What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-03-12 compared with 2025-03-13 · 271 added, 244 removed, 935 unchanged (36% of the section changed)

7 unchanged sentences

Consolidated Statements of Operations

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Comprehensive Loss

Consolidated Balance Sheets

2 unchanged sentences

Notes to Consolidated Financial Statements

Financial Statement Schedules:

Condensed Financial Information of Registrant as of December 31, 2025 and 2024 and for each of the three years in the period ended December 31, 2025

Report of Independent Registered Public Accounting Firm

1 unchanged sentence

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheet of Funko, Inc.

and its subsidiaries (the "Company") as of December 31, 2024, and the related consolidated statements of operations, of comprehensive (loss) income, of stockholders’ equity and of cash flows for the year then ended, including the related notes and financial statement schedule as of December 31, 2024 and for the year then ended listed in the index appearing under Item 15(a)2 (collectively referred to as the "consolidated financial statements").

We have audited the accompanying consolidated balance sheets of Funko, Inc.

and its subsidiaries (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of operations, of comprehensive loss, of stockholders’ equity and of cash flows for the years then ended, including the related notes and financial statement schedule as of December 31, 2025 and 2024 and for the years then ended listed in the accompanying index (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material weaknesses in internal control over financial reporting existed as of that date as the Company did not design and maintain effective controls (i) related to the order-to-cash and income taxes business processes, as well as controls related to the preparation and review of journal entries at a foreign subsidiary;

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material weaknesses in internal control over financial reporting existed as of that date as the Company did not design and maintain effective controls (i) related to the order-to-cash business process, as well as controls related to the preparation and review of journal entries at a foreign subsidiary;

(ii) to verify appropriate segregation of duties;

and (iii) over certain information technology general controls for certain information systems that are relevant to the preparation of the financial statements, related to program change management controls and user access controls.

and (iii) over certain information technology general controls for certain information systems that are relevant to the preparation of the financial statements, specifically related to program change management controls and user access controls.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

1 unchanged sentence

We considered these material weaknesses in determining the nature, timing, and extent of audit tests applied in our audit of the 2025 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for crypto asset safeguarding assets and liabilities in 2024.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in management's report referred to above.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audit.

Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

2 unchanged sentences

(206) 398 3000, www.pwc.com/us

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audit of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinions.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Emphasis of Matter

As discussed in Note 2 to the consolidated financial statements, the Company has had net losses, there is no remaining borrowing availability under the Company’s revolving credit facility, and the amended credit agreement has a maturity date of December 31, 2027.

Management’s evaluation of the events and conditions, and management's plans to mitigate these matters are also described in Note 2.

Definition and Limitations of Internal Control over Financial Reporting

12 unchanged sentences

The costs of these programs reduce gross sales in the period the related sale is recognized.

The Company’s consolidated net sales were $1,050 million for the year ended December 31, 2024, of which a significant portion relates to certain products.

The Company’s net sales were $908.2 million for the year ended December 31, 2025, of which a significant portion relates to certain products.

The principal consideration for our determination that performing procedures relating to revenue recognition from certain products is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s revenue recognition from certain products.

2 unchanged sentences

These procedures included, among others (i) testing revenue recognized, on a sample basis, by obtaining and inspecting source documents, such as contracts, purchase orders, invoices, proof of transfer of control, and cash receipts net of credit memos and discounts;

(ii) confirming outstanding customer invoice balances as of December 31, 2024, on a sample basis, and for confirmations not returned, obtaining and inspecting source documents, such as contracts, invoices, proof of transfer of control, and subsequent cash receipts;

(ii) testing outstanding customer invoice balances as of December 31, 2025, on a sample basis, by obtaining and inspecting source documents, such as contracts, invoices, proof of transfer of control, and subsequent cash receipts;

(iii) testing the timing of revenue recognition, on a sample basis, for revenue transactions that occurred near period end by obtaining and inspecting source documents, such as contracts, purchase orders, invoices, and proof of transfer of control;

9 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Funko Inc.

(the Company) as of December 31, 2023, the related consolidated statements of operations, comprehensive (loss) income, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S.

We have audited the accompanying consolidated statement of operations, comprehensive loss, stockholders’ equity and cash flows of Funko, Inc.

(the Company) for the year ended December 31, 2023, and the related notes and financial statement schedule listed in Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

1 unchanged sentence

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

11 unchanged sentences

Total operating expenses 953,752 1,036,859 1,199,913

Income (loss) from operations 12,991 ( 103,827 ) ( 11,920 )

(Loss) income from operations ( 45,543 ) 12,991 ( 103,827 )

Interest expense, net 19,181 20,575 27,970

1 unchanged sentence

Gain on tax receivable agreement liability adjustment — — ( 100,223 )

Other expense (income), net 2,922 ( 127 ) 787

Other (income) expense, net ( 785 ) 2,922 ( 127 )

Loss before income taxes ( 63,939 ) ( 10,506 ) ( 31,941 )

Income tax expense (benefit) 4,564 132,497 ( 17,801 )

Income tax expense 4,356 4,564 132,497

Net loss ( 68,295 ) ( 15,070 ) ( 164,438 )

net (loss) income attributable to non-controlling

net loss attributable to non-controlling

( 935 ) ( 352 ) ( 10,359 )

9 unchanged sentences

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Year Ended December 31,

2 unchanged sentences

Net loss $ ( 68,295 ) $ ( 15,070 ) $ ( 164,438 )

Other comprehensive (loss) income:

Foreign currency translation (loss) gain, net of tax effect of $ 0 , $( 770 ) and $ 1,169 for the years ended December 31, 2024, 2023 and 2022, respectively

Other comprehensive income (loss):

Foreign currency translation gain (loss), net of tax effect of $ 0 , $ 0 and $( 770 ) for the years ended December 31, 2025, 2024 and 2023, respectively

6,366 ( 1,541 ) 2,617

Comprehensive loss ( 61,929 ) ( 16,611 ) ( 161,821 )

Comprehensive (loss) income attributable to

Comprehensive loss attributable to

non-controlling interests

19 unchanged sentences

Current liabilities:

Line of credit $ 60,000 $ 120,500

Current portion of long-term debt 22,512 22,072

Current portion of revolving credit facility $ 1,125 $ 60,000

Current portion of term debt 21,932 22,512

Current portion of operating lease liabilities 18,792 17,102

13 unchanged sentences

Additional paid-in-capital 357,330 343,472

Accumulated other comprehensive loss ( 1,676 ) ( 180 )

Accumulated other comprehensive income (loss) 4,621 ( 1,676 )

Accumulated deficit ( 176,142 ) ( 108,782 )

12 unchanged sentences

Comprehensive

Income (Loss) Retained Earnings (Accumulated Deficit) Non-

(Loss) Income Retained Earnings (Accumulated Deficit) Non-

Controlling Interests Total

4 unchanged sentences

Activity under equity-based compensation plans 1,601 — — — 756 — — — 756

Acquisition of non-controlling interest of TokenWave, LLC 71 — — — ( 4,781 ) — — ( 732 ) ( 5,513 )

Cumulative translation adjustment, net of tax — — — — — 2,423 — 194 2,617

Establishment of liabilities under tax receivable agreement and related changes to deferred tax assets — — — — 761 — — — 761

Recapitalization of common units of FAH, LLC — — ( 910 ) — 5,873 ( 5,873 ) —

Redemption of common units of FAH, LLC 1,756 — ( 1,016 ) — 4,083 — — ( 4,083 ) —

Net (loss) income — — — — — — ( 8,035 ) 2,795 ( 5,240 )

Net loss — — — — — — ( 154,079 ) ( 10,359 ) ( 164,438 )

Period ended December 31, 2023 50,549 $ 5 2,277 $ — $ 326,180 $ ( 180 ) $ ( 94,064 ) $ 6,099 $ 238,040

11 unchanged sentences

Redemption of common units of FAH, LLC 1,344 — ( 1,339 ) — 2,117 — — ( 2,117 ) —

Other — — — — ( 22 ) — — — ( 22 )

Net loss — — — — — — ( 67,360 ) ( 935 ) ( 68,295 )

23 unchanged sentences

Accrued expenses and other liabilities ( 18,758 ) ( 9,842 ) ( 29,716 )

Net cash provided by (used in) operating activities 123,524 30,935 ( 40,134 )

Net cash (used in) provided by operating activities ( 5,120 ) 123,524 30,935

Investing Activities

5 unchanged sentences

Financing Activities

Borrowings on line of credit 40,000 71,000 120,000

Payments on line of credit ( 100,500 ) ( 20,500 ) ( 50,000 )

Proceeds from long-term debt — — 20,000

Payment of long-term debt ( 31,104 ) ( 22,581 ) ( 18,000 )

Borrowings on revolving credit facility 85,000 40,000 71,000

Payments on revolving credit facility ( 20,000 ) ( 100,500 ) ( 20,500 )

Payment of term debt ( 23,134 ) ( 31,104 ) ( 22,581 )

Distributions to continuing equity owners — — ( 1,118 )

1 unchanged sentence

Other, net 171 1,322 ( 1,201 )

Net cash (used in) provided by financing activities ( 99,242 ) 25,596 54,639

Net cash provided by (used in) financing activities 42,037 ( 99,242 ) 25,596

Effect of exchange rates on cash and cash equivalents 2,478 ( 852 ) 518

6 unchanged sentences

Establishment of liabilities under tax receivable agreement — 547 —

Issuance of equity instruments for acquisitions — — 1,487

Tenant allowance — — 17,236

See accompanying notes to consolidated financial statements.

30 unchanged sentences

For both the years ended December 31, 2025, 2024 and 2023, no individual license agreement accounted for more than 10% of sales.

For the year ended December 31, 2022, 13 % of sales were related to the Company’s largest license agreement with no other license agreements accounting for more than 10% of sales.

The Company maintains its cash within bank deposit accounts at high quality, accredited financial institutions.

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Changes in economic or operating conditions impacting these estimates and assumptions could result in the impairment of the Company's long-lived assets.

