| Supplemental Financial Statement Information |
Note 17: Supplemental Financial Statement Information
Components of Other Income (Expense), net, are
summarized as follows (in thousands):
| Schedule of other income expense, net | |
| | | |
| | | |
| | | |
| | |
| | |
Three Months Ended June 30, | |
Six Months Ended June 30, |
| | |
2026 | |
2025 | |
2026 | |
2025 |
| Interest Expense (a) | |
$ | (175 | ) | |
$ | (165 | ) | |
$ | (408 | ) | |
$ | (293 | ) |
| | |
| | | |
| | | |
| | | |
| | |
| Other Income (Expense), net (b-l) | |
| | | |
| | | |
| | | |
| | |
| Loss on Revaluation of Warrants (b) | |
| – | | |
| (678 | ) | |
| – | | |
| (232 | ) |
| Loss on Revaluation of Equity Investment in YFE (c) | |
| (514 | ) | |
| (3,778 | ) | |
| (3,471 | ) | |
| (7,418 | ) |
| Realized Loss on Marketable Securities Investments (d) | |
| – | | |
| (32 | ) | |
| – | | |
| (28 | ) |
| (Loss) Gain on Foreign Exchange (e) | |
| (412 | ) | |
| 1,713 | | |
| (784 | ) | |
| 2,380 | |
| Loss on Debt Settlement (f) | |
| (630 | ) | |
| – | | |
| (754 | ) | |
| (944 | ) |
| Interest Income (g) | |
| 47 | | |
| 12 | | |
| 82 | | |
| 66 | |
| Finance Lease Interest Expense (h) | |
| (4 | ) | |
| (6 | ) | |
| (8 | ) | |
| (10 | ) |
| Gain on Lease Modification (i) | |
| – | | |
| 4 | | |
| – | | |
| 4 | |
| Legal Settlement Income (j) | |
| 39,238 | | |
| – | | |
| 39,238 | | |
| – | |
| Loss on Standstill Agreement (k) | |
| (4,000 | ) | |
| – | | |
| (4,000 | ) | |
| – | |
| Other (l) | |
| (2,618 | ) | |
| (122 | ) | |
| (2,565 | ) | |
| (89 | ) |
| Other Income (Expense), net | |
$ | 31,107 | | |
$ | (2,887 | ) | |
$ | 27,738 | | |
$ | (6,271 | ) |
Three Months and Six Months Ended June 30, 2026
| |
(a) |
Interest Expense during the three months and six months ended June 30, 2026, primarily consisted of $0.2 million and $0.4 million in interest, respectively, incurred on production facilities and the factoring liability. |
| |
(b) |
For the three months and six months ended June 30, 2026, the Company did not record any gain related to warrant revaluation. |
| |
(c) |
As the investment in YFE is accounted for under the fair value option, the Company recognized a loss on revaluation of its equity investment in YFE of approximately $0.5 million and $3.5 million for the three months and six months ended June 30, 2026, respectively. The loss reflected decreases in YFE’s stock price during the current reporting periods compared to the respective prior reporting periods. The impact of foreign currency translation is excluded and presented separately. |
| |
(d) |
For the three months and six months ended June 30, 2026, the Company did not record any loss related to marketable securities. |
| |
(e) |
The loss on foreign exchange during the three months ended June 30, 2026, primarily related to the remeasurement of foreign currency transactions of the Company’s non-U.S. subsidiary, resulting in a loss of $0.4 million. The loss on foreign exchange during the six months ended June 30, 2026, primarily related to the revaluation of the YFE investment, resulting in a loss of $0.2 million due to the Euro depreciating against the U.S. dollar as compared to prior period and a loss of $0.6 million due to the remeasurement of foreign currency transactions of the Company’s non-U.S. subsidiary. |
| |
(f) |
The loss on debt settlement recorded during the three months and six months ended June 30, 2026, includes a loss of $0.6 million and $0.8 million, respectively, arising from the Section 3(a)(10) transaction completed during the periods. |
| |
(g) |
Interest Income during the three months and six months ended June 30, 2026, primarily consisted of income from investments in marketable securities. |
| |
(h) |
The finance lease interest expense represents the interest portion of the finance lease obligations for equipment purchased under an equipment lease line. |
| |
(i) |
For the three months and six months ended June 30, 2026, the Company did not record any gain related to lease modification. |
| |
(j) |
Between May 29, 2026 and June 11, 2026, the Company received aggregate cash of $39.2 million representing 50% of the court-approved settlement payments under the Section 16(b) litigation settlement agreements. For additional information, see Note 1, Organization and Business - Recent Transactions, to our condensed consolidated financial statements. |
| |
(k) |
In connection with the legal settlement with the Anson Investments Master Fund LP and its affiliates, on June 10, 2026, Kartoon Studios Inc. entered into a standstill and voting agreement with the Anson Parties, under which the Company agreed to pay the Anson Parties $4.0 million and the Anson Parties agreed to certain voting commitments and standstill restrictions through June 11, 2027. The amount was recognized as a non-operating loss for the three months and six months ended June 30, 2026. For additional information, see Note 1, Organization and Business - Recent Transactions, to our condensed consolidated financial statements. |
