What changed in this filing

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Item 1. Financial Statements

2025-11-14 compared with 2025-08-14 · 618 added, 577 removed, 769 unchanged (61% of the section changed)

3 unchanged sentences

(in thousands, except for share data)

June 30, 2025

September 30, 2025

December 31, 2024

34 unchanged sentences

Deferred Tax Liability, net

Factoring Liability

Warrant Liability

3 unchanged sentences

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

Preferred Stock, 10,000,000 shares authorized, 0 shares issued and outstanding as of September 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 September 30, 2025 and December 31, 2024

Series B Preferred Stock, $ 0.001 par value, 0 shares authorized, 0 shares issued and outstanding as of September 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 September 30, 2025 and December 31, 2024

Common Stock, $ 0.001 par value, 190,000,000 and 190,000,000 shares authorized, 49,338,158 and 46,285,078 shares issued and 48,913,630 and 46,209,081 outstanding as of September 30, 2025 and December 31, 2024, respectively

Additional Paid-in Capital

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

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

Treasury Stock at Cost, 424,528 and 75,997 shares of common stock as of September 30, 2025 and December 31, 2024, respectively

Accumulated Deficit

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(in thousands, except for share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Production Services

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Interest Expense

Other Expense, net

Other Income (Expense), net

Net Loss Attributable to Non-Controlling Interests

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(in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Change in Accumulated Other Comprehensive Income:

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Foreign Currency Translation Adjustments

Total Change in Accumulated Other Comprehensive Income

Total Change in Accumulated Other Comprehensive (Loss) Income

Total Comprehensive Net Loss

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Treasury Stock

Accumulated Other Comprehensive

Accumulated Other Compre-

December 31, 2024

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Share Based Compensation

Stock Options Granted to Consultants, Net

Stock Options Granted to Consultants

Warrant Exercise

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

Currency Translation Adjustment

Foreign Currency Translation Adjustment

Balance, March 31, 2025

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Share Based Compensation

Stock Options Granted to Consultants, Net

Stock Options Granted to Consultants

Warrant Reclassification

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

Currency Translation Adjustment

Foreign Currency Translation Adjustment

Balance, June 30, 2025

$ ( 751,975 )

Kartoon Studios, Inc.

Condensed Consolidated Statements of Stockholders'

(in thousands, except for share data)

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 Accounts Payable Settlement

Non-cash Share Exchange

Share Based Compensation

Stock Options Granted to Consultants

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

Foreign Currency Translation Adjustment

Balance, September 30, 2025

$ ( 758,545 )

(1) Includes out-of-period

adjustment of Q1 and Q2 2025 NCI attribution resulted from deferral of terms under a production financing agreement.

The adjustment had

no impact on consolidated revenue, total consolidated net loss, total equity, or cash flows.

Preferred Stock

Additional Paid-In

Accumulated Other

Comprehensive

Treasury Stock

Accumulated Other Compre-

December 31, 2023

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Issuance of Common Stock for Services

Issuance of Common Stock for Vested

Restricted Stock Units, Net of Shares Withheld for Taxes

Fractional Shares Issued Upon Reverse

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

Share Based Compensation

Realized Loss Reclassified from AOCI

to Earnings, net change in Unrealized Loss

Currency Translation Adjustment

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

Foreign Currency Translation Adjustment

Balance, March 31, 2024

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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

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

Proceeds from Securities Purchase Agreement, Net

Share Based Compensation

Realized Loss Reclassified from AOCI

to Earnings, net change in Unrealized Loss

Currency Translation Adjustment

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

Foreign Currency Translation Adjustment

Balance, June 30, 2024

$ ( 731,464 )

Issuance of Common Stock for Services

Transfer - Post Reverse Stock Split Adjustment

Share-Based Compensation

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

Foreign Currency Translation Adjustment

Balance, September 30, 2024

$ ( 733,521 )

The accompanying notes are an integral part of

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(in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows from Operating Activities:

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

Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:

Amortization of Film and Television Costs

Depreciation and Amortization of Property, Equipment and Intangible Assets

Amortization of Right-of-Use Asset

Amortization of Right-of-Use Assets

Amortization of Premium on Marketable Securities

Share Based Compensation Expense

Impairment of Film and Television Costs

Loss on Settlement of Related Party Note

Loss on Debt Settlements

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

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

Loss on Partial Disposal of Equity Investment in Your Family Entertainment AG

Loss on Share Exchange

Loss (Gain) on Warrant Revaluation

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Credit Loss Expense

Non-cash Interest Expense

Other Non-Cash Items

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Investment in Marketable Securities

