Kartoon Studios, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Marketable Securities

Marketable Securities

12 Months Ended

Dec. 31, 2022

The Company classifies and accounts for its marketable debt securities as available-for-sale and the securities are stated at fair value.

The investments in marketable securities had an adjusted cost basis of $90.3 million and a market value of $83.7 million as of December 31, 2022. The balances consisted of the following securities (in thousands):


	Adjusted Cost		Unrealized Gain/(Loss)		Fair Value
Corporate Bonds	$	40,823	$	(2,579)	$	38,244
U.S. Treasury	20,869		(1,313)		19,556
Mortgage-Backed	5,980		(606)		5,374
U.S. agency and government sponsored securities	10,781		(1,221)		9,560
U.S. states and municipalities	11,801		(895)		10,906
Asset-Backed	67		(1)		66
Total	$	90,321	$	(6,615)	$	83,706

The investments in marketable securities had an adjusted cost basis of $113.8 million and a market value of $112.5 million as of December 31, 2021. The balances consisted of the following securities (in thousands):


	Adjusted Cost		Unrealized Gain/(Loss)		Fair Value
Corporate Bonds	$	47,864	$	(529)	$	47,335
U.S. Treasury	24,410		(257)		24,153
Mortgage-Backed	7,504		(143)		7,361
U.S. agency and government sponsored securities	14,675		(87)		14,588
U.S. states and municipalities	11,871		(189)		11,682
Asset-Backed	6,456		(50)		6,406
Commercial Paper	998		–		998
Total	$	113,778	$	(1,255)	$	112,523

The Company holds eighty-three available-for-sale securities, all of which are in an unrealized loss position as of December 31, 2022. All of the available-for-sale securities held by the Company as of December 31, 2022, have been in an unrealized loss position for a period greater than twelve months. As of December 31, 2021, the Company had not yet held marketable securities for greater than twelve months. The Company reported the net unrealized losses in accumulated other comprehensive (loss) income, a component of stockholders' equity. The decline in fair value is largely due to changes in

interest rates and other market conditions and is expected to recover as the securities approach maturity. As the decline in fair value is attributable to interest rates and not credit quality, and the Company does not intend to sell the securities and it is not more likely than not the Company would be required to sell the securities before recovery of their amortized cost basis, which may be maturity, the Company does not consider the securities to be other-than-temporarily impaired as of December 31, 2022.

A realized loss of $0.2 million and $0.1 million was recognized in earnings during the year ended December 31, 2022 and December 31, 2021, respectively, due to prepayments of principals for certain mortgage-backed securities and an additional $0.2 million realized loss was recognized during the year ended December 31, 2022 from securities sold prior to their maturities.

The contractual maturities of the Company’s marketable investments as of December 31, 2022 were as follows (in thousands):


	Fair Value
Due within 1 year	$	12,665
Due after 1 year through 5 years	62,377
Due after 5 years through 10 years	4,471
Due after 10 years	4,193
Total	$	83,706

The Company may sell certain of its marketable debt securities prior to their stated maturities for reasons including, but not limited to, managing liquidity, credit risk, duration and asset allocation.