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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number: 000-54389
KARTOON STUDIOS, INC.
(Exact name of registrant as specified in its charter)
Nevada20-4118216
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
190 N. Canon Drive, 4th FL
Beverly Hills, CA 90210
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: 310-273-4222
______________________________
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each classTrading Symbol(s)Name of Exchange where registered
Common Stock, par value $0.001 per shareTOON
The NYSE American
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
Accelerated filero
Non-accelerated filer x
Smaller reporting companyx
Emerging growth companyo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of May 14, 2024, the registrant had 39,387,500 shares of common stock outstanding.


Kartoon Studios, Inc.
FORM 10-Q

1

PART I. FINANCIAL INFORMATION
Item 1.     Financial Statements
Kartoon Studios, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and par value data)

As of
March 31, 2024December 31, 2023
(Unaudited)
ASSETS
Current Assets:
Cash$2,763 $4,095 
Investments in Marketable Securities (amortized cost of $10,109 and $12,838, respectively)
9,382 11,950 
Accounts Receivable (net of allowance of $226 and $189, respectively)
13,389 18,072 
Tax Credits Receivable, net11,955 20,714 
Notes and Accounts Receivable from Related Party1,403 1,435 
Other Receivable539 103 
Prepaid Expenses and Other Assets1,580 740 
Total Current Assets41,011 57,109 
Noncurrent Assets:
Property and Equipment, net1,780 1,877 
Operating Lease Right-of-Use Assets, net6,758 7,076 
Finance Lease Right-of-Use Assets, net1,473 1,867 
Film and Television Costs, net1,389 1,295 
Investment in Your Family Entertainment AG18,681 19,094 
Intangible Assets, net22,115 22,993 
Other Assets123 125 
Total Assets$93,330 $111,436 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable$12,000 $16,864 
Participations Payable1,674 1,915 
Accrued Expenses1,812 691 
Accrued Salaries and Wages2,114 1,926 
Deferred Revenue3,762 3,127 
Margin Loan2,940 782 
Production Facilities
8,292 15,336 
Bank Indebtedness 2,905 
Current Portion of Operating Lease Liabilities1,156 908 
Current Portion of Finance Lease Liabilities877 1,120 
Warrant Liability26 63 
Due to Related Party1 3 
Other Current Liabilities231  
Total Current Liabilities34,885 45,640 
Noncurrent Liabilities:
Deferred Revenue3,416 3,458 
Operating Lease Liabilities, Net Current Portion6,400 6,736 
Finance Lease Liabilities, Net Current Portion751 928 
Deferred Tax Liability, net1,399 1,399 
Other Noncurrent Liabilities5 14 
Total Liabilities46,856 58,175 
Commitments and Contingencies (Note 19)
Stockholders’ Equity:
Preferred Stock, 9,943,999 shares authorized, 0 shares issued and outstanding as of March 31, 2024 and December 31, 2023
  
0% Series A Convertible Preferred Stock, $0.001 par value, 6,000 shares authorized, 0 shares issued and outstanding as of March 31, 2024 and December 31, 2023
  
Series B Preferred Stock, $0.001 par value, 1 share authorized, 1 share issued and outstanding as of March 31, 2024 and December 31, 2023
  
Series C Preferred Stock, $0.001 par value, 50,000 shares authorized, 0 shares issued and outstanding as of March 31, 2024 and December 31, 2023
  
Common Stock, $0.001 par value, 190,000,000 and 190,000,000 shares authorized, 35,426,663 and 35,323,217 shares issued and 35,351,190 and 35,247,744 outstanding as of March 31, 2024 and December 31, 2023, respectively
352 352 
Additional Paid-in Capital774,286 773,986 
Treasury Stock at Cost, 75,473 shares of common stock as of March 31, 2024 and December 31, 2023
(339)(339)
Accumulated Deficit(725,591)(718,546)
Accumulated Other Comprehensive Loss(3,906)(3,883)
Total Kartoon Studios, Inc. Stockholders' Equity44,802 51,570 
Non-Controlling Interests in Consolidated Subsidiaries1,672 1,691 
Total Stockholders' Equity46,474 53,261 
Total Liabilities and Stockholders’ Equity$93,330 $111,436 
The accompanying notes are an integral part of these condensed consolidated financial statements.
2

Kartoon Studios, Inc.
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
(Unaudited)
Three Months Ended March 31,
20242023
Revenues:
Production Services$2,763 $9,886 
Content Distribution2,329 3,301 
Licensing & Royalties100 46 
Media Advisory & Advertising Services886 956 
Total Revenues6,078 14,189 
Operating Expenses:
Marketing and Sales444 245 
Direct Operating Costs4,325 11,285 
General and Administrative7,603 9,225 
Impairment of Property and Equipment 120 
Impairment of Intangible Assets 4,023 
Impairment of Goodwill 11,287 
Total Operating Expenses12,372 36,185 
Loss from Operations(6,294)(21,996)
Interest Expense(203)(1,085)
Other Expense, net(567)(1,712)
Loss Before Income Tax Benefit (Expense)(7,064)(24,793)
Income Tax Benefit 934 
Net Loss(7,064)(23,859)
Net Loss Attributable to Non-Controlling Interests19 31 
Net Loss Attributable to Kartoon Studios, Inc.$(7,045)$(23,828)
Net Loss per Share (Basic)$(0.20)$(0.74)
Net Loss per Share (Diluted)$(0.20)$(0.74)
Weighted Average Shares Outstanding (Basic)35,297,74631,978,335
Weighted Average Shares Outstanding (Diluted)35,297,74631,978,335

The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Kartoon Studios, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(in thousands)
(Unaudited)
Three Months Ended March 31,
20242023
Net Loss$(7,064)$(23,859)
Change in Accumulated Other Comprehensive Income (Loss):
Change in Unrealized Gain on Marketable Securities20 830 
Realized Losses on Marketable Securities Reclassified from AOCI into Earnings141 1,537 
Foreign Currency Translation Adjustments(184)3 
Total Change in Accumulated Other Comprehensive Income (Loss)(23)2,370 
Total Comprehensive Net Loss$(7,087)$(21,489)
Net Loss Attributable to Non-Controlling Interests19 31 
Total Comprehensive Net Loss Attributable to Kartoon Studios, Inc.$(7,068)$(21,458)
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Kartoon Studios, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(in thousands, except share data)
(Unaudited)
Common StockPreferred StockAdditional Paid-In CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive LossNon-Controlling InterestTotal
SharesAmountSharesAmountSharesAmount
December 31, 202335,247,744$352 1$ $773,986 75,473 $(339)$(718,546)$(3,883)$1,691 $53,261 
Issuance of Common Stock for Services53,497– – 74 – – – – 74 
Issuance of Common Stock for Vested Restricted Stock Units, Net of Shares Withheld for Taxes49,949 – – – – – – – – – – 
Share-Based Compensation– – – – 226 – – – – – 226 
Realized Loss Reclassified from AOCI to Earnings, net change in Unrealized Loss– – – – – – – – 161 – 161 
Currency Translation Adjustment– – – – – – – – (184)– (184)
Net Loss– – – – – – – (7,045)– (19)(7,064)
Balance, March 31, 202435,351,190$352 1$ $774,286 75,473$(339)$(725,591)$(3,906)$1,672 $46,474 
December 31, 202231,918,552$319 1$ $762,418 42,633$(290)$(641,443)$(9,925)$1,790 $112,869 
Issuance of Common Stock for Vested Restricted Stock Units, Net of Shares Withheld for Taxes78,0881 – (1)3,700(9)– – – (9)
Fractional Shares Issued Upon Reverse Stock Split117,144– – – – – – – – 
Share-Based Compensation– – 910 – – – – 910 
Realized Loss Reclassified from AOCI to Earnings, net change in Unrealized Loss– – – – – 2,367 – 2,367 
Currency Translation Adjustment– – – – – 3 – 3 
Net Loss– – – – (23,828)– (31)(23,859)
Balance, March 31, 202332,113,784$320 1$ $763,327 46,333$(299)$(665,271)$(7,555)$1,759 $92,281 