Investment in Intangible Assets, net

Purchase of Property and Equipment

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Repayments of Bank Indebtedness, net

Proceeds from Sale of Equity Investment in Your Family Entertainment AG

Proceeds from Securities Purchase Agreements

Proceeds from ERTC Factoring Transaction

Principal Payments on Finance Lease Obligations

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Proceeds from Warrant Exercise

Net Cash Used in Financing Activities

Net Cash Provided by (Used in) in Financing Activities

Effect of Exchange Rate Changes on Cash

Net Decrease in Cash and Restricted Cash

Net (Decrease) Increase in Cash and Restricted Cash

Beginning Cash and Restricted Cash

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Notes to Condensed Consolidated Financial Statements

June 30, 2025

September 30, 2025

Organization and Business

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WOW Unlimited Media Inc.

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

of the largest animation production studios globally.

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

- one of the largest animation production studios globally.

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.

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

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.

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

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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,

Distribution partners include YouTube, YouTube Kids, Amazon Prime Video, Amazon

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

and smart TVs from Samsung and LG.

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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.

(“Ameba”), a subscription streaming service with a focus on educational and entertainment content for younger children.

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

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

Recent Transactions

On July 31, 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% claim 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

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.

The arrangement includes a recourse provision under which the Company remains obligated to repay

amounts advanced in the event of any disallowance, modification, or reduction of the claim by the IRS.

Liquidity, Going Concern, and Capital Resources

As of June 30, 2025,

As of September 30, 2025,

the Company had cash and restricted cash of $ 1.4 million, which decreased by $ 7.0 million as compared to December 31, 2024.

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.

was primarily due to cash used in operating activities of $ 11.8 million and the effect of exchange rate of $ 0.3 million, offset by cash

provided by financing activities of $ 2.8 million and cash provided by investing activities of $ 2.4 million.

The cash used in operating

activities was primarily due to net loss of $ 19.4 million and net change in operating asset and liabilities of $ 6.0 million, partially

offset by net change in non-cash adjustments of $ 13.6 million.

The cash provided by financing activities was primarily due to net proceeds

from production facilities of $ 2.8 million, cash proceeds from partial disposal of YFE investment of $ 0.8 million and proceeds from ERTC

sale of $ 0.5 million, offset by net repayment of margin loan of $ 1.0 million and payments of lease obligations of $ 0.3 million.

provided by investing activities of $ 2.4 million was primarily due to proceeds from the sale and maturities of marketable securities of

$ 3.8 million and proceeds from the settlement of the Note Receivable of $ 0.4 million, offset by the investment in marketable securities

of $ 1.8 million and the purchase of new property and equipment of $ 0.1 million.

As of September 30, 2025,

the Company did not hold any available-for-sale marketable securities, and the decrease in available-for-sale marketable securities of

$ 2 .0 million as compared to December 31, 2024, was due to a sale of securities during the nine months ended September 30, 2025.

In accordance with Accounting

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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.

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.

For the nine months ended September 30, 2025 and 2024, the Company reported net losses of $ 19.4 million and $ 15.1

million, respectively.

The Company reported net cash used in operating activities of $ 11.8 million, and cash used in operating activities

of $ 1.1 million for the nine months ended September 30, 2025 and 2024, respectively.

As of September 30, 2025, the Company had an

accumulated deficit of $ 758.5 million and total stockholders’ equity of $ 24 .0 million.

As of September 30, 2025, the Company

had total current assets of $ 27.1 million, including cash of $ 0.9 million, and restricted cash of $ 0.5 million, and total current

liabilities of $ 32.5 million.

The Company had negative working capital of $ 5.4 million as of September 30, 2025, compared to working

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

In October 2025, the Company closed an offering transaction and received an aggregate

gross proceeds of approximately $ 7.3 million.

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 cash resources and projected inflows to fund operations for the next

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

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.

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

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

the successful execution and timing of these plans, macroeconomic uncertainty around the impact of tariffs on the toy and

related industries, 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

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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

The accompanying interim condensed

consolidated 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.

