2025 based on the remaining vesting periods, assuming the underlying grants are not cancelled or forfeited.

Note ~~18:~~19: Warrants

The Company has warrants outstanding to purchase up to 45,511,965 shares of the Company’s common stock as of June 30, ~~2021~~2022, and December 31, ~~2020.~~
~~On January 22, 2020, the Company entered into~~2021, with a ~~private transaction (the “Private Transaction”) pursuant to a Warrant Exercise Agreement (the “Agreement”) with the holder~~total value of ~~the Company’s existing warrants (the “Original Warrants”). The Original Warrants were originally issued on October 3, 2017, to purchase~~$74.2 million, an ~~aggregate of~~ ~~500,000~~ ~~shares of common stock, at an exercise price of $3.90 per share and were to expire in October 2022.~~
Pursuant to the Agreement, the holder of the Original Warrants and the Company agreed that such Original Warrant holder would exercise its Original Warrants in full and the Company would amend the Original Warrants to reduce the exercise price thereof to $~~0.34~~ ~~(the~~ average closing price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the Agreement) (the “Amended Exercise Price”). The Company received approximately $~~170,000~~ ~~from the exercise of the Original Warrants.~~
~~The placement agent received warrants to purchase 50,000 shares at an exercise price of $0.34 per share.~~
~~Pursuant to the SPA described in Note 11, the Company issued to the note holders warrants to purchase~~ ~~65,476,191~~ ~~shares of common stock, exercisable for a period of~~ 5 ~~five years at an initial~~ exercise price of $~~0.26~~1.86 ~~per share.~~and average term of 5.5 years.

2640

~~The placement agent received~~As of June 30, 2022, 892,857 liability classified derivative warrants to purchase ~~6,547,619~~ shares ~~at an exercise price~~ of $~~0.26~~ ~~per share. The fair values of derivative warrants attached to 2020 Convertible Notes~~the Company’s common stock remained outstanding and Notes conversion option were determined using the Black-Scholes-Merton model with standard valuation inputs. The valuation inputs as of March 17, 2020 included expected volatility of 89%, and annual interest rate of 0.66%. The warrants were determined to be liability classified and adjusted to fair value as ofare revalued each reporting period. As of June 30, ~~2021,~~2022, the warrants ~~to purchase 892,857 shares~~ were ~~outstanding and re-valued~~revalued at ~~$1,513,883,~~$0.6 million, resulting in a ~~net increase~~decrease of $0.3 million in liability ~~of $316,814,~~ as compared to December 31, ~~2020.~~2021. The change in value is recorded ~~in the Warrant Revaluation Expense line item~~ within Net Other Income (Expense) on the condensed consolidated statement of operations. The valuation inputs as of June 30, ~~2021~~2022 included an expected volatility of ~~103%,~~128% and an annual interest rate of ~~0.61%~~2.97%.

On January 28, 2021, the Company entered into letter agreements (the “Letter Agreements”) with certain existing institutional and accredited investors to exercise certain outstanding warrants (the “Existing Warrants”) to purchase up to an aggregate of 39,740,500 shares of the Company’s common stock at their original exercise price of $~~1.55~~ ~~per share (the “Exercise”).~~ The Company ~~received approximately $61.6~~ ~~million in gross proceeds. The Special Equities Group, a division of Bradley Woods & Co. Ltd., acted as~~did not have any warrant ~~solicitation agent and received a cash fee of $4,286,844 million. In consideration for~~activity during the ~~exercise of the Existing Warrants for cash, the exercising holders will receive new unregistered warrants to purchase up to an aggregate of~~ ~~39,740,500~~ shares of common stock (the “New Warrants”) at an exercise price of $2.37 per share and with an exercise period of five years from the initial issuance date. Pursuant to the Letter Agreements, the New Warrants are substantially in the form of the Existing Warrants (except for customary legends and other language typical for an unregistered warrant, including the ability for the holder of the New Warrant to make a cashless exercise if no resale registration statement covering the common stock underlying the New Warrants is effective after six months), will be exercisable immediately, and will have a term of exercise of five years, The Company registered the resale of the shares of common stock issuable upon exercise of the New Warrants. The valuation inputs at January 28, 2021 included expected volatility of 144%, and annual interest rate of 0.42%. The fair value of these warrants was determined to be $69,138,527 using the Black-Scholes option pricing model, which was recorded as a warrant incentive expense and included in the calculation of the Net Loss per Common Share, based on the following assumptions:
Schedule of assumptions for warrant activity
Exercise Price $ 2.37
Dividend Yield 0%
Volatility 144%
Risk-free interest rate 0.42%
Expected life of options 5.0 years
~~The following table summarizes the changes in the Company’s outstanding warrants during the~~three or six months ended June 30, ~~2021:~~ 2022.
Schedule of warrant activity
Warrants Outstanding Number of Shares
Exercise Prices
Per Share
Weighted Average Remaining Contractual Life Weighted Average Exercise Price Per Share
Balance at December 31, 2020 45,511,965 $ 0.21 - 5.30 5.19 years $ 1.55
Warrants Granted 39,740,500 $ 2.37 4.58 years $ 2.37
Warrants Exercised 39,740,500 $ 1.55 4.76 years $ 1.55
Warrants Expired – $ – – $ –
Balance at June 30, 2021 45,511,965 $ 0.21 - 5.30 4.91 years $ 2.27

Exercisable December 31, 2020 7,176,620 $ 0.76 - 6.00 3.77 years $ 2.52
Exercisable June 30, 2021 44,511,965 $ 0.21 - 5.30 4.77 years $ 2.29
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Note ~~19:~~20: Income Taxes

The Company accounts for income taxes in accordance with ~~Accounting Standards Codification Topic~~ASC 740, Income Taxes (“~~Topic~~ASC 740”), which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns. A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized.

~~Topic~~ASC 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company’s financial statements. ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.

The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operation in the provision for income taxes. As of June 30, ~~2021,~~2022 and December 31, ~~2020,~~2021, the Company had 0no accrued interest or penalties related to uncertain tax positions.

The Company files income tax returns in the U.S. federal jurisdiction and in the ~~state~~states of California, ~~and~~ Massachusetts and New ~~Jersey.~~Jersey and will start filing in New York. The Company is currently subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities since inception of the Company.

~~Genius Brands International, Inc.~~The Company is subject to US income taxes on a stand-alone basis. ~~Genius Brands International, Inc.~~The Company, the Beacon Media Group (formerly ChizComm) and ~~ChizComm Canada~~Wow file separate stand-alone tax returns in each jurisdiction in which they operate. ~~ChizComm Canada is a corporation~~Beacon Communications, Wow and Ameba are corporations operating in Canada and isare subject to Canadian income taxes on its stand-alone taxable income.

Note ~~20:~~21: Commitment and Contingencies

~~Effective January 1, 2019, the Company adopted ASC 842,~~ ~~Leases~~~~, using the modified retrospective transition method applied at the effective date~~The following is a schedule of ~~the standard.~~
~~As of January 1, 2019, management recorded lease liability of $2,071,903, right-of-use asset of $2,153,747, accumulated amortization of $124,070, a reversal of previously recorded deferred rent of $37,920~~ ~~and the increase in accumulated deficit of $4,306~~.
Asfuture minimum contractual obligations as of June 30, ~~2021, weighted-average lease term for operating leases equals to~~2022 ~~72.72~~(in thousands) ~~months. Weighted-average discount rate equals to~~ ~~9.86~~%.:
Schedule of future minimum lease payments
2022 2023 2024 2025 2026 Thereafter Total
Operating/Capital Leases $ 1,849 $ 3,285 $ 2,242 $ 1,808 $ 1,825 $ 6,385 $ 17,394
Employment Contracts 3,283 2,189 794 427 0 0 6,693
Consulting Contracts 1,656 503 0 0 0 0 2,159
Debt 63,782 18,440 24 24 18 0 82,288
$ 70,570 $ 24,417 $ 3,060 $ 2,259 $ 1,843 $ 6,385 $ 108,534
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On February 6, 2018, the Company entered into an operating lease for 6,969 square feet of general office space at 131 South Rodeo Drive, Suite 250, Beverly Hills, CA 90212 pursuant to a 91-month lease that commenced on May 25, 2018. The Company pays rent of $364,130 annually, subject to annual escalations of 3.5%.
Effective January 21, 2019, the Company entered into a sublease for the 6,969 square feet of general office space located at 131 South Rodeo Drive, Suite 250, Beverly Hills, CA 90212 pursuant to an 83-month sublease that commenced on February 4, 2019. The subtenant paid the Company rent of $422,321 annually, subject to annual escalations of 3.5%. On September 11, 2020, the Company entered into a Surrender Agreement with the landlord which terminated the 131 South Rodeo Dr. lease agreement. As a result, the Company recorded a decrease in the Right of Use asset, accumulated amortization, and the lease liability of $~~2,142,863, $465,124~~ ~~and $1,760,302~~ ~~respectively. The termination of the lease resulted in a loss of $338,586. Simultaneously, as part of the Surrender Agreement the Sublease was terminated.~~Leases

On January 30, 2019, the Company entered into an operating lease for 5,838 square feet of general office space at 190 N. Canon Drive, Suite 400, Beverly Hills, CA 90210 pursuant to a 96-month lease that commenced on August 1, 2019. The Company pays rent of ~~$392,316~~$0.4 million annually, subject to annual escalations of 3.5%.

On February 1, 2021, as part of the ChizComm Acquisition, the Company assumed an operating lease that was entered into on May 19, 2019 for 6,845 square feet of general office space located at 245 Fairview Mall Drive, Suites 202 and 301, Toronto, Ontario M2J 4T1 pursuant to ~~a 84 month~~an 84-month lease which commenced on October 1, 2019. The Company pays rent of $95,830 annually, subject to annual escalations 5% to 7%.
28
~~On February 1, 2021,~~ Also, as part of the ChizComm Acquisition, the Company assumed an operating lease that was entered into on April 30, 2019 for 3,379 square feet of general office space located at One International Boulevard, 11^th Floor, Mahawh, New Jersey pursuant to a 24-month lease which ~~commenced~~ended on May 1, ~~2019.~~2021. The Company pays rent of $74,338 annually.

On March 2, 2021, the Company entered into an operating lease for 4,765 square feet of general office space located at 1050 Wall Street West, Suite 665, Lyndhurst NJ, 07071 pursuant to an 89-month lease which ~~is expected to commence~~commenced on ~~August~~October 1, 2021. The Company ~~will pay $114,360~~pays rent of $0.1 million annually subject to annual escalations of 2.5%.

~~In addition,~~On April 6, 2022, as part of the Wow Acquisition, the Company ~~has contractual commitments~~assumed an operating lease for ~~employment agreements~~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 ~~employees.~~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 9.7%.

