What changed in this filing

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Item 1. Financial Statements

2025-08-14 compared with 2025-05-15 · 648 added, 501 removed, 698 unchanged (62% of the section changed)

3 unchanged sentences

(in thousands, except for share data)

June 30, 2025

December 31, 2024

Current Assets:

Restricted Cash

Investments in Marketable Securities (amortized cost

of $ 3,283 and $ 2,116 , respectively)

Accounts Receivable (net of allowance of $ 204 and $ 239 ,

respectively)

Tax Credits Receivable (net of allowance of $ 210 and

$ 187 , respectively)

Notes and Accounts Receivable from Related Party

Investments in Marketable Securities (amortized cost of $ 700 and $ 2,116 , respectively)

Accounts Receivable (net of allowance of $ 94 and $ 239 , respectively)

Tax Credits Receivable (net of allowance of $ 316 and $ 187 , respectively)

Other Receivable

7 unchanged sentences

Film and Television Costs, net

Tax Credits Receivable (net of allowance of $ 433 and

$ 421 , respectively)

Tax Credits Receivable (net of allowance of $ 393 and $ 421 , respectively)

Investment in Your Family Entertainment AG

Intangible Assets, net

LIABILITIES AND STOCKHOLDERS’

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:

20 unchanged sentences

Stockholders’ Equity:

Preferred Stock, 10,000,000 shares authorized, 0 shares

issued and outstanding as of March 31, 2025 and December 31, 2024

0% Series A Convertible Preferred Stock, $ 0.001 par

value, 6,000 shares authorized, 0 shares issued and outstanding as of March 31, 2025 and December 31, 2024

Series B Preferred Stock, $ 0.001 par value, 0 shares

authorized, 0 shares issued and outstanding as of March 31, 2025 and December 31, 2024

Series C Preferred Stock, $ 0.001 par value, 50,000

shares authorized, 0 shares issued and outstanding as of March 31, 2025 and December 31, 2024

Common Stock, $ 0.001 par value, 190,000,000

and 190,000,000 shares authorized, 47,861,379 and 46,285,078 shares issued and 47,785,248 and 46,209,081 outstanding as of March 31,

2025 and December 31, 2024, respectively

Preferred Stock, 10,000,000 shares authorized, 0 shares issued and outstanding as

of June 30, 2025 and December 31, 2024

0% Series A Convertible Preferred Stock, $ 0.001 par value, 6,000 shares authorized,

0 shares issued and outstanding as of June 30, 2025 and December 31, 2024

Series B Preferred Stock, $ 0.001 par value, 0 shares authorized, 0 shares issued

and outstanding as of June 30, 2025 and December 31, 2024

Series C Preferred Stock, $ 0.001 par value, 50,000 shares authorized, 0 shares

issued and outstanding as of June 30, 2025 and December 31, 2024

Common Stock, $ 0.001 par value, 190,000,000 and 190,000,000

shares authorized, 47,982,835 and 46,285,078 shares issued and 47,906,569 and 46,209,081 outstanding as of June 30, 2025 and

December 31, 2024, respectively

Additional Paid-in Capital

Treasury Stock at Cost, 76,131 and

75,997 shares of common stock as of March 31, 2025 and December 31, 2024, respectively

Treasury Stock at Cost, 76,266 and 75,997 shares of common stock

as of June 30, 2025 and December 31, 2024, respectively

Accumulated Deficit

Other Comprehensive Loss

Accumulated Other Comprehensive Loss

Total Kartoon Studios, Inc.

Stockholders' Equity

Non-Controlling Interests in Consolidated

Non-Controlling Interests in Consolidated Subsidiaries

Total Stockholders' Equity

Total Liabilities and Stockholders’

Total Liabilities and Stockholders’ Equity

The accompanying notes are an integral part of

3 unchanged sentences

(in thousands, except for share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Production Services

11 unchanged sentences

Other Expense, net

Loss Before Income Tax Benefit (Expense)

Income Tax Benefit (Expense)

Net Loss Attributable to Non-Controlling Interests

9 unchanged sentences

(in thousands)

Three Months Ended March 31,

Change in Accumulated Other Comprehensive Income (Loss):

Three Months Ended June 30,

Six Months Ended June 30,

Change in Accumulated Other Comprehensive Income:

Change in Unrealized Gain on Marketable Securities

Realized (Gain) Loss on Marketable Securities Reclassified from AOCI into Earnings

Realized Loss on Marketable Securities Reclassified from AOCI into Earnings

Foreign Currency Translation Adjustments

Total Change in Accumulated Other Comprehensive Income (Loss)

Total Change in Accumulated Other Comprehensive Income

Total Comprehensive Net Loss

6 unchanged sentences

(in thousands, except for share data)

Preferred Stock

Additional Paid-In

Treasury Stock

Accumulated Other Comprehensive

Non-Controlling

December 31, 2024

1 unchanged sentence

Issuance of Common Stock for Services

Issuance of Common Stock for Vested

Restricted Stock Units, Net of Shares Withheld for Taxes

Issuance of Common Stock for Vested Restricted Stock Units, Net of Shares Withheld for Taxes

Share Based Compensation

Stock Options Granted to Consultants

Stock Options Granted to Consultants, Net

Warrant Exercise

Realized Loss Reclassified from AOCI

to Earnings, net change in Unrealized Loss

Realized Loss Reclassified from AOCI to Earnings, net change in Unrealized Loss

Currency Translation Adjustment

1 unchanged sentence

$ ( 745,812 )

Issuance of Common Stock for Services

Issuance of Common Stock for Vested Restricted Stock Units, Net of Shares Withheld for Taxes

Share Based Compensation

Stock Options Granted to Consultants, Net

Warrant Reclassification

Realized Loss Reclassified from AOCI to Earnings, net change in Unrealized Loss

Currency Translation Adjustment

Balance, June 30, 2025

$ ( 751,975 )

Kartoon Studios, Inc.

Condensed Consolidated Statements of Stockholders'

(in thousands, except for share data)

Additional Paid-In

Accumulated Other

Comprehensive

December 31, 2023

3 unchanged sentences

Restricted Stock Units, Net of Shares Withheld for Taxes

Fractional Shares Issued Upon Reverse

Share Based Compensation

4 unchanged sentences

$ ( 725,591 )

Issuance of Common Stock for Services

Issuance of Common Stock for Vested

Restricted Stock Units, Net of Shares Withheld for Taxes

Proceeds from Securities Purchase

Agreement, Net

Proceeds From Warrant Exchange, net

Share Based Compensation

Realized Loss Reclassified from AOCI

to Earnings, net change in Unrealized Loss

Currency Translation Adjustment

Balance, June 30, 2024

$ ( 731,464 )

The accompanying notes are an integral part of

3 unchanged sentences

(in thousands)

Months Ended March 31,

Six Months Ended June 30,

Cash Flows from Operating Activities:

Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating

Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities:

Amortization of Film and Television Costs

Depreciation and Amortization of Property, Equipment

and Intangible Assets

Depreciation and Amortization of Property, Equipment and Intangible Assets

Amortization of Right-of-Use Asset

1 unchanged sentence

Share Based Compensation Expense

Impairment of Film and Television Costs

Loss on Settlement of Related Party Note

Loss on Revaluation of Equity Investments in Your

Family Entertainment AG

Unrealized (Gain) Loss on Foreign Currency of Equity

Investments in Your Family Entertainment AG

Gain on Warrant Revaluation

Realized (Gain) Loss on Marketable Securities

Gain on Early Lease Termination

Loss on Revaluation of Equity Investments in Your Family Entertainment AG

Unrealized (Gain) Loss on Foreign Currency of Equity Investments in Your Family Entertainment AG

Loss (Gain) on Warrant Revaluation

Realized Loss on Marketable Securities

Stock Issued for Services

Stock Options Issued for Services

Credit Loss (Recovery) Expense

Credit Loss Expense

Other Non-Cash Items

14 unchanged sentences

Lease Liability

Due to Related Party

Due From (To) Related Party

Other Liabilities

Net Cash Provided by (Used in) Operating Activities

Net Cash Used in Operating Activities

Cash Flows from Investing Activities:

Repayments from Related Party for Notes Receivable

Proceeds from Sales and Maturities of Marketable

Proceeds from Sales and Maturities of Marketable Securities

Investment in Marketable Securities

Investment in Intangible Assets, net

Purchase of Property and Equipment

Net Cash Provided by (Used in) Investing Activities

Net Cash Provided by Investing Activities

Cash Flows from Financing Activities:

4 unchanged sentences

Repayments of Bank Indebtedness, net

Proceeds from Securities Purchase Agreements

Principal Payments on Finance Lease Obligations

Debt Issuance Costs

Shares Withheld for Taxes on Vested Restricted Shares

Proceeds from Warrant Exercise

6 unchanged sentences

Cash Paid for Interest

Cash Paid for Taxes

Non-Cash Operating Activities

Reduction in Leased Asset Due to Modified Lease Liability

Non-Cash Financing and Investing Activities

Leased Assets Obtained in Exchange for New Finance Lease Liabilities

The accompanying notes are an integral part of

2 unchanged sentences

Notes to Condensed Consolidated Financial Statements

March 31, 2025

June 30, 2025

Organization and Business

1 unchanged sentence

Kartoon Studios, Inc.

known as Genius Brands International, Inc.) (the “Company” or “we,” “us” or “our”) is

a global content and brand management company that creates, produces, licenses, and broadcasts educational, multimedia animated content

for children.

Led by experienced industry personnel, the Company distributes its content primarily on streaming platforms and television,

and license properties for a broad range of consumer products based on the Company’s characters.

The Company is a “work for

hire” producer for many of the streaming outlets and animated content intellectual property (“IP”) holders.

In the children’s

media sector, the Company’s portfolio features “content with a purpose” for toddlers to tweens, providing enrichment

as well as entertainment.

With the exception of selected WOW Unlimited Media Inc.

(“Wow”) titles, the Company’s programs,

along with licensed programs, are being broadcast in the United States on the Company’s wholly-owned advertisement supported video

on demand (“AVOD”) service, its free ad supported TV (“FAST”) channels and

subscription video on demand (“SVOD”) outlets, Kartoon Channel!

TV, as well as linear streaming platforms .

