Kartoon Studios, Inc.

Notes to Condensed Consolidated Financial Statements

September 30, 2025

Note 1: Organization and Business

Organization and Nature of Business

Kartoon Studios, Inc. (formerly Genius Brands International, Inc.) (the “Company”, “Kartoon Studios” or “we,” “us” or “our”) is a global content and brand management company focused on the creation, production, licensing, and distribution of multimedia animated content for children. Led by experienced industry personnel, the Company’s core business includes original intellectual property (“IP”) development, third-party IP production services, media agency, and content monetization through licensing and owned distribution platforms.

Kartoon Studios’ owned and produced titles includeStan Lee’s Superhero Kindergarten(starring Arnold Schwarzenegger),Llama Llama (starring Jennifer Garner),Rainbow Rangers,KC! Pop Quiz, andShaq’s Garage (starring Shaquille O’Neal). The Company’s library also includes titles such asBaby Genius,Thomas Edison’s Secret Lab,Warren Buffett’s Secret Millionaires Club,Team Zenko Go!,Reboot,Bee & PuppyCat: Lazy in Space, andCastlevania. The Company maintains a strategy of leveraging owned IP and third-party relationships to expand distribution and consumer product licensing.

Kartoon Studios also owns WOW Unlimited Media Inc. (“WOW”), through which the Company established its affiliate relationship with Mainframe Studios - one of thelargest animation production studios globally. Mainframe Studios is a producer-for-hire for several major streaming platforms and IP holders. To date, Mainframe has produced over 1,200 television episodes, 70 movies, and three feature films, including titles such asBarbie Dreamhouse Adventures,Octonauts: Above & Beyond,Cocomelon,SuperKitties, andUnicorn Academy, in partnership with leading global media companies. In addition, Wow owns Frederator Networks Inc. (“Frederator”). Frederator operates a leading animation-focused creator network on YouTube encompassing over 2,500 channels. Frederator Studios has developed and produced original programming in partnership with Cartoon Network, Nickelodeon, Nick Jr., Netflix, Sony Pictures Animation, and Amazon.

The Company distributes its content across streaming platforms, linear television, and its ad-supported and subscription-based video-on-demand services and apps, includingKartoon Channel! andAmeba TV. Distribution partners include YouTube, YouTube Kids, Amazon Prime Video, Amazon Fire, Roku, Apple TV, iOS, Android TV, Android mobile, Pluto TV, Xumo, Tubi, Samsung TV Plus, Google TV, Cox, DISH, Sling TV, KartoonChannel.com, and smart TVs from Samsung and LG. The Company also licenses content to third-party networks and streaming services globally, including Netflix, Paramount+, HBO Max, and Nickelodeon.

The Company owns Ameba Inc. (“Ameba”), a subscription streaming service with a focus on educational and entertainment content for younger children. As a cornerstone of the Company’s subscription offerings, Ameba delivers a vast library of engaging and educational content, accessible across multiple platforms.

The Company also owns The Beacon Media Group, LLC and The Beacon Communications Group, Ltd. (collectively, “Beacon”), a specialized media and marketing agency focused on children’s and family audiences. Beacon represents over 20 kids and family clients, including Bandai Namco, Moose Toys, Bazooka Brands, Goliath Games, Playmates Toys, Cepia LLC, and Zebra Pens.

Through its investment in Germany-based Your Family Entertainment AG (“YFE”), a publicly listed company on the Frankfurt Stock Exchange (RTV: FWB), the Company holds a strategic interest in one of Europe’s leading independent children’s content providers, with a catalog of approximately 150 titles and 3,500 half-hour episodes.

The Company holds a controlling interest in Stan Lee Universe, LLC (“SLU”), which owns the intellectual property rights to Stan Lee’s name, likeness, signature, and associated IP assets.

Kartoon Studios’ common stock is listed on the NYSE American LLC (“NYSE American”) under the ticker symbol “TOON.”

Recent Transactions

ERTC Sale

On July 31, 2025, the Company entered into an agreement to sell its rights to its $0.9 million outstanding Employee Retention Tax Credit (“ERTC”) refund claims to a third party in exchange for cash consideration. Under the agreement, the Company received an upfront payment of $0.5 million equal to 55% of the claim amount upon execution, with an additional payment of $0.1 million equal to 15%, to be paid upon collection from the IRS. The Company is entitled to receive any interest earned on the 15% claim amount if it is collected from the IRS within nine months of signing the agreement. Any interest received from the IRS after the nine-month period will be retained by the lender. Pursuant to the agreement, the Company retains legal title and remains obligated in the event of any disallowance, modification, or reduction of the claim by the IRS. The arrangement includes a recourse provision under which the Company remains obligated to repay amounts advanced in the event of any disallowance, modification, or reduction of the claim by the IRS.

Liquidity, Going Concern, and Capital Resources

As of September 30, 2025, the Company 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, the Company 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.

In accordance with Accounting Standards Codification (“ASC”), Presentation of Financial Statements - Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events that raise substantial doubt about the Company’s ability to continue as a going concern for at least one year after the date the condensed consolidated financial statements are issued.