Rental expenses incurred for operating and capital leases during the three months ended June 30, ~~2021~~2022 and ~~June 30, 2020~~2021 were $~~131,403~~0.4 million and $~~207,839~~0.1, million, respectively. Rental expenses incurred for operating and capital leases during the six months ended June 30, ~~2021~~2022 and ~~June 30, 2020~~2021 were $~~243,746~~0.6 million and $~~415,678~~0.2, million, respectively. ~~During the six months ended June 30, 2021, the Company did not receive sub-lease income. During the six months ended June 30, 2020, the Company received sub-lease income of $238,484~~.
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Other Funding Commitments

The ~~following~~Company enters into various agreements associated with its individual properties. Some of these agreements call for the potential future payment of royalties or “profit” participations for either (i) the use of third party intellectual property, in which the Company is obligated to share net profits with the underlying rights holders on a ~~schedule~~certain basis as defined in the respective agreements or (ii) services rendered by animation studios, post-production studios, writers, directors, musicians or other creative talent for which the Company is obligated to share with these service providers a portion of ~~future minimum contractual obligations~~the net profits of the properties on which they have rendered services, as ~~of June 30, 2021, under the Company’s operating leases and employment agreements:~~ defined in each respective agreement.
Schedule of future minimum lease payments
2021 2022 2023 2024 2025 Thereafter Total
Operating Leases $ 227,931 $ 572,896 $ 556,152 $ 578,180 $ 596,844 $ 896,766 $ 3,428,769
Employment Contracts 1,544,508 2,932,027 2,236,788 1,105,566 506,583 – 8,325,472
Consulting Contracts 150,000 187,500 – – – – 337,500
$ 1,922,439 $ 3,692,423 $ 2,792,940 $ 1,683,746 $ 1,103,427 $ 896,766 $ 12,091,741

Note ~~21:~~22: Related Party Transactions

Pursuant to his employment agreements dated ~~November 16, 2018 and November 16,~~December 7, 2020, ~~Mr.~~Andy Heyward, the Company’s CEO, is entitled to an Executive Producer fee of $12,500 per ~~half~~one-half hour episode for each episode he provides services as an executive ~~producer. The third identified series under this employment agreement is~~ producer~~Stan Lee’s Superhero Kindergarten.~~. During the six months ended June 30, ~~2021, 11 half hours were delivered. Accordingly,~~2022, Mr. Heyward ~~is owed~~earned $~~137,500~~0.6 ~~which is included~~million in ~~Due~~producer fees. Mr. 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 ~~Related Party on~~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 ~~condensed consolidated Balance Sheet.~~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 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’s Chief Executive Officer.~~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. During the three ~~and six~~ months ended June 30, ~~2021,~~2022, the Company earned $0 in royalties from this agreement.

AsOn 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 days of the effective date. 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, ~~2021, Mr. Heyward is owed $1,506~~ ~~for reimbursable expenses which are included in Due to~~2022 recorded with the principal balance within Note Receivable from Related Party on the Company’s condensed consolidated ~~Balance Sheet.~~balance sheet. In addition, pursuant to its joint venture with 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!.
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Note ~~22:~~23: Segment Reporting

The ~~Company has determined that it operates in two~~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 ~~production~~CODM does not evaluate the expenses by operating segment and, ~~distribution of children’s content and to provide media and advertising services.~~therefore, it is not separately presented.

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The following table presents ~~sales~~the revenue and net earnings within ~~our~~the Company’s two operating ~~segments.~~segments for the three and six months ended June 30, 2022 and 2021 (in thousands):
Schedule of Segment Reporting
Content Production & Distribution Media & Advertising Services Total
Total Revenue $ 1,681,756 $ 1,724,712 $ 3,406,469
% of segment revenue 49% 51% 100%

Total Assets $ 193,873,259 $ 7,346,495 $ 201,219,754
% of segment assets 96% 4% 100%
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
Total Revenues:
Content Production & Distribution $ 21,042 $ 1,371 $ 21,496 $ 1,682
Media Advisory & Advertising Services 1,082 971 2,067 1,724
Total Revenue $ 22,124 $ 2,342 $ 23,563 $ 3,406

Net Loss:
Content Production & Distribution (12,822 ) (6,851 ) (16,860 ) (82,840 )
Media Advisory & Advertising Services (520 ) (543 ) (1,012 ) (813 )
Total Net Operating Loss $ (13,342 ) $ (7,394 ) $ (17,872 ) $ (83,653 )
Geographic Information
The following table provides information about disaggregated revenue by geographic area for the three months ended June 30, 2022 and 2021 (in thousands):
Schedule of segments by geographic area
Three Months Ended
Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021
Total Revenues:
United States $ 15,441 $ 1,880 $ 15,993 $ 2,616
Canada 5,709 462 6,596 790
United Kingdom 974 0 974 0
Total Revenue $ 22,124 $ 2,342 $ 23,563 $ 3,406

Note ~~23:~~24: Subsequent Events

On July ~~20, 2021, Mr. Heyward was paid~~7, 2022, the Company entered into an Equipment Master Lease Agreement with the Royal Bank of Canada, pursuant to which it opened a ~~bonus~~line of ~~$55,000.~~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 ~~20, 2021, the Company issued 176,101 shares of the Company’s common stock valued at $1.55 per share to a production company for services.~~
~~On August 5, 2021, Mr.~~15, 2022, Andy Heyward was paid ~~$137,500~~$55,000 for ~~accrued producer fees.~~
his second quarter discretionary bonus.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis of our results of operations, financial condition and liquidity and capital resources should be read in conjunction with our financial statements and related notes for the three and six months ended June 30, ~~2021~~2022 and ~~2020.~~2021. Certain statements made or incorporated by reference in this report and our other filings with the Securities and Exchange Commission, in our press releases and in statements made by or with the approval of authorized personnel constitute forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are subject to the safe harbor created thereby. Forward-looking statements reflect intent, belief, current expectations, estimates or projections about, among other things, our industry, management’s beliefs, and future events and financial trends affecting us. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will” and variations of these words or similar expressions are intended to identify forward looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward looking statements. Although we believe the expectations reflected in any forward-looking statements are reasonable, such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. These differences can arise as a result of the risks described in the section entitled “Item 1A. Risk Factors” in our Annual Report on Form 10-K filed on ~~March 31, 2021~~April 6, 2022 and elsewhere in this report, as well as other factors that may affect our business, results of operations, or financial condition. Forward-looking statements in this report speak only as of the date hereof, and ~~forward looking~~forward-looking statements in documents incorporated by reference speak only as of the date of those documents. Unless otherwise required by law, we undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, we cannot assure you that the forward-looking statements contained in this report will, in fact, transpire.

Overview

The ~~management’s discussion~~Management’s Discussion and ~~analysis~~Analysis of Financial Condition and Results of Operations (“MD&A”) is ~~based on~~intended to provide readers of our condensed consolidated financial statements ~~which have been prepared in accordance~~ with ~~accounting principles generally accepted in~~ the ~~United States~~perspectives of ~~America. The preparation~~management. This should allow the readers of ~~these financial~~this report to obtain a comprehensive understanding of our businesses, strategies, current trends, and future prospects. It should be noted that the MD&A contains forward-looking statements ~~requires us to make certain estimates~~that involve risks and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.uncertainties.

Our Business

Organization and Nature of Business
Genius Brands International, Inc. (“we,” “us,” “our,” or the “Company”) is a publicly traded (NASDAQ:GNUS) global content and brand management company that creates, produces, licenses, and ~~licenses~~broadcasts, timeless and educational, multimedia ~~content.~~animated content for children. Led by experienced industry personnel, we distribute content primarily on streaming platforms and television and we license our ~~content in all formats as well as~~properties for a broad range of consumer products based on our characters. We are a leading “work for hire” producer for many of the streaming outlets and IP holders. In the ~~children's~~children’s media sector, our portfolio features “content with a purpose” for toddlers to tweens, ~~which provides~~providing enrichment as well as entertainment. ~~New intellectual property titles include~~ ~~Stan Lee’s Superhero Kindergarten~~ ~~produced~~Our programs along with ~~Stan Lee’s Pow! Entertainment, and Oak Productions. Arnold Schwarzenegger lends his voice as the lead and is also an Executive Producer on the series. The show is~~those programs we acquire and/or license, are being broadcast in the United States on our wholly-owned ~~distribution outlet,~~ advertisement supported video on demand (“AVOD”) service, Kartoon Channel!~~. Other newer series include, the preschool property~~ ~~Rainbow Rangers~~, ~~which debuted in November 2018~~and our subscription video on ~~Nickelodeon~~demand (“SVOD”) distribution outlets, Kartoon Channel! Kidaverse and ~~which was renewed for a second season~~Ameba TV. These streaming services are available on Apple TV, Apple iOS, Android TV, Android mobile, Amazon Prime, Amazon Fire, Tubi, Roku, Comcast, Cox, Dish/Sling, Zumo, Pluto, Samsung Smart TVs, LG Smart TVs, as well as YouTube, among other popular platforms. Our in-house owned and ~~preschool property~~produced shows include Stan Lee’s Superhero Kindergarten starring Arnold Schwarzenegger, Llama Llama ~~which debuted on Netflix~~starring Jennifer Garner, Rainbow Rangers, KC Pop Quiz, and the upcoming Shaq’s Garage starring Shaquille O’Neal, scheduled to debut in ~~January 2018 and was renewed by Netflix for a second season.~~the fourth quarter of 2022. Our library titles include the award-winning Baby Genius, adventure comedy Thomas ~~Edison's~~Edison’s Secret ~~Lab~~®Lab®, and Warren Buffett’s Secret Millionaires Club, created with and starring iconic investor Warren Buffett, which is distributed across our Genius Brands Network on Comcast’s Xfinity on Demand, AppleTV, Roku, Amazon Fire, YouTube, Amazon Prime, Cox, Dish, Sling and Zumo, as well as Connected TV. In July 2020, we entered into a binding term sheet with POW, Inc. (“POW!”) in which we agreed to form an entity with POW! to exploit 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”. POW! and the Company executed an Operating Agreement for the joint venture, effective as of June 1, 2021. This agreement enables us 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, from which Genius Brands plans to develop and license multiple properties each year. We are also in production on a new animated series starring Shaquille O’Neal called ~~Shaq’s Garage.~~
~~In addition, we act as licensing agent for Penguin Young Readers, a division of Penguin Random House LLC which owns or controls the underlying rights to~~ ~~Llama Llama~~~~, leveraging our existing licensing infrastructure to expand this brand into new product categories, new retailers, and new territories.~~
Buffett.

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We license our programs to other services worldwide, in addition to the operation of our own channels, including but not limited to Netflix, HBO Max, Paramount+, Nickelodeon, and satellite, cable and terrestrial broadcasters around the world.
Through our recent investment in Germany’s Your Family Entertainment (“YFE”), a publicly traded company on the Frankfurt Exchange (RTV-Frankfurt), we have gained access to one of the largest animation catalogues in Europe with over 3,000 titles and a global distribution network which currently covers over 60 territories, worldwide and which we are currently in the process of rebranding as Kartoon Channel! Worldwide.
We recently acquired WOW Unlimited Media Inc. (“Wow”), and through that acquisition, we established an affiliate relationship with Mainframe Studios, which is one of the largest animation producers in the world. In addition, Wow owns Frederator Networks Inc. (“Frederator”) and its Channel Frederator Network, the largest animation focused multi-channel network on YouTube, with over 2,500 content creators and currently averages over 1 billion views per month.
We own a select amount of valuable IP, including among them a controlling interest in Stan Lee Universe (“SLU”), through which we control the name, likeness, signature, and all consumer product and IP rights to Stan Lee (the “Stan Lee Assets”). We plan to launch a Stan Lee Centennial program of merchandise set to coincide with Stan Lee’s 100^th birthday on December 28, 2022.
We also own Beacon Media, the largest media buying service for children in North America. Beacon represents over 30 major toy companies, including Playmobile, Bandai Toys, Bazooka, Moose Toys and JAKKS Pacific.
In addition, we recently acquired the Canadian company Ameba TV (“Ameba”), which distributes a profitable SVOD channel for kids and is now expected to become the backbone of the newly launched SVOD channel of Kartoon Channel!, Kartoon Channel! Kidaverse.
The combination of ourselves, our investment in YFE, our acquired companies Wow, Ameba and Beacon Media provides us with world class animation production studios, a catalogue representing thousands of hours of premium global content for children, a broadcast system for delivering that content and an in-house Consumer Products Licensing infrastructure to fully exploit the content.
Environmental, Social and Governance Strategy

We are attempting to shape culture, social attitudes and societal outcomes with our animated content and consumer products that touch the lives of young people and their families. As a global content company that reaches millions of people, we aim to be a positive force in the world.

We are committed to advancing and strengthening our approach to environmental, social and governance (“ESG”) topics to help serve our partners, audiences, employees and shareholders — and to enhance our success as a business.