These streaming platforms include Comcast,

Cox, DISH, Sling TV, Amazon Prime Video, Amazon Fire, Roku, Apple TV, Apple iOS, Android TV, Android mobile, Pluto TV, Xumo, Tubi, YouTube,

YouTube Kids, and Samsung and LG smart TVs.

The Company's in-house owned and produced animated shows include Stan Lee’s Superhero

Kindergarten starring Arnold Schwarzenegger, Llama Llama starring Jennifer Garner, Rainbow Rangers, KC!

Pop Quiz, and

Shaq’s Garage starring Shaquille O’Neal.

The Company’s library titles include the award-winning Baby Genius ,

adventure comedy Thomas Edison’s Secret Lab®, and Warren Buffett’s Secret Millionaires Club , created with

and starring iconic investor Warren Buffett, Team Zenko Go!, Reboot , Bee & PuppyCat:

Genius Brands International, Inc.) (the “Company”, “Kartoon Studios” or “we,” “us” or

“our”) is a global content and brand management company focused on the creation, production, licensing, and distribution of

multimedia animated content for children.

Led by experienced industry personnel, the Company’s core business includes original intellectual

property (“IP”) development, third-party IP production services, media agency, and content monetization through licensing

and owned distribution platforms.

Kartoon Studios’ owned

and produced titles include Stan Lee’s Superhero Kindergarten (starring Arnold Schwarzenegger), Llama Llama (starring

Jennifer Garner), Rainbow Rangers , KC!

Pop Quiz , and Shaq’s Garage (starring Shaquille O’Neal).

The Company’s

library also includes titles such as Baby Genius , Thomas Edison’s Secret Lab , Warren Buffett’s Secret Millionaires

Club , Team Zenko Go!

, Reboot , Bee & PuppyCat:

Lazy in Space , and Castlevania .

The Company also licenses

its programs to other services worldwide, in addition to the operation of its own channels, including, but not limited to, Netflix, Paramount+,

Max, Nickelodeon, and satellite, cable, and terrestrial broadcasters around the world.

Through our investments in

Germany’s Your Family Entertainment AG (“YFE”), a publicly traded company on the Frankfurt Stock Exchange (RTV-Frankfurt),

we have gained access to a leading producer and distributor of high-quality children’s and family programming.

YFE owns and operates

one of Europe’s largest channel-independent libraries of around 150 titles and 3,500 half-hour episodes.

Through the ownership of Wow,

the Company established an affiliate relationship with Mainframe Studios, which is one of the largest animation producers in the world.

The Company maintains

a strategy of leveraging owned IP and third-party relationships to expand distribution and consumer product licensing.

Kartoon Studios also owns

WOW Unlimited Media Inc.

(“WOW”), through which the Company established its affiliate relationship with Mainframe Studios—one

of the largest animation production studios globally.

In addition, Wow owns Frederator Networks Inc.

(“Frederator”) and its Channel Frederator Network , the largest animation

focused creator network on YouTube with over 2,500 channels.

Frederator also owns Frederator Studios, focused on developing and producing

shorts and series for and with partners.

Over the past 20 years, Frederator Studios has partnered with Cartoon Network, Nickelodeon, Nick

Jr., Netflix, Sony Pictures Animation, and Amazon.

The Company has rights to

certain select valuable IP, through our ownership of a controlling interest in Stan Lee Universe, LLC (“SLU”), an entity we

control and through which we control the name, likeness, signature, and all consumer product and IP rights to Stan Lee (the “Stan

Lee Assets”).

The Company also owns The

Beacon Media Group, LLC (“Beacon Media”) and The Beacon Communications Group, Ltd.

(“Beacon Communications”) (collectively,

“Beacon”), a leading North American media and marketing agency, celebrated for its innovative, tailored strategies and unmatched

expertise in reaching kids, parents, and families with precision and impact.

Beacon represents over 20 kids and family clients, including

Bandai Namco, Moose Toys, Bazooka Brands, Goliath Games, Playmates Toys, Cepia LLC, and Zebra Pens.

In addition, the Company owns

the Canadian company Ameba Inc.

(“Ameba”), which operates a premier subscription-based streaming service specializing in younger

children's entertainment.

As a cornerstone of our subscription offerings, Ameba delivers a vast library of engaging and educational content,

(“Frederator”)

along with its Channel Frederator Network .

Mainframe Studios is a producer-for-hire for several major streaming platforms and IP

To date, Mainframe has produced over 1,200 television episodes, 70 movies, and three feature films, including titles such as

Barbie Dreamhouse Adventures , Octonauts:

Above & Beyond , Cocomelon , SuperKitties , and Unicorn Academy ,

in partnership with leading global media companies.

Frederator operates a leading animation-focused creator network on YouTube encompassing

over 2,500 channels.

Frederator Studios has developed and produced original programming in partnership with Cartoon Network, Nickelodeon,

Nick Jr., Netflix, Sony Pictures Animation, and Amazon.

The Company distributes its

content across streaming platforms, linear television, and its ad-supported and subscription-based video-on-demand services and apps,

including Kartoon Channel!

and Ameba TV .

Distribution partners include:

YouTube, YouTube Kids, Amazon Prime Video, Amazon

Fire, Roku, Apple TV, iOS, Android TV, Android mobile, XBox, Pluto TV, Xumo, Tubi, Samsung TV Plus, Google TV, Cox, DISH, Sling TV, KartoonChannel.com,

and smart TVs from Samsung and LG.

The Company also licenses content to third-party networks and streaming services globally, including

Netflix, Paramount+, HBO Max, and Nickelodeon.

The Company owns Ameba Inc.

(“Ameba”), a Canadian-based subscription streaming service with a focus on educational and entertainment content for younger

As a cornerstone of the Company’s subscription offerings, Ameba delivers a vast library of engaging and educational content,

accessible across multiple platforms.

We believe, that Ameba significantly enhances our digital footprint and revenue streams.

The Company's common stock

is listed on the NYSE American LLC (“NYSE American”) exchange, under the symbol “TOON”.

Recent Transactions

"Winnie-the-Pooh”

Project Financing

On June 21, 2024, we announced

the launch of Winnie-the-Pooh on the Kartoon Channel through a $ 30 .0 million joint venture (the “JV”) with Catalyst

Venture Partners (“Catalyst”).

The binding term sheet governing the project stipulates after Catalyst recoups its investment,

the ownership and profit split between the partners is 35 % to Kartoon Studios and 65 % to Catalyst Venture Partners.

In addition, Kartoon

Studios is entitled to receive a 25 % agency fee for licensing and distribution from gross proceeds, which is payable prior to the distribution

of net proceeds.

Under the terms, Kartoon Studios maintains operational control and oversees the production process.

Winnie-the-Pooh

is based on the designs and stories of one of the most successful and enduring brands of all time, A.A.

Milne’s Winnie-the-Pooh .

Catalyst has agreed to provide the full amount of the production financing with the plan to include an animated holiday movie, 5 holiday

specials and 4 seasons of episodic series.

As of March 31, 2025,

The Company also owns The

Beacon Media Group, LLC and The Beacon Communications Group, Ltd.

(collectively, “Beacon”), a specialized media and marketing

agency focused on children’s and family audiences.

Beacon represents over 20 kids and family clients, including Bandai Namco, Moose

Toys, Bazooka Brands, Goliath Games, Playmates Toys, Cepia LLC, and Zebra Pens.

Through its investment in

Germany-based Your Family Entertainment AG (“YFE”), a publicly listed company on the Frankfurt Stock Exchange (RTV:

the Company holds a strategic interest in one of Europe’s leading independent children’s content providers, with a catalog

of approximately 150 titles and 3,500 half-hour episodes.

The Company holds a controlling

interest in Stan Lee Universe, LLC (“SLU”), which owns the intellectual property rights to Stan Lee’s name, likeness,

signature, and associated IP assets.

Kartoon Studios’ common

stock is listed on the NYSE American LLC (“NYSE American”) under the ticker symbol “TOON.”

Liquidity, Going Concern, and Capital Resources

As of June 30, 2025,

the Company had cash and restricted cash of $ 2.6 million, which decreased by $ 5.8 million as compared to December 31, 2024.

was primarily due to cash used in financing activities of $ 2.6 million, cash used in operating activities of $ 1.8 million and cash used

in investing activities of $ 1.2 million.

The cash used in financing activities was primarily due to repayments of the production facilities

and margin loan, net of proceeds from each, resulting in net cash used of $ 2.5 million, and payments of lease obligations of $ 0.1 million.

The cash used in operating activities was primarily due to net loss of $ 6.6 million partially offset by net change in non-cash adjustments

of $ 4.6 million, and net change in operating asset and liabilities of $ 0.2 million.

The cash used in investing activities was

due to purchase of marketable securities of $ 1.8 million.

As of March 31, 2025,

the Company held available-for-sale marketable securities with a fair value of $ 3.2 million.

An increase of $ 1.2 million as compared to

December 31, 2024 was due to a purchase transaction during the three months ended March 31, 2025.

The available-for-sale securities

consist principally of corporate and government debt securities and are also available as a source of liquidity.

As of March 31, 2025

and December 31, 2024, the Company’s margin loan balance was $ 0.4 million and $ 0.9 million, respectively.

During the three

months ended March 31, 2025, the Company borrowed an additional $ 2.7 million from its investment margin account and repaid $ 3.2 million

primarily with cash received from sales and maturities of marketable securities.

The borrowed amounts were primarily used for operational

The interest rates for the borrowings fluctuate based on the Fed Funds Upper Target plus 0.60 %.

The weighted average interest rates

were 0.32 % and 0.46 %, respectively, on average margin loan balances of $ 0.1 million and $ 1 .0 million as of March 31, 2025

and December 31, 2024, respectively.

The Company incurred interest expense on the loan of $ 1,806 and $ 18,632 during the three months

ended March 31, 2025 and 2024, respectively.

The investment margin account borrowings do not mature but are collateralized by the marketable

securities held by the same custodian and the custodian can issue a margin call at any time, effecting a payable on demand loan.

the call option, the margin loan is recorded as a current liability on the Company’s condensed consolidated balance sheets.

was primarily due to cash used in operating activities of $ 6.3 million, cash used in financing activities of $ 0.3 million, the effect

of exchange rate of $ 0.6 million, offset by cash provided by investing activities of $ 1.3 million.

