What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-15 compared with 2025-11-14 · 345 added, 376 removed, 84 unchanged (90% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion

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 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

and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide readers of our condensed

This management’s

Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide readers of our

consolidated financial statements with the perspectives of management.

This should allow the readers of this report to obtain a comprehensive

understanding of our businesses, strategies, current trends, and future prospects.

It should be noted that the MD&A contains forward-looking

This should allow the readers of this report to obtain an understanding

of our businesses, strategies, current trends, and future prospects.

It should be noted that the following MD&A contains forward-looking

statements that involve risks and uncertainties.

The following discussion 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 months

ended March 31, 2026 and 2025.

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.

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, 2025, which was filed with the SEC on March 31, 2026 (“The 2025 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 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.

We are a global content and

brand management company focused on the creation, production, licensing, and distribution of multimedia animated content for children.

Our main sources of revenue are derived from animation

production services provided to third parties, the sale of licenses for the distribution of films and television programs, advertising

revenues, and merchandising and licensing sales.

Production Services

Our production services business

is centered on delivering original and third-party commissioned animated content with a focus on production efficiency and scalability.

Mainframe Studios, our primary production entity, is undertaking operational enhancements through the adoption of flexible production

workflows, strategic outsourcing, and the integration of new technologies.

These initiatives aim to optimize cost structures and streamline

the production pipeline.

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.

Animation Production Services:

Our production services business is centered on delivering original and third-party commissioned animated content with a focus on

production efficiency and scalability.

Mainframe Studios, our primary production entity, is undertaking operational enhancements through

the adoption of flexible production workflows, strategic outsourcing, and the integration of new technologies.

These initiatives aim to

optimize cost structures and streamline the production pipeline.

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.

Mainframe Studios is currently engaged

in the production of numerous owned IP and for-hire projects spanning a range of formats and target audiences, including Phoebe &

Jay, It's Andrew, Unicorn Academy, and SuperKitties .

This content is being produced for leading platforms and broadcasters

such as Disney Junior, PBS Kids, Netflix, Canadian Broadcasting Corporation, and the Australian Broadcasting Corporation, among others.

These projects are at various stages of production and delivery, with certain titles completed during the prior year and others expected

to be delivered through 2026.

During 2025, we entered into active development and production on Hundred

Acre Wood’s Winnie and Friends, an animated franchise series inspired by Winnie-the-Pooh by A.A.

Structured as

a serialized short-form series, the production is engineered for broad multi-platform distribution across AVOD, FAST, SVOD, in-store,

and international platforms.

Developed as a cornerstone franchise for Kartoon Studios, the series features an original yarn-based animation

style combining digital tools with handcrafted textures to create a warm, storybook aesthetic enhanced by music and dance.

The franchise

includes a multi-phase rollout, consisting of major holiday specials, including Christmas, Halloween, Thanksgiving, and Easter, and is

supported by an integrated global consumer products program spanning toys, apparel, home goods, publishing, collectibles, and retail partnerships.

The series is scheduled to premiere with preliminary activities in Q4 2026, with a full launch across main distribution channels anticipated

Content Distribution

Our content distribution strategy

is focused on scaling audience reach and monetization across our proprietary networks, including Kartoon Channel!, Frederator, Ameba,

and Kartoon Channel!

We hope to grow our revenue through expanded licensing activity and increased utilization of existing

IP assets such as Stan Lee brands, Shaq’s Garage , Rainbow Rangers , and many more.

To support margin expansion, we

are actively implementing AI-driven tools designed to reduce operating costs in areas such as language dubbing, video resolution enhancement,

and 2D-to-3D conversion.

Film and Television Licensing:

We recognize revenue by licensing rights to exploit functional IP (IP that has significant standalone functionality, such as the ability

to be played or aired).

Our content distribution strategy is focused on scaling audience reach and monetization across a network of branded

destinations, including Kartoon Channel!

, Kartoon Channel!

Worldwide , Frederator, and Ameba.

We plan to grow revenue through

expanded licensing activity and increased utilization of owned IP assets such as Rainbow Rangers , Stan Lee brands, Shaq’s

Garage , and many more.

To support margin expansion, we are actively implementing AI-driven tools designed to reduce operating costs

in areas such as localization and video resolution enhancement.

Advertising Revenue:

receive advertising revenue through our wholly-owned VOD services, Kartoon Channel!

and Ameba, and Frederator’s owned and

operated YouTube channels as well as revenues generated from the operation of Federator’s creator network, Channel Frederator

Additionally, advertising revenue is derived from Kartoon Channel!

branded channels on Free Ad Supported Streaming

Licensing and Royalties

We believe the licensing and

royalties business presents the most significant long-term growth opportunity.

Merchandising and Licensing :

The Company enters into merchandising and licensing agreements that allow licensees to produce merchandise utilizing certain of the Company’s

symbolic IP (IP that is not functional as it does not have significant standalone use and substantially all of the utility of symbolic

IP is derived from its association with the entity’s past or ongoing activities, such as a brand or logo).

We believe the licensing

and royalties business presents the most significant long-term growth opportunity.

Strategic emphasis is being placed on the commercialization

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

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

Winnie & Friends property, with a

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We intend to expand the use of our broader

IP catalog in licensing programs beginning throughout 2026 and beyond.

IP catalog in licensing programs in 2026 and beyond.

Media Advisory and Advertising Services

Our media advisory and advertising

segment is focused on developing recurring revenue through a mix of retainer and project-based engagements.

The group continues to build

upon its established presence in the toy industry while expanding into adjacent sectors, including family entertainment and travel.

the past two years, the team has broadened its client engagement capabilities by integrating influencer-driven marketing strategies and

custom campaign development.

Beacon, our specialized media

and marketing agency, provides media advisory and advertising consulting services to clients.

Revenue is recognized when the services

are performed or are paid through a monthly retainer.

Our media advisory and advertising operations are structured to generate recurring

and diversified revenue through a combination of retainer-based engagements and commission-driven media planning and buying.

revenue model affords client flexibility and supports margin optimization through efficient resource utilization.

Beacon has continued

to invest in higher-value service offerings, including influencer-driven marketing programs, data-informed media planning, and customized

campaign development.

These capabilities have increased the scope and duration of client engagements and strengthened customer retention.

As these services scale, we expect to benefit from operating leverage, as incremental revenue can be generated with comparatively limited

increases in fixed costs.

The group continues to build upon its established presence in the toy industry while expanding into adjacent

sectors, including family entertainment and travel.

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.

Section 3(a)(10) Accounts Payable Settlement

On August 27, 2025, we entered

into an agreement to engage in a transaction under Section 3(a)(10) of the Securities Act of 1933, as amended (the “Securities Act”)

with Continuation Capital, Inc.

(“CCI”), 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, CCI makes payments to our vendors in cash and, in exchange, we issue shares

of common stock to CCI.

The settlement was valued at 1.75 shares of common stock per $1 of accounts payable, 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.

The transaction

was carried out in stages and completed in the year ended December 31, 2025.

On November 18, 2025, we entered

into a new agreement to settle an additional $1.0 million of accounts payable under Section 3(a)(10) of the Securities Act with CCI, in

exchange for issuing 1,695,072 shares of common stock.

The terms were consistent with the original arrangement.

As of March 31, 2026

we had completed the arrangement, settling a total of $1.0 million of accounts payable and issuing an aggregate of 1,695,072 shares of

common stock.

During the three months ended March 31, 2026, we settled an aggregate of $0.6 million of accounts payable, issued 977,360

shares of common stock to CCI, and recognized a loss of $0.1 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 condensed consolidated

statements of operations.

On April 8, 2026, we entered

into a new agreement to settle an additional $1.1 million of accounts payable under Section 3(a)(10) of the Securities Act with CCI, in

exchange for issuing 2,001,797 shares of common stock, and to settle additional obligations up to $0.3 million in exchange for issuing

551,250 shares of common stock.