Historically, the Company has incurred net losses. For the nine months ended September 30, 2025 and 2024, the Company reported net losses of $19.4 million and $15.1 million, respectively. The Company reported net cash used in operating activities of $11.8 million, and cash used in operating activities of $1.1 million for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, the Company had an accumulated deficit of $758.5 million and total stockholders’ equity of $24.0 million. As of September 30, 2025, the Company had total current assets of $27.1 million, including cash of $0.9 million, and restricted cash of $0.5 million, and total current liabilities of $32.5 million. The Company had negative working capital of $5.4 million as of September 30, 2025, compared to working capital of $1.2 million as of December 31, 2024. In October 2025, the Company closed an offering transaction and received an aggregate gross proceeds of approximately $7.3 million. Management has evaluated the significance of these conditions in relation to the Company’s ability to meet its obligations and noted the Company has sufficient cash resources and projected inflows to fund operations for the next 12 months from the issuance date of this 10-Q. Management has evaluated the significance of these conditions in relation to the Company’s ability to meet its obligations and concluded, that there is substantial doubt about our ability to continue as a going concern for a period of at least one year subsequent to the issuance of the accompanying condensed consolidated financial statements. Historically, the Company has financed its operations primarily through revenue generated from operations, loans and sales of its securities, and the Company expects to continue to seek and obtain additional capital in a similar manner. In order to address the Company’s capital needs, the Company intends 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. There can be no assurance that the Company will be able to complete any such financing, collaborative or strategic transaction in a timely manner or on acceptable terms. As a result, the Company may have to significantly limit its operations and its business, financial condition and results of operations would be materially harmed. In parallel, management also plans to preserve liquidity, as needed, by implementing cost saving measures. While management is taking these steps to improve liquidity, due to the uncertainty surrounding the successful execution and timing of these plans, macroeconomic uncertainty around the impact of tariffs on the toy and related industries, doubt continues to exist regarding the Company’s ability to meet its obligations as they become due within one year after the date the financial statements are issued.

Note 2: Basis of Presentation and Summary of Significant Accounting Policies

The accompanying interim condensed consolidated financial statements of the Company have been prepared in conformity with U.S. Generally Accepted Accounting Principles (U.S. GAAP”) and are consistent in all material respects with those applied in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2025. The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue, costs, expenses and other comprehensive income/(loss) that are reported in the condensed consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events, historical experience, actions that the company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. On a regular basis, the Company evaluates the assumptions, judgments and estimates. Actual results may differ from these estimates.

The accompanying interim condensed consolidated financial statements are unaudited, but in the opinion of management, contain all adjustments (which include normal recurring adjustments) considered necessary to present fairly the interim financial statements. Interim results are not necessarily indicative of financial results for a full year. The information included in this Form 10-Q should be read in conjunction with the Company’s 2024 Annual Report.

The following is provided to update the Company’s significant accounting policies previously described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 31, 2025.

Foreign Currency Forward Contracts

As of September 30, 2025 and December 31, 2024 gross amounts of foreign currency (“FX”) forward contract in an asset and liability position subject to a master netting arrangement resulted in a net liability of $0.1 million and $0.6 million, respectively, recorded within Other Current Liabilities on the condensed consolidated balance sheets. For the three and nine months ended September 30, 2025, the Company recorded a realized loss of $14,946 and $0.2 million, respectively, on FX forward contracts within Production Services Revenue on the condensed consolidated statements of operations. For the three and nine months ended September 30, 2024, the Company recorded a realized loss of $35,601 and $0.1 million, respectively, on FX forward contracts within Production Services Revenue on the condensed consolidated statements of operations.

Trade Accounts Receivable and Allowance for Credit Loss

As of September 30, 2025 and December 31, 2024, the Company recorded an allowance for credit loss of $0.1 million and $0.2 million, respectively.

The following table summarizes the activity in the allowance for credit losses related to trade accounts receivable as of September 30, 2025 and December 31, 2024 (in thousands):

Tax Credits Receivable

The Company classifies the majority of its tax credits receivable as current based on their normal operating cycle. As of September 30, 2025, a portion of the Company’s tax credits receivable is presented as a long-term asset due to uncertainty regarding the timing of obtaining the necessary certifications required to process the tax credits. Management will continue to monitor the status of the outstanding items and reclassify the receivable to current when the timing of collection becomes reasonably estimable.

As of September 30, 2025 and December 31, 2024, $16.8 million and$12.7 million in tax credit receivables related to Wow’s film and television productions were recorded, net of $0.7 million and $0.6 million, respectively, recorded as an allowance for credit loss. As of September 30, 2025, $2.3 million in tax credits receivable net of $0.4 million allowance for credit loss was presented as non-current asset. As of December 31, 2024 $2.4 million in tax credits receivable net of $0.4 million allowance for credit loss was presented as non-current asset.

Factoring Liability

On July 31, 2025, the Company entered into an arrangement to transfer its ERTC refund claim (“ERTC receivable”) of $0.9 million to a financing counterparty on a recourse basis. Because the Company retained exposure to the transferred asset through the recourse provisions and otherwise did not relinquish control, the transaction did not qualify for sale accounting under ASC 860*, Transfers and Servicing*, and has been accounted for as a secured borrowing. Accordingly, the ERTC receivable remains recognized in Other Receivables, and a corresponding liability is recognized for the cash proceeds received (net of any direct issuance costs). The related factoring liability of $0.6 million represents approximately 75% of the ERTC underlying receivable amount and is presented in the consolidated balance sheet within Noncurrent Liabilities. Management does not anticipate any repayment obligation within twelve months and expects full collection of the ERTC refund by the financing counterparty. No gain or loss was recognized at inception. The ERTC receivable serves as collateral for the borrowing. The difference between the ERTC receivable and the cash proceeds was recorded as borrowing discount, which is deferred and accreted to interest expense using the effective interest method (26.84%) over the expected term of the borrowing. Collections on the ERTC receivable are remitted to the lender pursuant to the agreement and reduce the outstanding loan principal when applied. The Company evaluates the ERTC receivable for collectibility each reporting period.

Concentration of Risk

The Company maintains its cash in bank deposit accounts which, at times, may exceed the Federal Deposit Insurance Corporation’s (“FDIC”) or the Canadian Deposit Insurance Corporation’s (“CDIC”) insured amounts. Balances on interest bearing deposits at banks in the United States are insured by the FDIC up to $250,000 per account and deposits in banks in Canada are insured by the CDIC up to CAD 100,000. As of September 30, 2025 and December 31, 2024, the Company had five and twelve bank deposit accounts with an aggregate uninsured balance of $16,710 and $6.7 million, respectively.