Other assets primarily comprise capitalized implementation costs from cloud computing arrangements, safeguarding assets and security deposits.

Other assets primarily comprise capitalized implementation costs from cloud computing arrangements and security deposits.

The Company capitalizes eligible costs associated with cloud computing arrangements over the term of the arrangement, plus reasonably certain renewals, and intends to recognize those costs on a straight-line basis in the same line item in the consolidated statement of operations as the expense for fees associated with the cloud computing arrangement once the capitalized project is ready for intended use.

Cloud computing arrangement costs, included in prepaid expenses and other current assets were $ 2.8 million and $ 2.7 million and other assets were $ 0.6 million and $ 3.1 million as of December 31, 2024 and 2023, respectively.

Amortization expense associated with the cloud computing arrangements of $ 2.8 million and $ 2.2 million was recorded in the year ended December 31, 2024 and 2023, respectively, and no amortization expense was recorded for the years ended December 31, 2022.

The Company incurred an abandonment charge of $ 32.5 million during the year ended December 31, 2022, as it was determined the enterprise resource planning cloud computing arrangement was no longer feasible for its intended use.

Cash flows related to capitalized implementation costs are presented in cash flows used in operating activities.

Capitalized cloud computing arrangement costs and amortization expense were immaterial for the periods presented.

Revenue Recognition and Sales Allowance

2 unchanged sentences

Deferred revenue was $ 17.6 million and $ 13.3 million as of December 31, 2025 and 2024, respectively, and is recorded within accrued expenses and other current liabilities on the Company's consolidated balance sheets.

The Company expects to recognize revenue under these performance obligations over the next 12 months.

The Company routinely enters into arrangements with its customers to provide sales incentives, support customer promotions, and provide allowances for returns and defective merchandise.

3 unchanged sentences

The Company adjusts its estimates at least quarterly or when facts and circumstances used in the estimate process change.

As of December 31, 2024 and 2023, we had reserves for sales allowances of $ 42.2 million and $ 44.1 million, respectively.

We have made an accounting policy election to exclude from revenue, all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer (for example, sales, use, value-added, and certain excise taxes).

We have elected to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations.

Accordingly, shipping and handling activities that are performed by the Company, whether before or after a customer has obtained control of the products, are considered fulfillment costs to satisfy our performance obligation to transfer the products, and are recorded as incurred within cost of sales.

As of December 31, 2025 and 2024, the Company had sales allowances of $ 39.8 million and $ 42.2 million, respectively.

The Company has made an accounting policy election to exclude from revenue, all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the Company from a customer (for example, sales, use, value-added, and certain excise taxes).

The Company has elected to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations.

Accordingly, shipping and handling activities that are performed by the Company, after a customer has obtained control of the products, are considered fulfillment costs and are included within cost of sales when related revenues are recognized.

Shipping fees billed to customers are included in net sales.

We have elected the practical expedient to not recognize a significant financing component for contracts that include payments terms of one year or less.

We have also elected the practical expedient permitting expensing of costs to obtain a contract when the expected amortization period is one year or less.

We enter into agreements for rights to licensed trademarks, copyrights and likenesses for use in our products.

The Company has elected the practical expedient to not recognize a significant financing component for contracts that include payments terms of one year or less.

The Company has also elected the practical expedient permitting expensing of costs to obtain a contract when the expected amortization period is one year or less.

The Company enters into agreements for rights to licensed trademarks, copyrights and likenesses for use in our products.

These licensing agreements require the payment of royalty fees to the licensor based on a percentage of revenue.

Many licensing agreements also require minimum royalty commitments.

When royalty fees are paid in advance, we record these payments as a prepaid asset.

If we determine that it is probable that the expected revenue will not be realized, a reserve is recorded against the prepaid asset for the non-recoverable portion.

As of December 31, 2024 , we recorded a prepaid asset of $ 6.1 million, net of a reserve of $ 8.5 million.

As of December 31, 2023, we recorded a prepaid asset of $ 25.1 million, net of a reserve of $ 4.5 million.

We record a royalty liability as revenues are earned based on the terms of the licensing agreement.

In situations where a minimum commitment is not expected to be met based on expected revenues, we will accrue up to the minimum amount when it is reasonably certain that revenues generated will not meet the minimum commitment.

When royalty fees are paid in advance, the Company records these payments as a prepaid asset.

If the Company determines that it is probable that the expected revenue will not be realized, a reserve is recorded against the prepaid asset for the non-recoverable portion.

As of December 31, 2025 , the Company recorded a prepaid asset of $ 18.6 million, net of a reserve of $ 0.8 million.

As of December 31, 2024, the Company recorded a prepaid asset of $ 6.1 million, net of a reserve of $ 8.5 million.

The Company records a royalty liability as revenues are earned based on the terms of the licensing agreement.

In situations where a minimum commitment is not expected to be met based on expected revenues, the Company will accrue up to the minimum amount when it is reasonably certain that revenues generated will not meet the minimum commitment.

Our license agreements typically grant our licensors the right to audit our compliance with the terms and conditions of such agreements.

Any such audit could result in a dispute over whether we have paid the proper royalties and a requirement that we pay additional royalties.

As of December 31, 2024 and 2023 , we had a reserve of $ 23.5 million and $ 18.1 million, respectively, related to ongoing and future royalty audits, based on estimates of the costs we expect to incur.

Any such audit could result in a dispute over whether the Company has paid the proper royalties and a requirement that the Company pay additional royalties.

As of December 31, 2025 and 2024 , the Company had an accrual of $ 29.6 million and $ 23.5 million, respectively, related to ongoing and future royalty audits, based on estimates of the costs the Company expects to incur.

Royalty and license expense is recorded within cost of sales on the consolidated statements of operations.

8 unchanged sentences

Product design and development costs are recognized in selling, general and administrative expenses in the consolidated statements of operations as incurred.

Product design and development costs for the years ended December 31, 2024, 2023 and 2022, were $ 6.8 million, $ 8.0 million, and $ 10.2 million, respectively.

Product design and development costs, excluding personnel costs for the years ended December 31, 2025, 2024 and 2023, were $ 5.7 million, $ 6.8 million, and $ 8.0 million, respectively.

Foreign Currency

We have international sales and operating expenses that are denominated in local functional currencies.

The Company has international sales and operating expenses that are denominated in local functional currencies.

The functional currency of our international subsidiaries is the same as the local currency.

1 unchanged sentence

dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates prevailing throughout the period.

Translation adjustments are included in other comprehensive (loss) income on the consolidated statements of comprehensive (loss) income.

Translation adjustments are included in other comprehensive income (loss) on the consolidated statements of comprehensive loss.

Transaction gains and losses including intercompany transactions denominated in a currency other than the functional currency of Funko, Inc.

are included in other expense (income), net on our consolidated statements of operations.

are included in other (income) expense, net on our consolidated statements of operations.

There were no material gains (losses) recognized In connection with the settlement and remeasurement of intercompany balances for the years ended December 31, 2025, 2024 and 2023.

The income tax effects related to the unrealized foreign currency component of other comprehensive (loss) income are reclassified to earnings only when the net investment is sold, or when a liquidation of the respective net investment in the foreign entity is substantially completed.

The income tax effects related to the unrealized foreign currency component of other comprehensive income (loss) are reclassified to earnings only when the net investment is sold, or when a liquidation of the respective net investment in the foreign entity is substantially completed.

Deferred Tax Assets and Tax Receivable Agreement

During the year ended December 31, 2023, the Company determined that based on all the available evidence, including the Company’s three-year cumulative pre-tax loss position, it is not more likely than not that the results of operations will generate sufficient taxable income to realize its deferred tax assets.

Consequently, the Company established a full valuation allowance of $ 123.2 million against its deferred tax assets, thus reducing the carrying balance to $ 0 , and recognized a corresponding increase to tax expense in the consolidated statements of operations and comprehensive (loss) income in the year ended December 31, 2023.

Future changes to the balances of these valuation allowances, as a result of this continued review and analysis by the Company, could impact the financial statements within the period of change.

1 unchanged sentence

As a result of the full valuation allowance on the deferred tax assets, and projected inability to fully utilize all or part of the related tax benefits, the Company determined that certain payments to the TRA Parties related to unrealized tax benefits under the TRA are no longer probable and estimable.

Based on this assessment, the Company reduced its TRA Liability as of June 30, 2023, to $ 9.6 million, and recognized a gain of $ 99.6 million within the accompanying consolidated statements of operations and comprehensive (loss) income.

The Company performed a true-up in the fourth quarter of 2023 based on the filed 2022 consolidated tax return and recognized a further reduction in TRA liability and corresponding $ 603 thousand gain within the accompanying consolidated statements of operations and comprehensive (loss) income.

The Company estimated a TRA liability for the year ended December 31, 2024 of $ 547 thousand as utilization of certain portions of the deferred tax assets subject to the TRA were more likely than not to be recognized.

The Company estimated a TRA liability for the year ended December 31, 2025 and 2024 of $ 120 thousand and $ 547 thousand, respectively, as utilization of certain portions of the deferred tax assets subject to the TRA were more likely than not to be recognized.

Assets Held-for-Sale

1 unchanged sentence

Assets that qualify as held-for-sale are reported at the lower of its carrying value or its fair value less cost to sell.

Assets held-for-sale are included within prepaid expenses and other current assets on the Company's consolidated balance sheets .

Assets held-for-sale were included within prepaid expenses and other current assets on the Company's consolidated balance sheets.

During the fiscal years ended December 31, 2025, 2024 and 2023, the Company recorded net losses of $ 67.4 million, $ 14.7 million and $ 154.1 million, respectively.

The Company’s annual revenues decreased from $ 1.1 billion in 2023 to $ 1.0 billion in 2024 and to $ 908.2 million in 2025.

The Company’s principal sources of liquidity are existing cash and cash equivalents and cash flows from operating activities.

There is no remaining borrowing availability under the Company's Revolving Credit Facility, as defined below, and the amended Credit Agreement, as defined below, requires that cash in excess of $ 50.0 million be used for prepayment of the Revolving Credit Facility, which prepayments permanently reduce the revolving commitments.