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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.

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 filed with the SEC on March 31, 2025.

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.

As of September 30, 2025

and December 31, 2024 gross amounts of foreign currency (“FX”) forward contract 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 nine months ended September 30, 2025, the Company recorded

a realized loss of $ 14,946 and $ 0.2 million, respectively, on FX forward contracts within Production Services Revenue on the condensed

consolidated statements of operations.

For the three and nine months ended September 30, 2024, the Company recorded a realized loss

of $ 35,601 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 June 30, 2025 and

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

As of September 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 June 30, 2025 and December 31, 2024

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

2024 (in thousands):

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Charged to costs and expenses

Balance, net as of June 30, 2025

Balance, net as of September 30, 2025

Tax Credits Receivable

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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

As of September 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 September 30, 2025

and December 31, 2024, $ 16.8 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.

As of September 30, 2025, $ 2.3 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.

Factoring Liability

On July 31, 2025, the Company

entered into an arrangement to transfer its ERTC refund claim (“ERTC receivable”) of $ 0.9 million to a financing counterparty

on a recourse basis.

Because the Company retained exposure to the transferred asset through the recourse provisions and otherwise did

not relinquish control, the transaction did not qualify for sale accounting under ASC 860 , Transfers and Servicing , and has been

accounted for as a secured borrowing.

Accordingly, the ERTC receivable remains recognized in Other Receivables, and a corresponding liability

is recognized for the cash proceeds received (net of any direct issuance costs).

The related factoring liability of $ 0.6 million represents

approximately 75% of the ERTC underlying receivable amount and is presented in the consolidated balance sheet within Noncurrent Liabilities.

Management does not anticipate any repayment obligation within twelve months and expects full collection of the ERTC refund by the financing

counterparty.

No gain or loss was recognized at inception.

The ERTC receivable serves as collateral for the borrowing.

The difference

between the ERTC receivable and the cash proceeds was recorded as borrowing discount, which is deferred and accreted to interest expense

using the effective interest method (26.84%) over the expected term of the borrowing.

Collections on the ERTC receivable are remitted

to the lender pursuant to the agreement and reduce the outstanding loan principal when applied.

The Company evaluates the ERTC receivable

for collectibility each reporting period.

Concentration of Risk

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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 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.

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

uninsured balance of $ 16,710 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

The managed account maintained its investments in marketable securities of approximately $ 2 .0 million

as of December 31, 2024, and no such investments as of September 30, 2025, as all securities were sold during the period.

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 September 30, 2025 and December 31, 2024, the Company did not have account balances held at this financial

institution that exceed the insured balances.

During the three months ended

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 June 30, 2024, the Company had four customers whose

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

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

These customers accounted for 85.1 % 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.

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.

During the three months ended September 30, 2024, the Company had four

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

These customers accounted for 77.2 % of the total

During the nine months ended

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

These customers accounted for 85.6 % 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.

During the nine months ended September 30, 2024, the Company had three

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

These customers accounted for 60.2 % of the total

As of September 30, 2025,

the Company had four 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.

for 67.5 % of the total accounts receivable as of September 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

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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

Total Fair Value

Investments in Marketable Securities:

Agency and Government Sponsored Securities

As of September 30, 2025,

there were no marketable securities outstanding.

The following table summarizes

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2024 (in thousands):

Schedule of marketable securities measured at fair value on a recurring basis

Total Fair Value

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An allowance for credit loss was not

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

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

Refer to Note 5 for additional details.

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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.

ASU will have on the consolidated financial statements and related disclosures, which is expected to result in enhanced disclosures in

the annual report for the year 2025.

In November, 2024 the FASB

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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

of evaluating the impact that the adoption of this ASU will have on the consolidated financial statements and related disclosures, which

is expected to result in enhanced disclosures.

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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.

(“POW”) pursuant to 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.

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,

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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.

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.

September 30, 2025 and 2024, SLU generated a net loss of $ 0.1 million and $ 0.1 million, respectively.

During the nine months ended September 30,

2025 and 2024, SLU generated a net loss of $ 0.2 million and $ 0.3 million, respectively.

There were no contributions or distributions during

the nine months ended September 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 June 30, 2025,

As of September 30, 2025,

the Company owned 5,009,005 shares of YFE.

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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.

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

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 %.

