Note 22: Subsequent Events

Marketable Securities

Subsequent to June 30, 2026, the Company purchased marketable securities for $1.5 million, and sold marketable securities for proceeds of $2.0 million.

Stockholder Rights Plan and Related Measures

On July 1, 2026, the Company’s Board of Directors adopted a stockholder rights plan and related measures, as described below.

Preferred Stock Rights Agreement:

On July 1, 2026, the Company entered into a Preferred Stock Rights Agreement (the “Rights Agreement”) with VStock Transfer, LLC, as rights agent. In connection with the Rights Agreement, the Board of Directors declared a dividend of distribution of one right (a “Right”) for each outstanding share of our common stock, payable to stockholders of record as of the close of business on July 13, 2026. In general terms, the Rights Agreement imposes significant dilution upon any person or group (other than the Company and certain other exempt persons, that is or becomes the beneficial owner of ten percent (10%) or more of the Company’s common stock without the prior approval of the Board of Directors. Each Right entitles its registered holder, upon the occurrence of certain triggering events, to purchase from the Company one one-thousandth of a share of Series D Participating Preferred Stock at a purchase price of $3.75 per one one-thousandth of a share, subject to adjustment. The Rights become exercisable only if a person or group acquires beneficial ownership of 10% or more of our outstanding common stock without the approval of the Board of Directors, subject to certain exceptions. The Rights are redeemable by the Board of Directors at a price of $0.001 per Right at any time prior to the earlier of the time the Rights become exercisable and their final expiration, and will expire at the close of business on June 29, 2027, unless earlier redeemed or exchanged.

Certificate of Designation of Series D Participating Preferred Stock:

In connection with the Rights Agreement, the Company filed with the Secretary of State of the State of Nevada a Certificate of Designation designating 300,000 shares of our authorized preferred stock as Series D Participating Preferred Stock, par value $0.001 per share. Each one one-thousandth of a share of Series D Participating Preferred Stock (“Series D Preferred Stock”), if issued, upon the exercise of the Rights (i) will not be redeemable; (ii) will entitle holders to quarterly dividend payments, when and if declared, of $0.001 per one one-thousandth of a share of Series D Preferred Stock, or an amount equal to the dividend paid on one share of common stock, whichever is greater; (iii) will entitle holders upon liquidation either to receive $1.00 per one one-thousandth of a share of Series D Preferred Stock or an amount equal to the payment made on one share of common stock, whichever is greater; (iv) will have the same voting power as one share of common stock and will vote together with the common stock; and (v) will entitle holders to a payment per one one-thousandth of a share of Series D Preferred Stock equal to the payment made on one share of common stock if the common stock is exchanged via merger, consolidation, or a similar transaction. No shares of Series D Preferred Stock were issued or outstanding as of the date of this Report, and the designation was established solely to support the Rights Agreement.

Amendments to Bylaws:

The Board also adopted amendments to our Bylaws that, among other things, divide the Board of Directors 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 of Directors, establish advance notice procedures for stockholder nominations of directors and other stockholder proposals, require the affirmative vote of the holders of at least two-thirds of the voting power of our outstanding stock to remove a director, and designate an exclusive forum for certain legal proceedings.

The foregoing actions had no effect on the Company’s financial position, results of operations, or shares of common stock outstanding as of or for the period covered by this report. For additional information, see our Form 8-K filed on July 2, 2026, as amended by our Form 8-K/A filed on July 6, 2026, and our Form 8-A12B filed on July 2, 2026.

Disposal of a Subsidiary

On July 8, 2026, the Company sold all of the issued and outstanding common stock of Frederator Networks, Inc. (“Frederator Networks”), which operated the Frederator Network channel business, to Project Robot LLC, an unaffiliated third party, pursuant to a stock purchase agreement dated June 18, 2026. Kartoon Studios will retain key intellectual property of Frederator Studios, LLC, a wholly owned subsidiary of the Company, including Bee and PuppyCat, Bravest Warriors, Castlevania, and Catbug, for distribution and product licensing opportunities. The transaction was part of the Company’s strategic realignment to focus on monetization of premium intellectual property and franchise development. Upon closing, the Company ceased to have a controlling financial interest in Frederator Networks. The base purchase price under the purchase agreement was $0.5 million in cash, subject to customary post-closing adjustments for net working capital, indebtedness, and cash and cash equivalents, on a cash-free, debt-free basis. The Company expects to recognize a loss on disposal of approximately $0.3 million (before income taxes), representing the excess of Frederator Networks’ net carrying amount over the estimated net consideration to be received. This estimate is preliminary, unaudited, and subject to change pending finalization of the post-closing working capital true-up pursuant to the purchase agreement, which is expected to be completed within 60 days of closing. Because the transaction closed after June 30, 2026, Frederator Networks’ assets, liabilities, and results of operations continue to be included in the Company’s condensed consolidated financial statements as of and for the three and six months ended June 30, 2026 on a continuing-operations basis. Frederator Networks did not meet the held-for-sale criteria of ASC 360-10-45-9 as of June 30, 2026. Management concluded that the disposition does not represent a strategic shift that has, or will have, a major effect on the Company’s operations or financial results, and accordingly, the transaction does not qualify for discontinued-operations presentation under ASC 205-20. In connection with the closing, Frederator Networks, Inc and Project Robot LLC entered into a three-year Channel Distribution Agreement with Frederator Studios, LLC. Under this arrangement, Frederator Studios, LLC, will continue to receive a declining share of net YouTube receipts (85% in year one, decreasing to 5% by year three) generated from certain retained channels through YouTube CMS infrastructure. Frederator Studios, LLC and Frederator Networks, Inc., will each retain a 50% ownership interest in the Frederator trademark. Management does not believe this continuing involvement affects the conclusions and estimates described above.