The accompanying notes are an integral part of these condensed consolidated financial statements.
5

Kartoon Studios, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Three Months Ended March 31,
20242023
Cash Flows from Operating Activities:
Net Loss$(7,064)$(23,859)
Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities:
Amortization of Film and Television Costs62 236 
Depreciation and Amortization of Property, Equipment & Intangible Assets610 705 
Amortization of Right-of-Use Asset561 748 
Amortization of Premium on Marketable Securities26 169 
Share-Based Compensation Expense226 910 
Impairment of Intangible Assets 4,023 
Impairment of Goodwill 11,287 
Impairment of Property and Equipment 120 
Deferred Income Taxes (934)
Loss on Revaluation of Equity Investments in Your Family Entertainment AG 895 
Unrealized (Gain) Loss on Foreign Currency of Equity Investments in Your Family Entertainment AG413 (308)
Gain on Warrant Revaluation(37)(139)
Realized Loss on Marketable Securities141 1,537 
Stock Issued for Services74  
Credit Loss Expense65 161 
Other Non-Cash Items5 2 
Decrease (Increase) in Operating Assets:
Accounts Receivable, net4,620 5,107 
Other Receivable(436)294 
Tax Credits Earned (less capitalized)(1,970)(4,597)
Tax Credits Received, net10,251 7,237 
Film and Television Costs, net(162)(365)
Prepaid Expenses and Other Assets(849)379 
Increase (Decrease) in Operating Liabilities:
Accounts Payable(4,860)(5,838)
Accrued Salaries & Wages219 370 
Accrued Expenses1,121 129 
Accrued Production Costs366 (94)
Participations Payable(224)(373)
Deferred Revenue652 (2,749)
Lease Liability41 (195)
Due to Related Party(1)(2)
Other Liabilities(5)(21)
Net Cash Provided by (Used in) Operating Activities$3,845 $(5,165)
Cash Flows from Investing Activities:
Repayments from/(Loans to) Related Party for Note Receivables32 (52)
Proceeds from Principal Collections on Marketable Securities 460 
Proceeds from Sales and Maturities of Marketable Securities2,562 14,257 
Purchase of Property & Equipment(34)(17)
Net Cash Provided by Investing Activities$2,560 $14,648 
Cash Flows from Financing Activities:
Proceeds from Margin Loan3,081 4,408 
Repayments of Margin Loan(923)(15,648)
Proceeds from Production Facilities2,828 3,771 
Repayment of Production Facilities(9,654)(5,966)
(Repayments of )/Proceeds from Bank Indebtedness, net(2,841)2,117 
Principal Payments on Finance Lease Obligations(362)(535)
Debt Issuance Costs(20)(45)
Shares Withheld for Taxes on Vested Restricted Shares (9)
Payment for Warrant Put Option Exercise (250)
Net Cash Used in Financing Activities$(7,891)$(12,157)
Effect of Exchange Rate Changes on Cash154 7 
Net Decrease in Cash(1,332)(2,667)
Beginning Cash4,095 7,432 
Ending Cash$2,763 $4,765 
Non-Cash Financing and Investing Activities
Leased Assets Obtained in Exchange for New Finance Lease Liabilities$ $1,216 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

Kartoon Studios, Inc.
Notes to Condensed Consolidated Financial Statements
March 31, 2024
Note 1: Organization and Business
Organization and Nature of Business
Kartoon Studios, Inc. (formerly known as Genius Brands International, Inc.) (the “Company” or “we,” “us” or “our”) is a global content and brand management company that creates, produces, licenses, and broadcasts timeless and educational, multimedia animated content for children. Led by experienced industry personnel, the Company distributes its content primarily on streaming platforms and television, and licenses properties for a broad range of consumer products based on the Company’s characters. The Company is a “work for hire” producer for many of the streaming outlets and animated content intellectual property (“IP”) holders. In the children’s media sector, the Company’s portfolio features “content with a purpose” for toddlers to tweens, providing enrichment as well as entertainment. With the exception of selected WOW Unlimited Media Inc. (“Wow”) titles, the Company’s programs, along with licensed programs, are being broadcast in the United States on the Company’s wholly-owned advertisement supported video on demand (“AVOD”) service, its free ad supported TV (“FAST”) channels and subscription video on demand (“SVOD”) outlets, Kartoon Channel! and Ameba TV, as well as linear streaming platforms. These streaming platforms include Comcast, Cox, DISH, Sling TV, Amazon Prime Video, Amazon Fire, Roku, Apple TV, Apple iOS, Android TV, Android mobile, Pluto TV, Xumo, Tubi, YouTube, YouTube Kids and via KartoonChannel.com, as well as Samsung and LG smart TVs. The Company's in-house owned and produced animated shows include Stan Lee’s Superhero Kindergarten starring Arnold Schwarzenegger, Llama Llama starring Jennifer Garner, and Rainbow Rangers, KC Pop Quiz and Shaq’s Garage starring Shaquille O’Neal. The Company’s library titles include the award-winning Baby Genius, adventure comedy Thomas Edison’s Secret Lab®, and Warren Buffett’s Secret Millionaires Club, created with and starring iconic investor Warren Buffett, Team Zenko Go!, Reboot, Bee & PuppyCat: Lazy in Space and Castlevania.
The Company also licenses its programs to other services worldwide, in addition to the operation of its own channels, including, but not limited to, Netflix, Paramount+, Max, Nickelodeon, and satellite, cable and terrestrial broadcasters around the world.
Through the Company’s investments in Germany’s Your Family Entertainment AG (“YFE”), a publicly traded company on the Frankfurt Stock Exchange (RTV-Frankfurt), it has gained access to one of the largest animation catalogues in Europe with over 50 titles consisting of over 1,600 episodes, and a global distribution network which currently covers over 60 territories worldwide.
Through the ownership of Wow, the Company established an affiliate relationship with Mainframe Studios, which is one of the largest animation producers in the world. In addition, Wow owns Frederator Networks Inc. (“Frederator”) and its Channel Frederator Network, the largest animation focused multi-channel network on YouTube with over 2,500 channels. Frederator also owns Frederator Studios, focused on developing and producing shorts and series for and with partners. Over the past 20 years, Frederator Studios has partnered with Nickelodeon, Nick Jr., Netflix, Sony Pictures Animation and Amazon.
The Company has rights to a select amount of valuable IP, including among them a controlling interest in Stan Lee Universe, LLC (“SLU”), through which it controls the name, likeness, signature, and all consumer product and IP rights to Stan Lee (the “Stan Lee Assets”).
The Company also owns The Beacon Media Group, LLC (“Beacon Media”) and The Beacon Communications Group, Ltd. (“Beacon Communications”) (collectively, “Beacon”), a leading North American marketing and media agency and its first-class media research, planning and buying division. Beacon represents over 30 kids and family clients, including Bandai Namco, Moose Toys, Bazooka Candy Brands and Playmobil.
In addition, the Company owns the Canadian company Ameba Inc. (“Ameba”), which distributes SVOD service for kids and has become a focal point of revenue for TOON Media Networks’ subscription offering.

