Kartoon Studios, Inc.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosures.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this report, our disclosure controls and procedures ensuring that information that we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, were ineffective, due to a material weakness related to Information Technology General Control area.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive officer and principal financial officer and effected by our board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

Because of our inherent limitations, our internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control – Integrated Framework (2013 Framework).

Our management, with the participation of our Chief Executive Officer (principal executive officer) and our Chief Financial Officer (principal financial and accounting officer), has concluded that, as of December 31, 2024, based on those criteria, our internal controls over financial reporting are ineffective, due to a material weakness related to Information Technology General Control area.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Our internal controls over financial reporting included a process deficiency which is observed in many small companies with a small number of accounting and financial reporting staff:

Our management believes the financial statements included in this Form 10-K fairly present, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in accordance with GAAP.

Changes in Internal Control over Financial Reporting

As disclosed in our 2023 Annual Report for the year ended December 31, 2023, based upon our evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of December 31, 2023 that our disclosure controls and procedures, as defined in Rules 13a-15(f) and 15d-15(f), promulgated under the Exchange Act were not effective at the reasonable assurance level due to material weaknesses in our internal control over financial reporting.

Specifically, these weaknesses were identified in the following areas:

In response to the identified material weaknesses, management has taken comprehensive actions to strengthen its internal controls and has been and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated. Our plans for remediation included, but were not limited to, the efforts summarized below, which have been implemented:

The Company remains committed to improving internal controls and ongoing enhancements to our financial reporting processes.

Remediation of a Material weakness in Internal Control over Financial Reporting

We recognize the importance of the control environment as it sets the overall tone for the Company and serves as the foundation for all other components of internal control. Accordingly, we have taken significant steps to enhance our internal control over financial reporting and remediate previously identified material weaknesses.

As of December 31, 2024, we have successfully remediated the material weakness related to the income tax area through the engagement of third party tax expertise, implementing formalized controls and documentation processes over income tax accounting and reporting. In addition, the material weakness related to the accounting for complex and non-routine transactions has been remediated through the enhanced technical review procedures and the involvement of external advisors for significant transactions. Other remediation efforts, that have been implemented include controls over segregation of duties (with the ITGC exception noted below) through the use of dedicated systems for period close, accounts payable and reporting and quarterly review procedures.

As of December 31, 2024 a material weakness related to our information technology general controls (ITGC) remains. However, the management has discussed this matter and developed a remediation plan including transitioning some of the administrative responsibilities to a third-party service provider. Given, that the plan has not yet been fully implemented, the control remains ineffective as of December 31, 2024.

Beginning in the second quarter of 2024 and through the remainder of the 2024 fiscal year, all but one of our previously identified material weaknesses were remediated, with the exception of the ITGC matter noted above. We remain committed to completing the final phase of our remediation plan and strengthening our overall control environment.

Inherent Limitations over Internal Controls

Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations, including the possibility of human error and circumvention by collusion or overriding of controls. Accordingly, even an effective internal control system may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.