GENIUS BRANDS INTERNATIONAL, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND OPERATING RESULTS. (Form 10-Q)

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 nine months ended
September 30, 2022 and 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 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 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 and Analysis of Financial Condition and Results of
Operations ("MD&A") is intended to provide readers of our condensed consolidated
financial statements with the perspectives of management. This should allow the
readers of 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 that involve risks and
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 broadcasts, timeless and educational,
multimedia animated content for children. Led by experienced industry personnel,
we distribute content primarily on streaming platforms and television and we
license our 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 media sector, our portfolio features
"content with a purpose" for toddlers to tweens, providing enrichment as well as
entertainment. Our programs along with those programs we acquire and/or license,
are being broadcast in the United States on our wholly-owned advertisement
supported video on demand ("AVOD") service, Kartoon Channel!, and our
subscription video on demand ("SVOD") distribution outlets, Kartoon Channel!
Kidaverse and 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 produced shows
include Stan Lee's Superhero Kindergarten starring Arnold Schwarzenegger, Llama
Llama starring Jennifer Garner, Rainbow Rangers, KC Pop Quiz, and the upcoming
Shaq's Garage starring Shaquille O'Neal, scheduled to debut in the fourth
quarter of 2022. Our library titles include the award-winning Baby Genius,
adventure comedy Thomas Edison's Secret Lab®, and Warren Buffett's Secret
Millionaires Club, created with and starring iconic investor Warren Buffett.







  47





We license our programs to other services around the world, in addition to operating our own channels, including but not limited to Netflix, HBO Max, Paramount+, Nickelodeon and broadcasters by satellite, cable and terrestrial worldwide.



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 certain amount of valuable intellectual property, including a controlling interest in Stan Lee Universe (“SLU”), through which we control the name, likeness, signature, and all consumer products and proprietary rights intellectual on Stan Lee (the “Stan Lee Assets”). We plan to launch a Stan Lee Centennial Merchandise Program to coincide with by Stan Lee 100th anniversary 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 inclusive business practices, as set out below:



Human Capital Management



From September 30, 2022we employed 798 full-time employees and 454 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:







  48





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.


Prevent harassment and discrimination

We have adopted policies regarding harassment, discrimination and other behavior 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, which they witness. Among other means, 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 Llamaseries.



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.



The acquisition of Wow Media Unlimited Inc.

On April 6, 2022, we completed the acquisition of Wow. On October 26, 2021 our
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. We purchased 100% of Wow's
issued and outstanding 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 3.00 EUROS per share, or $2.7 million,
increasing the number of YFE's outstanding shares to 6,857,132. As of September
30, 2022, our ownership in YFE was 48.0%.







  49





Coronavirus (COVID-19)

We continue to work with our stakeholders (including customers, employees,
consumers, suppliers, business partners and local communities) to responsibly
address this global pandemic. We will continue to monitor the situation and
assess possible implications to our business and our stakeholders and will take
appropriate actions in an effort to mitigate adverse consequences. We cannot
assure you that we 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 highly uncertain and cannot be
predicted with confidence, including the 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 facilities, the
actions taken to control the spread of COVID-19 or treat its impact, and changes
in worldwide and U.S. economic conditions. Further deteriorations in economic
conditions, as a result of the COVID-19 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 adverse effect on our business, financial position,
results of operations and cash flows. To the 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
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 otherwise. On
March 15, 2022, we began implementing our "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.



Results of Operations



Our summary results for the three months ended September 30, 2022 and September
30, 2021 are below.



Revenues



                                                Three Months Ended
                                         September 30,       September 30,
                                             2022                2021             Change        % Change
                                                        (in thousands, except percentages)
Production Services Revenue             $         9,095     $             -
    $    9,095              -%
Content Distribution                              9,106                 599          8,507          1,420%
Licensing & Royalties                               280                  91            189            208%
Media Advisory & Advertising Services             1,198               1,182
            16              1%
Total Revenue                           $        19,679     $         1,872     $   17,807            951%




Production Services revenue is generated specifically by Wow providing animation
production services for the three months ended September 30, 2022, since the
acquisition of Wow at the start of the second 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.





  50






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
September 30, 2022, increased 1,420% as compared to the three months ended
September 30, 2021, primarily due to the acquisition of Ameba, Wow and
Frederator, increasing revenue by $8.8 million, offset by a $0.3 million
decrease.



