Kartoon Studios (TOON) risk factors, FY2024 10-K

RISKS RELATING TO OUR BUSINESS

1. 01We have incurred net losses since inception
2. 02If we are not able to obtain sufficient capital, we may not be able to continue our growth
3. 03Our revenues and results of operations may fluctuate from period to period
4. 04The 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
5. 05Changes in the United States, global or regional economic conditions could adversely affect the profitability of our business
6. 06Based on its assessment, our management concluded that, as of December 31, 2024 our internal control over financial reporting was ineffective due to material weakness resulting from the inadequate design of user access provisioning/deprovisioning controls area
7. 07Inaccurately anticipating changes and trends in popular culture, media and movies, fashion, or technology can negatively affect our sales
8. 08We face competition from a variety of content creators that sell similar merchandise and have better resources than we do
9. 09The 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
10. 10We 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
11. 11Failure to successfully market or advertise our products could have an adverse effect on our business, financial condition and results of operations
12. 12The failure of others to promote our products may adversely affect our business
13. 13We may not be able to keep pace with technological advances
14. 14Failure in our information technology and storage systems could significantly disrupt the operation of our business
15. 15Our 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
16. 16Loss of key personnel may adversely affect our business
17. 17Litigation may harm our business or otherwise distract management
18. 18Our 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
19. 19Protecting and defending against intellectual property claims may have a material adverse effect on our business
20. 20We are exposed to investment risk with the acquisition of an equity interest in Your Family Entertainment AG
21. 21We operate internationally, which exposes us to global economic, financial and political risks
22. 22A decrease in the fair values of our reporting units may result in future intangible assets impairments

RISKS RELATING TO OUR INDEBTEDNESS

1. 23We have incurred indebtedness that could adversely affect our operations and financial condition

RISKS RELATED TO TAX RULES AND REGULATIONS

1. 24Changes 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
2. 25Changes in, or interpretations of, tax rules and regulations, and changes in geographic operating results, may adversely affect our effective tax rates

RISKS RELATING TO OUR COMMON STOCK

1. 26Our stock price may be subject to substantial volatility, and stockholders may lose all or a substantial part of their investment
2. 27Our failure to meet the continued listing requirements of NYSE American could result in a delisting of our common stock
3. 28If our common stock becomes subject to the penny stock rules, it may be more difficult to sell our common stock
4. 29We are authorized to issue “blank check” preferred stock without stockholder approval, which could adversely impact the rights of holders of our common stock
5. 30We do not expect to pay dividends in the future and any return on investment may be limited to the value of our common stock
6. 31Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline