| Page Number |
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| PART I. |
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| Item 1. | Business | 1 |
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| Item 1A. | Risk Factors | 8 |
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| Item 1B. | Unresolved Staff Comments | 18 |
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| Item 1C. | Cybersecurity | 18 |
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| Item 2. | Properties | 19 |
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| Item 3. | Legal Proceedings | 19 |
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| Item 4. | Mine Safety Disclosures | 21 |
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| PART II. |
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| Item 5. | Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 22 |
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| Item 6. | [Reserved] | 23 |
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| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 |
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| Item 7A. | Quantitative and Qualitative Disclosures About Market Risk | 38 |
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| Item 8. | Financial Statements and Supplementary Data | 38 |
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| Item 9. | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure | 38 |
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| Item 9A. | Controls and Procedures | 39 |
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| Item 9B. | Other Information | 40 |
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| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections | 40 |
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| PART III. |
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| Item 10. | Directors, Executive Officers and Corporate Governance | 42 |
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| Item 11. | Executive Officer and Director Compensation | 42 |
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| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 42 |
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| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 42 |
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| Item 14. | Principal Accounting Fees and Services | 42 |
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| PART IV. |
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| Item 15. | Exhibits and Financial Statement Schedules | 44 |
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| Signatures | 47 | |
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i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (including the section regarding Management’s Discussion and Analysis of Financial Condition and Results of Operations) contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations thereof are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this Annual Report on Form 10-K. Additionally, statements concerning future matters are forward-looking statements. These statements include, among other things, statements regarding:
| · | Our ability to generate revenue or achieve profitability |
| · | Our ability to obtain additional financing on acceptable terms, if at all |
| · | Fluctuations in the results of our operations from period to period |
| · | General economic and financial conditions; the adverse effects of public health epidemics on our business, results of operations and financial condition |
| · | Our ability to anticipate changes in popular culture, media and movies, fashion and technology |
| · | Competitive pressure from other distributors of content and within the retail market |
| · | Our reliance on and relationships with third-party production and animation studios |
| · | Our ability to market and advertise our products |
| · | Our reliance on third parties to promote our products |
| · | Our ability to keep pace with technological advances |
| · | Performance of our information technology and storage systems |
| · | A disruption or breach of our internal computer systems |
| · | Our ability to retain key personnel |
| · | Our ability to successfully identify appropriate acquisition targets, successfully acquire identified targets and successfully integrate the business of acquired companies |
| · | The impact of federal, state or local regulations on us or our vendors and licensees |
| · | Our ability to protect and defend against litigation, including intellectual property claims |
| · | The volatility of our stock price |
| · | The marketability of our stock |
| · | Our broad discretion to invest or spend the proceeds of our financings in ways with which our stockholders may not agree and may have limited ability to influence |
| · | Other risks and uncertainties, including those listed in Item 1A, “Risk Factors” |
ii
Although forward-looking statements in this Annual Report on Form 10-K reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading “Risk Factors” in Item 1A. below, as well as those discussed elsewhere in this Annual Report on Form 10-K. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K. We file reports with the Securities and Exchange Commission (“SEC”) and our electronic filings with the SEC (including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and any amendments to these reports) are available free of charge on the SEC’s website athttp://www.sec.gov.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report on Form 10-K, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this Annual Report on Form 10-K, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
Reverse Stock Split
On February 10, 2023, we effected a 1-for-10 reverse stock split of our outstanding shares of common stock. Unless noted, all references to shares of common stock and per share amounts contained in this Annual Report on Form 10-K have been retroactively adjusted to reflect a 1-for-10 reverse stock split.
We are providing the following summary of the risk factors contained in this Annual Report on Form 10-K to enhance the readability and accessibility of our risk factor disclosures. We encourage you to carefully review the full risk factors contained in this Annual Report on Form 10-K in their entirety for additional information regarding the material factors that make an investment in our securities speculative or risky. These risks and uncertainties include, but are not limited to, the following:
Risks Relating to our Business
| · | We have incurred net losses since inception. |
| · | If we are not able to obtain sufficient capital, we may not be able to continue our growth. |
| · | Our revenues and results of operations may fluctuate from period to period. |
| · | The value of our investments is subject to significant capital markets risk related to changes in interest rates and credit spreads as well as other investment risks, which may adversely affect our results of operations, financial condition or cash flows. |
| · | Changes in the United States, global or regional economic conditions could adversely affect the profitability of our business. |
| · | If we fail to develop, implement and maintain an effective system of internal control over financial reporting, the accuracy and timing of our financial reporting in future periods may be adversely affected. |
| · | Inaccurately anticipating changes and trends in popular culture, media and movies, fashion, or technology can negatively affect our sales. |
| · | We face competition from a variety of content creators that sell similar merchandise and have better resources than we do. |
| · | The production of our animated content is accomplished through third-party production and animation studios around the world, and any failure of these third parties could negatively impact our business. |
iii
| · | We cannot assure you that our original programming content will appeal to our distributors and viewers or that any of our original programming content will not be cancelled or removed from our distributors’ platforms. |
| · | Failure to successfully market or advertise our products could have an adverse effect on our business, financial condition and results of operations. |
| · | The failure of others to promote our products may adversely affect our business. |
| · | We may not be able to keep pace with technological advances. |
| · | Failure in our information technology and storage systems could significantly disrupt the operation of our business. |
| · | Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption and cause our business and reputation to suffer. |
| · | Loss of key personnel may adversely affect our business. |
| · | Litigation may harm our business or otherwise distract management. |
| · | Our vendors and licensees may be subject to various laws and government regulations, violation of which could subject these parties to sanctions which could lead to increased costs or the interruption of normal business operations that could negatively impact our financial condition and results of operations. |
| · | Protecting and defending against intellectual property claims may have a material adverse effect on our business. |
| · | Any additional future acquisitions or strategic investments may not be available on attractive terms and would subject us to additional risks. |
| · | We are exposed to investment risk with the acquisition of an equity interest in Your Family Entertainment AG. |
| · | We operate internationally, which exposes us to global economic, financial and political risks. |
Risks Related to our Indebtedness
| · | We have incurred indebtedness related to our production tax credit loan facilities, and although these loans are not exceeding Canadian government tax credits, there could be factors that could adversely affect our operations and financial conditions. |
Risks Related to Tax Rules and Regulations
| · | Changes in foreign, state and local tax incentives may increase the cost of original programming content to such an extent that they are no longer feasible. |
| · | Changes in, or interpretations of, tax rules and regulations, and changes in geographic operating results, may adversely affect our effective tax rates. |
iv
Risks Relating to our Common Stock
| · | Our stock price may be subject to substantial volatility, and stockholders may lose all or a substantial part of their investment. |
| · | Our failure to meet the continued listing requirements of NYSE American (“NYSE American”) could result in a delisting of our common stock. |
| · | If our common stock becomes subject to the penny stock rules, it may be more difficult to sell our common stock. |
| · | We are authorized to issue “blank check” preferred stock without stockholder approval, which could adversely impact the rights of holders of our common stock. |
| · | We do not expect to pay dividends in the future and any return on investment may be limited to the value of our common stock. |
| · | Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline. |
v