Recent Transactions
Subsequent to March 31, 2024, the Company announced the initial closing of its registered direct offering of up to $7,000,000 (the “Offering”) on April 23, 2024. In the initial closing, the Company sold 3,900,000 shares of its common
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stock, par value $0.001 per share (the “Common Stock”), and pre-funded warrants to purchase up to 100,000 shares of Common Stock (the “Pre-funded Warrants”) to an institutional investor (the "Investor"), at $1.00 per share of Common Stock and $0.99 per Pre-funded Warrant, for aggregate gross proceeds of approximately $4,000,000, prior to deducting placement agent fees and other offering expenses, pursuant to a securities purchase agreement, dated April 18, 2024 (the “SPA”). Pursuant to the terms of the SPA, the Investor has the sole option to purchase up to an additional 3,000,000 shares of Common Stock and/or Pre-funded Warrants as part of the Offering, at $1.00 per share of Common Stock and $0.99 per Pre-Funded Warrant, in up to three subsequent closings during the 180-day period following the date of the SPA in which each subsequent closing is equal to no less than $1,000,000, whereby the Company would receive additional aggregate gross proceeds of up to $3,000,000 (together with the gross proceeds from the initial closing, up to a total of $7,000,000), prior to deducting placement agent fees and other offering expenses. Additionally, the Company has 4,784,909 warrants with a reprice option that was triggered by the registered direct offering which reduced the exercise price from $2.50 per share to $1.00 per share.
Liquidity
As of March 31, 2024, the Company had cash of $2.8 million, which decreased by $1.3 million as compared to December 31, 2023. The decrease was primarily due to cash used in financing activities of $7.9 million, offset by cash provided by operating activities of $3.8 million and investing activities of $2.6 million. The cash used in financing activities was primarily due to the net repayment of the production facilities and bank indebtedness, partially offset by the net proceeds from the margin loan, resulting in cash used of $7.5 million, and payments on finance leases of $0.4 million. The cash provided by investing activities was due to sales of marketable securities of $2.6 million. The cash provided by operating activities of $3.8 million is driven primarily by the collection of production tax credits of $8.3 million and depreciation and amortization of $1.2 million, offset by the $7.1 million net loss in the period.
As of March 31, 2024, the Company held available-for-sale marketable securities with a fair value of $9.4 million, a decrease of $2.6 million as compared to December 31, 2023 due to sales and maturities during the three months ended March 31, 2024. The available-for-sale securities consist principally of corporate and government debt securities and are also available as a source of liquidity.
As of March 31, 2024 and December 31, 2023, the Company’s margin loan balance was $2.9 million and $0.8 million, respectively. During the three months ended March 31, 2024, the Company borrowed an additional $3.1 million from its investment margin account and repaid $0.9 million primarily with cash received from sales and maturities of marketable securities. 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 0.95% and 0.98%, respectively, on average margin loan balances of $14.2 million and $27.4 million as of March 31, 2024 and December 31, 2023, respectively. The Company incurred interest expense on the loan of $18,632 and $0.7 million during the three months ended March 31, 2024 and 2023, respectively. 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 is recorded as a current liability on the Company’s condensed consolidated balance sheets.
The Company is subject to financial and customary affirmative and negative non-financial covenants on the revolving demand facility and the revolving equipment lease line that have an aggregate total outstanding balance of $1.0 million U.S. dollars (“USD”) or $1.4 million Canadian dollars (“CAD”).
During March 2024, the Company amended the revolving demand facility, equipment lease line, and treasury risk management facility. As a result of the amendment, the revolving demand facility allows for draws of up to CAD 1.0 million to be made by way of CAD prime rate loans, CAD overdrafts, USD base rate loans or letters of credit up to a maximum of $200,000 in either CAD or USD and having a term of up to 1 year. The CAD prime borrowings and overdrafts bear interest at a rate equal to bank prime plus 2.00% per annum. The USD base rate borrowings bear interest at a rate equal to bank base rate plus 2.00% per annum. In addition, the equipment lease line was terminated, however, the Company has and will continue to make the regular principal and interest payments under the specific financing terms of the existing equipment lease agreements. The amendment removed the treasury risk management facility that allowed for advances of up to CAD 0.5 million. As of March 31, 2024 and the date of the amendment, there were no outstanding amounts drawn under the treasury risk management facility. The amendment also introduced revised financial covenants that are effective as of March 15, 2024. The Company was in compliance with its covenants as of March 31, 2024. The
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amendment did not have any impact on the Company’s existing production facilities that are separate from the revolving demand facility and are used for financing specific productions.
Historically, the Company has incurred net losses. For the three months ended March 31, 2024 and 2023, the Company reported net losses of $7.1 million and $23.9 million, respectively. The Company reported net cash provided by operating activities of $3.8 million and cash used in operating activities of $5.2 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, the Company had an accumulated deficit of $725.6 million and total stockholders’ equity of $46.5 million. As of March 31, 2024, the Company had total current assets of $41.0 million, including cash of $2.8 million and marketable securities of $9.4 million, and total current liabilities of $34.9 million. The Company had working capital of $6.1 million as of March 31, 2024, compared to working capital of $11.5 million as of December 31, 2023. 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 marketable securities and investments to fund operations for the next 12 months from the issuance date of this 10-Q. In addition, the Company has the ability to reduce operating costs and use equity and equity-linked instruments to pay for services and compensation.
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, 2023 filed with the Securities and Exchange Commission (the “SEC”) on April 9, 2024. 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.
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 2023 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, 2023.
Foreign Currency Forward Contracts
As of March 31, 2024, the gross amounts of FX forwards in an asset and liability position subject to a master netting arrangement resulted in a net liability of $0.2 million recorded within Other Current Liabilities on the condensed consolidated balance sheet. The total net change in fair value of $0.2 million and an insignificant realized loss for the three months ended March 31, 2024 is recorded as an unrealized loss within Production Services Revenue on the condensed consolidated statement of operations.
Trade Accounts Receivable and Allowance for Credit Loss
As of March 31, 2024 and December 31, 2023, the Company recorded an allowance for credit loss of $0.2 million and $0.2 million, respectively.
Tax Credits Receivable
As of March 31, 2024 and December 31, 2023, $12.0 million and $20.7 million, respectively, in current tax credit receivables related to Wow’s film and television productions were recorded, net of $0.5 million and $0.5 million, respectively, recorded as an allowance for credit loss. It is estimated that the Company will collect the receivables balance; therefore, no additional reserve was recorded.
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 March 31, 2024 and December 31, 2023, the
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Company had eleven and ten bank deposit accounts with an aggregate uninsured balance of $1.6 million and $2.5 million, respectively.
The Company has a managed account with a financial institution. The managed account maintains its investments in marketable securities of approximately $9.4 million and $12.0 million as of March 31, 2024 and December 31, 2023, respectively. 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 March 31, 2024 and December 31, 2023, the Company did not have account balances held at this financial institution that exceed the insured balances.
The Company’s investment portfolio consists of investment-grade securities diversified among security types, industries and issuers. The Company’s policy limits the amount of credit exposure to any one security issue or issuer and the Company believes no significant concentration of credit risk exists with respect to these investments.
During the three months ended March 31, 2024, the Company had two customers, whose total revenue exceeded 10% of the total condensed consolidated revenue. These customers accounted for 61.7% of the total revenue. As of March 31, 2024, the Company had two customers whose total accounts receivable exceeded 10% of the total accounts receivable. These customers accounted for 52.8% of the total accounts receivable as of March 31, 2024.
During the three months ended March 31, 2023, the Company had three customers whose total revenue exceeded 10% of the total condensed consolidated revenue. These customers accounted for 71.9% of the total revenue.
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
The following table summarizes the marketable securities measured at fair value on a recurring basis by level within the fair value hierarchy as of March 31, 2024 (in thousands):
Level 1Level 2Total Fair Value
Investments in Marketable Securities:
Corporate Bonds$4,898 $ $4,898 
U.S. agency and government sponsored securities 1,851 1,851 
U.S. states and municipalities 2,633 2,633 
Total$4,898 $4,484 $9,382 
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 March 31, 2024 and December 31, 2023. Refer to Note 5 for additional details.
New Accounting Standards Issued but Not Yet Adopted
In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements. The new guidance clarifies or improves disclosure and presentation requirements on a variety of topics in the codification. The amendments will align the requirements in the FASB Accounting Standard Codification with the SEC’s regulations. The amendments are effective prospectively on the date each individual amendment is effectively removed from Regulation S-X or Regulation S-K. The Company is in the process of evaluating the impact that the adoption of this ASU will have to the condensed consolidated financial statements and related disclosures, which is not expected to be material.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting – Improvements to Reportable Segments Disclosures. The amendments enhance disclosures of significant segment expenses by requiring disclosure of significant segment expenses regularly provided to the chief operating decision maker (CODM), extend certain annual disclosures to interim periods, and permit more than one measure of segment profit or loss to be reported under certain conditions. The amendments are effective for the Company in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption of the amendment is permitted, including adoption in any interim periods for which financial statements have not been issued. The Company is in the process of