The Company has a managed account with a financial institution. The managed account maintained its investments in marketable securities of approximately $2.0 million as of December 31, 2024, andno such investments as of September 30, 2025, as all securities were sold during the period. Assets in the managed account are protected by the Securities Investor Protection Corporation (“SIPC”) up to $500,000 (with a limit of $250,000 for cash). In addition, the financial institution provides additional “excess of SIPC” coverage which insures up to $1.0 billion. As of September 30, 2025 and December 31, 2024, the Company did not have account balances held at this financial institution that exceed the insured balances.

During the three months ended September 30, 2025, the Company had four customers, whose total revenue exceeded 10% of the total condensed consolidated revenue. These customers accounted for 85.1% of the total revenue. During the three months ended September 30, 2024, the Company had four customers whose total revenue exceeded 10% of the total condensed consolidated revenue. These customers accounted for 77.2% of the total revenue.

During the nine months ended September 30, 2025, the Company had four customers, whose total revenue exceeded 10% of the total condensed consolidated revenue. These customers accounted for 85.6% of the total revenue. During the nine months ended September 30, 2024, the Company had three customers whose total revenue exceeded 10% of the total condensed consolidated revenue. These customers accounted for 60.2% of the total revenue.

As of September 30, 2025, the Company had four customers whose total accounts receivable exceeded 10% of the total accounts receivable. These customers accounted for 67.5% of the total accounts receivable as of September 30, 2025. As of December 31, 2024, the Company had three customers whose total accounts receivable exceeded 10% of the total accounts receivable. These customers accounted for 53.2% of the total accounts receivable as of December 31, 2024.

There is significant financial risk associated with a dependence upon a small number of customers. The Company periodically assesses the financial strength of these customers and establishes allowances for any anticipated credit losses.

Fair Value of Financial Instruments

As of September 30, 2025, there were no marketable securities outstanding.

The following table summarizes the marketable securities measured at fair value on a recurring basis by level within the fair value hierarchy as of December 31, 2024 (in thousands):

Fair values were determined for each individual security in the investment portfolio. The Company’s marketable securities are considered to be available-for-sale investments as defined under FASB ASC 320,Investments – Debt and Equity Securities. An allowance for credit loss was not recorded for the marketable securities as of September 30, 2025 and December 31, 2024. Refer to Note 5 for additional details.

New Accounting Standards Issued but Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The amendment in the ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. The Company is in the process of evaluating the impact that the adoption of this ASU will have on the consolidated financial statements and related disclosures, which is expected to result in enhanced disclosures in the annual report for the year 2025.

In November, 2024 the FASB issued ASU 2024-03,Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expense. This update mandates that public companies provide more detailed information about specific expenses in their financial statement notes. The effective date for this guidance is annual reporting periods beginning after December 15, 2026, with interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is in the process of evaluating the impact that the adoption of this ASU will have on the consolidated financial statements and related disclosures, which is expected to result in enhanced disclosures.

Note 3: Variable Interest Entity

In July 2020, the Company entered into a binding term sheet with POW! Entertainment, LLC. (“POW”) pursuant to which the Company agreed to form an entity with POW to exploit certain rights in intellectual property created by Stan Lee, as well as the name and likeness of Stan Lee. The entity is called “Stan Lee Universe, LLC” (“SLU”). POW and the Company executed an Operating Agreement for the joint venture, effective as of June 1, 2021. The purpose of the acquisition was to enable the Company to assume the worldwide rights, in perpetuity, to the name, physical likeness, physical signature, live-action and animated motion picture, television, online, digital, publishing, comic book, merchandising and licensing rights to Stan Lee and over 100 original Stan Lee creations, from which the Company plans to develop and license multiple properties each year.

During the three months ended September 30, 2025 and 2024, SLU generated a net loss of $0.1 million and $0.1 million, respectively. During the nine months ended September 30, 2025 and 2024, SLU generated a net loss of $0.2 million and $0.3 million, respectively. There were no contributions or distributions during the nine months ended September 30, 2025 and 2024 and there were no changes in facts and circumstances that would result in a re-evaluation of the VIE assessment.

Note 4: Investment in Equity Interest

As of September 30, 2025, the Company owned 5,009,005 shares of YFE. At the time of the initial investment in 2021, it was determined that based on the Company’s 28.7% ownership in YFE, the Company had significant influence over the entity. Therefore, under the equity method of accounting, the Company elected to account for the investment at fair value under the fair value option. Under the fair value option, the investment is remeasured and recorded at fair value each reporting period, with the change recorded through earnings.

On July 14, 2025, the Company sold 1,500,000 YFE shares to a single foreign investor for total proceeds of €750,000 ($0.8 million) as part of its ongoing strategy to optimize its portfolio of assets. Subsequently, the Company’s ownership in YFE decreased from 44.8% to 35.0%. Before the transaction, the Company owned 6,857,132 shares of YFE.

On September 25, 2025, the Company executed a share exchange agreement with F&M Film und Medien Beteiligungs GmbH (“F&M”), pursuant to which the Company agreed to transfer 348,127 shares of Your Family Entertainment AG previously held by the Company, to F&M, in exchange for 348,127 shares of the Company’s common stock previously held by F&M, on a one-for-one basis. Subsequently, the Company’s ownership in YFE decreased from 35.0% to 32.7%. Management concluded that the Company continues to exercise significant influence over the investee.

As of September 30, 2025, the fair value of the investment was determined to be $6.7 million recorded within noncurrent assets on the Company’s condensed consolidated balance sheet. The fair value as of September 30, 2025 decreased by net $9.7 million, as compared to December 31, 2024. The net decrease is comprised of the net impact of a decrease in YFE’s stock price, the share sale and exchange transactions completed in the quarter, and the effect of foreign currency remeasurement from EURO to USD. The total change in fair value is recorded within Other Income (Expense), net on the Company’s condensed consolidated statements of operations.

As of September 30, 2025 and December 31, 2024, the Company’s ownership in YFE was 32.7% and 44.8%, respectively.

