Kartoon Studios, Inc. 10-Q

Item 1. Financial Statements Kartoon Studios, Inc. Condensed Consolidated Balance Sheets (in thousands, except for share data) As of June 30, 2025 December 31, 2024 (Unaudited) ASSETS Current Assets: Cash $ 2,056 $ 7,879 Restricted Cash 512 506 Investments in Marketable Securities (amortized cost of $ 700 and $ 2,116 , respectively) 687 2,029 Accounts Receivable (net of allowance of $ 94 and $ 239 , respectively) 7,043 11,982 Tax Credits Receivable (net of allowance of $ 316 and $ 187 , respectively) 12,287 10,295 Other Receivable 1,531 1,367 Prepaid Expenses and Other Assets 1,347 606 Total Current Assets 25,463 34,664 Noncurrent Assets: Property and Equipment, net 1,886 2,053 Operating Lease Right-of-Use Assets, net 5,552 5,847 Finance Lease Right-of-Use Assets, net 487 278 Notes and Accounts Receivable from Related Party – 1,352 Film and Television Costs, net 4,093 2,621 Tax Credits Receivable (net of allowance of $ 393 and $ 421 , respectively) 2,227 2,384 Investment in Your Family Entertainment AG 10,773 16,429 Intangible Assets, net 19,404 19,722 Other Assets 118 117 Total Assets $ 70,003 $ 85,467 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts Payable $ 6,772 $ 11,954 Participations Payable 1,073 1,427 Accrued Expenses 1,278 405 Accrued Salaries and Wages 1,916 1,213 Deferred Revenue 6,510 5,997 Margin Loan 116 900 Production Facilities, net 10,609 9,220 Current Portion of Operating Lease Liabilities 1,018 1,002 Current Portion of Finance Lease Liabilities 264 249 Due to Related Party – 8 Other Current Liabilities 804 1,065 Total Current Liabilities 30,360 33,440 Noncurrent Liabilities: Deferred Revenue 3,369 3,371 Operating Lease Liabilities, Net Current Portion 5,025 5,359 Finance Lease Liabilities, Net Current Portion 210 54 Deferred Tax Liability, net 1,336 1,301 Warrant Liability – 5,477 Other Noncurrent Liabilities 28 5 Total Liabilities 40,328 49,007 Commitments and Contingencies (Note 19) – – Stockholders’ Equity: 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 48 45 Additional Paid-in Capital 783,860 777,930 Treasury Stock at Cost, 76,266 and 75,997 shares of common stock as of June 30, 2025 and December 31, 2024, respectively ( 340 ) ( 340 ) Accumulated Deficit ( 751,975 ) ( 739,285 ) Accumulated Other Comprehensive Loss ( 3,238 ) ( 3,379 ) Total Kartoon Studios, Inc. Stockholders' Equity 28,355 34,971 Non-Controlling Interests in Consolidated Subsidiaries 1,320 1,489 Total Stockholders' Equity 29,675 36,460 Total Liabilities and Stockholders’ Equity $ 70,003 $ 85,467 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Kartoon Studios, Inc. Condensed Consolidated Statements of Operations (in thousands, except for share data) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Revenues: Production Services $ 7,359 $ 5,095 $ 13,931 $ 7,858 Content Distribution 1,992 2,396 3,973 4,725 Licensing and Royalties 86 27 170 127 Media Advisory and Advertising Services 842 866 1,709 1,752 Total Revenues 10,279 8,384 19,783 14,462 Operating Expenses: Marketing and Sales 167 292 353 736 Direct Operating Costs 7,113 5,845 13,797 10,170 General and Administrative 6,214 6,908 11,927 14,511 Total Operating Expenses 13,494 13,045 26,077 25,417 Loss from Operations ( 3,215 ) ( 4,661 ) ( 6,294 ) ( 10,955 ) Interest Expense ( 165 ) ( 246 ) ( 293 ) ( 449 ) Other Expense, net ( 2,887 ) ( 1,016 ) ( 6,271 ) ( 1,583 ) Net Loss ( 6,267 ) ( 5,923 ) ( 12,858 ) ( 12,987 ) Net Loss Attributable to Non-Controlling Interests 104 50 169 69 Net Loss Attributable to Kartoon Studios, Inc. $ ( 6,163 ) $ ( 5,873 ) $ ( 12,689 ) $ ( 12,918 ) Net Loss per Share (Basic) $ ( 0.13 ) $ ( 0.15 ) $ ( 0.27 ) $ ( 0.35 ) Net Loss per Share (Diluted) $ ( 0.13 ) $ ( 0.15 ) $ ( 0.27 ) $ ( 0.35 ) Weighted Average Shares Outstanding (Basic) 47,805,923 38,386,420 47,252,544 36,842,083 Weighted Average Shares Outstanding (Diluted) 47,805,923 38,386,420 47,252,544 36,842,083 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Kartoon Studios, Inc. Condensed Consolidated Statements of Comprehensive Loss (in thousands) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Net Loss $ ( 6,267 ) $ ( 5,923 ) $ ( 12,858 ) $ ( 12,987 ) Change in Accumulated Other Comprehensive Income: Change in Unrealized Gain on Marketable Securities 11 43 45 63 Realized Loss on Marketable Securities Reclassified from AOCI into Earnings 32 216 28 357 Foreign Currency Translation Adjustments 37 ( 52 ) 68 ( 236 ) Total Change in Accumulated Other Comprehensive Income 80 207 141 184 Total Comprehensive Net Loss $ ( 6,187 ) $ ( 5,716 ) $ ( 12,717 ) $ ( 12,803 ) Net Loss Attributable to Non-Controlling Interests 104 50 169 69 Total Comprehensive Net Loss Attributable to Kartoon Studios, Inc. $ ( 6,083 ) $ ( 5,666 ) $ ( 12,548 ) $ ( 12,734 ) The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Kartoon Studios, Inc. Condensed Consolidated Statements of Stockholders' Equity (in thousands, except for share data) (Unaudited) Common Stock Preferred Stock Additional Paid-In Treasury Stock Accumulated Accumulated Other Comprehensive Non- Controlling Shares Amount Shares Amount Capital Shares Amount Deficit Loss Interest Total December 31, 2024 46,209,081 $ 46 – $ – $ 777,930 75,997 $ ( 340 ) $ ( 739,286 ) $ ( 3,379 ) $ 1,489 $ 36,460 Issuance of Common Stock for Services 14,990 – – – 3 – – – – – 3 Issuance of Common Stock for Vested Restricted Stock Units, Net of Shares Withheld for Taxes 99,177 1 – – 27 134 – – – – 28 Share Based Compensation – – – – 87 – – – – – 87 Stock Options Granted to Consultants, Net – – – – 8 – – – – – 8 Warrant Exercise 1,462,000 1 – – – – – – – – 1 Realized Loss Reclassified from AOCI to Earnings, net change in Unrealized Loss – – – – – – – – 30 – 30 Currency Translation Adjustment – – – – – – – – 31 – 31 Net Loss – – – – – – – ( 6,526 ) – ( 65 ) ( 6,591 ) Balance, March 31, 2025 47,785,248 $ 48 – $ – $ 778,055 76,131 $ ( 340 ) $ ( 745,812 ) $ ( 3,318 ) $ 1,424 $ 30,057 Issuance of Common Stock for Services 77,292 – – – 52 – – – – – 52 Issuance of Common Stock for Vested Restricted Stock Units, Net of Shares Withheld for Taxes 44,029 – – – – 135 – – – – – Share Based Compensation – – – – 48 – – – – – 48 Stock Options Granted to Consultants, Net – – – – ( 4 ) – – – – – ( 4 ) Warrant Reclassification – – – – 5,709 – – – – – 5,709 Realized Loss Reclassified from AOCI to Earnings, net change in Unrealized Loss – – – – – – – – 43 – 43 Currency Translation Adjustment – – – – – – – – 37 – 37 Net Loss – – – – – – – ( 6,163 ) – ( 104 ) ( 6,267 ) Balance, June 30, 2025 47,906,569 $ 48 – $ – $ 783,860 76,266 $ ( 340 ) $ ( 751,975 ) $ ( 3,238 ) $ 1,320 $ 29,675 (continued) 6 Kartoon Studios, Inc. Condensed Consolidated Statements of Stockholders' Equity (in thousands, except for share data) (Unaudited) Common Stock Preferred Stock Additional Paid-In Treasury Stock Accumulated Accumulated Other Comprehensive Non- Controlling Shares Amount Shares Amount Capital Shares Amount Deficit Loss Interest Total December 31, 2023 35,247,744 $ 352 1 $ – $ 773,986 75,473 $ ( 339 ) $ ( 718,546 ) $ ( 3,883 ) $ 1,691 $ 53,261 Issuance of Common Stock for Services 53,497 – – – 74 – – – – – 74 Issuance of Common Stock for Vested Restricted Stock Units, Net of Shares Withheld for Taxes 49,949 – – – – – – – – – – Fractional Shares Issued Upon Reverse Stock Split – – – – – – – – – – – Share Based Compensation – – – – 226 – – – – – 226 Realized Loss Reclassified from AOCI to Earnings, net change in Unrealized Loss – – – – – – – – 161 – 161 Currency Translation Adjustment – – – – – – – – ( 184 ) – ( 184 ) Net Loss – – – – – – – ( 7,045 ) – ( 19 ) ( 7,064 ) Balance, March 31, 2024 35,351,190 $ 352 1 $ – $ 774,286 75,473 $ ( 339 ) $ ( 725,591 ) $ ( 3,906 ) $ 1,672 $ 46,474 Issuance of Common Stock for Services 73,745 – – – 83 – – – – – 83 Issuance of Common Stock for Vested Restricted Stock Units, Net of Shares Withheld for Taxes 38,582 – – – 25 217 – – – – 25 Proceeds from Securities Purchase Agreement, Net 4,000,000 4 – – 3,325 – – – – – 3,329 Proceeds From Warrant Exchange, net – – – – – – – – – – – Share Based Compensation – – – – 164 – – – – – 164 Realized Loss Reclassified from AOCI to Earnings, net change in Unrealized Loss – – – – – – – – 259 – 259 Currency Translation Adjustment – – – – – – – – ( 52 ) – ( 52 ) Net Loss – – – – – – – ( 5,873 ) – ( 50 ) ( 5,923 ) Balance, June 30, 2024 39,463,517 $ 356 1 $ – $ 777,883 75,690 $ ( 339 ) $ ( 731,464 ) $ ( 3,699 ) $ 1,622 $ 44,359 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Kartoon Studios, Inc. Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited) Six Months Ended June 30, 2025 2024 Cash Flows from Operating Activities: Net Loss $ ( 12,858 ) $ ( 12,987 ) Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities: Amortization of Film and Television Costs 107 144 Depreciation and Amortization of Property, Equipment and Intangible Assets 1,277 1,201 Amortization of Right-of-Use Asset 530 971 Amortization of Premium on Marketable Securities 7 44 Share Based Compensation Expense 135 390 Impairment of Film and Television Costs – 17 Loss on Settlement of Related Party Note 1,344 – Gain on Early Lease Termination ( 4 ) – Loss on Revaluation of Equity Investments in Your Family Entertainment AG 7,418 881 Unrealized (Gain) Loss on Foreign Currency of Equity Investments in Your Family Entertainment AG ( 1,761 ) 596 Loss (Gain) on Warrant Revaluation 232 ( 60 ) Realized Loss on Marketable Securities 28 357 Stock Issued for Services 81 158 Stock Options Issued for Services 4 – Credit Loss Expense 61 114 Other Non-Cash Items 13 3 Decrease (Increase) in Operating Assets: Accounts Receivable 5,050 5,322 Other Receivable ( 149 ) ( 270 ) Tax Credits Earned (less capitalized) ( 5,889 ) ( 4,128 ) Tax Credits Received, net 5,069 10,251 Film and Television Costs, net ( 1,952 ) ( 440 ) Prepaid Expenses and Other Assets ( 750 ) ( 513 ) Increase (Decrease) in Operating Liabilities: Accounts Payable ( 5,221 ) ( 6,592 ) Accrued Salaries and Wages 656 52 Accrued Expenses 872 384 Accrued Production Costs 11 643 Participations Payable ( 366 ) ( 441 ) Deferred Revenue 213 1,682 Lease Liability ( 447 ) ( 413 ) Due From (To) Related Party 3 ( 1 ) Other Liabilities ( 4 ) ( 19 ) Net Cash Used in Operating Activities $ ( 6,290 ) $ ( 2,654 ) Cash Flows from Investing Activities: Repayments from Related Party for Notes Receivable – 45 Proceeds from Sales and Maturities of Marketable Securities 3,152 5,514 Investment in Marketable Securities ( 1,771 ) – Investment in Intangible Assets, net – ( 7 ) Purchase of Property and Equipment ( 80 ) ( 34 ) Net Cash Provided by Investing Activities $ 1,301 $ 5,518 Cash Flows from Financing Activities: Proceeds from Margin Loan 5,223 6,297 Repayments of Margin Loan ( 6,005 ) ( 6,022 ) Proceeds from Production Facilities 5,221 4,285 Repayment of Production Facilities ( 4,476 ) ( 9,653 ) Repayments of Bank Indebtedness, net – ( 2,628 ) Proceeds from Securities Purchase Agreements – 3,329 Principal Payments on Finance Lease Obligations ( 208 ) ( 389 ) Debt Issuance Costs ( 29 ) ( 48 ) Shares Withheld for Taxes on Vested Restricted Shares – 25 Proceeds from Warrant Exercise 1 – Net Cash Used in Financing Activities $ ( 273 ) $ ( 4,804 ) Effect of Exchange Rate Changes on Cash ( 555 ) 586 Net Decrease in Cash and Restricted Cash ( 5,817 ) ( 1,354 ) Beginning Cash and Restricted Cash 8,385 4,095 Ending Cash and Restricted Cash $ 2,568 $ 2,741 Supplemental Disclosures of Cash Flow Information Cash Paid for Interest $ 35 $ 75 Non-Cash Operating Activities Reduction in Leased Asset Due to Modified Lease Liability $ 106 $ – Non-Cash Financing and Investing Activities Leased Assets Obtained in Exchange for New Finance Lease Liabilities $ 356 $ – The accompanying notes are an integral part of these condensed consolidated financial statements. 8 Kartoon Studios, Inc. Notes to Condensed Consolidated Financial Statements June 30, 2025 Note 1: Organization and Business Organization and Nature of Business Kartoon Studios, Inc. (formerly 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 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”) along with its Channel Frederator Network . Mainframe Studios is a producer-for-hire for several major streaming platforms and IP holders. 