Kartoon Studios, Inc.
For the period ended Mar 31, 2025. Filed May 15, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 15, 2025
TOON$0.50+2.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001683168-24-008023
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-15.
0001683168-25-003620
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 63 previous paragraphs and 49 current paragraphs.
19 unchanged; 22 reworded; 8 added; 18 removed; 4 previous and 0 current paragraphs rearranged.
Tables are not compared: 10 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
Revenue related to Content Distribution on AVOD and SVOD, including advertising sales for the three months ended March 31, 2025, decreased by 15% as compared to the three months ended March 31, 2024. The decrease of $0.3 million was due to a decrease of $0.2 million in Frederator’s creator network revenue from YouTube driven by overall less viewership as compared to the prior year period, and a decrease in Kartoon Studios’ content distribution revenue of $0.1 million related to lower volume of licensing agreements signed by theKartoon Channel! Worldwide division for the broadcast of the channel.
Current report
Liquidity and Capital Resources
Current report
Over the next 12 months, we expect to use cash primarily to fund ongoing operations, content production, and strategic growth initiatives. Management believes that the future cash needs can be addressed through a combination of actions within its control, including cost reductions, optimization of working capital, and securing licensing and distribution advances. Other potential sources of liquidity that are outside of our control include receipt of IRS Employee Retention Tax Credits, warrant redemptions, or proceeds from capital raises. Any of these could help improve our liquidity position and depend on external factors such as IRS processing timelines, market conditions, and investor participation. Based on current cash balances and the ability to execute on planned initiatives, management believes it has sufficient liquidity to meet its obligations for at least the next 12 months.
Current report
As of March 31, 2025, we had total current assets of $25.1 million, including cash of $2.3 million, restricted cash of $0.5 million and marketable securities of $3.2 million, and our total current liabilities were $26.8 million. We had negative working capital of $1.7 million as of March 31, 2025 as compared to working capital of $1.2 million as of December 31, 2024. Thedecreaseof$2.9 millionwas due to a decrease of $9.5 million in current assets and a decrease of $6.6 million in current liabilities compared to the prior period. A decrease in current assets is primarily driven by a decrease of $5.6 million in cash, a decrease of $4.4 million in accounts receivable and a decrease of $2.0 million in production tax credit receivable position, offset by an increase of $1.2 million in marketable securities investments, an increase of $0.4 million in related party notes receivable balance and an increase $0.7 million in prepaid balance. The decrease in current liabilities is primarily driven by a decrease of $6.0 million in accounts payable, a decrease by $1.8 million in production facilities and a decrease of $0.5 million in margin loan balance, offset by an increase of $1.3 million in accrued expenses and an increase of $0.5 million in accrued salaries.
Current report
During the three months ended March 31, 2025, 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.
Current report
Items necessary to reconcile from net loss to cash used in operating activities included net non-cash expenses of $4.6 million for the three months ended March 31, 2025 as compared to net non-cash expenses of $2.1 million for the three months ended March 31, 2024. The majority of the increase of $2.5 million was primarily due to loss of $3.6 million on the revaluation of our equity investment in YFE securities and a loss of $0.9 million relating to Related Party Notes Receivable settlement agreement that was considered probable during the three months ended March 31, 2025. The increase is offset by an increase of $1.1 million of FX impact on the value of the equity investment in YFE, an increase of $0.4 million in gain related to revaluation of the warrants, a decrease of $0.3 million in amortization of Right-of-Use assets, a decrease of $0.1 million in stock-based compensation expense and a decrease of $0.1 million in realized loss on marketable securities due to the lower sales of our marketable securities prior to their maturity date.
Current report
The net change in operating asset and liability activities from cash used of $8.8 million as of March 31, 2024 to cash used of $0.2 million as of March 31, 2025 was due to a decrease of $6.8 million in operating assets activity and a decrease of $1.8 million in operating liabilities activity. A decrease of in operating assets activity was primarily due to a decrease of $6.1 million in net receipts tax credits during the current year related to completed projects and an increase of $1.0 million in net Film and Television Cost expenditures, offset by a decrease of $0.3 million in outstanding balance of the ERTC receivable. A decrease of in operating liability activity was primarily due to an increase in accounts payable of $1.1 million due to certain legal expenditures being subject to extended payment terms related to potential insurance recovery and a decrease of $0.5 million in deferred revenue, representing less cash received in advance for projects not yet recognized.