We are committed to responsible, ethical and inclusionary business practices as outlined below:

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Human Capital Management
As of June 30, 2022, we employed 817 full-time employees and 90 independent contractors.

We aim to build a culture that attracts and retains the best employees and a workplace where everyone feels welcome, safe and inspired. Our human capital management strategy is intended to address the following areas:

A Culture of Diversity, Equity and Inclusion

We seek to foster a culture of diversity, equity and inclusion through a range of partnerships, collaborations, programs and initiatives, some of which are described below.

We strive to be an inclusionary workplace because we believe that it strengthens our business. In 2021, we created the role of Chief Diversity Officer. That role is responsible for both helping meet our hiring goals and reviewing the content we create.
· ~~In 2021, we created the role of Chief Diversity Officer. That role is responsible for both helping meet our hiring goals and reviewing the content we create.~~
· ~~Our board of directors is diverse: 33.3% female and with representation from people of color and the LBGTQ community.~~
· ~~Our diverse workforce is 59% female.~~

Preventing Harassment and Discrimination

We have enacted policies addressing harassment, discrimination and other behaviors that could create a hostile workplace, some of which are described below.

· We make available to our employees, training on preventing sexual harassment, discrimination and retaliation.
· We expect employees to report any violations of Company policies, including sexual harassment, they witness. Among other ways, employees can report incidents of harassment using our anonymous complaint and reporting hotline.

Social Impact and Corporate Social Responsibility

We believe that the content we produce, primarily directed at young people and their families, both reflects and influences how our young viewers perceive and understand important issues. We endeavor to earn our viewers’ trust through a variety of practices, and we are focused on using our platforms to create positive social impacts.

By way of just a few examples: in our show Rainbow Rangers, a diverse cast of girls works to save animals and protect the environment, while demonstrating the power of teamwork; in our Llama Llama series, we teach kindness and inclusion, and feature a differently abled character, which we have been told is appreciated by moms and kids who deal with physical challenges. In the earliest days of the COVID-19 pandemic, we spread public service messages to keep our audiences safe and informed with animated shorts featuring the iconic voices from our series including Warren Buffett from The Secret Millionaires Club and Jennifer Garner, the voice of Mama Llama from the Llama Llama series.

Our mission statement says it all: “Content with a Purpose.” Social justice, caring about the environment and modeling appropriate and inclusionary behavior for kids has been part of our company for many years and we are constantly seeking ways to improve on what we have already been doing.

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~~Recent Financings~~Acquisition of Wow Unlimited Media Inc.

On ~~January 28,~~April 6, 2022, we completed the acquisition of Wow. On October 26, 2021 weour wholly-owned subsidiary, 1326919 B.C. LTD., a corporation existing under the laws of the Province of British Columbia and Wow, entered into ~~letter agreements (the “Letter Agreements”) with certain existing institutional~~an Arrangement Agreement to effect a plan of arrangement under the arrangement provisions of Part 9, Division 5 of the Business Corporations Act. We purchased 100% of Wow’s issued and ~~accredited investors to exercise certain~~ outstanding ~~warrants (the “Existing Warrants”) to purchase up to an aggregate of 39,740,500~~shares for $38.3 million in cash and 11,057,085 shares of our common stock.
Recent Investments
Following the initial equity investment in YFE during the fourth quarter of 2021, we 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, we 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 us, at 2.00 EUROS per share or $0.6 million. On April 5, 2022, we exercised our subscription rights to purchase an additional 914,284 shares of YFE’s common stock at ~~their original exercise price of $1.55~~3.00 EUROS per share, ~~(the “Exercise”). We received approximately $61.6~~or $2.7 million, increasing the number of YFE’s outstanding shares to 6,857,132 and our ownership in ~~gross proceeds. The Special Equities Group, a division~~YFE to 49.2% as of Bradley Woods & Co. Ltd., acted as warrant solicitation agent and received a cash fee of approximately $4.3 million. In consideration for the exercise of the Existing Warrants for cash, the exercising holders received new unregistered warrants to purchase up to an aggregate of 39,740,500 shares of common stock (the “New Warrants”) at an exercise price of $2.37 per share and with an exercise period of five years from the initial issuance date. Pursuant to the Letter Agreements, the New Warrants are substantially in the form of the Existing Warrants (except for customary legends and other language typical for an unregistered warrant, including the ability for the holder of the New Warrant to make a cashless exercise if no resale registration statement covering the common stock underlying the New Warrants is effective after six months), were exercisable immediately, and we were required to register the shares of common stock underlying the New Warrants for resale.June 30, 2022.

Coronavirus (COVID-19)

~~With respect~~We continue to the ongoing and evolving coronavirus (“COVID-19”) outbreak, which was designated as a pandemic by the World Health Organization on March 11, 2020, COVID-19 has caused substantial disruption in international and U.S. economies and markets. COVID-19 has had an adverse impact on the entertainment industry and, if repercussions of COVID-19 are prolonged, could have a significant adverse impact onwork with our ~~business, which could be material. The majority of our~~stakeholders (including customers, employees, have been working remotely from home, with only a few individuals monitoring the office as needed. A safe return-to-work plan has been developed. We had announced a return to office date of September 7, 2021, for fully vaccinated employees. However, due to a recent surge in COVID-19 cases and the increased transmissibility ofCOVID-19 variants, there may be a further delay in returning, in-person, to the office. We have not experienced any disruption in our supply chain, nor have we experienced any negative impact from our animation production partners. However, shipping logistical issues and increased expenses due to COVID-19 may impact our consumer productsconsumers, suppliers, business partners and ~~our projected advertising revenues. With regard~~local communities) to content distribution, we have observed demand increases for streaming entertainment services in 2021. If there is a further resurgence and the COVID-19 outbreak is prolonged, we may see a negative impact on our revenues.
~~Our management cannot at~~responsibly address this ~~point estimate the impact of COVID-19 on our business and no provision for COVID-19 is reflected in the accompanying financial statements.~~global pandemic. We will continue to ~~actively~~ monitor the situation and ~~may take further actions that alter~~assess possible implications to our business ~~operations as may be required by federal, state, local or foreign authorities, or~~and our stakeholders and will take appropriate actions in an effort to mitigate adverse consequences. We cannot assure you that we ~~determine~~will be successful in any such mitigation efforts. The extent to which the COVID-19 pandemic will continue to negatively impact our operations will depend on future developments which are inhighly uncertain and cannot be predicted with confidence, including the ~~best interests~~duration of the pandemic, the emergence of new virus variants, new information which may emerge concerning the severity of the COVID-19 pandemic, outbreaks occurring at any of our ~~employees, customers, partners~~facilities, the actions taken to control the spread of COVID-19 or treat its impact, and ~~stockholders. To date, we believe that~~changes in worldwide and U.S. economic conditions. Further deteriorations in economic conditions, as a result of the COVID-19 ~~has not caused~~pandemic or otherwise, could lead to a further or prolonged decline in demand for our products and services and negatively impact our business. It may also impact financial markets and corporate credit markets which could adversely impact our access to financing or the terms of any such financing. We cannot at this time predict the extent of the impact of the COVID-19 pandemic and its resulting economic impact, but it could have a material ~~negative impact~~adverse effect on our business, ~~including~~financial position, results of operations and cash flows. To the ~~effects~~extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in “Item 1A. Risk Factors” and elsewhere in the 2021 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on April 6, 2022, such as our ~~customers, suppliers~~ability to protect our information technology networks and infrastructure from unauthorized access, misuse, malware, phishing and other events that could have a security impact as a result of our remote working environment or ~~vendors, or on~~otherwise. On March 15, 2022, we began implementing our ~~financial results.~~“Return to Office” plan. We continue to be flexible with employee in-office requirements as we adjust to COVID-19 outbreaks and employee preferences for remote work.
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Results of Operations

Our summary results for the three months ended June 30, 2022 and June 30, 2021 ~~and~~are below.
Revenues
Three Months Ended
June 30, 2022 June 30, 2021 Change % Change
(in thousands, except percentages)
Production Services Revenue $ 10,018 $ – $ 10,018 –%
Content Distribution 8,529 135 8,394 6,218%
Licensing & Royalties 2,495 1,236 1,259 102%
Media Advisory & Advertising Services 1,082 971 111 11%
Total Revenue $ 22,124 $ 2,342 $ 19,782 845%
Production Services revenue is generated specifically by Wow providing animation production services for the three months ended June 30, ~~2020 are below.~~
~~Revenues~~
Three Months Ended
June 30, 2021 June 30, 2020 Change % Change
Licensing & Royalties $ 1,236,156 $ 162,759 $ 1,073,397 660 %
Media Advisory & Advertising Services 971,324 – 971,324 N/A
Television & Home Entertainment 67,959 326,244 (258,285 ) (79 )%
Advertising Sales 66,102 70,357 (4,255 ) (6 )%
Product Sales 664 1,319 (655 ) (50 )%
Total Revenue $ 2,342,205 $ 560,679 $ 1,781,526 318 %
2022, since the acquisition of the Company at the start of the quarter.

Content Distribution revenue is generated from the distribution of our properties for broadcast on television, video-on-demand (“VOD”) or SVOD in domestic and international markets and the sale of DVDs for home entertainment through our partners. Content Distribution also includes our advertising sales generated on our digital networks, the Kartoon Channel! in the form of either flat rate promotions or advertising impressions served, SVOD revenues generated by Ameba and revenue generated by Frederator on its multi-channel network.
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Fluctuations in Content Distribution revenue are based on the achievement of revenue recognition criteria such as the start of a license period and the delivery of the content or advertisement to the customer. Revenue related to our AVOD and SVOD, including advertising sales during the three months ended June 30, 2022, increased 6,218% as compared to the three months ended June 30, 2021, primarily due to the acquisition of Ameba, Wow and Frederator, increasing revenue by $7.7 million.

Licensing ~~and~~& Royalties ~~revenue include~~revenues are generated by the items ~~for~~in which we license the rights to our copyrights and trademarks of our brands and those of the brands for which we act as a licensing agent. ~~During~~Revenue related to our licensing and royalties for the three months ended June 30, ~~2021~~2022 increased 102% as compared to the three months ended June 30, ~~2020, Licensing and Royalties revenue increased $1,073,397 or 660%. The increase was primarily~~2021, due to ~~proceeds received in conjunction with~~entering an agreement for the ~~mutually agreed termination~~licensing of certain ~~licensing rights.~~Stan Lee Assets.

Media Advisory & Advertising Services revenue is a combination of client retainer fee-based services and media ~~commissions.~~commissions generated by our wholly-owned subsidiary, Beacon Media Group, which we acquired on February 1, 2021. The increase of ~~$971,324 was a result of the ChizComm acquisition on February 1, 2021.~~
Television & Home Entertainment revenue is generated from distribution of our properties for broadcast on television, video-on-demand (“VOD”), or subscription video-on-demand (“SVOD”) in domestic and international markets and the sale of DVDs for home entertainment through our partners. Fluctuations in Television & Home Entertainment revenue occur period over period based on the achievement of revenue recognition criteria such as the start of a license period and the delivery of the content to the customer. During11% during the three months ended June 30, ~~2021~~2022 as compared to the three months ended June 30, ~~2020, Television & Home Entertainment revenue decreased $258,285, or 79%.~~2021 represents new customers acquired, net of churn, during the period.
49
Expenses
Three Months Ended
June 30, 2022 June 30, 2021 Change % Change
(in thousands, except percentages)
Marketing and Sales $ 972 $ 1,541 $ (569 ) (37)%
Direct Operating Costs 14,648 1,269 13,379 1,054%
General and Administrative 15,105 7,106 7,999 113%
Total Expenses $ 30,725 $ 9,916 $ 20,809 210%
Marketing and Sales expenses consist primarily of advertising expenses and certain payments made to our marketing partners. Advertising expenses include promotional activities such as digital and television advertising. Marketing expenses also include payroll and related expenses for personnel that support marketing activities. The decrease ~~was primarily due to the recognition of revenue related to the delivery of~~ ~~Rainbow Rangers~~ ~~Season 2~~ in ~~2020. There was no comparable delivery during the same period 2021.~~
~~Advertising~~marketing and sales ~~are generated on the Kid Genius Cartoon Channel in the form of either flat rate promotions or advertising impressions served. Advertising sales decreased by $4,255 or 6%, during~~expenses for the three months ended June 30, ~~2021~~2022 as compared to the three months ended June 30, ~~2020. The decrease~~2021 was primarily due to ~~reduced Ad impressions to drive an increase in market share and user growth.~~
Product sales are generated through Merch by Amazon and consist of on-demand printed t-shirt sales for the Llama Llama and Rainbow Rangers brands. Product sales decreased $655 or 50%, during the three months ended June 30, 2021 compared to the three months ended June 30, 2021.
~~Expenses~~
Three Months Ended
June 30, 2021 June 30, 2020 Change % Change
Marketing and Sales $ 1,540,882 $ 128,556 $ 1,412,326 1,099 %
Direct Operating Costs 1,269,301 440,015 829,286 188 %
General and Administrative 7,106,151 2,368,834 4,737,317 200 %
Interest Expense 8,803 430,606 (421,803 ) (98 )%
Total $ 9,925,137 $ 3,368,011 $ 6,557,126 195 %
~~Marketing and sales expenses increased $1,412,326, or 1,099%, for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, primarily due to an increase~~a decrease in marketing and advertising expenses incurred to promote ~~Stan Lee’s Superhero Kindergarten~~ ~~and the~~ Kartoon ~~Channel!.~~Channel.

~~Direct operating costs include costs~~
Amortization, including any impairments of ~~our product sales, unamortizable post-production costs,~~ film and television ~~cost amortization expense,~~costs, makes up the majority of our Direct Operating Costs. Expenses directly associated with the acquisition, salaries and related expenses to the production services employees Mainframe and Frederator, licensing and production of content, such as participation ~~expense~~expenses related to agreements with various animation studios, post-production studios, writers, directors, musicians or other creative talent with which we are obligated to share net profits of the properties on which they have rendered ~~services. During~~services and costs of our product sales make up the ~~three months ended June 30, 2021, we recorded film and television cost amortization expense~~remainder of ~~$553,562 and participation expense of $704,949 compared to expenses of $292,362 and $370,803, respectively, for the three months ended June 30, 2020.~~Direct Operating Costs. The ~~increases~~increase in direct operating costs for the three months ended June 30, ~~2021~~2022 as compared to the three months ended June 30, ~~2020 is~~2021 was primarily due to ~~increased amortization~~the consolidation of service salaries and ~~participation~~channel expenses related to ~~revenues from~~ the ~~Rainbow Rangers~~ ~~property.~~Wow Acquisition.

General and ~~administrative~~Administrative expenses primarily consist ~~primarily~~ of ~~salaries, employee benefits,~~payroll and related expenses, share-based compensation related to ~~stock options, insurances,~~our equity compensation plan, rent, depreciation of our property and equipment and amortization of our intangible assets, as well as ~~other~~ professional fees ~~related to finance, accounting, legal~~ and ~~investor relations. General~~other general corporate expenses. The $8.0 million increase in general and administrative expenses for three months ended June 30, 2021 increased $4,737,317, or 200%, compared to the same period in 2020. This increase was primarily related to the acquisition of the ChizComm entities, increases in legal professional fees, share based compensation, rent expense and directors’ and officers’ insurance.
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~~Interest expense~~ for the three months ended June 30, ~~2021 decreased $421,803, or 98%,~~2022 as compared to the ~~same period~~three months ended June 30, 2021 primarily consisted of a $4.5 million increase in ~~2020. This decrease was due to~~costs associated with the ~~repayment~~acquisition of Wow and Frederator and an increase share-based compensation expense and the ~~outstanding Senior Secured Convertible Notes in 2020.~~consolidation of Wow’s general and administrative expenses for the three months ended June 30, 2022.

Our summary results for the six months ended June 30, 2022 and June 30, 2021 ~~and~~are below.
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Revenues
Six Months Ended
June 30, 2022 June 30, 2021 Change % Change
(in thousands, except percentages)
Production Services Revenue $ 10,018 $ – $ 10,018 –%
Content Distribution 8,942 275 8,667 3,152%
Licensing & Royalties 2,536 1,407 1,129 80%
Media Advisory & Advertising Services 2,067 1,724 343 20%
Total Revenues $ 23,563 $ 3,406 $ 20,157 592%
Production Services Revenue is generated specifically by Wow providing animation production services for the ~~three~~six months ended June 30, ~~2020~~2022.
Content Distribution revenue is generated from the distribution of our properties for broadcast on television, video-on-demand (“VOD”) or subscription video-on-demand (“SVOD”) in domestic and international markets and the sale of DVDs for home entertainment through our partners. Content Distribution also includes our advertising sales generated on our digital network, the Kartoon Channel! in the form of either flat rate promotions or advertising impressions served, SVOD revenues generated by Ameba and revenue generated by Frederator on its multi-channel network.
Fluctuations in Content Distribution revenue are ~~below.~~based on the achievement of revenue recognition criteria such as the start of a license period and the delivery of the content or advertisement to the customer. Revenue related to our AVOD and SVOD, including advertising sales for the six months ended June 30, 2022, increased 3,152% as compared to the six months ended June 30, 2021 primarily due to the acquisition of Ameba, Wow and Frederator, increasing revenue by $7.7 million.
~~Revenues~~
Six Months Ended
June 30, 2021 June 30, 2020 Change % Change
Licensing & Royalties $ 1,406,616 $ 366,124 $ 1,040,492 284 %
Media Advisory & Advertising Services 1,724,712 – 1,724,712 N/A
Television & Home Entertainment 151,430 378,461 (227,031 ) (60 )%
Advertising Sales 122,564 149,014 (26,450 ) (18 )%
Product Sales 1,146 1,819 (673 ) (37 )%
Total Revenue $ 3,406,468 $ 895,418 $ 2,511,050 280 %

Licensing ~~and~~& Royalties ~~revenue include~~revenues are generated by the items ~~for~~in which we license the rights to our copyrights and trademarks of our brands and those of the brands for which we act as a licensing agent. ~~During~~Revenue related to our licensing and royalties for the six months ended June 30, ~~2021~~2022 increased 80% as compared to the six months ended June 30, ~~2020, Licensing and Royalties revenue increased $1,040,492, or 284%. The increase was~~2021 primarily due to ~~proceeds received in conjunction with~~entering an agreement for the ~~mutually agreed termination~~licensing of certain ~~licensing rights. On April 7, 2021, we finalized a Mutual Termination Agreement with Mattel, Inc., with regard to~~ ~~Rainbow Rangers~~ ~~property. The agreement allows us to contract with other companies for the design and manufacturing of~~ ~~Rainbow Rangers~~ ~~toys.~~Stan Lee Assets.

Media Advisory & Advertising Services revenue is a combination of client retainer fee-based services and media ~~commissions.~~commissions generated by our wholly-owned subsidiary, Beacon Media Group, which we acquired on February 1, 2021. The increase of ~~$1,724,712 was a result of the ChizComm acquisition on February 1, 2021.~~
Television & Home Entertainment revenue is generated from distribution of our properties for broadcast on television, VOD, or SVOD in domestic and international markets and the sale of DVDs for home entertainment through our partners. Fluctuations in Television & Home Entertainment revenue occur period over period based on the achievement20% represents an additional month of revenue ~~recognition criteria such as the start of a license period and the delivery of the content to the customer. During~~recognized during the six months ended June 30, 2022 as compared the six months ended June 30, 2021 and new customers acquired, net of churn during the period.
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Expenses
Six Months Ended
June 30, 2022 June 30, 2021 Change % Change
(in thousands, except percentages)
Marketing and Sales $ 1,132 $ 2,143 $ (1,011 ) (47)%
Direct Operating Costs 14,992 1,518 13,474 888%
General and Administrative 25,962 14,039 11,923 85%
Total Expenses $ 42,086 $ 17,700 $ 24,386 138%
Marketing and Sales expenses consist primarily of advertising expenses and certain payments made to our marketing partners. Advertising expenses include promotional activities such as digital and television advertising. Marketing expenses also include payroll and related expenses for personnel that support marketing activities. The decrease in marketing and sales expenses for the six months ended June 30, 2022 as compared to the six months ended June 30, ~~2020, Television & Home Entertainment revenue decreased $227,031, or 60%. The decrease~~2021 was primarily due to ~~the recognition of revenue related to the delivery of~~ ~~Rainbow Rangers~~ ~~Season 2 in 2020. There was no comparable delivery during the same period 2021.~~
Advertising sales are generated on the Kid Genius Cartoon Channel in the form of either flat rate promotions or advertising impressions served. Advertising sales decreased by $26,450 or 18%, during the six months ended June 30, 2021 compared to the six months ended June 30, 2020. Thea decrease ~~was primarily due to reduced Ad impressions to drive an increase in market share and user growth.~~
Product sales are generated through Merch by Amazon and consist of on-demand printed t-shirt sales for the Llama Llama and Rainbow Rangers brands. Product sales decreased $673 or 37%, during the six months ended June 30, 2021 compared to the six months ended June 30, 2021.
~~Expenses~~
Six Months Ended
June 30, 2021 June 30, 2020 Change % Change
Marketing and Sales $ 2,142,710 $ 241,256 $ 1,901,454 788%
Direct Operating Costs 1,517,767 667,521 850,246 127%
General and Administrative 14,039,979 4,131,416 9,908,563 240%
Interest Expense 17,509 1,151,609 (1,134,100 ) (98)%
Total $ 17,717,965 $ 6,191,802 $ 11,526,163 186%
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~~Marketing and sales expenses increased $1,901,454, or 788%, for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily due to an increase~~ in marketing and advertising expenses incurred to promote ~~Stan Lee’s Superhero Kindergarten~~ ~~and~~ the Kartoon ~~Channel!.~~Channel.

~~Direct operating costs include costs~~Amortization, including any impairments of ~~our product sales, unamortizable post-production costs,~~ film and television ~~cost amortization expense,~~costs makes up the majority of our Direct Operating Costs. Expenses directly associated with the acquisition, salaries and related expenses to the production services of Mainframe and Frederator, licensing and production of content, such as participation ~~expense~~expenses related to agreements with various animation studios, post-production studios, writers, directors, musicians or other creative talent with which we are obligated to share net profits of the properties on which they have rendered ~~services. During~~services and costs of our product sales make up the ~~six months ended June 30, 2021, we recorded film and television cost amortization expense~~remainder of ~~$658,369 and participation expense of $704,949 compared to expenses of $292,362 and $370,803, respectively, for the six months ended June 30, 2020.~~Direct Operating Costs. The ~~increases~~increase in direct operating costs for the six months ended June 30, ~~2021~~2022 as compared to the six months ended June 30, ~~2020 is~~2021 was primarily due to ~~increased amortization~~the consolidation of service salaries and ~~participation~~channel expenses into our financial statements related to ~~revenues from~~ the ~~Rainbow Rangers~~ ~~property.~~Wow Acquisition.

