Kartoon Studios(US:TOON)2023-04-13 13:15Acquisition and Partnerships - Genius Brands International, Inc. completed the acquisition of Wow Unlimited Media Inc. for $38.3 million in cash and 1,105,708 shares of common stock[26]. - Genius Brands has access to over 1,600 episodes from Germany's Your Family Entertainment, covering over 60 territories worldwide[19]. - The company produced 52 episodes of the preschool music series Ukulele U for the Canadian Broadcasting Corporation[29]. - The animated series Team Zenko Go! was delivered to Netflix, consisting of 44 episodes[30]. - As of December 31, 2022, the company has partnered with over 50 consumer products licensees and licensed content to over 40 broadcasters in more than 90 countries[51]. Financial Performance - For the year ended December 31, 2022, the company generated net revenues of $62.3 million and incurred a net loss of $44.5 million, compared to net revenues of $7.9 million and a net loss of $126.3 million in the previous year[78]. - Total revenue for the year ended December 31, 2022, was $62.3 million, a 691% increase from $7.9 million in 2021[162]. - Content Distribution revenue increased by 2,146% to $24.7 million, primarily due to acquisitions of Ameba, Wow, and Frederator, contributing an additional $23.9 million[164]. - Licensing & Royalties revenue rose by 77% to $2.8 million, driven by a new licensing agreement for Stan Lee Assets[165]. - Total expenses for 2022 were $106 million, up 48% from $71.6 million in 2021, with Direct Operating Costs increasing by $41.9 million due to acquisitions[167][170]. Stock and Shareholder Information - As of April 12, 2023, approximately 30,018,578 shares of common stock are free trading out of 32,059,657 shares issued and outstanding[138]. - The company underwent a reverse stock split of 1-for-10 on February 10, 2023, to regain compliance with Nasdaq's Minimum Bid Price Requirement[129]. - The company does not expect to pay dividends in the foreseeable future, with any return on investment limited to the appreciation of its common stock[135]. - The company is authorized to issue up to 10,000,000 shares of "blank check" preferred stock, which could adversely impact the rights of common stockholders[134]. - As of April 12, 2023, there were approximately 348 stockholders of record for the common stock[151]. Operational Challenges and Risks - The company has incurred net losses since inception, indicating potential financial instability[71]. - The company faces competition from major players in children's content, including Disney and Nickelodeon, which may affect its market position[50]. - The production of animated content is reliant on third-party studios, and any failures or delays could negatively affect profitability and market delivery[95]. - The company cannot assure that its original programming content will appeal to distributors and viewers, which could jeopardize future revenue streams[96]. - The company is exposed to significant risks due to international operations, including legal, regulatory, economic, and political risks[111]. Financial Obligations and Capital Structure - As of December 31, 2022, the company had production loan facility obligations of approximately $18.3 million and advances of $1.7 million under its senior secured revolving credit facility[118]. - The company also had an outstanding margin loan of $60.8 million secured by marketable investment securities as of December 31, 2022[118]. - The company has future minimum purchase obligations of approximately $103.4 million over the next five years, with about $74.3 million potentially due within one year[189]. - The company incurred indebtedness that could adversely affect its operations and financial condition, limiting its ability to refinance or obtain additional financing[119]. Tax and Regulatory Considerations - The company is subject to various regulations, including the Children's Online Privacy Protection Act (COPPA), which impacts its online distribution practices[52]. - The company is subject to ordinary course audits from the Canada Revenue Agency, which may impact the collectability of tax credit receivables[122]. - Changes in foreign, state, and local tax incentives may increase the cost of original programming, adversely affecting the company's financial condition[121]. - The company relies on refundable tax credits as a key component of production financing, with a normal operating cycle of 12 to 24 months for the collection of these credits[202]. Employee and Corporate Culture - The company employs 743 full-time employees and 57 independent contractors, focusing on a culture of diversity, equity, and inclusion[62]. - The company aims to create positive social impacts through its content, reflecting its commitment to social responsibility and corporate governance[60]. Market and Economic Conditions - Economic conditions, including a decrease in economic activity or increased price levels, could adversely affect demand for the company's products, reducing revenue and earnings[88]. - Revenues and results of operations may fluctuate significantly due to the appeal of content, timing of product releases, and commercial success, which are difficult to predict[82].