Current report
Critical Accounting Policies and Estimates
Removed paragraphs (18)
Previous report
Revenue related to Content Distribution on advertisement supported video on demand (“AVOD”) and subscription video on demand (“SVOD”), including advertising sales for the three months ended September 30, 2024, decreased by 8% as compared to the three months ended September 30, 2023. This was primarily due to a decrease in Frederator’s creator network revenue of $0.2 million from YouTube due to reduced advertising spending and a decline in revenue per mille (“RPM”) advertising rates.
Previous report
Revenue related to Licensing & Royalties for the three months ended September 30, 2024 decreased by 76% as compared to the three months ended September 30, 2023 primarily due to higher royalties earned in the prior year for owned IP and music royalties.
Previous report
The decrease in General and Administrative expenses for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 was primarily due to a decrease in expenses of $1.9 million related to cost saving initiatives, a decrease of $0.6 million in litigation expenses mainly due to a litigation insurance provision recognized in the three months ended September 30, 2024, a decrease of $0.4 million in annual shareholder meeting expenses of holding the annual shareholder meeting during the quarter ended September 30, 2024 as opposed to earlier in the prior year, and lower depreciation expense of $0.3 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.
Previous report
Revenue
Previous report
Revenue related to Content Distribution on AVOD and SVOD, including advertising sales for the nine months ended September 30, 2024, decreased by 21% as compared to the nine months ended September 30, 2023. This was primarily due to a decrease in Frederator’s creator network revenue of $1.7 million from YouTube due to reduced advertising spending and a decline in RPM advertising rates.
Previous report
Revenue generated by Media Advisory & Advertising services for the nine months ended September 30, 2024 increased by 13% as compared to the nine months ended September 30, 2023 primarily due to higher net renewal activity, client fees, and media purchases from clients.
Previous report
Expenses
Previous report
The decrease in Marketing and Sales expenses for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 was primarily due to expenses incurred for stock issued for services of $1.3 million related to our Shaq’s Garage series that was not incurred during the current nine months ended September 30, 2024, and a decrease of $0.3 million in marketing expenses associated with company brand development
Previous report
Direct Operating Costs during the nine months ended September 30, 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 amortization, including any write-downs of film and television costs, make up the remainder of Direct Operating Costs. The decrease of 54% as compared to the nine months ended September 30, 2023 was primarily due to a $11.5 million reduction in salary costs, net of tax credits, as a result in a reduction in headcount due to a lower volume of service production projects for the nine months ended September 30, 2024, compared to the same period of the prior year, and $6.5 million of film cost impairments and write-down of development projects for the nine months ended September 30, 2024.
Previous report
Three Months and Nine Months Ended September 30, 2024
Previous report
Three Months and Nine Months Ended September 30, 2023
Previous report
Liquidity, Going Concern, and Capital Resources
Previous report
We are subject to financial and customary affirmative and negative non-financial covenants on the revolving demand facility and equipment lease agreements that have an aggregate total outstanding balance of$1.2 million (CAD 1.6 million).
Previous report
During March 2024, we 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$0.7 million (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, we have 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$0.4 million(CAD 0.5 million). As of the date of amendment and December 31, 2023, 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. As of September 30, 2024, we are not in compliance with a financial covenant to maintain a minimum liquidity threshold. Due to financial covenant violations in the second quarter of 2024, our remaining equipment lease agreements with the lender of$0.6 million (CAD 0.8 million)are subject to early repayment. During the three months ended September 30, 2024, the lender agreed to a repayment plan for the equipment leases under the equipment lease line to be completed prior to the end of the fourth quarter of 2024. On August 30, 2024, we paid$0.1 million(CAD 0.1 million) to the lender as part of our repayment plan for the existing equipment lease line agreements. Subsequent to September 30, 2024, we paid$0.3 million(CAD 0.4 million) to the lender as part of our repayment plan for the equipment lease line. The amendment and covenant violation did not have any impact on our production facilities that are separate from the revolving demand facility and are used for financing specific productions.