The cash used in operating activities

was primarily due to net loss of $ 12.9 million and net change in operating asset and liabilities of $ 2.9 million, partially offset by

net change in non-cash adjustments of $ 9.5 million.

The cash used in financing activities was primarily due to payments of lease obligations

of $ 0.2 million and repayments of the production facilities and margin loan, net of proceeds from each, resulting in net cash used of

$0.1 million.

The cash provided by investing activities of $ 1.3 million was primarily due to proceeds from the sale and maturities of

marketable securities of $ 3.2 million, offset by the investment in marketable securities of $ 1.8 million.

As of June 30,

2025, the Company held available-for-sale marketable securities with a fair value of $ 0.7

million,a decrease of $ 1.3

million as compared to December 31, 2024, due to a sale of securities during the six months ended June 30, 2025.

available-for-sale securities consist of government debt securities and are also available as a source of liquidity.

In accordance with Accounting

Standards Codification (“ASC”), Presentation of Financial Statements - Going Concern (Subtopic 205-40), the Company has evaluated

whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern

for at least one year after the date the condensed consolidated financial statements are issued.

Historically, the Company

has incurred net losses.

For the three months ended March 31, 2025 and 2024, the Company reported net losses of $ 6.6 million and $ 7.1

million, respectively.

The Company reported net cash used in operating activities of $ 1.8 million, and cash used in operating activities

of $ 3.8 million for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, the Company had an accumulated

deficit of $ 745.8 million and total stockholders’ equity of $ 30.1 million.

As of March 31, 2025, the Company had total current

assets of $ 25.1 million, including cash of $ 2.3 million, restricted cash of $ 0.5 million, and marketable securities of $ 3.2 million,

and total current liabilities of $ 26.8 million.

The Company had negative working capital of $ 1.7 million as of March 31, 2025, compared

For the six months ended June 30, 2025 and 2024, the Company reported net losses of $ 12.9 million and $ 13 .0 million,

respectively.

The Company reported net cash used in operating activities of $ 6.3 million, and cash used in operating activities of $ 2.7

million for the six months ended June 30, 2025 and 2024, respectively.

As of June 30, 2025, the Company had an accumulated deficit

of $ 752 .0 million and total stockholders’ equity of $ 29.7 million.

As of June 30, 2025, the Company had total current assets

of $ 25.5 million, including cash of $ 2.1 million, restricted cash of $ 0.5 million, and marketable securities of $ 0.7 million, and

total current liabilities of $ 30.4 million.

The Company had negative working capital of $ 4.9 million as of June 30, 2025, compared

to working capital of $ 1.2 million as of December 31, 2024.

Management has evaluated the significance of these conditions in relation

to the Company’s ability to meet its obligations and noted the Company has sufficient marketable securities and investments to fund

operations for the next 12 months from the issuance date of this 10-Q.

to the Company’s ability to meet its obligations and concluded, that there is substantial doubt about our ability to continue as

a going concern for a period of at least one year subsequent to the issuance of the accompanying condensed consolidated financial statements.

Historically, the Company has financed its operations primarily through revenue generated from operations, loans and sales of its securities,

and the Company expects to continue to seek and obtain additional capital in a similar manner.

In order to address the Company’s

capital needs, the Company intends to consider multiple alternatives, including, but not limited to, the sale of equity or debt securities,

financing arrangements or entering into collaborative, strategic, and/or licensing transactions.

There can be no assurance that the Company

will be able to complete any such financing, collaborative or strategic transaction in a timely manner or on acceptable terms.

the Company may have to significantly limit its operations and its business, financial condition and results of operations would be materially

In parallel, management also plans to preserve liquidity, as needed, by implementing cost saving measures.

For example, subsequent

to the period ending June 30, 2025, in order to improve liquidity, the Company sold certain assets, including CARES Act Employee

Retention Tax Credit receivables and 1,500,000 YFE shares.

While management is taking these steps to improve liquidity, due to the uncertainty

surrounding the successful execution and timing of these plans, substantial doubt continues to exist regarding the Company’s ability

to meet its obligations as they become due within one year after the date the financial statements are issued.

Basis of Presentation and Summary of Significant Accounting

23 unchanged sentences

The following is provided

to update the Company’s significant accounting policies previously described in the Company’s Annual Report on Form 10-K for

the year ended December 31, 2024.

Reclassifications

The Company identified a disclosure

error in the presentation of the Note 6 Property and Equipment, net reported in the Form 10-K for the year ended December 31, 2024.

While the balance sheet correctly reflected the net book value of property and equipment, the footnote disclosure overstated by $ 0.7 million

both the gross asset cost and accumulated depreciation as of December 31, 2024.

The disclosure error did not impact the total net carrying

amount of property and equipment or the consolidated financial statements as a whole.

The comparative balances as of December 31, 2024

in Note 6 have been revised to reflect the correct gross cost and accumulated depreciation amounts.

The outstanding warrant balance

as of December 31, 2024, previously included 100,000 warrants that had been exercised in April 2024.

This exercised amount was identified

in the Q1 2025 review and the prior period balance has been corrected accordingly.

The correction was not material to the financial statements,

did not result in any adjusting entry, and had no impact on the Company’s results of operations or financial position.

to update the Company’s significant accounting policies previously described in the Company’s Annual Report on Form 10-K

for the year ended December 31, 2024.

Foreign Currency Forward Contracts

As of March 31, 2025

and December 31, 2024, the gross amounts of FX forwards in an asset and liability position subject to a master netting arrangement

resulted in a net liability of $ 0.5 million and $ 0.6 million, respectively, recorded within Other Current Liabilities on the condensed

consolidated balance sheets.

For the three months ended March 31, 2025 and 2024, the Company recorded a realized loss of $ 139,424 and

$ 15,507 , respectively, on FX forward contracts within Production Services Revenue on the condensed consolidated statements of operations.

As of June 30, 2025 and

December 31, 2024, the gross amounts of FX forwards in an asset and liability position subject to a master netting arrangement resulted

in a net liability of $ 0.1 million and $ 0.6 million, respectively, recorded within Other Current Liabilities on the condensed consolidated

balance sheets.

For the three and six months ended June 30, 2025 ,

the Company recorded a realized loss of $ 24,070 and $ 0.2 million, respectively, on

FX forward contracts within Production Services Revenue on the condensed consolidated statements of operations.

For the three and

six months ended June 30, 2024 , the Company recorded a realized loss of

$ 20,903 and $ 0.1 million, respectively, on FX forward contracts within Production Services Revenue

on the condensed consolidated statements of operations.

Trade Accounts Receivable and Allowance for

As of March 31, 2025

and December 31, 2024, the Company recorded an allowance for credit loss of $ 0.2 million and $ 0.2 million, respectively.

As of June 30, 2025 and

December 31, 2024, the Company recorded an allowance for credit loss of $ 0.1 million and $ 0.2 million, respectively.

The following table summarizes

the activity in the allowance for credit losses related to trade accounts receivable as of March 31, 2025 and December 31, 2024

the activity in the allowance for credit losses related to trade accounts receivable as of June 30, 2025 and December 31, 2024

(in thousands):

3 unchanged sentences

Balance, net as of December 31, 2024

Balance, net as of March 31, 2025

Charged to costs and expenses

Balance, net as of June 30, 2025

Tax Credits Receivable

The Company classifies majority

of its tax credits receivable as current based on their normal operating cycle.

As of March 31, 2025, a portion of the Company’s

The Company classifies the

majority of its tax credits receivable as current based on their normal operating cycle.

As of June 30, 2025, a portion of the Company’s

tax credits receivable is presented as a long-term asset due to uncertainty regarding the timing of obtaining the necessary certifications

2 unchanged sentences

to current when the timing of collection becomes reasonably estimable.

As of March 31, 2025

and December 31, 2024, $ 10.8 million a nd $ 12.7 million in tax credit receivables related

As of June 30, 2025 and

December 31, 2024, $ 14.5 million a nd $ 12.7 million in tax credit receivables related

to Wow’s film and television productions were recorded, net of $ 0.7 million and $ 0.6 million, respectively, recorded as an allowance

for credit loss.

As of March 31, 2025, $ 2.5 million in tax credits receivable net of $ 0.4 million allowance for credit loss was presented

As of June 30, 2025, $ 2.2 million in tax credits receivable net of $ 0.4 million allowance for credit loss was presented

as non-current asset.

7 unchanged sentences

the United States are insured by the FDIC up to $250,000 per account and deposits in banks in Canada are insured by the CDIC up to CAD

As of March 31, 2025 and December 31, 2024, the Company had ten and twelve bank deposit accounts with an aggregate

As of June 30, 2025 and December 31, 2024, the Company had eight and twelve bank deposit accounts with an aggregate

uninsured balance of $ 0.8 million and $ 6.7 million, respectively.

2 unchanged sentences

The managed account maintains its investments in marketable securities of approximately $ 0.7 million

and $ 2 .0 million as of March 31, 2025 and December 31, 2024, respectively.

and $ 2 .0 million as of June 30, 2025 and December 31, 2024, respectively.

Assets in the managed account are protected by the

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institution provides additional “excess of SIPC” coverage which insures up to $1.0 billion.

As of March 31, 2025 and

December 31, 2024, the Company did not have account balances held at this financial institution that exceed the insured balances.

The Company’s investment

portfolio, consists of investment-grade securities and, although reduced in size compared to prior years, remains reasonably diversified

among security types, industries and issuers.

The Company’s policy limits the amount of credit exposure to any one security issue

or issuer and the Company believes no significant concentration of credit risk exists with respect to these investments.

As of June 30, 2025 and December 31,

2024, the Company did not have account balances held at this financial institution that exceed the insured balances.

As of June 30, 2025,

the Company’s investment portfolio consists of high-grade, fixed-income U.S.

government agency bonds and therefore would not be

considered diversified.

While this represents a concentration in a single asset class and issuer type, these investments are considered

to have minimal credit risk due to the high credit quality of U.S.

government agencies.

The Company continues to monitor its investment

holdings in accordance with its investment policy and believes no significant concentration of credit risk exists with respect to these

During the three months ended

March 31, 2025, the Company had four customers, whose total revenue exceeded 10% of the total condensed consolidated revenue.

June 30, 2025, the Company had four customers, whose total revenue exceeded 10% of the total condensed consolidated revenue.

customers accounted for 86.6 % of the total revenue.

