Core Viewpoint - Kartoon Studios has announced the addition of composer Danny Elfman to the creative team for the upcoming project "Hundred Acre Wood's Winnie and Friends," which aims to reimagine the classic franchise for a new generation [3][6][8]. Company Overview - Kartoon Studios (NYSE American: TOON) is a global leader in children's and family entertainment, delivering premium content and high-value intellectual property to millions of viewers worldwide [9]. - The company operates Mainframe Studios, one of North America's largest animation producers, with over 22,000 minutes of award-winning programming [9]. Project Details - The project will consist of 208 seven-minute episodes and five holiday specials, with the first special set to premiere in December 2026, and a sneak peek scheduled for Christmas Eve 2025 [6][8]. - The franchise is expected to be the most ambitious initiative in Kartoon Studios' history, aiming to create a long-term global franchise that will generate significant shareholder value [6][8]. Financial Impact - The "Winnie-the-Pooh" franchise has historically been commercially successful, generating approximately $80 billion in retail sales [8]. - Danny Elfman's contributions are anticipated to enhance the project's appeal, potentially driving further box office success and audience engagement [5][8]. Creative Team - Elfman joins Executive Producer Linda Woolverton, known for her work on "The Lion King" and "Beauty and the Beast," and Creative Director John Rivoli, recognized for his contributions to major franchises like "Harry Potter" and "Batman" [7][8]. - The collaboration is expected to blend nostalgia with fresh interpretations, appealing to both existing fans and new audiences [8].

Core Insights - Kartoon Studios has announced the addition of composer Danny Elfman to the creative team for the upcoming project "Hundred Acre Wood's Winnie and Friends," which aims to reimagine the classic franchise [3][6] - The project is described as the most ambitious franchise initiative in the company's history, launching with 208 seven-minute episodes and five holiday specials [6][9] - The first special is set to premiere in December 2026, with a sneak peek scheduled for Christmas Eve 2025, coinciding with the 100th anniversary of A.A. Milne's original publication [6][8] Company Overview - Kartoon Studios (NYSE American: TOON) is a global leader in children's and family entertainment, delivering premium content and high-value intellectual property [9] - The company operates Mainframe Studios, one of North America's largest animation producers, with over 22,000 minutes of award-winning programming [9] - Through its Toon Media Networks division, Kartoon Studios reaches audiences across various platforms, including linear television and streaming services [10] Financial Impact - The franchise of Winnie-the-Pooh has generated approximately $80 billion in retail sales, indicating its commercial success and potential for future revenue generation [8] - The collaboration with renowned figures like Elfman, Woolverton, and Rivoli is expected to enhance the creative quality and marketability of the new franchise [7][8]

Core Insights - Kartoon Studios has retired 348,127 shares of its common stock, enhancing the capital structure and increasing remaining shareholders' ownership percentage [1][2] - The share retirement is part of a strategy to streamline the capital structure and is expected to positively impact future earnings per share growth [2] - The company is focused on achieving sustained profitability and growth, with confidence in its strategic direction and growth trajectory [2] Company Overview - Kartoon Studios (NYSE AMERICAN: TOON) is a leader in children's and family entertainment, offering premium content and intellectual property to a global audience [3] - The company's portfolio includes well-known brands such as Stan Lee's Superhero Kindergarten and Rainbow Rangers, and it operates Mainframe Studios, a major animation producer [3] - Through its Toon Media Networks division, Kartoon Studios reaches audiences via various platforms, including linear television and streaming services, with Kartoon Channel! being the top kids' streaming app on the Apple App Store [4] Strategic Positioning - The decision to exchange a portion of YFE holdings for TOON shares reflects management's belief in the long-term value of Kartoon Studios [2] - The company is positioned for sustained growth with a robust content pipeline and strategic brand partnerships, reaching over 60 countries [4]