Note 5: Marketable Securities

The Company classifies its marketable debt securities as available-for-sale (“AFS”) and reports them at fair value in accordance with ASC Topic 326,Measurement of Credit Losses on Financial Instruments.

During the three months ended September 30, 2025, the Company sold all of its investments in marketable debt securities. As a result, there wereno marketable securities outstanding as of September 30, 2025, and the proceeds were used for general operating purposes.

The investments in marketable securities as of December 31, 2024 had an adjusted cost basis of $2.1 million and a market value of $2.0 million. The balances consisted of the following securities(in thousands):

The AFS securities held by the Company as of December 31, 2024 had been in an unrealized loss position for a period greater than 12 months. The Company reported the net unrealized losses in accumulated other comprehensive income (loss), a component of stockholders’ equity. As of September 30, 2025 and December 31, 2024, an allowance for credit loss wasnot recognized as the issuers of the securities had not established a cause for default, various rating agencies had reaffirmed each security's investment grade status and the Company did not have the intent, nor is it required to sell its securities prior to recovery.

Realized losses of $8,983 and $0.1 million were recognized in earnings during the three months ended September 30, 2025 and 2024, respectively. Realized losses of $36,674 and $0.5 million were recognized in earnings during the nine months ended September 30, 2025 and 2024, respectively, primarily due to selling securities prior to maturity to provide additional liquidity for general operating needs.

Note 6: Property and Equipment, net

The Company has property and equipment as follows (in thousands):

During the nine months ended September 30, 2025 and 2024, the Company recorded depreciation expense of $0.4 million and $0.3 million, respectively.

During the nine months ended September 30, 2025 and 2024, the Company didnot incur any impairment charges on its property and equipment.

Note 7: Leased Right-of-Use Assets, net

Leased right-of-use assets consisted of the following (in thousands):

As of September 30, 2025, the weighted-average lease term for the Company’s operating leases was 66 months and the weighted-average discount rate was 11.2%. As of December 31, 2024, the weighted-average lease term for operating leases was 73 months and the weighted-average discount rate was 11.1%.

Effective April 1, 2025, the Company executed a lease reassignment agreement with the landlord for its Ontario office, resulting in the reassignment of one of its suites to a new tenant. The Company continues to lease and occupy remaining space under the original terms of the lease agreement. The reassignment reduced the Company’s leased space from 570 square feet to 74 square feet, and associated rent obligations, but did not change any other conditions of the lease. The modification was accounted for as a partial termination of the lease under ASC 842. Accordingly, the Company remeasured the lease liability as of the effective date of the modification using the discount rate based on the remaining lease term and payments. Based on the modified lease payment terms, the discount rate was determined to be 8.96%, and the remeasured lease liability was $16,042. This represented a reduction of $0.1 million compared to the pre-modification lease liability. The Company adjusted the right-of-use asset based on the proportion of the reduction in the remeasured lease liability, resulting in a reduction of $0.1 million. The Company recognized a gain on lease modification of $4,253 in the condensed consolidated statements of operations. The remaining lease costs of $16,770 will be recognized on a straight-line basis over the remaining lease term.

Operating lease costs during the three months ended September 30, 2025 and 2024 were $0.4 million and $0.9 million, respectively, recorded within General and Administrative Expenses on the Company’s condensed consolidated statements of operations. Operating lease costs during the nine months ended September 30, 2025 and 2024 were $1.1 million and $1.2 million, respectively, recorded within General and Administrative Expenses on the Company’s condensed consolidated statements of operations.

During the three and nine months ended September 30, 2025, the Company recorded finance lease costs of $0.1 million and $0.3 million, respectively, primarily comprised of ROU amortization of $0.1 million and $0.3 million, respectively. During the three and nine months ended September 30, 2024, the Company recorded finance lease costs of $0.2 million and $1.0 million, respectively, primarily comprised of ROU amortization of $0.2 million and $1.0 million. ROU amortization is recorded within General and Administrative Expenses and accretion of interest expense is recorded within Other Income (Expense), net on the Company’s condensed consolidated statements of operations.

Note 8: Film and Television Costs, net

The following table highlights the activity in Film and Television Costs as of September 30, 2025 and December 31, 2024 (in thousands):

During the nine months ended September 30, 2025 and 2024, the Company recorded amortization expense of $0.2 million and $0.2 million, respectively.

During the nine month ended September 30, 2025, the Company recorded $0.1 million of write-downs related to projects not advancing beyond the development stage. Based on the review performed by the executive team it was determined, that certain projects would no longer be pursued. The Company didnot record any write-downs on film costs during the nine months ended September 30, 2024.

The Company didnot record any impairment charges on film costs during the nine months ended September 30, 2025 and 2024.

Note 9: Intangible Assets, net

Intangible Assets, net

The Company had the following intangible assets(in thousands) with their weighted average remaining amortization period (in years):

Intangible Assets, net

During the three months ended September 30, 2025 and 2024, the Company recorded intangible asset amortization expense of $0.5 million and $0.5 million, respectively. During the nine months ended September 30, 2025 and 2024, the Company recorded intangible asset amortization expense of $1.5 million and $1.5 million, respectively.

Expected future amortization of intangible assets subject to amortization as of September 30, 2025 is as follows (in thousands):

As of September 30, 2025 and December 2024, $5.4 million and $5.3 million, respectively, of the Company’s intangible assets related to the acquired trade names from the Wow acquisition had indefinite lives and are not subject to amortization.

Note 10: Deferred Revenue

As of September 30, 2025 and December 31, 2024, the Company had aggregate short term and long term deferred revenue of $8.9 million and $9.4 million, respectively. The decrease in deferred revenue is primarily related to production on various shows advancing to later stages of execution of the projects as of September 30, 2025, compared to the progress as of December 31, 2024. Wow's deferred revenue balance relates to cash received from customers for productions in progress. Revenue is fully recognized upon production completion. Deferred revenue also includes both (i) variable fee contracts with licensees and customers in which the Company collected advances and minimum guarantees against future royalties and (ii) fixed fee contracts. The Company recognizes revenue related to these contracts when all revenue recognition criteria have been met.