During the three months ended March 31, 2024, the Company had two customers whose

During the three months ended June 30, 2024, the Company had four customers whose

total revenue exceeded 10% of the total condensed consolidated revenue.

These customers accounted for 80.9 % of the total revenue.

As of March 31, 2025,

the Company had three customers whose total accounts receivable exceeded 10% of the total accounts receivable.

During the six months ended

June 30, 2025, the Company had four customers, whose total revenue exceeded 10% of the total condensed consolidated revenue.

customers accounted for 85.9 % of the total revenue.

During the six months ended June 30, 2024, the Company had three customers whose

total revenue exceeded 10% of the total condensed consolidated revenue.

These customers accounted for 66.7 % of the total revenue.

As of June 30, 2025,

the Company had two customers whose total accounts receivable exceeded 10% of the total accounts receivable.

These customers accounted

for 53.2 % of the total accounts receivable as of March 31, 2025.

for 49.6 % of the total accounts receivable as of June 30, 2025.

As of December 31, 2024, the Company had three customers whose

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The following table summarizes

the marketable securities measured at fair value on a recurring basis by level within the fair value hierarchy as of March 31, 2025

the marketable securities measured at fair value on a recurring basis by level within the fair value hierarchy as of June 30, 2025

(in thousands):

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Investments in Marketable Securities:

Corporate Bonds

Agency and Government Sponsored Securities

States and Municipalities

The following table summarizes

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An allowance for credit loss was not

recorded for the marketable securities as of March 31, 2025 and December 31, 2024.

recorded for the marketable securities as of June 30, 2025 and December 31, 2024.

Refer to Note 5 for additional details.

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to the name, physical likeness, physical signature, live-action and animated motion picture, television, online, digital, publishing,

comic book, merchandising and licensing rights to Stan Lee and over 100 original Stan Lee creations (the “Stan Lee Assets”),

from which the Company plans to develop and license multiple properties each year.

comic book, merchandising and licensing rights to Stan Lee and over 100 original Stan Lee creations, from which the Company plans to develop

and license multiple properties each year.

During the three months ended

March 31, 2025 and 2024, SLU generated an insignificant amount of net loss.

There were no contributions or distributions during the

three months ended March 31, 2025 and 2024 and there were no changes in facts and circumstances that would result in a re-evaluation

of the VIE assessment.

June 30, 2025 and 2024 and the six months ended June 30, 2025 and 2024, SLU generated an insignificant amount of net loss.

were no contributions or distributions during the six months ended June 30, 2025 and 2024 and there were no changes in facts and

circumstances that would result in a re-evaluation of the VIE assessment.

Investment in Equity Interest

As of March 31, 2025,

As of June 30, 2025,

the Company owned 6,857,132 shares of YFE.

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and recorded at fair value each reporting period, with the change recorded through earnings.

As of March 31, 2025, the fair value

As of June 30, 2025, the fair value

of the investment was determined to be $ 10.8 million recorded within noncurrent assets on the Company’s consolidated balance sheet.

The fair value as of March 31, 2025 decreased by net $ 3 .0 million, as compared to December 31, 2024.

The fair value as of June 30, 2025 decreased by net $ 5.7 million, as compared to December 31, 2024.

The net decrease is comprised

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change in fair value is recorded within Other Income (Expense), net on the Company’s consolidated statement of operations.

March 31, 2025 and December 31, 2024, the Company’s ownership in YFE was 44.8 %.

June 30, 2025 and December 31, 2024, the Company’s ownership in YFE was 44.8 %.

On July 14, 2025, the Company sold 1,500,000

YFE shares for total proceeds of € 750,000 as part of its ongoing strategy to optimize its portfolio of assets.

Subsequently, the

Company’s ownership in YFE decreased to 34.98 %.

Marketable Securities

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The investments in marketable

securities had an adjusted cost basis of $ 3.3 million and a market value of $ 3.2 million as of March 31, 2025.

The balances consisted

of the following securities (in thousands) :

securities had an adjusted cost basis of $ 0.7

million and a market value of $ 0.7

million as of June 30, 2025.

The balances consisted of the following securities (in thousands) :

Schedule of marketable securities

Adjusted Cost

Corporate Bonds

Unrealized Gain (Loss)

Agency and Government Sponsored Securities

States and Municipalities

The investments in marketable

securities as of December 31, 2024 had an adjusted cost basis of $ 2.1 million and a market value of $ 2 .0 million.

The balances consisted

of the following securities (in thousands) :

securities as of December 31, 2024 had an adjusted cost basis of $ 2.1

million and a market value of $ 2 .0

The balances consisted of the following securities (in thousands) :

Adjusted Cost

Unrealized Gain (Loss)

Corporate Bonds

1 unchanged sentence

States and Municipalities

The Company holds 7 AFS securities,

5 of which were in an unrealized loss position and have been in an unrealized loss position for a period greater than 12 months as of

March 31, 2025.

The AFS securities held by the Company as of December 31, 2024 had also been in an unrealized loss position

for a period greater than 12 months.

The Company reported the net unrealized losses in accumulated other comprehensive income (loss),

a component of stockholders’ equity.

As of March 31, 2025 and December 31, 2024, an allowance for credit loss was no t

recognized as the issuers of the securities had not established a cause for default, various rating agencies had reaffirmed each security's

investment grade status and the Company did not have the intent, nor is it required to sell its securities prior to recovery.

Realized gain of $ 4,454 and

losses of $ 141,174 were recognized in earnings during the three months ended March 31, 2025 and 2024, respectively, primarily due to selling

securities prior to maturity in Q1 2024 to prevent further market condition losses on the securities.

The Company holds 1 AFS security,

which was in an unrealized loss position and has been in an unrealized loss position for a period greater than 12 months as of June 30,

The AFS securities held by the Company as of December 31, 2024 had also been in an unrealized loss position for a period greater

than 12 months.

The Company reported the net unrealized losses in accumulated other comprehensive income (loss), a component of stockholders’

As of June 30, 2025 and December 31, 2024, an allowance for credit loss was no t recognized as the issuers of the securities

had not established a cause for default, various rating agencies had reaffirmed each security's investment grade status and the Company

did not have the intent, nor is it required to sell its securities prior to recovery.

Realized losses of $ 32,145

and $ 215,612 were recognized in earnings during the three months ended June 30, 2025 and 2024, respectively.

Realized losses of $ 27,691

and $ 356,786 were recognized in earnings during the six months ended June 30, 2025 and 2024, respectively, primarily due to selling securities

prior to maturity to prevent further market condition losses on the securities.

The contractual maturities

of the Company’s marketable investments as of March 31, 2025 were as follows (in thousands):

of the Company’s marketable investments as of June 30, 2025 were as follows (in thousands):

Schedule of contractual maturities of marketable investments

Due within 1 year

Due after 1 year through 5 years

The Company may sell certain

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Property and Equipment, net

The Company has property and

equipment as follows (in thousands):

The Company has property

and equipment as follows (in thousands):

Schedule of property and equipment, net

March 31, 2025

June 30, 2025

December 31, 2024

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Property and Equipment, net

During the three months ended

March 31, 2025 and 2024, the Company recorded depreciation expense of $ 0.1 million.

During the three months ended

March 31, 2025 and 2024, the Company did no t incur any impairment charges on its property and equipment.

During the six months ended

June 30, 2025 and 2024, the Company recorded depreciation expense of $ 0.3 million and $ 0.2 million, respectively.

During the six months ended

June 30, 2025 and 2024, the Company did no t incur any impairment charges on its property and equipment.

Leased Right-of-Use Assets, net

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Schedule of leased right of use assets

March 31, 2025

June 30, 2025

December 31, 2024

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Leased Right-of-Use Assets, net

As of March 31, 2025,

As of June 30, 2025,

the weighted-average lease term for the Company’s operating leases was 69 months and the weighted-average discount rate was 11.2 %.

As of December 31, 2024, the weighted-average lease term for operating leases was 73 months and the weighted-average discount rate

Effective April 1, 2025, the

Company executed a lease reassignment agreement with the landlord for its Ontario office, resulting in the reassignment of one of its

suites to a new tenant.

The Company continues to lease and occupy remaining space under the original terms of the lease agreement.

reassignment reduced the Company’s leased space from 570 square feet to 74 square feet, and associated rent obligations, but did

not change any other conditions of the lease.

The modification was accounted for as a partial termination of the lease under ASC 842.

Accordingly, the Company remeasured the lease liability as of the effective date of the modification using the discount rate based on

the remaining lease term and payments.

Based on the modified lease payment terms, the discount rate was determined to be 8.96%,

and the remeasured lease liability was $ 16,042 .

This represented a reduction of $ 0.1 million compared to the pre-modification

lease liability.

The Company adjusted the right-of-use asset based on the proportion of the reduction in the remeasured lease liability,

resulting in a reduction of $ 0.1 million.

The Company recognized a gain on lease modification of $ 4,253 in the consolidated

statements of operations.

The remaining lease costs of $ 16,770 will be recognized on a straight-line basis over the remaining lease

Operating lease costs during

the three months ended March 31, 2025 and 2024 were $ 0.4 million and $ 0.4 million, respectively, recorded within General and Administrative

the three months ended June 30, 2025 and 2024 were $ 0.4 million and $ 0.7 million, respectively, recorded within General and Administrative

Expenses on the Company’s condensed consolidated statements of operations.

During the three months ended

March 31, 2025, the Company recorded finance lease costs of $ 0.1 million primarily comprised of ROU amortization of $ 0.1 million.

During the three months ended March 31, 2024, the Company recorded finance lease costs of $ 0.4 million primarily comprised of ROU

amortization.

ROU amortization is recorded within General and Administrative Expenses and accretion of interest expense is recorded within

Other Expense, net on the Company’s condensed consolidated statements of operations.

Operating lease costs during the six months ended June

30, 2025 and 2024 were $ 0.7 million and $ 0.8 million, respectively, recorded within General and Administrative Expenses on the Company’s

condensed consolidated statements of operations.

During the three and six months

ended June 30, 2025, the Company recorded finance lease costs of $ 0.1 million and $ 0.2 million respectively, primarily comprised

of ROU amortization of $ 0.1 million and $ 0.2 million respectively.

During the three and six months ended June 30, 2024, the Company

recorded finance lease costs of $ 0.3 million and $ 0.7 million, respectively, primarily comprised of ROU amortization of $ 0.3 million and

$ 0.6 million, respectively.