Licensing & Royalties revenues are generated by the items 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. Revenue related to our licensing
and royalties for the three months ended September 30, 2022 increased 208% as
compared to the three months ended September 30, 2021, due to entering in an
agreement for the licensing of certain Stan Lee Assets.



Expenses



                                           Three Months Ended
                                     September 30,      September
                                         2022            30, 2021         Change        % Change
                                                  (in thousands, except percentages)
Marketing and Sales                  $         880     $      1,188     $     (308 )         (26)%
Direct Operating Costs                      13,875              634         13,241          2,088%
General and Administrative                  10,363            9,884        
   479              5%
Total Expenses                       $      25,118     $     11,706     $   13,412            115%



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 three
months ended September 30, 2022 as compared to the three months ended September
30, 2021 was primarily due to a decrease in marketing and advertising expenses
incurred to promote Kartoon Channel.



Salaries and related expenses of the animation production services employees of
Mainframe and Frederator make up the majority of our Direct Operating Costs.
Channel expenses, licensing and production of content costs, such as
participation expenses related to profit sharing obligations with various
animation studios, post-production studios, writers, directors, musicians or
other creative talent that have rendered services and amortization, including
any impairments of film and television costs, make up the remainder of Direct
Operating Costs. The increase in direct operating costs for the three months
ended September 30, 2022 as compared to the three months ended September 30,
2021 was primarily due to the consolidation of Wow and Frederator's animation
production service salaries and channel expenses into our direct operating
costs.



General and Administrative expenses primarily consist of payroll and related
expenses, share-based compensation related to our equity compensation plan,
rent, depreciation of our property and equipment and amortization of our
intangible assets, as well as professional fees and other general corporate
expenses. The $0.5 million increase in general and administrative expenses for
the three months ended September 30, 2022 as compared to the three months ended
September 30, 2021 primarily consisted of a $3.0 million increase in costs
associated with the acquisition of Wow and Frederator and a decrease in
share-based compensation expense for the three months ended September 30, 2022.



Our summary results for the nine months ended September 30, 2022 and September
30, 2021 are below.





  51






Revenues



                                                   Nine months Ended
                                          September 30,          September 30,
                                               2022                  2021             Change        % Change
                                          (in thousands, except percentages)
Production Services Revenue             $           19,113      $          
  -     $   19,113              -%
Content Distribution                                18,049                  874         17,175          1,965%
Licensing & Royalties                                2,816                1,497          1,319             88%
Media Advisory & Advertising Services                3,266                2,907            359             12%
Total Revenues                          $           43,244      $         5,278     $   37,966            719%



Production services revenue is generated specifically from Wow providing animation production services for the nine months ended September 30, 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 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 nine months ended September
30, 2022, increased 1,965% as compared to the nine months ended September 30,
2021 primarily due to the acquisition of Ameba, Wow and Frederator, increasing
revenue by $17.3 million, offset by a $0.1 million decrease.



Licensing & Royalties revenues are generated by the items 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. Revenue related to our licensing
and royalties for the nine months ended September 30, 2022 increased 88% as
compared to the nine months ended September 30, 2021 primarily due to entering
an agreement for the licensing of certain Stan Lee Assets.



Media Advisory & Advertising Services revenue is a combination of client
retainer fee-based services and media commissions generated by our wholly-owned
subsidiary, Beacon Media Group, which we acquired on February 1, 2021. The
increase of 12% represents an additional month of revenue recognized during the
nine months ended September 30, 2022 as compared the nine months ended September
30, 2021 and new customers acquired, net of churn during the period.







  52






Expenses



                                              Nine months Ended
                                     September 30,          September 30,
                                          2022                  2021             Change          % Change
                                     (in thousands, except percentages)
Marketing and Sales                $            2,012      $         3,331     $    (1,319 )          (40)%
Direct Operating Costs                         28,865                2,152          26,713           1,241%
General and Administrative                     36,327               23,932 
        12,395              52%
Total Expenses                     $           67,204      $        29,415     $    37,789             128%



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 nine
months ended September 30, 2022 as compared to the nine months ended September
30, 2021 was primarily due to a decrease in marketing and advertising expenses
incurred to promote the Kartoon Channel!



Salaries and related expenses of the animation production services employees of
Mainframe and Frederator make up the majority of our Direct Operating Costs.
Channel expenses, licensing and production of content costs, such as
participation expenses related to profit sharing obligations with various
animation studios, post-production studios, writers, directors, musicians or
other creative talent that have rendered services and amortization, including
any impairments of film and television costs, make up the remainder of Direct
Operating Costs. The increase in direct operating costs for the three months
ended September 30, 2022 as compared to the three months ended September 30,
2021 was primarily due to the consolidation of Wow and Frederator's animation
production service salaries and channel expenses into our direct operating
costs.



General and Administrative expenses primarily consist of payroll and related
expenses, share-based compensation related to our equity compensation plan,
rent, depreciation of our property and equipment and amortization of our
intangible assets, as well as professional fees and other general corporate
expenses. The $12.4 million increase in general and administrative expenses for
the nine months ended September 30, 2022 as compared to the nine months ended
September 30, 2021 primarily consisted of a $6.1 million increase in costs
associated with the acquisition of Wow and Frederator, a $2.5 million increase
in professional fees related to costs to acquire Wow and Frederator and a $1.1
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 September 30, 2022.







  53






Other Income (Expense), Net



Components of other income (expense), net are summarized as follows (in
thousands):




                                               Three Months Ended                       Nine months Ended
                                       September 30,        September 30,       September 30,       September 30,
                                           2022                 2021                2022                2021

Gain (Loss) on Warrant Revaluation
(a)                                   $           166      $           420     $           434     $           103
Loss on Foreign Exchange (b)                   (1,336 )                  5              (2,596 )                (3 )
Loss on Marketable Securities
Investments (c)                                   (36 )                (25 )              (160 )               (25 )
Gain (Loss) on Revaluation of
Equity Investment in YFE(d)                    (4,071 )                  -              (1,170 )                 -
Interest Income (e)                               257                  183                 759                 314
Warrant Incentive Expense (f)                       -                    -                   -             (69,139 )
Interest Expense (g)                             (782 )                 (2 )            (1,256 )               (20 )
Net Other Income (Expense)            $        (5,802 )    $           581     $        (3,989 )   $       (68,770 )



(a) The gain on revaluation of the warrants is linked to the change in fair value of the warrants

outstanding warrants that have been determined to be derivative liabilities

attached to convertible bonds previously issued and converted.

(b) For the three and nine month periods ended September 30, 2022currency loss

foreign exchange primarily relates to the foreign exchange loss on the investment

in YFE’s equity securities accounted for under the fair value option. For

the three and nine months ended September 30, 2021currency loss

exchange related to monetary transactions denominated in foreign currencies.

(c) We started investing in transferable securities during the three months

ended September 30, 2021. Net realized loss on marketable securities

recorded during the three and nine months ended September 30, 2022

reflects the loss of investments in available-for-sale securities which

will not be recovered due to prepayments of principal on certain

securities backed by mortgages. We have not incurred any realized losses on

negotiable securities during the three and nine months ended September 30,

2021.

(d) The loss on revaluation of the investment in YFE corresponds to the change

fair value recorded on our investments in YFE accounted for under the

fair value option. The loss is the result of the change in the YFE share price

at the end of the current reporting period.

(e) Interest income received during the three and nine months ended September

30, 2022 and 2021, consists primarily of cash interest received on

investments in marketable securities, net of amortization of premiums.

(f) Warrant incentive expense relates to the fair value of the new warrants

which were issued in 2021 to certain holders of existing warrants in exchange

for previously issued outstanding warrants.

(g) Interest expense during the three and nine months ended September 30, 2022

mainly consists of $0.4 million and $0.6 millionrespectively, of

interest incurred on our margin loan secured by its

security investments and $0.3 million and $0.6 millionrespectively, of

interest incurred on the production facility loan and bank debt

        assumed as part of the Wow Acquisition.



Cash and capital resources



During the nine months ended September 30, 2022, we had cash, cash equivalents
and restricted cash of $7.1 million, which decreased by $3.0 million from
December 31, 2021. The decrease was primarily due to cash used in investment
activities, inclusive of the Wow and Ameba acquisitions and the YFE investments,
of $35.9 million, $24.2 million used for operational activities, offset by $57.4
million of financing from the margin loan and production facilities and bank
indebtedness assumed in the Wow Acquisition.







  54






As of September 30, 2022, we held marketable securities with a fair value of
$89.9 million as available-for-sale, a decrease of $22.7 million as compared to
December 31, 2021. The available-for-sale securities, which consist principally
of corporate and government debt securities, are also available as a source
of
liquidity.