Note 11: Margin Loan

As of September 30, 2025, the Company hadno outstanding margin loan balance. As of December 31, 2024, the Company’s margin loan balance was $0.9 million. During the nine months ended September 30, 2025, the Company borrowed an additional $5.9 million from its investment margin account and repaid $6.8 million primarily with cash received from sales and maturities of marketable securities and other transactions. The borrowed amounts were primarily used for operational costs. The interest rates for the borrowings fluctuate based on the Fed Funds Upper Target plus 0.60%. The weighted average interest rates were 0.39% and 0.46%, respectively, on average margin loan balances of $0.2 million and $1.0 million as of September 30, 2025 and December 31, 2024, respectively.

During the three months ended September 30, 2025 and 2024, the Company incurred interest expense on the loan of $3,195 and $11,070, respectively. During the nine months ended September 30, 2025 and 2024, the Company incurred interest expense on the loan of $8,062 and $42,131, respectively, included in Interest Expense on the Company’s condensed consolidated statements of operations. The investment margin account borrowings do not mature but are collateralized by the marketable securities held by the same custodian and the custodian can issue a margin call at any time, effecting a payable on demand loan. Due to the call option, the margin loan was recorded as a current liability on the Company’s condensed consolidated balance sheets.

Note 12: Bank Indebtedness and Production Facilities

The Company has certain credit facilities that are comprised of the following:

Production Facilities, net

The production facilities are used for financing specific productions. The Company’s production facilities bear interest at rates ranging from bank prime plus 1.00% -1.25% per annum. The production facilities are generally repayable on demand. Any borrowings under the production facilities are collateralized by a security interest in substantially all of the relevant production company’s tangible and intangible assets, including a combination of federal and provincial tax credits, other government incentives, production service agreements and license agreements as well as those of certain of our subsidiaries and related entities acting as guarantors of the production facilities.

As of September 30, 2025 and December 31, 2024, the Company had an outstanding net balance of USD 12.6 million (CAD 17.5 million), including USD 0.9 million (CAD 1.3 million) of interest, and USD 9.2 million (CAD 13.3 million), including USD 0.8 million (CAD 1.2 million) of interest, respectively, recorded as Production Facilities, net within current liabilities on the Company’s condensed consolidated balance sheets.

As of September 30, 2025 and December 31, 2024, Production Facilities, net includes unamortized debt issuance costs related to the issuance of production facilities of $0.1 million and $0.1 million, respectively, which were included as a reduction to the carrying amount of production facilities.

Equipment Lease Facility

In the fourth quarter of 2022, the Company entered into an equipment lease agreement with a Canadian bank. This additional equipment lease facility allows the Company to finance equipment purchases of up to $1.0 million (CAD 1.4 million) in total. Each transaction under the equipment lease facility has specific financing terms in respect of the leased equipment such as term, finance amount, rate, and payment terms.

As of September 30, 2025, the Company has two leases remaining under this facility with finance rates of 7.52% and 8.20%, and remaining lease terms of 2 months and 11 months, respectively.

As of September 30, 2025 and December 31, 2024, the outstanding balances, net of repayments, of $0.1 million (CAD 0.1 million) and $0.3 million (CAD 0.4 million), respectively, were included within current and noncurrent Finance Lease Liabilities, net on the Company’s condensed consolidated balance sheets.

Note 13: Stockholders’ Equity

Common Stock

As of September 30, 2025 and December 31, 2024, the total number of authorized shares of common stock was 190,000,000.

As of September 30, 2025 and December 31, 2024, there were 48,913,630 and 46,209,081 shares of common stock outstanding, respectively.

During the nine months ended September 30, 2025 and 2024, the Company issued 226,733 and 218,886 shares of common stock for services, respectively.

During the nine months ended September 30, 2025 and 2024, the Company issued 182,987 and 88,531 shares of common stock in connection with vested restricted stock units (RSUs), net of shares withheld for tax obligations, respectively.

On March 5, 2025, the Company issued 1,462,000 shares of common stock to investor Armistice Capital Master Fund Ltd. upon the exercise of outstanding pre-funded warrants. The warrants were exercised at a price of $0.001 per share, which represented par value, resulting in total proceeds of $1,462. The issuance was completed in accordance with the terms of the warrant agreements, and the shares issued are fully paid and non-assessable.

On August 27, 2025, the Company entered into an agreement to engage in a transaction under Section 3(a)(10) of the Securities Act of 1933 with a third party lender (“Lender”) 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, the Lender makes payments to the Company’s vendors in cash and, in exchange, the Company issues shares of common stock to the Lender. The settlement was valued at $0.75 per $1 of accounts payable and is being carried out in stages, 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. During the three months ended September 30, 2025 the Company settled $0.7 million of accounts payable by issuing 1,180,955 shares of common stock to the Lender. The Company recognized a loss of $0.3 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 Company’s condensed consolidated statements of operations.

Preferred Stock

The Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001 per share including 9,944,000 shares of undesignated preferred stock,6,000 shares designated as 0% Series A Convertible Preferred Stock and 50,000 shares designated as Series C Preferred Stock. The board of directors is authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders, to issue from time-to-time shares of preferred stock in one or more series. Each series of preferred stock will have such number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by the board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

As of September 30, 2025 and December 31, 2024, there were 0 shares of Series A Convertible Preferred Stock outstanding. As of September 30, 2025 and December 31, 2024, there were 0 shares of Series C Preferred Stock outstanding.

Treasury Stock

During the nine months ended September 30, 2025 and 2024,404 and 217 shares of common stock, respectively, with a cost of $293 and $252, respectively, were withheld to cover taxes owed by certain employees, all of which were included as treasury stock outstanding and recorded at cost within Treasury Stock on the condensed consolidated balance sheet.

