What changed in this filing

/stocks — the workspaceLOADING

Item 1. Legal Proceedings

2026-08-14 compared with 2026-05-15 · 115 added, 247 removed, 17 unchanged (96% of the section changed)

Legal Proceedings

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

as described below.

As of June 30, 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 as described below.

Each of the proceedings described below was previously reported in Part I, Item 3 of the Company’s Annual Report

on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 31, 2026 (the “2025 Annual Report”), and in Part

II, Item 1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 (the “Q1 2026 Form 10-Q”), which

descriptions are incorporated herein by reference.

The following summarizes material developments during the quarter ended June 30,

Securities Litigation:

On February 4, 2025, the District

Court issued an order granting in part and denying in part the renewed motion to dismiss and denying Plaintiffs’ motion for leave

to file a sur-reply.

The District Court dismissed all claims against Mr.

Denton, and claims against the Company and Mr.

Heyward based

on all but one of the complained-of statements.

However, the District Court determined that Plaintiffs had adequately pled a Section 10(b)

claim based on March 2020 statements concerning the number of times that the Rainbow Rangers cartoon was airing on Nickelodeon.

the other alleged misstatements that were dismissed, and as to any claims against Mr.

Denton, the District Court granted Plaintiffs leave

to amend their pleading another time.

On March 3, 2025, Plaintiffs filed a Third Amended Complaint, seeking again to assert claims against

the Company and Mr.

Heyward related to the four alleged misstatements that survived the Ninth Circuit appeal;

they did not replead any

claims against Mr.

On April 14, 2025, defendants filed a motion to dismiss the Third Amended Complaint.

On August 5, 2025, the

District Court issued a decision that granted in part and denied in part Defendants’ motion to dismiss Plaintiffs’ Third Amended

Two of the four alleged misstatements were dismissed with prejudice.

Plaintiffs were granted leave to amend as to one of the

alleged misstatements, and the Court denied the motion as to the fourth misstatement.

Plaintiffs elected not to further amend their complaint,

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

As previously reported, the

Company and its Chief Executive Officer Andy Heyward are defendants in a putative securities class action pending in the U.S.

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

Securities Litigation, Master File No.

2:20-cv-07457

Plaintiffs seek unspecified damages on behalf of a putative class of persons who invested in the Company’s common stock during

the alleged class period.

Following the District Court’s February 4, 2025 and August 5, 2025 orders, a single alleged misstatement under

Plaintiffs’ Third Amended Complaint remains at issue in the case.

The alleged misstatement appeared in a press release issued March 17,

2020, and was repeated in a shareholder letter issued March 20, 2020.

It 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.

Plaintiffs claim this statement was false and 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,

the parties elected to mediate the dispute, as well as the shareholder derivative actions referenced below, before Phillips ADR.

The mediation

was held December 9, 2024.

As previously reported, the

parties mediated the dispute, together with the shareholder derivative actions referenced below, before Phillips ADR in December 2024.

The case did not settle during the mediation.

In light of the District Court’s February 4, 2025, order,

however, the mediator has reached out to the parties to determine whether there is a basis now to resolve the dispute.

While the Company

has advised that it would like to settle the lawsuit, the mediator has not reported back concerning his discussions with Plaintiffs’

We cannot predict whether the parties will decide to continue with mediation or, if they do, whether they will be able to reach

a settlement of the case and of related shareholder derivative litigation on terms acceptable to the parties.

As previously disclosed, the

Company, its Chief Executive Officer Andy Heyward, and its former Chief Financial Officer Robert Denton were named as defendants in a

putative class action lawsuit filed in the U.S.

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 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

filed a second amended complaint, naming the same defendants.

The new complaint alleged again that the Company made numerous - depending

on how one counted, more than two dozen - false or misleading statements about the Company’s business and business prospects, this

time over an expanded alleged class period that extended into March 2021.

They again alleged that these misstatements violated Section

10(b) and 20(a) of the Exchange Act.

Lead plaintiffs again sought unspecified damages on behalf of an alleged class of persons who invested

in the Company’s common stock during the expanded alleged class period.

In November 2021, the defendants filed a motion to dismiss

the second amended complaint.

On July 15, 2022, the Court issued a decision dismissing the second amended complaint in its entirety and

with prejudice.

