##### Table of Contents

---



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



---



FORM 10-Q



---



(Mark One)



|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------



For the quarterly period ended September 30, 2005



| ̈ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
|- | ---------------------------------------------------------------



For the transition period from  to



COMMISSION FILE NUMBER 000-27915



GENIUS PRODUCTS, INC.

(Exact name of small business issuer as specified in its charter)



|                                                              |  |                                 
|------------------------------------------------------------- |  | --------------------------------
|DELAWARE                                                      |  | 33-0852923                      
|(State or other jurisdictionof incorporation or organization) |  | (IRS EmployerIdentification No.)



740 LOMAS SANTA FE,
SUITE 210

SOLANA BEACH, CA 92075

(Address of principal executive offices)



(858) 793-8840

(Issuers telephone number)



NOT APPLICABLE

(Former name, former address and former fiscal year,

if changed since last
report)



Check whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act 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 x  No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ̈No x



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



There were 43,559,275 shares outstanding of the issuers Common Stock as of November 2, 2005.



---



---

##### Table of Contents

GENIUS PRODUCTS, INC.



INDEX



|           |  |                                                                                                                             |  |     
|---------- |  | --------------------------------------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                                            
|           |  |                                                                                                                             |  | PAGE
|PART I     |  | FINANCIAL INFORMATION                                                                                                       |  |     
|           |  |                                                                                                                            
|Item 1     |  | Financial Statements                                                                                                        |  |     
|           |  |                                                                                                                            
|           |  | Condensed Consolidated Balance Sheets at September 30, 2005 (unaudited) and December 31, 2004 (audited)                     |  | 3   
|           |  |                                                                                                                            
|           |  | Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2005 and 2004 (unaudited) |  | 4   
|           |  |                                                                                                                            
|           |  | Condensed Consolidated Statements of Cash Flow for the Nine Months Ended September 30, 2005 and 2004 (unaudited)            |  | 5   
|           |  |                                                                                                                            
|           |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                            |  | 6   
|           |  |                                                                                                                            
|Item 2     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                       |  | 12  
|           |  |                                                                                                                            
|Item 3     |  | Quantitative and Qualitative Disclosures About Market Risk                                                                  |  | 17  
|           |  |                                                                                                                            
|Item 4     |  | Controls and Procedures                                                                                                     |  | 17  
|           |  |                                                                                                                            
|PART II    |  | OTHER INFORMATION                                                                                                           |  |     
|           |  |                                                                                                                            
|Item 1     |  | Legal Proceedings                                                                                                           |  | 18  
|           |  |                                                                                                                            
|Item 2     |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                 |  | 18  
|           |  |                                                                                                                            
|Item 3     |  | Defaults Upon Senior Securities                                                                                             |  | 18  
|           |  |                                                                                                                            
|Item 4     |  | Submission of Matters to a Vote of Security Holders                                                                         |  | 18  
|           |  |                                                                                                                            
|Item 5     |  | Other Information                                                                                                           |  | 18  
|           |  |                                                                                                                            
|Item 6     |  | Exhibits                                                                                                                    |  | 19  
|           | 
|SIGNATURES |  | 20                                                                                                                         



FORWARD-LOOKING STATEMENTS



This report includes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 relating to, among other things, our goals, plans and projections regarding our financial position, results of operations, market position, product development and business strategy. These statements
may be identified by the use of words such as will, may, estimate, expect, intend, plan, believe, should, would, could or the
negative of these terms and other terms of similar meaning in connection with any discussion of future operating or financial performance. All forward-looking statements are based on our current views with respect to future events, are based on
assumptions and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause action outcomes and results to differ materially from current expectations. Also, these forward-looking
statements present our estimates and assumptions only as of the date of this report.



These factors include, among other things, our inability to raise additional working capital, changes in debt and equity markets, increased competitive pressures, changes in our business plan, and changes in the retail DVD and entertainment
industries. For further details and a discussion of these and other risks and uncertainties, see Forward-Looking Statements and Risk Factors in our most recent Annual Report on Form 10-KSB. Unless otherwise required by law,
we undertake no obligation to publicly update any forward- looking statement, whether as a result of new information, future events or otherwise.



2



---

##### Table of Contents

PART I - FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------



GENIUS PRODUCTS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS



|                                                                                                                      |  |                   |             |   |                  |   |             |  
|--------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | ---------------- | - | ----------- | -
|                                                                                                                      |  | September 30,2005 |             |   | December 31,2004 |  
|                                                                                                                      |  | (unaudited)       |             |   |                  |  
|ASSETS                                                                                                                |  |                   |             |   |                  |   |             |  
|Current assets:                                                                                                       |  |                   |             |   |                  |   |             |  
|Cash and equivalents                                                                                                  |  | $                 | 331,313     |   |                  | $ | 1,223,881   |  
|Accounts receivable, net of allowance for doubtful accounts and sales returns of $2,026,947 and $1,542,805            |  |                   | 5,649,464   |   |                  |   | 3,615,073   |  
|Inventories, net                                                                                                      |  |                   | 5,103,105   |   |                  |   | 3,473,483   |  
|Prepaid royalties                                                                                                     |  |                   | 1,755,023   |   |                  |   | 1,042,120   |  
|Prepaid expenses                                                                                                      |  |                   | 713,318     |   |                  |   | 312,046     |  
|                                                                                                                      |  |                   |             |   |                  |   |             |  
|Total current assets                                                                                                  |  |                   | 13,552,223  |   |                  |   | 9,666,603   |  
|Property and equipment, net                                                                                           |  |                   | 301,226     |   |                  |   | 264,989     |  
|Production masters, net of accumulated amortization of $1,791,943 and $1,054,005                                      |  |                   | 3,615,641   |   |                  |   | 2,825,426   |  
|Film library, net of accumulated amortization of $929,269                                                             |  |                   | 16,270,146  |   |                  |   |            |  
|Goodwill                                                                                                              |  |                   | 12,361,258  |   |                  |   |            |  
|Deposits and other                                                                                                    |  |                   | 574,338     |   |                  |   | 239,148     |  
|                                                                                                                      |  |                   |             |   |                  |   |             |  
|Total assets                                                                                                          |  | $                 | 46,674,832  |   |                  | $ | 12,996,166  |  
|                                                                                                                      |  |                   |             |   |                  |   |             |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                  |  |                   |             |   |                  |   |             |  
|Current liabilities:                                                                                                  |  |                   |             |   |                  |   |             |  
|Accounts payable                                                                                                      |  | $                 | 8,583,594   |   |                  | $ | 7,329,218   |  
|Notes payable                                                                                                         |  |                   | 4,000,000   |   |                  |   |            |  
|Accrued expenses                                                                                                      |  |                   | 3,235,852   |   |                  |   | 789,166     |  
|Customer deposits                                                                                                     |  |                   | 184,767     |   |                  |   |            |  
|Debentures payable                                                                                                    |  |                   | 50,750      |   |                  |   | 50,750      |  
|Redeemable common stock                                                                                               |  |                   | 409,646     |   |                  |   | 395,172     |  
|                                                                                                                      |  |                   |             |   |                  |   |             |  
|Total current liabilities                                                                                             |  |                   | 16,464,609  |   |                  |   | 8,564,306   |  
|Stockholders equity                                                                                                  |  |                   |             |   |                  |   |             |  
|Preferred stock, $.0001 par value; 10,000,000 shares authorized; no shares outstanding                                |  |                   |            |   |                  |   |            |  
|Common stock, $.0001 and $.001 par value; 100,000,000 shares authorized; 42,871,136 and 25,208,512 shares outstanding |  |                   | 4,287       |   |                  |   | 25,209      |  
|Committed common stock                                                                                                |  |                   | 1,490,683   |   |                  |   |            |  
|Additional paid-in capital                                                                                            |  |                   | 60,919,003  |   |                  |   | 25,984,012  |  
|Accumulated deficit                                                                                                   |  |                   | (32,203,750 | ) |                  |   | (21,577,361 | )
|                                                                                                                      |  |                   |             |   |                  |   |             |  
|Total stockholders equity                                                                                            |  |                   | 30,210,223  |   |                  |   | 4,431,860   |  
|                                                                                                                      |  |                   |             |   |                  |   |             |  
|Total liabilities and stockholders equity                                                                            |  | $                 | 46,674,832  |   |                  | $ | 12,996,166  |  
|                                                                                                                      |  |                   |             |   |                  |   |             |  