On September 25, 2025, the Company executed a share exchange agreement with F&M Film und Medien Beteiligungs GmbH (“F&M”), pursuant to which the Company agreed to transfer 348,127 shares of Your Family Entertainment AG previously held by the Company, to F&M, in exchange for 348,127 shares of the Company’s common stock previously held by F&M, on a one-for-one basis. The shares received from F&M were returned to the Company’s treasury and recorded at their cost of approximately $0.3 million within Treasury Stock on the condensed consolidated balance sheet.

Note 14: Stock Options

On August 27, 2020, the Company’s stockholders approved the adoption of the Kartoon Studios, Inc. 2020 Equity Incentive Plan (as amended, the ”2020 Plan”). The 2020 Plan replaced the previously adopted 2015 Incentive Plan (the “2015 Plan”). The maximum number of shares available for issuance was initially equal to the sum of (i) 3,000,000 shares of common stock and (ii) the number of shares of common stock remaining available for issuance under the 2015 Plan, which was then equal to 216,767 shares. On May 23, 2023, the Company’s stockholders approved the adoption of an Amended and Restated 2020 Equity Incentive Plan, which provided for the maximum number of shares of common stock available for issuance under the 2020 Plan to be increased by 5,000,000 shares. Subsequently, on May 14, 2025, the Company’s stockholders approved a further amendment and restatement of the 2020 Plan, providing for an additional increase of 5,000,000 shares of common stock authorized for issuance under the plan. As of September 30, 2025, the maximum number of shares available for issuance was 13,216,767.

During the nine months ended September 30, 2025, the Company granted options to purchase 100,000 shares of common stock to the music composer on theWinnie & Friendstitle song, with weighted-average grant-date fair market value of $39,260. The options vested immediately upon grant.

The fair value of the options granted during the nine months ended September 30, 2025 was calculated using the Black-Scholes-Merton (“BSM”) option pricing model based on the following assumptions:

During the nine months ended September 30, 2024, the Company didnot grant any stock options.

The following table summarizes the Company’s option activity:

During the three months ended September 30, 2025, the Company didnot recognize any share-based compensation expense related to stock options.

During the three months ended September 30, 2024, the Company recognized $23,804 in share-based compensation expense related to stock options.

During the nine months ended September 30, 2025 and 2024, the Company recognized $24,699 and $0.1 million, respectively, in share-based compensation expense related to stock options included in General and Administrative Expenses on the Company’s condensed consolidated statements of operations. As of September 30, 2025, the Company hadno unrecognized share-based compensation expense related to outstanding stock options. The outstanding options as of September 30, 2025 had an aggregated intrinsic value ofzero.

Note 15: Restricted Stock Units

Restricted stock units (“RSUs”) are granted under the Company’s 2020 Plan. During the nine months ended September 30, 2025 and 2024, the Company granted 400,123 and 286,324 fully vested RSUs to the Company’s board members and consultants, with a fair market value of $0.3 million and $0.3 million, respectively.

An aggregate of 409,720 shares of common stock were issued during the nine months ended September 30, 2025 as a result of RSUs vested during the current and prior periods.

The following table summarizes the Company’s RSU activity:

During the three months ended September 30, 2025 and 2024, the Company recognized $41,847 and $0.1 million, respectively, in share-based compensation expense related to RSUs. During the nine months ended September 30, 2025 and 2024, the Company recognized $0.2 million and $0.4 million, respectively, in share-based compensation expense related to RSU awards included in General and Administrative Expenses on the Company’s condensed consolidated statements of operations. The unvested share-based compensation as of September 30, 2025 was $9,601 which will be recognized through the fourth quarter of 2026 assuming the underlying grants are not cancelled or forfeited. The total fair value of shares vested during the nine months ended September 30, 2025 was $0.3 million.

Note 16: Warrants

The following table summarizes the activity in the Company’s outstanding warrants during the nine months ended September 30, 2025:

On March 13, 2025,89,286 derivative warrants classified as a liability as issued with convertible notes in 2020 to purchase shares of the Company’s common stock expired and were no longer outstanding as of September 30, 2025. In addition,32,523 warrants previously classified as equity expired during the nine months ended September 30, 2025.

On March 5, 2025,1,462,000 pre-funded warrants were exercised at a price of $0.001 per share, which represented par value, resulting in total proceeds of $1,462. The issuance was completed in accordance with the terms of the warrant agreements, and the shares issued are fully paid and non-assessable.

On December 18, 2024, the Company issued 7,894,736 Series A derivative warrants and 7,894,736 Series B derivative warrants in connection with the public offering. Upon issuance, the warrants were classified as liabilities as the terms did not allow for settlement in shares in all circumstances, including under the Fundamental Transaction provision. The warrants were initially measured at fair value and remeasured at each reporting period, with changes in fair value recorded in earnings.

On May 14, 2025, the Company’s shareholders approved the settlement of the Series A warrants and Series B warrants in shares in all scenarios, including in the event of a Fundamental Transaction, thereby satisfying the conditions for equity classification. Based on this approval, the Company reevaluated the classification of the warrants under ASC 815-40 and determined that equity classification is appropriate. The warrants were remeasured to fair value immediately before the reclassification. As of May 13, 2025, the warrants were revalued at approximately $5.7 million, resulting in a $0.7 million decrease in the liability as compared to March 31, 2025. The change in value was recorded as a Gain on Revaluation of Warrants within Other Income (Expense), net on the condensed consolidated statements of operations and within the Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities on the condensed consolidated statements of cash flows. Subsequently, the total liability of approximately $5.7 million was reclassified to additional paid-in capital.

As of September 30, 2025, the 7,894,736 Series A warrants and 7,894,736 Series B warrants remain outstanding as equity-classified instruments.

The fair value of the outstanding Series A derivative warrants, prior to their reclassification to equity, was determined by using the BSM based on the following assumptions as of May 13, 2025:

The fair value of the outstanding Series A derivative warrants was determined by using the BSM option pricing model based on the following assumptions as of December 31, 2024:

The fair value of the outstanding Series B derivative warrants, prior to their reclassification to equity, was determined by using the BSM option pricing model based on the following assumptions as of May 13, 2025:

The fair value of the outstanding Series B derivative warrants was determined by using the BSM option pricing model based on the following assumptions as of December 31, 2024:

Note 17: Supplemental Financial Statement Information

Other Expense, net

Components of Other Income (Expense), net, are summarized as follows (in thousands):

Three Months and Nine Months Ended September 30, 2025

Three Months and Nine Months Ended September 30, 2024

Note 18: Income Taxes

The Company accounts for income taxes in accordance with ASC 740,Income Taxes, which requires the recognition of deferred tax liabilities and assets at currently enacted tax rates for the expected future tax consequences of events that have been included in the financial statements or tax returns. A valuation allowance is recognized to reduce the net deferred tax asset to an amount that is more likely than not to be realized.

ASC 740 provides guidance on the accounting for uncertainty in income taxes recognized in a company’s financial statements. ASC 740 requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the consolidated financial statements.

For the nine months ended September 30, 2025, the effective tax rate was 0%. The effective tax rate differed from the U.S. federal statutory rate primarily due to state income taxes, a foreign tax rate differential, and a change in valuation allowance. For the nine months ended September 30, 2024, the effective tax rate was 0%. The effective tax rate differed from the U.S. federal statutory rate primarily due to state income taxes, a foreign tax rate differential, and a change in valuation allowance.

During the nine months ended September 30, 2025, the Company didnot record an income tax expense. As of September 30, 2025 and December 31, 2024, net deferred tax liability was $1.3 million and $1.3 million, respectively.

Kartoon Studios, Inc. and its wholly-owned U.S. subsidiaries are subject to U.S. income taxes and file a consolidated tax return in the U.S. The Beacon Communications Group, Ltd., Ameba Inc. and WOW Unlimited Media Inc. are subject to Canadian income taxes on a stand-alone basis and file separate tax returns in Canada.

The Company files income tax returns in the U.S. federal jurisdiction and in the states of California, Florida, Massachusetts, New Jersey and New York, as well as Canada. To the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses were generated and carried forward to make adjustments up to the amount of the net operating losses. The Company is currently subject to U.S. federal, state and local and foreign tax examinations by tax authorities. The Company is no longer subject to audits by U.S. federal, state, local or foreign authorities for years prior to 2020.

On July 4, 2025, the President signed H.R. 1 the OneBig Beautiful Bill Act into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic research and development expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. These changes were reflected in the income tax provision for the period ended September 30, 2025, as enactment occurred before the balance sheet date. The Company determined, there was no material impact to our income tax expense or effective tax rate, due to the full valuation allowance against the net deferred tax asset.

Note 19: Commitments and Contingencies

The following is a schedule of future minimum cash contractual obligations as of September 30, 2025 (in thousands):

Leases

The present value discount of the minimum operating lease payments above was $1.9 million which when deducted from the cash commitments for the leases included in the table above, equates to the lease liabilities of $5.7 million recorded as of September 30, 2025 on the Company’s condensed consolidated balance sheet.

Employment contracts

The Company has entered into employment agreements with certain key executives, which remain in effect for fixed terms. Under these agreements, the executives receive a base salary, subject to potential reviews at the discretion of the Board of Directors. Some of these agreements also include provisions for severance benefits in certain circumstances. As a result, the Company's commitments under these agreements represent future salary or severance payments obligations.

Other Funding Commitments

The Company enters into various agreements associated with its individual properties. Some of these agreements call for the potential future payment of royalties or “profit” participations for either (i) the use of third party intellectual property, in which the Company is obligated to share net profits with the underlying rights holders on a certain basis as defined in the respective agreements, or (ii) services rendered by animation studios, post-production studios, writers, directors, musicians or other creative talent for which the Company is obligated to share with these service providers a portion of the net profits of the properties on which they have rendered services, as defined in each respective agreement.

Note 20: Related Party Transactions

Pursuant to his initial employment agreement dated December 7, 2020, Mr. Heyward was previously entitled to receive a quarterly bonus. Mr. Heyward was paid $55,000 as quarterly bonus for each quarter during the nine months ended September 30, 2025 and 2024.

On February 27, 2023, Mr. Heyward’s prior employment agreement was amended to provide him a creative producer fee of $100,000 per quarter, prorated for the first quarter of 2023, for services rendered to Wow. Mr. Heyward was paid $100,000 in creative producer fees for each quarter during the nine months ended September 30, 2025 and 2024.

On July 19, 2022, the Company entered into a Shareholder Loan Agreement with YFE in the amount of EURO 1.3 million, accruing interest at the fixed annualized rate of 5%, with successive interest periods ofthree months due on the last day of each calendar quarter. The principal plus interest were to be repaid by no later than June 30, 2026. On April 27, 2025, the Company entered into a settlement agreement with YFE to resolve the outstanding Shareholder Loan Agreement. Pursuant to the settlement, the Company accepted a reduced repayment amount of $0.4 million, payable in two installments no later than June 2025, in full satisfaction of the loan balance. The settlement agreement became effective in April 2025 and the Company recorded an adjustment to the balance of the loan and recognized a loss of approximately $0.9 million. As of September 30, 2025, all terms of the settlement agreement were fulfilled.

During 2022, the Company entered into a sublease agreement with a related party to lease one office in the general office space at 190 N. Canon Drive, Suite 400, Beverly Hills, CA 90210. The monthly income was $595 during the nine months ended September 30, 2025 and 2024 and recorded within Other Expense, net in the Company's condensed consolidated statements of operations.