On August 12, 2022, lead plaintiffs

filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit.

After a full briefing of the appeal, a panel of

the Court of Appeals held oral argument on the appeal on November 6, 2023, and took the matter under submission.

On April 5, 2024, the Appellate

Court issued its opinion, affirming in part and reversing in part the decision of the District Court.

The Appellate Court affirmed the

dismissal of certain claims pertaining to Company statements where it found that Plaintiffs failed to adequately plead a 10(b) cause of

action but reversed the lower court’s dismissal of claims related to four of the Company’s alleged misstatements, finding

that, in three of those instances, the Plaintiffs adequately pleaded loss causation, and in one instance adequately alleged a misleading

The Court of Appeals did not address other elements of any claims based on these four complained-of statements, noting that

the District Court should address those issues on remand.

The matter was remanded to

the District Court in May 2024.

By order entered June 4, 2024, the Court directed the defendants to file a renewed motion to dismiss on

a schedule to be proposed by the parties.

Consistent with that order, Defendants filed their renewed motion on July 29, 2024.

filed the opposition to the motion on September 16, 2024, and Defendants filed a reply brief on October 16, 2024.

The District Court subsequently

vacated the hearing on the renewed motion to dismiss (including plaintiffs’ motion for leave to file a sur-reply) that had been

scheduled for November 4, 2024, determining that the matter could be resolved by the Court based on the parties' written submissions.

In light of the District Court’s February 4, 2025 order, the mediator reached out to the

parties to determine whether there is a basis now to resolve the dispute.

The mediator has not reported back concerning his discussions

with Plaintiffs’ counsel.

The Company cannot predict whether the parties will decide to continue with mediation or, if they do, whether

they will be able to reach a settlement of the case and of the related shareholder derivative litigation on terms acceptable to the parties.

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

At the status conference held

January 12, 2026, the Court referred 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 both parties having substantially completed their document productions.

The Court has not issued a scheduling order.

Shareholder Derivative

Since the Company’s

last quarterly report, there have been no developments in the shareholder derivative actions involving the Company, which were previously

Related to the securities class action, the Company’s directors (other than Dr.

Cynthia Turner-Graham and Michael Hirsh),

together with Messrs.

Heyward and Denton and former director Michael Klein, have been named as defendants in several putative stockholder

derivative lawsuits.

As previously disclosed, these include a consolidated proceeding pending in the U.S.

District Court for the Central

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

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

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

Heyward, et al.

an additional case pending in the U.S.

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

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.

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

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

shareholder derivative action, Cohen v.

There have been no material

developments during the quarter in the previously reported shareholder derivative actions, including Cohen v.

Heyward, et al., Case No.

A-25-929617-C was filed in the District Court of Clark County,

Nevada, making substantially similar allegations to the derivative actions already pending, and the Company expects, that the Cohen action

will be similarly stayed pending the outcome of the securities class action.

As the Company cannot predict the outcome of the securities

class action, it is likewise unable to predict the outcome of the shareholder derivative lawsuits.

A-25-929617-C (District Court of Clark County, Nevada).

The Company is named only as a nominal defendant, and the plaintiffs seek no recovery

from the Company.

All of the derivative actions remain stayed, or are expected to be stayed, pending the outcome of the securities class

action, whose outcome, and therefore the outcome of the derivative actions, the Company cannot predict.

Section 16(b) Litigation:

As previously disclosed, the

Company is also a nominal defendant in an action filed on January 11, 2022, in the U.S.

District Court for the Southern District of New

York and styled Todd Augenbaum v.

As previously reported, the

Company is a nominal defendant in Todd Augenbaum v.

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

1:22-cv-00249 AS .

The action, which again

purports to be brought on behalf and for the benefit of the Company, seeks the recovery under Section 16(b) of the Exchange Act of supposed

short-swing profits allegedly realized by roughly a dozen persons and entities that participated as investors in certain of the Company’s

private placements of securities in 2020.

Plaintiff Augenbaum, who purports to be a Company stockholder, filed his lawsuit after issuing

a demand to the Company’s Board of Directors asking that the Company sue the investor defendants.

The Company rejected the demand

in late December 2021, and Mr.

Augenbaum sued a few weeks later, as Section 16(b) permits him to do.

No Company officer or director is

among the defendants.