Core Viewpoint - Kartoon Studios is launching "Bitcoin Brigade: Adventures in Satoshi City," an innovative animated series that integrates blockchain technology and Bitcoin education into children's entertainment, set to debut in fall 2026 on Kartoon Channel [1][10]. Group 1: Series Overview - "Bitcoin Brigade" invites children into Satoshi City, a digital realm where kids discover a portal connecting their world to a decentralized metropolis, blending action with educational themes [2]. - The series will feature dynamic anime-style visuals and original K-Pop music, aiming to create an immersive experience [2]. - The narrative includes young heroes representing Bitcoin and blockchain concepts, who defend their city from villains threatening the system [6]. Group 2: Business Model and Partnerships - Kartoon Studios is developing a comprehensive Bitcoin-native business platform, including The Satoshi Sparks Rewards System, allowing kids to earn digital currency by engaging with the series [8]. - The company is partnering with Bitkern, a leading Bitcoin mining company, to guide the series and its global launch strategy [2][4]. - A global licensing program will feature toys and apparel embedded with NFC chips to educate children about Bitcoin and blockchain technology [9]. Group 3: Educational Focus - The series aims to teach children about finance, ownership, and innovation through engaging storytelling and interactive challenges [3][8]. - An interactive mobile app will provide secure, kid-friendly Lightning wallets for earning and spending Sparks, with parental controls to promote responsible Bitcoin custodianship [9]. Group 4: Market Positioning - Kartoon Studios positions itself at the forefront of kids' entertainment and blockchain innovation, aiming for a revolutionary impact on entertainment, education, and gaming [1][11]. - The series will be accessible on multiple platforms, including Kartoon Channel and YouTube Kids, ensuring broad engagement [10].

Core Insights - Kartoon Studios is rapidly expanding its Stan Lee consumer products business under the leadership of former Marvel EVP Bob Sabouni, aiming to unlock shareholder value through premium legacy IP monetization [4][5] - The company has secured high-value partnerships with industry leaders such as Madame Tussauds, Panini Publishing, and Topps, highlighting the long-term market potential of the Stan Lee brand [5][6] - The Stan Lee Universe initiative benefits from a substantial direct-to-consumer marketing engine, boasting over 30 million followers across various social media platforms, which supports product launches and brand collaborations [7][8] Company Strategy - The company is executing a focused strategy to convert Stan Lee's cultural equity into ongoing revenues and long-term shareholder value, with a goal to build a scalable global consumer products business [5][7] - Bob Sabouni's experience in generating billions in retail sales at Marvel is expected to enhance the company's licensing and partnership efforts [5][6] - The rollout of Stan Lee superhero IP, starting with "The Excelsiors" graphic novel, is part of the broader strategy to engage fans and create new revenue streams [5][7] Partnership Highlights - Recent deals include a renewal with Madame Tussauds for a lifelike Stan Lee wax figure and a limited-edition card activation with Panini Publishing [6] - The partnership with Topps provides access to a vast collector network, enhancing the reach of the Stan Lee Universe [6] - Additional partnerships include collaborations for fine art collectibles, designer sunglasses, and high-end collectible cards, showcasing a diversified consumer product portfolio [6][7] Market Potential - The Stan Lee brand's unique ability to attract iconic collaborators and multi-generational fans underscores its long-term market potential [5][6] - The company anticipates announcing more licenses across various categories before the end of the year, further expanding its product offerings [7] - The integration of film and theme park licensing rights with strategic brand partnerships is expected to deepen fan engagement and create meaningful revenue streams [7][8]