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evaluating the impact that the adoption of this ASU will have to the condensed consolidated financial statements and related disclosures, which is expected to result in enhanced disclosures.
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 Update 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 to the condensed 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”) in 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 (the “Stan Lee Assets”), from which the Company plans to develop and license multiple properties each year.
During the three months ended March 31, 2024 and 2023, SLU generated an insignificant amount of net income. There were no contributions or distributions during the three months ended March 31, 2024 and 2023 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 March 31, 2024 and December 31, 2023, the Company owned 6,857,132 shares of YFE. At the time of the initial investment in 2021, it was determined that based on the Company’s 28.69% 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. As of March 31, 2024, the fair value of the investment was determined to be $18.7 million recorded within noncurrent assets on the Company’s consolidated balance sheets. The fair value as of March 31, 2024 decreased by net $0.4 million, as compared to December 31, 2023. The decrease is the effect of foreign currency remeasurement from EURO to USD, resulting in a loss of $0.4 million. The total change in fair value is recorded within Other Expense, net on the Company’s condensed consolidated statement of operations. As of March 31, 2024 and December 31, 2023, the Company’s ownership in YFE was 44.8%.
Note 5: Marketable Securities
The Company classifies and accounts for its marketable debt securities as available-for-sale securities (“AFS”) and the securities are stated at fair value. On January 1, 2023, the Company adopted ASU 2016-13 Measurement of Credit Losses on Financial Instruments (Topic 326), which replaced the legacy GAAP other-than-temporary impairment (“OTTI”) model with a credit loss model. The credit loss model applicable to AFS debt securities requires the recognition of credit losses through an allowance account but retains the concept from the OTTI model that credit losses are recognized once securities become impaired. The adoption of the ASU did not have a material impact on the Company's condensed consolidated financial statements.
The investments in marketable securities had an adjusted cost basis of $10.1 million and a market value of $9.4 million as of March 31, 2024. The balances consisted of the following securities (in thousands):
Adjusted CostUnrealized Loss Fair Value
Corporate Bonds$5,263 $(365)$4,898 
U.S. Agency and Government Sponsored Securities1,999 (148)1,851 
U.S. States and Municipalities2,847 (214)2,633 
Total$10,109 $(727)$9,382 
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The investments in marketable securities as of December 31, 2023 had an adjusted cost basis of $12.8 million and a market value of $12.0 million. The balances consisted of the following securities (in thousands):
Adjusted CostUnrealized Loss Fair Value
Corporate Bonds$6,333 $(425)$5,908 
U.S. Treasury646 (37)609 
U.S. Agency and Government Sponsored Securities2,000 (148)1,852 
U.S. States and Municipalities3,859 (278)3,581 
Total$12,838 $(888)$11,950 
The Company holds 9 AFS securities, all of which were in an unrealized loss position and have been in an unrealized loss position for a period greater than 12 months as of March 31, 2024. The AFS securities held by the Company as of December 31, 2023 had also 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 March 31, 2024 and December 31, 2023, an allowance for credit loss was not 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 $0.1 million and $1.5 million were recognized in earnings during the three months ended March 31, 2024 and 2023, respectively, primarily due to selling securities prior to maturity to prevent further market condition losses on the securities.
The contractual maturities of the Company’s marketable investments as of March 31, 2024 were as follows (in thousands):
Fair Value
Due within 1 year$184 
Due after 1 year through 5 years9,198 
Total$9,382 
The Company may sell certain of its marketable debt securities prior to their stated maturities for reasons including, but not limited to, managing liquidity, credit risk, duration and asset allocation.
Note 6: Property and Equipment, net
The Company has property and equipment as follows (in thousands):
As of
March 31, 2024December 31, 2023
Furniture and Equipment$117 $117 
Computer Equipment224 219 
Leasehold Improvements2,209 2,200 
Software218 192 
Property and Equipment, gross2,768 2,728 
Less Accumulated Depreciation(823)(724)
Foreign Currency Translation Adjustment(165)(127)
Property and Equipment, net$1,780 $1,877 
During the three months ended March 31, 2024 and 2023, the Company recorded depreciation expense of $0.1 million for both respective periods.
The Company did not incur any impairment charges on its property and equipment during the three months ended March 31, 2024.
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During the three months ended March 31, 2023, due to changes in the Company's estimated undiscounted future cash flows, a reassessment of its long-lived assets was performed. As a result, the carrying value of one of the Company's asset group’s property and equipment assets were written down to zero and an Impairment of Property and Equipment of $0.1 million was recorded within Operating Expenses in the condensed consolidated statement of operations.
Note 7: Leased Right-of-Use Assets, net
Leased right-of-use assets consisted of the following (in thousands):
As of
March 31, 2024December 31, 2023
Office Lease Assets$9,437 $9,437 
Equipment Lease Assets5,360 5,360 
Right-of-Use Assets, Gross14,797 14,797 
Accumulated Amortization(5,787)(5,237)
Foreign Currency Translation Adjustment(779)(617)
Leased Right-of-Use Assets, net$8,231 $8,943 
As of March 31, 2024, the weighted-average lease term for the Company’s operating leases was 81 months and the weighted-average discount rate was 11.1%. As of December 31, 2023, the weighted-average lease term for operating leases was 83 months and the weighted-average discount rate was 11.1%.
Operating lease costs during the three months ended March 31, 2024 and 2023 were $0.4 million and $0.4 million, respectively, recorded within General and Administrative Expenses on the Company’s condensed consolidated statements of operations.
During the three months ended March 31, 2024, the Company recorded finance lease costs of $0.4 million primarily comprised of ROU amortization of $0.4 million. During the three months ended March 31, 2023, the Company recorded finance lease costs of $0.6 million primarily comprised of ROU amortization of $0.5 million. ROU amortization is recorded within General and Administrative Expenses and accretion of interest expense is recorded within Other 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 March 31, 2024 and December 31, 2023 (in thousands):
Film and Television Costs, net as of December 31, 2022$7,780 
Additions to Film and Television Costs1,078 
Disposals(41)
Film Amortization Expense & Impairment Losses(7,536)
Foreign Currency Translation Adjustment14 
Film and Television Costs, net as of December 31, 20231,295 
Additions to Film and Television Costs162 
Film Amortization Expense & Impairment Losses(62)
Foreign Currency Translation Adjustment(6)
Film and Television Costs, net as of March 31, 2024$1,389 
During the three months ended March 31, 2024 and 2023,, the Company recorded amortization expense of $0.1 million and $0.2 million, respectively. The Company did not write-down or record any significant impairment charges on film costs during the three months ended March 31, 2024 and 2023.
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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
Weighted Average Remaining Amortization PeriodAs of
March 31, 2024December 31, 2023
Customer Relationships6.2$17,396 $17,325 
Digital Networks14.0803 803 
Trade Names67.29,971 9,970 
Intangible Assets, gross28,170 28,098 
Less Accumulated Amortization(4,381)(3,794)
Foreign Currency Translation Adjustment(1,674)(1,311)
Intangible Assets, net$22,115 $22,993 
_______________________
During the three months ended March 31, 2024 and 2023, the Company recorded intangible asset amortization expense of $0.5 million and $0.6 million, respectively.
During the three months ended March 31, 2023, due to changes in the Company's financial projections, the Company reassessed its definite and indefinite-lived intangible asset values to determine whether impairments existed. As a result, the Company recorded a total Impairment of Intangible Assets of $4.0 million within Operating Expenses in the condensed consolidated statement of operations for the three months ended March 31, 2023.
Expected future amortization of intangible assets subject to amortization as of March 31, 2024 is as follows (in thousands):
Fiscal Year:
2024$1,544 
20252,059 
20262,059 
20272,059 
20282,059 
Thereafter6,787 
Total$16,567 
As of March 31, 2024, $5.5 million 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.
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Note 10: Deferred Revenue
As of March 31, 2024 and December 31, 2023, the Company had aggregate short term and long term deferred revenue of $7.2 million and $6.6 million, respectively. The increase in deferred revenue is primarily related to productions on various shows nearing completion of the project as of March 31, 2024, compared to the progress as of December 31, 2023. 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 March 31, 2024 and December 31, 2023, the Company’s margin loan balance was $2.9 million and $0.8 million, respectively. During the three months ended March 31, 2024, the Company borrowed an additional $3.1 million from its investment margin account and repaid $0.9 million primarily with cash received from sales and maturities of marketable securities. 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 0.95% and 0.98%, respectively, on average margin loan balances of $14.2 million and $27.4 million as of March 31, 2024 and December 31, 2023, respectively. The Company incurred interest expense on the loan of $18,632 and $0.7 million during the three months ended March 31, 2024 and 2023, respectively. 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 is 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 (together, the “Facilities”) that are comprised of the following:
Revolving Demand Facility

