Funko, Inc. 10-Q

Item 4. Controls and Procedures. Limitations on Effectiveness of Disclosure Controls and Procedures. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has concluded, based on its evaluation as of June 30, 2024, that our “disclosure controls and procedures” (as such term is defined in Rules 13a–15(e) and 15d–15(e) under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)), were not effective at the reasonable assurance level as of such date because of the material weaknesses in our internal control over financial reporting previously described in Item 9A. “Controls and Procedures” of our 2023 Annual Report on Form 10-K. Remediation Efforts to Address the Material Weaknesses Our remediation efforts to address the above material weaknesses are ongoing and include: • enhancing the design of control activities to operate at a level of precision to identify all potentially material errors, and training control owners to improve required retention of documentation evidencing their operation; • designing and implementing controls that review, approve, and periodically re-evaluate the user access privileges for all US ERP and systems related to our digital collectibles business users and the business purpose for allowing access for each authorized user to address segregation of duties; • designing and implementing controls that require review and approval of changes to key financial information technology systems and reports utilized in the performance of internal controls used in financial reporting; and • investing in training and hiring personnel with appropriate expertise to plan and perform more timely and thorough monitoring activities for internal controls over financial reporting. We anticipate that our remediation efforts will continue throughout 2024, however, we cannot provide assurance as to when our remediation measures will be complete, and the material weaknesses cannot be considered remediated until the applicable controls have operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Changes in Internal Control over Financial Reporting Other than management’s continuing efforts to remediate the material weaknesses discussed above, there were no changes in our internal control over financial reporting during the quarter ended June 30, 2024, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 42 PART II – OTHER INFORMATION Item 1. Legal Proceedings. See Note 6, “Commitments and Contingencies - Legal Contingencies” in the Notes to Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for a discussion of material legal proceedings.