We borrowed an additional $63.2 million from our investment margin account
during the nine months ended September 30, 2022 and repaid $7.8 million with
cash received from sales and/or redemptions of its marketable securities. 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 September
30, 2022, the additional borrowings of $4.2 million related to quarterly
operational costs. The interest rate for these investment margin account
borrowings fluctuates based on the Federal Funds Rate plus 0.65% with interest
only payable monthly. The weighted average interest rate was 2.65% on an average
margin loan balance of $61.2 million during the three months ended September 30,
2022. The weighted average interest rate was 1.54% on an average margin loan
balance of $43.4 million during the nine months ended September 30, 2022. We
incurred interest expense of $0.6 million during the nine months ended September
30, 2022. The investment margin account borrowings do not mature but are payable
on demand as the custodian can issue a margin call at any time, therefore the
margin loan is recorded as a current liability on 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.



Working Capital



As of September 30, 2022, we had current assets of $143.6 million, including
cash and cash equivalents of $7.1 million and marketable securities of $89.9
million and our current liabilities were $111.2 million. We had working capital
of $32.4 million as of September 30, 2022 as compared to working capital of
$115.1 million as of December 31, 2021. The decrease of $82.7 million in working
capital as compared to December 31, 2021 was primarily due to the $56.0 million
increase in our margin loan balance, a $21.4 million increase due to the
assumption of Wow's current debt for interim production facilities and bank
loans upon the acquisition and the increase of deferred revenue of $10.4
million.



During the nine months ended September 30, 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. We manage liquidity risk by continuously
monitoring actual and forecasted cash flows, using lease financing and by
maintaining our 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.


Comparison of cash flows for the nine months ended September 30, 2022 and
September 30, 2021

Our total cash, cash equivalents and cash restricted for September 30, 2022
and 2021 was $7.1 million and $4.9 millionrespectively.






  55






Comparison of Cash Flows



                                               Nine months Ended
                                       September 30,       September 30,
                                           2022                2021             Change        % Change
                                                      (in thousands, except percentages)

Cash flows used in operating activities ($22,837) ($15,965)

   $   (6,872 )          43 %
Cash Used in Investing Activities             (37,362 )          (135,522 )       98,160           (72)%
Cash Provided by Financing
Activities                                     57,419              55,915          1,504             3 %
Effect of Exchange Rate Changes on
Cash                                             (187 )                 -           (187 )           - %
Decrease in Cash, Cash Equivalents
and Restricted Cash                   $        (2,967 )   $       (95,572 )   $   92,605           (97)%




Operating Activities



Cash used in operating activities for the nine months ended September 30, 2022
increased $6.9 million as compared to cash used during the nine months ended
September 30, 2021 due to an increase in cash used of $10.5 million for
operating liabilities as compared to the prior period, offset by an increase in
cash used of $3.2 million, primarily due to the increase in liabilities assumed
as part of the acquisition of Wow.



Investing Activities



Cash used in investing activities for the nine months ended September 30, 2022
decreased $98.2 million as compared to cash used during the nine months ended
September 30, 2021. The decrease in cash used for investing was primarily due to
a decrease of investment activity in our marketable securities of $141.8 million
during the nine months ended September 30, 2022, as compared to the nine months
ended September 30, 2021. The decrease is partially offset by the increase of
$41.2 million in our investment activity related to the acquisitions of Wow and
Ameba and investments in YFE, as compared to the acquisition of Beacon in the
prior year period.



Financing Activities



Cash provided by financing activities for the nine months ended September 30,
2022 increased by $1.5 million as compared to cash provided during the nine
months ended September 30, 2021. The primary source of cash during the nine
months ended September 30, 2022 was the net proceeds borrowed from our margin
loan of $55.4 million and $3.5 million from production loans, compared to the
primary source of cash during the nine months ended September 30, 2021 of $57.3
million from the warrant exercise during January 2021.



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 period of next five years is
approximately $101.6 million as of September 30, 2022, of which about $64.5
million, could be owed within one year, if the margin loan and interim
production facilities are called. For additional information on our contractual
commitments and timing of future payments see Note 21 to the condensed
consolidated financial statements included in this Report on Form 10-Q.



We plan to use our cash (as described above) to fund our significant cash requirements.

From September 30, 2022We have $3.1 million investment commitments related to equipment rentals.






  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 2021 Annual Report on Form 10-K, and "Critical Accounting Policies and
Estimates" in Part II, Item 7 of the 2021 Annual Report on Form 10-K describe
the significant accounting policies and methods used in the preparation of our
condensed consolidated financial statements.



Off-balance sheet arrangements

We have no off-balance sheet arrangements.

© Edgar Online, source Previews

Comments are closed.