Cash used for operating activities for the fiscal year ended December 31, 2025 was $ 5.1 million, which included $ 18.3 million of interest payments.

As of December 31, 2025, the Company held cash and cash equivalents of $ 42.1 million and total debt under the Credit Agreement, of $ 219.9 million (net of $ 0.4 million in unamortized debt issuance costs), with a maturity date of December 31, 2027, which is beyond one year from the date that the financial statements are issued or available to be issued.

The Company sources, procures and assembles inventory, primarily out of Vietnam, Cambodia, China and Mexico.

The effects of tariffs imposed in 2025, and the potential imposition of modified or additional tariffs or export controls by other countries, could continue to have an adverse effect on future net sales, margins, profitability and cash flows.

The Company anticipates it may face continued supply chain challenges, cost volatility, and consumer and economic uncertainty due to these ongoing changes in global trade policies.

The Company has continued to benefit from 2025 price increases and realized certain cost-savings of shifting production into lower tariff countries, overhead reductions and capital expenditures and entered into the Fifth Amendment to the Credit Agreement, to proactively manage the Company’s liquidity.

On February 13, 2026, the Credit Parties entered into the Fifth Amendment of the Credit Agreement to, among other things, amend the Prior Credit Agreement to (i) extend the maturity date of the loans from September 17, 2026 to December 31, 2027, and (ii) amend the financial covenants applicable to FAH, LLC and its subsidiaries under the Prior Credit Agreement to, among other things, (a) waive the minimum Fixed Charge Coverage Ratio financial covenant for the fiscal quarter ended December 31, 2025 and the fiscal quarters ending March 31, 2026 and June 30, 2026, (b) provide FAH, LLC additional cushion with respect to the minimum Fixed Charge Coverage Ratio financial covenant for the fiscal quarters ending September 30, 2026, December 31, 2026 and March 31, 2027 relative to the minimum Fixed Charge Coverage Ratio covenant set forth in the Prior Credit Agreement, (c) introduce a minimum Consolidated EBITDA covenant for the six-month period ending June 30, 2026, (d) waive the maximum Net Leverage Ratio covenant for the fiscal quarter ended December 31, 2025 and the fiscal quarters ending March 31, 2026, June 30, 2026 and September 30, 2026, (e) subject to certain usage restrictions, permit FAH, LLC to forego testing of certain Financial Covenants for any test period (to the extent required to be tested in such test period and not in two consecutive quarters) if FAH, LLC makes a voluntary permanent prepayment of the loans under the Credit Agreement in an amount not less than $ 10.0 million prior to the delivery of a compliance certificate for such test period, (f) requiring amortization payments on the outstanding revolving loans, with each such amortization payment in respect of the outstanding revolving loans permanently reducing the revolving commitments and (g) requiring quarterly mandatory prepayment of the revolving loans with cash (subject to certain exceptions) and cash equivalents in excess of $ 50.0 million, with each such prepayment permanently reducing the revolving commitments.

Consistent with the Prior Credit Agreement, the Credit Parties are subject to a covenant to hold no less than $ 10.0 million of Qualified Cash at any time.

As a result of the Fifth Amendment of the Credit Agreement, the Company expects that its existing resources and future cash flows from operations and cash and cash equivalents, will provide it with sufficient liquidity to meet its obligations for at least the next twelve months from the issuance date of these financial statements, including compliance with all covenants under the Credit Agreement.

As the Company's financial condition continues to improve as a result of the initiatives referred to above, the Company plans to either amend the Credit Agreement to further extend the maturity, seek alternative financing arrangements prior to the maturity of the debt, or opportunistically pursue other business opportunities or strategic transactions with the assistance of financial advisors.

However, there can be no assurance these plans will be completed.

If the Company is unable to complete these plans before the end of the fiscal year December 31, 2026, the debt would then be reclassified from a long-term liability to a current liability.

If the Credit Agreement is not refinanced before its maturity date of December 31, 2027 on terms that are acceptable to the Company or, if the Company does not successfully enter into a transaction(s) to strengthen its balance sheet and increase its financial flexibility, the Company’s liquidity, results of operations, cash flows and financial condition would be materially adversely impacted.

Recently Adopted Accounting Standards

In January 2025, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") 122, that rescinded SAB 121, Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for its Platform Users .

The Company has elected to early adopt SAB 122 on a fully retrospective basis.

As a result of the adoption, the Company has excluded the crypto asset safeguarding asset and corresponding liability of $ 6.1 million from the December 31, 2023 presentation of prepaid expenses and other current assets and accrued expenses and other current liabilities, on the consolidated balance sheets and consolidated statements of cash flows, respectively.

The Company, through its wholly-owned subsidiary TokenWave, LLC, operates the Droppp.io platform, to facilitate the buying and selling of its NFTs, holds cryptographic key information for NFTs and is a custodian for NFTs held in platform users' accounts.

The Company has not incurred a loss event during the years ended December 31, 2024, 2023 or 2022, as a result of its safeguarding.

In November 2023, the Financial Accounting Standards Board issued an Accounting Standards Update ("ASU"), which requires all public entities, including public entities with a single reportable segment, to provide in interim and annual periods one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance.

Additionally, the standard requires disclosures of significant segment expenses and other segment items as well as incremental qualitative disclosures.

The Company adopted the ASU for the year ended December 31, 2024, on a retrospective basis.

The adoption of this ASU did not change the way that the Company identifies its reportable segments and, as a result, did not have a material impact on the Company’s segment-related disclosures.

Refer to Note 15, "Segments" for further information on the Company's reportable segment.

In December 2023, the Financial Accounting Standards Board issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

ASU 2023-09 amends existing income tax disclosure guidance, primarily requiring more detailed disclosure for income taxes paid by jurisdiction and the effective tax rate reconciliation.

The Company adopted the ASU for the year ended December 31, 2025, on a prospective basis.

Refer to Note 12, "Income Taxes" for further information on the Company's enhanced disclosures.

Accounting Pronouncements Not Yet Adopted

In December 2023, the Financial Accounting Standards Board issued an ASU amending existing income tax disclosure guidance, primarily requiring more detailed disclosure for income taxes paid by jurisdiction and the effective tax rate reconciliation.

The ASU is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted and it can be applied on either a prospective or retroactive basis.

The Company is currently evaluating the ASU to determine its impact on income tax disclosures.

In November 2024, the Financial Accounting Standards Board issued an ASU requiring that an entity disclose in the notes to the financial statements specified information about certain costs and expenses, including the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) other amounts of depletion expense included in each relevant expense caption presented on the statement of operations.

In November 2024, the Financial Accounting Standards Board issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses for public business entities.

ASU 2024-03 requires that an entity disclose in the notes to the financial statements specified information about certain costs and expenses, including the amounts of (a) purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) other amounts of depletion expense included in each relevant expense caption presented on the statement of operations.

The standard also requires disclosure of a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, as well as the total amount of selling expenses and an entity’s definition of selling expenses.

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The Company recognized an intangible asset of $ 1.8 million, with a useful life of 10 years for the HipDot trade name, cash of $ 0.6 million, liabilities of $ 0.5 million and the remaining $ 4.1 million was allocated to Goodwill.

On June 8, 2022, the Company acquired 100 % of the membership interests in Mondo Collectibles, LLC (f/k/a Mondo Tees Buyer, LLC) (“Mondo”), a high-end pop culture collectibles company that creates vinyl records, posters, toys, apparel, books, games and other collectibles.

This transaction represented an opportunity to expand the Company’s product offerings into vinyl records, posters and other high-end collectibles.

The Company accounted for the acquisition as a business combination.

The final purchase consideration was $ 14.0 million in cash.

Goodwill and Intangible Assets

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The Company has determined that it has one reporting unit for which discrete financial information is available and results are regularly reviewed by management.

The Company determined as of its annual October 1, 2025 goodwill impairment assessment, it was more likely than not that the fair value of the reporting unit was above the carrying value of the net assets.

During the year ended December 31, 2025, the Company observed a significant decline in the market valuation of the Company’s Class A common stock along with a volatile macroeconomic environment.

As a result, the Company has evaluated potential goodwill impairment triggering events as of December 31, 2025, and determined it was more likely than not that the fair value of the reporting unit was above carrying value of the net assets.

However, the Company will continue to evaluate for impairment triggering events due to the substantive changes in circumstances, such as market capitalization, which could indicate a potential impairment and the need to record a material, non-cash charge in a future period.

The Company will continue to monitor conditions that may indicate the need for a recoverability assessment of the carrying value of the identified intangible and other long-lived assets.

No impairment charges relating to goodwill were recorded in the years ended December 31, 2025, 2024 and 2023.

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Balance as of January 1, 2024 $ 133,795

Acquisition 4,065

Reclassification to assets held-for-sale ( 87 )

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Balance as of December 31, 2024 $ 133,652

Reclassification to assets held-for-sale ( 87 )

Foreign currency remeasurement 248

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Intangible assets acquired in a business combination are recognized separately from goodwill and are initially recognized at their fair value at the acquisition date.

Intangible assets acquired include intellectual property (product design), customer, licensor and supplier relationships, trade names, and noncompetition agreements.

Intangible assets acquired include intellectual property (product design), customer and licensor relationships, and trade names.

These are definite-lived assets and are amortized on a straight-line basis over their estimated useful lives.

As of December 31, 2024 and 2023, there were also $ 27.0 thousand and $ 88.0 thousand, respectively, in indefinite-lived assets not subject to amortization but tested for impairment.

As of December 31, 2025 and 2024, there were also immaterial indefinite-lived assets not subject to amortization but tested for impairment.

There were immaterial impairment charges relating to indefinite-lived intangible assets recorded in the years ended December 31, 2025, 2024 and 2023, respectively.

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Total $ 287,489 $ ( 151,679 ) $ 135,810 $ 287,034 $ ( 135,514 ) $ 151,520

Amortization expense for the years ended December 31, 2024, 2023 and 2022 was $ 15.8 million, $ 15.8 million, and $ 15.4 million, respectively.