The terms were consistent with the original arrangement.

Results of Operations

Our summary results for the

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

Three Months Ended September 30,

three months ended March 31, 2026 and 2025 are below:

Three Months Ended March 31,

(in thousands, except percentages)

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Total Revenue

Production Services revenue

was generated specifically by Mainframe Studios providing animation production services.

Revenue for production services is recognized

over time on a percentage of completion basis, therefore, as the projects are still in progress, we recognize revenue based upon the proportion

of costs incurred cumulatively to total expected costs.

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

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 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

revenue from YouTube driven by overall less viewership as compared to the prior year period.

Revenue related to Licensing

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 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)

Marketing and Sales

Direct Operating Costs

General and Administrative

Total Expenses

The decrease in Marketing

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 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 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

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

assets for impairment.

As a result, we concluded that impairment charges to those assets were not required.

Furthermore, we concluded

that no indicators of impairment or triggering events were identified during the period.

Our summary results for the

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

Nine Months Ended September 30,

(in thousands, except percentages)

Production Services

Production services revenue was generated specifically by Mainframe

Studios providing animation production services.

Revenue for production services is recognized over time on a percentage of completion

basis, therefore, as the projects are still in progress, we recognize revenue based upon the proportion of costs incurred cumulatively

to total expected costs.

Consequently, less revenue is recognized during the periods in which the projects are near completion or completed.

The production services revenue for the three months ended March 31, 2026 was 38% lower than the production services revenue recognized

during the three months ended March 31, 2025.

The decrease was primarily due to the timing of production deliveries at Mainframe Studios,

with several projects shifting from the first quarter into later periods in 2026, reducing the proportion of costs incurred relative to

total estimated project costs.

In contrast, the comparable prior year period benefited from multiple projects simultaneously entering

advance production phases, resulting in a higher concentration of production activity and correspondingly higher revenue recognized under

the percentage of completion method.

Content Distribution

Revenue related to content

distribution on advertising-supported video on demand (“AVOD”) and subscription video on demand (“SVOD”), including

advertising sales for the three months ended March 31, 2026, increased by 15% as compared to the three months ended March 31,

The increase was primarily driven by revenue recognized from the delivery of episodes of Wow’s It’s Andrew!

Project of $0.2 million, distribution revenue from other Wow IP of $0.6 million and an increase in sales activity of Ameba and Kartoon

Channel divisions by $0.1 million.

The increase was partially offset by a decline in content revenue from Frederator’s creator network

on YouTube of $0.6 million for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.

decrease in Frederator’s creator network revenue from YouTube was due to overall less viewership as compared to the prior year period.

Licensing and Royalties

Revenue related to our licensing

and royalties for the three months ended March 31, 2026 decreased by 13% as compared to the three months ended March 31, 2025,

primarily attributable to timing differences in revenue recognition from our existing license deals.

Media Advisory and Advertising Services

Total Revenue

Production Services revenue

was generated specifically by Mainframe Studios providing animation production services.

Revenue for production services is recognized

over time on a percentage of completion basis, therefore, as the projects are still in progress, we recognize revenue based upon the proportion

of costs incurred cumulatively to total expected costs.

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

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 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 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 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.

advisory and advertising services for the three months ended March 31, 2026 decreased by 8% as compared to the three months ended

March 31, 2025, primarily due to lower net renewal activity and media purchases from clients, which were impacted by continued U.S.

tariffs legislative uncertainty.

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands, except percentages)

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Total Expenses

The decrease in Marketing

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.

Marketing and Sales

Marketing and sales expenses

for the three months ended March 31, 2026 increased by approximately 3% as compared to the three months ended March 31, 2025.

The increase is considered immaterial, and overall marketing and sales spending remained largely consistent period-over-period, reflecting

no significant changes in the Company's corporate awareness initiatives or advertising activities.

Direct Operating Costs

Direct operating costs during

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 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.

the three months ended March 31, 2026 consisted primarily of salaries and related expenses for the animation production services

employees of Wow.

Creator network channel expenses, licensing and production of content costs, such as participation expenses related

to profit sharing obligations with various animation studios, post-production studios, writers, directors, musicians or other creative

talent that had rendered services and amortization, including any write-downs of film and television costs, make up the remainder of direct

operating costs.

The 29% decrease was primarily due to lower salary costs by $2.5 million driven by a lower headcount included in Production

Services related to the delivered projects, that were in the advanced production stages in the prior year quarter compared to the current

The decrease in direct operating costs was partially offset by an increase of $0.3 million in film amortization expense and an

increase of $0.2 million in participation expenses arising from new contractual agreements entered into during the period as well as existing

agreements, consistent with the corresponding increase in owned-IP revenue.

General and Administrative

The $0.6 million decrease

in general and administrative expenses for the three months ended March 31, 2026, as compared to the three months ended March 31,

2025, was driven by a decrease of $0.5 million in salaries and wages and a decrease of $0.3 million in professional fees, reflecting reduced

use of external consulting services.

The decrease was partially offset by an increase of $0.1 million in share-based compensation expense

due to new awards granted in recent periods and an increase of $0.1 million in other administrative costs, mainly IT infrastructure and

other equipment costs.

Impairment Charge

During the three months ended

March 31, 2026 and March 31, 2025, we reassessed our nonfinancial assets, including our definite-lived intangible assets, our

indefinite-lived intangible assets for impairment.

As a result, we concluded that impairment charges to those assets were not required.

Furthermore, we concluded

that no indicators of impairment or triggering events were identified during the period.

Other Expense, net

Furthermore, we concluded that no indicators of impairment or triggering events were identified during the periods.

Components of Other Income (Expense), net, are

summarized as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Interest Expense (a)

Gain (Loss) on Revaluation of Warrants (b)

Gain on Revaluation of Warrants (b)

Loss on Revaluation of Equity Investment in YFE (c)

Realized Loss on Marketable Securities Investments (d)

Gain (Loss) on Foreign Exchange (e)

Realized Gain on Marketable Securities Investments (d)

(Loss) Gain on Foreign Exchange (e)

Loss on Debt Settlement (f)

1 unchanged sentence

Finance Lease Interest Expense (h)

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 $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.

Other Expense, net

Three Months Ended March 31, 2026 and March 31, 2025

Interest Expense during the three months ended March 31, 2026, primarily consisted of $0.2 million interest incurred on production facilities and on the factoring liability.

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

During the three months ended March 31, 2025, the Company recorded a $0.4 million fair value gain due to a revaluation of the outstanding 7,894,736 Series A warrants and 7,894,736 Series B warrants issued in December 2024.

These warrants were classified as a liability in the quarter ended March 31, 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 $3.0 million and $3.6 million for the three months ended March 31, 2026 and March 31, 2025, 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 gain on marketable securities investments recorded during the three months ended March 31, 2025, reflects the gain on the sale of marketable securities prior to maturity date.

The loss on Foreign Exchange during the three months ended March 31, 2026, primarily related to the revaluation of the YFE investment, resulting in a loss of $0.1 million due to the Euro depreciating against the U.S.

dollar as compared to prior period and a loss of $0.2 million due to the remeasurement of foreign currency transactions of the Company’s non-U.S.

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

dollar against the Euro relative to prior periods.

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.

The loss on debt settlement recorded during the three months ended March 31, 2026, includes a loss of $0.1 million arising from the Section 3(a)(10) transaction completed during the quarter.

The loss on debt settlement recorded during the three months ended March 31, 2025, includes a loss of $0.9 million related to the loan settlement agreement with YFE.

Interest Income during the three months ended March 31, 2026, primarily consisted of income from investments in marketable securities, net of premium amortization expense.

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

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 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 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 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.

During the three months ended March 31, 2026, other income of $28,000 was recognized from the recovery of previously written-off accounts receivable, and $24,810 from credit card and other rebates.

During the three months ended March 31, 2025, other income of $32,522 was recognized primarily related to credit card rewards.

Liquidity, Going Concern, and Capital Resources

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.

As of March 31, 2026,

we had cash of $5.0 million, which increased by $2.1 million as compared to December 31, 2025.

The increase was primarily due to

cash provided by investing activities of $2.9 million, cash provided by financing activities of $1.8 million, and the effect of exchange

rate of $0.2 million, offset by cash used in operating activities of $2.9 million.

The cash provided by investing activities of $2.9 million

was primarily due to proceeds from the sale and maturities of marketable securities.

The cash provided by financing activities of $1.8

million, was primarily due to the drawdowns, net of repayments and debt issuance costs, from production facilities.

The cash used in operating

activities of $2.9 million was primarily due to net loss of $6.4 million, and net change in operating asset and liabilities of $2.3 million,

partially offset by net change in non-cash adjustments of $5.9 million.

As of March 31, 2026,

we held available-for-sale marketable securities with a fair value of $1.0 million.

A decrease of

$3.0 million as compared to December 31, 2025, was due to a sale of securities

during the three months ended March 31, 2026.

The available-for-sale securities consist principally of government debt securities

and are also available as a source of liquidity.

Working Capital

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.

As of March 31, 2026,

we had total current assets of $30.7 million, including cash of $5.0 million, and marketable securities of $1.0 million, and our total

current liabilities were $31.4 million.

We had negative working capital of $0.7 million as of March 31, 2026 as compared to working

capital of $2.3 million as of December 31, 2025.

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

instruments to pay for services and compensation.

$3.0 million was du e to a decrease of $5.0 million in current assets, offset by a

decrease of $2.0 million in current liabilities compared to the balances as of December 31, 2025.

The decrease in current assets

is primarily driven by a decrease of $6.3 million in accounts receivable related to the timing of contractual billing milestones in production

projects, a decrease of $3.0 million in marketable securities investments due to the sale of a portion of the marketable securities, offset

by an increase of $2.1 million in cash primarily due to proceeds from the sale of a portion of the marketable securities, an increase

of $1.7 million in production tax credit receivable due to recognized credits for the ongoing projects ,

an increase of $0.3 million in prepaid expenses, and an increase of $0.2 million in other receivable due to collection of insurance proceeds

related to previously filed claims.

The decrease in current liabilities is primarily driven by a decrease of $5.0 million in accounts

payable driven by the settlements under Section 3(a)(10) of the Securities Act, a decrease of $0.8 million in deferred revenue balance

related to revenue recognized under the percentage-of-completion method on production projects, offset by an increase of $1.8 million

in accrued expenses related mainly to billing timing and insurance policy renewals, and an increase of $1.8 million in production facilities

due to advance stages of production projects.

During the three months ended March 31, 2026, we met our immediate cash requirements

through existing cash balances.

Additionally, we used equity and equity-linked instruments to pay for services and compensation.

Going Concern

Based on our current expected

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,

level of operating expenditures and the cash and cash equivalents on hand at March 31, 2026, management concluded 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 going forward.

We continue to navigate macroeconomic challenges in the animation and advertising industries, including ongoing government tariffs and

intensified competition.

In the prior periods, we have demonstrated resilience in our financing activities, having successfully raised

net proceeds through public offerings.

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

For example, during the three months ended March 31, 2026, in order to improve liquidity, we settled $0.6 million of outstanding

accounts payable in a transaction under Section 3(a)(10) of the Securities Act.

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,

Our ability to sell securities registered under 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 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

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

of Cash Flows for the Three Months Ended March 31, 2026 and March 31, 2025

Our total cash as of March 31,

2026 and March 31, 2025 was $5.0 million and $2.8 million, respectively.

Three Months Ended March 31,

(in thousands)

Net Cash Used in Operating Activities

Net Cash Provided by Investing Activities

Net Cash Provided by (Used in) in Financing Activities

Net Cash Provided by (Used in) Investing Activities

Net Cash Provided by (Used in) Financing Activities

Effect of Exchange Rate Changes on Cash

Increase (Decrease) in Cash and Restricted Cash

Net Non-cash Expenses

Items necessary to reconcile

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 $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.