As of December 31, 2023, the Company had an outstanding balance of $2.9 million (CAD 3.8 million) on the revolving demand facility by way of bank prime rate loan draws, included as Bank Indebtedness within current liabilities on the Company’s condensed consolidated balance sheets. During the three months ended March 31, 2024, the Company paid the outstanding balance.
During March 2024, the Company amended the revolving demand facility. As a result of the amendment, the revolving demand facility allows for draws of up to CAD 1.0 million to be made by way of CAD prime rate loans, CAD overdrafts, USD base rate loans or letters of credit up to a maximum of $200,000 in either CAD or USD and having a term of up to 1 year. The CAD prime borrowings and overdrafts bear interest at a rate equal to bank prime plus 2.00% per annum. The USD base rate borrowings bear interest at a rate equal to bank base rate plus 2.00% per annum.
Treasury Risk Management Facility
During March 2024, an amendment was entered into that removed the treasury risk management facility.
Production Facilities
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 and are guaranteed and secured by the Company with no limitations for maximum potential future payments. The security reflects substantially all of the 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 of March 31, 2024 and December 31, 2023, the Company had an outstanding balance of USD 8.3 million (CAD 11.2 million), including USD 1.1 million (CAD 1.5 million) of interest, and USD 15.3 million (CAD 20.3 million), including USD 1.4 million (CAD 1.9 million) of interest, respectively, recorded as Production Facilities, net within current liabilities on the Company’s condensed consolidated balance sheets.
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Equipment Lease Line
During March 2024, the equipment lease line was terminated, however, the Company has and will continue to make the regular principal and interest payments under the specific financing terms of the existing equipment lease agreements. Each existing transaction under the equipment lease line has specific financing terms in respect of the leased equipment such as term, finance amount, rate, and payment terms. The finance rates for these equipment leases range from 4.19% to 7.18% with remaining lease terms of 4 - 28 months as of March 31, 2024.
As of March 31, 2024, the outstanding balance of $1.0 million (CAD 1.4 million) was included within current and noncurrent Finance Lease Liabilities on the Company’s condensed consolidated balance sheets.
Equipment Lease Facility
The Company also 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 CAD 1.4 million in total. Each transaction under the equipment lease line has specific financing terms in respect of the leased equipment such as term, finance amount, rate, and payment terms. As of March 31, 2024, the Company has leases remaining under this facility with finance rates of 7.52% to 8.20% and remaining lease terms of 20 - 29 months.
As of March 31, 2024, the outstanding balance of $0.5 million (CAD 0.7 million) was included within current and noncurrent Finance Lease Liabilities on the Company’s condensed consolidated balance sheets.