ROU amortization is recorded within General and Administrative Expenses and accretion of interest expense

is recorded within Other Expense, net on the Company’s condensed consolidated statements of operations.

Film and Television Costs, net

The following table highlights

the activity in Film and Television Costs as of March 31, 2025 and December 31, 2024 (in thousands):

the activity in Film and Television Costs as of June 30, 2025 and December 31, 2024 (in thousands):

Schedule of film and television costs activity

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Foreign Currency Translation Adjustment

Film and Television Costs, net as of March 31, 2025

During the three months ended

March 31, 2025 and 2024, the Company recorded amortization expense of $ 0.1 million and $ 0.1 million, respectively.

Film and Television Costs, net as of June 30, 2025

During the six months ended

June 30, 2025 and 2024, the Company recorded amortization expense of $ 0.1 million and $ 0.2 million, respectively.

The Company did no t

write-down or record any significant impairment charges on film costs during the three months ended March 31, 2025 and 2024.

write-down or record any significant impairment charges on film costs during the six months ended June 30, 2025 and 2024.

Intangible Assets, net

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Weighted Average Remaining Amortization

March 31, 2025

June 30, 2025

December 31, 2024

6 unchanged sentences

During the three months ended

March 31, 2025 and 2024, the Company recorded intangible asset amortization expense of $ 0.5 million and $ 0.5 million, respectively.

June 30, 2025 and 2024, the Company recorded intangible asset amortization expense of $ 0.5 million and $ 0.5 million, respectively.

the six months ended June 30, 2025 and 2024, the Company recorded intangible asset amortization expense of $ 1 .0 million and $ 1 .0 million,

respectively.

Expected future amortization

of intangible assets subject to amortization as of March 31, 2025 is as follows (in thousands):

of intangible assets subject to amortization as of June 30, 2025 is as follows (in thousands):

Schedule of expected future intangible asset amortization

As of March 31, 2025, $ 5.3 million of the

Company’s intangible assets related to the acquired trade names from the Wow acquisition had indefinite lives and are not subject

to amortization.

As of June 30, 2025, $ 5.5 million of the Company’s

intangible assets related to the acquired trade names from the Wow acquisition had indefinite lives and are not subject to amortization.

Deferred Revenue

As of March 31, 2025

and December 31, 2024, the Company had aggregate short term and long term deferred revenue of $ 9.5 million and $ 9.4 million, respectively.

The increase in deferred revenue is insignificant and primarily related to productions on various shows nearing completion of the project

as of March 31, 2025, similar to the progress as of December 31, 2024.

Wow's deferred revenue balance relates to cash received

from customers for productions in progress.

As of June 30, 2025 and

December 31, 2024, the Company had aggregate short term and long term deferred revenue of $ 9.9 million and $ 9.4 million, respectively.

The increase in deferred revenue is primarily related to productions on various shows nearing completion of the project as of June 30,

2025, similar to the progress as of December 31, 2024.

Wow's deferred revenue balance relates to cash received from customers for

productions in progress.

Revenue is fully recognized upon production completion.

Deferred revenue also includes both

(i) variable fee contracts with licensees and customers in which the Company collected advances and minimum guarantees against future

royalties and (ii) fixed fee contracts.

The Company recognizes revenue related to these contracts when all revenue recognition criteria

have been met.

As of March 31, 2025

and December 31, 2024, the Company’s margin loan balance was $ 0.4 million and $ 0.9 million, respectively.

During the three

months ended March 31, 2025, the Company borrowed an additional $ 2.7 million from its investment margin account and repaid $ 3.2 million

Deferred revenue also includes both (i) variable fee

contracts with licensees and customers in which the Company collected advances and minimum guarantees against future royalties and (ii)

fixed fee contracts.

The Company recognizes revenue related to these contracts when all revenue recognition criteria have been met.

As of June 30, 2025 and

December 31, 2024, the Company’s margin loan balance was $ 0.1 million and $ 0.9 million, respectively.

During the six months

ended June 30, 2025, the Company borrowed an additional $ 5.2 million from its investment margin account and repaid $ 6 .0 million

primarily with cash received from sales and maturities of marketable securities.

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The weighted average interest rates

were 0.32 % and 0.46 %, respectively, on average margin loan balances of $ 0.1 million and $ 1 .0 million as of March 31, 2025

were 0.32 % and 0.46 %, respectively, on average margin loan balances of $ 0.1 million and $ 1 .0 million as of June 30, 2025

and December 31, 2024, respectively.

The Company incurred interest expense on the loan of $ 1,806 and $ 18,632 during the three months

ended March 31, 2025 and 2024, respectively.

The investment margin account borrowings do not mature but are collateralized by the marketable

securities held by the same custodian and the custodian can issue a margin call at any time, effecting a payable on demand loan.

the call option, the margin loan is recorded as a current liability on the Company’s condensed consolidated balance sheets.

During the three months ended June 30, 2025 and 2024, the Company incurred interest expense

on the loan of $ 3,062 and $ 12,429 , respectively.

During the six months ended June 30, 2025 and 2024, the Company incurred interest expense

on the loan of $ 4,868 and $ 31,061 , respectively, included in Interest Expense on the Company’s condensed consolidated statements

of operations.

The investment margin account borrowings do not mature but are collateralized by the marketable securities held by the

same custodian and the custodian can issue a margin call at any time, effecting a payable on demand loan.

Due to the call option, the

margin loan is recorded as a current liability on the Company’s condensed consolidated balance sheets.

Bank Indebtedness and Production Facilities

The Company has certain credit

facilities that are comprised of the following:

has certain credit facilities that are comprised of the following:

Production Facilities, net

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The production facilities are generally repayable on demand.

Any borrowings under the production facilities

are collateralized by a security interest in substantially all of the relevant production company’s tangible and intangible assets,

including a combination of federal and provincial tax credits, other government incentives, production service agreements and license

agreements as well as those of certain of our subsidiaries and related entities acting as guarantors of the production facilities.

As of March 31, 2025

and December 31, 2024, the Company had an outstanding net balance of USD 7.4 million (CAD 10.6 million), including USD 0.6 million

(CAD 0.8 million) of interest, and USD 9.2 million (CAD 13.3 million), including USD 0.8 million (CAD 1.2 million) of interest, respectively,

Any borrowings

under the production facilities are collateralized by a security interest in substantially all of the relevant production company’s

tangible and intangible assets, including a combination of federal and provincial tax credits, other government incentives, production

service agreements and license agreements as well as those of certain of our subsidiaries and related entities acting as guarantors of

the production facilities.

As of June 30, 2025 and

December 31, 2024, the Company had an outstanding net balance of USD 10.6 million (CAD 14.5 million), including USD 0.8 million (CAD

1 .0 million) of interest, and USD 9.2 million (CAD 13.3 million), including USD 0.8 million (CAD 1.2 million) of interest, respectively,

recorded as Production Facilities, net within current liabilities on the Company’s condensed consolidated balance sheets.

As of March 31, 2025

and December 31, 2024, Production Facilities, net includes unamortized debt issuance costs related to the issuance of production

facilities of $ 127,040 and $ 122,973 , respectively, which were included as a reduction to the carrying amount of production facilities.

As of June 30, 2025 and

December 31, 2024, Production Facilities, net includes unamortized debt issuance costs related to the issuance of production facilities

of $ 0.1 million and $ 0.1 million, respectively, which were included as a reduction to the carrying amount of production facilities.

Equipment Lease Facility

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to finance equipment purchases of up to $ 1 .0 million (CAD 1.4 million) in total.

Each transaction under the equipment lease facility has

specific financing terms in respect of the leased equipment such as term, finance amount, rate, and payment terms.

As of March 31, 2025,

the Company has two leases remaining under this facility with finance rates of 7.52 % and 8.20 %, and remaining lease terms of 8 months

and 17 months.

As of March 31, 2025

and December 31, 2024, the outstanding balances, net of repayments, of $ 0.2 million (CAD 0.3 million) and $ 0.3 million (CAD 0.4 million),

Each transaction under the

equipment lease facility has specific financing terms in respect of the leased equipment such as term, finance amount, rate, and payment

of June 30, 2025 , the Company has two leases remaining under

this facility with finance rates of 7.52 % and 8.20 %, and remaining lease terms of 5 months

and 14 months, respectively .

As of June 30, 2025 and

December 31, 2024, the outstanding balances, net of repayments, of $ 0.2 million (CAD 0.2 million) and $ 0.3 million (CAD 0.4 million),

respectively, were included within current and noncurrent Finance Lease Liabilities, net on the Company’s consolidated balance sheets.

Stockholders’ Equity

As of March 31, 2025

and December 31, 2024 the total number of authorized shares of common stock was 190,000,000 .

As of March 31, 2025

and December 31, 2024, there were 47,785,248 and 46,209,081 shares of common stock outstanding, respectively.

During the three months ended

March 31, 2025 and 2024, the Company issued 14,990

and 53,497 shares of common stock for services, respectively.

During the three months ended

March 31, 2025 and 2024, the Company issued 99,177

shares of common stock in connection with vested restricted stock units (RSUs), net of shares withheld for tax obligations, respectively.

As of June 30, 2025 and

December 31, 2024 the total number of authorized shares of common stock was 190,000,000 .

As of June 30, 2025 and

December 31, 2024, there were 47,906,569 and 46,209,081 shares of common stock outstanding, respectively.

During the six months ended

June 30, 2025 and 2024, the Company issued 95,282 and 127,242 shares of common stock for services, respectively.

During the six months ended

June 30, 2025 and 2024, the Company issued 143,206 and 88,531 shares of common stock in connection with vested restricted stock units

(RSUs), net of shares withheld for tax obligations, respectively.

On March 5, 2025, the Company

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shares of preferred stock authorized with a par value of $0.001 per share including 9,944,000 shares of undesignated preferred stock,

6,000 shares designated as 0% Series A Convertible Preferred Stock and 50,000 shares as Series C Preferred Stock.

The board of directors

is authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders, to issue from time-to-time

shares of preferred stock in one or more series.

Each series of preferred stock will have such number of shares, designations, preferences,

voting powers, qualifications and special or relative rights or privileges as shall be determined by the board of directors, which may

include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

As of March 31, 2025

and December 31, 2024, there were 0 shares of Series A Convertible Preferred Stock outstanding.