Previous report
As of September 30, 2024, we had total current assets of $37.2 million, including cash of $4.6 million and marketable securities of $4.1 million, and our total current liabilities were $33.7 million. We had working capital of $3.5 million as of September 30, 2024 as compared to working capital of $11.5 million as of December 31, 2023. The decrease of $8.0 million was primarily due to sales of marketable securities of $8.0 million, a decrease in accounts receivable and tax credits receivable of $14.0 million, partially offset by a decrease in accounts payable of $4.8 million and a decrease in production facilities and bank indebtedness of $8.9 million. During the nine months ended September 30, 2024, we met our immediate cash requirements through existing cash balances and through the sale of marketable securities. Additionally, we used equity and equity-linked instruments to pay for services and compensation. Based on our current expected level of operating expenditures and the cash and cash equivalents on hand at September 30, 2024, management concludes that there is substantial doubt about our ability to continue as a going concern for a period of at least 12 months subsequent to the issuance of the accompanying condensed consolidated financial statements. Historically, the Company has financed its operations primarily through revenue generated from operations, loans and sales of its securities, and the Company expects to continue to seek and obtain additional capital in a similar manner. The Company has filed a registration statement on Form S-3 on December 22, 2023, as amended, registering the sale of up to $75 million of the Company’s securities pursuant to a shelf registration statement, and a registration statement on Form S-1 on September 27, 2024, as amended, in connection with a best efforts public offering of up to $8 million of the Company’s securities. However, the Company does not have any committed sources of financing at this time, and it is uncertain whether any additional funding will be available when it needs it on terms that will be acceptable to it, or at all. The Company’s ability to sell securities registered on its registration statement on From S-3 is limited until such time that the market value of its voting securities held by non-affiliates is $75 million or more. In addition, the number of shares of common stock and securities convertible or exercisable for common stock that the Company can sell, under certain circumstances, will be limited by NYSE American rules and regulations. There can be no assurance that the Company will be able to raise funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of its existing shareholders will be diluted. The issuance of debt can result in restrictive covenants that limit operations. If funding is not available or not available at terms acceptable to the Company, the Company will seek to reduce overhead costs a…
Excerpt shortened here; the source contains the full paragraph.
Previous report
Items necessary to reconcile from net loss to cash used in operating activities included net non-cash expenses of $5.9 million for the nine months ended September 30, 2024 as compared to net non-cash expenses of $37.6 million for the nine months ended September 30, 2023. The net decrease of $31.7 million in non-cash expenses was primarily due to the absence of the recognition of $21.6 million in impairment expenses of film and television costs, long-lived assets, intangible assets and goodwill, a decrease in warrant incentive expense of $12.7 million, a decrease of realized losses from marketable securities of $3.6 million, and a decrease in share-based compensation of $1.5 million. The decreases were partially offset by the nine months ended September 30, 2023 reconciling non-cash items of $8.9 million related to gains from revaluations of warrants.
Previous report
The net change in operating asset and liability activities provided by operating activities of $8.1 million as of September 30, 2024 compared to the net change in operating asset and liability activities used by operating activities of $6.0 million as of September 30, 2023 was primarily due to an increase in net receipts of tax credits during the current year of $7.4 million as credits were received for production completed in the prior year, a decrease in deferred revenue of $8.0 million, an increase in accounts receivable, net of $2.6 million and a $2.9 million increase in accounts payable due to timing.
Previous report
Critical Accounting Estimates
Reworded paragraphs (22)
Previous wording
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 thethree and nine months ended September 30, 2024 and September 30, 2023*. Certain statements made or incorporated by reference in this report and our other filings with the Securities and Exchange Commission (the “SEC”), 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 “Risk Factors” below in this Quarterly Report on Form 10-Q (the “Form 10-Q”) and 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 (the “2023 Annual Report”), 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. References to “we”, “us”,”our”, and the “Company” refer to Kartoon Studios, Inc.*
Current wording
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, 2025 and 2024. 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, 2024, which was filed with the SEC on March 31, 2025 (“The 2024 Annual Report”), 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.