On July 14, 2025, the Company

sold 1,500,000 YFE shares to a single foreign investor for total proceeds of € 750,000 ($ 0.8 million) as part of its ongoing strategy

to optimize its portfolio of assets.

Subsequently, the Company’s ownership in YFE decreased from 44.8 % to 35.0 %.

Before the transaction,

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

On September 25, 2025, the

Company executed 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 previously held by the Company, to F&M, in exchange

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

Subsequently, the Company’s

ownership in YFE decreased from 35.0 % to 32.7 %.

Management concluded that the Company continues to exercise significant influence over

the investee.

As of September 30, 2025,

the fair value of the investment was determined to be $ 6.7 million recorded within noncurrent assets on the Company’s condensed

consolidated balance sheet.

The fair value as of September 30, 2025 decreased by net $ 9.7 million, as compared to December 31,

The net decrease is comprised of the net impact of a decrease in YFE’s stock price, the share sale and exchange transactions

completed in the quarter, 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 condensed consolidated statements of operations.

As of September 30, 2025

and December 31, 2024, the Company’s ownership in YFE was 32.7 % and 44.8 %, respectively.

Marketable Securities

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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)

Agency and Government Sponsored Securities

During the three months ended

September 30, 2025, the Company sold all of its investments in marketable debt securities.

As a result, there were no marketable

securities outstanding as of September 30, 2025, and the proceeds were used for general operating purposes.

The investments in marketable

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

Schedule of marketable securities

Adjusted Cost

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States and Municipalities

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.

The AFS securities held by

the Company as of December 31, 2024 had 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 September 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 $ 8,983

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

Due within 1 year

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.

and $ 0.1 million were recognized in earnings during the three months ended September 30, 2025 and 2024, respectively.

Realized losses

of $ 36,674 and $ 0.5 million were recognized in earnings during the nine months ended September 30, 2025 and 2024, respectively, primarily

due to selling securities prior to maturity to provide additional liquidity for general operating needs.

Property and Equipment, net

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Schedule of property and equipment, net

June 30, 2025

September 30, 2025

December 31, 2024

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Property and Equipment, net

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.

During the nine months ended

September 30, 2025 and 2024, the Company recorded depreciation expense of $ 0.4 million and $ 0.3 million, respectively.

During the nine months ended

September 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

June 30, 2025

September 30, 2025

December 31, 2024

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Accumulated Amortization

Right-of-Use Assets, Gross

Right-of-Use Assets, Net

Foreign Currency Translation Adjustment

Leased Right-of-Use Assets, net

As of June 30, 2025,

As of September 30, 2025,

the weighted-average lease term for the Company’s operating leases was 66 months and the weighted-average discount rate was 11.2 %.

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resulting in a reduction of $ 0.1 million.

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

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

statements of operations.

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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

the three months ended September 30, 2025 and 2024 were $ 0.4 million and $ 0.9 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

Operating lease costs during the nine months ended September

30, 2025 and 2024 were $ 1.1 million and $ 1.2 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.

During the three and nine

months ended September 30, 2025, the Company recorded finance lease costs of $ 0.1 million and $ 0.3 million, respectively, primarily

comprised of ROU amortization of $ 0.1 million and $ 0.3 million, respectively.

During the three and nine months ended September 30,

2024, the Company recorded finance lease costs of $ 0.2 million and $ 1 .0 million, respectively, primarily comprised of ROU amortization

of $ 0.2 million and $ 1 .0 million.

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.

is recorded within Other Income (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 June 30, 2025 and December 31, 2024 (in thousands):

the activity in Film and Television Costs as of September 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 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 six months ended June 30, 2025 and 2024.

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

During the nine months ended

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

During the nine month ended

September 30, 2025, the Company recorded $ 0.1 million of write-downs related to projects not advancing beyond the development stage.

Based on the review performed by the executive team it was determined, that certain projects would no longer be pursued.

The Company did

no t record any write-downs on film costs during the nine months ended September 30, 2024.

The Company did no t record

any impairment charges on film costs during the nine months ended September 30, 2025 and 2024.

Intangible Assets, net

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Weighted Average Remaining Amortization

June 30, 2025

December 31, 2024

September 30, 2025

September 30, 2024

Customer Relationships

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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.

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.

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

During the nine months ended September 30, 2025 and 2024, the Company recorded intangible asset amortization expense of $ 1.5 million and

$ 1.5 million, respectively.