See accompanying notes
to unaudited interim financial statements



3



---

##### Table of Contents

GENIUS PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                                    |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|--------------------------------------------------- |  | -------------------------------- | ---------- | - | ------------------------------- | - | ---------- | ---- |  | - | ----------- | - |  | - | ---------- | -
|                                                    |  | Three Months Ended September 30, |            |   | Nine Months Ended September 30, |  
|                                                    |  | 2005                             |            |   | 2004                            |   |            | 2005 |  |   | 2004        |  
|Revenues:                                           |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Video and DVD                                       |  | $                                | 8,084,989  |   |                                 | $ | 5,155,484  |      |  | $ | 13,301,381  |   |  | $ | 9,656,572  |  
|Theatrical                                          |  |                                  | 709,506    |   |                                 |   |           |      |  |   | 1,176,975   |   |  |   |           |  
|Audio                                               |  |                                  | 1,565,909  |   |                                 |   | 382,978    |      |  |   | 3,381,426   |   |  |   | 1,437,515  |  
|Royalties, licensing and other                      |  |                                  | 95,471     |   |                                 |   | 304,485    |      |  |   | 460,392     |   |  |   | 379,776    |  
|                                                    |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Gross revenues                                      |  |                                  | 10,455,875 |   |                                 |   | 5,842,947  |      |  |   | 18,320,174  |   |  |   | 11,473,863 |  
|Sales returns, discounts and allowances             |  |                                  | (2,050,232 | ) |                                 |   | (825,491   | )    |  |   | (3,536,195  | ) |  |   | (1,267,460 | )
|                                                    |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Net revenues                                        |  |                                  | 8,405,643  |   |                                 |   | 5,017,456  |      |  |   | 14,783,979  |   |  |   | 10,206,403 |  
|Costs and expenses                                  |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Cost of revenues:                                   |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Video and DVD                                       |  |                                  | 3,952,062  |   |                                 |   | 3,586,147  |      |  |   | 7,919,497   |   |  |   | 6,690,913  |  
|Theatrical                                          |  |                                  | 531,987    |   |                                 |   |           |      |  |   | 1,687,650   |   |  |   |           |  
|Audio                                               |  |                                  | 626,610    |   |                                 |   | 116,664    |      |  |   | 2,117,010   |   |  |   | 598,930    |  
|Amortization of production masters and film library |  |                                  | 521,283    |   |                                 |   | 233,312    |      |  |   | 1,667,207   |   |  |   | 433,290    |  
|Warehouse expense and other                         |  |                                  | 38,488     |   |                                 |   |           |      |  |   | 109,655     |   |  |   |           |  
|                                                    |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Total cost of revenues                              |  |                                  | 5,670,430  |   |                                 |   | 3,936,123  |      |  |   | 13,501,019  |   |  |   | 7,723,133  |  
|                                                    |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Gross profit                                        |  |                                  | 2,735,213  |   |                                 |   | 1,081,333  |      |  |   | 1,282,960   |   |  |   | 2,483,270  |  
|Operating expenses:                                 |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Product development                                 |  |                                  | 276,822    |   |                                 |   | 232,231    |      |  |   | 720,975     |   |  |   | 624,093    |  
|Sales and marketing                                 |  |                                  | 609,377    |   |                                 |   | 647,656    |      |  |   | 1,687,062   |   |  |   | 1,596,391  |  
|General and administrative                          |  |                                  | 2,506,852  |   |                                 |   | 1,008,713  |      |  |   | 6,579,977   |   |  |   | 2,865,246  |  
|Restructuring                                       |  |                                  | 2,745,422  |   |                                 |   |           |      |  |   | 2,745,422   |   |  |   |           |  
|                                                    |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Total operating expenses                            |  |                                  | 6,138,473  |   |                                 |   | 1,888,600  |      |  |   | 11,733,436  |   |  |   | 5,085,730  |  
|                                                    |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Loss from operations                                |  |                                  | (3,403,260 | ) |                                 |   | (807,267   | )    |  |   | (10,450,476 | ) |  |   | (2,602,460 | )
|Interest expense and other, net                     |  |                                  | (75,975    | ) |                                 |   | (110,110   | )    |  |   | (158,763    | ) |  |   | (440,178   | )
|                                                    |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Loss before provision for income tax                |  |                                  | (3,479,235 | ) |                                 |   | (917,377   | )    |  |   | (10,609,239 | ) |  |   | (3,042,638 | )
|Provision for income tax                            |  |                                  | 8,175      |   |                                 |   |           |      |  |   | 17,150      |   |  |   | 800        |  
|                                                    |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Net loss                                            |  | $                                | (3,487,410 | ) |                                 | $ | (917,377   | )    |  | $ | (10,626,389 | ) |  | $ | (3,043,438 | )
|                                                    |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Basic and diluted net loss per share                |  | $                                | (0.08      | ) |                                 | $ | (0.04      | )    |  | $ | (0.28       | ) |  | $ | (0.13      | )
|                                                    |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Basic and diluted weighted average shares           |  |                                  | 43,378,990 |   |                                 |   | 25,080,003 |      |  |   | 37,767,552  |   |  |   | 23,364,187 |  
|                                                    |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  



See accompanying notes
to unaudited interim financial statements



4



---

##### Table of Contents

GENIUS PRODUCTS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



|                                                                            |  |                                 |             |   |      |   |            |  
|--------------------------------------------------------------------------- |  | ------------------------------- | ----------- | - | ---- | - | ---------- | -
|                                                                            |  | Nine Months Ended September 30, |            
|                                                                            |  | 2005                            |             |   | 2004 |  
|Cash flows from operating activities                                        |  |                                 |             |   |      |   |            |  
|Net loss                                                                    |  | $                               | (10,626,389 | ) |      | $ | (3,043,438 | )
|Adjustments to reconcile net loss to net cash used by operating activities: |  |                                 |             |   |      |   |            |  
|Depreciation and amortization                                               |  |                                 | 1,797,293   |   |      |   | 489,923    |  
|Change in allowance for doubtful accounts and provision for returns         |  |                                 | 267,086     |   |      |   | 538,037    |  
|Common stock issued for services                                            |  |                                 | 288,733     |   |      |   | 62,800     |  
|Amortization of warrants issued for services                                |  |                                 | 149,295     |   |      |   | 72,680     |  
|Vested options and warrants granted to non-employees for services           |  |                                 | 1,850,104   |   |      |   | 395,243    |  
|Interest expense on redeemable common stock                                 |  |                                 | 14,474      |   |      |   | 16,777     |  
|Amortization of discounts on notes payable                                  |  |                                 |            |   |      |   | 341,872    |  
|Changes in assets and liabilities:                                          |  |                                 |             |   |      |   |            |  
|(Increase) decrease in Accounts receivable                                  |  |                                 | 974,468     |   |      |   | (3,147,720 | )
|(Increase) decrease in Inventories                                          |  |                                 | (979,728    | ) |      |   | (1,332,732 | )
|(Increase) decrease in Prepaid royalties                                    |  |                                 | (712,903    | ) |      |   | (1,390     | )
|(Increase) decrease in Prepaid expenses and deposits                        |  |                                 | (288,891    | ) |      |   | (84,101    | )
|(Increase) decrease in Development of production masters                    |  |                                 | (3,348,311  | ) |      |   | (1,288,121 | )
|Increase (decrease) in Accounts payable                                     |  |                                 | (4,877,201  | ) |      |   | 2,791,651  |  
|Increase (decrease) in Accrued expenses and other                           |  |                                 | 1,604,660   |   |      |   | 106,498    |  
|                                                                            |  |                                 |             |   |      |   |            |  
|Net cash used in operating activities                                       |  |                                 | (13,887,311 | ) |      |   | (4,082,021 | )
|Cash flows from investing activities                                        |  |                                 |             |   |      |   |            |  
|Patents and trademarks                                                      |  |                                 | (9,800      | ) |      |   | (3,005     | )
|AVM cash, net of expenses paid in cash                                      |  |                                 | 340,656     |   |      |   |           |  
|Purchase of property and equipment                                          |  |                                 | (134,911    | ) |      |   | (149,435   | )
|                                                                            |  |                                 |             |   |      |   |            |  
|Net cash (used in) provided by investing activities                         |  |                                 | 195,945     |   |      |   | (152,440   | )
|Cash flows from financing activities:                                       |  |                                 |             |   |      |   |            |  
|Payments on notes payable                                                   |  |                                 | (2,335,934  | ) |      |   | (294,999   | )
|Payments of offering costs                                                  |  |                                 | (834,391    | ) |      |   |           |  
|Purchase of redeemable common stock                                         |  |                                 |            |   |      |   | (117,362   | )
|Proceeds from exercise of options                                           |  |                                 | 83,580      |   |      |   | 296,885    |  
|Proceeds from exercise of warrants                                          |  |                                 | 757,120     |   |      |   |           |  
|Proceeds from issuance of common stock                                      |  |                                 | 15,128,423  |   |      |   | 6,419,968  |  
|                                                                            |  |                                 |             |   |      |   |            |  
|Net cash provided by financing activities                                   |  |                                 | 12,798,798  |   |      |   | 6,304,492  |  
|Net increase (decrease) in cash and equivalents                             |  |                                 | (892,568    | ) |      |   | 2,070,031  |  
|Cash at beginning of period                                                 |  |                                 | 1,223,881   |   |      |   | 941,332    |  
|                                                                            |  |                                 |             |   |      |   |            |  
|Cash at end of period                                                       |  | $                               | 331,313     |   |      | $ | 3,011,363  |  
|                                                                            |  |                                 |             |   |      |   |            |  



