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. On May 23, 2024, the Board of Directors approved the maximum number of shares available for issuance up to an aggregate of 5,000,000 shares from 3,000,000 shares of common stock in the initial 2020 Plan. 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 12,000 outstanding shares granted under the 2015 Plan, as of September 30, 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 nine months ended September 30, 2024 and September 30, 2023, the Company granted options to purchase 35,000 and no options, respectively. The 35,000 options to purchase common stock had a weighted-average grant date fair market value of $24,210.

The fair value of the options granted during the nine months ended September 30, 2024 were calculated using the Black-Scholes Merton (“BSM”) option pricing model based on the following assumptions:

The following table summarizes the Company’s option activity:

During the nine months ended September 30, 2023, upon termination of certain employees, the Company accelerated the vesting of any unvested options held by the employees pursuant to their employment agreements. This resulted in 55,816 options becoming immediately vested on the separation date and $0.1 million in expense recognized by the Company.

During the three months ended September 30, 2024 and September 30, 2023, the Company recognized $23,804 and $0.2 million, respectively, in share-based compensation expense related to stock options. During the nine months ended September 30, 2024 and September 30, 2023, the Company recognized $0.1 million and $0.9 million, respectively, in share-based compensation expense related to stock options. Share-based compensation expense is included in General and Administrative Expense on the Company’s condensed consolidated statements of operations. The unrecognized share-based compensation expense at September 30, 2024 was $48,503 which will be recognized through the second quarter of 2025 assuming the underlying grants are not cancelled or forfeited. The outstanding shares as of September 30, 2024 had an aggregated intrinsic value of zero.