As of March 31, 2024, the Company met all required financial and non-financial covenants.
Note 13: Stockholders’ Equity
Common Stock
As of March 31, 2024 and December 31, 2023 the total number of authorized shares of common stock was 190,000,000.
As of March 31, 2024 and December 31, 2023, there were 35,351,190 and 35,247,744 shares of common stock outstanding, respectively.
Preferred Stock
The Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001 per share. 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.
In connection with the Company’s acquisition of Wow, certain eligible Canadian stockholders, noteholders and optionholders of Wow elected to receive the Exchangeable Shares in the capital of the Wow Exchange Co. Inc. (“ExchangeCo”) instead of shares of the Company’s common stock to which they were otherwise entitled.
The shares of ExchangeCo are exchangeable into shares of the Company’s common stock in accordance with their terms. Holders of the ExchangeCo shares are entitled to defined voting rights (the “Voting Rights”) in the Company pursuant to a voting and exchange trust agreement (the “Voting Agreement”) dated April 6, 2022 among the Company, ExchangeCo, 1329258 B.C. Ltd. and Computershare Trust Company of Canada (the “Voting Trustee”). The Voting Trustee holds a single share of Series B Preferred Stock in the capital of the Company (the “Special Voting Share”), which grants the Voting Trustee that number of votes at the meetings of the Company’s stockholders as is equal to the number of shares of the Company’s common stock that at such time have not been delivered pursuant to the tender of ExchangeCo shares. The Voting Trustee is required to exercise each vote attached to the Special Voting Share only as directed by the relevant holder of the underlying Company shares of common stock and, in the absence of any instructions, will not exercise voting rights with respect to the applicable shares.
As of March 31, 2024 and December 31, 2023, there were 0 shares of Series A Convertible Preferred Stock outstanding. As of March 31, 2024 and December 31, 2023, there was 1 share of Series B Preferred Stock outstanding. As of March 31, 2024 and December 31, 2023, there were 0 shares of Series C Preferred Stock outstanding.
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Note 14: Stock Options
On September 1, 2020, the Company adopted the Kartoon Studios, Inc. 2020 Incentive Plan (the “2020 Plan”) as voted by the Board of Directors. The Board of Directors approved the maximum number of shares available for issuance up to an aggregate of 3,000,000 shares of common stock, which does not include shares that the Company may issue related to acquisitions. The 2020 Plan replaced the previously adopted 2015 Incentive Plan (the “2015 Plan”) that had a total number of authorized shares of 216,767, however the remaining 57,800 outstanding shares granted under the 2015 Plan, as of March 31, 2024, remain to be governed under such plan. All expired or terminated shares granted under the 2015 Plan, that have not been vested or exercised, reverts to and again becomes available for issuance under the 2020 Plan.
During the three months ended March 31, 2024 and 2023, the Company did not grant any stock options.
The following table summarizes the Company’s option activity:
Stock OptionsWeighted-Average Remaining Contractual LifeWeighted-Average Exercise Price per Share
Outstanding at December 31, 20231,183,9085.56$14.96 
Granted$ 
Exercised$ 
Forfeited/Cancelled(117,969)$11.81 
Expired(5,800)$19.90 
Outstanding at March 31, 20241,060,1395.47$15.28 
Unvested at March 31, 202490,3484.93$7.04 
Vested and exercisable at March 31, 2024969,7915.52$16.05 
During the three months ended March 31, 2024 and 2023, the Company recognized $0.1 million and $0.4 million, respectively, in share-based compensation expense related to stock options included in General & Administrative Expense on the Company’s condensed consolidated statements of operations. The unrecognized share-based compensation expense at March 31, 2024 was $0.1 million which will be recognized through the second quarter of 2025 assuming the underlying grants are not cancelled or forfeited. The outstanding shares as of March 31, 2024 had an aggregated intrinsic value of zero.
Note 15: Restricted Stock Units
Restricted stock units (“RSUs”) are granted under the Company’s 2020 Plan. During the three months ended March 31, 2024 and 2023, the Company granted 95,229 and 11,070 fully vested RSUs to the Company’s board members and consultants, with a fair market value of $131,379 and $30,000, respectively.
An aggregate of 103,446 shares of common stock were issued during the three months ended March 31, 2024 as a result of RSUs vested during the current and prior periods.
The following table summarizes the Company’s RSU activity:
Restricted Stock UnitsWeighted-
Average Grant Date Fair Value per Share
Unvested at December 31, 2023982,625$13.42 
Granted95,229$1.38 
Vested(97,021)$1.61 
Forfeited$ 
Unvested at March 31, 2024980,833$13.42 
During the three months ended March 31, 2024 and 2023, the Company recognized $0.2 million and $0.5 million, respectively, in share-based compensation expense related to RSU awards included in General & Administrative Expense
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on the Company’s condensed consolidated statements of operations. The unvested share-based compensation as of March 31, 2024 was $0.3 million 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 three months ended March 31, 2024 was $0.2 million.
Note 16: Warrants
The following table summarizes the Company’s warrant activity:
WarrantsWeighted-Average Remaining Contractual LifeWeighted-Average Exercise Price per Share
Outstanding at December 31, 20236,852,9524.16$8.19 
Granted$– 
Exercised$– 
Expired(26,000)$26.88 
Forfeitures$– 
Outstanding at March 31, 20246,826,9523.93$8.12 
Exercisable at March 31, 20246,826,9523.93$8.12 
Exercisable at December 31, 20236,852,9524.16$8.19 
As of March 31, 2024, 89,286 derivative warrants classified as a liability as issued with convertible notes in 2020 to purchase shares of the Company’s common stock remained outstanding and are revalued each reporting period. As of March 31, 2024, the warrants were revalued at approximately $25,741, resulting in a decrease of $37,334 in liability as compared to December 31, 2023. The change in value was recorded as a Gain on Revaluation of Warrants within Other Expense, net on the condensed consolidated statements of operations and within the Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities on the condensed consolidated statements of cash flows.
The fair value of the outstanding derivative warrants was determined by using the Black-Scholes Merton option pricing model based on the following assumptions as of March 31, 2024:
Market Price$1.37 
Exercise Price$2.10 
Dividend Yield %
Volatility87 %
Risk-free Interest Rate5.03 %
Expected Life of Warrants0.95 years
Note 17: Supplemental Financial Statement Information
Other Expense, net
Components of Other Expense, net, are summarized as follows (in thousands):
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Three Months Ended March 31,
20242023
Interest Expense (a)$(203)$(1,085)
Gain on Revaluation of Warrants (b)$37 $139 
Loss on Revaluation of Equity Investment in YFE (c) (895)
Realized Loss on Marketable Securities Investments (d)(141)(1,537)
Gain (Loss) on Foreign Exchange (e)(650)320 
Interest Income (f)53 310 
Finance Lease Interest Expense (g)(30)(50)
Other (h)164 1 
Other Expense, net
$(567)$(1,712)
(a)
Interest Expense during the three months ended March 31, 2024 primarily consisted of $0.1 million of interest incurred on the production facilities and $0.1 million of interest incurred on bank indebtedness.
(b)
The Gain on Revaluation of Warrants during the three months ended March 31, 2024 is primarily related to the changes in fair value of the remaining outstanding warrant classified as a liability due to decreases in market price.
(c)
As accounted for using the fair value option, the Loss on Revaluation of Equity Investment in YFE is a result of the increases or decreases in YFE’s stock price as of the current reporting period when compared to the prior reporting period. This excludes the impact of foreign currency recorded separately. The stock price of YFE as of March 31, 2024 did not change from the prior period.
(d)The Realized Loss on Marketable Securities Investments reflects the loss that will not be recovered from the investments due to selling securities prior to maturity.
(e)
The Gain (Loss) on Foreign Exchange during the three months ended March 31, 2024 primarily related to the revaluation of the YFE investment, resulting in a loss of $0.4 million due to the EURO fluctuation to USD as compared to the prior reporting period. The remaining balance is related to remeasurements of transactions made in foreign currencies that are outstanding as of the balance sheet date.
(f)
Interest Income during the three months ended March 31, 2024 primarily consisted of interest income, net of premium amortization expense, recorded for the investments in marketable securities.
(g)The Finance Lease Interest Expense represents the interest portion of the finance lease obligations for equipment purchased under an equipment lease line.
(h)
Other Income is primarily related to late fees from select clients on a payment plan.
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.