Previous wording
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.
Current wording
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 artificial intelligence (“AI”) technology to streamline processes and drive efficiencies within the organization. With over 1,200 episodes, 70 movies, and three feature films to its credit, the division has partnered with major industry players to produce acclaimed series such as "Barbie Dreamhouse Adventures," "Octonauts: Above & Beyond,"“Cocomelon”, and "Unicorn Academy."
Previous wording
Our Content Distribution business is focused on achieving scale across our networks, includingKartoon Channel!, Frederator, Ameba, andKartoon 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 Rangersand 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.
Current wording
Our content distribution business is focused on achieving scale across our networks, includingKartoon Channel!, Frederator, Ameba, andKartoon Channel! Worldwide. Revenue growth is expected to be driven by the continued focus on licensed content and exploitation of our current content such as with our Stan Lee brand,Shaq's Garage, Rainbow Rangersand many more. Continued profit growth is expected to be realized the more we can scale the business across our platforms. In addition, we have implemented and are continuing to look at AI tools to reduce the cost of operating distribution expenses such as dubbing expenses, video resolution upscaling and converting between 2D and 3D.
Previous wording
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.
Current wording
We believe that our licensing and royalties business has the most upside and potential for us of all our business lines. We are looking to take advantage of our incredible set of Stan Lee assets to drive consumer products - both digitally and physically. We plan to focus on utilizing all of our IP assets further in 2025 and beyond.
Previous wording
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 recently by leveraging their relationships with influencers to promote products and provide bespoke marketing initiatives for the clients.
Current wording
Our media advisory and 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.
Previous wording
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 Wow production services for the three months ended September 30, 2024 was 23% lower than the Wow production services revenue recognized during three months ended September 30, 2023 primarily due to a lower volume of active service production projects in the current period versus the prior year period.
Current wording
Production Services revenue was generated specifically by Mainframe Studios 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, 2025 was higher than the Mainframe Studios’ production services revenue recognized during three months ended March 31, 2024 primarily due to the number of active projects in the current quarter.
Previous wording
Revenue related to Licensing & Royalties for the nine months ended September 30, 2024 decreased by 35% as compared to the nine months ended September 30, 2023 primarily due to higher royalties earned in the prior year for music royalties.
Current wording
Revenue related to Licensing and Royalties for the three months ended March 31, 2025 decreased by 16% as compared to the three months ended March 31, 2024 primarily due to lower amounts earned from our license deals related to our consumer products agreements and music licensing agreements.
Previous wording
Revenue generated by Media Advisory & Advertising services for the three months ended September 30, 2024 increased by 43% as compared to the three months ended September 30, 2023 primarily due to higher net renewal activity and media purchases from clients.
Current wording
Revenue generated by Media Advisory and Advertising services for the three months ended March 31, 2025 decreased by 2% as compared to the three months ended March 31, 2024 primarily due to lower net renewal activity and media purchases from clients.
Previous wording
The decrease in Marketing and Sales expenses for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 was primarily due to a decrease of $0.3 million in marketing expenses associated with company brand development.
Current wording
The decrease in Marketing and Sales expenses for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 was primarily due to a decrease in advertising efforts aimed at promoting the Kartoon Studios branding.
Previous wording
Direct Operating Costs during the three months ended September 30, 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 amortization, including any write-downs of film and television costs, make up the remainder of Direct Operating Costs. The decrease was primarily due to $6.3 million of film cost impairments and write-down of development projects for the three months ended September 30, 2023, a $1.1 million reduction in salary costs, net of tax credits, from a decline in headcount as a result of lower volumes of service production projects for the three months ended September 30, 2024, compared to the same period of the prior year, and a reduction of $0.2 million in participation estimates related to Wow owned IP.