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 children. As a cornerstone of the Company’s subscription offerings, Ameba delivers a vast library of engaging and educational content, accessible across multiple platforms. 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. 9 Through its investment in Germany-based Your Family Entertainment AG (“YFE”), a publicly listed company on the Frankfurt Stock Exchange (RTV: FWB), 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. The decrease 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. The 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 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 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. As a result, the Company may have to significantly limit its operations and its business, financial condition and results of operations would be materially harmed. 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. 10 Note 2: Basis of Presentation and Summary of Significant Accounting Policies The accompanying interim condensed consolidated financial statements of the Company have been prepared in conformity with U.S. Generally Accepted Accounting Principles (U.S. GAAP”) and are consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2025. The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue, costs, expenses and other comprehensive income/(loss) that are reported in the condensed consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events, historical experience, actions that the company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. On a regular basis, the Company evaluates the assumptions, judgments and estimates. Actual results may differ from these estimates. The accompanying combined interim financial statements are unaudited, but in the opinion of management, contain all adjustments (which include normal recurring adjustments) considered necessary to present fairly the interim financial statements. Interim results are not necessarily indicative of financial results for a full year. The information included in this Form 10-Q should be read in conjunction with the Company’s 2024 Annual Report. 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. Foreign Currency Forward Contracts 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 Credit Loss 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. 11 The following table summarizes the activity in the allowance for credit losses related to trade accounts receivable as of June 30, 2025 and December 31, 2024 (in thousands): Schedule of allowance for credit losses trade accounts receivable Balance, net as of December 31, 2023 $ 189 Charged to costs and expenses 64 Recoveries ( 14 ) Balance, net as of December 31, 2024 $ 239 Charged to costs and expenses 28 Recoveries ( 35 ) Write-offs ( 138 ) Balance, net as of June 30, 2025 $ 94 Tax Credits Receivable 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 required to process the tax credits. Management will continue to monitor the status of the outstanding items and reclassify the receivable to current when the timing of collection becomes reasonably estimable. 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 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. As of December 31, 2024 $ 2.4 million in tax credits receivable net of $ 0.4 million allowance for credit loss was presented as non-current asset. Concentration of Risk The Company maintains its cash in bank deposit accounts which, at times, may exceed the Federal Deposit Insurance Corporation’s (“FDIC”) or the Canadian Deposit Insurance Corporation’s (“CDIC”) insured amounts. Balances on interest bearing deposits at banks in 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 100,000. 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. The Company has a managed account with a financial institution. The managed account maintains its investments in marketable securities of approximately $ 0.7 million and $ 2 .0 million as of June 30, 2025 and December 31, 2024, respectively. Assets in the managed account are protected by the Securities Investor Protection Corporation (“SIPC”) up to $500,000 (with a limit of $250,000 for cash). In addition, the financial institution provides additional “excess of SIPC” coverage which insures up to $1.0 billion. 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 investments. 12 During the three months ended June 30, 2025, the Company had four customers, whose total revenue exceeded 10% of the total condensed consolidated revenue. These customers accounted for 86.6 % of the total revenue. 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. During the six months ended June 30, 2025, the Company had four customers, whose total revenue exceeded 10% of the total condensed consolidated revenue. These 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 49.6 % of the total accounts receivable as of June 30, 2025. As of December 31, 2024, the Company had three 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 December 31, 2024. There is significant financial risk associated with a dependence upon a small number of customers. The Company periodically assesses the financial strength of these customers and establishes allowances for any anticipated credit losses. Fair Value of Financial Instruments The following table summarizes 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): Schedule of marketable securities measured at fair value on a recurring basis Level 1 Level 2 Total Fair Value Investments in Marketable Securities: U.S. Agency and Government Sponsored Securities $ – $ 687 $ 687 Total $ – $ 687 $ 687 The following table summarizes the marketable securities measured at fair value on a recurring basis by level within the fair value hierarchy as of December 31, 2024 (in thousands): Level 1 Level 2 Total Fair Value Investments in Marketable Securities: Corporate Bonds $ 537 $ – $ 537 U.S. Agency and Government Sponsored Securities – 1,107 1,107 U.S. States and Municipalities – 385 385 Total $ 537 $ 1,492 $ 2,029 Fair values were determined for each individual security in the investment portfolio. The Company’s marketable securities are considered to be available-for-sale investments as defined under FASB ASC 320, Investments – Debt and Equity Securities . An allowance for credit loss was not recorded for the marketable securities as of June 30, 2025 and December 31, 2024. Refer to Note 5 for additional details. 