See accompanying notes
to unaudited interim financial statements



5



---

##### Table of Contents

GENIUS PRODUCTS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



NOTE 1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES



Genius Products, Inc. (Genius, on a parent-only basis, and we or our on a Consolidated basis), incorporated under the laws of the
State of Delaware in 2004, is headquartered in Solana Beach, California. We are an entertainment company, which together with our wholly owned subsidiaries, American Vantage Media Corporation (AVMC) and Wellspring Media, Inc
(Wellspring), produce, publish and distribute films, videos and music on digital video discs (DVDs), compact discs (CDs), and to a smaller extent, videos (VHS) and the new Universal Media Disc
(UMD) under a variety of branded and, non-branded names. Our products are sold at retail outlets nationwide, and, to a very small extent, internationally, either through distributors or through retailers that we sell to directly.



INTERIM FINANCIAL STATEMENTS. The accompanying unaudited condensed
consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes required by accounting principles generally accepted in the United States of America
for a complete set of financial statements. These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto included in Genius Annual
Report on Form 10-KSB for the year ended December 31, 2004. In the opinion of management, the unaudited financial information for the interim periods presented reflects all adjustments necessary for a fair statement of the results for the
periods presented, with such adjustments consisting only of normal recurring adjustments. Operating results for interim periods are not necessarily indicative of operating results for an entire fiscal year.



The financial statements as of and for the three and nine months ended September 30, 2004
were restated in an amendment to Form 10-QSB filed on December 23, 2004.



PRINCIPLES OF CONSOLIDATION. The unaudited condensed consolidated financial statements include the accounts of Genius Products, Inc., its wholly owned subsidiary American Vantage Media Corporation, also referred to herein as AVMC (and its
wholly owned subsidiary Wellspring Media, Inc.) which was acquired on March 21, 2005 (Note 6), as well as Sanuk Corporation (which is inactive).



BUSINESS ACQUISITIONS. We account for our business acquisitions as a purchase, whereby the purchase price is allocated to the assets acquired and liabilities assumed
based on their estimated fair value. The excess of the purchase price over estimated fair value of the net identifiable assets is allocated to goodwill. Determining the fair value of assets and liabilities requires various assumptions and estimates.



REVENUE RECOGNITION. Revenues from the sale of video and audio products are
recorded upon the shipment of goods or in certain circumstances at the time of delivery, depending on the terms of the contract. Costs of sales and an allowance for returns are also recorded at the time of shipment. The allowance for returns
calculation is based upon an analysis of historical customer and product returns performance as well as current customer inventory data as available. Updates to the returns calculation is performed quarterly. Sales made under consignment or
guaranteed sales arrangements are not recognized as net revenue until such time that cash is received for the sale and release of return liability is confirmed by the customer. Revenues from the theatrical release of feature films are recognized at
the time of exhibition based on our participation with box office receipts.



ACCOUNTS RECEIVABLE. The allowance for doubtful accounts and provision for sales returns includes managements estimate of the amount expected to be lost or returned on specific accounts and for losses or returns on other as yet
unidentified accounts included in accounts receivable. In estimating the allowance component for unidentified losses and returns, management relies on historical experience and takes into account current information obtained from retailers including
retail sell-through data and retail inventory data as available. The amounts we will ultimately realize could differ materially in the near term from the amounts assumed in arriving at the allowance for doubtful accounts and provision for sales
returns in the accompanying financial statements.



CONCENTRATIONS OF CREDIT
RISK. For the three month period ended September 30, 2005, Wal-Mart and Anderson Merchandisers accounted for 39.3% and 12.6% of net revenues, respectively. For the three month period ended September 30, 2004, Dollar Tree, 99 Cents Only
Stores and Target comprised 26.6%, 13.1% and 10.9%, respectively, of net revenues.



For the nine month period ended September 30, 2005, Wal-Mart and Anderson Merchandisers accounted for 22.8% and 13.5% of net revenues. For the nine month period ended September 30, 2004, Target and Dollar Tree comprised 25.1% and
24.4%, respectively, of net revenues.



6



---

##### Table of Contents

Financial instruments that potentially subject us to concentration of credit risk consist primarily of temporary cash
investments and trade receivables. We restrict investment of temporary cash investments to financial institutions with investment grade credit ratings. We provide credit in the normal course of business to customers located throughout the United
States. We perform ongoing credit evaluations of our customers, generally do not require collateral and maintain allowances for potential credit losses which, when realized, have been within the range of managements expectations.



INVENTORIES. Inventories consist of raw materials and finished goods and are valued at the
lower of cost or market. Cost is determined on a first-in-first-out method of valuation. We regularly monitor inventory for excess or obsolete items and make any valuation corrections when such adjustments are needed.



GOODWILL. Goodwill represents the excess of the purchase price over the fair value of
identified tangible and intangible assets recorded in connection with the acquisition of AVMC (Note 6) and will be reviewed annually for impairment, or between the annual tests if an event occurs or circumstances change that indicate it is
more-likely-than-not that the fair value of a reporting unit is less than its carrying value. We will perform our annual impairment test as of December 31 in each fiscal year.



LONG-LIVED ASSETS. Property and equipment purchases are recorded at cost and are depreciated and amortized over the estimated useful lives
of the assets (three to seven years generally) using the straight-line method. Music production masters are stated at cost net of accumulated amortization. Costs incurred for music production masters, including licenses to use certain classical
compositions, royalties, and recording and design costs are capitalized and amortized over a three or seven year period using the straight line method from the time a title is initially released, consistent with the estimated timing of revenue for a
title.



We capitalize the costs of production and acquisition of film
libraries. Costs of production include costs of film and tape conversion to DLT master format, menu design, authoring and compression. These costs are amortized to direct operating expenses in accordance with Statement of Position (SOP)
00-2, Accounting by Producers or Distributors of Films, using the individual film forecast method over a period of ten years. Costs are stated at the lower of unamortized film costs or estimated fair value. Films classified as part of a
library have an initial release date of more than three years prior to the acquisition of the film. For acquired film libraries, ultimate revenue includes estimates over a period not to exceed ten years. Management regularly reviews and revises when
necessary its ultimate revenue and cost estimates, which may result in a change in the rate of amortization of film costs and/or a write-down of all or a portion of the unamortized costs of the library to its estimated fair value. No assurances can
be given that unfavorable changes to revenue and cost estimates will not occur, which may result in significant write-downs affecting our results of operations and financial condition. The unamortized library costs and production masters at
September 30, 2005 was approximately $19.9 million. All exploitation costs, including print and advertising (P&A) costs associated with our theatrical department, are expensed as incurred.



Patents and trademarks covering a number of our products are being amortized on a
straight-line basis over 5 to 17 years.



Long-lived assets, including goodwill,
are reviewed annually for impairment and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment is necessary when the undiscounted cash flows estimated to be generated by the
asset are less than the carrying amount of the asset.



