Genius Brands International Responds to Misleading Short Seller Criticisms

Genius Brands International, Inc. “Genius Brands” (NASDAQ:GNUS) today released the following statement from CEO and Chairman Andy Heyward, in response to recent short seller criticisms published online and on certain social media platforms:

“Genius Brands has carefully reviewed the report and social media comments published by two short seller funds last week. These materials contain numerous misleading statements, omissions of key facts, and red herrings. More importantly, the short sellers themselves demonstrate a fundamental misunderstanding of the unique potential of Genius Brands and our position of strength given the current dynamics of our industry.

It is also important to keep in mind how these short sellers make money and what they are trying to do. Make no mistake, their intention – and indeed how they make their money – is to manipulate the stock price of companies like ours in order to profit at the expense of other shareholders. Their interests are directly opposed to shareholders’ interests. In contrast, as one of the largest investors in the Company myself, my interests are fully aligned with those of my fellow shareholders – and will remain so.

With that in mind, I submit the following:

• We are well positioned to create substantial value – With Kartoon Channel! launching on June 15 and to be available in more than 100 million U.S. TV households and 200 million mobile devices, we are positioned to be one of the preeminent ad-supported kids’ digital networks. The service referred to as a ‘Netflix for kids’ is made even stronger by the distinct fact that it is a free service. There are no subscriptions fees, it is ad-supported. Further, we do not anticipate being impacted by COVID-19. The business of cartoons has historically had an appeal that is timeless, and is a rare asset class which has historically been resistant to typical market forces (e.g., the price of gold, oil, interest rates, elections, etc.). While the rest of Hollywood is grinding to a stop during the COVID-19 crisis, we're creating new products for an audience that is growing now out of the new technologies and streaming services. This is especially true at a time when there are more kids at home and in front of their devices during the pandemic. We believe we will see robust and accelerated revenue growth coming forth in this arena for the foreseeable future.

• Our balance sheet is strong – We have $9.75 million of debt; in excess of $45 million of cash, significant receivables from a diverse array of companies across our industry with strong credit profiles, and low overhead. Today, Genius Brands has enough cash on our balance sheet to meet our existing obligations and execute on our business plan for at least 60 months, and still fund continuing new production and content acquisitions each year. Conveniently, last week when one of the short sellers stated we weren’t at the same revenue point as one of our Canadian-based competitors, he neglected to mention that the other company has more than 60 times ($600 million) as much debt as Genius Brands. We think identifying this omission is important to understanding the whole story. Finally, to clear up market confusion that we believe has been generated as a result of one short seller’s report, the shelf registration on form S-3 filed on June 4^th was related to our capital raise in March 2020. We registered the resale of shares underlying the warrants we issued in March, and the S-3 filing does not in any way represent a new capital raise, nor is it related to recent changes in our stock price.

• The short sellers’ criticisms of our Programs highlight their own industry ignorance – Llama Llama is an industry-recognized tremendous asset that we have on great terms, which are mutually beneficial with the IP’s author/book publisher and ourselves. We are also confident in the appeal of the soon to be launched Stan Lee’s Superhero Kindergarten, one of the last creations of Stan Lee, creator of Spider-Man, X-Men, Iron Man, Incredible Hulk, Thor, Fantastic Four, Black Panther, and the Avengers, among others. Similarly, we are happy with the outlook for Rainbow Rangers. The fact is that the show’s airings on Nick Jr. have been scaled back while we are currently producing new episodes, which is a standard industry practice known as “resting.” We expect the airings to ramp back up in August when the new episodes are completed and this will be timed with the launch of toys from Mattel hitting the shelves of Walmart in August. We are confident Nick Jr.’s interests are aligned with ours – after all, they have a stake in the consumer products merchandising royalties related to this asset.

• The track record of our leadership team speaks volumes – Our senior management comes largely from the Walt Disney Company, DreamWorks Animation, and Hasbro Toys, and has been responsible for many of the biggest and most profitable hits in children's television history, as well as toy and consumer product programs generating Billions of dollars of program sales and royalty income. The management team and board have had creative, licensing, production, broadcasting, and sales roles in some of the biggest animated hits in children’s history, including Lion King, Toy Story, Strawberry Shortcake, Care Bears, Power Rangers, My Little Pony, Spider-Man, Batman, X-Men, Transformers, Muppet Babies, Fraggle Rock, Real Ghostbusters, and Inspector Gadget. Collectively, we have more than 150 years of experience in children’s media, and have helped generate literally tens of billions of dollars of content and consumer products sales.