The defendant investors filed motions to dismiss the action.

After full briefing, the court, by order entered March

30, 2023, granted the motion to dismiss with leave to amend.

Plaintiff subsequently filed his First Amended Complaint on May 1, 2023.

Defendants moved to dismiss again.

After a full briefing and oral argument, the Court (with a new judge now sitting) denied the motion

to dismiss by order entered on January 24, 2024.

The parties then engaged in extensive fact discovery, which closed in October 2024.

parties proceeded with expert discovery.

Following the completion of expert discovery in December 2024, Plaintiff and the various Defendants

filed cross-motions for summary judgment in mid-January 2025.

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

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.

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 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.

1:22-cv-00249 AS (S.D.N.Y.), an

action brought under Section 16(b) of the Exchange Act by a stockholder on behalf and for the benefit of the Company.

The action seeks

disgorgement of alleged short-swing profits realized by certain investors in the Company’s 2020 private placements.

No Company officer

or director is among the defendants.

The plaintiff seeks no relief from the Company, and the Company stands to receive any recovery obtained

in the action.

Settlements with six of the

eight defendants.

Between May 29, 2026 and June 11, 2026, the Company and plaintiff’s counsel entered into settlement agreements with

six of the eight defendants, resolving the plaintiff’s claims against those defendants subject to the terms and conditions of the settlement

The settling parties agreed to pay aggregate settlement amounts of approximately $78.5 million (gross of plaintiff’s counsel’s

fees and expenses, which have not yet been awarded), and the parties agreed to mutual releases.

The settling defendants also waived any

indemnity claims against the Company relating to the action.

Fifty percent of each settlement amount, or $39.2 million in the aggregate,

was paid directly to the Company during June 2026.

The remaining fifty percent was deposited into escrow to fund the court-awarded fees

and expenses of plaintiff’s counsel, with any residual balance payable to the Company after the applicable approval orders become final.

Plaintiff’s application for attorneys’ fees and expenses is expected to occur in the coming months.

In connection with the settlement

with the Anson Investments Master Fund LP and its affiliates, on June 10, 2026, the Company entered into a standstill and voting agreement

under which the Company agreed to pay the Anson parties $4.0 million.

This amount was paid in July 2026.

For the accounting treatment

of the settlement receipts, the escrowed balance, and the standstill and voting agreement, see Note 1 and Note 2 to the condensed consolidated

financial statements.

Trial as to the non-settling

The Court held trial beginning June 8, 2026 and concluding June 18, 2026, after which the jury returned a verdict in favor

of the two non-settling defendants and awarded no damages.

Following the verdict, plaintiff’s counsel filed a motion for judgment as a

matter of law and, in the alternative, for a new trial.

If the motions are denied, the Company anticipates the plaintiff will appeal to

the United States Court of Appeals for the Second Circuit.

Should the Court of Appeals rule in the plaintiff’s favor, the Company may

have an opportunity to recover funds from the non-settling defendants, whether through a judgment as a matter of law or a favorable verdict

in a second trial.

If the jury verdict is instead upheld, the case will conclude with no further damages awarded.

The Company cannot predict

the outcome of the pending motions, any future appeal, or a potential second trial.

As previously reported in

the Q1 2026 Form 10-Q, one of the non-settling defendants, Empery Asset Management and affiliated entities, filed an action against the

Company 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.

650906/2026 (Supreme Court of the State of

New York, New York County).

The action alleges breach of contract and seeks 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.

During the quarter, following the parties’ stipulation, the federal court entered an order

on May 13, 2026 remanding the action to state court.

On June 22, 2026, Empery filed an amended complaint adding the second non-settling

defendant, Brio Capital Master Fund Ltd.

and an affiliated entity, as additional plaintiffs and asserting damages of over $10 million.

The Company filed its answer responding to the amended complaint on July 28, 2026.

The Company denies all liability.

As previously reported, the

Company’s indemnification matter with its placement agent, Special Equities Group (“SEG”), arising from a non-party subpoena

in the Augenbaum litigation, was resolved by an amicable agreement between the parties.

The Company’s agreements with SEG differ in nature

from those at issue in the Empery litigation and have no bearing on the outcome of the claims in that litigation.

There were no further

developments during the quarter.

In all of the aforementioned

6 unchanged sentences

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