What changed in this filing

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Item 1. Legal Proceedings

2026-05-15 compared with 2025-11-14 · 132 added, 51 removed, 132 unchanged (58% of the section changed)

Legal Proceedings

As of September 30, 2025,

As of March 31, 2026,

there were no material pending legal proceedings to which the Company is a party or as to which any of its property is subject other than

25 unchanged sentences

Plaintiffs elected not to further amend their complaint,

Defendants’ response to the Third Amended Complaint will be due November 28, 2025.

leaving only one alleged misstatement at issue in the case.

This one alleged misstatement, which appeared in a press release issued March

17, 2020, and repeated in a shareholder letter issued March 20, 2020, stated that the Nickelodeon cable platform Nick, Jr., had increased

its airing of the Company’s cartoon series Rainbow Rangers to 26 times a week.

Plaintiffs claim this was false, and that the misstatement

was issued with an intent to deceive investors.

Defendants have denied and continue to deny any wrongdoing.

Given that only a small portion

of the Third Amended Complaint remains, and with no case schedule in place, Defendants filed a request with the Court to set a status

conference pursuant to Federal Rule of Civil Procedure 16 to limit the scope of discovery, to phase discovery, and to modify the normal

rule requiring an allegation-by-allegation response to the Third Amended Complaint.

The Court granted the request and held the conference

on January 12, 2026.

The Court issued an order referring the case to Magistrate Judge Oliver to resolve questions about the scope of discovery

and concerning proposals by Defendants to streamline the Defendants’ formal Answer to the Third Amended Complaint, in both cases

to focus on the small portion of the Third Amended Complaint remaining.

Since that time, the parties have served discovery demands and

responses, and Judge Oliver has resolved a number of discovery disputes in a manner that has limited the scope of discovery being sought

by Plaintiffs.

Additionally, Plaintiffs designated a few dozen paragraphs of their Third Amended Complaint that they felt should be formally

answered by Defendants, and Defendants have filed their Answer.

Discovery is ongoing, with the parties scheduled to file a further report

with Magistrate Oliver on May 11, 2026, to address the status of discovery and any further disputes that have arisen or may arise.

Court has not issued a scheduling order.

The Company cannot predict the outcome of the securities class action.

Meanwhile, as previously reported,

12 unchanged sentences

putative class action lawsuit filed in the U.S.

District Court for the Central District of California and styled In re Genius Brands International,

District Court for the Central District of California and styled In re Genius Brands

International, Inc.

Securities Litigation, Master File No.

2:20-cv-07457 DSF (RAOx) .

Lead plaintiffs alleged generally that the defendants violated Sections

10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) by issuing allegedly false or misleading statements

about the Company, initially over an alleged class period running from March into early July 2020.

Plaintiffs sought unspecified damages

on behalf of the alleged class of persons who invested in the Company’s common stock during the alleged class period.

moved to dismiss lead plaintiffs’ amended complaint, and in a decision issued on August 30, 2021, the Court dismissed the amended

complaint but granted lead plaintiffs a further opportunity to plead a claim.

Lead plaintiffs alleged generally that the defendants

violated Sections 10(b) and 20(a) of the Exchange Act of 1934 by issuing allegedly false or misleading statements about the Company, initially

over an alleged class period running from March into early July 2020.

Plaintiffs sought unspecified damages on behalf of the alleged class

of persons who invested in the Company’s common stock during the alleged class period.

Defendants moved to dismiss lead plaintiffs’

amended complaint, and in a decision issued on August 30, 2021, the Court dismissed the amended complaint but granted lead plaintiffs

a further opportunity to plead a claim.

In September 2021, lead plaintiffs

42 unchanged sentences

District Court for the Central

District of California and styled In re Genius Brands Stockholder Derivative Litigation , Case No.

District of California and styled In re Genius Brands Stockholder Derivative Litigation , C ase No.

2:20-cv-08277 DSF (RAOx);

action filed in the Los Angeles County Superior Court captioned Ly, etc.

an action filed in the Los Angeles County Superior Court captioned Ly, etc.

Heyward, et al.

and an additional

case pending in the U.S.

an additional case pending in the U.S.

District Court for the District of Nevada, styled Miceli, etc.

Heyward, et al.

Heyward, et al., Case No.