Expected future amortization

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

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

Schedule of expected future intangible asset 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.

As of September 30, 2025 and December 2024,

$ 5.4 million and $ 5.3 million, respectively, 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 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.

As of September 30, 2025

and December 31, 2024, the Company had aggregate short term and long term deferred revenue of $ 8.9 million and $ 9.4 million, respectively.

The decrease in deferred revenue is primarily related to production on various shows advancing to later stages of execution of the projects

as of September 30, 2025, compared 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 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

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.

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 September 30, 2025,

the Company had no outstanding margin loan balance.

As of December 31, 2024, the Company’s margin loan balance was $ 0.9 million.

During the nine months ended September 30, 2025, the Company borrowed an additional $ 5.9 million from its investment margin

account and repaid $ 6.8 million primarily with cash received from sales and maturities of marketable securities and other transactions.

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 0.39 % and 0.46 %, respectively, on average margin loan balances of $ 0.2 million

and $ 1 .0 million as of September 30, 2025 and December 31, 2024, respectively.

During the three months ended

September 30, 2025 and 2024, the Company incurred interest expense on the loan of $ 3,195 and $ 11,070 , respectively.

During the nine months

ended September 30, 2025 and 2024, the Company incurred interest expense on the loan of $ 8,062 and $ 42,131 , 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 was recorded as a current liability on the Company’s

condensed consolidated balance sheets.

Bank Indebtedness and Production Facilities

has certain credit facilities that are comprised of the following:

The Company 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 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,

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 September 30, 2025

and December 31, 2024, the Company had an outstanding net balance of USD 12.6 million (CAD 17.5 million), including USD 0.9 million

(CAD 1.3 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.

As of September 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

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

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.

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 September 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 2 months and 11 months, respectively.

As of September 30, 2025

and December 31, 2024, the outstanding balances, net of repayments, of $ 0.1 million (CAD 0.1 million) and $ 0.3 million (CAD 0.4 million),

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

balance sheets.

Stockholders’ Equity

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

As of September 30, 2025

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

As of September 30, 2025

and December 31, 2024, there were 48,913,630 and 46,209,081 shares of common stock outstanding, respectively.

During the nine months ended

September 30, 2025 and 2024, the Company issued 226,733 and 218,886 shares of common stock for services, respectively.

During the nine months ended

September 30, 2025 and 2024, the Company issued 182,987 and 88,531 shares of common stock in connection with vested restricted stock units

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

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

On August 27, 2025, the

Company entered into an agreement to engage in a transaction under Section 3(a)(10) of the Securities Act of 1933 with a third party

lender (“Lender”) to settle $ 1.8

million of outstanding accounts payable, in exchange for issuing 3,148,535

shares of common stock.

Under the terms of the agreement, the Lender makes payments to the Company’s vendors in cash and, in

exchange, the Company issues shares of common stock to the Lender.

The settlement was valued at $ 0.75

accounts payable and is being carried out in stages, pursuant to the terms of the agreement.

The transaction was approved by a court

after a public hearing on the fairness of the terms and conditions.

During the three months ended September 30, 2025 the

Company settled $ 0.7

million of accounts payable by issuing 1,180,955

shares of common stock to the Lender.

The Company recognized a loss of $ 0.3

million on the settlement, representing the difference between the carrying value of liabilities extinguished and the fair value of

shares issued, included in Other Income (Expense), Net, on the Company’s condensed consolidated statements of operations.

Preferred Stock

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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.

As of September 30, 2025

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

As of September 30, 2025 and

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

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.

During the nine months ended

September 30, 2025 and 2024, 404 and 217 shares of common stock, respectively, with a cost of $ 293 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.

On September 25, 2025, the

Company executed 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 previously held by the Company, to F&M, in exchange

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

The shares received from F&M

were returned to the Company’s treasury and recorded at their cost of approximately $ 0.3 million within Treasury Stock on the condensed

consolidated balance sheet.

Stock Options

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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.

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

was 13,216,767 .

During the nine months ended

September 30, 2025, the Company granted options to purchase 100,000 shares of common stock to the music composer on the Winnie

& Friends title song, with weighted-average grant-date fair market value of $ 39,260 .

The options vested immediately upon grant.