13 New Accounting Standards Issued but Not Yet Adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The amendment in the ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. The Company is in the process of evaluating the impact that the adoption of this ASU will have to the consolidated financial statements and related disclosures, which is expected to result in enhanced disclosures. In March 2024, the FASB issued ASU 2024-01, Scope Application of Profits Interests and Similar Awards . The ASU is intended to help entities determine whether profits interest and similar awards are in the scope of ASC 718, Stock Compensation . The ASU solely focuses on scope and does not address guidance on recognition, classification, attribution, or measurement. For public business entities, it is effective for annual periods beginning after December 15, 2024 and interim periods within those annual periods. For all other entities, it is effective for annual periods beginning after December 15, 2025. Early adoption is permitted for both interim and annual financial statements. The amendments would be applied either retrospectively to all prior periods presented in the financial statements or prospectively to profits interest and similar awards granted or modified on or after the date at which the entity first applies the amendments. The Company is in the process of evaluating the impact that the adoption of this ASU will have to the consolidated financial statements and related disclosures, which is expected to result in enhanced disclosures. In November, 2024 the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expense. This update mandates that public companies provide more detailed information about specific expenses in their financial statement notes. The effective date for this guidance is annual reporting periods beginning after December 15, 2026, with interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is in the process of evaluating the impact that the adoption of this ASU will have to the consolidated financial statements and related disclosures, which is expected to result in enhanced disclosures. Note 3: Variable Interest Entity In July 2020, the Company entered into a binding term sheet with POW! Entertainment, LLC. (“POW”) in which the Company agreed to form an entity with POW to exploit certain rights in intellectual property created by Stan Lee, as well as the name and likeness of Stan Lee. The entity is called “Stan Lee Universe, LLC” (“SLU”). POW and the Company executed an Operating Agreement for the joint venture, effective as of June 1, 2021. The purpose of the acquisition was to enable the Company to assume the worldwide rights, in perpetuity, 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, from which the Company plans to develop and license multiple properties each year. During the three months ended June 30, 2025 and 2024 and the six months ended June 30, 2025 and 2024, SLU generated an insignificant amount of net loss. There 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. Note 4: Investment in Equity Interest As of June 30, 2025, the Company owned 6,857,132 shares of YFE. At the time of the initial investment in 2021, it was determined that based on the Company’s 29 % ownership in YFE, the Company had significant influence over the entity. Therefore, under the equity method of accounting, the Company elected to account for the investment at fair value under the fair value option. Under the fair value option, the investment is remeasured and recorded at fair value each reporting period, with the change recorded through earnings. 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 June 30, 2025 decreased by net $ 5.7 million, as compared to December 31, 2024. The net decrease is comprised of the net impact of a decrease in YFE’s stock price, and the effect of foreign currency remeasurement from EURO to USD. The total change in fair value is recorded within Other Income (Expense), net on the Company’s consolidated statement of operations. As of 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 %. 14 Note 5: Marketable Securities The Company classifies its marketable debt securities as available-for-sale (“AFS”) and reports them at fair value in accordance with ASC Topic 326, Measurement of Credit Losses on Financial Instruments . The investments in marketable 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 Unrealized Gain (Loss) Fair Value U.S. Agency and Government Sponsored Securities $ 700 $ ( 13 ) $ 687 Total $ 700 $ ( 13 ) $ 687 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) : Adjusted Cost Unrealized Gain (Loss) Fair Value Corporate Bonds $ 559 $ ( 22 ) $ 537 U.S. Agency and Government Sponsored Securities 1,155 ( 48 ) 1,107 U.S. States and Municipalities 402 ( 17 ) 385 Total $ 2,116 $ ( 87 ) $ 2,029 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, 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 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 June 30, 2025 were as follows (in thousands): Schedule of contractual maturities of marketable investments Fair Value Due within 1 year $ 687 Total $ 687 The Company may sell certain of its marketable debt securities prior to their stated maturities for reasons including, but not limited to, managing liquidity, credit risk, duration and asset allocation. 