What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-11-14 compared with 2025-08-14 · 298 added, 233 removed, 162 unchanged (77% of the section changed)

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and analysis of our results of operations, financial condition and liquidity and capital resources should be read in conjunction with

our financial statements and related notes for the three and six months ended June 30, 2025 and 2024.

Certain statements made or incorporated

by reference in this report and our other filings with the Securities and Exchange Commission, in our press releases and in statements

made by or with the approval of authorized personnel constitute forward looking statements within the meaning of Section 27A of the Securities

Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are subject to the

safe harbor created thereby.

Forward-looking statements reflect intent, belief, current expectations, estimates or projections about,

among other things, our industry, management’s beliefs, and future events and financial trends affecting us.

Words such as “anticipates,”

“expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,”

“may,” “will” and variations of these words or similar expressions are intended to identify forward looking statements.

In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including

any underlying assumptions, are forward looking statements.

Although we believe the expectations reflected in any forward-looking statements

are reasonable, such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions

that are difficult to predict.

Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking

statements as a result of various factors.

These differences can arise as a result of the risks described in the section entitled “Item

Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March

31, 2025 (“The 2024 Annual Report”), and elsewhere in this report, as well as other factors that may affect our business,

results of operations, or financial condition.

Forward-looking statements in this report speak only as of the date hereof, and forward-looking

statements in documents incorporated by reference speak only as of the date of those documents.

Unless otherwise required by law, we undertake

no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or

In light of these risks and uncertainties, we cannot assure you that the forward-looking statements contained in this report

will, in fact, transpire.

our financial statements and related notes for the three and nine months ended September 30, 2025 and 2024.

Certain statements made or

incorporated by reference in this report and our other filings with the Securities and Exchange Commission, in our press releases and

in statements made by or with the approval of authorized personnel constitute forward looking statements within the meaning of Section

27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act,

and are subject to the safe harbor created thereby.

Forward-looking statements reflect intent, belief, current expectations, estimates

or projections about, among other things, our industry, management’s beliefs, and future events and financial trends affecting us.

Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,”

“estimates,” “may,” “will” and variations of these words or similar expressions are intended to identify

forward looking statements.

In addition, any statements that refer to expectations, projections or other characterizations of future events

or circumstances, including any underlying assumptions, are forward looking statements.

Although we believe the expectations reflected

in any forward-looking statements are reasonable, such statements are not guarantees of future performance and are subject to certain

risks, uncertainties and assumptions that are difficult to predict.

Therefore, our actual results could differ materially and adversely

from those expressed in any forward-looking statements as a result of various factors.

These differences can arise as a result of the

risks described in the section entitled “Item 1A.

Risk Factors” in our Annual Report on Form 10-K for the year ended December

31, 2024, which was filed with the SEC on March 31, 2025 (“The 2024 Annual Report”), and elsewhere in this report, as well

as other factors that may affect our business, results of operations, or financial condition.

Forward-looking statements in this report

speak only as of the date hereof, and forward-looking statements in documents incorporated by reference speak only as of the date of those

Unless otherwise required by law, we undertake no obligation to publicly update or revise these forward-looking statements,

whether as a result of new information, future events or otherwise.

In light of these risks and uncertainties, we cannot assure you that

the forward-looking statements contained in this report will, in fact, transpire.

Management’s Discussion

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Strategic emphasis is being placed on the commercialization

of the Stan Lee intellectual property portfolio, with a focus on both digital and physical consumer products.

We intend to expand the

use of our broader IP catalog in licensing programs beginning throughout 2025 and beyond.

of the Stan Lee intellectual property portfolio and the launch of the Hundred Acre Wood:

Winnie & Friends property, with a

focus on both digital and physical consumer products, as well as location-based fan experiences.

We intend to expand the use of our broader

IP catalog in licensing programs beginning throughout 2026 and beyond.

Media Advisory and Advertising Services

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custom campaign development.

Recent Events

Registered Direct Offering and Concurrent Private

On October 20, 2025, we entered

into a securities purchase agreement (the “Purchase Agreement”) with an institutional investor (the “Purchaser”),

pursuant to which we agreed to issue to the Purchaser, (i) in a registered direct offering (the “Registered Direct Offering”),

3,000,000 shares (the “Shares”) of our common stock, par value $0.001 per share (the “Common Stock”), and pre-funded

warrants (“Pre-Funded Warrants”) to purchase up to 6,903,049 shares of Common Stock (the “Pre-Funded Warrant Shares”),

and (ii) in a concurrent private placement pursuant to the Purchase Agreement (the “Concurrent Private Placement” and, together

with the Registered Direct Offering, the “October Offerings”), common warrants (the “Common Warrants”) to purchase

an aggregate of up to 9,903,049 shares of Common Stock (the “Common Warrant Shares”), with an exercise price of $0.738.

October Offerings closed on October 22, 2025 (the “Closing Date”), and we received aggregate gross proceeds of approximately

$7.3 million in connection therewith, excluding any proceeds that may be received upon the exercise of the Common Warrants and before

deducting placement agent fees and other offering expenses payable by us.

Each Share and privately placed Common Warrant was sold at a

public offering price of $0.738.

Each Pre-Funded Warrant and privately placed Common Warrant was sold at a public offering price of $0.737.

The Shares, Pre-Funded Warrants

and Pre-Funded Warrant Shares were offered by the Company pursuant to a shelf registration statement on Form S-3 (File No.

which was declared effective by the Securities and Exchange Commission (the “Commission”) on January 5, 2024 (the “Registration

The Common Warrants and the Common Warrant Shares have not been registered under the Securities Act of 1933, as amended

(the “Securities Act”), and were instead offered pursuant to the exemption provided in Section 4(a)(2) under the Securities

Act and/or Rule 506(b) promulgated thereunder.

Pursuant to the terms of the

Purchase Agreement, until January 31, 2026, we agreed that neither we nor any of our subsidiaries will issue (or enter into any agreement

to issue) any shares of Common Stock or Common Stock Equivalents (as defined in the Purchase Agreement) or file any registration statement

or any amendment or supplement thereto, subject to certain limited exceptions, including (i) the prospectus supplement relating to the

Registered Direct Offering, (ii) the Resale Registration Statement (as defined below).

We further agreed, subject to limited exceptions,

for a period from the date of the Purchase Agreement until October 20, 2027, not to issue, enter into any agreement to issue or announce

the issuance or proposed issuance of any shares of Common Stock or Common Stock Equivalents involving a Variable Rate Transaction (as

defined in the Purchase Agreement), provided however that commencing October 20, 2026, we are allowed to enter into, and issue shares

pursuant to, an “at the market” offering.

Dawson James Securities Inc.

acted as the exclusive placement agent (the “Placement Agent”) on a “reasonable best efforts” basis, in connection

with the October Offerings and received a cash fee of 7% of the aggregate gross proceeds paid to us for the securities sold in the October

Offerings and reimbursement of certain out-of-pocket expenses of $75,000.

The placement agent is also entitled to receive a cash fee of

7% of the gross proceeds received from the exercise of any Common Warrants.

As additional compensation to the Placement Agent, in connection

with the October Offerings, we issued to the Placement Agent or its designees, warrants (the “Placement Agent Warrants”) to

purchase an aggregate of 693,213 shares of Common Stock (the “Placement Agent Warrant Shares”) with substantially the same

terms as the Common Warrants, except that they have an exercise price per share equal to $0.8118.

The Placement Agent Warrants were offered

pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and/or Rule 506(b) promulgated thereunder.

Pursuant to the Purchase Agreement,

we agreed to file, as soon as practicable (and in any event within thirty (30) calendar days of the date of the Purchase Agreement), a

registration statement (the “Resale Registration Statement”) providing for the resale by the Purchaser of the Common Warrant

In addition, we will use commercially reasonable efforts to cause the Resale Registration Statement to become effective within

ninety (90) days following the Closing Date and to keep the Resale Registration Statement effective at all times until the Purchaser does

not own any Common Warrants or Common Warrant Shares.

Results of Operations

Our summary results for the

three months ended June 30, 2025 and 2024 are below:

Three Months Ended June 30,

three months ended September 30, 2025 and 2024 are below:

Three Months Ended September 30,

(in thousands, except percentages)

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Consequently, less revenue is recognized during the periods in which the projects

are near completion or completed.

Revenue for the three months ended June 30, 2025 was higher than the Mainframe Studios’ production

services revenue recognized during three months ended June 30, 2024 primarily due to the number of active projects in the current

are near completion.

Revenue for the three months ended September 30, 2025 was 45% higher than Mainframe Studios’ production

services revenue recognized during the three months ended September 30, 2024 primarily due to several ongoing projects progressing

into more advanced production stages, resulting in higher revenue recognized under the percentage-of-completion method.

Revenue related to Content

Distribution on AVOD and SVOD, including advertising sales for the three months ended June 30, 2025, decreased by 17% as compared

to the three months ended June 30, 2024.

Distribution on AVOD and SVOD, including advertising sales for the three months ended September 30, 2025, decreased by 24% as compared

to the three months ended September 30, 2024.

The decrease of $0.6 million was due to a decrease in Frederator’s creator network

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Revenue related to Licensing

and Royalties for the three months ended June 30, 2025 increased by 219% as compared to the three months ended June 30, 2024

primarily due to higher amounts earned from our existing license deals related to our consumer products agreements and music licensing

Additionally, we executed new licensing agreements related to Stan Lee Universe, LLC assets.

and Royalties for the three months ended September 30, 2025 increased by 97% as compared to the three months ended September 30,

2024 primarily due to higher amounts earned from our existing license deals related to our consumer products agreements, music licensing

agreements, and certain new executed licensing agreements related to Stan Lee Universe, LLC assets.

Revenue generated by Media

Advisory and Advertising services for the three months ended June 30, 2025 decreased by 3% as compared to the three months ended

June 30, 2024 primarily due to lower net renewal activity and media purchases from clients.

Three Months Ended June 30,

Advisory and Advertising services for the three months ended September 30, 2025 decreased by 36% as compared to the three months

ended September 30, 2024 primarily due to lower net renewal activity and media purchases from clients and due to tariffs imposed

on toy manufacturers adversely affecting certain clients’ marketing budgets, resulting in delayed media spending.

Three Months Ended September 30,

(in thousands, except percentages)

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The decrease in Marketing

and Sales expenses for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024 was primarily

due to a decrease in advertising efforts aimed at promoting the Kartoon Studios branding.

and Sales expenses for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 was

primarily due to lower corporate advertising spending.

Direct Operating Costs during

the three months ended June 30, 2025 consisted of salaries and related expenses for animation production services employees of Mainframe

Studios and Frederator.

The remainder of Direct Operating Costs consisted of creator network channel expenses, content licensing, and

production costs, including participation expenses related to profit-sharing obligations with various animation studios, post-production

studios, writers, directors, musicians, and other creative talent, as well as amortization and any write-downs of film and television

The increase during the three months ended June 30, 2025 was primarily due to an increase in salary costs and headcount included

the three months ended September 30, 2025 consisted of salaries and related expenses for animation production services employees

of Mainframe Studios.

The remainder of Direct Operating Costs consisted of creator network channel expenses, content licensing, and production

costs, including participation expenses related to profit-sharing obligations with various animation studios, post-production studios,

writers, directors, musicians, and other creative talent, as well as amortization and any write-downs of film and television costs.

increase during the three months ended September 30, 2025 was primarily due to an increase in salary costs and headcount included

in Production Services related to new projects that advanced in the current quarter compared to the same period of the prior year.

The decrease in General and

Administrative expenses for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024 was primarily

due to a decrease of $0.5 million in professional fees reflecting lower legal expenses and reduced use of external consulting services,

a decrease of $0.1 million in depreciation expense related to the property and equipment impairment recorded in prior year and a net reduction

of $0.1 million in overhead costs primarily due to cost-saving initiatives.

The increase in General and

Administrative expenses for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024

was primarily due to an increase of $0.3 million in professional fees reflecting the timing of legal insurance reimbursements in the current

quarter compared to the prior year quarter, an increase of $0.3 million in general and administrative expenses, offset by a decrease of

$0.1 million in depreciation expense related to the property and equipment impairment recorded in prior year, and a decrease of $0.1 million

of stock-based compensation expense due to vested awards fully recognized.

During the three months ended

June 30, 2025, we reassessed our nonfinancial assets, including our definite-lived intangible assets, our indefinite-lived intangible

September 30, 2025, we reassessed our nonfinancial assets, including our definite-lived intangible assets, our indefinite-lived intangible

assets for impairment.

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Our summary results for the

six months ended June 30, 2025 and 2024 are below:

Six Months Ended June 30,

nine months ended September 30, 2025 and 2024 are below:

Nine Months Ended September 30,

(in thousands, except percentages)

10 unchanged sentences

Consequently, less revenue is recognized during the periods in which the projects

are near completion or completed.

Revenue for the six months ended June 30, 2025 was higher than the Mainframe Studios’ production

services revenue recognized during six months ended June 30, 2024 primarily due to the number of active projects in the current quarter.

are near completion.

Revenue for the nine months ended September 30, 2025 was 65% higher than the Mainframe Studios’ production

services revenue recognized during nine months ended September 30, 2024 primarily due to several ongoing projects progressing into

more advanced production stages, resulting in higher revenue recognized under the percentage-of-completion method.

Revenue related to Content

Distribution on AVOD and SVOD, including advertising sales for the six months ended June 30, 2025, decreased by 16% as compared to

the six months ended June 30, 2024.

The decrease of $0.8 million was due to a decrease of $0.6 million in Frederator’s creator

network revenue from YouTube driven by overall less viewership as compared to the prior year period, and a decrease in Kartoon Studios’

content distribution revenue of $0.2 million related to lower volume of licensing agreements signed by the Kartoon Channel!

division for the broadcast of the channel.

Distribution on AVOD and SVOD, including advertising sales for the nine months ended September 30, 2025, decreased by 18% as compared

to the nine months ended September 30, 2024.

The decrease of $1.2 million was due to a decrease of $1.1 million in Frederator’s

creator network revenue from YouTube driven by overall less viewership as compared to the prior year period, and a decrease in Kartoon

Studios’ content distribution revenue of $0.1 million related to lower volume of licensing agreements signed by the Kartoon Channel!

Worldwide division for the broadcast of the channel.

Revenue related to Licensing

and Royalties for the six months ended June 30, 2025 increased by 34% as compared to the six months ended June 30, 2024 primarily

due to higher amounts earned from our existing license deals related to our consumer products agreements and music licensing agreements.

Additionally, we executed new licensing agreements related to Stan Lee Universe, LLC assets.

and Royalties for the nine months ended September 30, 2025 increased by 3% as compared to the nine months ended September 30,

2024 primarily due to higher amounts earned from our existing license deals related to our consumer products agreements, music licensing

agreements, and certain new executed licensing agreements related to Stan Lee Universe, LLC assets.

Revenue generated by Media

Advisory and Advertising services for the six months ended June 30, 2025 decreased by 2% as compared to the six months ended June 30,

2024 primarily due to lower net renewal activity and media purchases from clients.

Six Months Ended June 30,

Advisory and Advertising services for the nine months ended September 30, 2025 decreased by 18% as compared to the nine months ended

September 30, 2024 primarily due to lower net renewal activity and media purchases from clients, which were impacted by the new U.S.

tariffs legislative uncertainty.

Nine Months Ended September 30,

(in thousands, except percentages)

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The decrease in Marketing

and Sales expenses for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 was primarily due

to a decrease in advertising efforts aimed at promoting the Kartoon Studios branding.

and Sales expenses for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 was

primarily due to lower corporate advertising spending.

Direct Operating Costs during

the six months ended June 30, 2025 consisted of salaries and related expenses for animation production services employees of Mainframe

Studios and Frederator.

The remainder of Direct Operating Costs consisted of creator network channel expenses, content licensing, and

production costs, including participation expenses related to profit-sharing obligations with various animation studios, post-production

studios, writers, directors, musicians, and other creative talent, as well as amortization and any write-downs of film and television

The increase during the six months ended June 30, 2025 was primarily due to an increase in salary costs and headcount included

the nine months ended September 30, 2025 consisted of salaries and related expenses for animation production services employees of

Mainframe Studios.

The remainder of Direct Operating Costs consisted of creator network channel expenses, content licensing, and production

costs, including participation expenses related to profit-sharing obligations with various animation studios, post-production studios,

writers, directors, musicians, and other creative talent, as well as amortization and any write-downs of film and television costs.

increase during the nine months ended September 30, 2025 was primarily due to an increase in salary costs and headcount included

in Production Services related to new projects that began in the current year compared to the same period of the prior year.

The decrease in General and

Administrative expenses for the six months ended June 30, 2025 as compared to the six months ended June 30, 2024 was primarily

due to a decrease of $1.2 million in professional fees reflecting lower legal expenses and reduced use of external consulting services,

decrease of $0.7 million in overhead costs primarily due to cost-saving initiatives, decrease of $0.4 million in depreciation expense

related to the property and equipment impairment recorded in prior year, and a $0.3 million decrease in share-based compensation expense.

During the three months ended

June 30, 2025, we reassessed our nonfinancial assets, including our definite-lived intangible assets, our indefinite-lived intangible

Administrative expenses for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024

was primarily due to a decrease of $1.0 million in professional fees reflecting lower legal expenses including legal insurance reimbursements

and reduced use of external consulting services, decrease of $0.7 million in salaries and wages, decrease of $0.4 million in depreciation

expense related to the property and equipment impairment recorded in prior year, a $0.4 million decrease in share-based compensation expense

due to vested awards fully recognized, a decrease of $0.1 million in rent expense due to currency translation of our foreign office rent

expense, offset by an increase of $0.5 million in certain expenses related to a production that did not meet capitalization criteria.

During the nine months ended

September 30, 2025, we reassessed our nonfinancial assets, including our definite-lived intangible assets, our indefinite-lived intangible

assets for impairment.

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Other Expense, net

Components of Other Expense, net, are summarized

as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Components of Other Income (Expense), net, are

summarized as follows (in thousands):

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, we entered into a settlement agreement with YFE related to the Shareholder Loan Agreement.

As the settlement was considered probable and the loss reasonably estimable as of March 31, 2025, we recorded a loss of approximately $0.9 million during the three months ended March 31, 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.

In 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.

The amount also included $11,991 of other

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

For the six months ended June 30, 2025, other income

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

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.

Liquidity, Going Concern, and Capital Resources

As of June 30, 2025,

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

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

$0.5 million in the value of our cash due to changes in foreign exchange rates, offset by cash provided by investing activities of $1.3

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, we held available-for-sale marketable securities with a fair value of $0.7 million, a decrease of $1.3 million as compared to

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

The available-for-sale

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

As of September 30, 2025,

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

The decrease 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.

The cash 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,

we 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.

Working Capital

As of June 30, 2025,

we 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 our total current liabilities were $30.4 million.

We had negative working capital of $4.9 million as of June 30,

2025 as compared to working capital of $1.2 million as of December 31, 2024.

of $6.1 million was du e to a decrease of $9.2

million in current assets and a decrease of $3.1 million in current liabilities compared to the prior period.

A decrease in current assets

is primarily driven by a decrease of $5.8 million in cash, a decrease of $4.9 million in accounts receivable and a decrease of $1.3 million

in marketable securities investments, offset by an increase of $2.0 million in production tax credit receivable position, an increase

$0.7 million in prepaid balance and an increase of $0.1 million in other receivables.

The decrease in current liabilities is primarily

driven by a decrease of $5.2 million in accounts payable, a decrease of $0.8 million in margin loan balance, a decrease of $0.3 million

in accrued participation cost balance and a decrease of $0.3 million in other current liabilities, offset by an increase by $1.4 million

in production facilities, an increase of $0.9 million in accrued expenses, an increase of $0.7 million in accrued salaries, and an increase

of $0.5 million in deferred revenue balance.

During the six months ended

June 30, 2025, we met our immediate cash requirements through existing cash balances.

As of September 30, 2025,

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

liabilities were $32.5 million.

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

of $1.2 million as of December 31, 2024.

The decrease of

$6.6 million was du e to a decrease of $7.5 million in current assets and a decrease

of $0.9 million in current liabilities compared to the balances as of December 31, 2024.

A decrease in current assets is primarily

driven by a decrease of $7.0 million in cash, a decrease of $3.3 million in accounts receivable, and a decrease of $2.0 million in marketable

securities investments, offset by an increase of $4.2 million in production tax credit receivable position and an increase $0.6 million

in prepaid balance.

The decrease in current liabilities is primarily driven by a decrease of $3.7 million in accounts payable, a decrease

of $0.9 million in margin loan balance, a decrease of $0.5 million in accrued participation cost balance, a decrease of $0.5 million in

deferred revenue balance, and a decrease of $0.3 million in other current liabilities, offset by an increase by $3.3 million in production

facilities, an increase of $1.1 million in accrued expenses, and an increase of $0.6 million in accrued salaries.

During the nine months ended

September 30, 2025, we met our immediate cash requirements through existing cash balances.

Additionally, we used equity and equity-linked

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Based on our current expected

level of operating expenditures and the cash and cash equivalents on hand at June 30, 2025, management concludes that there is substantial

doubt about our ability to continue as a going concern for a period of at least twelve months subsequent to the issuance of the accompanying

condensed consolidated financial statements.

Historically, we have financed our operations primarily through revenue generated from operations,

loans and sales of our securities, and we expect to continue to seek and obtain additional capital in a similar manner.

In order to address

our capital needs, we intend 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.

We do not have any committed sources

of financing at this time, and it is uncertain whether any additional funding will be available when we need it on terms that will be

acceptable to us, or at all.

Our ability to sell securities registered on our registration statement on Form S-3 is limited until such

time that the market value of our voting securities held by non-affiliates is $75 million or more.

In addition, the number of shares of

Common Stock and securities convertible or exercisable for Common Stock that we can sell, under certain circumstances, will be limited

by NYSE American rules and regulations.

If we are able to raise funds by selling additional shares of Common Stock or other securities

convertible into Common Stock, the ownership interest of our existing shareholders will be diluted.

The issuance of debt can result in

restrictive covenants that limit operations.

There can be no assurance that we will be able to complete any such financing, collaborative

or strategic transaction in a timely manner or on acceptable terms.

As a result, we may have to significantly limit our operations and

its business, financial condition and results of operations would be materially harmed.

In parallel, management also

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

For example, subsequent to the period ending June 30,

2025, in order to improve liquidity, we sold certain assets, including CARES Act Employee Retention Tax Credit receivables and 1,500,000

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 our ability to meet our obligations as they become due within one

year after the date the accompanying condensed consolidated financial statements are issued.

Comparison of Cash Flows for the Six Months Ended June 30,

2025 and June 30, 2024

Our total cash as of June 30,

2025 and June 30, 2024 was $2.1 million and $7.9 million, respectively.

Six Months Ended June 30,

level of operating expenditures and the cash and cash equivalents on hand at September 30, 2025, management concludes that there

is substantial doubt about our ability to continue as a going concern for a period of at least twelve months subsequent to the issuance

of the accompanying condensed consolidated financial statements.

Historically, we have financed our operations primarily through revenue

generated from operations, loans and sales of our securities, and we expect to continue to seek and obtain additional capital in a similar

Subsequent to September 30, 2025, we were successful in raising net proceeds of $6.6 million in connection with the October Offerings,

which closedon October 22, 2025, strengthening our cash position.

In order to address our capital needs, we intend 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.

We do not have any committed sources of financing at this time, and it is uncertain whether

any additional funding will be available when we need it on terms that will be acceptable to us, or at all.

Our ability to sell securities

registered on our registration statement on Form S-3 is limited until such time that the market value of our voting securities held by

non-affiliates is $75 million or more.

In addition, the number of shares of Common Stock and securities convertible or exercisable for

Common Stock that we can sell, under certain circumstances, will be limited by NYSE American rules and regulations.

If we are able to

raise funds by selling additional shares of Common Stock or other securities convertible into Common Stock, the ownership interest of

our existing shareholders will be diluted.

The issuance of debt can result in restrictive covenants that limit operations.

no assurance that we will be able to complete any such financing, collaborative or strategic transaction in a timely manner or on acceptable

As a result, we may have to significantly limit our operations and its business, financial condition and results of operations

would be materially harmed.

Comparison of Cash Flows for the Nine Months Ended September 30,

2025 and September 30, 2024

Our total cash as of September 30,

2025 and September 30, 2024 was $0.9 million and $7.9 million, respectively.

Nine Months Ended September 30,

(in thousands)

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Net Cash Provided by Investing Activities

Net Cash Used in Financing Activities

Net Cash Provided by (Used in) in Financing Activities

Effect of Exchange Rate Changes on Cash

Decrease in Cash and Restricted Cash

Increase (Decrease) in Cash and Restricted Cash

Net Non-cash Expenses

Items necessary to reconcile

from net loss to cash used in operating activities included net non-cash expenses of $9.5 million for the six months ended June 30,

2025 as compared to net non-cash expenses of $4.8 million for the six months ended June 30, 2024.

The majority of the increase of

$4.7 million was primarily due to loss of $6.5 million on the revaluation of our equity investment in YFE securities and a loss of $1.3

million relating to Related Party Notes Receivable settlement agreement, and a net loss of $0.3 million related to revaluation of the

The increase is offset by an increase of $2.4 million of FX impact on the value of the equity investment in YFE, a decrease

of $0.4 million in amortization of Right-of-Use assets, a decrease of $0.3 million in stock-based compensation expense and a decrease

net loss to cash used in operating activities included net non-cash expenses of $13.6 million for the nine months ended September 30,

2025 as compared to net non-cash expenses of $5.9 million for the nine months ended September 30, 2024.

The majority of the increase

of $7.7 million was primarily due to an increase of $7.3 million on the loss of our equity investment in YFE securities revaluation, a

loss of $1.5 million related to partial disposal of YFE shares, and a loss of $1.2 million related to accounts payable and note receivable

debt settlement transactions.

The increase is offset by an increase of $1.5 million of FX gain on the value of the equity investment in

YFE, a decrease of $0.6 million in amortization of Right-of-Use assets primarily due to concluded equipment lease agreements, a decrease

of $0.5 million in realized loss on marketable securities due to the lower sales of our marketable securities prior to their maturity

date, and a decrease of $0.4 million in stock-based compensation expense due to completed vesting.

Change in Operating Activities

The decrease in net change

in operating asset and liability activities used by operating activities of $2.9 million as of June 30, 2025, compared to the net

change in operating asset and liability activities provided by operating activities of $5.5 million as of June 30, 2024, was due

to a decrease of $8.8 million in operating assets activity and a increase of $0.4 million in operating liabilities activity.

of in operating assets activity was primarily due to a decrease of $6.9 million in net receipts tax credits during the current year related

to completed projects and an increase of $1.5 million in net Film and Television Cost expenditures, a decrease of $0.3 million in accounts

receivable net receipts and a decrease of $0.2 million in prepaid expenses, offset by a increase of $0.1 million in outstanding balance

of other receivable.

An increase in operating liability activity was primarily due to a decrease in accounts payable of $1.4 million due

to certain legal expenditures being subject to extended payment terms related to potential insurance recovery, an decrease of $0.6 million

in accrued salaries and wages, a decrease of $0.5 million in accrued expenses, offset by a increase of $1.5 million in deferred revenue,

representing more cash received in advance for projects not yet recognized, and an increase of $0.6 million in accrued production costs.

in operating asset and liability activities used by operating activities of $6.0 million as of September 30, 2025, compared to the

net change in operating asset and liability activities provided by operating activities of $8.1 million as of September 30, 2024,

was primarily due to an increase of $14.0 million in operating assets activity.

An increase of in operating assets activity was primarily

due to an decrease of $10.4 million in net receipts tax credits during the current year related to completed projects, a decrease of $2.8

million in accounts receivable net receipts, an increase of $1.9 million in net film and television cost expenditures, an increase of

$0.4 million in prepaid expenses, offset by a net decrease of $1.4 million in other receivables representing expected ERTC claims recorded

in prior period but not yet collected.

Net changes in operating liabilities activity had an immaterial effect on the operating cashflow

as of September 30, 2025, however the management notes that certain material fluctuations occurred within specific accounts that

offset each other.

These changes include a net decrease of $2.5 million in deferred revenue representing revenue recognition for the advances

already received, a decrease of $0.4 million in accrued production costs and higher lease liability payments by $0.2 million, offset by

a decrease of $1.8 million accounts payable disbursements, an increase of $0.7 million in accrued salaries and wages and an increase of

$0.7 million in accrued expenses.

Change in Investing Activities

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by investing activities of $5.5 million was primarily due to a decrease in proceeds from the sales and maturities of marketable securities

of $2.4 million during the six months ended June 30, 2025 reflecting fewer sales during the current period.

In addition, we made

a purchase of additional securities of $1.8 million during the six months ended June 30, 2025.

of $4.2 million during the nine months ended September 30, 2025 reflecting fewer sales during the current period.

In addition, we

made a purchase of additional securities of $1.8 million and received proceeds of $0.4 million related to note receivable settlement during

the nine months ended September 30, 2025.

Change in Financing Activities

The decrease in cash used

in financing activities of $4.5 million was primarily due to a decrease in repayments of our production facilities of $5.2 million, an

increase of $0.9 million in proceeds drawn from the production facilities, a decrease of bank indebtedness repayment of $2.6 million and

a decrease in lease payments of $0.2 million, offset by a decrease in proceeds from financing of $3.3 million, and a decrease in borrowings

from our margin loan of $1.1 million during the six months ended June 30, 2025 as compared to the six months ended June 30,

The increase in cash provided

by financing activities of $9.3 million was primarily due to a decrease in repayments of our production facilities and margin loan of

$10.1 million, a decrease of bank indebtedness repayment of $2.3 million, a receipt of $0.8 million in proceeds from Sale of Equity Investment

in Your Family Entertainment AG, a decrease in lease payments of $0.7 million, and a receipt of $0.5 million proceeds from ERTC sale transaction,

offset by a decrease in proceeds from financing of $3.3 million, and a decrease in borrowings from our margin loan and production facilities

of $1.8 million, net, during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024.

Material Cash Requirements

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The aggregate amount of future minimum purchase obligations under these agreements over the period of next five years is approximately

$27.1 million as of June 30, 2025, of which $16.2 million could be owed within one year.

Included in the amount that could be due

within one year is the margin loan current balance of $0.1 million and production facilities of $10.7 million.

$32.8 million as of September 30, 2025, of which $16.4 million could be owed within one year.

Included in the amount that could be

due within one year is the production facilities balance of $12.7 million.

We plan to utilize our liquidity

(as described above) to fund our material cash requirements.

As of June 30, 2025,

As of September 30, 2025,

we had $0.4 million in commitments for capital expenditures, related to equipment leases.

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arrangements.

Quantitative and Qualitative Disclosures about Market

Quantitative and Qualitative Disclosures

about Market Risk

As a “smaller reporting

1 unchanged sentence

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 2. Management’s Discussion and Analysis