Kartoon Studios, Inc.

Current report

We are subject to laws governing children’s privacy and online safety, including the FTC’s amended COPPA rule, which became fully enforceable in April 2026, and compliance requires ongoing operational measures.

Current report

Our digital distribution properties, including Kartoon Channel!, are directed to children, and we are subject to the Children’s Online Privacy Protection Act (COPPA) and the FTC’s implementing rule, which govern the online collection, use, disclosure, and retention of personal information from children under the age of 13. In April 2025, the FTC published significant amendments to the COPPA Rule, and operators were required to be in full compliance by April 22, 2026. Among other changes, the amended rule expanded the definition of personal information to include biometric identifiers, requires separate verifiable parental consent before disclosing children’s personal information to third parties for purposes not integral to our service (including targeted advertising and training artificial intelligence technologies), and requires operators to maintain a written information security program and data retention policy applicable to children’s personal information.

Current report

Because a portion of our revenue is derived from advertising on child-directed services, these requirements, particularly the separate consent requirement for third-party advertising disclosures, affect how we and our advertising partners may collect and use viewer data. Compliance involves ongoing operational, contractual, and technological measures, including monitoring third-party vendors’ use of data collected through our services. In addition, a growing number of states have enacted laws imposing further restrictions on the processing of minors’ personal information, and additional federal and state rulemaking, including with respect to age verification, remains under active consideration.

Current report

We implemented the changes necessary to comply with the amended rule by the required date, and doing so has not to date had a material effect on our operations or advertising-supported revenue. However, because these requirements are not uniform across jurisdictions and continue to evolve, compliance with the most restrictive applicable standard could increase our costs or constrain our advertising-supported revenue model in the future. Failure to comply with COPPA or analogous state laws could result in investigations, enforcement actions, civil penalties, and reputational harm with parents, distributors, and advertisers, any of which could adversely affect our business, financial condition, and results of operations.

Current report

We are authorized to issue “blank check” preferred stock without stockholder approval, which could adversely impact the rights of holders of our common stock.

Current report

Our Articles of Incorporation, as amended (our “Articles of Incorporation”), authorize us to issue up to 10,000,000 shares of blank check preferred stock without seeking approval of our shareholders. As of June 30, 2026, 6,000 shares of our authorized preferred stock have been designated as 0% Series A Convertible Preferred Stock, and 50,000 shares of our authorized preferred stock have been designated as Series C Preferred Stock, none of which shares were outstanding. On July 1, 2026, the Board of Directors designated 300,000 shares of our authorized preferred stock as Series D Participating Preferred Stock, none of which have been issued, in connection with our adoption of a stockholder rights plan on that date, as described elsewhere in this report. Any preferred stock that we issue in the future may rank ahead of our common stock in terms of dividend priority or liquidation premiums and may have greater voting rights than our common stock. In addition, such preferred stock may contain provisions allowing those shares to be converted into shares of common stock, which could dilute the value of common stock to current stockholders and could adversely affect the market price, if any, of our common stock. In addition, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company. Although we have no present intention to issue any additional shares of authorized preferred stock, there can be no assurance that we will not do so in the future.

Current report

Our stockholder rights plan and provisions of our amended Bylaws and Nevada law could discourage, delay or prevent a change in control and may adversely affect the market price of our common stock.

Current report

On July 1, 2026, our Board of Directors adopted a stockholder rights plan (the “Rights Agreement”) and adopted amendments to our Bylaws. Under the Rights Agreement, if a person or group acquires beneficial ownership of 10% or more of our outstanding common stock without the approval of our Board, the rights held by that person or group would become void and each other holder of a right would become entitled to purchase shares of our common stock at a substantial discount, resulting in significant dilution to the acquiring person or group. In connection with the Rights Agreement, on July 1, 2026 our Board also designated a new series of participating preferred stock. In addition, the amendments to our Bylaws adopted on July 1, 2026, among other things, divide our Board into two classes with staggered terms, eliminate the ability of stockholders to act by written consent, provide that special meetings of stockholders may be called only by the Board, establish advance notice procedures for stockholder nominations and proposals, require a two-thirds supermajority stockholder vote to remove a director, and designate an exclusive forum for certain disputes. We are also subject to provisions of Nevada law that may have anti-takeover effects.

Current report

These provisions, alone or in combination, could make it more difficult for a third party to acquire us, or for our stockholders to change the composition of our Board, even in a transaction that some or all of our stockholders might consider to be in their best interests or in which our stockholders might receive a premium over the then-current market price of our common stock. As a result, these provisions could limit the price that investors are willing to pay in the future for shares of our common stock and could adversely affect the market price of our common stock and the ability of our stockholders to realize a premium for their shares.

Current report

Actions of activist stockholders could be disruptive and costly and could adversely affect our results of operations, financial condition, and/or share price.

Current report

While we strive to maintain constructive communications with our stockholders, we may, from time to time, be subject to demands from activist stockholders. Any activist campaign against the Company that contests, conflicts with, or seeks to change, our board composition, leadership, strategic direction, or business mix could have an adverse effect on us because: (i) responding to actions by activist stockholders could disrupt our operations, be costly or time-consuming, or divert the attention of our board of directors and senior management from their regular duties, including diverting their attention from the operation of our business and the execution of our strategic plans, which could adversely affect our results of operations or financial condition; (ii) perceived uncertainties as to our future direction, including as a result of possible changes to the composition of our board, may lead to the perception of a change in the direction of the business or lack of continuity, any of which may be exploited by our competitors, cause concern to our customers, employees, and/or business partners and result in the loss of potential business opportunities, or make it more difficult to attract and retain qualified personnel and business partners, and may adversely affect our relationships with vendors, customers, business partners, and other third parties; (iii) these types of actions could cause significant fluctuations in our share price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business; and (iv) if individuals are elected to our board of directors with a specific agenda, it may adversely affect our ability to effectively implement our business strategy and create additional value for our stockholders.

Previous report

We must raise additional capital to fund our operations in order to continue as a going concern.

Previous report

As of March 31, 2026, we had an accumulated deficit of $770.2 million and total stockholders’ equity of $22.6 million. As of March 31, 2026, we had total current assets of $30.7 million, including cash of $5.0 million, and total current liabilities of $31.4 million. We had negative working capital of $0.7 million as of March 31, 2026, compared to working capital of $2.3 million as of December 31, 2025. Management has evaluated the significance of these conditions in relation to our ability to meet our 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 consolidated financial statements. In order to address our capital needs, we will need to raise further capital through the sale of equity or debt securities, financing arrangements or by entering into collaborative, strategic, and/or licensing transactions. There can be no assurance that we will be able to complete any such financing, collaborative or strategic transactions in a timely manner or on acceptable terms, or at all. Our ability to continue as a going concern is dependent upon our ability to generate revenue and raise additional capital. There can be no assurance that we will be successful in accomplishing these objectives. Without such additional capital, we may be required to curtail or cease operations and be required to realize our assets and discharge our liabilities other than in the normal course of business which could cause investors to suffer the loss of all or a substantial portion of their investment.