15 Note 6: Property and Equipment, net The Company has property and equipment as follows (in thousands): Schedule of property and equipment, net As of June 30, 2025 December 31, 2024 Furniture and Equipment $ 81 $ 117 Computer Equipment 824 817 Leasehold Improvements 2,200 2,200 Software 282 250 Property and Equipment, gross 3,387 3,384 Less Accumulated Depreciation ( 1,339 ) ( 1,078 ) Foreign Currency Translation Adjustment ( 162 ) ( 253 ) Property and Equipment, net $ 1,886 $ 2,053 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. Note 7: Leased Right-of-Use Assets, net Leased right-of-use assets consisted of the following (in thousands): Schedule of leased right of use assets As of June 30, 2025 December 31, 2024 Operating Lease Office Lease Assets $ 9,332 $ 9,437 Accumulated Amortization ( 3,168 ) ( 2,740 ) Finance Lease Equipment Lease Assets 4,570 4,214 Accumulated Amortization ( 3,802 ) ( 3,643 ) Right-of-Use Assets, Gross $ 6,932 $ 7,268 Foreign Currency Translation Adjustment ( 893 ) ( 1,143 ) Leased Right-of-Use Assets, net $ 6,039 $ 6,125 16 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 was 11.1 %. 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. The 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 term. Operating lease costs during 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. 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. Note 8: Film and Television Costs, net The following table highlights 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 Film and Television Costs, net as of December 31, 2023 $ 1,295 Additions to Film and Television Costs 1,653 Disposals ( 75 ) Film Amortization Expense ( 231 ) Foreign Currency Translation Adjustment ( 21 ) Film and Television Costs, net as of December 31, 2024 $ 2,621 Additions to Film and Television Costs 1,566 Disposals ( 18 ) Film Amortization Expense ( 107 ) Foreign Currency Translation Adjustment 31 Film and Television Costs, net as of June 30, 2025 $ 4,093 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 six months ended June 30, 2025 and 2024. 17 Note 9: Intangible Assets, net Intangible Assets, net The Company had the following intangible assets (in thousands) with their weighted average remaining amortization period (in years) : Intangible Assets, net Schedule of intangible asset Weighted Average Remaining Amortization As of Period June 30, 2025 December 31, 2024 Customer Relationships 5.0 $ 17,325 $ 17,325 Digital Networks 12.8 803 803 Trade Names 65.9 9,970 9,970 Intangible Assets, gross 28,098 28,098 Less Accumulated Amortization ( 6,821 ) ( 5,822 ) Foreign Currency Translation Adjustment ( 1,873 ) ( 2,555 ) Intangible Assets, net $ 19,404 $ 19,722 During the three months ended June 30, 2025 and 2024, the Company recorded intangible asset amortization expense of $ 0.5 million and $ 0.5 million, respectively. During 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 June 30, 2025 is as follows (in thousands): Schedule of expected future intangible asset amortization Fiscal Year: 2025 $ 1,020 2026 2,040 2027 2,040 2028 2,040 2029 2,040 Thereafter 4,724 Total $ 13,904 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. 18 Note 10: Deferred Revenue 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. Note 11: Margin Loan 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. The borrowed amounts were primarily used for operational costs. 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 June 30, 2025 and December 31, 2024, respectively. 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. Note 12: Bank Indebtedness and Production Facilities The Company has certain credit facilities that are comprised of the following: Production Facilities, net The production facilities are used for financing specific productions. The Company’s production facilities bear interest at rates ranging from bank prime plus 1.00 % - 1.25 % per annum. 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 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 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. 19 Equipment Lease Facility In the fourth quarter of 2022, the Company entered into an equipment lease agreement with a Canadian bank. This additional equipment lease facility allows the Company 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 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. Note 13: Stockholders’ Equity Common Stock 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 issued 1,462,000 shares of common stock to investor Armistice Capital Master Fund Ltd. upon the exercise of outstanding pre-funded warrants. The warrants were exercised at a price of $ 0.001 per share, which represented par value, resulting in total proceeds of $ 1,462 . The issuance was completed in accordance with the terms of the warrant agreements, and the shares issued are fully paid and non-assessable. Preferred Stock The Company has 10,000,000 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 designated 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 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. 20 Treasury Stock 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. Note 14: 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”). 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 . 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 13,216,767 . During the six months ended June 30, 2025 and 2024, the Company did no t grant any stock options. The following table summarizes the Company’s option activity: Schedule of option activity Stock Options Weighted-Average Remaining Contractual Life Weighted-Average Exercise Price per Share Outstanding at December 31, 2024 952,140 4.79 $ 12.72 Granted – – – Exercised – – – Forfeited/Cancelled ( 25,547 ) – 7.70 Expired ( 44,280 ) – 16.45 Outstanding at June 30, 2025 882,313 4.58 $ 12.68 Unvested at June 30, 2025 – – – Vested and exercisable at June 30, 2025 882,313 4.58 $ 12.68 During the three months ended June 30, 2025 and 2024, the Company recognized $ 6,486 and $ 40,317 , respectively, in share-based compensation expense related to stock options. 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 . 21 Note 15: Restricted Stock Units Restricted stock units (“RSUs”) are granted under the Company’s 2020 Plan. 