During the quarter ended September 30, 2024, the Company entered intoa consulting agreement with a related party for office space interior design services. The agreement was subject to an initial fee of $6,545 and a monthly fee of $595 that commenced on September 1, 2024. The monthly expense was $595 and $0 during the nine months ended September 30, 2025 and 2024, respectively, and was recorded within General and Administrative expenses in the Company's condensed consolidated statements of operations.

On February 6, 2025, certain members of the Company’s executive management team, including the Chief Operating Officer, established a nonprofit organization The Stan Lee Foundation (the “Foundation”), which was granted tax-exempt status under Section 501(c)(3). The Foundation is not owned, governed, or controlled by the Company. The Company may reference the Foundation in connection with reputational or community engagement efforts. The Company provided limited administrative support totaling approximately $772 during the three months ended September 30, 2025. This support was not part of an ongoing funding commitment and is not considered material to the Company’s condensed consolidated financial statements. The Foundation is not consolidated in these condensed consolidated financial statements.

On August 25, 2025, the Company entered into a new employment agreement with Andy Heyward, the Company’s CEO, which replaced and superseded all prior employment agreements. The agreement revised certain compensation terms, including a new performance-based bonus structure contingent on market capitalization and net income thresholds as of December 31, 2025. The agreement further provides for the potential issuance of a restricted stock unit (“RSU”) award to Mr. Heyward, subject to the determination of the terms. No bonuses were earned or accrued under this arrangement as of September 30, 2025.

Pursuant to the terms of the agreement, Mr. Heyward is entitled to an executive producer fee of $12,500 per episode for each episode he provides services as an executive producer, up to maximum 52 episodes per calendar year. During the nine months ended September 30, 2025 and 2024, Mr. Heyward hasnot earned or was not paid any producer fees.

Note 21: Segment Reporting

ASC Topic 280Segment Reporting establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise that engage in business activities from which it may recognize revenues and incur expenses, and for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker, or group, in deciding how to allocate resources and assess performance.

The Company’s chief operating decision maker (“CODM”) uses revenue and net income (loss) to evaluate the profitability and performance of each operating segment. The CODM does not evaluate the operating segments using asset information and it is therefore not disclosed. Segment operating expenses include operating expenses directly attributable to the segment as well as certain shared corporate administration services and other costs which are allocated to the reportable segments, such as legal expenses, human resources expenses, accounting expenses, insurance expenses, and corporate facilities expenses. Segment operating expenses exclude certain non-recurring items and other costs, such as interest expense, interest income, share-based compensation expense, and taxes. The Company’s CODM evaluates the performance of each reportable segment based on segment operating income (loss) because it provides insight to operational leverage and other operational metrics for each segment.

The Company has identified two operating segments based on the nature of the products and services offered:

The Content Production and Distribution segment includes the operations of Kartoon Studios, Inc, Mainframe Studios, and Frederator Studios. These entities are aggregated due to their similar economic characteristics, nature of products and services, production processes, customer types, and distribution methods. This segment is focused on the creation, production, and distribution of animated and live-action content, as well as licensing and royalty revenue from intellectual property.

The Media Advisory and Advertising Services segment includes The Beacon Media Group and The Beacon Communications Group. These entities provide media advisory and advertising services and marketing services.

The CEO (CODM) reviews revenue and net operating results, as allocated based on the nature of the business activity.

The following table presents the revenue and net earnings within the Company'stwo operating segments (in thousands):

Geographic Information

The following table provides information about disaggregated revenue by geographic area (in thousands):

Additional considerations include the use of segment-level budgets and forecasts created by Mainframe Studios, Frederator and Kartoon Studios at the entity level. The additional financial information prepared by the segment managers is discussed at length in meetings with the CODM. The Company determines that the revenue information reviewed by the CODM, combined with the financial information discussed with the segment managers is sufficiently detailed to allow the CODM to assess each component’s performance and make resource allocation decisions. Kartoon Studios, Frederator and Mainframe Studios are separate entities, although according to ASC 280-10-50-11 all criteria are met in order to present result in aggregation.

When evaluating the Company’s performance and making key decisions regarding resource allocation, the CODM reviews several metrics included in net income or loss, which also include the following:

All other segment items included in net income or loss are reported on the condensed consolidated statements of operations and described within their respective disclosures.

Note 22: Subsequent Events

On October 22, 2025, pursuant to the terms of a securities purchase agreement (the “Purchase Agreement”) entered into with an institutional investor (the “Investor”), the Company closed a registered direct offering of 3,000,000 shares (the “Shares”) of its common stock, par value $0.001 per share (“Common Stock”), and pre-funded warrants to purchase up to 6,903,049 shares of Common Stock (the “Pre-Funded Warrants”) to the Investor. In a concurrent private placement, pursuant to the Purchase Agreement, the Company also sold to the Investor unregistered warrants to purchase up to 9,903,049 shares of Common Stock (the “Common Warrants”), with an exercise price of $0.738 per share. Each Share and privately placed Common Warrant was sold at a public offering price of $0.738, and each Pre-Funded Warrant and privately placed Common Warrant was sold at a public offering price of $0.737, for aggregate gross proceeds at closing of approximately $7.3 million, prior to deducting placement agent fees and other offering expenses. The Company paid to the placement agent in connection with the offering a cash fee equal to 7% of the aggregate gross proceeds from the sale of the securities sold in this offering, and the placement agent is also entitled to receive 7% of the gross proceeds received from the exercise of any warrants issued in the offering. In addition, the Company issued warrants to purchase 693,213 shares of common stock to the placement agent and its designees with an exercise price of $0.8118 per share.

On August 27, 2025, the Company entered into a transaction under Section 3(a)(10) of the Securities Act of 1933 with a third party 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, the third party makes payments to the Company’s vendors in cash and, in exchange, the Company issues shares of common stock to the third party. The transaction was carried out in stages and as of November 14, 2025, the Company had completed the arrangement, settling a total of $1.8 million, and issued 3,148,535 shares of common stock.