Amortization expense for the years ended December 31, 2025, 2024 and 2023 was $ 15.8 million, respectively.

The future five-year amortization of intangibles subject to amortization at December 31, 2025 was as follows (in thousands):

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Accounts receivable, net $ 117,018 $ 119,882

Bad debt expense, net was $ 1.5 million, $ 0.3 million and $ 6.1 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Bad debt (recovery) expense, net was $( 0.6 ) million, $ 1.5 million and $ 0.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Activity in our allowance for credit losses was as follows (in thousands):

2025 2024 2023

Allowance for credit losses- beginning $ 3,702 $ 5,048 $ 7,589

Charged to costs 1,529 294

(Recovery of) amounts charged to costs ( 635 ) 1,529 294

Write offs ( 2,434 ) ( 2,875 ) ( 2,835 )

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Accrued liabilities and other current liabilities $ 77,499 $ 81,688

Deferred Revenue

For the years ended December 31, 2025, 2024 and 2023, the Company recognized substantially all of revenue that was included in the deferred revenue balances at the beginning of the respective periods and primarily related to fulfillment of customer pre-orders.

The Company expects to recognize the outstanding deferred revenue as of December 31, 2025, within the next 12 months.

Fair Value Measurements

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100,303 122,815

current portion

current portion of revolving credit facility and term debt

23,057 82,512

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Maturities of long-term debt are as follows (in thousands):

Term Facilities

Credit Facilities

2026 $ 23,435

Total $ 225,681

Credit Facilities

On September 17, 2021, FAH, LLC and certain of its material domestic subsidiaries from time to time (the “Credit Agreement Parties”) entered into a new credit agreement (as amended from time to time, the “Credit Agreement”) with JPMorgan Chase Bank, N.A., PNC Bank, National Association, KeyBank National Association, Citizens Bank, N.A., Bank of the West, HSBC Bank USA, National Association, Bank of America, N.A., U.S.

On September 17, 2021 (the "Original Closing Date"), FAH, LLC and certain of its material domestic subsidiaries from time to time (the “Credit Agreement Parties”) entered into a credit agreement (as amended, restated, amended and restated, supplemented, waived or otherwise modified from time to time, the “Credit Agreement”) with JPMorgan Chase Bank, N.A., PNC Bank, National Association, KeyBank National Association, Citizens Bank, N.A., Bank of the West, HSBC Bank USA, National Association, Bank of America, N.A., U.S.

Bank National Association, MUFG Union Bank, N.A., and Wells Fargo Bank, National Association (collectively, the “Initial Lenders”) and JPMorgan Chase Bank, N.A.

as administrative agent, providing for a term loan facility in the amount of $ 180.0 million (the “Term Loan Facility”) and a revolving credit facility of $ 100.0 million (the “Revolving Credit Facility”) (together the “Credit Facilities”).

Proceeds from the Credit Facilities were primarily used to repay the Company's former credit facilities.

as administrative agent, providing for a term loan facility in the amount of $ 180.0 million (the “Term Loan Facility”) and a revolving credit facility in the amount of $ 100.0 million (the “Revolving Credit Facility”) (together the “Credit Facilities”).

Proceeds from the Credit Facilities on the Original Closing Date were primarily used to repay the Company's former credit facilities.

On April 26, 2022, the Credit Agreement Parties entered into Amendment No.

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2 to the Credit Agreement (the “Second Amendment”) with the Initial Lenders and Goldman Sachs Bank USA (collectively, the “Lenders”) and JPMorgan Chase Bank, N.A.

as administrative agent, which increased the Revolving Credit Facility to $ 215.0 million and converted the Credit Facility interest rate index from Borrower (as defined in the Credit Agreement) option LIBOR to SOFR.

as administrative agent, which increased the Revolving Credit Facility to $ 215.0 million and converted the Credit Facility interest rate index from LIBOR to SOFR.

On February 28, 2023, the Credit Agreement Parties entered into an Amendment No.

3 (the “Third Amendment”) to the Credit Agreement to, among other things, (i) modify the financial covenants under the Credit Agreement for the period beginning on the date of the Third Amendment through the fiscal quarter ended December 31, 2023 (the “Waiver Period”), (ii) reduce the size of the Revolving Credit Facility from $ 215.0 million to $ 180.0 million as of the date of the Third Amendment and thereafter to $ 150.0 million on December 31, 2023, which reduction is permanent after the Waiver Period, (iii) restrict the ability to draw on the Revolving Credit Facility during the Waiver Period in excess of the amount outstanding on the date of the Third Amendment, (iv) increase the margin payable under the Credit Facilities during the Waiver Period to (a) 4.00 % per annum with respect to any Term Benchmark Loan or RFR Loan (each as defined in the Credit Agreement), and (b) 3.00 % per annum with respect to any Canadian Prime Loan or ABR Loan (as defined in the Credit Agreement), (v) allow that any calculation of Consolidated EBITDA (each as defined in the Credit Agreement) that includes the fiscal quarters during the Waiver Period may include certain agreed upon amounts for certain addbacks, (vi) further limit our ability to make certain restricted payments, including the ability to pay dividends or make other distributions on equity interests, or redeem, repurchase or retire equity interests, incur additional indebtedness, incur additional liens, enter into sale and leaseback transactions or issue additional equity interests or securities convertible into or exchange for equity interests (other than the issuance of common stock) during the Waiver Period, (vii) require a minimum qualified cash requirement of at least $ 10.0 million and (viii) require a mandatory prepayment of the Revolving Credit Facility during the Waiver Period with any qualified cash proceeds in excess of $ 25.0 million.

3 (the “Third Amendment”) to the Credit Agreement to, among other things, (i) modify the then applicable financial covenants under the Credit Agreement in effect prior to the Third Amendment for the period beginning on the date of the Third Amendment through the fiscal quarter ended December 31, 2023 (the “Waiver Period”), (ii) reduce the size of the Revolving Credit Facility from $ 215.0 million to $ 180.0 million as of the date of the Third Amendment and thereafter to $ 150.0 million on December 31, 2023, which reduction is permanent after the Waiver Period, (iii) restrict the ability to draw on the Revolving Credit Facility during the Waiver Period in excess of the amount outstanding on the date of the Third Amendment, (iv) increase the margin payable under the Credit Facilities during the Waiver Period to (a) 4.00 % per annum with respect to any Term Benchmark Loan or RFR Loan (each as defined in the Credit Agreement), and (b) 3.00 % per annum with respect to any Canadian Prime Loan or ABR Loan (as defined in the Credit Agreement), (v) allow that any calculation of Consolidated EBITDA (as defined in the Credit Agreement) that includes the fiscal quarters during the Waiver Period may include certain agreed upon amounts for certain addbacks, (vi) further limit our ability to make certain restricted payments, including the ability to pay dividends or make other distributions on equity interests, or redeem, repurchase or retire equity interests, incur additional indebtedness, incur additional liens, enter into sale and leaseback transactions or issue additional equity interests or securities convertible into or exchange for equity interests (other than the issuance of common stock) during the Waiver Period, (vii) require a minimum Qualified Cash (as defined in the Credit Agreement) covenant of at least $ 10.0 million and (viii) require a mandatory prepayment of the Revolving Credit Facility during the Waiver Period with any Qualified Cash proceeds in excess of $ 25.0 million.

Beginning in the fiscal quarter ended March 31, 2024, the Third Amendment reset the maximum Net Leverage Ratio and the minimum Fixed Charge Coverage Ratio (each as defined in the Credit Agreement) that must be maintained by the Credit Agreement Parties to 2.50 :1.00 and 1.25 :1.00, respectively, which were the ratios in effect under the Credit Agreement prior to the Third Amendment.

On June 11, 2024 (the “Consent Effective Date"), the Credit Agreement Parties entered into that certain Limited Waiver and Limited Consent (the “Limited Waiver and Limited Consent”), with the lenders party thereto (the “Required Lenders”) and the Administrative Agent.

Pursuant to the Limited Waiver and Limited Consent, the Administrative Agent and the Required Lenders have agreed to irrevocably and permanently waive, from any time prior to or after the Consent Effective Date, the Credit Agreement Parties’ compliance with the covenant to maintain a minimum threshold of Qualified Cash (as defined in the Credit Agreement).

The Term Loan Facility matures on September 17, 2026 (the “Maturity Date”) and amortizes in quarterly installments in aggregate amounts equal to 2.50 % of the original principal amount of the Term Loan Facility, with any outstanding balance due and payable on the Maturity Date.

The first amortization payment commenced with the quarter ended on December 31, 2021.

The Revolving Credit Facility also terminates on the Maturity Date and loans thereunder may be borrowed, repaid, and reborrowed up to such date.

Loans under the Credit Facilities will, at the Borrowers’ option, bear interest at either (i) SOFR, EURIBOR, HIBOR, CDOR, Daily Simple SONIA and/or the Central Bank Rate, as applicable, plus (x) 4.00 % per annum and (y) solely in the case of Term SOFR based loans 0.10 % per annum or (ii) ABR or the Canadian prime rate, as applicable, plus 3.00 %, in each case of clauses (i) and (ii), subject to two 0.25 % step-downs based on the achievement of certain leverage ratios following February 28, 2023.

Each of SOFR, EURIBOR, HIBOR, CDOR and Daily Simple SONIA rates are subject to a 0 % floor.

For loans based on ABR, the Central Bank Rate or the Canadian prime rate, interest payments are due quarterly.

For loans based on Daily Simple SONIA, interest payments are due monthly.

For loans based on SOFR, EURIBOR, HIBOR or CDOR, interest payments are due at the end of each applicable interest period.

The Credit Facilities are secured by substantially all of the assets of FAH, LLC and any of its existing or future material domestic subsidiaries, subject to customary exceptions.

As of December 31, 2024 and 2023, the Credit Agreement Parties were in compliance with all of the financial covenants in its Credit Agreement.

Pursuant to the Limited Waiver and Limited Consent, the Administrative Agent and the Required Lenders agreed to irrevocably and permanently waive, from any time prior to or after the Consent Effective Date, the Credit Agreement Parties’ compliance with the covenant to maintain a minimum threshold of Qualified Cash.