The fair value of the options granted during the

nine months ended September 30, 2025 was calculated using the Black-Scholes-Merton (“BSM”) option pricing model based

on the following assumptions:

Schedule of option pricing model

Nine Months Ended September 30,

Exercise Price

Dividend Yield

Risk-free interest rate

Expected life of options

During the nine months ended

September 30, 2024, the Company did no t grant any stock options.

The following table summarizes

6 unchanged sentences

Forfeited/Cancelled

Outstanding at June 30, 2025

Unvested at June 30, 2025

Vested and exercisable at June 30, 2025

Outstanding at September 30, 2025

Unvested at September 30, 2025

Vested and exercisable at September 30, 2025

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

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 .

September 30, 2025, the Company did no t recognize any share-based compensation expense related to stock options.

During the three months ended

September 30, 2024, the Company recognized $ 23,804 in share-based compensation expense related to stock options.

During the nine months ended

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

As of September 30, 2025, the Company had no unrecognized share-based compensation expense related to outstanding stock options.

The outstanding options as of September 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 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.

During the nine months ended September 30, 2025 and 2024, the Company granted 400,123

and 286,324 fully vested RSUs to the Company’s board members and consultants, with a fair market value of $ 0.3 million and $ 0.3

million, respectively.

An aggregate of 409,720 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.

of common stock were issued during the nine months ended September 30, 2025 as a result of RSUs vested during the current and prior

The following table summarizes

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Unvested at December 31, 2024

Unvested at June 30, 2025

Unvested at September 30, 2025

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

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.

September 30, 2025 and 2024, the Company recognized $ 41,847 and $ 0.1 million, respectively, in share-based compensation expense related

During the nine months ended September 30, 2025 and 2024, the Company recognized $ 0.2 million and $ 0.4 million, respectively,

in share-based compensation expense related to RSU awards included in General and Administrative Expenses on the Company’s condensed

consolidated statements of operations.

The unvested share-based compensation as of September 30, 2025 was $ 9,601 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 nine months ended September 30, 2025 was $ 0.3 million.

The following table summarizes

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

the activity in the Company’s outstanding warrants during the nine months ended September 30, 2025:

Schedule of warrant activity

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( 1,462,000 )

Outstanding at June 30, 2025

Exercisable at June 30, 2025

Outstanding at September 30, 2025

Exercisable at September 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 June 30, 2025.

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

during the six months ended June 30, 2025.

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

In addition, 32,523 warrants previously classified as equity

expired during the nine months ended September 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

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.

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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.

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

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

Subsequently, the total liability

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

As of September 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:

Series A derivative warrants, prior to their reclassification to equity, was determined by using the BSM based on the following assumptions

as of May 13, 2025:

Schedule of assumptions

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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

Series B derivative warrants, prior to their reclassification to equity, was determined by using the BSM option pricing model based on

the following assumptions as of May 13, 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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Other Expense, net

Components of Other Expense, net, are summarized

as follows (in thousands):

Components of Other Income (Expense), net, are

summarized as follows (in thousands):

Schedule of other income expense, net

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Interest Expense (a)

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Finance Lease Interest Expense (h)

Gain on Lease Termination (i)

Other Expense, net

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.

Gain on Lease Modification (i)

Other Income (Expense), net

Three Months and Nine Months Ended September 30, 2025

Interest Expense during the three and nine months ended September 30, 2025 was $ 0.2 million and $ 0.5 million, respectively, primarily due to interest incurred on production facilities.

The Loss on Revaluation of Warrants during the nine months ended September 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 a change in their Fair Value resulted in a recorded gain due to a decrease of expiration period.

In the period ended June 2025, warrants were reclassified to equity.

As accounted for under the fair value option, the Company recognized losses in its Equity Investment in YFE of $ 2.9 million and $ 10.3 million during the three and nine months ended September 30, 2025, respectively.

The losses were primarily driven by decreases in YFE’s stock price as of the current reporting period when compared to the prior reporting period, and resulted in a revaluation loss of $ 1 .0 million and $ 8.6 million during the three and nine months ended September 30, 2025, respectively.

Additionally, during the three months ended September 30, 2025, the Company recorded a $ 1.5 million loss on the sale of a portion of the investment and a $ 0.3 million loss on the share exchange transaction.

This excludes the impact of foreign currency recorded separately.

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.

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.

