Kartoon Studios, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Supplemental Financial Statement Information

Supplemental Financial Statement Information

12 Months Ended

Dec. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Supplemental Financial Statement Information

Note 12: Supplemental Financial Statement Information

Accrued Expenses

The Company had the following current accrued liabilities (in thousands):

Schedule of other accrued liabilities
	As of December 31,
	2021		2020
Accrued Production Costs (a)	$	1,733	$	–
Other Accrued Expenses (b)		535		408
Accrued Salaries and Wages (c)		799		429
Total Accrued Liabilities – Current	$	3,067	$	837

__________________

	(a)	Represents production costs accrued for Rainbow Rangers Season 3 and KC! Pop Quiz.
	(b)	Primarily represents external consulting services and legal fees.
	(c)	Represents accrued salaries and wages and accrued vacation payable to employees.

Other Income (Expense), Net

Components of other income (expense), net, are summarized as follows (in thousands):


	Year Ended December 31,
	2021			2020
Gain on Contingent Consideration Revaluation	$	5,846		$	–
Gain (Loss) on Warrant Revaluation		342			(210,895	)
Loss on Foreign Exchange		(26	)		–
Loss on Marketable Securities Investments		(70	)		–
Loss on Equity Investment		(106	)		–
Interest Income		559			145
Warrant Incentive Expense		(69,139	)		–
Loss on Conversion Option Revaluation		–			(171,836	)
Loss on Lease Termination		–			(339	)
Sublease Income		–			317
Net Other Expense	$	(62,594	)	$	(382,608	)

The gain on contingent consideration revaluation is related to the change in fair value of the liability recorded for the earn-out arrangement with the sellers of the ChizComm entity acquired during 2021. The favorable decrease in the liability is based on the Company’s updated assumptions utilized to value the contingency.

The gain (loss) on warrant revaluation is related to the change in fair value of outstanding warrants that were determined to be derivative liabilities attached to previously issued and converted convertible notes.

The foreign exchange gains and losses are due to foreign currency denominated transactions, including the investment in YFE’s equity securities accounted for under the fair value option, in which the Company also realized a loss due to a decrease in fair value.

The Company started investing in marketable securities during the year ended December 31, 2021. The net realized loss on marketable securities recognized during the year ended December 31, 2021, reflects the loss in the investments in available-for-sale securities that will not be recovered due to prepayments of principals on certain mortgage-backed securities.

Interest Income, net during the year ended December 31, 2021, primarily consists of cash interest received of $1.2 million on the investments in marketable securities, net of $0.6 million for amortization of premiums.

The Warrant Incentive Expense is related to the fair value of new warrants issued in 2021 to certain existing warrant holders in exchange for previously issued outstanding warrants.

As of December 31, 2020 all notes were converted and repaid, therefore a revaluation on conversion options was not performed in 2021. In addition, as of December 31, 2020 the Company terminated the lease that generated sublease income, resulting in a loss on lease termination that did not occur during the year ended December 31, 2021.