On July 16, 2025, the Credit Agreement Parties entered into an Amendment No.

4 (the “Fourth Amendment”) to the Credit Agreement to, among other things, (i) waive compliance with (x) the maximum Net Leverage Ratio and (y) the minimum Fixed Charge Coverage Ratio financial covenants under the Credit Agreement, in each case, for the fiscal quarters ended June 30, 2025 and September 30, 2025;

(ii) permanently reduce the revolving commitments (x) from $ 150.0 million to $ 135.0 million as of the effective date of the Fourth Amendment and (y) from $ 135.0 million to $ 125.0 million as of December 31, 2025;

(iii) increase the applicable margin on all outstanding loans to 4.00 % per annum until the Credit Facilities are paid in full;

(iv) modify certain financial reporting obligations of the Credit Agreement Parties;

(v) add additional affirmative covenants applicable to the Credit Agreement Parties and their subsidiaries;

(vi) amend certain negative covenants applicable to the Credit Agreement Parties and their subsidiaries, including to add a covenant to hold no less than $ 10.0 million of Qualified Cash at any time following the date of the Fourth Amendment;

(vii) modify thresholds and grace periods for certain events of default;

(viii) add certain new event of default triggers;

and (ix) amend a covenant that the Company will not have a going concern or similar qualification to the Company’s annual audited financial statements to begin with the year ending December 31, 2025.

On February 13, 2026, the Credit Agreement Parties entered into an Amendment No.

5 (the "Fifth Amendment") to the Credit Agreement to, among other things, amend the Credit Agreement in effect prior to the Fifth Amendment (the " Prior Credit Agreement") to, among other things (i) extend the maturity date of the loans from September 17, 2026 to December 31, 2027 and, (ii) amend the financial covenants applicable to FAH, LLC and its subsidiaries under the Prior Credit Agreement to, among other things, (a) waive the minimum Fixed Charge Coverage Ratio financial covenant for the fiscal quarter ended December 31, 2025 and the fiscal quarters ending March 31, 2026 and June 30, 2026, (b) provide FAH, LLC additional cushion with respect to the minimum Fixed Charge Coverage Ratio financial covenant for the fiscal quarters ending September 30, 2026, December 31, 2026 and March 31, 2027 relative to the minimum Fixed Charge Coverage Ratio covenant set forth in the Prior Credit Agreement, (c) introduce a minimum Consolidated EBITDA covenant for the six-month period ending June 30, 2026, (d) waive the maximum Net Leverage Ratio covenant for the fiscal quarter ended December 31, 2025 and the fiscal quarters ending March 31, 2026, June 30, 2026 and September 30, 2026 and (e) subject to certain usage restrictions, permit FAH, LLC to forego testing of certain financial covenants for any test period (to the extent required to be tested in such test period) if the Company makes a voluntary prepayment of the loans under the Credit Agreement in an amount not less than $ 10.0 million prior to the delivery of a compliance certificate for such test period.

The Fifth Amendment also includes certain other modifications, including (i)(x) increasing the applicable margin on all outstanding SOFR loans to 4.50 % per annum effective on the closing date of the Fifth Amendment, with subsequent increases to the applicable margin as set forth in the Credit Agreement and (y) removing the 0.1 % per annum credit spread adjustment applicable to SOFR loans;

(ii) modifying the amortization payment on the term loans and requiring amortization payments on the outstanding revolving loans, with each such amortization payment in respect of the outstanding revolving loans permanently reducing the revolving commitments;

(iii) requiring quarterly mandatory prepayment of the revolving loans with cash (subject to certain exceptions) and cash equivalents in excess of $ 50.0 million, with each such prepayment permanently reducing the revolving commitments;

(iv) modifying certain financial reporting obligations of FAH, LLC and adding certain new affirmative covenants applicable to FAH, LLC and its subsidiaries;

and (v) adding certain additional events of default.

The Credit Facilities under the Credit Agreement will mature on December 31, 2027 (the “Maturity Date”).

On March 31, 2026, an amortization payment in an amount equal to $ 4,500,000 is due with respect to the Term Loan Facility.

At the end of each fiscal quarter thereafter, commencing with the fiscal quarter ending June 30, 2026, (i) the Term Loan Facility will amortize in quarterly installments equal to $ 4,125,000 , with any outstanding balance due and payable on the Maturity Date and (ii) the Revolving Credit Facility will amortize in quarterly installments equal to $ 375,000 (accompanied with permanent commitment reductions), with any outstanding balance due and payable on the Maturity Date.

Loans under the Credit Facilities currently bear interest at SOFR plus 4.50 % per annum.

On the first day of each fiscal quarter, commencing with April 1, 2027, an additional 0.25 % per annum will be added to the interest rate applicable to the loans under the Credit Facilities.

SOFR rate is subject to a 0 % floor.

For loans based on SOFR, interest payments are due at the end of each applicable interest period and in the case of loans based on SOFR with an interest period of more than three months’ duration, on each day prior to the last day of such interest period that occurs at intervals of three months’ duration after the first day of such interest period.

In addition, the Credit Agreement requires FAH, LLC and its subsidiaries to, subject to the proviso at the end of this paragraph, comply with the following Financial Covenants:

(i) on a quarterly basis, commencing with the fiscal quarter ending December 31, 2026, a maximum Net Leverage Ratio of 2.50 :1.00, (ii) on a quarterly basis, commencing with the fiscal quarter ending September 30, 2026, a minimum Fixed Charge Coverage Ratio of (a) 0.75 :1.00 with respect to the fiscal quarter ending September 30, 2026, (b) 0.85 :1.00 with respect to the fiscal quarter ending December 31, 2026, (c) 1.00 :1.00 with respect to the fiscal quarter ending March 31, 2027, and (d) 1.25 :1.00 with respect to the fiscal quarter ending June 30, 2027 and each fiscal quarter thereafter, (iii) at all times, a minimum Qualified Cash covenant of $ 10.0 million, and (iv) for the six-month period ending June 30, 2026, a minimum Consolidated EBITDA covenant of $ 15.1 million;

provided that if, in any fiscal quarter, FAH, LLC voluntarily prepays, prior to the date on which a compliance certificate is required to be delivered in respect of such fiscal quarter, more than $ 10.0 million of principal of then-outstanding loans, then all of the applicable Financial Covenants (other than the minimum Qualified Cash covenant), to the extent required to be tested in such fiscal quarter, will be deemed waived for such fiscal quarter (the “Covenant Cure Right”);

provided, further, that (x) the Covenant Cure Right is not permitted to be exercised in two (2) consecutive fiscal quarters, and (y) if the Cure Right is to be exercised in any fiscal quarter, FAH, LLC needs to have complied with the maximum Fixed Charge Coverage Ratio required in respect of the preceding fiscal quarter.

The Credit Facilities are secured by substantially all of the assets of the Credit Agreement Parties, subject to customary exceptions.

As of December 31, 2025, the Credit Agreement Parties were in compliance with all of the covenants then in effect and required to be tested under the Credit Agreement after execution of the Fifth Amendment.

The Credit Agreement Parties were also in compliance with all of the covenants then in effect under the Credit Agreement as of December 31, 2024.

At December 31, 2025 and 2024, the Credit Agreement Parties had $ 95.2 million and $ 113.2 million of borrowings outstanding under the Term Loan Facility, respectively, and $ 125.0 million and $ 60.0 million outstanding borrowings under the Revolving Credit Facility, respectively.

Interest rates on the outstanding borrowings under the Revolving Credit Facility at December 31, 2024 are reset every 30 days and can be repaid and reborrowed up until the maturity date.

Interest rates on the outstanding borrowings under the Revolving Credit Facility at December 31, 2025 are reset every 30 days and can be repaid up until the maturity date.

The weighted average rate on outstanding borrowings under Revolving Credit Facility as of December 31, 2025 and 2024 was 7.83 % and 6.71 %, respectively.

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During the years ended December 31, 2025, 2024 and 2023, operating cash outflows relating to operating lease liabilities were $ 18.2 million, $ 18.2 million and $ 19.5 million, respectively.

Operating lease right-of-use assets obtained in exchange for new operating lease obligations was $ 3.2 million, $ 0.9 million and $ 54.1 million, with $ 17.2 million lease incentives obtained, during the year ended December 31, 2024, 2023 and 2022, respectively.

Operating lease right-of-use assets obtained in exchange for new operating lease obligations was $ 1.8 million, $ 3.2 million and $ 0.9 million, during the years ended December 31, 2025, 2024 and 2023, respectively.

As of December 31, 2025 and 2024, the Company’s operating leases had a weighted-average remaining term of 5.2 years and 6.0 years, respectively, and weighted-average discount rates of 5.67 % and 5.76 %, respectively.

In January 2020, the Company entered into a non-cancellable operating sub-lease for office space expiring in December 2024.

Rental income recognized for the years ended December 31, 2024, 2023 and 2022 was $ 0.3 million, $ 0.6 million and $ 0.4 million, respectively, included as a reduction of selling, general and administrative expenses on the consolidated statements of operations.

In January 2020, the Company entered into a non-cancellable operating sub-lease for office space that expired December 2024.

Rental income recognized for the years ended December 31, 2024 and 2023 was $ 0.3 million and $ 0.6 million, respectively, included as a reduction of selling, general and administrative expenses on the consolidated statements of operations.

The future payments on the Company’s operating lease liabilities as of December 31, 2025 were as follows (in thousands):

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Loss before income taxes $ ( 63,939 ) $ ( 10,506 ) $ ( 31,941 )

Income Tax Expense (Benefit)

Income Tax Expense

is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from FAH, LLC based upon Funko, Inc.’s economic interest held in FAH, LLC.

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FAH, LLC’s members, including the Company, are liable for federal, state and local income taxes based on their share of FAH, LLC’s pass-through taxable income and loss.