Core Insights - Toon Media Networks, a subsidiary of Kartoon Studios, has experienced significant audience growth, particularly through its flagship streaming service, Kartoon Channel! [2][9] - The company reported a 221% year-over-year increase in FAST views and a 45% sequential increase compared to Q1 2025 [9] - Under the leadership of Todd Steinman, Toon Media Networks is consolidating its global operations and expanding its reach across over 60 territories [8][9] Performance Metrics - Kartoon Channel! achieved a 221% increase in FAST views year-over-year and a 45% increase sequentially [9] - Original content such as Rainbow Rangers and Stan Lee's Superhero Kindergarten saw viewership increases of 80% and 47% year-over-year, respectively [9] - The user base for the Kartoon Channel! app expanded by 26% quarter-over-quarter [9] Strategic Initiatives - Toon Media Networks is leveraging a cross-platform strategy that includes FAST, AVOD, and SVOD to enhance audience engagement and monetization [2][7] - The division is recognized for its scalable, data-driven approach to content delivery and audience growth [7][10] - The company received Amazon's Operational Excellence Award for its performance on Prime Video, highlighting its effective execution [10] Market Expansion - Toon Media Networks now reaches viewers in over 60 territories, delivering billions of views annually across various platforms [9][11] - The division operates on major streaming platforms including YouTube, Amazon Prime Video, Roku, and more, ensuring extensive multi-platform distribution [9][11] Leadership and Vision - Todd Steinman is recognized as a thought leader in the industry, and his leadership is expected to drive further growth and recognition for the brand [8][9] - The company plans to make several material announcements across multiple business segments in the near future, indicating ongoing strategic initiatives [8]

[Q2 2025 Earnings Release Highlights](index=1&type=section&id=Q2%202025%20Earnings%20Release%20Highlights) [1.1. Executive Summary](index=1&type=section&id=1.1.%20Executive%20Summary) Kartoon Studios achieved its fifth consecutive quarter of revenue growth in Q2 2025, with a 23% year-over-year increase and significant streaming viewership, while double-digit cost reductions position the company for profitability by the end of 2025 - The company achieved its **fifth consecutive quarter of revenue growth**[2](index=2&type=chunk)[3](index=3&type=chunk) - Q2 revenue **increased by 23% year-over-year**[2](index=2&type=chunk)[3](index=3&type=chunk) - G&A expenses saw a **double-digit decrease**, with the company projecting profitability in 2025[2](index=2&type=chunk)[3](index=3&type=chunk) - Kartoon Channel streaming service was rated as the **top children's streaming app** in the Apple App Store[2](index=2&type=chunk) - FAST viewership **increased by 221% year-over-year**[2](index=2&type=chunk) - Mainframe Studios revenue **increased by 44% year-over-year**[2](index=2&type=chunk) [1.2. Key Financial Performance](index=2&type=section&id=1.2.%20Key%20Financial%20Performance) The company reported strong Q2 revenue growth of 22.6% year-over-year to $10.3 million, with production services up 44.4%, alongside improved operational efficiency shown by a 31% narrower operating loss and 10.1% lower G&A expenses Q2 2025 Key Financial Metrics | Metric | Amount/Change | Year-over-Year Change (YoY) | Sequential Change | | :------------------------ | :---------- | :----------- | :------------------ | | Total Revenue | $10.3M | +22.6% | +8.2% | | Production Services Revenue | N/A | +44.4% | +12% | | Operating Loss | N/A | Narrowed 31% | N/A | | G&A Expenses | N/A | Decreased 10.1% | N/A | [Operational Performance & Strategic Initiatives](index=2&type=section&id=Operational%20Performance%20%26%20Strategic%20Initiatives) [2.1. Kartoon Channel! & Toon Media Networks](index=2&type=section&id=2.1.%20Kartoon%20Channel!%20%26%20Toon%20Media%20Networks) Kartoon Channel! remains the top children's streaming app in the Apple App Store, leveraging its content and user experience, while Toon Media Networks strengthens Kartoon Studios' global leadership in children's entertainment, diversifying revenue and maximizing audience engagement - Kartoon Channel! consistently holds the position as the **number one children's streaming app** in the Apple App Store[5](index=5&type=chunk) - Its popular content library includes *Super Mario Bros.™*, *Pac-Man and the Ghostly Adventures*, *Roblox Rumble*, and original productions *Shaq's Garage* and *Stan Lee's Superhero Kindergarten*[8](index=8&type=chunk) - The company received the **Amazon Operational Excellence Award**, validating its performance on Prime Video[11](index=11&type=chunk) [2.1.1. App Performance & Content Library](index=2&type=section&id=2.1.1.