Note 6: Stockholders’ Equity

As part of the reincorporation, the total number of authorized shares of common stock was changed to 250,000,000 shares of $0.001 par value. As of June 30, 2012, 71,862,617 shares of common stock were outstanding.

The Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001 which may have such designation, rights and preferences as approved by the Board of Directors. As of June 30, 2012, no shares of preferred stock were outstanding and the Board of Directors has not authorized issuance of preferred shares.

On March 31, 2012, the Company issued 8,727,732 shares of common stock in exchange for outstanding notes payable, including principal and interest, in the cumulative amount of $1,745,546, or $0.20 per share, for certain related parties and officers of the Company.

Through June 30, 2012, stock option grant notices for up to 15,220,000 shares of common stock to employees and service providers of the Company pursuant to the 2008 Stock Option Plan are outstanding. In accordance with the provisions of Topic 718, Compensation, of the Accounting Standards Codification, which require companies to measure the cost of employee services received in exchange for equity instruments based on the grant date fair value of those awards and to recognize the compensation expense over the requisite service period during which the awards are expected to vest, $123,379 has been recognized as Additional Paid in Capital as the value of these options granted for the six months ended June 30, 2012. Additional details regarding the stock options granted is found in Note 9: Stock Options.

On April 11, 2012, the Company agreed to issue 1,000,000 shares of common stock in exchange for services valued at $235,000.

On May 2, 2012, the Company issued 111,070 shares of common stock in exchange for services valued at $22,214.

On May 10, 2012, the Company issued 250,000 shares of common stock pursuant to a consulting agreement. The services are valued at $42,500.

On May 10, 2012, the Company issued 900,000 shares of common stock in exchange for cash in the amount of $180,000, or $0.20 per share, to an accredited investor. The Company issued an additional 50,000 shares to the same investor on June 25, 2012 in exchange for $10,000 cash.

On June 20, 2012, the Company issued 125,000 shares of common stock for services valued at $25,000.

On June 27, 2012, a senior secured convertible debenture was issued in the face value of $1,000,000 with a stated conversion price of $0.21, subject to certain adjustments, and 5,000,000 warrants, which is equal to the total face value divided by the stated warrant conversion price of $0.20. The debenture warrants may be exercised at any time on or after June 27, 2012 and on or prior to the close of business on June 27, 2017, at an exercise price of $0.33 per share, subject to adjustments upon certain events.  The warrants contain full anti-dilution protection and were valued at $379,688, which was recorded as debt discount as of June 30, 2012 (see also Note 4).

The Company issued warrants to purchase up to 380,952 shares of the company’s common stock at a price of $0.33 per share, which warrant contained terms substantially similar to the Debenture Warrants to National Securities Corporation and several of its employees, who acted as placement agent to the Company in connection with the Debenture. The warrants were valued at $28,929, which was recorded as debt issuance costs, using a Black-Scholes calculation with the following assumptions:

The Company is required to reserve shares equal to the total outstanding debentures divided by seventy-five percent (75%) of the conversion price plus the outstanding warrants. As of June 30, 2012, we have reserved 11,349,206 shares of common stock for the debenture conversion provision and warrants issued to Hillair. The net proceeds of the debenture, after legal fees, due diligence fees and commissions were $796,817.

On June 2, 2009, the Company, through Glendale Securities, Inc. of Sherman Oaks, California as broker-dealer, filed a Disclosure Statement with the Financial Investment Regulatory Agency (FINRA) pursuant to Rule 15c2-11 of the Securities and Exchange Act of 1934, as amended, to establish a secondary trading market on the Pink Sheets Electronic OTC Markets system. Glendale Securities’ request for un-priced quotation on the Pink OTC Markets was cleared by FINRA on July 13, 2009 and trading began on July 24, 2009. In May 2011, the OTC Markets, Inc. moved the Company to the OTCQB trading platform. On September 7, 2011, FINRA cleared the Company for quotation on the OTCBB. In connection with the change in domicile and name change from Pacific Entertainment Corporation to Genius Brands International, Inc., the Company filed an application for a new ticker symbol for trading purposes. The new trading symbol is “GNUS”.