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 six months ended June 30, 2025 as a result of RSUs vested during the current and prior periods. The following table summarizes the Company’s RSU activity: Schedule of RSU activity Restricted Stock Units Weighted- Average Grant Date Fair Value per Share Unvested at December 31, 2024 870,417 $ 13.53 Granted 180,936 0.64 Vested ( 180,936 ) 0.64 Forfeited – – Unvested at June 30, 2025 870,417 $ 13.53 During the three months ended June 30, 2025 and 2024, the Company recognized $ 0.04 million and $ 0.1 million, respectively, in share-based compensation expense related to RSUs. 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. Note 16: Warrants The following table summarizes the activity in the Company’s outstanding warrants during the six months ended June 30, 2025: Schedule of warrant activity Warrants Weighted-Average Remaining Contractual Life Weighted-Average Exercise Price per Share Outstanding at December 31, 2024 25,734,752 1.16 $ 2.19 Granted – – – Exercised ( 1,462,000 ) – 0.01 Expired ( 116,809 ) – 3.61 Forfeitures – – – Outstanding at June 30, 2025 24,155,943 3.11 $ 2.32 Exercisable at June 30, 2025 24,155,943 3.11 $ 2.32 22 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 June 30, 2025. In addition, 27,523 warrants previously classified as equity expired during the six months ended June 30, 2025. On March 5, 2025, 1,462,000 of the pre-funded warrants were exercised at a price of $ 0.001 per share, which represented par value, resulting in total proceeds of $ 1,462 . The issuance was completed in accordance with the terms of the warrant agreements, and the shares issued are fully paid and non-assessable. 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, 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 May 13, 2025 Market Price $ 0.65 Exercise Price $ 0.57 Dividend Yield –% Volatility 86.34% Risk-free Interest Rate 4.11% Expected Life of Warrants 5.00 The fair value of the outstanding Series A derivative warrants was determined by using the BSM option pricing model based on the following assumptions as of December 31, 2024: December 31, 2024 Market Price $ 0.59 Exercise Price $ 0.57 Dividend Yield –% Volatility 102% Risk-free Interest Rate 3.98% Expected Life of Warrants 5.00 23 The fair value of the outstanding 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 May 13, 2025 Market Price $ 0.65 Exercise Price $ 0.57 Dividend Yield –% Volatility 68.87% Risk-free Interest Rate 4.11% Expected Life of Warrants 1.50 The fair value of the outstanding Series B derivative warrants was determined by using the BSM option pricing model based on the following assumptions as of December 31, 2024: Exercise Price December 31, 2024 Market Price $ 0.59 Exercise Price $ 0.57 Dividend Yield –% Volatility 83% Risk-free Interest Rate 3.98% Expected Life of Warrants 1.50 Note 17: Supplemental Financial Statement Information Other Expense, net Components of Other Expense, net, are summarized as follows (in thousands): Schedule of other income expense, net Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Interest Expense (a) $ ( 165 ) $ ( 246 ) $ ( 293 ) $ ( 449 ) Gain (Loss) on Revaluation of Warrants (b) ( 678 ) 23 ( 232 ) 60 Loss on Revaluation of Equity Investment in YFE (c) ( 3,778 ) ( 881 ) ( 7,418 ) ( 881 ) Realized Loss on Marketable Securities Investments (d) ( 32 ) ( 216 ) ( 28 ) ( 357 ) Gain (Loss) on Foreign Exchange (e) 1,713 ( 330 ) 2,380 ( 980 ) Loss on Debt Settlement (f) – – ( 944 ) – Interest Income (g) 12 42 66 95 Finance Lease Interest Expense (h) ( 6 ) ( 24 ) ( 10 ) ( 54 ) Gain on Lease Termination (i) 4 – 4 – Other (j) ( 122 ) 370 ( 89 ) 534 Other Expense, net $ ( 2,887 ) $ ( 1,016 ) $ ( 6,271 ) $ ( 1,583 ) 24 Three Months and Six Months Ended June 30, 2025 (a) 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. (b) 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. (c) 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. (d) 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 $ 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. (e) 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.. (f) 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. (g) 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. (h) The Finance Lease Interest Expense represents the interest portion of the finance lease obligations for equipment purchased under an equipment lease line. (i) 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. (j) 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. The amount 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 . 25 Three Months and Six Months Ended June 30, 2024 (a) 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. (b) 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. (c) 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. (d) 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. (e) 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. (f) No loss on settlement of debt was recorded during the three and six months ended June 30, 2024. (g) 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. (h) 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. (j) 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. Note 18: Income Taxes The Company accounts for income taxes in accordance with ASC 740, Income Taxes , which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns. A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized. ASC 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company’s financial statements. ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the consolidated financial statements. 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 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 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. and its wholly-owned U.S. subsidiaries are subject to U.S. income taxes and file a consolidated tax return in the U.S. The Beacon Communications Group, Ltd., Ameba Inc. and WOW Unlimited Media Inc. are subject to Canadian income taxes on a stand-alone basis and file separate tax returns in Canada. 