%20App%20Performance%20%26%20Content%20Library) - Kartoon Channel! was rated as the **number one children's streaming app** in the Apple App Store, surpassing YouTube Kids, Netflix, and Disney+[5](index=5&type=chunk) - Users responded positively to popular shows and movies, highly curated channel safety, and user experience[5](index=5&type=chunk) - The content library includes *Super Mario Bros.™*, *Pac-Man and the Ghostly Adventures*, *Roblox Rumble*, and original productions *Shaq's Garage* and *Stan Lee's Superhero Kindergarten*[8](index=8&type=chunk) [2.1.2. Viewership & Subscription Growth](index=3&type=section&id=2.1.2.%20Viewership%20%26%20Subscription%20Growth) - FAST viewership **increased by 45% sequentially** and **221% year-over-year**, significantly expanding the audience[11](index=11&type=chunk) - Tubi watch time **increased by 50% year-over-year**, enhancing user engagement[11](index=11&type=chunk) - Kartoon Channel app viewership **increased by 26% sequentially**, strengthening digital footprint and user retention[11](index=11&type=chunk) - SVOD subscriptions grew for the **seventh consecutive month** as of July 2025, indicating strong subscription momentum[11](index=11&type=chunk) [2.2. Mainframe Studios Growth](index=4&type=section&id=2.2.%20Mainframe%20Studios%20Growth) Mainframe Studios achieved 44% year-over-year revenue growth, fueled by strong demand from global partners, with over 90% of 2025 projected revenue secured and agreements extending to 2027, ensuring robust future visibility - Mainframe Studios revenue **increased by 44% year-over-year**[12](index=12&type=chunk) - Revenue growth was driven by strong demand from top global partners including Netflix, Mattel, Disney, PBS, Sony Kids, and Spin Master[12](index=12&type=chunk) - Over **90% of projected 2025 revenue** is contractually locked, with production agreements extending into 2026 and 2027, ensuring strong future visibility[12](index=12&type=chunk) - Current productions include *SuperKitties* (Disney Channel), *Unicorn Academy* (Netflix), *Phoebe & Jay* (PBS), *Barbie* (Mattel/Netflix), and *It's Andrew* (ABC Australia, CBC Canada)[13](index=13&type=chunk) [2.3. Intellectual Property (IP) Pipeline](index=3&type=section&id=2.3.%20Intellectual%20Property%20(IP)%20Pipeline) Kartoon Studios plans to launch several key IP projects in H2 2025, including a Christmas special preview for *Winnie-the-Pooh and Friends of the Hundred Acre Wood* and the debut of *Stan Lee's The Accelerators* graphic novel - The Christmas special preview for *Winnie-the-Pooh and Friends of the Hundred Acre Wood* is scheduled for release on **December 24, 2025**[9](index=9&type=chunk) - *Stan Lee's The Accelerators* will debut as a graphic novel in **Q4 2025**, with television and audio versions under development[12](index=12&type=chunk) [Financial Review & Outlook](index=5&type=section&id=Financial%20Review%20%26%20Outlook) [3.1. Management Commentary](index=5&type=section&id=3.1.%20Management%20Commentary) Management emphasized the business model's strength, operational discipline, and global expansion driving margin improvement, with five consecutive quarters of revenue growth, strict cost control, and zero long-term debt supporting profitability, reflecting strong confidence through stock repurchases - CEO Andy Heyward emphasized the **strength and scalability of the company's business model**, along with operational discipline and global business expansion driving margin improvement[4](index=4&type=chunk) - CFO Brian Parisi noted the company achieved **five consecutive quarters of revenue growth**, highlighting strict cost control and **zero long-term debt**[13](index=13&type=chunk) - Management and board members purchased company stock in the open market, reflecting strong confidence in the company's strategic direction and business prospects[13](index=13&type=chunk) [3.2. Q2 2025 Financial Summary](index=5&type=section&id=3.2.%20Q2%202025%20Financial%20Summary) The company reported key financial data for Q2 2025, including $10.3 million in revenue, $25.5 million in current assets, and $29.7 million in shareholders' equity, with no long-term debt, demonstrating a robust financial position Q2 2025 Key Financial Data | Metric | Amount | | :------------------ | :---------- | | Revenue | $10.3 million | | Current Assets | $25.5 million | | Shareholders' Equity | $29.7 million | | Long-term Debt | None | - Complete financial results are available in the company's Form 10-Q report filed with the SEC[14](index=14&type=chunk) [3.3. Path to Profitability & Strategic Vision](index=5&type=section&id=3.3.