The Realized Loss on Marketable Securities Investments of $ 8,983 and $ 36,674 recorded during the three and nine months ended September 30, 2025, respectively, is related to the Loss of on sale of marketable securities prior to the maturity date.

The Gain on Foreign Exchange during the nine months ended September 30, 2025 primarily related to the revaluation of the YFE investment, resulting in a gain of $ 1.8 million, 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.

The remaining balance of $ 0.3 million represents the remeasurement of foreign currency transactions of the Company’s non-U.S.

subsidiary that remained outstanding as of the condensed consolidated balance sheet date.

The Loss on Foreign Exchange during the three months ended September 30, 2025 of $ 0.3 million is related to the remeasurement of foreign currency transactions of the Company’s non-U.S.

subsidiary that remained outstanding as of the condensed consolidated balance sheet date.

The Loss on Debt Settlement recorded during the nine months ended September 30, 2025 includes a loss of $ 0.9 million related to the loan settlement agreement with YFE finalized in April 2025 and a loss of $ 0.3 million arising from the Section 3(a)(10) transaction completed during the period.

The Loss on Debt Settlement of $ 0.3 million recorded during the three months ended September 30, 2025 is related to the Section 3(a)(10) transaction completed during the period.

Interest Income during the three and nine months ended September 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 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.

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.

On April 1, 2025, a subsidiary, Beacon Communications Group, Ltd (“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 September 30, 2025.

During the nine months ended September 30, 2025, a net loss of $ 0.1 million was recognized in connection with the reversal of previously accrued other income related to 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.

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

The amount also included approximately $ 75,568 of other income, primarily consisting of late fees from select clients on payment plans and credit card rewards.

For the three months ended September 30, 2025, other income primarily related to such late fees totaled $ 22,323 .

Three Months and Nine Months Ended September 30, 2024

Interest Expense during the three and nine months ended September 30, 2024 was $ 0.2 million and $ 0.6 million, respectively, primarily due to interest incurred on production facilities and bank indebtedness.

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

As the investment in YFE is accounted for under the fair value option, the Company recognized a loss on revaluation of its equity investment in YFE of approximately $ 0.5 million and $ 1.3 million for the three and nine months ended September 30, 2024, respectively.

The loss reflected decreases in YFE’s stock price during the current reporting periods compared to the respective prior reporting periods.

The impact of foreign currency translation is excluded and presented separately.

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

The Gain on Foreign Exchange during the three and nine months ended September 30, 2024 was primarily related to the revaluation of the YFE investment, resulting in a gain of $ 0.8 million and $ 0.2 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.

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

Interest Income during the three and nine months ended September 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 nine months ended September 30, 2024 represented the interest portion of the finance lease obligations for equipment purchased under an equipment lease line.

No gain or loss on lease modification was recorded during the three and nine months ended September 30, 2024.

Other Income during the three and nine months ended September 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 six months ended June 30,

2025, the effective tax rate was 0%.

For the nine months ended

September 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%.

federal statutory rate primarily

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

For the nine months ended September 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.

federal statutory rate primarily due to state income

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

During the nine months ended

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

As of September 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 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.

federal jurisdiction and in the states of California, Florida, Massachusetts, New Jersey and New York, as well as

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.

state and local and foreign tax examinations by tax authorities.

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.

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.

state, local or foreign authorities for years prior to 2020.

On July 4, 2025, the President

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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.

These changes were reflected in the income tax provision for the period ended September

30, 2025, as enactment occurred before the balance sheet date.

The Company determined, there was no material impact to our income tax

expense or effective tax rate, due to the full valuation allowance against the net deferred tax asset.

Commitments and Contingencies

The following is a schedule

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

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

Schedule of future minimum lease payments

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of the minimum operating lease payments above was $ 1.9 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.

the table above, equates to the lease liabilities of $ 5.7 million recorded as of September 30, 2025 on the Company’s condensed

consolidated balance sheet.

Employment contracts

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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.

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,

Heyward did no t earn any executive producer fees.

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.

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

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.

Pursuant to his initial employment

agreement dated December 7, 2020, Mr.

Heyward was previously entitled to receive a quarterly bonus.

Heyward was paid $ 55,000 as quarterly

bonus for each quarter during the nine months ended September 30, 2025 and 2024.

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.

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.

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.

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

first quarter of 2023, for services rendered to Wow.

Heyward was paid $ 100,000 in creative producer fees for each quarter during the

nine months ended September 30, 2025 and 2024.

On July 19, 2022, the Company

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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,

As of September 30,

2025, all terms of the settlement agreement were fulfilled.

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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.

The monthly income was $595 during the nine months ended September 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.

2024, the Company entered into a 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 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.

The monthly expense was $ 595 and $ 0 during the nine months ended September 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 was granted 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 $ 772 during the three months ended September 30,

This support was not part of an ongoing funding commitment and is not considered material to the Company’s condensed consolidated

financial statements.

The Foundation is not consolidated in these condensed consolidated financial statements.

On August 25, 2025, the Company

entered into a new employment agreement with Andy Heyward, the Company’s CEO, which replaced and superseded all prior employment

The agreement revised certain compensation terms, including a new performance-based bonus structure contingent on market capitalization

and net income thresholds as of December 31, 2025.

The agreement further provides for the potential issuance of a restricted stock unit

(“RSU”) award to Mr.

Heyward, subject to the determination of the terms.

No bonuses were earned or accrued under this arrangement

as of September 30, 2025.

Pursuant to the terms of the

agreement, Mr.

Heyward is entitled to an executive producer fee of $ 12,500 per episode for each episode he provides services as an executive

producer, up to maximum 52 episodes per calendar year.

During the nine months ended September 30, 2025 and 2024, Mr.

Heyward has no t earned

or was not paid any producer fees.

Segment Reporting

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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

The 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

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.

The Media Advisory and Advertising

Services segment includes The Beacon Media Group and The Beacon Communications Group.

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Schedule of segment information by revenues and net earnings

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Total Revenues:

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Schedule of segments by geographic area

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Total Revenues:

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Schedule of segment

Three Months Ended June 30, 2025

Three Months Ended September 30, 2025

Content Production and Distribution

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Net Loss Attributable to Kartoon Studios, Inc.

Six Months Ended June 30, 2025

Nine Months Ended September 30, 2025

Content Production and Distribution

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Net Loss Attributable to Kartoon Studios, Inc.

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Content Production and Distribution

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Net Loss Attributable to Kartoon Studios, Inc.

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Content Production and Distribution

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All other segment items included

in net income or loss are reported on the consolidated statements of operations and described within their respective disclosures.

in net income or loss are reported on the condensed consolidated statements of operations and described within their respective disclosures.

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.

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.

On October 22, 2025, pursuant

to the terms of a securities purchase agreement (the “Purchase Agreement”) entered into with an institutional investor (the

“Investor”), the Company closed a registered direct offering of 3,000,000 shares (the “Shares”) of its common

stock, par value $0.001 per share (“Common Stock”), and pre-funded warrants to purchase up to 6,903,049 shares of Common Stock

(the “Pre-Funded Warrants”) to the Investor.

In a concurrent private placement, pursuant to the Purchase Agreement, the Company

also sold to the Investor unregistered warrants to purchase up to 9,903,049 shares of Common Stock (the “Common Warrants”),

with an exercise price of $0.738 per share.

Each Share and privately placed Common Warrant was sold at a public offering price of $0.738,

and each Pre-Funded Warrant and privately placed Common Warrant was sold at a public offering price of $0.737, for aggregate gross proceeds

at closing of approximately $7.3 million, prior to deducting placement agent fees and other offering expenses.

The Company paid to the

placement agent in connection with the offering a cash fee equal to 7% of the aggregate gross proceeds from the sale of the securities

sold in this offering, and the placement agent is also entitled to receive 7% of the gross proceeds received from the exercise of any

warrants issued in the offering.

In addition, the Company issued warrants to purchase 693,213 shares of common stock to the placement

agent and its designees with an exercise price of $0.8118 per share.

On August 27, 2025, the Company

entered into a transaction under Section 3(a)(10) of the Securities Act of 1933 with a third party to settle $1.8 million of outstanding

accounts payable, in exchange for issuing 3,148,535 shares of common stock.

Under the terms of the agreement, the third party makes payments

to the Company’s vendors in cash and, in exchange, the Company issues shares of common stock to the third party.

The transaction

was carried out in stages and as of November 14, 2025, the Company had completed the arrangement, settling a total of $1.8 million,

and issued 3,148,535 shares of common stock.

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