26 The Company files income tax returns in the U.S. federal jurisdiction and in the states of California, Florida, Massachusetts, New Jersey, New York, as well as Canada. To the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses were generated and carried forward to make adjustments up to the amount of the net operating losses. The Company is currently subject to U.S. federal, state and local and foreign tax examinations by tax authorities. The Company is no longer subject to audits by U.S. federal, state, local or foreign authorities for years prior to 2020. Kartoon Studios, Inc. and its wholly-owned U.S. subsidiaries are subject to U.S. income taxes and file a consolidated tax return in the U.S. The Beacon Communications Group, Ltd., Ameba Inc. and WOW Unlimited Media Inc. are subject to Canadian income taxes on a stand-alone basis and file separate tax returns in Canada. On July 4, 2025, the President signed H.R. 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. Note 19: Commitments and Contingencies The following is a schedule of future minimum cash contractual obligations as of June 30, 2025 (in thousands): Schedule of future minimum lease payments 2025 2026 2027 2028 2029 Thereafter Total Operating Leases $ 780 $ 1,570 $ 1,402 $ 1,058 $ 1,097 $ 2,248 $ 8,155 Finance Leases 187 169 116 29 – – 501 Employment Contracts 1,713 853 538 498 – – 3,602 Consulting Contracts 2,572 1,296 – – – – 3,868 Debt 10,724 – – – – – 10,724 Production Financing 254 – – – – – 254 Contractual obligation $ 16,230 $ 3,888 $ 2,056 $ 1,585 $ 1,097 $ 2,248 $ 27,104 Leases The present value discount 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 .0 million recorded as of June 30, 2025 on the Company’s condensed consolidated balance sheet. Employment contracts The Company has entered into employment agreements with certain key executives, which remain in effect for fixed terms. Under these agreements, the executives receive a base salary, subject to potential reviews at the discretion of the Board of Directors. Some of these agreements also include provisions for severance benefits in certain circumstances. As a result, the Company's commitments under these agreements represent future salary or severance payments obligations. 27 Other Funding Commitments The Company enters into various agreements associated with its individual properties. Some of these agreements call for the potential future payment of royalties or “profit” participations for either (i) the use of third party intellectual property, in which the Company is obligated to share net profits with the underlying rights holders on a certain basis as defined in the respective agreements, or (ii) services rendered by animation studios, post-production studios, writers, directors, musicians or other creative talent for which the Company is obligated to share with these service providers a portion of the net profits of the properties on which they have rendered services, as defined in each respective agreement. In May 2024, the Company entered into a license agreement for the animated television series Andrew the Big BIG Unicorn , under which it committed to provide a non-refundable advance to one of the co-producers. 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 licensed territories. Note 20: Related Party Transactions Pursuant to his employment agreement dated December 7, 2020, Andy Heyward, the Company’s CEO, is entitled to an executive producer fee of $ 12,500 per one-half hour episode for each episode he provides services as an executive producer . During the six months ended June 30, 2025 and 2024, Mr. Heyward did no t earn any executive producer fees. Mr. 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. Heyward’s employment agreement was amended to include assignment of music royalties to Mr. Heyward for all musical compositions in which he provides services as a composer for or on behalf of the Company, in the event that the Company acquires up to 50 % of the writer's share of the royalties for that musical composition. If the Company acquires more than 50 % of the writer's share of the royalties on musical compositions Mr. Heyward provided services for, he has the option to purchase the additional royalties from the Company at the price the Company paid to acquire the additional royalties. 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 June 30, 2024, for services rendered to Wow. Mr. 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 entered into a merchandising and licensing agreement with Andy Heyward Animation Art (“AHAA”), whose principal is Andy Heyward. The Company entered into a customary merchandise license agreement with AHAA for the use of characters and logos related to Warren Buffett’s Secret Millionaires Club and Stan Lee’s Mighty 7 in connection with certain products to be sold by AHAA. The terms and conditions of such license are customary within the industry, and the Company earns an industry standard royalty on all sales made by AHAA utilizing the licensed content. 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. 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. 28 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 1, 2024. 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 501(c)(3). 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. Note 21: Segment Reporting ASC Topic 280 Segment Reporting establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise that engage in business activities from which it may recognize revenues and incur expenses, and for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker, or group, in deciding how to allocate resources and assess performance. The Company’s chief operating decision maker (“CODM”) uses revenue and net income (loss) to evaluate the profitability and performance of each operating segment. The CODM does not evaluate the operating segments using asset information and it is therefore not disclosed. Segment operating expenses include operating expenses directly attributable to the segment as well as certain shared corporate administration services and other costs which are allocated to the reportable segments, such as legal expenses, human resources expenses, accounting expenses, insurance expenses, and corporate facilities expenses. Segment operating expenses exclude certain non-recurring items and other costs, such as interest expense, interest income, share-based compensation expense, and taxes. The Company’s CODM evaluates