As of March 31, 2025 and December 31,

6,000 shares designated as 0% Series A Convertible Preferred Stock and 50,000 shares designated as Series C Preferred Stock.

of directors is authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders, to issue

from time-to-time shares of preferred stock in one or more series.

Each series of preferred stock will have such number of shares, designations,

preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by the board of directors,

which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

As of June 30, 2025 and

December 31, 2024, there were 0 shares of Series A Convertible Preferred Stock outstanding.

As of June 30, 2025 and December 31,

2024, there were 0 shares of Series C Preferred Stock outstanding.

Treasury Stock

During the three months ended

March 31, 2025, 134 shares of common stock with a cost of $ 252 were withheld to cover taxes owed by certain employees, all of which

were included as treasury stock outstanding and recorded at cost within Treasury Stock on the condensed consolidated balance sheet.

During the six months ended

June 30, 2025 and 2024, 269 and 217 shares of common stock, respectively, with a cost of $ 187 and $ 252 , respectively, were withheld to

cover taxes owed by certain employees, all of which were included as treasury stock outstanding and recorded at cost within Treasury Stock

on the condensed consolidated balance sheet.

Stock Options

On August 27, 2020, the

Company’s stockholders approved the adoption of the Kartoon Studios, Inc.

2020 Equity Incentive Plan (as amended, the

”2020 Plan”).

2020 Plan replaced the previously adopted 2015 Incentive Plan (the “2015 Plan”).

On August 27, 2020, the Company’s

stockholders approved the adoption of the Kartoon Studios, Inc.

2020 Equity Incentive Plan (as amended, the ”2020 Plan”).

The 2020 Plan replaced the previously adopted 2015 Incentive Plan (the “2015 Plan”).

The maximum number of shares available

for issuance was initially equal to the sum of (i) 3,000,000 shares of common stock and (ii) the number of shares of common stock

remaining available for issuance under the 2015 Plan, which was then equal to 216,767 shares.

2023, the Company’s stockholders approved the adoption of an Amended and Restated 2020 Equity Incentive Plan, which provided

for the maximum number of shares of common stock available for issuance under the 2020 Plan to be increased by 5,000,000

As of March 31, 2025 the maximum number of shares available for issuance was 8,216,767 .

The remaining 12,000

outstanding stock options granted under the 2015 Plan, as of March 31, 2025, remain to be governed under such plan.

2025, the Company’s stockholders approved an amendment to the 2020 Plan.

Refer to Note 22 Subsequent Events for additional

During the three months ended

March 31, 2025 and 2024, the Company did no t grant any stock options.

for issuance was initially equal to the sum of (i) 3,000,000 shares of common stock and (ii) the number of shares of common stock remaining

available for issuance under the 2015 Plan, which was then equal to 216,767 shares .

On May 23, 2023, the Company’s stockholders

approved the adoption of an Amended and Restated 2020 Equity Incentive Plan, which provided for the maximum number of shares of common

stock available for issuance under the 2020 Plan to be increased by 5,000,000 shares.

Subsequently, on May 14, 2025, the Company’s

stockholders approved a further amendment and restatement of the 2020 Plan, providing for an additional increase of 5,000,000 shares of

common stock authorized for issuance under the plan.

As of June 30, 2025 the maximum number of shares available for issuance was

During the six months ended

June 30, 2025 and 2024, the Company did no t grant any stock options.

The following table summarizes

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Forfeited/Cancelled

Outstanding at March 31, 2025

Unvested at March 31, 2025

Vested and exercisable at March 31, 2025

Outstanding at June 30, 2025

Unvested at June 30, 2025

Vested and exercisable at June 30, 2025

During the three months ended

March 31, 2025 and 2024, the Company recognized $ 18,213 and $ 69,965 , respectively, in share-based compensation expense related to stock

options included in General and Administrative Expense on the Company’s condensed consolidated statements of operations.

The unrecognized

share-based compensation expense at March 31, 2025 was $ 20,156 which will be recognized through the second quarter of 2025 assuming

the underlying grants are not cancelled or forfeited.

The outstanding shares as of March 31, 2025 had an aggregated intrinsic value

June 30, 2025 and 2024, the Company recognized $ 6,486 and $ 40,317 , respectively, in share-based compensation expense related to stock

During the six months ended June 30, 2025 and 2024, the Company recognized $ 24,699 and $ 0.1 million, respectively, in share-based

compensation expense related to stock options included in General and Administrative Expense on the Company’s condensed consolidated

statements of operations.

As of June 30, 2025, the Company had no unrecognized share-based compensation expense related to outstanding

stock options.

The outstanding options as of June 30, 2025 had an aggregated intrinsic value of zero .

Restricted Stock Units

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are granted under the Company’s 2020 Plan.

During the three months ended March 31, 2025 and 2024, the Company granted 110,968 and

95,229 fully vested RSUs to the Company’s board members and consultants, with a fair market value of $ 65,375 and $ 131,379 , respectively.

During the six months ended June 30, 2025 and 2024, the Company granted 180,936 and 194,680

fully vested RSUs to the Company’s board members and consultants, with a fair market value of $ 0.1 million and $ 0.2 million, respectively.

An aggregate of 187,604 shares

of common stock were issued during the three months ended March 31, 2025 as a result of RSUs vested during the current and prior

of common stock were issued during the six months ended June 30, 2025 as a result of RSUs vested during the current and prior periods.

The following table summarizes

4 unchanged sentences

Unvested at December 31, 2024

Unvested at March 31, 2025

Unvested at June 30, 2025

During the three months ended

March 31, 2025 and 2024, the Company recognized $ 0.1 million and $ 0.2 million, respectively, in share-based compensation expense related

to RSU awards included in General and Administrative Expense on the Company’s condensed consolidated statements of operations.

unvested share-based compensation as of March 31, 2025 was $ 17,545 which will be recognized through the fourth quarter of 2026 assuming

the underlying grants are not cancelled or forfeited.

The total fair value of shares vested during the three months ended March 31,

2025 was $ 0.1 million.

June 30, 2025 and 2024, the Company recognized $ 0.04 million and $ 0.1 million, respectively, in share-based compensation expense related

During the six months ended June 30, 2025 and 2024, the Company recognized $ 0.1 million and $ 0.3 million, respectively, in share-based

compensation expense related to RSU awards included in General and Administrative Expense on the Company’s condensed consolidated

statements of operations.

The unvested share-based compensation as of June 30, 2025 was $ 13,573 which will be recognized through

the fourth quarter of 2026 assuming the underlying grants are not cancelled or forfeited.

The total fair value of shares vested during

the six months ended June 30, 2025 was $ 0.1 million.

The following table summarizes

the activity in the Company’s outstanding warrants during the three months ended March 31, 2025:

the activity in the Company’s outstanding warrants during the six months ended June 30, 2025:

Schedule of warrant activity

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( 1,462,000 )

Outstanding at March 31, 2025

Exercisable at March 31, 2025

Outstanding at June 30, 2025

Exercisable at June 30, 2025

On March 13, 2025, 89,286

derivative warrants classified as a liability as issued with convertible notes in 2020 to purchase shares of the Company’s common

stock expired and were no longer outstanding as of March 31, 2025.

stock expired and were no longer outstanding as of June 30, 2025.

In addition, 27,523 warrants previously classified as equity expired

during the three months ended March 31, 2025.

during the six months ended June 30, 2025.

On March 5, 2025, 1,462,000

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The issuance was completed in accordance with the terms of the warrant agreements, and the shares issued are fully paid and non-assessable.

As of March 31, 2025,

7,894,736 Series A derivative warrants and 7,894,736 Series B derivative warrants, which were issued in connection with the public offering

on December 18, 2024 and are classified as liabilities, remained outstanding.

These warrants, which are exercisable for shares of the

Company’s common stock, are remeasured at fair value at each reporting period.

As of March 31, 2025, the warrants were revalued

at approximately $5.0 million, resulting in a $0.4 million decrease in the liability as compared to December 31, 2024.

in value was recorded as a Gain on Revaluation of Warrants within Other Income (Expense), net on the consolidated statements of operations

and within the Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities on the consolidated statements of cash flows.

On December 18, 2024, the

Company issued 7,894,736 Series A derivative warrants and 7,894,736 Series B derivative warrants in connection with the public offering.

Upon issuance, the warrants were classified as liabilities as the terms did not allow for settlement in shares in all circumstances, including

under the Fundamental Transaction provision.

The warrants were initially measured at fair value and remeasured at each reporting period,

with changes in fair value recorded in earnings.

On May 14, 2025, the Company’s

shareholders approved the settlement of the Series A warrants and Series B warrants in shares in all scenarios, including in the event

of a Fundamental Transaction, thereby satisfying the conditions for equity classification.

Based on this approval, the Company reevaluated

the classification of the warrants under ASC 815-40 and determined that equity classification is appropriate.

The warrants were remeasured

to fair value immediately before the reclassification.

As of May 13, 2025, the warrants were revalued at approximately $5.7 million, resulting

in a $0.7 million decrease in the liability as compared to March 31, 2025.

The change in value was recorded as a Gain on Revaluation

of Warrants within Other Income (Expense), net on the consolidated statements of operations and within the Adjustments to Reconcile Net

Loss to Net Cash Used in Operating Activities on the consolidated statements of cash flows.

Subsequently, the total liability of approximately

$5.7 million was reclassified to additional paid-in capital.

As of June 30, 2025, the 7,894,736 Series A warrants

and 7,894,736 Series B warrants remain outstanding as equity-classified instruments.

The fair value of the outstanding

Series A derivative warrants was determined by using the Black-Scholes Merton option pricing model based on the following assumptions

as of March 31, 2025:

Series A derivative warrants, prior to their reclassification to equity, was determined by using the Black-Scholes Merton option pricing

model based on the following assumptions as of May 13, 2025:

Schedule of assumptions

March 31, 2025

Exercise Price

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The fair value of the outstanding

Series B derivative warrants was determined by using the Black-Scholes Merton option pricing model based on the following assumptions

as of March 31, 2025:

Series B derivative warrants, prior to their reclassification to equity, was determined by using the Black-Scholes Merton option pricing

model based on the following assumptions as of May 13, 2025:

Schedule of assumptions

March 31, 2025

Exercise Price

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Series B derivative warrants was determined by using the BSM option pricing model based on the following assumptions as of December 31,

Exercise Price

December 31, 2024

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Schedule of other income expense, net

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Interest Expense (a)

Gain on Revaluation of Warrants (b)

Gain (Loss) on Revaluation of Warrants (b)

Loss on Revaluation of Equity Investment in YFE (c)

Realized Gain (Loss) on Marketable Securities Investments (d)

Realized Loss on Marketable Securities Investments (d)

Gain (Loss) on Foreign Exchange (e)

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Finance Lease Interest Expense (h)

Gain on Lease Termination (i)

Other Expense, net

Interest Expense during the three months ended March 31, 2025 primarily consisted of $ 0.1 million of interest incurred on production facilities and bank indebtedness.