3:21-cv-00132-MMD-WGC .

While the allegations and legal claims vary somewhat among the derivative actions, they all generally allege that the defendants breached

fiduciary duties owed to the Company.

The plaintiffs, all alleged stockholders of the Company, purport to sue on behalf and for the benefit

of the Company.

While the allegations and legal claims vary somewhat among the derivative actions, they all generally allege

that the defendants breached fiduciary duties owed to the Company.

The plaintiffs, all alleged stockholders of the Company, purport to

sue on behalf and for the benefit of the Company.

Accordingly, the derivative plaintiffs seek no recovery from the Company.

Instead, as a stockholder derivative action,

the Company is named as a nominal defendant.

Pursuant to agreements among the parties, the courts in all of the derivative lawsuits have

stayed proceedings pending the outcome of the securities litigation.

a stockholder derivative action, the Company is named as a nominal defendant.

Pursuant to agreements among the parties, the courts in

all of the derivative lawsuits have stayed proceedings pending the outcome of the securities litigation.

On October 2, 2025, a new

11 unchanged sentences

York and styled Todd Augenbaum v.

Anson Investments Master Fund LP, et al.

Anson Investments Master Fund LP, et al., Case No.

1:22-cv-00249 AS .

22 unchanged sentences

On September 30, 2025, the Court denied all cross-motions for summary judgment.

The parties met on March 11,

2025, to try to mediate the dispute before Phillips ADR.

The mediation was unsuccessful, and no further mediation sessions are scheduled.

As of this writing, the Court has not yet set a trial date or otherwise a pre-trial schedule.

As previously noted, Plaintiff seeks no

relief from the Company;

The Court has set trial in the action for June 8, 2026, and has set various pretrial dates as well.

As previously noted, Plaintiff seeks

no relief from the Company;

indeed, he seeks monetary relief for the Company.

In any event, the Company cannot predict the outcome of the

The Company desires a resolution

To that end, Company counsel attempted to engage the parties in settlement discussions after a mediation attempt in March

2025, which had excluded the Company, proved unsuccessful.

While Defendants expressed interest in discussions, Plaintiffs declined.

Company thereafter submitted a request to the Court that the Court direct the parties to mediation, with a direction that the Company

could participate fully in the mediation.

That request was denied without prejudice.

Since then, the Company’s Board of Directors

has established a special committee to attempt to negotiate a settlement with the Defendants.

The special committee has engaged counsel

and is in discussions with the mediator who oversaw the March 2025 mediation session.

To the extent a settlement proposal acceptable to

the Company and Defendants can be reached, the parties plan to seek Plaintiffs’ approval of the settlement and, potentially, to

seek Court intervention into the settlement process or settlement approval.

The Company cannot predict the outcome of these settlement

efforts, or of the case should the matter go to trial.

In connection with the Augenbaum

lawsuit, three of the investor groups named as defendants (the “demanding defendants”) have made a demand on the Company for

indemnification pursuant to terms of an indemnity provision of the securities purchase agreements under which they invested in the Company.

The Company believes the indemnity provision to be inapplicable and has rejected the demands.

The Company and the demanding defendants

have entered into standstill agreements and the parties have agreed to defer resolution of the indemnification matter pending resolution

of the underlying litigation with two of the groups and is in negotiations with the third.

In addition, the Company’s placement

agent for the offerings at issue, Special Equities Group (“SEG”), was subpoenaed by Mr.

Pursuant to its placement-agent

agreement with the Company, SEG demanded indemnification from the Company for its legal fees incurred in complying with the discovery

While reserving its rights, the Company believes that SEG’s indemnity claim under the governing placement agent agreement

likely has more merit than the demands of the demanding defendants.

SEG has presented bills for legal expenses totaling several hundred

thousand dollars, a figure that the Company views as excessive.

The Company is unable to predict the outcome of this dispute.

In all of the above-mentioned

active proceedings, the Company has denied and continues to deny any wrongdoing and intends to defend the claims vigorously.

maintains a program of directors’ and officers’ liability insurance that, subject to the insurers’ reservations of rights,

has offset a substantial portion of the costs incurred in defending the securities litigation and the shareholder derivative actions,

as well as the Augenbaum lawsuit.

lawsuit and as previously reported, six of the investor/investor-group Defendants (the “demanding defendants”) have made demands

on the Company for indemnification pursuant to terms of an indemnity provision of the March 2020 securities purchase agreements under

which they invested in the Company.