INCOME TAXES. We
estimate the actual current tax liability together with assessing temporary differences resulting from differing treatments of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. The provision for
income taxes during interim quarterly reporting periods is based on our estimate of the annual effective tax rate for the full fiscal year. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income.
To the extent that we believe that recovery is not likely, we must establish a valuation allowance. Significant management judgment is required in determining the provision for income taxes, deferred tax assets and liabilities and any valuation
allowance recorded against net deferred tax assets. We have recorded a full valuation allowance on our net deferred tax asset balances for all periods presented because of uncertainties related to utilization of deferred tax assets. At such time as
it is determined that it is more likely than not that the deferred tax assets are realizable, the valuation allowance will be reduced.



The Company has net operating loss (NOL) carry-forwards that can be utilized to offset future taxable income. In certain cases there are limitations on the amount of
taxable income which can be offset by NOL carryforwards after a change in control (generally greater than 50% change in ownership) of a loss corporation. California has similar rules. Generally, after a change, a loss corporation cannot deduct NOL
carryforwards in excess of the annual limitations. Due to these change in ownership provisions, utilization of the NOL and tax credit carryforwards may be subject to an annual limitation regarding their utilization against taxable income
in future periods.



7



---

##### Table of Contents

LOSS PER SHARE. Genius computes net income (loss) per share in accordance with Statement of Financial Accounting Standard
No. 128, Earnings Per Share (SFAS 128). Under the provisions of SFAS 128, basic net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted-average number of common shares
outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted-average number of common and dilutive common equivalent shares outstanding during the period. Diluted
earnings per share include the potentially dilutive effect of outstanding stock options and other dilutive securities. The Company has a net loss for the periods presented; accordingly, the inclusion of common stock equivalents for outstanding stock
options would be anti-dilutive and therefore the weighted-average shares used to calculate both basic and diluted loss per share are the same.



STOCK-BASED COMPENSATION. We measure compensation cost related to stock and stock options issued to employees using the intrinsic method of accounting prescribed by
Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, and related interpretations.



Had compensation cost for our stock option plan been determined based on the fair value at the grant dates for awards under this plan consistent with the method
prescribed by Statement of Financial Accounting Standards (SFAS) 123, Accounting for Stock-based Compensation as amended by SFAS No. 148, Accounting for Stock Based Compensation Transition and Disclosurean
amendment of FASB Statement No. 123, our net loss and loss per common share would have been increased to the pro forma amounts indicated below:



|                                     |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|------------------------------------ |  | -------------------------------- | ---------- | - | ------------------------------- | - | ---------- | ---- |  | - | ----------- | - |  | - | ---------- | -
|                                     |  | Three Months Ended September 30, |            |   | Nine Months Ended September 30, |  
|                                     |  | 2005                             |            |   | 2004                            |   |            | 2005 |  |   | 2004        |  
|Net loss as reported                 |  | $                                | (3,487,410 | ) |                                 | $ | (917,377   | )    |  | $ | (10,626,389 | ) |  | $ | (3,043,438 | )
|Compensation cost at fair value      |  |                                  | (258,266   | ) |                                 |   | (218,927   | )    |  |   | (591,939    | ) |  |   | (684,273   | )
|                                     |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Pro forma net loss                   |  | $                                | (3,745,676 | ) |                                 | $ | (1,136,304 | )    |  | $ | (11,218,328 | ) |  | $ | (3,727,711 | )
|                                     |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Basic and diluted net loss per share |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|As reported                          |  | $                                | (0.08      | ) |                                 | $ | (0.04      | )    |  | $ | (0.28       | ) |  | $ | (0.13      | )
|                                     |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Pro forma                            |  | $                                | (0.09      | ) |                                 | $ | (0.05      | )    |  | $ | (0.30       | ) |  | $ | (0.16      | )
|                                     |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  



The pro forma compensation cost
recognized for the grant date fair value of the stock options granted during the three and nine months ended September 30, 2005 and 2004 was estimated using the Black-Scholes model with the following weighted-average assumptions:



|                         |  |                                  |   |  |                                 |   |  |      |   |  |      |  
|------------------------ |  | -------------------------------- | - |  | ------------------------------- | - |  | ---- | - |  | ---- | -
|                         |  | Three Months Ended September 30, |   |  | Nine Months Ended September 30, |  
|                         |  | 2005                             |   |  | 2004                            |   |  | 2005 |   |  | 2004 |  
|Risk free interest rate  |  | 4.0                              | % |  | 4.0                             | % |  | 3.4  | % |  | 3.9  | %
|Expected dividend yield  |  |                                 |   |  |                                |   |  |     |   |  |     |  
|Expected volatility      |  | 69                               | % |  | 50                              | % |  | 42   | % |  | 48   | %
|Expected life (in years) |  | 3.0                              |   |  | 5.0                             |   |  | 3.7  |   |  | 4.9  |  



RECLASSIFICATIONS. Certain prior
period amounts have been reclassified to conform to the current period presentation.



8



---

##### Table of Contents

NOTE 2: INVENTORY



Inventories consist of raw materials and finished goods and are valued at the lower of cost or market.



|                           |  |                   |            |   |                  |   |           |  
|-------------------------- |  | ----------------- | ---------- | - | ---------------- | - | --------- | -
|                           |  | September 30,2005 |            |   | December 31,2004 |  
|Raw materials              |  | $                 | 156,324    |   |                  | $ | 349,231   |  
|Finished goods             |  |                   | 6,140,974  |   |                  |   | 3,598,610 |  
|                           |  |                   |            |   |                  |   |           |  
|                           |  |                   | 6,297,298  |   |                  |   | 3,947,841 |  
|Allowance for obsolescence |  |                   | (1,194,193 | ) |                  |   | (474,358  | )
|                           |  |                   |            |   |                  |   |           |  
|Inventories, net           |  | $                 | 5,103,105  |   |                  | $ | 3,473,483 |  
|                           |  |                   |            |   |                  |   |           |  



NOTE 3: PROPERTY AND EQUIPMENT



Property and equipment purchases are recorded at cost and are depreciated
and amortized over the estimated useful lives of the assets (three to seven years generally) using the straight-line method.



|                                          |  |                   |          |   |                  |   |          |              |  |                                   
|----------------------------------------- |  | ----------------- | -------- | - | ---------------- | - | -------- | ------------ |  | ----------------------------------
|                                          |  | September 30,2005 |          |   | December 31,2004 |   |          | Useful lives
|Computers and equipment                   |  | $                 | 588,733  |   |                  | $ | 424,071  |              |  | 3-5 years                         
|Furniture and fixtures                    |  |                   | 35,445   |   |                  |   | 33,746   |              |  | 3-7 years                         
|Leasehold improvements                    |  |                   | 22,365   |   |                  |   | 22,365   |              |  | Lesser of lease term oruseful life
|                                          |  |                   |          |   |                  |   |          |              |  |                                   
|                                          |  |                   | 646,543  |   |                  |   | 480,182  |              |  |                                   
|Accumulated depreciation and amortization |  |                   | (345,317 | ) |                  |   | (215,193 | )            |  |                                   
|                                          |  |                   |          |   |                  |   |          |              |  |                                   
|Property and equipment, net               |  | $                 | 301,226  |   |                  | $ | 264,989  |              |  |                                   
|                                          |  |                   |          |   |                  |   |          |              |  |                                   



Depreciation expense for the three and
nine months ended September 30, 2005 was $63,662 and $130,089, respectively and for the three and nine months ended September 30, 2004 was $21,324 and $49,410, respectively.



NOTE 4: RESTRUCTURING



During the quarter ended September 30, 2005, Genius executed a restructuring plan for the purpose of reorganizing its executive management team and terminating an
exclusive agreement with a financial advisor. As a result, restructuring related charges of approximately $2.7 million were recognized as operating expense during the quarter ended September 30, 2005, of which, $2.0 million was related to
non-cash compensation expense resulting from the grant of additional vested stock options and the acceleration of certain unvested stock options. At September 30, 2005, the remaining restructuring obligation was $0.4 million.



NOTE 5: STOCKHOLDERS EQUITY



COMMON STOCK



During the three months ended March 31, 2005, we issued a total of 14,875,925 common shares and returned no common shares to treasury.
6,518,987 shares were issued for proceeds of $10.3 million in conjunction with a private placement offering and 7 million shares were issued in conjunction with the acquisition of American Vantage Media Corporation. We issued 712,338 shares at
$2.16 to $2.27 per share for services rendered in connection with the private placement offering, of which 562,000 shares for the exercise of warrants at $.63 to $1.00 per share and 82,600 shares for the exercise of options at $.80 to $1.50 per
share.