During the first quarter of 2023, the Frederator indefinite-lived intangible asset was determined to be impaired as previously reported. The Deferred Tax Liability, net balance associated with the tradename decreased by $0.2 million on the unaudited condensed consolidated balance sheet, with a corresponding increase to Income Tax Benefit on the unaudited condensed consolidated statement of operations for the three months ended March 31, 2023. In addition, as part of the Ameba purchase price allocation, a $0.7 million deferred tax liability was previously recorded on the intangible assets. Due to the impairment write-off of the intangible assets, the Company reversed the Deferred Tax Liability, net balance associated with the related intangible assets by $0.7 million and recorded a corresponding increase to Income Tax Benefit on the unaudited condensed consolidated statement of operations for the three months ended March 31, 2023. During the first quarter of 2024, there was no activity that effected the Deferred Tax Liability balance.
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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, 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 2019.

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.
Note 19: Commitments and Contingencies
The following is a schedule of future minimum cash contractual obligations as of March 31, 2024 (in thousands):
20242025202620272028ThereafterTotal
Operating Leases$1,438 $1,638 $1,643 $1,413 $1,069 $3,379 $10,580 
Finance Leases782 668 281    1,731 
Employment Contracts2,519 1,127     3,646 
Consulting Contracts825      825 
Debt2,940 8,292     11,232 
$8,504 $11,725 $1,924 $1,413 $1,069 $3,379 $28,014 
The present value discount of the minimum operating lease payments above was $3.0 million which when deducted from the cash commitments for the leases included in the table above, equates to the lease liabilities of $7.6 million recorded as of March 31, 2024 on the Company’s condensed consolidated balance sheet.
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 employment agreement dated December 7, 2020, Andy Heyward, the Company’s CEO, is entitled to an executive producer fee of $12,500 per one-half hour episode for each episode he provides services as an executive producer. During the three months ended March 31, 2024, Mr. Heyward did not earn any executive producer fees. During the three months ended March 31, 2023 Mr. Heyward earned and was paid $162,500 in executive producer fees. Mr. Heyward also earned his $55,000 quarterly bonus during the three months ended March 31, 2024 and 2023.
On August 25, 2022, Mr. Heyward’s employment agreement was amended to include assignment of music royalties to Mr. Heyward for all musical compositions in which he provides services as a composer for or on behalf of the Company, in the event that the Company acquires up to 50% of the writer's share of the royalties for that musical composition. If the Company acquires more than 50% of the writer's share of the royalties on musical compositions Mr. Heyward provided services for, he has the option to purchase the additional royalties from the Company at the price the
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Company paid to acquire the additional royalties. During the three months ended March 31, 2024 and 2023, Mr. Heyward has not earned royalties from musical compositions.
On February 27, 2023, Mr. Heyward’s employment agreement was further amended to provide him a creative producer fee of $100,000 per quarter, prorated for the three months ended March 31, 2023, for services rendered to Wow. During the three months ended March 31, 2024 and 2023, Mr. Heyward earned $100,000 and $25,556 in creative producer fees.
On July 21, 2020, the Company entered into a merchandising and licensing agreement with Andy Heyward Animation Art (“AHAA”), whose principal is Andy Heyward. The Company entered into a customary merchandise license agreement with AHAA for the use of characters and logos related to Warren Buffett’s Secret Millionaires Club and Stan Lee’s Mighty 7 in connection with certain products to be sold by AHAA. The terms and conditions of such license are customary within the industry, and the Company earns an arm’s-length industry standard royalty on all sales made by AHAA utilizing the licensed content. During the three months ended March 31, 2024 and 2023, Mr. Heyward has not earned royalties from this agreement.
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 of three months due on the last day of each calendar quarter. The principal plus interest must be repaid by no later than June 30, 2026. As of March 31, 2024 and December 31, $1.4 million is included within Notes and Accounts Receivable from Related Party on the Company’s condensed consolidated balance sheets.
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 payments were $595 for the three months ended March 31, 2024 and 2023 and recorded within Other Expense, net in the Company's condensed consolidated statements of operations.
Note 21: Segment Reporting
The Company’s Chief Operating Decision Maker (“CODM”) uses revenue and net earnings to evaluate the profitability and performance of each operating segment. All other financial information is reviewed by the CODM on a condensed consolidated basis. The CODM does not evaluate the operating segments using asset information and it is therefore not disclosed. All expenses directly attributable to each reportable segment are included in the operating results for each segment. However, the CODM does not evaluate the expenses by operating segment and, therefore, it is not separately presented.
The following table presents the revenue and net earnings within the Company's two operating segments (in thousands):
Three Months Ended March 31,
20242023
Total Revenues:
Content Production & Distribution$5,192 $13,233 
Media Advisory & Advertising Services886 956 
Total Revenues$6,078 $14,189 
Net Loss:
Content Production & Distribution$(6,739)$(23,274)
Media Advisory & Advertising Services(306)(554)
Total Net Loss$(7,045)$(23,828)
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Geographic Information
The following table provides information about disaggregated revenue by geographic area (in thousands):
Three Months Ended March 31,
20242023
Total Revenues:
United States$3,181 $8,624 
Canada140 3,616 
United Kingdom2,559 1,799 
Other198 150 
Total Revenues$6,078 $14,189 
The amounts in the table above as of March 31, 2023 have been updated to modify the disclosure classification between segments related to forward currency contracts such that the revenue for Canada was understated and the revenue for the United States and the United Kingdom were overstated. The Company determined the update was not material to its previously issued statements as it did not affect the Company’s consolidated results from operations during the three months ended March 31, 2023.
Note 22: Subsequent Events
Subsequent to March 31, 2024, the Company announced the initial closing of its registered direct offering of up to $7,000,000 (the “Offering”) on April 23, 2024. In the initial closing, the Company sold 3,900,000 shares of its common stock, par value $0.001 per share (the “Common Stock”), and pre-funded warrants to purchase up to 100,000 shares of Common Stock (the “Pre-funded Warrants”) to an institutional investor (the "Investor"), at $1.00 per share of Common Stock and $0.99 per Pre-funded Warrant, for aggregate gross proceeds of approximately $4,000,000, prior to deducting placement agent fees and other offering expenses, pursuant to a securities purchase agreement, dated April 18, 2024 (the “SPA”). Pursuant to the terms of the SPA, the Investor has the sole option to purchase up to an additional 3,000,000 shares of Common Stock and/or Pre-funded Warrants as part of the Offering, at $1.00 per share of Common Stock and $0.99 per Pre-Funded Warrant, in up to three subsequent closings during the 180-day period following the date of the SPA in which each subsequent closing is equal to no less than $1,000,000, whereby the Company would receive additional aggregate gross proceeds of up to $3,000,000 (together with the gross proceeds from the initial closing, up to a total of $7,000,000), prior to deducting placement agent fees and other offering expenses. Additionally, the Company has 4,784,909 warrants with a reprice option that was triggered by the registered direct offering which reduced the exercise price from $2.50 per share to $1.00 per share.
Subsequent to March 31, 2024, the Company sold marketable securities and received proceeds of $2.5 million and incurred a realized loss of $0.2 million. The Company paid down the margin loan and invested $0.8 million in a money market fund.
Refer to Part II Item. 1 Legal Proceedings of this Form 10Q for recent developments in legal matters subsequent to March 31, 2024.
As of May 14, 2024, there were no additional subsequent events to report.
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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our results of operations, financial condition and liquidity and capital resources should be read in conjunction with our financial statements and related notes for the three months ended March 31, 2024 and 2023. Certain statements made or incorporated by reference in this report and our other filings with the Securities and Exchange Commission, in our press releases and in statements made by or with the approval of authorized personnel constitute forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are subject to the safe harbor created thereby. Forward-looking statements reflect intent, belief, current expectations, estimates or projections about, among other things, our industry, management’s beliefs, and future events and financial trends affecting us. Words such as “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “may,” “will” and variations of these words or similar expressions are intended to identify forward looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward looking statements. Although we believe the expectations reflected in any forward-looking statements are reasonable, such statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors. These differences can arise as a result of the risks described in the section entitled “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on April 9, 2024, and elsewhere in this report, as well as other factors that may affect our business, results of operations, or financial condition. Forward-looking statements in this report speak only as of the date hereof, and forward-looking statements in documents incorporated by reference speak only as of the date of those documents. Unless otherwise required by law, we undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, we cannot assure you that the forward-looking statements contained in this report will, in fact, transpire.
Overview

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide readers of our condensed consolidated financial statements with the perspectives of management. This should allow the readers of this report to obtain a comprehensive understanding of our businesses, strategies, current trends, and future prospects. It should be noted that the MD&A contains forward-looking statements that involve risks and uncertainties.

Our Business
Our Content Distribution business is focused on achieving scale across our networks, including Kartoon Channel!, Frederator, Ameba, and Kartoon Channel! Worldwide. Revenue growth will be driven by the continued focus on licensed content and exploitation of our current content such as Stan Lee, Shaq's Garage, Rainbow Rangers and many more. Continued profit growth will be realized the more we can scale the business across our platforms. In addition, we are looking at artificial intelligence (“AI”) tools to reduce the cost of operating distribution expenses such as dubbing expenses, video resolution upscaling and converting between 2D and 3D.
Our Production Services business is focused on creating high-quality original and for hire content in the most efficient way possible. To achieve this, our Mainframe Studios division, the main driver of this business, is exploring more ways to improve operations by adopting a more flexible and efficient approach. This includes collaborating with outsource partners and utilizing AI technology to streamline processes and drive efficiencies within the organization.
Our Licensing & Royalties business has the most upside and potential for the Company. We are looking to take advantage of our incredible set of Stan Lee assets to drive consumer products - both digitally and physically. We will be focused on utilizing all of our IP assets further in 2024 and beyond.
Our Media Advisory & Advertising Services business is focused on driving deal flow opportunities and winning annuity business through retainers and projects. The team continues to focus on the toy business, but also expansion into tangential industries such as family and travel. The team has expanded their reach over the past 12-18 months by leveraging their relationships with influencers to promote products and provide bespoke marketing initiatives for the clients.
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Results of Operations
Our summary results for the three months ended March 31, 2024 and 2023 are below:
Revenue
Three Months Ended March 31,
20242023Change% Change
(in thousands, except percentages)
Production Services$2,763 $9,886 $(7,123)(72)%
Content Distribution2,329 3,301 (972)(29)%
Licensing & Royalties100 46 54 117 %
Media Advisory & Advertising Services886 956 (70)(7)%
Total Revenue$6,078 $14,189 $(8,111)(57)%

Production Services revenue was generated specifically by Wow providing animation production services. Revenue for production services is recognized over time on a percentage of completion basis, therefore, as the projects are still in progress, we recognize revenue based upon the proportion of costs incurred cumulatively to total expected costs. Consequently, less revenue is recognized during the periods in which the projects are near completion or completed. Revenue for the three months ended March 31, 2024 was lower than the Wow production services revenue recognized during three months ended March 31, 2023 primarily due to a lower volume of active service production projects in the current period versus the prior year period.