%20Path%20to%20Profitability%20%26%20Strategic%20Vision) Kartoon Studios is confidently advancing towards profitability by late 2025, supported by Mainframe Studios' expanded production, a strengthened banking relationship, and new high-potential IP launches, while diversifying monetization across licensing, streaming, advertising, and digital platforms with globally relevant children's content - The company is confidently progressing towards **profitability by the end of 2025**[15](index=15&type=chunk) - The path to profitability is supported by Mainframe Studios' expanding production capabilities and a strengthened banking relationship with the National Bank of Canada[15](index=15&type=chunk) - Multiple high-potential franchise projects are planned for launch in 2025[15](index=15&type=chunk) - The company is expanding monetization capabilities through various channels including licensing, streaming, advertising, and digital platforms[15](index=15&type=chunk) [Company Information](index=6&type=section&id=Company%20Information) [4.1. About Kartoon Studios](index=6&type=section&id=4.1.%20About%20Kartoon%20Studios) Kartoon Studios (NYSE AMERICAN: TOON) is a global leader in children's and family entertainment, offering premium content and high-value IP, including *Stan Lee's Superhero Kindergarten* and *Shaq's Garage*, controlling Stan Lee Universe, operating Mainframe Studios, and reaching audiences in over 60 regions via Toon Media Networks, with Kartoon Channel! consistently ranked as the top children's streaming app - Kartoon Studios is a **global leader in children's and family entertainment**, providing premium content and high-value intellectual property[17](index=17&type=chunk) - The company's brand portfolio includes *Stan Lee's Superhero Kindergarten*, *Shaq's Garage*, *Rainbow Rangers*, and *Llama Llama*[17](index=17&type=chunk) - The company controls **Stan Lee Universe** and operates Mainframe Studios, one of North America's largest animation production companies[17](index=17&type=chunk) - Through its Toon Media Networks division, the company reaches audiences across cable, AVOD, SVOD, FAST channels, and top streaming platforms[18](index=18&type=chunk) - Kartoon Channel! is consistently rated as the **number one children's streaming app** in the Apple App Store[18](index=18&type=chunk) - The company has a distribution network in **over 60 regions globally**[18](index=18&type=chunk) [4.2. Forward-Looking Statements](index=6&type=section&id=4.2.%20Forward-Looking%20Statements) This section contains forward-looking statements regarding the company's future performance, profitability, content releases, and strategic initiatives, which are subject to various risks and uncertainties outlined in SEC filings, and the company undertakes no obligation to update these statements except as required by law - Statements regarding the company's 2025 profitability, content releases, and strategic initiatives are all forward-looking statements[19](index=19&type=chunk) - These statements are subject to various risks and uncertainties, including risk factors outlined in the company's annual report on Form 10-K and subsequent SEC filings[19](index=19&type=chunk) - Except as required by law, the company expressly disclaims any obligation to update or revise these statements[19](index=19&type=chunk) [4.3. Contact Information](index=6&type=section&id=4.3.%20Contact%20Information) This section provides contact information for media and investor relations - Media Contact: pr@kartoonstudios.com[20](index=20&type=chunk) - Investor Relations Contact: ir@kartoonstudios.com[20](index=20&type=chunk)

[PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Kartoon Studios reported 37% revenue growth to $19.8 million, but significant net losses and negative working capital raise going concern doubts Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | **$25,463** | **$34,664** | | Cash | $2,056 | $7,879 | | Accounts Receivable, net | $7,043 | $11,982 | | **Total Assets** | **$70,003** | **$85,467** | | **Total Current Liabilities** | **$30,360** | **$33,440** | | Accounts Payable | $6,772 | $11,954 | | Production Facilities, net | $10,609 | $9,220 | | **Total Liabilities** | **$40,328** | **$49,007** | | **Total Stockholders' Equity** | **$29,675** | **$36,460** | | **Working Capital** | **($4,897)** | **$1,224** | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | **Total Revenues** | **$19,783** | **$14,462** | | Production Services | $13,931 | $7,858 | | Content Distribution | $3,973 | $4,725 | | Loss from Operations | ($6,294) | ($10,955) | | **Net Loss Attributable to Kartoon Studios, Inc.