The components of the Company’s income tax expense (benefit) consisted of the following (in thousands):

The components of the Company’s income tax expense consisted of the following (in thousands):

Year Ended December 31,

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State and local

Deferred income taxes

— ( 301 ) 123,124

Total income taxes:

— ( 57 ) 110,810

Deferred income taxes

State and local

170 94 17,959

Income tax expense (benefit) $ 4,564 $ 132,497 $ ( 17,801 )

A reconciliation of income tax expense (benefit) from operations computed at the U.S.

federal statutory income tax rate to the Company’s effective income tax rate are as follows:

Year Ended December 31,

4,186 4,527 3,728

Income tax expense $ 4,356 $ 4,564 $ 132,497

The following table presents required disclosures pursuant to ASU 2023-09 and reconciles the provision computed at the U.S.

federal statutory income tax rate to the provision for income taxes for 2025:

December 31, 2025

(in thousands) Percent

Expected U.S.

federal income taxes at statutory rate $ ( 13,427 ) 21.0 %

State and local income taxes, net of federal income tax effect (1)

Foreign tax effects

United Kingdom 3,518 ( 5.5 )

Other foreign jurisdictions 525 ( 0.8 )

Effect of cross-border tax laws 124 ( 0.2 )

Changes in valuation allowance 12,283 ( 19.2 )

Nontaxable or nondeductible Items 966 ( 1.4 )

Other adjustments 197 ( 0.4 )

Effective tax rate $ 4,356 ( 6.8 ) %

(1) In 2025, state and local taxes in Texas comprise the majority of the state and local taxes, net of federal effect category.

The following table presents the required disclosures prior to the adoption of ASU 2023-09 and reconciles the provision computed at the U.S.

federal statutory income tax rate to the provision for income taxes for 2024 and 2023:

Year Ended December 31,

Expected U.S.

federal income taxes at statutory rate 21.0 % 21.0 %

State and local income taxes, net of federal benefit ( 3.5 ) ( 56.2 )

1 unchanged sentence

( 34.2 ) ( 9.3 )

Foreign tax credit — — 11.7

Foreign deferred tax — — 0.0

Non-deductible expenses

5 unchanged sentences

Return to provision 1.0 ( 23.8 )

( 7.4 ) 3.3 1.5

Income tax expense ( 43.4 ) % ( 414.8 ) %

The Company's annual effective tax rate in 2025 is different than the statutory rate of 21% due to the valuation allowance and foreign taxes.

The Company’s annual effective tax rate in 2023 is different than the statutory rate of 21% due to the valuation allowance.

The Company's annual effective tax rate for 2022 is different than the statutory rate of 21%, primarily due to a partial release of the valuation allowance, the limitation on deductions of future share based compensation pursuant to Section 162(m) of the Internal Revenue Code (the "Code"), and the fact that Company is not liable for income taxes on the portion of FAH, LLC’s earnings that are attributable to non-controlling interests.

The Company’s annual effective tax rate in 2024 is different than the statutory rate of 21% due to the valuation allowance and foreign taxes.

The Company's annual effective tax rate for 2023 is different than the statutory rate of 21%, due to the valuation allowance.

Deferred Income Taxes

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Net deferred tax assets $ ( 584 ) $ ( 542 )

(1) The prior years' Section 163(j) interest deferred tax asset has been disaggregated from investment in partnership to conform to current-year presentation.

The Company's federal net operating loss carryforward of $ 48.2 million at December 31, 2025 is indefinite.

The Company's state net operating loss carryforward of $ 7.9 million at December 31, 2025, have various expiration dates based on jurisdiction, ranging from tax years ending 2033 to 2044.

The Company's other carryforwards, primarily related to charitable contributions at December 31, 2024, expire in the tax years ending 2028 and 2029.

The Company's other carryforwards, primarily related to charitable contributions at December 31, 2025, expire in the tax years ending 2028 to 2030.

The Company evaluates its ability to realize deferred tax assets on a quarterly basis and establishes a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset may not be realized.

Based on the Company's assessment as of December 31, 2024, the Company determined that based on all the available evidence, including the Company’s three-year cumulative pre-tax loss position, it is not more likely than not that the results of operations will generate sufficient taxable income to realize its deferred tax assets and retained a full valuation allowance.

During the year ended December 31, 2023, the Company established a full valuation allowance of $ 123.2 million against its deferred tax assets and recognized a corresponding increase to tax expense in the consolidated statements of operations and comprehensive (loss) income in the year ended December 31, 2023.

The Company released $ 11.0 million valuation allowance during the year ended December 31, 2022, related to a discrete benefit on the outside basis deferred tax asset.

Based on the Company's assessment as of December 31, 2025 and 2024, the Company determined that based on all the available evidence, including the Company’s three-year cumulative pre-tax loss position, it is not more likely than not that the results of operations will generate sufficient taxable income to realize its deferred tax assets and retained a full valuation allowance.

As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the "change in valuation allowance" line of the rate reconciliation.

The following table presents a reconciliation of the total change in the valuation allowance for the year ended December 31, 2025 (in thousands):

Beginning balance $ ( 132,605 )

Change charged to income tax expense ( 14,333 )

Changes charged to additional paid-in-capital ( 1,091 )

Ending balance $ ( 148,029 )

Uncertain Tax Positions

The Company regularly evaluates the likelihood of realizing the benefit from income tax positions that we have taken in various federal, state and foreign filings by considering all relevant facts, circumstances and information available.

If the Company determines it is more likely than not that the position will be sustained, a benefit will be recognized at the largest amount that we believe is cumulatively greater than 50% likely to be realized.

The Company regularly evaluates the likelihood of realizing the benefit from income tax positions that the Company has taken in various federal, state and foreign filings by considering all relevant facts, circumstances and information available.

If the Company determines it is more likely than not that the position will be sustained, a benefit will be recognized at the largest amount that the Company believes is cumulatively greater than 50% likely to be realized.

There are no unrecognized tax benefits for uncertain tax positions for the three years ended December 31, 2025, 2024 and 2023.

Interest and penalties related to income tax matters are classified as a component of income tax expense (benefit).

As of December 31, 2024, and 2023, we have not recorded any interest or penalties as the amounts were not material.

As of December 31, 2025, and 2024, the Company has not recorded any interest or penalties as the amounts were not material.

Unrecognized tax benefits are recorded in other long-term liabilities on the consolidated balance sheets.

Income Taxes Paid

Year Ended December 31, 2025

(in thousands)

United Kingdom 4,124

Total Foreign $ 5,173

Total income taxes $ 5,355

Income taxes paid, net, for the periods ended December 31, 2024 and 2023 were $ 3.9 million and $ 1.1 million, respectively.

Other Matters

2 unchanged sentences

The Company is subject to U.S.

federal, state, and local income tax examinations by tax authorities for years after 2020 and subject to examination for all foreign income tax returns for fiscal 2024 and 2023.

federal, state, and local income tax examinations for tax years 2022 and forward and subject to examination for all foreign income tax returns for fiscal 2025 and 2024.

There were no open tax examinations at December 31, 2025.

11 unchanged sentences

If the Company does not generate sufficient taxable income in the aggregate over the term of the Tax Receivable Agreement to utilize the tax benefits, then it generally would not be required to make the related Tax Receivable Agreement payments.

During years ended December 31, 2024 and 2023, the Company acquired an aggregate of 1.2 million and 1.8 million common units of FAH, LLC, respectively, in connection with the redemption and/or exchange of common units, none of which resulted in an increase in the tax basis of our investment in FAH, LLC subject to the provisions of the Tax Receivable Agreement.

The Company estimated a TRA liability for the year ended December 31, 2024 of $ 547 thousand as utilization of certain portion of the deferred tax assets subject to the TRA were more likely than not to be recognized.

During years ended December 31, 2025 and 2024, the Company acquired an aggregate of 1.3 million and 1.2 million common units of FAH, LLC, respectively, in connection with the redemption and/or exchange of common units, none of which resulted in a material increase in the tax basis of our investment in FAH, LLC subject to the provisions of the Tax Receivable Agreement.

The Company estimated a TRA liability for the year ended December 31, 2025 and 2024 of $ 120 thousand and $ 547 thousand, respectively, as utilization of certain portion of the deferred tax assets subject to the TRA were more likely than not to be recognized.

There were no transactions subject to the Tax Receivable Agreement for which the Company did not recognize the related liability during the years ended December 31, 2024, 2023 and 2022, as we concluded at such time that it was probable that the Company would have sufficient future taxable income to utilize all of the related tax benefits.

The estimated gross outstanding balance of the TRA liability as of December 31, 2024 was equivalent to the liability outstanding at December 31, 2023 of $ 99.6 million, adjusted for immaterial redemptions and changes in tax rates.

There were no transactions subject to the Tax Receivable Agreement for which the Company did not recognize the related liability during the years ended December 31, 2025, 2024 and 2023, as the Company concluded at such time that it was probable that the Company would have sufficient future taxable income to utilize all of the related tax benefits.

The estimated gross outstanding balance of the TRA liability as of December 31, 2025 and 2024 was $ 102.5 million and $ 99.6 million, respectively.

The following table summarizes changes in the amount of the Company’s Tax Receivable Agreement liability (in thousands):

12 unchanged sentences

Our license agreements typically grant our licensors the right to audit our compliance with the terms and conditions of such agreements.

Any such audit could result in a dispute over whether we have paid the proper royalties and a requirement that we pay additional royalties.

As of December 31, 2024, we had a reserve of $ 23.5 million, related to ongoing and future royalty audits, based on estimates of the costs we expect to incur.

Any such audit could result in a dispute over whether the Company has paid the proper royalties and a requirement that the Company pay additional royalties.

As of December 31, 2025, the Company had an accrual of $ 29.6 million, related to ongoing and future royalty audits, based on estimates of the costs the Company expects to incur.

Pre-Production Costs and Inventory

3 unchanged sentences

The Company has employment agreements with certain officers.

The agreements include, among other things, an annual bonus based on certain performance metrics of the Company, as defined by the board of directors (the "Board"), and up to one year ’s severance pay beyond termination date.

