Kartoon Studios, Inc. Quarterly report pursuant to sections 13 or 15(d)

Quarterly report pursuant to sections 13 or 15(d)

2. Plant, Property, and Equipment and Intangible Assets

2. Plant, Property, and Equipment and Intangible Assets

3 Months Ended

Mar. 31, 2013

Plant, Property, and Equipment and Intangible Assets

The Company has plant, property and equipment and other intangible assets used in the creation of revenue as follows as of March 31, 2013 and December 31, 2012:

	3/31/2013			12/31/2012
Furniture and Equipment	$	89,159		$	89,159
Less Accumulated Depreciation		(68,018	)		(65,423	)
Net Fixed Assets	$	21,141		$	23,736

Trademarks	$	129,831		$	129,831
Product Masters		3,279,369			3,279,369
Other Intangible Assets		290,161			290,161
Less Accumulated Amortization		(3,379,868	)		(3,343,291	)
Net Intangible Assets	$	319,493		$	356,070

Pursuant to FASB Accounting Standards Codification regarding Topic 350, Intangible Assets, intangible asset(s) acquired, either individually or with a group of other assets shall be initially recognized and measured based on fair value. In the acquisition of the assets from Genius Products, fair value was calculated using a discounted cash flow analysis of the revenue streams for the estimated life of the assets. As this resulted in a fair market value in excess of the purchase price, the assets were recorded at $2,489,082, the total purchase price discounted with the imputed interest rate of 10%.

The Company reviews all intangible assets periodically to determine if the value has been impaired by recent financial transactions using the discounted cash flow analysis of revenue stream for the estimated life of the assets. At March 31, 2013 and December 31, 2012, it was determined that no impairment existed.

The Company continues to develop new videos, music, books and digital applications in addition to adding content, improved animation and bonus songs/features to its existing product catalog. In accordance with FASB Accounting Standards Codification regarding ASC 350 - Intangible Assets and ASC 730 - Research and Development, the costs of new product development and significant improvement to existing products are capitalized while routine and periodic alterations to existing products are expensed as incurred. As of March 31, 2013, the Company has $219,087 in Capitalized Product Development in Process representing video, music, website, digital application and preschool preparation program development projects not yet completed.

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

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