** | **($12,689)** | **($12,918)** | | Net Loss per Share (Basic & Diluted) | ($0.27) | ($0.35) | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($6,290) | ($2,654) | | Net Cash Provided by Investing Activities | $1,301 | $5,518 | | Net Cash Used in Financing Activities | ($273) | ($4,804) | | **Net Decrease in Cash and Restricted Cash** | **($5,817)** | **($1,354)** | | **Ending Cash and Restricted Cash** | **$2,568** | **$2,741** | - Management has substantial doubt about the company's ability to continue as a going concern due to historical net losses, **negative working capital of $4.9 million**, and **cash used in operations of $6.3 million** for the first six months of 2025[38](index=38&type=chunk) [Note 1: Organization, Business, and Going Concern](index=11&type=section&id=Note%201%3A%20Organization%20and%20Business) Kartoon Studios, a children's content company, faces substantial doubt about its going concern status due to historical losses and negative working capital - The company's core business includes original IP development, third-party production services through Mainframe Studios, a media agency (Beacon), and content distribution via platforms like Kartoon Channel[30](index=30&type=chunk)[33](index=33&type=chunk) - As of June 30, 2025, the company had **negative working capital of $4.9 million**, compared to positive working capital of $1.2 million at year-end 2024, indicating deteriorating short-term liquidity[38](index=38&type=chunk) - To improve liquidity after the quarter ended, the company sold certain assets, including Employee Retention Tax Credit receivables and **1,500,000 shares of Your Family Entertainment AG (YFE)**[38](index=38&type=chunk) [Note 2: Accounting Policies and Concentration of Risk](index=13&type=section&id=Note%202%3A%20Basis%20of%20Presentation%20and%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements are U.S. GAAP compliant; a key risk is customer concentration, with four customers accounting for 85.9% of revenue - For the six months ended June 30, 2025, **four customers accounted for 85.9% of total revenue**, up from 66.7% from three customers in the same period of 2024[51](index=51&type=chunk) - As of June 30, 2025, **two customers accounted for 49.6% of total accounts receivable**[52](index=52&type=chunk) [Note 4: Investment in Your Family Entertainment AG (YFE)](index=16&type=section&id=Note%204%3A%20Investment%20in%20Equity%20Interest) The YFE investment's fair value decreased by $5.7 million due to stock price decline, leading to a revaluation loss and subsequent share sale - The fair value of the YFE investment decreased by **$5.7 million** from December 31, 2024, to June 30, 2025, due to a decline in YFE's stock price and foreign currency effects[60](index=60&type=chunk) - On July 14, 2025, the company sold **1.5 million YFE shares for €750,000** as part of its strategy to optimize its asset portfolio and improve liquidity[60](index=60&type=chunk)[134](index=134&type=chunk) [Note 16: Warrants](index=24&type=section&id=Note%2016%3A%20Warrants) Shareholder approval enabled reclassification of Series A and B warrants from liability to equity, eliminating future fair value adjustments - On May 14, 2025, shareholder approval allowed for the reclassification of Series A and B warrants from liability to equity[97](index=97&type=chunk) - The warrant liability of approximately **$5.7 million** was reclassified to additional paid-in capital, eliminating future fair value adjustments through earnings for these instruments[97](index=97&type=chunk) [Note 21: Segment Reporting](index=31&type=section&id=Note%2021%3A%20Segment%20Reporting) Content Production drove 42% revenue growth to $18.1 million, but both segments reported net losses, with overall loss narrowing slightly Segment Performance for Six Months Ended June 30 (in thousands) | Segment | Revenue 2025 | Revenue 2024 | Net Loss 2025 | Net Loss 2024 | | :--- | :--- | :--- | :--- | :--- | | Content Production and Distribution | $18,074 | $12,710 | ($11,531) | ($12,435) | | Media Advisory and Advertising Services | $1,709 | $1,752 | ($1,158) | ($483) | | **Total** | **$19,783** | **$14,462** | **($12,689)** | **($12,918)** | [Note 22: Subsequent Events](index=35&type=section&id=Note%2022%3A%20Subsequent%20Events) Post-quarter, Kartoon Studios sold YFE shares and ERTC claims, and entered a share exchange to improve liquidity and optimize assets - Sold **1,500,000 YFE shares for €750,000** on July 14, 2025[134](index=134&type=chunk) - Entered a non-cash agreement to exchange **348,127 YFE shares** for 348,127 shares of its own common stock held by F&M Film[135](index=135&type=chunk) - Agreed