During the three months ended March 31, 2005, we issued a total of
3,549,076 warrants to purchase common stock at $1.58 to $2.78 per share, of which 2,086,076 were issued in conjunction with the private placement offering, and 1,463,000 were issued in conjunction with the transaction to acquire American Vantage
Media Corporation, of which, 63,000 warrants were issued as part of the offering costs.



During the three months ended June 30, 2005, we committed to issue shares totaling $82,500 related to recruiting expenses incurred during the quarter.



9



---

##### Table of Contents

During the three months ended June 30, 2005, 162,000 common shares were issued related to the exercise of warrants
for proceeds of $157,560.



During the three months ended September 30,
2005, we committed to issue shares totaling $117,250 related to recruiting expenses incurred during the quarter.



As of September 30, 2005, 30,000 common shares were committed related to the exercise of warrants.



STOCK OPTIONS AND WARRANTS



A summary of stock option and warrant activity follows:



|                                                     |  |                                |   |  |                              |     
|---------------------------------------------------- |  | ------------------------------ | - |  | ---------------------------- | ----
|                                                     |  | Options andWarrantsOutstanding |   |  | WeightedAverageExercisePrice
|December 31, 2004                                    |  | 22,711,748                     |   |  | $                            | 1.86
|Granted                                              |  | 6,452,514                      |   |  | $                            | 2.11
|Exercised                                            |  | (836,600                       | ) |  | $                            | 1.00
|Expired                                              |  | (12,500                        | ) |  | $                            | 5.12
|Canceled                                             |  | (112,500                       | ) |  | $                            | 3.99
|                                                     |  |                                |   |  |                              |     
|September 30, 2005                                   |  | 28,202,662                     |   |  | $                            | 1.97
|                                                     |  |                                |   |  |                              |     
|Options and warrants exercisable, September 30, 2005 |  | 20,976,440                     |   |  | $                            | 1.90
|                                                     |  |                                |   |  |                              |     



PRIVATE PLACEMENTS



On March 2, 2005, we entered into a Securities Purchase
Agreement with certain institutional investors related to the private placement of 6,518,987 shares of our common stock, par value $0.0001 per share, and five-year warrants to purchase 1,303,797 shares of Common Stock, half at an exercise price of
$2.56 per share and half at an exercise price of $2.78 per share. The fair value of these warrants was estimated as $1,392,231 using the Black-Scholes model with the following weighted average assumptions: expected volatility of 60%, risk free
interest of 4%, an expected life of five years and no expected dividends. The transaction closed on March 3, 2005 and we realized gross proceeds of $10.3 million from the financing before deducting commissions and other expenses. Offering costs
related to the transaction totaled $2,086,971 comprised of $718,589 cash payments for legal and investment services, $350,000 for 162,037 shares of stock valued at $2.16 per share issued for investment services and 782,279 warrants, half at an
exercise price of $2.56 and half at an exercise price of $2.78, valued at $1,014,986. The value of the warrants was estimated using the Black-Scholes model with the following weighted average assumptions: expected volatility of 60%, risk free
interest of 4%, an expected life of five years and no dividends. We agreed to register for resale the shares of Common Stock issued in the private placement and shares issuable upon exercise of warrants. Such registration statement became effective
on May 11, 2005.



In May 2005, we entered into a securities purchase
agreement with certain institutional investors related to the private placement of 3,000,000 shares of our common stock and five-year warrants to purchase 270,000 shares of our common stock at an exercise price of $2.56 per share. The fair value of
these warrants was estimated as $270,959 using the Black-Scholes model with the following weighted average assumptions: expected volatility of 68%, risk free interest of 4%, an expected life of five years and no expected dividends. The transaction
closed on May 20, 2005, and we realized gross proceeds of $5.25 million from the financing, before deducting commissions and other expenses. Offering costs related to the transaction totaled $236,577 comprised of cash payments for legal and
investment services.



NOTE 6: ACQUISITION OF AVMC



On March 21, 2005, we completed our acquisition of American Vantage Media Corporation
(AVMC), a subsidiary of American Vantage Companies (AVC). The acquisition was completed through an Agreement and Plan of Merger (Merger Agreement) which provided for the issuance to AVC of (i) 7,000,000
shares of our common stock valued at $2.27 per share and (ii) warrants to purchase 1,400,000 shares of our common stock, half at an exercise price of $2.56 per share and half at an exercise price of $2.78 per share, plus our assumption of
approximately $6.3 million in debt of AVMC. The fair value of these warrants was estimated as $1,596,482 using the Black-Scholes model with the following weighted average assumptions: expected volatility of 60%, risk free interest of 4.2%, an
expected life of five years and no expected dividends. The purchase price is approximated by using the average closing market price of our common stock over the two-day period before and after the sale was announced. $1,559,911 in direct costs
incurred for the acquisition include $238,886 for legal



10



---

##### Table of Contents

and professional services related to the valuation of the Wellspring library, as well as a transaction fee of $1,249,183 paid in the form of 550,301 shares
issued at a value of $2.27 per share, and 63,000 warrants, half at an exercise price of $2.56 and half at an exercise price of $2.78, for $71,842. The value of the warrants was estimated using the Black-Scholes model with the following weighted
average assumptions: expected volatility of 60%, risk free interest of 4.2%, an expected life of five years and no dividends.



The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition. The estimated fair values of assets
purchased and liabilities assumed, used herein, were estimated based on available information and is subject to refinement based upon the outcome of valuations and other fair value studies, which have not yet been completed. Therefore, the
allocation of the purchase price and resulting goodwill is subject to change.



|                     |  |             |           
|-------------------- |  | ----------- | ----------
|                     |  | (UNAUDITED)
|AVMC-STANDALONE      |  |             |           
|Cash                 |  | $           | 837,477   
|Accounts Receivable  |  |             | 3,275,945 
|Inventory            |  |             | 649,895   
|Other current Assets |  |             | 72,336    
|                     |  |             |           
|Total Current Assets |  |             | 4,835,653 
|Wellspring Library   |  |             | 15,379,258
|Fixed Assets         |  |             | 31,414    
|Other                |  |             | 365,163   
|Goodwill             |  |             | 12,361,258
|                     |  |             |           
|Total Assets         |  | $           | 32,972,746
|                     |  |             |           
|Accounts Payable     |  | $           | 6,131,577 
|Accrued Expenses     |  |             | 796,942   
|Customer Deposits    |  |             | 230,809   
|Short Term Debt      |  |             | 2,549,219 
|Notes payable        |  |             | 4,000,000 
|                     |  |             |           
|Total Liabilities    |  | $           | 13,708,547
|                     |  |             |           
|Total Consideration  |  | $           | 19,264,199
|                     |  |             |           



The short-term debt was paid off on
March 22, 2005, and the notes payable are due in February 2006.



Assuming
the acquisition had occurred on January 1 of the following respective years, the pro forma consolidated results of operations, excluding the Catalog department of AVMC which was sold on August 1, 2005 for approximately $130,000 resulting
in no gain or loss, would have been as follows:



|                             |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|---------------------------- |  | -------------------------------- | ---------- | - | ------------------------------- | - | ---------- | ---- |  | - | ----------- | - |  | - | ---------- | -
|                             |  | Three Months Ended September 30, |            |   | Nine Months Ended September 30, |  
|                             |  | 2005                             |            |   | 2004                            |   |            | 2005 |  |   | 2004        |  
|Pro forma net revenue        |  | $                                | 8,405,643  |   |                                 | $ | 10,477,042 |      |  | $ | 16,493,760  |   |  | $ | 23,973,544 |  
|Pro forma net loss           |  | $                                | (3,487,410 | ) |                                 | $ | (926,887   | )    |  | $ | (12,109,346 | ) |  | $ | (4,735,259 | )
|Pro forma net loss per share |  |                                  |            |   |                                 |   |            |      |  |   |             |   |  |   |            |  
|Basic and diluted            |  | $                                | (0.08      | ) |                                 | $ | (0.04      | )    |  | $ | (0.32       | ) |  | $ | (0.20      | )



This unaudited pro-forma information
may not be indicative of the results that would actually have been achieved had the acquisition occurred as of the date of the periods indicated above, or that may be achieved in the future.



11



---

##### Table of Contents

NOTE 7: SUBSEQUENT EVENTS



SHORT TERM NOTES



On October 4, 2005, Genius entered into a Note and Warrant Purchase agreement with a group of investors (collectively, the Investors). Under the Purchase
Agreement, the Investors loaned a total of $4.0 million to Genius in exchange for (i) promissory notes in favor of the Investors (the Notes) with a total principal balance of $4.0 million and (ii) five-year warrants
(Warrants) to purchase a total of 280,000 shares of Genius common stock, par value $0.0001 per share (Common Stock), with an exercise price per share equal to $1.88 (the last reported sales price of Genius Common
Stock, as reported by the Over the Counter Bulletin Board, on the initial closing date of October 5, 2005).



The Notes do not bear any interest, and all outstanding principal is due and payable in full on March 3, 2006 (the first business day that is 150 days after the
initial closing date). Genius may prepay all or any portion of the Notes without premium or penalty. Genius has the option on the maturity date to convert all, but not less than all, of the principal balance due under each Note into Common Stock. If
the loans are not repaid in full on March 3, 2006, then the number of shares of Common Stock issuable upon conversion of each Note is equal to the outstanding principal balance due under a Note divided by $1.00.



Pursuant to separate financing commitment letters, Genius has the option (but not the
obligation) to borrow up to an additional $4.0 million in one or more subsequent closings under the Purchase Agreement. In that regard, under such financing commitment letters, the Investors have agreed to loan Genius up to an additional $4.0
million in the aggregate as requested by Genius under certain conditions. The Investors financing commitment remains effective until, and may be drawn by Genius on, November 14, 2005, assuming that there has not occurred since
September 30, 2005 a material adverse event involving Genius. Any additional loans drawn upon by Genius and Warrants issued in connection therewith shall be in the forms of Notes and Warrants, respectively, provided for in the Purchase
Agreement. The number of warrant shares to be issued in any subsequent closing will be 70,000 shares for each $1 million in loans actually funded (with the number of shares prorated for any portion thereof).



Genius is obligated to register the shares of Common Stock issuable upon (i) exercise of
the Warrants and (ii) conversion of the Notes, if any, for resale on a Form S-3 registration statement within 30 days after Genius is eligible to use a Form S-3 registration statement. If Genius has not filed a Form S-3 registration statement
on or before January 31, 2006 and has not otherwise included the registrable securities in another registration statement, then Genius shall, no later than March 3, 2006, file with a registration statement, on such form which Genius is
then eligible to use, covering the resale of all of the registrable securities. Failure to file a registration statement within the required timeframes will result in the payment of liquidated damages to the Investors an amount in cash equal to 1.0%
of the aggregate purchase price paid by the Investors pursuant to the Purchase Agreement.



In connection with the Purchase Agreement, each of the Investors agreed not to, directly or indirectly, sell, effect any short sale, seek to hedge its position or otherwise effect any transaction with respect to
Geniuss Common Stock until January 30, 2006.



Prior to the
transaction, there were no material relationships between Genius and its affiliates, on the one hand, and the Investors and their affiliates, on the other hand, except that affiliated with JLF Asset Management, LLC and Bonanza Master Fund, Ltd.
beneficially own more than 5% of Genius Common Stock.



|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS AND NOTES THERETO CONTAINED IN THIS REPORT. THE DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE THAT INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER
FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM THOSE EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS. FOR ADDITIONAL INFORMATION CONCERNING THESE FACTORS, SEE THE
INFORMATION UNDER THE CAPTION BUSINESS RISK FACTORS IN OUR ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 2004.



OVERVIEW



We are an entertainment company that produces, publishes and distributes films, videos and music on digital video discs (DVDs), compact discs
(CDs), and to a smaller extent, videos (VHS) and the new Universal Media Disc



12



---

##### Table of Contents

(UMD) under a variety of branded and, non-branded names. Our products are sold at retail outlets nationwide, and either through distributors or
through retailers that we sell to directly. Our business in the third quarter and nine months ended September 30, 2005 includes revenues from four major sources, as follows:



| |  |  | Sales of branded proprietary and licensed DVDs and VHS (67% and 59% of gross revenues for the third quarter and nine months ended September 30, 2005);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sales of branded proprietary and licensed music audio CDs and cassettes (15% and 18% of gross revenues for the third quarter and nine months ended September 30, 2005); and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sales of non-branded value DVDs and music CDs (11% and 14% of gross revenues for the third quarter and nine months ended September 30, 2005).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sales of theatrical and other (8% and 9% of gross revenues for the third quarter and nine months ended September 30, 2005).
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



Revenues from royalties, licensing and other revenue fluctuated for the third
quarter and nine months ended September 30, 2005 due to the discontinuation of our sales of jewelry in the fourth quarter 2004 and by royalties earned from Wellspring titles as a result of the AVMC acquisition.



Consistent with other retail product distributors, we experience some degree
of sales seasonality, which has been further impacted by our acquisition of American Vantage Media Corporation (AVMC) in March 2005. Excluding the impact of the acquisition of AVMC, our second quarter (period ending June 30) is
typically the lowest sales period and our fourth quarter the highest. We have also historically experienced higher returns during the first two quarters than during the last two quarters. However, our historic changes in revenues may not be
indicative of future trends and may not track industry seasonality norms. In addition, we are currently placing a higher focus on our branded and proprietary business and less of a focus on non-branded, value priced products compared to prior years,
which transition may also affect the fluctuation in our quarterly results.



We do not report our different product lines as segments because we do not allocate our resources among product lines nor do we measure performance by product line. We do not maintain discrete financial information
regarding product lines. Our chief operating decision maker receives financial information taken as a whole. Our sales, marketing and product development efforts among our different product lines are supported by one integrated group of individuals.
Additionally, our warehousing costs also reflect support of all product lines and as such cannot be segmented.



On March 21, 2005, we completed our acquisition of American Vantage Media Corporation (AVMC), a subsidiary of American Vantage Companies
(AVC). The acquisition was completed through an Agreement and Plan of Merger (Merger Agreement) which provided for the issuance to AVC of (i) 7,000,000 shares of our common stock valued at $2.27 per share and
(ii) warrants to purchase 1,400,000 shares of our common stock, half at an exercise price of $2.56 per share and half at an exercise price of $2.78 per share, plus our assumption of approximately $6.3 million in debt of AVMC.



CRITICAL ACCOUNTING POLICIES



There have been no significant changes in the critical accounting policies
disclosed in Managements Discussion and Analysis of Financial Condition and Results of Operations included in our most recent Annual Report on Form 10-KSB. The preparation of our financial statements requires management to make
estimates and assumptions that affect the amounts reported. The significant areas requiring the use of managements estimates relate to provisions for lower of cost or market inventory write downs, doubtful accounts receivables, unrecouped
royalty fee advances, and sales returns and allowances.



13



---

##### Table of Contents

Although these estimates are based on managements knowledge of current events and actions management may undertake in the future, actual results may
ultimately differ materially from those estimates.



RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2005 AND 2004



Revenues:



Video and DVD revenues for
the third quarter and the nine months ended September 30, 2005 were composed of sales of branded and proprietary products including branded classic movies and television shows on DVD as well as non-branded classic movies and television shows on
DVD, and Wellspring titles from AVMC. Video revenues increased $2.9 million and $3.6 million during the third quarter and the nine months ended September 30, 2005 to $8.1 million and $13.3 million, as compared to $5.2 million and $9.7 million
during the comparable prior year periods. These increases from 2004 were due to the the addition of revenues from AVMC, which we acquired on March 22, 2005, and increased revenues from Genius and branded products during the same periods.



Theatrical revenues were composed of sales generated from film
rental by our theatrical subsidiary, Wellspring Media Inc. Theatrical revenues increased to $0.7 million and $1.2 million for the third quarter and the nine months ended September 30, 2005, compared to zero for the comparable prior year
periods.



Audio revenues for the third quarter and the nine
months ended September 30, 2005 were composed of Baby Genius, Kid Genius, licensed music CDs, interactive music programs, and non-branded, value music products sold at an entry level price point at retail. Audio revenues increased $1.2 million
and $1.9 million during the third quarter and nine months ended September 30, 2005 to $1.6 million and $3.4 million, as compared to $0.4 million and $1.4 million during the comparable prior year periods. These increases were attributable to
higher sales of the Baby Genius and licensed music product and continued sales of the non-branded, value music products and Lifestyles Music Program that were introduced in the fourth quarter of 2004.