The agreements include, among other things, an annual bonus based on certain performance metrics of the Company, as defined by the board of directors (the "Board"), and up to two years ' salary severance pay beyond termination date.

The Company has entered into a Credit Facility which includes a term loan facility and a revolving credit facility.

13 unchanged sentences

The Company is, and may in the future become, subject to various legal proceedings and claims that arise in or outside the ordinary course of business.

For example, several stockholder derivative actions based on the earnings announcement and Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 have been brought on behalf of the Company against certain of its directors and officers.

Specifically, on April 23, June 5, and June 10, 2020, the actions captioned Cassella v.

Mariotti et al., Evans v.

Mariotti et al., and Igelido v.

Mariotti et al., respectively, were filed in the United States District Court for the Central District of California.

On July 6, 2020, these three actions were consolidated for all purposes into one action under the title In re Funko, Inc.

Derivative Litigation , and on August 13, 2020, the consolidated action was stayed.

On May 9, 2022, another complaint, asserting substantially similar claims, was filed in the U.S.

District Court for the Central District of California, captioned Smith v.

Mariotti, et al.

On July 5, 2022, two purported stockholders filed an additional derivative action in the Court of Chancery of the State of Delaware, captioned Fletcher v.

Mariotti et al .

In March 2023, the Company reached a non-monetary settlement in principle in In re Funko, Inc.

Derivative Litigation , Smith v.

Mariotti , and Fletcher v.

Mariotti et al.

and the actions were stayed pending finalization of the settlement.

As part of the settlement, the plaintiffs in all three cases agreed to dismiss their claims on behalf of the corporation in exchange for a set of corporate governance reforms and attorney’s fees and expenses.

The attorney’s fees and expenses were paid out of Funko’s directors and officers’ insurance.

On November 18, 2024, the Court entered a Final order and Judgment approving the settlement in all respects.

Accordingly, all three of the cases were dismissed, with prejudice, between November 18 and December 20, 2024, and the Court granted a Stipulation of Voluntary Dismissal with Prejudice releasing all claims against Funko.

On June 11, 2021, a purported stockholder filed a related derivative action, captioned Silverberg v.

Mariotti, et al.

, in the Court of Chancery of the State of Delaware, seeking declaratory and monetary relief.

The claims asserted in Silverberg v.

Mariotti, et al.

litigation were released as a result of the settlement described above.

Accordingly, the Silverberg v.

Mariotti, et al.

litigation was dismissed with prejudice on December 2, 2024.

Additionally, between November 16, 2017 and June 12, 2018, seven purported stockholders of the Company filed putative class action lawsuits in the Superior Court of Washington in and for King County against the Company, certain of its officers and directors, ACON, Fundamental Capital, the underwriters of its IPO, and certain other defendants.

For example, between November 16, 2017 and June 12, 2018, seven purported stockholders of the Company filed putative class action lawsuits in the Superior Court of Washington in and for King County against the Company, certain of its officers and directors, ACON, Fundamental Capital, the underwriters of its IPO, and certain other defendants.

On July 2, 2018, the suits were ordered consolidated for all purposes into one action under the title In re Funko, Inc.

5 unchanged sentences

The Company filed its answer on September 19, 2022 and the Court certified the case as a class action on November 6, 2023.

The consolidated complaint alleges that the Company violated Sections 11, 12, and 15 of the Securities Act of 1933, as amended (“Securities Act”), as amended, by making allegedly materially misleading statements in documents filed with the SEC in connection with the Company’s IPO and by omitting material facts necessary to make the statements made therein not misleading.

The lawsuits seek, among other things, compensatory statutory damages and rescissory damages in account of the consideration paid for the Company’s Class A common stock by the plaintiffs and members of the putative class, as well as attorneys’ fees and costs.

The consolidated complaint alleged that the Company violated Sections 11, 12, and 15 of the Securities Act of 1933, as amended (“Securities Act”), by making allegedly materially misleading statements in documents filed with the SEC in connection with the Company’s IPO and by omitting material facts necessary to make the statements made therein not misleading.

The lawsuits sought, among other things, compensatory statutory damages and rescissory damages in account of the consideration paid for the Company’s Class A common stock by the plaintiffs and members of the putative class, as well as attorneys’ fees and costs.

On October 21, 2024, the parties agreed to a settlement in principle, and on October 29, 2024 notified the Court of a proposed class settlement.

The Company has accrued a liability, and offsetting receivable, of $ 14.75 million on its consolidated balance sheets as of December 31, 2024.

The Court preliminarily approved the settlement on February 12, 2025 and the settlement was paid on February 25, 2025, directly by the Company’s applicable insurance policies.

The Court preliminarily approved the settlement of $ 14.75 million on February 12, 2025 and the settlement was paid on February 25, 2025, directly by the Company’s applicable insurance policies.

The Court issued final approval of the settlement and dismissed the litigation on June 6, 2025.

On January 18, 2022, a purported stockholder filed a putative class action lawsuit in the Court of Chancery of the State of Delaware, captioned Shumacher v.

5 unchanged sentences

On December 15, 2022, Plaintiff opposed the Defendants’ motion to dismiss, and also moved for attorneys’ fees.

Briefing on the motion to dismiss was completed on February 8, 2023;

briefing on Plaintiff’s fee application was completed on April 10, 2023.

The Court heard oral argument on both motions on July 24, 2023.

On December 18, 2023, the Court denied Defendants’ motion to dismiss and denied Plaintiffs’ application for an interim fee.

We filed our answer on January 26, 2024, and discovery is currently ongoing.

On March 13, 2024, the representative plaintiff moved to withdraw as a plaintiff in the action, and another purported stockholder moved to intervene as representative plaintiff.

On October 28, 2024, the Court granted the plaintiff’s motion to withdraw and granted the new representative plaintiff’s motion to intervene.

The Company filed its Answer to the Verified Class Action Complaint in Intervention on December 10, 2024, and discovery is currently ongoing.

As a result, the litigation is now captioned Lynch vs.

Mariotti, et al .

In October 2025, the parties participated in a mediation to resolve the litigation.

On February 18, 2026, the parties executed a settlement agreement pursuant to which the Company agreed, through its insurers, to resolve the remaining claims for $ 5.4 million, and to pay plaintiff’s counsel a mootness fee of $ 3.0 million.

The parties have submitted the settlement agreement to the Court of Chancery for approval.

On June 2, 2023, a purported stockholder filed a putative class action lawsuit in the United States District Court for the Western District of Washington, captioned Studen v.

Funko, Inc., et al.

The Complaint alleges that the Company and certain individual defendants violated Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), as well as Rule 10b-5 promulgated thereunder by making allegedly materially misleading statements in documents filed with the SEC, as well as in earnings calls and presentations to investors, regarding a planned upgrade to its enterprise resource planning system and the relocation of a distribution center, as well as by omitting material facts about the same subjects necessary to make the statements made therein not misleading.

The lawsuits seek, among other things, compensatory damages and attorneys’ fees and costs.

On August 17, 2023, the Court appointed lead plaintiff, and on August 29, 2023, the parties submitted a joint stipulated scheduling order.

Plaintiff’s amended complaint was filed October 19, 2023.

The amendment adds additional allegations by including accounts from purported former employees and contractors.

Plaintiff seeks to represent a putative class of investors who purchased or acquired Funko common stock between March 3, 2022 and March 1, 2023.

On August 17, 2023, the Court appointed two lead plaintiffs, and, those lead plaintiffs filed an amended complaint on October 19, 2023.

The amended complaint alleges that the Company and certain individual defendants violated Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), as well as Rule 10b-5 promulgated thereunder by making allegedly materially misleading statements in documents filed with the SEC, as well as in earnings calls and presentations to investors, regarding a planned upgrade to its enterprise resource planning system and the relocation of a distribution center, as well as by omitting material facts about the same subjects necessary to make the statements made therein not misleading.

Plaintiffs seek to represent a putative class of investors who purchased or acquired Funko common stock between March 3, 2022 and March 1, 2023, and seek, among other things, compensatory damages and attorneys' fees and costs.

On May 16, 2024, the Court granted the Company’s motion to dismiss with leave for Plaintiffs to file a second amended complaint.

3 unchanged sentences

Plaintiffs’ opening brief was filed on October 21, 2024, and briefing was completed on February 10, 2025.

Oral argument is expected to be held in or around May or June 2025.

Oral argument was held on May 23, 2025.

On February 4, 2026, the Court of Appeals affirmed in part and reversed in part the District Court’s decision.

Specifically, it affirmed the dismissal of all claims based on statements made on earnings calls and presentations to investors, but reversed the dismissal of claims based on certain risk factor disclosures made in the Company’s SEC filings.

On April 12, 2024, a former employee of the Company filed a putative class action in San Diego Superior Court, seeking to represent all non-exempt workers of the Company in the State of California.

3 unchanged sentences

The lawsuit seeks, among other things, compensatory damages, statutory penalties, attorneys’ fees and costs.

There have been no substantive rulings in the case, including as to propriety of proceeding on a class wide basis, and a date for trial has not yet been set.

The parties have agreed to a mediation session related to this case that is expected to occur in May 2025.

On May 20, 2025, the parties participated in mediation and reached an immaterial monetary settlement in exchange for a release of all claims that were or could have been asserted in the complaint for the period from April 12, 2020 through July 19, 2025.

In January 2026, the Court granted preliminary approval of the class action settlement.

The settlement administrator mailed class notices to the class members in February 2026.

The final approval hearing is scheduled for May 1, 2026.

On March 2, 2026, a purported stockholder filed a derivative lawsuit on behalf of the Company as a nominal defendant against certain of our current and former directors in the District Court for the Western District of Washington, captioned Marconi v.

Perlmutter et al.

The derivative complaint alleges breach of fiduciary duty, gross mismanagement, corporate waste, and unjust enrichment claims, as well as a violation of Section 14(a) of the Exchange Act, arising from substantially similar factual predicate as alleged in the Studen v.

matter discussed above and seeks monetary damages, attorneys’ fees and costs and corporate governance reforms.

This matter is currently in the early stages of litigation.