to sell **$0.9 million in ERTC refund claims** for an upfront cash payment of **$0.5 million** (55% of the claim amount)[136](index=136&type=chunk) [Management's Discussion and Analysis (MD&A)](index=36&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue grew 37% driven by Production Services, but liquidity worsened, raising going concern doubts, prompting capital raise and cost-saving plans [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Revenue increased 37% for six months, led by Production Services; G&A decreased, but Other Expense rose due to YFE investment revaluation loss Revenue Comparison for Three Months Ended June 30 (in thousands) | Revenue Stream | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Production Services | $7,359 | $5,095 | $2,264 | 44% | | Content Distribution | $1,992 | $2,396 | ($404) | (17%) | | **Total Revenue** | **$10,279** | **$8,384** | **$1,895** | **23%** | Revenue Comparison for Six Months Ended June 30 (in thousands) | Revenue Stream | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Production Services | $13,931 | $7,858 | $6,073 | 77% | | Content Distribution | $3,973 | $4,725 | ($752) | (16%) | | **Total Revenue** | **$19,783** | **$14,462** | **$5,321** | **37%** | - General and Administrative expenses decreased by **$2.6 million (18%)** for the six months ended June 30, 2025, compared to the prior year, due to lower professional fees, cost-saving initiatives, and reduced share-based compensation[159](index=159&type=chunk) - Other Expense, net for the six months ended June 30, 2025 was **$6.3 million**, a significant increase from $1.6 million in the prior year, primarily driven by a **$7.4 million loss on the revaluation of the YFE equity investment**[161](index=161&type=chunk)[162](index=162&type=chunk) [Liquidity, Going Concern, and Capital Resources](index=42&type=section&id=Liquidity%2C%20Going%20Concern%2C%20and%20Capital%20Resources) Liquidity significantly weakened with $5.8 million cash decrease and negative working capital, leading to substantial going concern doubt - Cash and restricted cash decreased by **$5.8 million** in the first six months of 2025, primarily due to **$6.3 million of cash used in operating activities**[164](index=164&type=chunk) - Working capital shifted from **$1.2 million** at Dec 31, 2024, to a deficit of **$4.9 million** at June 30, 2025, a decrease of **$6.1 million**[167](index=167&type=chunk) - Management plans to address the going concern issue by considering multiple alternatives, including the sale of equity or debt securities and implementing cost-saving measures[169](index=169&type=chunk)[170](index=170&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Kartoon Studios is exempt from providing this disclosure - The company is exempt from this disclosure requirement due to its status as a smaller reporting company[184](index=184&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were effective as of June 30, 2025, and a material weakness in IT general controls was remediated - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[186](index=186&type=chunk) - A previously identified material weakness related to inadequate segregation of duties in IT general controls was remediated, with the final phase completed in the second quarter of 2025[187](index=187&type=chunk)[188](index=188&type=chunk) [PART II - OTHER INFORMATION](index=47&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company faces ongoing securities class action and derivative lawsuits, with a Section 16(b) case awaiting summary judgment decisions - In the securities class action, the District Court has allowed a claim based on March 2020 statements to proceed, while dismissing others; the case is ongoing[193](index=193&type=chunk) - Several shareholder derivative lawsuits are stayed pending the outcome of the securities class action[200](index=200&type=chunk) - In a Section 16(b) lawsuit where the company is a nominal defendant, cross-motions for summary judgment have been filed and are awaiting a court decision[201](index=201&type=chunk) [Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) Substantial doubt exists about the company's going concern ability due to losses, negative working capital, and high customer concentration - There is substantial doubt about the company's ability to continue as a going concern, requiring it to raise additional capital to fund operations[206](index=206&type=chunk) - The company has a history of operating losses, incurring a **net loss of $12.9 million** for the six months ended June 30, 