Revenue related to Content Distribution on AVOD and SVOD, including advertising sales for the three months ended March 31, 2024, decreased by 29% as compared to the three months ended March 31, 2023. This was primarily due to a decrease in Frederator’s multi-channel network revenue of $0.8 million from YouTube due to less viewership and a decline in RPM advertising rates.
Revenue related to Licensing & Royalties for the three months ended March 31, 2024 increased by 117% as compared to the three months ended March 31, 2023 primarily due to the acquisition of new customers during the current period.
Revenue generated by Media Advisory & Advertising services for the three months ended March 31, 2024 decreased by 7% as compared to the three months ended March 31, 2023 primarily due to lower net renewal activity and media purchases from clients.
Expenses
Three Months Ended March 31,
20242023Change% Change
(in thousands, except percentages)
Marketing and Sales$444 $245 $199 81 %
Direct Operating Costs4,325 11,285 (6,960)(62)%
General and Administrative7,603 9,225 (1,622)(18)%
Impairment of Property and Equipment– 120 (120)(100)%
Impairment of Intangible Assets– 4,023 (4,023)(100)%
Impairment of Goodwill– 11,287 (11,287)(100)%
Total Expenses$12,372 $36,185 $(23,813)(66)%
The increase in Marketing and Sales expenses for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily due to an increase in advertising efforts aimed at promoting the Kartoon Studios branding.
Direct Operating Costs during the three months ended March 31, 2024 consisted primarily of salaries and related expenses for the animation production services employees of Wow and Frederator. Channel expenses, licensing and production of content costs, such as participation expenses related to profit sharing obligations with various animation studios, post-production studios, writers, directors, musicians or other creative talent that had rendered services and
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amortization, including any write-downs of film and television costs, make up the remainder of Direct Operating Costs. The decrease was primarily due to a reduction in salary costs and headcount due to a lower volume of service production projects for the three months ended March 31, 2024, compared to the same period of the prior year.
The decrease in General and Administrative expenses for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 was primarily due to a decrease of $0.7 million in share-based compensation expense, a decrease in depreciation related to equipment leases that had ended prior to the current period, and a decrease in general expenses as part of the Company’s cost saving initiatives.
During the three months ended March 31, 2023, we reassessed our nonfinancial assets, including our definite-lived intangible assets, our indefinite-lived intangible assets and our remaining goodwill for impairment. As a result, we concluded that impairment charges to those assets were required. The Company concluded that there were no indications or triggering events that would further impair the assets during the three months ended March 31, 2024.
Other Expense, net
Components of Other Expense, net are summarized as follows (in thousands):
Three Months Ended March 31,
20242023
Interest Expense (a)$(203)$(1,085)
Gain on Revaluation of Warrants (b)37 139 
Loss on Revaluation of Equity Investment in YFE (c)– (895)
Realized Loss on Marketable Securities Investments (d)(141)(1,537)
Gain (Loss) on Foreign Exchange (e)(650)320 
Interest Income (f)53 310 
Finance Lease Interest Expense (g)(30)(50)
Other (h)164 
Other Expense, net
$(567)$(1,712)
(a)Interest Expense during the three months ended March 31, 2024 primarily consisted of $0.1 million of interest incurred on the production facilities and $0.1 million of interest incurred on bank indebtedness.
(b)The Gain on Revaluation of Warrants during the three months ended March 31, 2024 is primarily related to the changes in fair value of the remaining outstanding warrant classified as a liability due to decreases in market price.
(c)As accounted for using the fair value option, the Loss on Revaluation of Equity Investment in YFE is a result of the increases or decreases in YFE’s stock price as of the current reporting period when compared to the prior reporting period. This excludes the impact of foreign currency recorded separately. The stock price of YFE as of March 31, 2024 did not change from the prior period.
(d)The Realized Loss on Marketable Securities Investments reflects the loss that will not be recovered from the investments due to selling securities prior to maturity.
(e)The Gain (Loss) on Foreign Exchange during the three months ended March 31, 2024 primarily related to the revaluation of the YFE investment, resulting in a loss of $0.4 million due to the EURO fluctuation to USD as compared to the prior reporting period. The remaining balance is related to remeasurements of transactions made in foreign currencies that are outstanding as of the balance sheet date.
(f)Interest Income during the three months ended March 31, 2024 primarily consisted of interest income, net of premium amortization expense, recorded for the investments in marketable securities.
(g)The Finance Lease Interest Expense represents the interest portion of the finance lease obligations for equipment purchased under an equipment lease line.
(h)
Other Income is primarily related to late fees from select clients on a payment plan.
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Liquidity and Capital Resources
As of March 31, 2024, we had cash of $2.8 million, which decreased by $1.3 million as compared to December 31, 2023. The decrease was primarily due to cash used in financing activities of $7.9 million, offset by cash provided by operating activities of $3.8 million and investing activities of $2.6 million. The cash used in financing activities was primarily due to the net repayment of the production facilities and bank indebtedness, partially offset by the net proceeds from the margin loan, resulting in cash used of $7.5 million, and payments on finance leases of $0.4 million. The cash provided by investing activities was due to sales of marketable securities of $2.6 million.
As of March 31, 2024, we held available-for-sale marketable securities with a fair value of $9.4 million, a decrease of $2.6 million as compared to December 31, 2023 due to sales and maturities during the three months ended March 31, 2024. The available-for-sale securities consist principally of corporate and government debt securities and are also available as a source of liquidity.
As of March 31, 2024 and December 31, 2023, our margin loan balance was $2.9 million and $0.8 million, respectively. During the three months ended March 31, 2024, we borrowed an additional $3.1 million from our investment margin account and repaid $0.9 million primarily with cash received from sales and maturities of marketable securities. 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 0.95% and 0.98% on average margin loan balances of $14.2 million and $27.4 million as of March 31, 2024 and December 31, 2023, respectively. We incurred interest expense on the loan of $18,632 and $0.7 million during the three months ended March 31, 2024 and 2023, respectively. 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 is recorded as a current liability on our condensed consolidated balance sheets.
We are subject to financial and customary affirmative and negative non-financial covenants on the revolving demand facility and equipment lease line that have an aggregate total outstanding balance of USD 1.0 million (CAD 1.4 million).
During March 2024, the Company amended the revolving demand facility, equipment lease line, and treasury risk management facility. As a result of the amendment, the revolving demand facility allows for draws of up to CAD 1.0 million to be made by way of CAD prime rate loans, CAD overdrafts, USD base rate loans or letters of credit up to a maximum of $200,000 in either CAD or USD and having a term of up to 1 year. The CAD prime borrowings and overdrafts bear interest at a rate equal to bank prime plus 2.00% per annum. The USD base rate borrowings bear interest at a rate equal to bank base rate plus 2.00% per annum. In addition, the equipment lease line was terminated, however, the Company has and will continue to make the regular principal and interest payments under the specific financing terms of the existing equipment lease agreements. The amendment removed the treasury risk management facility that allowed for advances of up to CAD 0.5 million. As of March 31, 2024 and the date of the amendment, there were no outstanding amounts drawn under the treasury risk management facility. The amendment also introduced revised financial covenants that are effective as of March 15, 2024. The amendment did not have any impact on the Company’s existing production facilities that are separate from the revolving demand facility and are used for financing specific productions.

Working Capital
As of March 31, 2024, we had total current assets of $41.0 million, including cash of $2.8 million and marketable securities of $9.4 million, and our total current liabilities were $34.9 million. We had working capital of $6.1 million as of March 31, 2024 as compared to working capital of $11.5 million as of December 31, 2023. The decrease of $5.4 million was primarily due to a decrease in our cash and marketable security position.
During the three months ended March 31, 2024, we met our immediate cash requirements through existing cash balances. Additionally, we used equity and equity-linked instruments to pay for services and compensation. We believe that our current cash balances and our investments in available for sale marketable securities are sufficient to support our operations for at least the next twelve months. To meet our short and long-term liquidity needs, we expect to use existing cash and marketable securities balances.
Comparison of Cash Flows for the Three Months Ended March 31, 2024 and March 31, 2023
Our total cash as of March 31, 2024 and March 31, 2023 was $2.8 million and $4.1 million, respectively.

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Three Months Ended March 31,
20242023Change
(in thousands)
Net Cash Provided by (Used in) Operating Activities$3,845 $(5,165)$9,010 
Net Cash Provided by Investing Activities2,560 14,648 (12,088)
Net Cash Used in Financing Activities(7,891)(12,157)4,266 
Effect of Exchange Rate Changes on Cash154 147 
Decrease in Cash
$(1,332)$(2,667)$1,335 
Net Non-cash Expenses
Items necessary to reconcile from net loss to cash provided by operating activities included net non-cash expenses of $2.1 million for the three months ended March 31, 2024 as compared to net non-cash expenses of $19.4 million for the three months ended March 31, 2023. The majority of the decrease of $17.3 million was primarily due to the absence of the recognition of $15.4 million in impairment expenses of long-lived assets, intangible assets and goodwill and a loss of $0.9 million on the revaluation of our equity investment in YFE securities that was recorded during the three months ended March 31, 2023. In addition, the realized loss on marketable securities decreased by $1.4 million due to the decreased sales of our marketable securities prior to their maturity date and stock based compensation expense decrease