Quarterly report [Sections 13 or 15(d)]

Basis of Presentation and Summary of Significant Accounting Policies (Policies)

v3.26.1
Basis of Presentation and Summary of Significant Accounting Policies (Policies)
 3 Months Ended
Mar. 31, 2026
Accounting Policies [Abstract]  
Foreign Currency Forward Contracts

Foreign Currency Forward Contracts

 

As of March 31, 2026 and December 31, 2025, gross amounts of foreign currency (“FX”) forward contract in an asset and liability position subject to a master netting arrangement resulted in a net liability of $28,711 and $43,438, respectively, recorded within Other Current Liabilities on the condensed consolidated balance sheets. For the three months ended March 31, 2026 and March 31, 2025, the Company recorded a realized loss of $25,961 and $0.1 million, respectively, on FX forward contracts within Production Services Revenue on the condensed consolidated statements of operations.

 
Trade Accounts Receivable and Allowance for Credit Loss

Trade Accounts Receivable and Allowance for Credit Loss

 

The following table summarizes the activity in the allowance for credit losses related to trade accounts receivable as of March 31, 2026 and December 31, 2025 (in thousands):

       
Balance, net as of December 31, 2024   $ 239  
Charged to costs and expenses     179  
Recoveries     (39 )
Write-offs     (376 )
Balance, net as of December 31, 2025     3  
Charged to costs and expenses     3  
Balance, net as of March 31, 2026   $ 6  

 
Tax Credits Receivable

Tax Credits Receivable

 

The Company classifies the tax credits receivable as current based on their normal operating cycle. Government assistance, in the form of refundable tax credits, is relied upon as a key component of production financing. These amounts are claimed from the CRA through the submission of income tax returns and can take up to 18 to 24 months from the date of the first tax credit dollar being earned to being received. As this financing is fundamental to the Company’s ability to produce animated productions and generate revenue in the normal course of business, the normal operating cycle for such assets is considered to be a 12 to 24-month period, or the time it takes for the CRA to assess and refund the tax credits earned.

 

As of March 31, 2026 and December 31, 2025, the Company had $18.5 million and $16.8 million in tax credit receivables related to Wow’s film and television productions, respectively, net of corresponding allowance for credit loss of $0.4 million and $0.4 million, respectively. The Company did not have any non-current tax credits receivable as of March 31, 2026 and December 31, 2025.

 
Concentration of Risk

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, 2026 and December 31, 2025, the Company had seven and six bank deposit accounts with an aggregate uninsured balance of $3.5 million and $1.9 million, respectively.

 

The Company has a managed account with a financial institution. The managed account maintained its investments in marketable securities of approximately $1.0 million as of March 31, 2026, and $4.0 million as of December 31, 2025. 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, 2026 and December 31, 2025, the Company did not have account balances held at this financial institution that exceed the insured balances.

 

As of March 31, 2026, the Company had four customers, the accounts receivable for each of which exceeded 10% of the total accounts receivable. These customers accounted for an aggregate of 62.4% of the total accounts receivable as of March 31, 2026. As of December 31, 2025, the Company had three customers, the accounts receivable for each of which exceeded 10% of the total accounts receivable. These customers accounted for an aggregate of 54.5% of the total accounts receivable as of December 31, 2025.

   
  As of
  March 31, 2026 December 31, 2025
Customer A 19.8% *
Customer B 16.5% 26.1%
Customer C 14.8% *
Customer D 11.2% 11.1%
Customer E * 17.3%
* Less than 10%    

 

During the three months ended March 31, 2026, three customers each accounted for more than 10% of the Company’s total consolidated revenue. These customers accounted for an aggregate of 59.6% of the Company’s total revenue for the three months ended March 31, 2026. During the three months ended March 31, 2025, four customers each accounted for more than 10% of the Company’s total consolidated revenue. These customers accounted for an aggregate of 85.1% of the Company’s total revenue for the three months ended March 31, 2025.

  Three Months Ended March 31,
  2026 2025
Customer F 32.4% 17.9%
Customer G 15.3% 19.5%
Customer H 11.9% 16.0%
Customer A * 31.7%
* Less than 10%    

 

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

Fair Value of Financial Instruments

 

The following table presents the fair values of the Company's financial instruments measured on a recurring basis, categorized within the fair value hierarchy as of March 31, 2026 (in thousands):

                       
    Level 1     Level 2     Total Fair Value  
Investments in Marketable Securities:                        
U.S. Treasury   $ 996     $ –     $ 996  
Total   $ 996     $ –     $ 996  
                         
Investment in Equity Interest:                        
Investment in YFE   $ –     $ 2,393     $ 2,393  
Total   $ –     $ 2,393     $ 2,393  
                         
Foreign Currency Forward Contracts:                        
Foreign Currency Forward Contracts, net:   $ –     $ (29 )   $ (29 )
Total   $ –     $ (29 )   $ (29 )

 

The following table presents the fair values of the Company's financial instruments measured on a recurring basis, categorized within the fair value hierarchy as of December 31, 2025 (in thousands):

    Level 1     Level 2     Total Fair Value  
Investments in Marketable Securities:                        
U.S. Treasury   $ 3,978     $ –     $ 3,978  
Total   $ 3,978     $ –     $ 3,978  
                         
Investment in Equity Interest:                        
Investment in YFE   $ –     $ 5,481     $ 5,481  
Total   $ –     $ 5,481     $ 5,481  
                         
Foreign Currency Forward Contracts:                        
Foreign Currency Forward Contracts, net:   $ –     $ (43 )   $ (43 )
Total   $ –     $ (43 )   $ (43 )
                         

 

There were no transfers between Level 1, Level 2, or Level 3 during the three months ended March 31, 2026. No allowance for credit losses was recorded for marketable securities as of March 31, 2026 or December 31, 2025. For a description of the Company's fair value methodologies and classification policies, refer to Note 2 in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the Securities and Exchange Commission on March 31, 2026.

 
New Accounting Standards Issued but Not Yet Adopted

New Accounting Standards Issued but Not Yet Adopted

 

In November, 2024 the FASB issued Accounting Standard Update (“ASU”) 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expense. This update mandates that public companies provide more detailed information about specific expenses in their financial statement notes. The effective date for this guidance is annual reporting periods beginning after December 15, 2026, with interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is in the process of evaluating the impact that the adoption of this ASU will have to the consolidated financial statements and related disclosures, which is expected to result in enhanced disclosures.

 

In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities, which establishes authoritative guidance on the recognition, measurement, presentation, and disclosure of government grants. Under ASU 2025-10, government grants are recognized when it is probable that the entity will both comply with the conditions of the grant and the grant will be received. The ASU provides specific accounting models for grants related to assets and grants related to income, including options to recognize government grants as deferred income or as a reduction of the asset’s cost basis. The ASU also requires enhanced disclosures regarding the nature of government grants, significant terms and conditions, accounting policies applied, and amounts recognized in the financial statements. ASU 2025-10 is effective for fiscal years beginning after December 15, 2028, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-10.