2025, and has an **accumulated deficit of $752.0 million**[206](index=206&type=chunk)[208](index=208&type=chunk) - During Q2 2025, **four customers accounted for 85.9% of total revenue**, highlighting significant customer concentration risk[212](index=212&type=chunk) - Potential U.S. tariffs on foreign-produced content could adversely impact the business, as its primary animation production is in Canada[210](index=210&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=51&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period [Other Information](index=51&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements this quarter [Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Form 10-Q, including corporate governance and certifications

Core Insights - Kartoon Studios is on a path toward profitability by the end of 2025, with significant revenue growth and cost reductions [1][17] - The company reported its fifth consecutive quarter of revenue growth, with Q2 revenue increasing by 23% year-over-year [2][5] - The Kartoon Channel remains the top-rated children's streaming app in the Apple App Store, with viewership expanding significantly [3][8] Financial Performance - Total revenue for Q2 2025 reached $10.3 million, reflecting an increase of 22.6% year-over-year and 8.2% sequentially [5][19] - Production services revenue grew by 44.4% year-over-year, driven by increased client demand [5][18] - General and administrative (G&A) expenses decreased by 10.1% year-over-year, indicating effective cost control [5][15] Operational Highlights - The company achieved a 31% reduction in operating loss year-over-year, showcasing improved operational efficiency [5][15] - FAST views surged by 221% year-over-year, indicating strong audience engagement [1][8] - SVOD subscriptions have increased for the seventh consecutive month, highlighting robust subscription growth [8] Content and IP Development - Major launches are planned for the second half of 2025, including a Christmas special for "Hundred Acre Wood/Winnie & Friends" [7][17] - The company has a diverse content pipeline, including popular titles and collaborations with major partners like Netflix and Disney [6][18] - The library includes well-known franchises such as Super Mario Bros.™ and original content like Stan Lee's Superhero Kindergarten [6][20] Strategic Outlook - The company is focused on expanding monetization across various platforms, including licensing, streaming, and advertising [17] - A strengthened banking partnership with National Bank of Canada supports the company's growth initiatives [17] - Management has demonstrated confidence in the company's strategic direction through recent share repurchase activities [15]

Core Insights - Kartoon Studios is experiencing significant growth, with a reported 116% year-over-year earnings increase for January and February 2025 compared to the same period in 2024, driven by the success of Kartoon Channel! and Ameba's domestic business [4] - The company has expanded its distribution to 71 territories, reaching an audience of 2.8 billion, and is focusing on international operations and monetization under the leadership of Todd Steinman, who has been promoted to oversee global business [5][3] - The introduction of AI-assisted dubbing technology is aiding in the efficient localization of content, facilitating quicker entry into new international markets [8] Company Developments - Todd Steinman has been promoted to President of Toon Media Networks Worldwide, reflecting the company's strategy to accelerate international growth and capitalize on digital platform momentum [3][5] - The company has doubled its performance across FAST channels, including platforms like Tubi, Pluto TV, and Xumo, and recently launched a 24/7 Rainbow Rangers channel on Google TV Freeplay, enhancing its domestic reach [7] - Kartoon Studios has established a diversified children's service model that includes AVOD, SVOD, and FAST channels, contributing to its rapid growth and profitability [6] Strategic Focus - The company aims to build on its momentum in international markets, emphasizing profitability, brand impact, and family-oriented content [9] - The combination of various streaming models has created a scalable and profitable platform for children's programming, positioning Kartoon Channel! as a leader in the next generation of AVOD distribution [6][12] - The operational excellence of Kartoon Studios has been recognized, including an award from Amazon for 100% on-time delivery, highlighting its commitment to quality and efficiency [14]