Royalties, licensing and other revenues were composed of royalties from
licensing fees from Wellspring Media, Inc, and the license of our Baby Genius brand name. Royalties, licensing and other revenues decreased $0.2 million and increased $0.1 million during the third quarter and the nine months ended September 30,
2005 to $0.1 million and $0.5 million, as compared to $0.3 million and $0.4 million during the comparable prior year periods. The changes resulted from a decrease in royalties related to the licensing of our Baby Genius brand name, offset by an
increase in licensing revenues from our acquisition of AVMC on March 22, 2005.



As a result of the foregoing, total gross revenues increased $4.7 million and $6.9 million during the third quarter and the nine months ended September 30, 2005, to $10.5 million and $18.3 million as compared to
$5.8 million and $11.5 million during the comparable prior year periods, due primarily to increased sales of video and audio products as discussed above.



Sales returns, discounts and allowances increased $1.2 million and $2.3 million during the third quarter and the nine months ended September 30, 2005
to $2.1 million and $3.5 million, as compared to $0.8 million and $1.3 million during the comparable prior year periods. These increases resulted primarily from the acquisition of AVMC on March 22, 2005 as well as additional markdowns and
higher returns from sales. Additionally, there has been an industry trend towards an increasing percentage of returns for the sale of DVDs. The provision for sales returns and allowances is calculated in accordance with historical averages and
industry changes, but may vary in the future based on customer and product mix.



Net revenues increased $3.4 million and $4.6 million during the third quarter and the nine months ended September 30, 2005 to $8.4 million and $14.8 million as compared to $5.0 million and $10.2 million during
the comparable prior year periods, due to the increase in sales of DVD and the acquisition of AVMC, offset in part by an increase in sales returns and allowances as described above. During the third quarter and the nine months ended
September 30, 2005, two customers accounted for 10% or more of gross revenues. Wal-Mart and Anderson accounted for 39% and 13% of net revenues for the third quarter ended September 30, 2005, and 23% and 14% of net revenues for the nine
months ended September 30, 2005, respectively.



Costs and
expense:



Cost of Sales:



Cost of sales consists primarily of the cost of products sold to customers,
packaging and shipping costs, amortization of production masters, and royalties paid on sales of licensed products. For analytical purposes we review amortization of



14



---

##### Table of Contents

production masters as a stand-alone cost element and discuss the aggregate cost of producing, packaging, and shipping of the audio, DVD, and royalty,
licensing and other products. Generally cost of sales increased as a result of the increased sales.



Video and DVD cost of sales increased $0.4 million and $1.2 million during the third quarter and the nine months ended September 30, 2005 to $4.0
million and $7.9 million, as compared to $3.6 million and $6.7 million during the comparable prior periods. These increases resulted from an increase in video and DVD sales, partially due to the addition of AVMC into our video and DVD product mix in
the third quarter and the nine months ended September 30, 2005, and inventory write-offs for VHS tapes during the second quarter which impacted the nine months ended September 30, 2005.



Theatrical cost of sales, were composed primarily of print and advertising
costs related to sales generated from film rental by our theatrical subsidiary, Wellspring Media Inc., increased $0.5 million and $1.7 million during the third quarter and the nine months ended September 30, 2005 to $0.5 million and $1.7
million, as compared to zero during the comparable prior periods. Theatrical P&A during the third quarter and nine months ended September 30, 2005 included significant expenditures on the release of titles such as Palindromes,
Kings & Queens, Wild Side, and The Beat My Heart Skipped. These expenditures can vary from period to period, often in advance of associated revenues.



Audio cost of sales increased $0.5 million and $1.5 million during the third quarter and the nine months ended
September 30, 2005 to $0.6 million and $2.1 million, as compared to $0.1 million and $0.6 million during the comparable prior periods. The increase in cost of sales was due to the higher audio sales during the third quarter and the nine months
ended September 30, 2005.



Amortization of production
masters and film library increased $0.3 million and $1.2 million during the third quarter and the nine months ended September 30, 2005 to $0.5 million and $1.7 million, as compared to $0.2 million and $0.4 million during the comparable prior
periods. The increase in amortization of production masters and film library is primarily the result of the acquisition of AVMC, as well as an increase in amortization of the production masters due to the development of our library.



Operating Expense:



Product development expenses increased slightly during the third quarter and increased by $0.1 million during the nine
months ended September 30, 2005 to $0.3 million and $0.7 million, as compared to $0.2 million and $0.6 million during the comparable prior periods. The increases were attributed to the addition of new titles into our libraries.



Sales and marketing expenses were effectively flat during the third quarter
and the nine months ended September 30, 2005 as compared to the comparable prior periods. Prior to its acquisition by Genius, AVMC significantly reduced its sales and marketing expense. Although the acquisition of AVMC resulted in higher sales
to Genius, the current revenue levels are significantly below the prior year, due in part, to the lack of resources dedicated to sales and marketing. The Company intends to increase sales and marketing expense in 2006 to support revenue increases.



General and administrative expenses increased by $1.4 million
and $3.6 million during the third quarter and the nine months ended September 30, 2005 to $2.4 million and $6.5 million, as compared to $1.0 million and $2.9 million during the comparable prior periods. These increases were primarily due to
increased payroll, rent, and utilities as a result of the acquisition of AVMC, as well as, to increased transaction costs related to certain initiatives. Additional expenses include increased insurance, accounting and legal costs associated with the
larger combined entity.



Restructuring expenses were incurred
during the third quarter ended September 30, 2005 relating to the Companys decision to reorganize its executive management and terminate an exclusive agreement with a financial advisor.



Interest expense of $0.1 million during the third quarter ended
September 30, 2005 was consistent with the comparable prior period. Interest expense decreased by $0.3 million during the nine months ended September 30, 2005 as compared to the comparable prior period. The decrease resulted from the
payoff of notes payable in the fourth quarter of 2004, partially offset by an increase in interest expense related to the $4.0 million notes payable acquired with AVMC. Interest expense is expected to increase in the future as a result of the short
term notes executed subsequently to the end of the third quarter ended September 30, 2005.



As result of the foregoing, the net loss increased $2.6 million and $7.6 million during the third quarter and the nine months ended September 30,
2005, to $3.5 million and $10.6 million as compared to $0.9 million and $3.0 million during the



15



---

##### Table of Contents

comparable prior periods. Excluding the impact of the Restructuring, the net loss for the third quarter ended September 30, 2005 would have improved
$0.2 million to $0.7 million as compared to $0.9 million in the comparable prior period.



LIQUIDITY AND CAPITAL RESOURCES



Net cash used in operations during the nine months ended September 30, 2005 was $13.9 million, primarily due to the net loss of $10.6 million, certain transition costs related to AVMC and decreases in accounts payable, partially offset
by increases in accounts receivable. For the nine months ended September 30, 2004, net cash used in operations was 4.1 million, driven primarily by the net loss of $3.0 million.



Net cash provided by investing activities in the nine months ended September 30, 2005, was $0.2 million, primarily
attributed to net cash received from the AVMC acquisition, offset by the purchase of property and equipment. For the nine months ended September 30, 2004, net cash used in investing activities was $0.2 million, which was primarily due to the
purchase of property and equipment.



Cash provided from
financing activities in the nine months ended September 30, 2005 was $12.8 million, primarily resulting from the sale of our common stock in private equity placements in March and May of 2005 and cash received from the exercise of stock options
and warrants. Cash received was partially offset by payments on short term debt and offering costs. For the nine months ended September 30, 2004, cash provided by financing activities was $6.3 million, primarily driven by a private equity
placement.



At September 30, 2005, we had a cash balance
of $0.3 million and net accounts receivable of $5.6 million. On October 4, 2005, Genius obtained a $4.0 million loan as discussed below. In early October 2005 we received and shipped a $7 million order to one customer and the resulting
receivable is expected to be collected near the end of November. The $4.0 million notes, from our AVMC acquisition, are due in February 2006. Based on these facts and expected cash proceeds from future operations, we may or may not raise additional
capital or obtain further loans using all our assets including our film library as collateral within the next twelve months. Although we believe that our expanded product line offers us the opportunity for significantly improved operating results in
future quarters, no assurance can be given that we will operate on a profitable basis, as such performance is subject to numerous variables and uncertainties, many of which are out of our control.