Interest Expense during the three months ended March 31, 2024 primarily consisted of $ 0.2 million of interest incurred on production facilities and bank indebtedness.

The Gain on Revaluation of Warrants during the three months ended March 31, 2025 is related to the changes in fair value of the outstanding 7,894,736 Series A and 7,894,736 Series B warrants classified as a liability due to a decrease of expiration period.

The Gain on Revaluation of Warrants recorded during the three months ended March 31, 2024 is related to the remeasurement of 89,286 outstanding liability warrants which expired in March 2025.

As accounted for using the fair value option, the Loss on Revaluation of Equity Investment in YFE of $ 3.6 million recorded in the three months ended March 31, 2025, is a result of the decreases in YFE’s stock price as of the current reporting period when compared to the prior reporting period.

Three Months and Six Months Ended June 30, 2025

Interest Expense during the three and

six months ended June 30, 2025 consisted of $ 0.2 million and $ 0.3 million respectively, primarily due to interest incurred on

production facilities.

The Loss on Revaluation of Warrants during the three months ended June 30, 2025 is related to the remeasurement occurred immediately before reclassification of the outstanding 7,894,736 Series A warrants and 7,894,736 Series B warrants from liability to equity.

The Loss on Revaluation of Warrants during the six months ended June 30, 2025 consists of $0.7 million Loss recorded at remeasurement offset by a $0.4 million fair value gain in the period ended March 31, 2025 of the outstanding 7,894,736 Series A warrants and 7,894,736 Series B warrants.

These Warrants were classified as a liability in the period ended March 31, 2025 and change in their Fair Value resulted in a recorded gain due to a decrease of expiration period.

As accounted for using the fair value option, the Loss on Revaluation of Equity Investment in YFE of $ 3.8 million and $ 7.4 million, respectively, recorded in the three and six months ended June 30, 2025, is a result of the decreases in YFE’s stock price as of the current reporting period when compared to the prior reporting period.

This excludes the impact of foreign currency recorded separately.

The Realized Gain on Marketable Securities Investments of $ 4,454 recorded during the three months ended March 31, 2025 is attributable to the sale of U.S.

The Realized Loss on Marketable Securities Investments of $ 32,145 recorded during the three months ended June 30, 2025 is related to the Loss of $ 37,197 on sale of certain securities prior to the maturity date, offset by the Gain of $ 5,053 attributable to the sale of U.S.

Treasury Securities.

The Realized Loss on Marketable Securities Investments of $ 0.1 million recorded during the three months ended March 31, 2024, reflects the loss that was not recovered from the investments due to selling securities and issuers' prepayments of principals on certain mortgage-backed securities.

The Gain on Foreign Exchange during the three months ended March 31, 2025 primarily related to the revaluation of the YFE investment, resulting in a gain of $ 0.7 million due to the depreciation of U.S.

dollar as compared to three months ended March 31, 2024 in which a loss of $ 0.6 million was recognized.

In April 2025, the Company entered into a settlement agreement with YFE related to the Shareholder Loan Agreement.

As the settlement was considered probable and the loss reasonably estimable as of March 31, 2025, the Company recorded a loss of approximately $ 1 million during the three months ended March 31, 2025.

Interest Income during the three months ended March 31, 2025 and 2024 primarily consisted of income from investments in marketable securities, net of premium amortization expense, as well as other transactions, including interest income related to Employee Retention Tax Credit (“ERTC”) receivable and interest income related to the Shareholder Loan.

The Realized Loss on Marketable Securities Investments of $ 27,691 recorded during the six months ended June 30, 2025 is related to the Loss of $ 37,197 on sale of certain securities prior to the maturity date, offset by the Gain of $ 9,507 attributable to the sale of U.S.

Treasury Securities.

The Gain on Foreign Exchange during the three and six months ended June 30, 2025 primarily related to the revaluation of the YFE investment, resulting in a gain of $ 1.7 million and $ 2.4 million, respectively, due to the depreciation of the U.S.

dollar against the Euro relative to prior periods..

In April 2025, a settlement agreement with YFE related to the Shareholder Loan Agreement was finalized.

As the settlement was considered probable and the loss reasonably estimable as of March 31, 2025, the Company recorded a loss of approximately $ 0.9 million during the period ended June 30, 2025.

Interest Income during the three and six months ended June 30, 2025 and 2024 primarily consisted of income from investments in marketable securities, net of premium amortization expense, as well as other transactions, including interest income related to Employee Retention Tax Credit (“ERTC”) receivable and interest income related to the Shareholder Loan.

Each of these sources was individually immaterial.

The Finance Lease Interest Expense represents the interest portion of the finance lease obligations for equipment purchased under an equipment lease line.

Other Income is primarily related to late fees from select clients on a payment plan.

On April 1, 2025, a subsidiary, Beacon Communications, executed a rent reassignment agreement relinquishing one floor of its office space in Toronto to a new tenant who assumed the lease obligation for that floor.

This transaction resulted in a gain of $ 4,253 on lease modification recorded during the period ended June 30, 2025.

During the three months ended June 30, 2025, a

net loss of $ 0.1

million was recognized in connection with the reversal of previously accrued other income related to Employee Retention Tax Credit

(ERTC) claims.

Other income had initially been recorded based on anticipated recoveries from submitted claims.

Recent legislative

developments reduced the expected recoverable amounts, resulting in a partial reversal of the accrued other income.

also included $ 11,991

of other income, primarily consisting of late fees from select clients on payment plans.

For the six months ended June 30,

2025, other income primarily related to such late fees totaled $ 50,197 .

Three Months and Six Months Ended June 30, 2024

Interest Expense during the three and six months ended June 30, 2024 consisted of $ 0.2 million and $ 0.4 million, respectively, primarily due to interest incurred on production facilities and bank indebtedness.

The Gain on Revaluation of Warrants recorded during the three and six months ended June 30, 2024 was related to the remeasurement of 89,286 outstanding liability warrants which expired in March 2025.

As accounted for using the fair value option, the Loss on Revaluation of Equity Investment in YFE of $ 0.9 million recorded in the three and six months ended June 30, 2024, was a result of the decreases in YFE’s stock price as of the current reporting period when compared to the prior reporting period.

This excluded the impact of foreign currency recorded separately.

The Realized Loss on Marketable Securities Investments during the three and six months ended June 30, 2024 reflected the loss that was not recovered from the investments due to selling securities prior to maturity.

The Gain (Loss) on Foreign Exchange during the three and six months ended June 30, 2024 was primarily related to the revaluation of the YFE investment, resulting in a loss of $ 0.2 million and $ 0.6 million, respectively due to the EURO fluctuation to USD, as compared to the prior reporting period.

The remaining balance was related to remeasurements of transactions made in foreign currencies that are outstanding as of the condensed consolidated balance sheet date.

No loss on settlement of debt was recorded during the three and six months ended June 30, 2024.

Interest Income during the three and six months ended June 30, 2024 primarily consisted of interest income, net of premium amortization expense, recorded for the investments in marketable securities.

The Finance Lease Interest Expense during the three and six months ended June 30, 2024 represented the interest portion of the finance lease obligations for equipment purchased under an equipment lease line.

Other Income during the three and six months ended June 30, 2024 was primarily related to late fees from select clients on a payment plan.

The Company accounts for income

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in the consolidated financial statements.

For the three months

ended March 31, 2025, the effective tax rate was 0%.

For the six months ended June 30,

2025, the effective tax rate was 0%.

The effective tax rate differed from the U.S.

federal statutory rate

primarily due to state income taxes, a foreign tax rate differential, and a change in valuation allowance.

For the three months

ended March 31, 2024, the effective tax rate was 0%.

federal statutory rate primarily due to state

income taxes, a foreign tax rate differential, and a change in valuation allowance.

For the six months ended June 30, 2024, the effective

tax rate was 0%.

The effective tax rate differed from the U.S.

federal statutory rate primarily

due to state income taxes, a foreign tax rate differential, and a change in valuation allowance.

During the three months

ended March 31, 2025 the Company did no t

record an income tax expense.

As of March 31, 2025 and December 31, 2024, net deferred liability was $ 1.3 million and $ 1.3 million , respectively.

federal statutory rate primarily due to state income taxes, a foreign tax

rate differential, and a change in valuation allowance.

During the six months ended

June 30, 2025 the Company did no t record an income tax expense.

As of June 30, 2025 and December 31, 2024, net deferred

tax liability was $ 1.3 million and $ 1.3 million, respectively.

Kartoon Studios, Inc.

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returns in Canada.

On July 4, 2025, the President

1 the One Big Beautiful Bill Act into law.

The legislation includes several changes to federal tax law that generally

allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing

of domestic research and development expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining

the limitation on business interest expense.

These changes were not reflected in the income tax provision for the period ended June 30,

2025, as enactment occurred after the balance sheet date.

The Company is currently evaluating the impact on future periods.

Commitments and Contingencies

The following is a schedule

of future minimum cash contractual obligations as of March 31, 2025 (in thousands):

of future minimum cash contractual obligations as of June 30, 2025 (in thousands):

Schedule of future minimum lease payments

7 unchanged sentences

of the minimum operating lease payments above was $ 2.1 million which when deducted from the cash commitments for the leases included in

the table above, equates to the lease liabilities of $ 6.2 million recorded as of March 31, 2025 on the Company’s condensed

consolidated balance sheet.

the table above, equates to the lease liabilities of $ 6 .0 million recorded as of June 30, 2025 on the Company’s condensed consolidated

balance sheet.

Employment contracts

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advance to one of the co-producers.

As of March 31, 2025, approximately $0.5 million of the committed advance remains unpaid

and is expected to be funded in 2025.