Items necessary to reconcile

net loss to cash used in operating activities included net non-cash expenses of $5.9 million for the three months ended March 31,

2026 as compared to net non-cash expenses of $4.6 million for the three months ended March 31, 2025.

The increase of $1.3 million

in non-cash expenses compared to prior year was primarily due to an increase of $0.6 million non-cash adjustment due to stock issued for

services, the absence of $0.4 million gain on warrant revaluation recorded in prior year, an increase of $0.3 million in Film and Television

amortization related to the projects delivered in prior year, an increase of $0.1 million in stock-based compensation expense due to new

awards granted, and a loss of $0.8 million related to accounts payable debt settlement transactions.

Additionally, we recorded a noncash

reduction of $0.6 million in accounts payable due to corresponding stock issuances to CCI.

These movements were offset by a $0.8 million

net decrease in loss on debt settlement, reflecting a $1.0 million loss on the related party loan settlement in the prior year compared

to a $0.2 million loss on accounts payable settlement transactions in the current year.

Change in cash used in operating

activities also includes fluctuations in working capital, including movements in operating assets and liabilities.

Working capital adjustments

reflect timing differences between the recognition of revenues and expenses and the related cash receipts or payments.

Operating asset

and liability activities resulted in a decrease of $2.3 million in cash during the three month ended March 31, 2026, and an increase

of $0.2 million in cash during the three month ended March 31, 2025.

The changes resulted in a net decrease in operating asset and

liability cash flows of $2.5 million compared to prior year.

This was primarily due to a decrease in net cash flows generated by the operating

assets activity by $3.1 million, partially offset by a decrease in cash flows used by the operating liabilities by $0.6 million.

in cash flows from operating activities by $3.1 million was primarily driven by a lower reduction in operating assets during the year,

which generated less cash than in the comparative period.

This was due to lower net receipts of tax credits during the current period

by $4.1 million and higher capitalized costs related to ongoing productions by $1.2 million, and an unfavorable impact of $0.1 million

attributable to other receivables, offset by cash flows generated by net receipts of outstanding accounts receivable by $1.9 million and

less cash spent on prepaid services by $0.4 million.

The decrease in cash flows used by the operating liabilities by $0.6 million was

primarily due to generally less accounts payable settled in cash by $1.0 million, an increase of $0.5 million in accrued expenses representing

additional costs recognized during the period that were outstanding as of March 31, 2026, offset by an unfavorable impact of deferred

revenue movement of $0.8 million representing revenue recognized related to cash received in advance in prior periods, and a decrease

of $0.1 million related to timing of Mainframe production costs accruals.

Change in Investing Activities

The decrease in cash provided

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

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.

The increase in cash provided

by investing activities of $4.1 million was primarily due to an increase in proceeds from the sales and maturities of marketable securities

of $2.3 million during the three months ended March 31, 2026.

In addition, during the three months ended March 31, 2025, we

invested a portion of the financing proceeds from the prior year offering in the marketable securities totaling to $1.8 million.

Change in Financing Activities

1 unchanged sentence

by financing activities of $4.3 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.

$5.0 million, and a decrease in borrowings from our margin loan and production facilities of $0.7 million during the three months ended

March 31, 2026 as compared to the three months ended March 31, 2025.

Material Cash Requirements

4 unchanged sentences

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

$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.

$30.1 million as of March 31, 2026, of which $20.1 million could be owed within one year.

Included in the amount that could be due

within one year is the production facilities balance of $13.7 million.

We plan to utilize our liquidity

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

As of September 30, 2025,

As of March 31, 2026,

we had $0.3 million in commitments for capital expenditures, related to equipment leases.

14 unchanged sentences

arrangements.

Quantitative and Qualitative Disclosures

about Market Risk

Quantitative and Qualitative Disclosures about

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