the performance of each reportable segment based on segment operating income (loss) because it provides insight to operational leverage and other operational metrics for each segment. The Company has identified two operating segments based on the nature of the products and services offered: Content Production and Distribution segment includes the operations of Kartoon Studios, Inc, Mainframe Studios, and Frederator Studios. These entities are aggregated due to their similar economic characteristics, nature of products and services, production processes, customer types, and distribution methods. This segment is focused on the creation, production, and distribution of animated and live-action content, as well as licensing and royalty revenue from intellectual property. Media Advisory and Advertising Services segment includes The Beacon Media Group and The Beacon Communications Group. These entities provide media advisory and advertising services and marketing services. The CEO (CODM) reviews revenue and net operating results, as allocated based on the nature of the business activity. 29 The following table presents the revenue and net earnings within the Company's two operating segments (in thousands): Schedule of segment information by revenues and net earnings Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Total Revenues: Content Production and Distribution $ 9,437 $ 7,518 $ 18,074 $ 12,710 Media Advisory and Advertising Services 842 866 1,709 1,752 Total Revenues $ 10,279 $ 8,384 $ 19,783 $ 14,462 Net Loss: Content Production and Distribution $ ( 5,505 ) $ ( 5,696 ) $ ( 11,531 ) $ ( 12,435 ) Media Advisory and Advertising Services ( 658 ) ( 177 ) ( 1,158 ) ( 483 ) Total Net Loss Attributable to Kartoon Studios, Inc. $ ( 6,163 ) $ ( 5,873 ) $ ( 12,689 ) $ ( 12,918 ) Geographic Information The following table provides information about disaggregated revenue by geographic area (in thousands): Schedule of segments by geographic area Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Total Revenues: United States $ 4,889 $ 4,304 $ 9,615 $ 7,485 Canada 3,734 1,808 6,761 1,948 United Kingdom 1,618 2,240 3,330 4,799 Other 38 32 77 230 Total Revenues $ 10,279 $ 8,384 $ 19,783 $ 14,462 Additional considerations include the use of segment-level budgets and forecasts created by Mainframe Studios, Frederator and Kartoon Studios at the entity level. The additional financial information prepared by the segment managers is discussed at length in meetings with the CODM. The Company determines that the revenue information reviewed by the CODM, combined with the financial information discussed with the segment managers is sufficiently detailed to allow the CODM to assess each component’s performance and make resource allocation decisions. Kartoon Studios, Frederator and Mainframe Studios are separate entities, although according to ASC 280-10-50-11 all criteria are met in order to present result in aggregation. 30 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: Schedule of segment allocations Three Months Ended June 30, 2025 Content Production and Distribution Media Advisory and Advertising Total Revenue $ 9,437 $ 842 $ 10,279 Less Operating Expenses: Selling, Marketing and Direct Operating Costs 7,212 70 7,282 General and Administrative Expenses 4,176 1,252 5,428 Other Expenses – 8 8 Segment results: $ ( 1,951 ) $ ( 488 ) $ ( 2,439 ) Reconciliation of net (loss) income: Depreciation Expense $ 685 $ 43 $ 728 Interest Expense 165 – 165 Stock Based Compensation 48 – 48 Tax provision – – – Other 2,760 127 2,887 Net Loss Attributable to Non-Controlling Interests ( 104 ) – ( 104 ) Net Loss Attributable to Kartoon Studios, Inc. $ ( 5,505 ) $ ( 658 ) $ ( 6,163 ) Six Months Ended June 30, 2025 Content Production and Distribution Media Advisory and Advertising Total Revenue $ 18,074 $ 1,709 $ 19,783 Less Operating Expenses: Selling, Marketing and Direct Operating Costs 14,002 148 14,150 General and Administrative Expenses 7,849 2,520 10,369 Other Expenses – 8 8 Segment results: $ ( 3,777 ) $ ( 967 ) $ ( 4,744 ) Reconciliation of net (loss) income: Depreciation Expense $ 1,324 $ 90 $ 1,414 Interest Expense 293 – 293 Stock Based Compensation 136 – 136 Tax Provision – – – Other 6,170 101 6,271 Net Loss Attributable to Non-Controlling Interests ( 169 ) – ( 169 ) Net Loss Attributable to Kartoon Studios, Inc. $ ( 11,531 ) $ ( 1,158 ) $ ( 12,689 ) 31 Three Months Ended June 30, 2024 Content Production and Distribution Media Advisory and Advertising Total Revenue $ 7,518 $ 866 $ 8,384 Less Operating Expenses: Selling, Marketing and Direct Operating Costs 6,061 75 6,136 General and Administrative Expenses 4,736 1,193 5,929 Other Expenses – – – Segment results: $ ( 3,279 ) $ ( 402 ) $ ( 3,681 ) Reconciliation of net (loss) income: Depreciation Expense $ 765 $ 51 $ 816 Interest Expense 246 – 246 Stock Based Compensation 164 – 164 Tax provision – – – Other 1,292 ( 276 ) 1,016 Net Loss Attributable to Non-Controlling Interests ( 50 ) – ( 50 ) Net Loss Attributable to Kartoon Studios, Inc. $ ( 5,696 ) $ ( 177 ) $ ( 5,873 ) Six Months Ended June 30, 2024 Content Production and Distribution Media Advisory and Advertising Total Revenue $ 12,710 $ 1,752 $ 14,462 Less Operating Expenses: Selling, Marketing and Direct Operating Costs 10,818 88 10,906 General and Administrative Expenses 9,861 2,477 12,338 Other Expenses – 5 5 Segment results: $ ( 7,969 ) $ ( 818 ) $ ( 8,787 ) Reconciliation of net (loss) income: Depreciation Expense $ 1,673 $ 105 $ 1,778 Interest Expense 446 3 449 Stock Based Compensation – – – Tax provision 390 – 390 Other 2,026 ( 443 ) 1,583 Net Loss Attributable to Non-Controlling Interests ( 69 ) – ( 69 ) Net Loss Attributable to Kartoon Studios, Inc. $ ( 12,435 ) $ ( 483 ) $ ( 12,918 ) All other segment items included in net income or loss are reported on the consolidated statements of operations and described within their respective disclosures. 32 Note 22: Subsequent Events 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. The 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. The 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. 33