General and ~~administrative~~Administrative expenses primarily consist ~~primarily~~ of ~~salaries, employee benefits,~~payroll and related expenses, share-based compensation related to ~~stock options, insurances,~~our equity compensation plan, rent, depreciation of our property and equipment and amortization of our intangible assets, as well as ~~other~~ professional fees ~~related to finance, accounting, legal~~ and ~~investor relations. General~~other general corporate expenses. The $11.9 million increase in general and administrative expenses for the six months ended June 30, ~~2021 increased $9,908,563, or 240%,~~2022 as compared to the same period in 2020. This increase was primarily related to the acquisition of the ChizComm entities, increases in legal professional fees, share based compensation, rent expense and directors’ and officers’ insurance.
~~Interest expense for~~ the six months ended June 30, 2021 ~~decreased $1,134,100, or 98%~~primarily consisted of a $4.5 million increase in costs associated with the acquisition of Wow and Frederator, a $4.2 million increase in share-based compensation expense, a $2.2 million increase related to an increase in salaries and wages, directors’ and officers’ insurance and the consolidation of Wow’s general and administration expenses for the three months ended June 30, 2022.
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Other Income (Expense), ~~compared to the same period~~ Net
Components of other income (expense), net are summarized as follows (in ~~2020. This decrease was due to the repayment of the outstanding Senior Secured Convertible Notes in 2020.~~thousands):
Three Months Ended
Six Months Ended

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021

Gain (Loss) on Warrant Revaluation (a) $ 227 $ 119 $ 269 $ (317 )
Loss on Foreign Exchange (b) (1,073 ) (5 ) (1,262 ) (7 )
Loss on Marketable Securities Investments (c) (44 ) – (123 ) –
Gain (Loss) on Revaluation of Equity Investment in YFE(d) (2,494 ) – 2,901 –
Interest Income (e) 253 75 501 122
Warrant Incentive Expense (f) – – – (69,139 )
Interest Expense (g) (418 ) (9 ) (473 ) (18 )
Net Other Income (Expense) $ (3,549 ) $ 180 $ 1,813 $ (69,359 )
(a) 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.
(b) 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.
(c) We started investing in marketable securities during the three months ended June 30, 2021. The net realized loss on marketable securities recognized during the three and six months ended June 30, 2022 reflects the loss in the investments in available-for-sale securities that will not be recovered due to prepayments of principals on certain mortgage-backed securities. We did not incur any realized losses on marketable securities during the three and six months ended June 30, 2021.
(d) The gain (loss) on revaluation of the equity investment in YFE is the change in fair value recognized on our investments in YFE accounted for using the fair value option. The gain (loss) is a result of the change in YFE’s stock price at the end of the current reporting period.
(e) Interest Income received during the three and six months ended June 30, 2022 and 2021, primarily consists of cash interest received on the investments in marketable securities, net of amortization of premiums.
(f) 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.
(g) Interest expense during the three and six months ended June 30, 2022 primarily consists of $0.2 million of interest incurred on our margin loan collateralized by our marketable security investments and $0.3 million of interest incurred on our production facilities loan and bank indebtedness assumed as part of the Wow Acquisition.
53

Liquidity and Capital Resources

During the six months ended June 30, ~~2021,~~2022, our cash, ~~and~~ cash equivalents and ~~marketable security positions increased~~restricted cash decreased by ~~$38,308,505, net. Cash~~$2.2 million. The decrease was primarily due to cash used in investment activities, inclusive of the Wow and ~~cash equivalents were~~Ameba acquisitions and the YFE investments, of $41.2 million, $17.7 million used ~~to purchase~~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, we held marketable securities with a fair value of ~~$80,902,119~~$97.4 million as available-for-sale, a decrease of $15.1 million as compared to December 31, 2021. The available-for-sale securities, which consist principally of corporate and government debt securities, are also available as a source of liquidity. As our recent focus has been on expanding its business, excess cash and liquid investments have been utilized to pay our margin loan down.
We borrowed an additional $59.0 million from our investment margin account during the six months ended June 30, ~~2021.~~2022 and repaid $4.5 million with cash received from sales and/or redemptions of its marketable securities. During the three months ended March 31, 2022, the borrowed amounts were used to finance our additional investments in YFE and the closing of the acquisitions of Ameba and WOW, in each case pledging certain of our marketable securities as collateral. During the three months ended June 30, 2022, the additional borrowings of $3.2 million related to the Company’s final obligated purchase of YFE shares and additional transactional costs in the acquisition of Wow. 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 balance of $34.6 million during the six months ended June 30, 2022. We incurred interest expense of $201,160 during the six months ended June 30, 2022. The investment margin account borrowings do not mature but are payable on demand as the custodian can issue a margin call at any time, therefore the margin loan is recorded as a current liability on our condensed consolidated balance sheets.
Upon the acquisition of Wow, we assumed certain credit facilities (the “Facilities”) with a Canadian bank. The Facilities are comprised of: (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 us and the security reflects substantially all of our and our subsidiary guarantors tangible and intangible assets subject to permitted encumbrances, including a combination of federal and provincial tax credits, other government incentives, production service agreements and license agreements. The Facilities are generally repayable on demand and are subject to customary affirmative and negative covenants, default provisions, representations and warranties and other terms and conditions.
54

Working Capital

As of June 30, ~~2021,~~2022, we had current assets of ~~$152,521,636,~~$150.3 million, including cash and cash equivalents of ~~$58,372,335,~~$7.8 million and marketable securities of $97.4 million and our current liabilities ~~of $15,507,100, resulting in~~were $112.7 million. We had working capital of ~~$137,014,536. As~~$37.6 million as of June 30, 2022 as compared to working capital of $115.1 million as of December 31, ~~2020, we had current assets~~2021. The decrease of ~~$108,566,089, including cash and cash equivalents of $100,456,324, and current liabilities of $7,178,906, resulting in working capital of $101,387,183.~~
~~The increase of $35,627,353~~$77.5 million in working capital as compared to December 31, ~~2020,~~2021 was primarily due to anthe $54.7 million increase in our margin loan balance and a $21.8 million increase due to the ~~our cash~~assumption of Wow’s current debt for interim production facilities and ~~cash equivalents and marketable security position, offset by~~bank loans upon the ~~change in net current assets and liabilities as a result of the acquisition of ChizComm.~~acquisition.

During the six months ended June 30, ~~2021,~~2022 we met our immediate cash requirements through existing cash balances. Additionally, we used equity and equity-linked instruments to pay for services and compensation. We have the ability to borrow against license contracts, production service contracts, or refundable tax credits receivable, entering into leases, the issuance of debentures, or the issuance of shares. The Company manages liquidity risk by continuously monitoring actual and forecasted cash flows, using lease financing and by maintaining revolving credit facilities. We believe that our current cash and cash equivalents balances and our investments in available for sale marketable securities are sufficient to support our operations for at least the next twelve months. ~~To meet our short and long-term liquidity needs, we expect to use existing cash balances.~~

Comparison of Cash Flows for the Six Months Ended June 30, ~~2021,~~2022 and ~~the Six Months Ended~~ June 30, ~~2020~~2021

Our total cash, ~~and~~ cash equivalents ~~were $58,372,335~~ and ~~$54,382,775~~restricted cash as of June 30, 2022 and 2021 was $7.5 million and ~~June 30, 2020,~~$58.4 million, respectively.
36
Comparison of Cash Flows

Six Months Ended
June 30, 2021 June 30, 2020 Change % Change
Cash used in operations $ (8,972,775 ) $ (2,331,260 ) $ (6,641,515 ) (285) %
Cash used in investing activities (89,316,206 ) (500 ) (89,315,706 ) N/A
Cash provided by financing activities 56,204,992 56,409,414 (204,422 ) (0.36) %
(Decrease)/Increase in cash and cash equivalents $ (42,083,989 ) $ 54,077,654 $ (96,161,643 ) 177 %
Six Months Ended
June 30, 2022 June 30, 2021 Change % Change
(in thousands, except percentages)
Cash Used in Operating Activities $ (17,672 ) $ (8,841 ) $ 8,831 100%
Cash Used in Investing Activities (41,211 ) (89,316 ) (48,105 ) (54)%
Cash Provided by Financing Activities 56,593 56,073 520 1%
Effect of Exchange Rate Changes on Cash 46 – 46 100%
Increase/(Decrease) in Cash, Cash Equivalents and Restricted Cash $ (2,244 ) $ (42,084 ) $ (39,840 ) (95)%

55
Operating Activities

Cash used in operating activities for the six months ended June 30, ~~2021 was $8,972,775~~2022 increased $8.8 million as compared to cash used ~~in operating activities of $2,331,261~~ during the ~~comparable period in the prior year.~~six months ended June 30, 2021. The ~~increase~~change in cash used in operating activities ~~was~~is primarily due to the increase in ~~stock-based compensation expense, accounts receivable (primarily~~cash of $9.5 million used to pay down operating liabilities as compared to the prior period, primarily due to the ~~ChizComm Acquisition) and film and television costs. These increases were partially offset by increases~~increase in ~~accounts payable (primarily due to~~liabilities from the ~~ChizComm acquisition).~~acquisition of Wow.

Investing Activities

Cash used in investing activities for the six months ended June 30, ~~2021 was $89,316,206~~2022 decreased $48.1 million as compared to ~~a use of $500 for~~cash used during the six months ended June 30, ~~2020.~~2021. The ~~increase~~decrease in cash used for investing was primarily due to our ~~investment~~investments in marketable securities of ~~$80,902,119. Investing activities also include~~$80.9 million and the cash payment to acquire ChizComm of $7.8 million during the six months ended June 30, 2021 compared to the cash used to acquire Wow and Ameba of $41.2 million, cash paid ~~net~~for our equity investment in YFE of ~~cash acquired~~$9.5 million, offset by proceeds from marketable securities of $10.0 million during the ~~ChizComm Acquisition of $7,788,877 which occurred on February 1, 2021.~~six months ended June 30, 2022.

Financing Activities

Cash provided by financing activities for the six months ended June 30, ~~2021 was $56,204,992~~2022 increased by $0.5 million as compared to ~~$56,409,414 of~~ cash provided byduring the ~~comparable period in 2020.~~six months ended June 30, 2021. The primary source of cash during the six months ended June 30, ~~2021~~2022 was the net proceeds borrowed from our margin loan of ~~$57,264,656~~$54.5 million and $2.5 million from production loans, compared to the primary source of cash during the six months ended June 30, 2021 of $57.3 million from the warrant exercise during January 2021. ~~During~~
Material Cash Requirements
We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods. Our material cash requirements from known contractual and other obligations primarily relate to our debt and lease obligations and our employment and consulting contracts. The aggregate amount of future minimum purchase obligations under these agreements over the ~~six months ended~~period of next five years is approximately $108.5 million as of June 30, ~~2020,~~2022, of which about $80.0 million, if the margin loan and interim production facilities are called, could be owed within one year. For additional information on our ~~primary sources~~contractual commitments and timing of ~~cash were~~future payments see Note 21 to the net sales of common shares for $44,755,672, net proceeds from the 2020 Convertible Notes of $6,098,000, the net proceeds of $5,819,319 from warrant exercises and $3,600,000 from the collection of the Investor Notes.condensed consolidated financial statements included in this Report on Form 10-Q.

~~Capital Expenditures~~We plan to utilize our liquidity (as described above) to fund our material cash requirements.

As of June 30, ~~2021,~~2022, we ~~do not~~ have ~~any material~~$5.8 million in commitments for capital ~~expenditures.~~expenditures, related to equipment leases.
56

Critical Accounting Policies

The preparation of the financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.

Note 2, “Summary of Significant Accounting Policies” in Part I, Item 1 of this Form 10-Q and in the Notes to Consolidated Financial Statements in Part II, Item 8 of the ~~2020~~2021 Annual Report on Form 10-K, and “Critical Accounting Policies and Estimates” in Part II, Item 7 of the ~~2020~~2021 Annual Report on Form 10-K describe the significant accounting policies and methods used in the preparation of our condensed consolidated financial statements.

37
Off Balance Sheet Arrangements

We have no off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’). Disclosure controls and procedures include, without limitation, controls and procedures that are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective for the six months ended June 30, ~~2021~~2022, in ensuring that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the ~~Securities and Exchange Commission~~SEC rules and forms.
57

Changes in Internal Control over Financial Reporting

~~There were no changes~~During the six months ended June 30, 2022, we continued to execute upon our 2021 planned remediation actions as disclosed in Item 9A. of our 2021 Annual Report on Form 10-K which was filed with the SEC on April 6, 2022, which are all intended to strengthen our overall control environment. This includes hiring additional accounting personnel at our corporate headquarters and other locations. We are committed to maintaining a strong internal control environment and believe that these remediation efforts will represent significant improvements in our control environment. Our management will continue to monitor, implement, test and evaluate the relevance of our risk-based approach and the effectiveness of our internal ~~control~~controls and procedures over financial reporting ~~that occurred during the quarter ended June 30, 2021, that have materially affected,~~on an ongoing basis and is committed to taking further action and implementing additional enhancements or ~~are reasonably likely to materially affect, our internal control over financial reporting.~~improvements, as necessary and as funds allow.

Inherent Limitations over Internal Controls

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

3858

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

As of June 30, ~~2021,~~2022, there were no material pending legal proceedings to which ~~we are~~the Company is a party or as to which any of its property is subject other than described below.
~~On June 16, 2021, the Company was named as a defendant in a lawsuit filed in the U.S. District Court for the Central District of California styled~~ ~~A Parent Media Co. Inc. v. Genius Brands International, Inc.~~, Case No. 2:21-CV-04897, alleging that the Company has infringed the plaintiff’s federally registered trademarks KIDOODLE.TV, KIDOODLE and KIDOODLETV by sponsoring Google Ads in which the plaintiff’s trademarks appeared. The Company has denied the plaintiff’s allegations and believes that in the event of a finding of liability any potential damages would be nominal. The case is in the early stages with an initial status conference scheduled for August 30, 2021, and it is likely that a close of discovery will be set in early 2022 with a trial date scheduled for mid-to-late 2022.

As previously disclosed, the Company, its Chief Executive Officer Andy Heyward, and its Chief Financial Officer Robert Denton, ~~are~~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. Securities Litigation, Master File No. 2:20-cv-07457 DSF (RAOx). ~~In a consolidated amended complaint filed February 1, 2021,~~Initially, the ~~Lead Plaintiffs allege~~lead plaintiffs alleged generally that the defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 by making materially false or misleading statements regarding the Company’s business and business prospects, artificially inflating the Company’s stock price during an alleged class period running from March 11 through July 5, 2020.(the “Exchange Act”). Plaintiffs ~~seek~~sought unspecified damages on behalf of the alleged class of persons who invested in our common stock during the alleged class period. ~~On March 17,~~The defendants moved to dismiss lead plaintiffs’ amended complaint; and in a decision issued on August 30, 2021, the Court dismissed the amended complaint but granted lead plaintiffs a further opportunity to plead a claim.
On September 27, 2021, the lead plaintiffs filed a second amended complaint, naming the same defendants. The new complaint alleged that the Company made numerous false or misleading statements about the Company’s business and business prospects over an expanded alleged class period, which they say violated Section 10(b) and 20(a) of the Exchange Act. The lead plaintiffs again sought unspecified damages on behalf of the alleged class—persons who invested in the Company’s common stock during the newly alleged class period. In November 2021, defendants filed a motion to dismiss the second amended complaint. ~~That motion is fully briefed, and~~On July 15, 2022, the Court ~~took~~issued a decision dismissing the ~~motion under submission without oral argument~~second amended complaint in ~~early July 2021. We~~its entirety and with prejudice. On August 12, 2022, lead plaintiffs filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit. The Company cannot predict the outcome of ~~the motion~~that appeal or the timing of a decision ~~from the Court. Pending resolution of the motion to dismiss, neither discovery nor other substantive proceedings are occurring or expected.~~on it.

Related to the securities class action, the Company’s directors, ~~Chief Executive Officer~~together with Messrs. Heyward and ~~Chief Financial Officer~~Denton have been named as defendants in several putative ~~shareholder~~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. v. Heyward, et ~~al.~~al., Case No. 20STCV44611; and an additional case pending in the U.S. District Court for the District of Nevada, styled Miceli, etc. v. Heyward, et ~~al.~~al., Case No. 3:21-cv-00132-MMD-WGC. While the allegations and legal claims vary somewhat among the derivative actions, they all generally allege that the defendants breached fiduciary duties owed to the Company by, among other things, causing the Company to issue the supposedly false and misleading statements that underlie the securities lawsuit, purportedly exposing the Company to liability and damaging the Company in an unspecified amount.Company. By these derivative lawsuits, the plaintiffs seek no recovery from the Company. Instead, as a ~~shareholder~~stockholder derivative action, the Company is named as ~~Nominal Defendant; and~~a nominal defendant. The plaintiffs, all alleged stockholders of the Company, purport to sue on behalf and for the benefit of the Company. Pursuant to agreements among the parties, the courts in all of the derivative lawsuits have stayed proceedings pending the outcome of the ~~motion to dismiss in~~securities class action. The Company cannot predict the impact of the securities ~~action.~~class action’s dismissal on the shareholder derivative lawsuits.

~~On July 7, 2020, we received~~
59
The Company is also a ~~letter from~~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 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 ~~law firm alleging~~dozen persons and entities that ~~rights Genius Brands had licensed from POW!, LLC, through its~~participated as investors in certain of the ~~Stan Lee Universe, LLC joint venture, had already been sold~~Company’s private placements of securities in 2020. Plaintiff Augenbaum, who purports to ~~another company, represented by that law firm. The law firm alleged~~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 ~~inter alia, interfering~~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 in the case. The Company cannot predict the outcome of the motions to dismiss, the timing of court action on the requests, or the outcome of the lawsuit more generally. While the Company again notes that plaintiff seeks no relief against the Company, several of the defendant investors have made demands on the Company that it indemnify their costs of defending the action, invoking provisions in the agreements by which the investors acquired Company securities.
The Company believes the indemnification demands lack merit; however, it is in discussions with investors who have made demands. The Company cannot predict the outcome of those discussions or the magnitude of any potential indemnification liability.
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. 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. On February 25, 2022, the Company filed a Motion to Dismiss on the ground that venue is improper. In response, Plaintiffs’ counsel has advised that they will be amending their ~~contractual rights. This matter~~complaint to address the arguments in the Company’s venue motion. Plaintiffs filed their 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. At the hearing on this Motion to Dismiss on June 14, 2022, the Company was ~~referred~~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”). The Company’s Answer to ~~our outside litigation counsel. We have~~the Amended Complaint with these two claims dismissed and stayed respectively is due on August 11, 2022. No trial date has been ~~informed that~~set and discovery continues in the ~~matter is being adjudicated~~case.
On June 3, 2022, Plaintiffs commenced their AAA arbitration proceeding regarding their claim for Breach of Escrow Agreement by filing their Arbitration Demand. The parties are presently in the process of selecting an ~~arbitration~~arbitrator in this proceeding.
On June 6, 2022, Plaintiffs filed a Request for Emergency Relief in the AAA proceeding seeking a mandatory injunction to release the Company shares held in escrow pending indemnification claims under the terms of the PSA. The Company opposed this Emergency Relief Request on multiple grounds (including, without limitation, the lack of any irreparable harm, the adequacy of money damages and ~~that~~ the ~~arbitrator issued a gag order preventing further communications~~Company’s indemnification claim applicable to the escrowed shares) and the hearing on this Emergency Relief Request occurred at the AAA offices in New York on June 24, 2022. The parties are still awaiting the ruling from ~~Plaintiff to 3~~^rd ~~parties.~~the Emergency Arbitrator regarding this requested relief.

In all of the above-mentioned active proceedings, the Company has denied and continues to deny any wrongdoing and intends to defend the claims vigorously. 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.
60

ITEM 1A. RISK FACTORS.

~~There~~Other than as set forth below, there have been no material changes to the Risk Factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021.
Risks Related to our Common Stock
Our failure to meet the continued listing requirements of Nasdaq Capital Market could result in a delisting of our common stock.
If we fail to satisfy the continued listing requirements of Nasdaq Capital Market, such as minimum financial and other continued listing requirements and standards, including those regarding minimum stockholders’ equity, minimum share price, and certain corporate governance requirements, Nasdaq may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we would expect to take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the Nasdaq minimum bid price requirement, or prevent future non-compliance with Nasdaq’s listing requirements.
On March 4, 2022, we received written notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying us that for the preceding 30 consecutive business days, our common stock did not maintain a minimum closing bid price of $1.00 per share (“Minimum Bid Price Requirement”) as required by Nasdaq Listing Rule 5550(a)(2). The notice had no immediate effect on the listing or trading of our common stock, and our common stock will continue to trade on The Nasdaq Capital Market under the symbol “GNUS” at this time.
In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a grace period of 180 calendar days, or until August 31, 2022, to regain compliance with Nasdaq Listing Rule 5550(a)(2). Compliance will be achieved automatically and without further action when the closing bid price of our common stock is at or above $1.00 for a minimum of 10 consecutive business days at any time during the 180-day compliance period, in which case Nasdaq will notify us of our compliance and the matter will be closed.
If, however, we do not achieve compliance with the Minimum Bid Price Requirement by August 31, 2022, we may be eligible for additional time to comply. In order to be eligible for such additional time, we will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the Minimum Bid Price Requirement, and we must notify Nasdaq in writing of its intention to cure the deficiency during the second compliance period. There can be no guarantee that we will regain compliance with the Minimum Bid Price Requirement, that we will maintain compliance with other Nasdaq Listing Rules, or that we will be eligible for a second compliance period.
Risks Related to the Wow Acquisition
We may not realize all of the anticipated financial, marketing and operational benefits of the Wow Acquisition.
The benefits we expect to achieve as a result of the Wow Acquisition will depend, in part, on our ability to realize anticipated growth opportunities and cost synergies. Our success in realizing these growth opportunities and cost synergies, and the timing of this realization, depends on the successful integration of Wow’s business and operations with our business and operations. Even if we are able to integrate our business with Wow’s business successfully, this integration may not result in the realization of the full benefits of the growth opportunities and cost synergies we currently expect within the anticipated time frame or at all. For example, me may be unable to eliminate duplicative costs, achieve growth plans, or effectively increase market share exposure. Moreover, we anticipate that we will incur substantial expenses in connection with the integration of our business with Wow’s business. While we anticipate that certain expenses will be incurred, such expenses are difficult to estimate accurately, and may exceed current estimates.

3961

Accordingly, the benefits from the Wow Acquisition may be offset by costs incurred or delays in integrating the companies, which could cause our financial assumptions to be inaccurate.
Exchange Rate fluctuations could result in significant foreign currency gains and losses and affect our business results.
Because the results of Wow are reported in Canadian dollars, which we will then translate to U.S. dollars for inclusion in our consolidated financial statements, we will be exposed to more significant currency translation risk as a result of the Wow Acquisition. As a result, changes between the foreign exchange rates, in particular the Canadian dollar and the U.S. dollar, affect the amounts we record for our foreign assets, liabilities, revenues and expenses, and could have a negative effect on our financial results. We currently do not enter into hedging arrangements to minimize the impact of foreign currency fluctuations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On ~~May 14, 2021,~~February 18, 2022, the Company issued ~~469,677~~350,000 shares of the Company’s common stock valued at ~~$1.55~~$0.89 per share to a consultant for ~~production~~advisory services. ~~Such~~The issuance of the shares of common stock was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.
On February 24, 2022, the Company issued 36,196 shares of the Company’s common stock valued at $1.81 per share, which were held in escrow as part of the ChizComm acquisition. The issuance of the shares of common stock was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

On December 7, 2020, Andy Heyward, the Company’s Chief Executive Officer, received an aggregate of 15,000,000 restricted stock units (“RSUs”), each representing a contingent right to receive one share of Company common stock, under the Company’s 2020 Incentive Plan, as amended. Of such RSUs, (i) 7,500,000 RSUs were to vest in four equal installments on the first, second, third and fourth anniversaries of December 7, 2020, subject to his continued employment, and (ii) 7,500,000 RSUs vested in four equal installments on the first, second, third and fourth anniversaries of December 7, 2020, based on achievement of certain performance goals and subject to his continued employment. On June 23, 2021, the Compensation Committee of the Board of Directors amended such RSU awards so that 3,750,000 of such RSUs shall continue to vest in four equal installments on the first, second, third and fourth anniversaries of December 7, 2020, subject to his continued employment and the remaining 11,250,000 RSUs shall vest as follows: (i) 3,750,000 RSUs vest when the Company’s common stock closing sale price equals or exceeds $3.00 per share or the Company’s market capitalization equals or exceeds $903,000,000 for 20 consecutive trading days; (ii) 3,750,000 RSUs vest when the Company’s common stock closing sale price equals or exceeds $3.50 per share or the Company’s market capitalization equals or exceeds $1,053,500,000 for 20 consecutive trading days, and (iii) 3,750,000 RSUs vest when the Company’s common stock closing sale price equals or exceeds $3.75 per share or the Company’s market capitalization equals or exceeds $1,128,750,000 for 20 consecutive trading days. In addition to the stock price and market capitalization vesting conditions set forth above, such 11,250,000 RSUs may also vest in four equal installments on the first, second, third and fourth anniversaries of December 7, 2020, based on achievement of certain operating performance-based vesting conditions established by the Compensation Committee and subject to his continued employment and also subject to pro rata adjustment for vesting pursuant to the stock price or market capitalization vesting conditions.None.
40

ITEM 6. EXHIBITS.

Exhibit
No.
Description

31.1* Section 302 Certification of Chief Executive ~~Officer.~~Officer.

31.2* Section 302 Certification of Chief Financial ~~Officer.~~Officer.

32.1** Section 906 Certification of Chief Executive ~~Officer.~~Officer.

32.2** Section 906 Certification of Chief Financial ~~Officer.~~Officer.

101.INS* ~~Inline~~ XBRL Instance Document
101.SCH* ~~Inline~~ XBRL Schema Document
101.CAL* ~~Inline~~ XBRL Calculation Linkbase Document
101.DEF* ~~Inline~~ XBRL Definition Linkbase Document
101.LAB* ~~Inline~~ XBRL Label Linkbase Document
101.PRE* ~~Inline~~ XBRL Presentation Linkbase Document
____________________________
~~104~~* ~~Cover Page Interactive Data File (embedded within the Inline XBRL document)~~Filed herewith
** Furnished herewith

* Filed herewith
** Furnished herewith
4162

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GENIUS BRANDS INTERNATIONAL, INC.

Date: August ~~16, 2021~~17, 2022 By: /s/ Andy Heyward

Andy Heyward
Chief Executive Officer
(Principal Executive Officer)

Date: August ~~16, 2021~~17, 2022 By: /s/ Robert L Denton

Robert L. Denton
Chief Financial Officer
(Principal Financial and Accounting Officer)

4263


ASSETS	June 30, 2021			December 31, 2020
	(unaudited)
Current Assets:
Cash and Cash Equivalents	$	58,372,335		$	100,456,324
Investment in Marketable Securities (amortized cost of $80,902,119)		80,392,494			0
Accounts Receivable, net		5,986,844			1,731,373
Prepaid Expenses and Other Assets		7,769,963			6,378,392
Total Current Assets		152,521,636			108,566,089

Property and Equipment, net		333,898			95,828
Right of Use Assets, net		2,299,230			1,972,364
Film and Television Costs, net		14,972,446			11,828,494
Lease Deposits		78,739			43,001
Investment in ChizComm		0			300,798
Investment in Stan Lee Universe, LLC		1,500,000			1,000,000
Intangible Assets, net		9,518,769			28,694
Goodwill		19,995,036			10,365,806
Total Assets	$	201,219,754		$	134,201,074

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable	$	8,413,030		$	785,526
Accrued Expenses		151,345			408,459
Participations Payable		3,823,742			3,160,016
Deferred Revenue		775,996			684,129
Payroll Protection Program		0			366,267
Warrant Derivative Liability		1,513,883			1,197,068
Lease Liability		219,858			146,099
Due to Related Party		139,006			2,420
Accrued Salaries and Wages		470,240			428,922
Total Current Liabilities		15,507,100			7,178,906

Long Term Liabilities:
Deferred Revenue		3,181,941			3,748,248
Lease Liability		2,499,633			2,052,530
Production Facility, net		274,365			1,099,713
Contingent Earn Out		7,210,000			0
Disputed Trade Payable		925,000			925,000
Total Liabilities		29,598,039			15,004,397

Stockholders’ Equity
Preferred Stock, $0.001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2021 and December 31, 2020		0			0
Common Stock, $0.001 par value, 400,000,000 shares authorized 300,791,335 and 258,438,514 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively		300,792			258,439
Additional Paid in Capital		724,924,857			588,500,680
Accumulated Deficit		(553,200,246	)		(469,557,324	)
Accumulated Other Comprehensive Loss		(403,688	)		(5,118	)
Total Stockholders' Equity		171,621,715			119,196,677

Total Liabilities and Stockholders’ Equity	$	201,219,754		$	134,201,074


	Common Stock				Preferred Stock						Additional Paid-In			Accumulated			Other Comprehensive
	Shares		Amount		Shares			Amount			Capital			Deficit			Loss			Total
Balance, December 31, 2020		258,438,514	$	258,439		–		$	–		$	588,500,680		$	(469,557,324	)	$	(5,118	)	$	119,196,677

Shares Issued for ChizComm acquisition		1,980,658		1,981		–			–			3,525,046			–			–			3,527,027
Proceeds From Warrant Exchange, net		39,740,500		39,740		–			–			57,224,916			–			–			57,264,656
Issuance of Common Stock for Services		161,986		162		–			–			240,838			–			–			241,000
Share Based Compensation		–		–		–			–			2,573,148			–			–			2,573,148
Warrant Incentive		–		–		–			–			69,138,527			–			–			69,138,527
Foreign Currency Translation Adjustment		–		–		–			–			–			–			(275	)		(275	)
Net Loss		–		–		–			–			–			(76,258,943	)		–			(76,258,943	)

Balance, March 31, 2021		300,321,658	$	300,322		–		$	–		$	721,203,155		$	(545,816,267	)	$	(5,393	)	$	175,681,817

Issuance of Common Stock for Services		469,677		470		–			–			727,530			–			–			728,000
Share Based Compensation		–		–		–			–			2,994,172			–			–			2,994,172
Unrealized Loss on Marketable Securities		–		–		–			–			–			–			(509,625)			(509,625)
Foreign Currency Translation Adjustment		–		–		–			–			–			–			111,330			111,330
Net Loss		–		–		–			–			–			(7,383,978	)		–			(7,383,978	)

Balance, June 30, 2021		300,791,335	$	300,792		–		$	–		$	724,924,857		$	(553,200,246	)	$	(403,688	)	$	171,621,715



Balance, December 31, 2019		21,877,724	$	21,878		1,097		$	1		$	75,117,076		$	(66,047,135	)	$	(5,118	)	$	9,086,702

Value of Preferred Stock Conversion		3,171,428		3,172		(667	)		(1	)		(3,171	)		–			–			–
Proceeds from Securities Purchase Agreement, Net		4,000,000		4,000		–			–			911,296			–			–			915,296
Proceeds From Warrant Exchange, net		500,000		500		–			–			169,500			–			–			170,000
Issuance of Common Stock for Services		43,077		43		–			–			27,957			–			–			28,000
Share Based Compensation		–		–		–			–			23,814			–			–			23,814
Net Loss		–		–		–			–			–			(5,835,944	)		–			(5,835,944	)

Balance, March 31, 2020		29,592,229	$	29,593		430		$	–		$	76,246,472		$	(71,883,079	)	$	(5,118	)	$	4,387,868

Proceeds from Securities Purchase Agreement, Net		47,500,000		47,500		–			–			43,792,875			–			–			43,840,375
Issuance of Common Stock for Services		49,610		50		–			–			190,950			–			–			191,000
Share Based Compensation		–		–		–			–			328,497			–			–			328,497
Value of Preferred Stock Conversion		1,571,430		1,571		(330	)		–			(1,571	)		–			–			–
Derivative Liability Adjustment		–		–		–			–			171,835,729			–			–			171,835,729
Note Conversion		65,476,190		65,476		–			–			(120,662	)		–			–			(55,186	)
Warrant Exercise		74,666,711		74,667		–			–			8,159,358			(1,840,384	)		–			6,393,641
Warrant Revaluation		–		–		–			–			219,034,621			–			–			219,034,621
Warrants Issued for Services		–		–		–			–			519,513			–			–			519,513
Net Loss		–		–		–			–			–			(383,258,002	)		–			(383,258,002	)

Balance, June 30, 2020		218,856,170	$	218,857		100		$	–		$	519,985,782		$	(456,981,465	)	$	(5,118	)	$	63,218,056


	June 30, 2021			June 30, 2020
Cash Flows from Operating Activities:
Net Loss	$	(83,642,921	)	$	(389,093,946	)

Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Amortization of Film and Television Costs		759,989			292,362
Depreciation and Amortization Expense		392,861			266,417
Accretion of Discount on Secured Convertible Notes		0			(7,288	)
Bad Debt		(11,164	)		99,792
Stock Issued for Services		41,000			219,000
Share Based Compensation Expense		5,567,320			352,311
Warrant Revaluation Expense		316,814			212,228,659
Lease Modification		(66,859	)		0
Conversion Option Revaluation Expense		0			171,835,729
Debt Discount in Excess of the Principal		0			1,031,852
Warrant Inducement Expense		69,138,527			0

Decrease (Increase) in Operating Assets:
Accounts Receivable, net		1,906,261			974,524
Inventory, net		0			9,277
Prepaid Expenses & Other Assets		(1,134,977	)		(300,662	)
Lease Deposits		(23,348	)		0
Film and Television Costs, net		(3,175,941	)		(381,777	)

Increase (Decrease) in Operating Liabilities:
Accounts Payable		921,952			126,144
Accrued Salaries & Wages		41,318			69,800
Deferred Revenue		(474,440	)		62,290
Participations Payable		663,726			282,406
Due to Related Party		136,586			(493,309	)
Accrued Expenses		(329,479	)		95,159
Net Cash Used in Operating Activities		(8,972,775	)		(2,331,260	)

Cash Flows from Investing Activities:
Investment in Stan Lee Universe, LLC		(500,000	)		0
Cash Payment for ChizComm, net of cash acquired		(7,788,877	)		0
Investment in Marketable Securities		(80,902,119	)		0
Investment in Intangible Assets, net		(5,000	)		(500	)
Investment in Property & Equipment		(120,210	)		0
Net Cash Used in Investing Activities		(89,316,206	)		(500	)

Cash Flows from Financing Activities:
Payments On Lease Liability		131,951			(105,680	)
Proceeds from Sale of Securities Purchase Agreement, net		0			44,755,671
Proceeds From Warrant Exchange		57,264,656			5,819,319
Proceeds from Senior Secured Convertible Notes, net		0			6,098,000
(Repayment)/Proceeds from Payroll Protection Program		(366,267	)		366,267
Collection Of Investor Notes		0			3,600,000
Repayment of Secured Convertible Notes		0			(2,866,664	)
Note Conversion Costs		0			(55,186	)
Repayment of Production Facility, net		(825,348	)		(1,202,313	)
Net Cash Provided by Financing Activities		56,204,992			56,409,414

Net (Decrease)/Increase in Cash and Cash Equivalents		(42,083,989	)		54,077,654
Beginning Cash and Cash Equivalents		100,456,324			305,121
Ending Cash and Cash Equivalents	$	58,372,335		$	54,382,775

Supplemental Disclosures of Cash Flow Information:
Cash Paid for Interest	$	0	$	468,468
Schedule of Non-Cash Financing and Investing Activities
Issuance of common stock for services	$	969,000	$	0
Shares issued for ChizComm acquisition	$	3,527,027	$	0
Liability for Acquisition Earnout Shares	$	7,210,000	$	0
Senior Convertible notes were converted into 65,476,190 shares of Common Stock, 58,522,601 warrants were exercised on a cashless basis resulting in the issuance of 52,551,716 shares of Common Stock	$	0	$	13,750,000
Warrant Derivative Liability	$	0	$	10,229,852

Total purchase price consideration paid
	Amount
Cash consideration at closing	$	8,500,000
Equity consideration at closing		3,527,027
Fair value of Earn-Out shares		7,210,000
Total	$	19,237,027

Assets acquired and liabilities assumed
Cash	$	711,123
Accounts Receivable		6,150,919
Prepaid Expenses		56,594
Lease Deposits		12,390
Fixed Assets		147,689
Trade Name		3,430,000
Customer Relationships		6,140,000
Non-Compete Agreements		60,000
Goodwill		9,607,027
Accounts Payable and Accrued Expenses		(7,006,350	)
Payroll Tax Liability		(72,365	)

Total Consideration	$	19,237,027

Schedule of Total purchase price consideration paid
	Amount
Cash	$	38,310
Genius Common Stock Issued		10,832
Shares Issued Exchangeable for Genius Common Stock		722
Stock Option Value of Replacement Options- Pre-Combination Vested Options		1,213
Severance Payments		1,044
Bonuses		529
Total	$	52,650

Schedule of fair value of the assets acquired and the liabilities assumed
Cash and cash equivalents	$	2,573
Accounts Receivable		34,237
Prepaid Expenses and Other		1,245
Property and Equipment		1,936
ROU Assets		10,311
IP (In-Process)		4,600
IP (Proprietary Productions)		5,684
Tradename		7,631
Customer Relationships		16,064
Networks and Platforms		803
Goodwill		21,399
Accounts Payable		(1,547	)
Participations Payable		(1,380	)
Bank Debt		(1,475	)
Accrued Liabilities		(3,825	)
Interim Production Facilities		(16,930	)
Deferred Revenue		(18,080	)
Lease Liabilities		(10,614	)
Other Liabilities		(60	)
Total Consideration	$	52,650

Total purchase price consideration paid
	Amount
SPA cash consideration at closing	$	3,500
APA cash consideration at closing		300
Net working capital adjustment		269
Total	$	4,069

	·	~~Business prospects and industry expectations.~~Expense estimates.

	·	Contributory asset charges.

Supplemental pro forma information
	Three Months Ended
	Genius Brands Consolidated (including Wow and Ameba results)						Wow		Ameba
	June 30, 2022			June 30, 2021			June 30, 2021⁽¹⁾		June 30, 2021

Total Revenues	$	22,124		$	17,246		$	14,732	$	172

Net Income (Loss)	$	(13,343	)	$	(6,933	)	$	374	$	87

Net Loss per Common Share (Basic and Diluted)	$	(0.04	)	$	(0.02	)	$	0	$	0

Weighted Average Shares Outstanding (Basic and Diluted)		315,519,907			300,646,819			0		0


	Six Months Ended
	Genius Brands Consolidated (including Wow and Ameba results)						Wow		Ameba			Wow		Ameba
	June 30, 2022			June 30, 2021			June 30, 2022⁽¹⁾		June 30, 2022			June 30, 2021⁽¹⁾		June 30, 2021

Total Revenues	$	41,667		$	30,192		$	35,810	$	849		$	26,453	$	333

Net Income (Loss)	$	(16,926	)	$	(82,070	)	$	1,154	$	(32	)	$	1,418	$	165

Net Loss per Common Share (Basic and Diluted)	$	(0.05	)	$	(0.28	)	$	0	$	0		$	0	$	0

Weighted Average Shares Outstanding (Basic and Diluted)		309,682,010			293,969,462			0		0			0		0


		Three Months Ended						Six Months Ended
		June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020
Total Revenues	$	2,342,205		$	1,293,956		$	4,758,768		$	6,963,704

Net Loss		(7,383,978	)		(383,624,941	)		(84,269,062	)		(391,305,960	)

Net Loss per Common Share (Basic and Diluted)	$	(0.02	)	$	(4.89	)	$	(0.29	)	$	(15.85	)

Weighted Average Shares Outstanding (Basic and Diluted)		300,646,819			78,503,414			293,969,462			24,690,154

Summary of Investment in marketable security
	Adjusted Cost		Unrealized Loss			Fair Value		Adjusted Cost		Unrealized Gain/(Loss)			Fair Value
Corporate Bonds	$	45,625,483	$	(371,032	)	$	45,254,451	$	45,446	$	(2,420	)	$	43,026
U.S. Treasury		5,997,340		(32,998	)		5,964,342		24,281		(1,087	)		23,194
Mortgage-Backed									6,610		(413	)		6,197
U.S. agency and government sponsored securities		5,300,463		(6,186	)		5,294,277		13,529		(1,025	)		12,504
U.S. states and municipalities		11,231,747		(81,470	)		11,150,277		11,836		(757	)		11,079
Asset-Backed		12,747,086		(17,939	)		12,729,147		1,453		(25	)		1,428
Total	$	80,902,119	$	(509,625	)	$	80,392,494	$	103,155	$	(5,727	)	$	97,428

Schedule of Unrealized losses and fair values of available for sale securities
	Gross Unrealized Loss			Fair Value
Corporate Bonds	$	(1,328	)	$	24,698
U.S. Treasury		(823	)		18,518
Mortgage-Backed		(358	)		4,604
U.S. agency and government sponsored securities		(871	)		10,717
U.S. states and municipalities		(591	)		8,341
Asset-Backed		(24	)		1,429
Total	$	(3,995	)	$	68,307

Summary of contractual maturity
	Fair Value
Due after 1 year through five years	$	70,408,695
Due after 5 years through 10 years		2,074,020
Due after 10 years (a)		7,909,779
Total	$	80,392,494

Summary of contractual maturity
	Fair Value
Due within 1 year	$	11,763
Due after 1 year through 5 years		73,413
Due after 5 years through 10 years		4,218
Due after 10 years		8,034
Total	$	97,428

Schedule of property and equipment, net
	June 30, 2021			December 31, 2020
Furniture and Equipment	$	124,585		$	19,419
Computer Equipment		231,097			168,122
Leasehold Improvements		43,485			14,182
Software		115,622			68,152
Production Equipment		23,017			0
Property and Equipment, Gross		537,806			269,875
Less Accumulated Depreciation		(203,908	)		(174,047	)
Property and Equipment, Net	$	333,898		$	95,828

Schedule of right of use asset
		June 30, 2021		December 31, 2020
Office Lease Asset	$	2,700,864		$	2,245,093
Printer Lease Asset		12,374			12,374
Right Of Use Asset, Gross		2,713,238			2,257,467

Office Lease Accumulated Amortization		(402,403	)		(274,980	)
Printer Lease Accumulated Amortization		(11,605	)		(10,123	)
Right Of Use Asset, Net	$	2,299,230		$	1,972,364

Schedule of film and television costs activity
	Total
Film and Television Costs, Net as of December 31, 2019	$	9,906,885
Additions to Film and Television Costs		2,901,207
Film Amortization Expense		(979,598	)
Film and Television Costs, Net as of December 31, 2020		11,828,494
Additions to Film and Television Costs		3,903,941
Film Amortization Expense		(759,989	)
Film and Television Costs, Net as of June 30, 2021	$	14,972,446

Schedule of film and television costs activity
Film and Television Costs, Net as of December 31, 2020	$	11,828
Additions to Film and Television Costs		10,650
Film Amortization Expense		(19,538	)
Film and Television Costs, Net as of December 31, 2021		2,940
Additions to Film and Television Costs		16,213
Film Amortization Expense		(2,253	)
Film and Television Costs, Net as of June 30, 2022	$	16,900

Schedule of Goodwill
	Total
Goodwill as of December 31, 2020	$	10,365,806
Acquisition of ChizComm Entities		9,607,027
Foreign Currency Translation Adjustment		22,203
Goodwill as of June 30, 2021	$	19,995,036

Schedule of Intangible Asset
	June 30, 2021			December 31, 2020
Trademarks (a)	$	129,831		$	129,831
Trade Name (b)		3,430,000			0
Customer Relations (c)		6,140,000			0
Non-Compete (d)		60,000			0
Other Intangible Assets (a)		304,028			299,028
Intangible Assets, Gross		10,063,859			428,859
Foreign Currency Translation Adjustment		89,202			0
Less Accumulated Amortization		(634,292	)		(400,165	)
Intangible Assets, Net	$	9,518,769		$	28,694

Schedule of Intangible Asset
	Weighted Average Remaining Amortization Period	June 30, 2022			December 31, 2021
Customer Relationships	9	$	22,205		$	6,120
Digital Networks	17		3,607			0
Trade names	69		11,654			4,000
Technology	3		300			0
Non-Compete	2		60			60
Other Intangible Assets (a)	2		323			301
Intangible Assets, Gross			38,149			10,481

Foreign Currency Translation Adjustment			(786	)		24
Less Accumulated Amortization			(1,702	)		(772	)
Intangible Assets, Net		$	35,661		$	9,733

	(a)	~~Pursuant to FASB ASC 350-30-35,~~Represents the ~~Company reviews these~~remaining unamortized logo and website intangible assets ~~periodically to determine if the value should be retired or impaired due to recent events. During the three months ended June 30, 2021 and June 30, 2020, the Company recognized, $8,276~~ ~~and $10,847, respectively, in amortization expense~~ related to the ~~Trademarks, Product Masters, and Other Intangible Assets. During the six months ended June 30, 2021 and June 30, 2020, the Company recognized, $11,131~~ ~~and $21,638, respectively, in amortization expense related to the Trademarks, Product Masters, and Other Intangible Assets.~~
	~~(b)~~	~~Amount represents fair value of the ChizComm and ChizComm Beacon Media Trade Names which have been determined to have an indefinite useful life.~~
	~~(c)~~	~~Amount represents fair value of the ChizComm and ChizComm Beacon Media Customer Relationships~~merger with ~~a useful life of 12 years. Amortization expense for the three and six months ended June 30, 2021 was $129,277~~ ~~and $214,610, respectively.~~
	~~(d)~~	Amount represents fair value of the Non-Compete agreements as part of the ChizComm acquisition. The Non-Compete agreements have a useful life of 3 years. Amortization expense for the three and six months ended June 30, 2021 was $5,053 and $8,386, respectively.A Squared.

Expected future intangible asset amortization
Fiscal Year:
2022	$	1,427
2023		2,851
2024		2,827
2025		2,720
2026		2,712
Thereafter		23,124
Total	$	35,661

Expected future intangible asset amortization
Fiscal Year:
Remaining 2021	$	276,655
2022		552,963
2023		549,018
2024		524,678
Thereafter		4,185,455
Total	$	6,088,769

Schedule of Goodwill
	Content Production & Distribution			Media Advisory & Advertising Services			Total
Goodwill as of December 31, 2021	$	10,366		$	4,861		$	15,227
Acquisition of Ameba		673			0			673
Acquisition of Wow		21,398			0			21,398
Foreign Currency Translation Adjustment		(558	)		(20	)		(578	)
Goodwill as of June 30, 2022	$	31,879		$	4,841		$	36,720

Schedule of other accrued liabilities
	June 30, 2021		December 31, 2020
Other Accrued Expenses (a)	$	151,345	$	408,459
Accrued Salaries and Wages (b)		470,240		428,922
Total Accrued Liabilities – Current	$	621,585	$	837,381

	~~(a)~~	~~Primarily represents accrued interest and legal fees.~~
	~~(b)~~	~~Represents accrued salaries and wages and accrued vacation payable to employees as of June 30, 2021 and the year ended December 31, 2020.~~