Current wording
Direct Operating Costs during the three months ended March 31, 2025 consisted of salaries and related expenses for animation production services employees of Mainframe Studios and Frederator. The remainder of Direct Operating Costs consisted of creator network channel expenses, content licensing, and production costs, including participation expenses related to profit-sharing obligations with various animation studios, post-production studios, writers, directors, musicians, and other creative talent, as well as amortization and any write-downs of film and television costs. The increase during the three months ended March 31, 2025 was primarily due to an increase in salary costs and headcount included in Production Services related to new projects that began in the current quarter compared to the same period of the prior year.
Previous wording
The decrease in General and Administrative expenses for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 was primarily due to a decrease of $2.0 million as a result of decreased use in equipment rentals and software licenses, a decrease of $1.5 million in share-based compensation expense, a decrease of $1.5 million in payroll related expenses, a decrease of $0.9 million in depreciation related to equipment leases that had ended prior to the current period, and a decrease of $0.6 million in general administrative expenses related to additional cost saving initiatives.
Current wording
The decrease in General and Administrative expenses for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 was primarily due to a decrease of $0.6 million in depreciation expense related to the property and equipment impairment recorded in prior year, a reduction of $1.4 million in overhead costs primarily due to cost-saving initiatives, and a $0.1 million decrease in share-based compensation expense.
Previous wording
During the three months ended September 30, 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. We concluded that there were no indications or triggering events that would further impair the assets during the three months ended September 30, 2024.
Current wording
During the three months ended March 31, 2025, we reassessed our nonfinancial assets, including our definite-lived intangible assets, our indefinite-lived intangible assets for impairment. As a result, we concluded that impairment charges to those assets were not required. Furthermore, we concluded that no indicators of impairment or triggering events were identified during the period.
Previous wording
As of September 30, 2024, we had cash of $4.6 million, which increased by $0.5 million as compared to December 31, 2023. The increase was primarily due to cash provided by investing activities of $7.9 million, offset by cash used in financing activities of $6.4 million and cash used for operating activities of $1.1 million. The cash used in financing activities was primarily due to repayments of the production facilities, finance lease obligations, and bank indebtedness, net of proceeds from each, resulting in net cash used of $10.0 million, offset by net proceeds from the Offering of $3.3 million and margin loan of $0.3 million. The cash provided by investing activities was primarily due to sales of marketable securities of $8.0 million.
Current wording
As of March 31, 2025,we had cash and restricted cash of $2.8 million, which decreased by $5.6 million as compared to December 31, 2024. The decrease was primarily due to cash used in financing activities of $2.6 million, cash used in operating activities of $1.8 million and cash used in investing activities of $1.2 million. The cash used in financing activities was primarily due to repayments of the production facilities and margin loan, net of proceeds from each, resulting in net cash used of $2.5 million, and payments of lease obligations of $0.1 million. The cash used in operating activities was primarily due to net loss of $6.6 million partially offset by net change in non-cash adjustments of $4.6 million and net change in operating asset and liabilities of $0.2 million. The cash used in investing activities was due to purchase of marketable securities of $1.8 million.
Previous wording
As of September 30, 2024, we held available-for-sale marketable securities with a fair value of $4.1 million, a decrease of $7.9 million as compared to December 31, 2023 due to sales and maturities during the nine months ended September 30, 2024. The available-for-sale securities consist principally of corporate and government debt securities and are also available as a source of liquidity.
Current wording
As of March 31, 2025, we held available-for-sale marketable securities with a fair value of $3.2 million. An increase of $1.2 million as compared to December 31, 2024 was due to a purchase transaction during the three months ended March 31, 2025. The available-for-sale securities consist principally of corporate and government debt securities and are also available as a source of liquidity.
Previous wording
For three months ended September 30, 2024 and September 30, 2023, we incurred interest expense on the loan of $11,070 and $0.2 million, respectively. We incurred interest expense on the margin loan of $42,131 and $1.5 million during the nine months ended September 30, 2024 and September 30, 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.
Current wording
As of March 31, 2025 and December 31, 2024, our margin loan balance was $0.4 million and $0.9 million, respectively. During the three months ended March 31, 2025, we borrowed an additional $2.7 million from our investment margin account and repaid $3.2 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 0.32% and 0.46%, respectively, on average margin loan balances of $0.1 million and $1.0 million as of March 31, 2025 and December 31, 2024, respectively. We incurred interest expense on the loan of $1,806 and $18,632 during the three months ended March 31, 2025 and 2024, 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.