| |
(l) |
Other loss of $2.6 million primarily consists of non-operating losses related to legal fees directly attributable to the legal settlement, recorded during the three months and six months ended June 30, 2026. |
Three Months and Six Months Ended June 30, 2025
| |
(a) |
Interest Expense during the three months and six months ended June 30, 2025 consisted of $0.2 million and $0.3 million, respectively, primarily due to interest incurred on production facilities. |
| |
(b) |
The loss on revaluation of warrants during the three months ended June 30, 2025 was related to the remeasurement occurred immediately before reclassification of the outstanding 7,894,736 Series A warrants and 7,894,736 Series B warrants from liability to equity. The loss on revaluation of warrants during the six months ended June 30, 2025 consisted of $0.7 million loss recorded at remeasurement offset by a $0.4 million fair value gain in the period ended March 31, 2025 of the outstanding 7,894,736 Series A warrants and 7,894,736 Series B warrants. These warrants were classified as a liability in the period ended March 31, 2025 and change in their fair value resulted in a recorded gain due to a decrease of expiration period. |
| |
(c) |
As accounted for using the fair value option, the loss on revaluation of equity investment in YFE of $3.8 million and $7.4 million, respectively, recorded in the three months and six months ended June 30, 2025, was a result of the decreases in YFE’s stock price as of the reporting period when compared to the prior reporting period. This excluded the impact of foreign currency recorded separately. |
| |
(d) |
The realized loss on marketable securities investments of $32,145 recorded during the three months ended June 30, 2025, was related to the Loss of $37,197 on sale of certain securities prior to the maturity date, offset by the gain of $5,053 attributable to the sale of U.S. Treasury Securities. The realized loss on marketable securities investments of $27,691 recorded during the six months ended June 30, 2025 was related to the loss of $37,197 on sale of certain securities prior to the maturity date, offset by the gain of $9,507 attributable to the sale of U.S. Treasury securities. |
| |
(e) |
The gain on foreign exchange during the three months and six months ended June 30, 2025 primarily related to the revaluation of the YFE investment and remeasurement of foreign currency transactions of the Company’s non-U.S. subsidiary, resulting in a gain of $1.7 million and $2.4 million, respectively, due to the depreciation of the U.S. dollar against the Euro relative to prior periods. |
| |
(f) |
In April 2025, a settlement agreement with YFE related to the shareholder loan agreement was finalized. As the settlement was considered probable and the loss reasonably estimable as of March 31, 2025, the Company recorded a loss of approximately $0.9 million during the first quarter of 2025. |
| |
(g) |
Interest Income during the three and six months ended June 30, 2025, primarily consisted of income from investments in marketable securities, net of premium amortization expense, as well as other transactions, including interest income related to Employee Retention Tax Credit (“ERTC”) receivable and interest income related to the shareholder loan. Each of these sources was individually immaterial. |
| |
(h) |
The finance lease interest expense represents the interest portion of the finance lease obligations for equipment purchased under an equipment lease line. |
| |
(i) |
On April 1, 2025, a subsidiary, Beacon Communications, executed a rent reassignment agreement relinquishing one floor of its office space in Toronto to a new tenant who assumed the lease obligation for that floor. This transaction resulted in a gain of $4,253 on lease modification recorded during the period ended June 30, 2025. |
| |
(j) |
During the three months ended June 30, 2025, a net loss of $0.1 million was recognized in connection with the reversal of previously accrued other income related to Employee Retention Tax Credit (ERTC) claims. Other income had initially been recorded based on anticipated recoveries from submitted claims. Subsequent legislative developments reduced the expected recoverable amounts, resulting in a partial reversal of the accrued other income. The amount also included $11,991 of other income, primarily consisting of late fees from select clients on payment plans. For the six months ended June 30, 2025, other income primarily related to such late fees totaled $50,197. |
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