On October 4, 2005, Genius entered into a Note and Warrant Purchase
agreement with a group of investors (collectively, the Investors). Under the Purchase Agreement, the Investors loaned a total of $4.0 million to Genius in exchange for (i) promissory notes in favor of the Investors (the
Notes) with a total principal balance of $4.0 million and (ii) five-year warrants (Warrants) to purchase a total of 280,000 shares of Genius common stock, par value $0.0001 per share (Common Stock),
with an exercise price per share equal to $1.88 (the last reported sales price of Genius Common Stock, as reported by the Over the Counter Bulletin Board, on the initial closing date of October 5, 2005).



The Notes do not bear any interest, and all outstanding principal is due and
payable in full on March 3, 2006 (the first business day that is 150 days after the initial closing date). Genius may prepay all or any portion of the Notes without premium or penalty. Genius has the option on the maturity date to convert all,
but not less than all, of the principal balance due under each Note into Common Stock. If the loans are not repaid in full on March 3, 2006, then the number of shares of Common Stock issuable upon conversion of each Note is equal to the
outstanding principal balance due under a Note divided by $1.00.



Pursuant to separate financing commitment letters, Genius has the option (but not the obligation) to borrow up to an additional $4.0 million in one or more subsequent closings under the Purchase Agreement. In that regard, under such
financing commitment letters, the Investors have agreed to loan Genius up to an additional $4.0 million in the aggregate as requested by Genius under certain conditions. The Investors financing commitment remains effective until, and may be
drawn by Genius on, November 14, 2005, assuming that there has not occurred since September 30, 2005 a material adverse event involving Genius. Any additional loans drawn upon by Genius and Warrants issued in connection therewith shall be
in the forms of Notes and Warrants, respectively, provided for in the Purchase Agreement. The number of warrant shares to be issued in any subsequent closing will be 70,000 shares for each $1 million in loans actually funded (with the number of
shares prorated for any portion thereof).



Genius is obligated
to register the shares of Common Stock issuable upon (i) exercise of the Warrants and (ii) conversion of the Notes, if any, for resale on a Form S-3 registration statement within 30 days after Genius is eligible to use a Form S-3
registration statement. If Genius has not filed a Form S-3 registration statement on or before January 31, 2006 and has not otherwise included the registrable securities in another registration statement, then Genius shall, no later than March



16



---

##### Table of Contents

3, 2006, file with a registration statement, on such form which Genius is then eligible to use, covering the resale of all of the registrable securities.
Failure to file a registration statement within the required timeframes will result in the payment of liquidated damages to the Investors an amount in cash equal to 1.0% of the aggregate purchase price paid by the Investors pursuant to the Purchase
Agreement.



In connection with the Purchase Agreement, each of
the Investors agreed not to, directly or indirectly, sell, effect any short sale, seek to hedge its position or otherwise effect any transaction with respect to Geniuss Common Stock until January 30, 2006.



Prior to the transaction, there were no material relationships between Genius
and its affiliates, on the one hand, and the Investors and their affiliates, on the other hand, except that affiliated with JLF Asset Management, LLC and Bonanza Master Fund, Ltd. beneficially own more than 5% of Genius Common Stock.



The table below summarizes information as of September 30, 2005
regarding certain future minimum contractual obligations and commitments for the next five years:



|                      |  |                  |         |      |   |           |  |      |         |      |   |         |  |   |        |  |   |          
|--------------------- |  | ---------------- | ------- | ---- | - | --------- |  | ---- | ------- | ---- | - | ------- |  | - | ------ |  | - | ---------
|                      |  | Remainder of2005 |         | 2006 |   | 2007      |  | 2008 |         | 2009 |   | Total  
|Lease obligations     |  | $                | 102,505 |      | $ | 419,088   |  | $    | 423,525 |      | $ | 393,943 |  | $ | 18,446 |  | $ | 1,357,507
|Employment agreements |  |                  | 250,463 |      |   | 309,600   |  |      | 166,017 |      |   |        |  |   |       |  |   | 726,079  
|Severance             |  |                  | 119,701 |      |   | 314,606   |  |      |        |      |   |        |  |   |       |  |   | 434,307  
|                      |  |                  |         |      |   |           |  |      |         |      |   |         |  |   |        |  |   |          
|Total                 |  | $                | 472,669 |      | $ | 1,043,294 |  | $    | 589,542 |      | $ | 393,943 |  | $ | 18,446 |  | $ | 2,517,893



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------



As of September 30, 2005, our cash and cash equivalents were invested with financial institutions with investment grade credit ratings. Due to the
short duration of our investment portfolio and the high quality of our investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our portfolio. Therefore, we would not expect our operating
results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates on our investment portfolio.



We do not enter into hedging or derivative instrument arrangements.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------



We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) that are designed to ensure that information
required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission
(SEC), and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding the required disclosures. In
designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.



As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based
upon that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and
reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding the required disclosures.



17



---

##### Table of Contents

PART II - OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------



We have disclosed in previous reports filed with the Securities and Exchange Commission (i) a complaint filed against our new subsidiary American
Vantage Media Corporation and Wellspring Media, Inc. in U.S. Bankruptcy Court for the District of Delaware by the Chapter 7 Trustee of the Winstar Communications, Inc. Estate, and (ii) a possible rescission offer in Washington State. There have
been no material developments in these matters. For a complete description of the facts and circumstances surrounding the Winstar litigation, see the disclosures in our Annual Report on Form 10-KSB for the year ended December 31, 2004 under
Item 3. Legal Proceedings, which are incorporated by reference herein.



In October, 2005 Genius commenced litigation against Falcon Picture Group, LLC (Falcon) in the Superior Court of San Diego County, Case No. GIN047884 seeking damages of $975,000 arising out of
Falcons breach of the license agreement. In October, 2005, Falcon commenced litigation against Genius in the Circuit Court of Cook County, Illinois, Case No. 05H16850 (the Illinois Proceeding), based upon allegations, among
other things, that Genius breached the terms of a license agreement by refusing to pay certain royalties to which Falcon supposedly was entitled. Falcon seeks a damages award of approximately $83,332 subject to proof at trial. Falcon further alleges
that as a result of Genius purported default under the license agreement, Falcon is entitled to a judgment declaring the license agreement to have been lawfully terminated. Although Genius has not yet responded to the complaint in the Illinois
Proceeding, Genius plans to vigorously defend against the allegations thereof.



We are a party to routine litigation incidental to our business, none of which is likely to have a material adverse effect on us.



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



Unregistered securities were issued in the third quarter of 2005 as follows:



|           |  |              |  |              |  |                    |  |                         |  |                                                                
|---------- |  | ------------ |  | ------------ |  | ------------------ |  | ----------------------- |  | ---------------------------------------------------------------
|ISSUE DATE |  | NO. OFSHARES |  | NET PROCEEDS |  | CLASS OFPERSON     |  | EXEMPTION               |  | ADDITIONALINFORMATION                                          
|7/28/05    |  | 175,000      |  | $           |  | AccreditedInvestor |  | Rule 506 ofRegulation D |  | Shares issued as part of an amendment to a services arrangement



Proceeds were used for
general working capital purposes.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------



None.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------



None.



|ITEM 5. | OTHER INFORMATION
|------- | -----------------



None.



18



---

##### Table of Contents

|ITEM 6. | EXHIBITS
|------- | --------



EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K



|            |  |                                                                                                
|----------- |  | -----------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                    
|            | 
|31.1        |  | Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act.*
|            | 
|31.2        |  | Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act.*
|            | 
|32.1        |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.*   
|            | 
|32.2        |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.*   



|* | Filed herewith.
|- | ---------------



19



---

##### Table of Contents

SIGNATURES



In accordance with the
requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                         |  |  |  |                        |  |     |  |                                                                                      
|------------------------ |  |  |  | ---------------------- |  | --- |  | -------------------------------------------------------------------------------------
|Dated: November 14, 2005 |  |  |  | GENIUS PRODUCTS, INC.,
|                         |  |  |  | a Delaware Corporation
|                         |  |  |  |                       
|                         |  |  |  |                        |  | By: |  | /s/ Trevor Drinkwater                                                                
|                         |  |  |  |                        |  |     |  | Trevor Drinkwater President and Chief Executive Officer (Principal Executive Officer)



|                         |  |  |  |     |  |                 |  |                                                                                 
|------------------------ |  |  |  | --- |  | --------------- |  | --------------------------------------------------------------------------------
|                         |  |  | 
|Dated: November 14, 2005 |  |  |  | By: |  | /s/ Shawn Howie
|                         |  |  |  |     |  |                 |  | Shawn Howie Chief Financial Officer (Principal
Financial and Accounting Officer)



20