Previous wording
Comparison of Cash Flows for the Nine Months Ended September 30, 2024 and September 30, 2023
Current wording
Comparison of Cash Flows for the Three Months Ended March 31, 2025 and March 31, 2024
Previous wording
Our total cash as of September 30, 2024 and September 30, 2023 was $4.6 million and $3.9 million, respectively.
Current wording
Our total cash as of March 31, 2025 and March 31, 2024 was $2.3 million and $7.9 million, respectively.
Previous wording
The decrease in cash provided by investing activities of $61.5 million was primarily due to a decrease in proceeds from the sales and maturities of marketable securities of $60.1 million during the nine months ended September 30, 2024 as a result of selling less marketable securities during the current period.
Current wording
The decrease in cash provided by investing activities of $3.7 million was primarily due to a decrease in proceeds from the sales and maturities of marketable securities of $2.0 million during the three months ended March 31, 2025 reflecting fewer sales during the current period. In addition, we made a purchase of additional securities of $1.8 million during the three months ended March 31, 2025.
Previous wording
The decrease in cash used in financing activities of $46.4 million was primarily due to a decrease in repayments of our margin loan of $67.4 million, partially offset by less proceeds drawn from the margin loan and production facilities of $13.2 million, higher repayments during the current period, compared to proceeds from bank indebtedness during the prior year period, resulting in a net increase of cash used in financing of $2.8 million, and higher repayments of production facilities in the current year of $3.7 million.
Current wording
The decrease in cash used in financing activities of $5.3 million was primarily due to a decrease in repayments of our production facilities of $4.8 million, a decrease of bank indebtedness repayment of $2.8 million and a decrease in lease payments of $0.3 million, offset by increase in repayments of margin loan of $2.3 million along with a decrease in borrowings from our margin loan of $0.4 million during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.
Previous wording
We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods. Our material cash requirements from known contractual and other obligations primarily relate to our debt and lease obligations and our employment and consulting contracts. The aggregate amount of future minimum purchase obligations under these agreements over the period of next five years is approximately $25.3 million as of September 30, 2024, of which $5.0 million could be owed within one year. Included in the amount that could be due within one year is the margin loan current balance of $1.1 million and revolving demand facility current balance of $0.6 million.
Current wording
We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods. Our material cash requirements from known contractual and other obligations primarily relate to our debt and lease obligations and our employment and consulting contracts. The aggregate amount of future minimum purchase obligations under these agreements over the period of next five years is approximately $24.2 million as of March 31, 2025, of which about $14.3 million could be owed within one year. Included in the amount that could be due within one year is the margin loan current balance of $0.4 million and production facilities of $7.5 million.
Previous wording
As of September 30, 2024, we had $1.1 million in commitments for capital expenditures, related to equipment leases.
Current wording
As of March 31, 2025, we had $0.2 million in commitments for capital expenditures, related to equipment leases.
Previous wording
The preparation of the financial statements and related disclosures in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.
Current wording
The preparation of the financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and our discussion and analysis of our financial condition and operating results require our management to make judgments, assumptions and estimates that affect the amounts reported. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Our summary results for the nine months ended September 30, 2024 and 2023 are below:
Previous report — wording carried elsewhere
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 Wow production services for the nine months ended September 30, 2024 was 45% lower than the Wow production services revenue recognized during nine months ended September 30, 2023 primarily due to a lower volume of active service production projects in the current period versus the prior year period.
Previous report — wording carried elsewhere
During the nine months ended September 30, 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. We concluded that there were no indications or triggering events that would further impair the assets during the nine months ended September 30, 2024.
Previous report — wording carried elsewhere
As of September 30, 2024 and December 31, 2023, our margin loan balance was $1.1 million and $0.8 million, respectively. During the nine months ended September 30, 2024, we borrowed an additional $9.1 million from our investment margin account and repaid $8.8 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 0.71% and 0.98%, respectively, on average margin loan balances of $7.5 million and $27.4 million as of September 30, 2024 and December 31, 2023, respectively.