As of June 30, 2025, approximately $0.3 million of the committed advance remains unpaid and is

expected to be funded in 2025.

The advance is recoupable from future distribution and licensing revenues generated within the Company’s

4 unchanged sentences

hour episode for each episode he provides services as an executive producer .

During the three months ended March 31, 2025 and 2024,

During the six months ended June 30, 2025 and 2024,

Heyward did no t earn any executive producer fees.

Heyward also earned his $ 55,000 quarterly bonus during the three months ended

March 31, 2025 and 2024.

Heyward also earned his $ 55,000 quarterly bonus for each quarter during the

six months ended June 30, 2025 and 2024.

On August 25, 2022, Mr.

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to acquire the additional royalties.

During the three months ended March 31, 2025 and 2024, Mr.

Heyward has no t earned royalties from

musical compositions.

During the six months ended June 30, 2025 and 2024, Mr.

Heyward has no t earned royalties from musical

compositions.

On February 27, 2023, Mr.

Heyward’s employment agreement was further amended to provide him a creative producer fee of $ 100,000 per quarter, prorated for

the three months ended March 31, 2024, for services rendered to Wow.

During the three months ended March 31, 2025 and 2024,

Heyward earned $ 100,000 in creative producer fees.

the three months ended June 30, 2024, for services rendered to Wow.

Heyward earned $ 100,000 in creative producer fees for each

quarter during the six months ended June 30, 2025 and 2024.

On July 21, 2020, the Company

4 unchanged sentences

by AHAA utilizing the licensed content.

During the three months ended March 31, 2025 and 2024, Mr.

During the six months ended June 30, 2025 and 2024, Mr.

Heyward has no t earned royalties from

this agreement.

On July 19, 2022, the

Company entered into a Shareholder Loan Agreement with YFE in the amount of EURO 1.3

million, accruing interest at the fixed annualized rate of 5 %,

with successive interest periods of three

months due on the last day of each calendar quarter.

The principal plus interest were to be repaid by no later than June 30, 2026.

On April 27, 2025, the Company entered into a settlement agreement with YFE to resolve the outstanding Shareholder Loan Agreement.

Pursuant to the settlement, the Company accepted a reduced repayment amount of $ 0.4 million,

payable in two installments no later than June 2025, in full satisfaction of the loan balance.

Although the settlement agreement

became effective in April 2025, the Company recorded an adjustment to the balance of the loan and recognized a loss of

approximately $0.9 million during the three months ended March 31, 2025, as the negotiations were at an advanced stage and the

transaction was considered probable and reasonably estimable.

As of March 31, 2025, $ 0.4 million

is included within current assets on the Company’s condensed consolidated balance sheets.

During 2022, the Company

entered into a sublease agreement with a related party to lease one

office in the general office space at 190 N.

Canon Drive, Suite 400, Beverly Hills, CA 90210.

The monthly income was $ 595

during the three months ended March 31, 2025 and 2024 and recorded within Other Expense, net in the Company's condensed

consolidated statements of operations.

During the quarter ended

September 30, 2024, the Company entered into a one year consulting agreement with a

related party for office space interior design services.

On July 19, 2022, the Company

entered into a Shareholder Loan Agreement with YFE in the amount of EURO 1.3 million, accruing interest at the fixed annualized rate of

5 %, with successive interest periods of three months due on the last day of each calendar quarter.

The principal plus interest were to

be repaid by no later than June 30, 2026.

On April 27, 2025, the Company entered into a settlement agreement with YFE to resolve the outstanding

Shareholder Loan Agreement.

Pursuant to the settlement, the Company accepted a reduced repayment amount of $ 0.4 million, payable

in two installments no later than June 2025, in full satisfaction of the loan balance.

The settlement agreement became effective in April

2025 and the Company recorded an adjustment to the balance of the loan and recognized a loss of approximately $0.9 million.

As of June 30,

2025, all terms of the settlement agreement were fulfilled.

During 2022, the Company entered

into a sublease agreement with a related party to lease one office in the general office space at 190 N.

Canon Drive, Suite 400, Beverly

Hills, CA 90210.

The monthly income was $595 during the six months ended June 30, 2025 and 2024 and recorded within Other Expense, net

in the Company's condensed consolidated statements of operations.

During the quarter ended September 30,

2024, the Company entered into a one year consulting agreement with a related party for office

space interior design services.

The agreement was subject to an initial fee of $ 6,545 and a monthly fee of $ 595 that commenced on September

The monthly expense was $ 595 and $ 0 during the three months ended March 31, 2025 and 2024, respectively,

and was recorded within General and Administrative expenses in the Company's condensed consolidated statements of operations.

The monthly expense was $ 595 and $ 0 during the six months ended June 30, 2025 and 2024, respectively, and was recorded within

General and Administrative expenses in the Company's condensed consolidated statements of operations.

On February 6, 2025,

certain members of the Company’s executive management team, including the Chief Operating Officer, established a nonprofit

organization.

The Stan Lee Foundation (the “Foundation”), which has applied for tax-exempt status under Section

The Foundation is not owned, governed, or controlled by the Company.

The Company may reference the Foundation in

connection with reputational or community engagement efforts.

The Company provided limited administrative support totaling

approximately $ 497

during the three months ended June 30, 2025.

This support was not part of an ongoing funding commitment and is not considered

material to the Company’s financial statements.

The Foundation is not consolidated in these financial statements.

Segment Reporting

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The following table presents the revenue and net

earnings within the Company's two operating segments (in thousands):

earnings within the Company's two

operating segments (in thousands):

Schedule of segment information by revenues and net earnings

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Total Revenues:

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Schedule of segments by geographic area

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Total Revenues:

11 unchanged sentences

When evaluating the Company’s

performance and making key decisions regarding resource allocation, the CODM reviews several metrics included in net income or loss, which

also include the following:

performance and making key decisions regarding resource allocation, the CODM reviews several metrics included in net income or loss,

which also include the following:

Schedule of segment

Three Months Ended March 31, 2025

Three Months Ended June 30, 2025

Content Production and Distribution

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Net Loss Attributable to Kartoon Studios, Inc.

Three Months Ended March 31, 2024

Six Months Ended June 30, 2025

Content Production and Distribution

12 unchanged sentences

Net Loss Attributable to Kartoon Studios, Inc.

Three Months Ended June 30, 2024

Content Production and Distribution

Media Advisory and Advertising

Less Operating Expenses:

Selling, Marketing and Direct Operating Costs

General and Administrative Expenses

Other Expenses

Segment results:

Reconciliation of net (loss) income:

Depreciation Expense

Interest Expense

Stock Based Compensation

Tax provision

Net Loss Attributable to Non-Controlling Interests

Net Loss Attributable to Kartoon Studios, Inc.

Six Months Ended June 30, 2024

Content Production and Distribution

Media Advisory and Advertising

Less Operating Expenses:

Selling, Marketing and Direct Operating Costs

General and Administrative Expenses

Other Expenses

Segment results:

Reconciliation of net (loss) income:

Depreciation Expense

Interest Expense

Stock Based Compensation

Tax provision

Net Loss Attributable to Non-Controlling Interests

Net Loss Attributable to Kartoon Studios, Inc.

All other segment items included

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Subsequent Events

Subsequent to March 31,

2025, the Company sold marketable securities and received proceeds of $1.0 million.

Additionally, the Company redeemed marketable securities

and received proceeds of $0.3 million.

Subsequent to March 31,

2025, the fair value of the Company’s investment in YFE experienced a decline due to a decrease in YFE’s stock price.

of May 14, 2025, the share price of YFE was €1.19 compared to €1.81 as of March 31, 2025.

The Company will continue

to monitor the investment for any further developments and assess any potential accounting implications.

Effective April 1, 2025, the

Company’s subsidiary, Beacon Communications, executed a rent reassignment agreement relinquishing one floor of its office space

in Toronto to a new tenant who assumed the lease obligation for that floor, and completed the sale of related furniture assets.

On May 14, 2025, at the Company’s

2025 Annual Meeting of Stockholders (the “2025 Annual Meeting”), the Company’s stockholders approved an amendment to

the 2020 Plan to increase the aggregate number of shares of the Company’s common stock available for awards under the 2020 Plan

by 5,000,000 shares.

The Company’s stockholders also approved the issuance of up to an aggregate of 17,447,366 shares of the Company’s

Common Stock upon the exercise of the Series A Common Stock Purchase Warrants, Series B Common Stock Purchase Warrants, and the Placement

Agent Common Stock Purchase Warrants issued in connection with the offering that closed on December 18, 2024.

As of August 13, 2025,

the Company had margin loan balance of $0.2 million.

On July 14, 2025, the Company

sold 1,500,000 YFE shares for total proceeds of €750,000 or €0.50 per share, as part of its ongoing strategy to optimize its

portfolio of assets.

Although this transaction occurred after June 30, 2025 and did not impact the fair value measurement reported in

the Company’s June 30, 2025 financial statements, it is expected to affect the valuation in the subsequent reporting period.

Company will continue to monitor the investment for any further developments and assess any potential accounting implications.

Subsequent to June 30,

2025, the Company entered into a Share Exchange Agreement with F&M Film und Medien Beteiligungs GmbH (“F&M”), pursuant

to which The Company agreed to transfer 348,127 shares of Your Family Entertainment AG (“YFE”) currently held by the Company,

to F&M, in exchange for 348,127 shares of the Company’s common stock currently held by F&M, on a one-for-one basis.

share exchange was structured as a non-cash transaction and will be effected upon the mutual closing date, subject to the exchange of

share certificates and registration of the transferred shares.

Subsequent to June 30,

2025, the Company entered into an agreement to sell its rights to its $0.9 million outstanding Employee Retention Tax Credit (ERTC) refund

claims to a third party in exchange for cash consideration.

Under the agreement, the Company received an upfront payment of $0.5 million

equal to 55% of the claim amount upon execution, with an additional payment of $0.1 million equal to 15%, to be

paid upon collection from the IRS.

The Company is entitled to receive any interest earned on the 15% refundable amount if it is collected

from the IRS within nine months of signing the agreement.

Any interest received from the IRS after the nine-month period will be retained

by the lender.

Pursuant to the agreement, the Company retains legal title and remains obligated in the event of any disallowance, modification,

or reduction of the claim by the IRS.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements