Kartoon Studios Inc
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
TOON$0.50+2.8%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001355848-24-000113
Item 1A. Risk FactorsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001683168-24-008023
Item 1A. Risk FactorsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 18 previous paragraphs and 19 current paragraphs.
11 unchanged; 6 reworded; 2 added; 1 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 0 previous and 1 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (2)
Current report
Based on our current expected level of operating expenditures and the cash and cash equivalents on hand at September 30, 2024, management concludes that there is substantial doubt about our ability to continue as a going concern for a period of at least 12 months subsequent to the issuance of the accompanying condensed consolidated financial statements.
Current report
Historically, we have financed its operations primarily through revenue generated from operations, loans and sales of our securities, and we expect to continue to seek and obtain additional capital in a similar manner. We have filed a registration statement on Form S-3 on December 22, 2023, as amended, registering the sale of up to $75 million of the Company’s securities pursuant to a shelf registration statement, and a registration statement on Form S-1 on September 27, 2024, as amended, in connection with a best efforts public offering of up to $8 million of the Company’s securities. However, we donot have any committed sources of financing at this time, and it is uncertain whether additional funding will be available when we need it on terms that will be acceptable to us, or at all. Our ability sell securities registered on our registration statement on Form S-3 is limited until such time the market value of our voting securities held by non-affiliates is $75 million or more. In addition, the number of shares of common stock and securities convertible or exercisable for common stock that we can sell, under certain circumstances, will be limited by the NYSE American rules and regulations. There can be no assurance that we will be able to continue to raise funds through the sale of shares of common stock or issuance of debt. If we raise funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of its existing stockholders will be diluted. The issuance of debt can result in restrictive covenants that limit operations. If funding is not available or not available at terms acceptable to us, we will seek to reduce overhead costs and reduce its weekly cash obligations in the short term as needed. In addition, we can look to divest or bring in equity partners for our various divisions and bring in near term capital. No adjustments have been made to the presented condensed consolidated financial statements as a result of this uncertainty.
Removed paragraphs (1)
Reworded paragraphs (6)
Previous wording
We have a history of operating losses and incurred net losses in each fiscal quarter since our inception. Six Months Ended June 30, 2024, we generated total revenues of $14.5 million and incurred a net loss of $12.9 million, while for the previous year, we generated total revenue of $25.2 million and incurred a net loss of $36.3 million, respectively. For the year ended December 31, 2023, we generated total revenues of $44.1 million and incurred a net loss of $77.1 million, while for the previous year, we generated net revenue of $62.3 million and incurred a net loss of $45.6 million. These losses, among other things, have had an adverse effect on our results of operations, financial condition, stockholders’ equity, net current assets and working capital.
Current wording
We have a history of operating losses and incurred net losses in each fiscal quarter since our inception. During the nine months ended September 30, 2024, we generated total revenues of $23.2 million and incurred a net loss of $15.0 million, while for the same period the previous year, we generated total revenue of $35.3 million and incurred a net loss of $51.7 million, respectively. For the year ended December 31, 2023, we generated total revenues of $44.1 million and incurred a net loss of $77.1 million, while for the previous year, we generated net revenue of $62.3 million and incurred a net loss of $45.6 million. These losses, among other things, have had an adverse effect on our results of operations, financial condition, stockholders’ equity, net current assets and working capital.
Previous wording
As of June 30, 2024, we and our subsidiaries have production loan facility obligations of approximately $9.8 million and advances outstanding of $0.4 million under our senior secured revolving credit facility. As of December 31, 2023, we and our subsidiaries have production loan facility obligations of approximately $15.3 million and advances outstanding of $2.9 million under our senior secured revolving credit facility. We also had an outstanding margin loan of $0.8 million secured by our marketable investment securities as of December 31, 2023. The facilities are guaranteed by us and the security reflects substantially all of our tangible and intangible assets including a combination of federal and provincial tax credits, other government incentives, production service agreements and license agreements. The facilities and the margin loan are generally repayable on demand and are subject to customary default provisions, representations and warranties and other terms and conditions.
Current wording
As of September 30, 2024, we and our subsidiaries have production loan facility obligations of approximately $8.7 million and advances outstanding of $0.6 million under our senior secured revolving credit facility. As of December 31, 2023, we and our subsidiaries have production loan facility obligations of approximately $15.3 million and advances outstanding of $2.9 million under our senior secured revolving credit facility. We also had an outstanding margin loan of $0.8 million secured by our marketable investment securities as of December 31, 2023. The facilities are guaranteed by us and the security reflects substantially all of our tangible and intangible assets including a combination of federal and provincial tax credits, other government incentives, production service agreements and license agreements. The facilities and the margin loan are generally repayable on demand and are subject to customary default provisions, representations and warranties and other terms and conditions.
Previous wording
We were not in compliance with financial covenants under its revolving demand facility as of June 30, 2024. As a result of the covenant violations, our remaining equipment lease agreements with the lender of CAD million are subject to repayment. As of August 14, 2024, the lender and the Company have agreed to a repayment plan for the equipment leases to be completed within the fourth quarter of 2024. The amendment and covenant violations did not have any impact on the Company’s production facilities that are separate from the revolving demand facility and are used for financing specific productions.
Current wording
We were not in compliance with a financial covenant under the revolving demand facility as of September 30, 2024. Due to financial covenant violations in the second quarter of 2024, the Company’s remaining equipment lease agreements with the lender of$0.6 million (CAD 0.8 million)as of September 30, 2024, are subject to early repayment. During thethree months ended September 30, 2024, the lender and the Company agreed to a repayment plan for the equipment leases under the equipment lease line to be completed prior to the end of the fourth quarter of 2024. On August 30, 2024, the Company paid $0.1 million (CAD 0.1 million) to the lender as part of its early repayment plan for the existing equipment lease line agreements. Subsequent to September 30, 2024, the Company paid$0.3 million(CAD 0.4 million) to the lender as part of its repayment plan for the equipment lease line. The amendment and covenant violations did not have any impact on the Company’s production facilities that are separate from the revolving demand facility and are used for financing specific productions.
Previous wording
As of June 30, 2024, approximately 38,373,500 shares of common stock of the 39,463,517 shares of common stock issued are outstanding and freely trading. As of June 30, 2024, there were 6,926,952 warrants outstanding. Lastly, as of June 30, 2024, there are 958,806 shares of common stock underlying outstanding options granted, 2,293,603 shares, including vested and unvested, of common stock underlying outstanding restricted stock units (“RSUs”) and 216,767 shares reserved for issuance under our Kartoon Studios, Inc. 2020 Incentive Plan.
Current wording
As of September 30, 2024, approximately 37,303,946 shares of common stock are outstanding and unrestricted, out of the 39,555,161 shares of common stock issued, meaning they exclude shares held by insiders and can be freely traded on the open market. As of September 30, 2024, there were 6,926,952 warrants outstanding. Lastly, as of September 30, 2024, there are 953,640 shares of common stock underlying outstanding options granted, 2,385,247 shares, including vested and unvested, of common stock underlying outstanding restricted stock units (“RSUs”) and 1,832,734 shares reserved for issuance under our Kartoon Studios, Inc. 2020 Incentive Plan.
Previous wording
During the three and six months ended June 30, 2024, we had four customers, whose total revenue exceeded 10% of the total condensed consolidated revenue. These customers accounted for 80.9% of the total revenue.
Current wording
During the three months ended September 30, 2024, we had four customers, whose total revenue exceeded 10% of the total condensed consolidated revenue. These customers accounted for 77.2% of the total revenue.
Previous wording
During the six months ended June 30, 2024, we had three customers, whose total revenue exceeded 10% of the total condensed consolidated revenue. These customers accounted for 66.7% of the total revenue. As of June 30, 2024, the Company had three customers whose total accounts receivable exceeded 10% of the total accounts receivable. These customers accounted for 66.0% of the total accounts receivable as of June 30, 2024.
Current wording
During the nine months ended September 30, 2024, we had three customers, whose total revenue exceeded 10% of the total condensed consolidated revenue. These customers accounted for 60.2% of the total revenue. As of September 30, 2024, the Company had three customers whose total accounts receivable exceeded 10% of the total accounts receivable. These customers accounted for 59.4% of the total accounts receivable as of September 30, 2024.