Regarding these demands (and

the potential for additional demands from other Defendants), the Company has rejected each of the demands on multiple grounds.

the demanding defendants, the Iroquois investors and the Empery investors, have filed lawsuits alleging breach of contract and seeking

declaratory relief in the Supreme Court of New York, Commercial Division, seeking damages of more than $5.2 million, and more than $3.5

million, respectively.

These lawsuits are described separately below.

As of the date of this memorandum, the Iroquois action has been

voluntarily dismissed without prejudice, and the Empery action remains pending in federal court awaiting an order of remand to state court.

Iroquois Action .

or about January 8, 2026, Iroquois Master Fund Ltd.

and Iroquois Capital Investment Group, LLC filed an action against the Company in

the Supreme Court of the State of New York, New York County, styled Iroquois Master Fund Ltd., et al.

Kartoon Studios, Inc., Index

650077/2026 .

The complaint asserted breach of contract and sought declaratory relief in connection with the Company's denial of

the Iroquois plaintiffs' indemnification demands, with monetary damages of approximately $5.2 million representing defense expenses the

Iroquois plaintiffs claimed to have incurred to date in Augenbaum, together with a declaration that the Company is obliged to advance

their defense expenses on an ongoing basis.

On February 3, 2026, the Company removed the action to the United States District Court for

the Southern District of New York, where it was styled Iroquois Master Fund Ltd., et al.

Kartoon Studios, Inc., Case No.

1:26-cv-00938

The Company filed a Notice of Related Action, and on February 20, 2026, the case was accepted as related to Augenbaum

and assigned to Judge Subramanian.

The parties submitted, and the Court approved, a stipulation extending the time for the Company to

respond to the complaint until March 12, 2026.

On March 13, 2026, before the Company filed any responsive pleading, the Iroquois plaintiffs

voluntarily dismissed the action without prejudice pursuant to Federal Rule of Civil Procedure 41(a)(1)(A)(i), and the case was terminated

on March 16, 2026.

Because the dismissal was without prejudice, the Iroquois plaintiffs are not precluded from refiling.

The Company is

not aware of any refiling as of the date of this memorandum.

Empery Action .

12, 2026, four affiliated Empery entities filed an action against the Company in the Supreme Court of the State of New York, New York

County, styled Empery Asset Master Ltd., et al.

Kartoon Studios, Inc., Index No.

650906/2026, alleging breach of contract and

seeking declaratory relief in connection with the Company's denial of their indemnification demands, with damages of approximately $3.5

million plus a declaration that the Company is obliged to advance their defense expenses on an ongoing basis.

On March 6, 2026, the Company

removed the action to the U.S.

District Court for the Southern District of New York, where it is styled Empery Asset Master Ltd., et

Kartoon Studios, Inc., Case No.

1:26-cv-01872 (S.D.N.Y.) and has been related to Augenbaum before Judge Subramanian.

challenged removal on diversity grounds, and on March 9, 2026, the parties jointly stipulated to remand the action to state court.

of the date of this memorandum, the Court has not yet entered an order of remand, and the federal action accordingly remains pending.

The Company cannot predict the outcome of the Empery lawsuit, or whether other demanding defendants will file similar actions.

Finally, as previously reported,

the Company’s placement agent for the offerings at issue, Special Equities Group (“SEG”), has also demanded indemnification

from the Company for its legal fees incurred in connection with the Augenbaum lawsuit.

SEG has presented bills for legal expenses totaling

several hundred thousand dollars, a figure that the Company views as excessive.

The Company has reserved all rights.

We are unable to

predict the outcome of this dispute.

In all of the aforementioned

active proceedings, the Company has denied and continues to deny any allegations of wrongdoing directed against it.

The Company intends

to defend the claims asserted against it vigorously.

The Company maintains a program of directors’ and officers’ liability

insurance, which, subject to the insurers’ reservations of rights, has to this point offset a substantial portion of the costs incurred

in defending the Securities Litigation and the Shareholder Derivative Actions, as well as the Augenbaum lawsuit.

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

What changed 10-Q

Item 1. Legal Proceedings