The Company is party to additional legal proceedings incidental to its business.

1 unchanged sentence

The Company identifies its segments according to how the business activities are managed and evaluated and for which discrete financial information is available and regularly reviewed by its Chief Operating Decision Maker (“CODM”) to allocate resources and assess performance.

The Company’s current CODM is our Chief Executive Officer, Cynthia Williams.

The Company’s current CODM is our Chief Executive Officer, Josh Simon.

Because the CODM reviews financial performance and allocates resources at a consolidated level on a regular basis, the Company has one segment.

The segment derives revenue from customers by providing a wide variety of branded categories, including Core Collectible (predominately figures), Loungefly (predominately softlines including bags, wallets, backpacks and accessories) and Other (predominately Mondo, Digital and other emerging brands).

All product lines, designs, licenses, and marketing/sales strategies are centrally managed as a single operating entity rather than at a geographic or subsidiary level.

3 unchanged sentences

During the monthly finance review, consolidated net income (loss) along with other finance metrics are presented to the CODM to understand how branded categories are tracking to budget, specific to net sales.

During the year ended December 31, 2025, there were no changes to the measures used for finance metrics utilized, other than product costs are now reported inclusive of all inventoriable costs.

The following table sets forth segment information for revenue, segment net loss and significant expenses:

3 unchanged sentences

Net sales $ 908,209 $ 1,049,850 $ 1,096,086

Product, freight, duties and shipping costs 439,124 502,327 646,011

Product, freight, duties, shipping and other inventoriable costs 398,473 446,435 583,371

License and royalty costs 158,467 168,883 179,714

Inventory reserves and other costs 7,311 81,044 29,546

Salaries, benefits, incentive and stock compensation 145,687 145,593 157,940

4 unchanged sentences

Other expense (income) 18,396 23,497 ( 71,886 )

Income tax expense (benefit) 4,564 132,497 ( 17,801 )

Income tax expense 4,356 4,564 132,497

Net loss $ ( 68,295 ) $ ( 15,070 ) $ ( 164,438 )

30 unchanged sentences

Employee Benefit Plans

We currently maintain the Funko 401(k) Plan, a defined contribution retirement and savings plan, for the benefit of our employees, including our named executive officers, who satisfy certain eligibility requirements.

Our named executive officers are eligible to participate in the 401(k) Plan on the same terms as other full-time employees.

The Company currently maintains the Funko 401(k) Plan, a defined contribution retirement and savings plan, for the benefit of our employees, including our named executive officers, who satisfy certain eligibility requirements.

The Company's named executive officers are eligible to participate in the 401(k) Plan on the same terms as other full-time employees.

The Code allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k) Plan.

Currently, we match contributions made by participants in the 401(k) Plan up to 4 % of the employee earnings, and these matching contributions are fully vested as of the date on which the contribution is made.

We believe that providing a vehicle for tax-deferred retirement savings though our 401(k) Plan, and making fully vested matching contributions, adds to the overall desirability of our compensation package and further incentivizes our employees, including our named executive officers, in accordance with our compensation policies.

Currently, the Company matches contributions made by participants in the 401(k) Plan up to 4 % of the employee earnings, and these matching contributions are fully vested as of the date on which the contribution is made.

The Company believes that providing a vehicle for tax-deferred retirement savings through our 401(k) Plan, and making fully vested matching contributions, adds to the overall desirability of the Company's compensation package and further incentivizes employees, including named executive officers, in accordance with the Company's compensation policies.

The Company’s employer matching contributions were $ 2.9 million, $ 3.1 million and $ 3.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.

17 unchanged sentences

Simultaneously with the payment of cash or shares of Class A common stock, as applicable, in connection with a redemption or exchange of common units pursuant to the terms of the FAH LLC Agreement, a number of shares of our Class B common stock registered in the name of the redeeming or exchanging Continuing Equity Owner will be cancelled for no consideration on a one -for-one basis with the number of common units so redeemed or exchanged.

On May 3, 2022, the Company entered into a common unit subscription agreement with FAH, LLC pursuant to which the Company purchased 4,251,701 newly issued common units in exchange for a capital contribution of approximately $ 74.0 million (the “Capital Contribution”).

Following the Capital Contribution, (i) the common units of FAH, LLC were recapitalized through a reverse unit split in order to maintain a one -to-one ratio between the number of common units owned by the Company and the number of outstanding shares of Class A common stock in accordance with the FAH LLC Agreement, and (ii) approximately 0.9 million outstanding shares of Class B common stock were cancelled.

Equity-Based Compensation

31 unchanged sentences

Outstanding at December 31, 2024 298 $ 8.39 $ 1,490 9.38

Granted 298 8.39 —

Forfeited ( 298 ) 8.39 —

Outstanding at December 31, 2025 — — — 0.00

1 unchanged sentence

Performance stock options awarded to employees under the 2024 Plan are granted with an exercise price equal to the closing market price of the Company’s common stock at the date of grant.

The awards will be eligible to vest based on the achievement of a stock price hurdle equal to three times the Exercise Price (the “Vesting Price”), measured based on the average of the Company’s closing share price over a 90 trading day trailing average, prior to the fourth anniversary of May 20, 2024 and subject to Employee’s continued employment with the Company;

The awards were eligible to vest based on the achievement of a stock price hurdle equal to three times the Exercise Price (the “Vesting Price”), measured based on the average of the Company’s closing share price over a 90 trading day trailing average, prior to the fourth anniversary of May 20, 2024 and subject to Employee’s continued employment with the Company;

provided, that, notwithstanding the foregoing, such Stock Option Grant shall not be eligible to vest until at least the second anniversary of the date of grant regardless of whether such stock price hurdle has been achieved.

The awards have ten year contractual terms.

All performance stock options outstanding at December 31, 2024 were forfeited during the year ended December 31, 2025.

A summary of restricted stock unit activity for the year ended December 31, 2025 is as follows:

12 unchanged sentences

Unvested at December 31, 2024 42 $ 12.89 1.00

Granted 750 3.46

Vested ( 3 ) 17.09

2 unchanged sentences

The number of units subject to future vesting is based on annual Company achieved factors, such as Net Sales and Adjusted EBITDA Margin and achievement is at the direction of the Compensation Committee of the board of directors.

Unvested units are expected to vest at the determination date of December 31, 2024 or December 31, 2025, depending on the grant.

Unvested units are expected to vest at the determination date of December 31, 2025, depending on the grant.

For awards granted during the year ended December 31, 2025 to our Chief Executive Officer, future vesting is based on:

(A) 1/3 of the restricted stock units over three years in three equal annual installments on each of the first three anniversaries of September 1, 2025, (B) 1/3 of the restricted stock units based on the achievement of a stock price hurdle equal to or greater than $ 8.00 per share based on (I) the average of the Company’s closing share price over a 45 trading day trailing average or (II) the price received by holders of Class A common stock in connection with a change in control for each share of Class A common stock held on the date of such change in control, and (C) the remaining 1/3 of the restricted stock units subject to the Inducement Grant based on the achievement of a stock price hurdle equal to or greater than $ 20.00 per share based on (I) the average of the Company’s closing share price over a 45 trading day trailing average or (II) the price received by holders of Class A common stock in connection with a change in control for each share of Class A common stock held on the date of such change in control, which stock price hurdles must be achieved prior to the seventh anniversary of September 1, 2025, and in each case subject to the grantee's continued service through the applicable vesting dates.

Achievement is estimated at a weighted average 97.9 % of the units granted as of December 31, 2025.

8 unchanged sentences

The fair value of option awards is estimated at the grant date using the Black-Scholes option pricing model that requires management to apply judgment and make estimates, including:

• Volatility —this is estimated based primarily on historical volatilities of a representative group of publicly traded consumer product companies with similar characteristics

• Volatility —this is estimated based primarily on the Company's historical daily volatility over the same time period as the calculated expected term of the award

• Risk-free interest rate —this is the U.S.

20 unchanged sentences

As such, future redemptions or direct exchanges of common units of FAH, LLC by the Continuing Equity Owners will result in a change in ownership and reduce or increase the amount recorded as non-controlling interest and increase or decrease additional paid-in capital when FAH, LLC has positive or negative net assets, respectively.

Net loss and comprehensive (loss) income are attributed between Funko, Inc.

Net loss and comprehensive loss are attributed between Funko, Inc.

and noncontrolling interest holders based on each party’s relative economic ownership interest in FAH, LLC.

1 unchanged sentence

owned 55.3 million, 53.0 million and 50.5 million of FAH, LLC common units, respectively, representing a 99.7 %, 97.2 % and 94.9 % economic ownership interest in FAH, LLC, respectively.

Net loss and comprehensive (loss) income of FAH, LLC excludes certain activity attributable to Funko, Inc., including $ 13.6 million, $ 10.5 million and $ 16.6 million of equity-based compensation expense for share-based compensation awards issued by Funko, Inc.

for the years ended December 31, 2024, 2023 and 2022, respectively, and $ 0.1 million of income tax expense, $ 128.7 million income tax expense and $ 20.5 million of income tax benefit for corporate, federal, state and local taxes attributable to Funko, Inc.

Net loss and comprehensive loss of FAH, LLC excludes certain activity attributable to Funko, Inc., including $ 11.5 million, $ 13.6 million and $ 10.5 million of equity-based compensation expense for share-based compensation awards issued by Funko, Inc.

for the years ended December 31, 2025, 2024 and 2023, respectively, and $ 0.0 million, $ 0.1 million and $ 128.7 million of income tax expense for corporate, federal, state and local taxes attributable to Funko, Inc.

for the years ended December 31, 2025, 2024 and 2023, respectively.

(Loss) Earnings per Share

Loss per Share

Basic and Diluted Loss per Share

4 unchanged sentences

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted loss per share of Class A common stock:

Year Ended December 31, 2024 Year Ended December 31, 2023 Year Ended December 31, 2022

Year ended December 31,

2025 2024 2023

(in thousands, except per share data)

12 unchanged sentences

Loss per share of Class A common stock — diluted $ ( 1.24 ) $ ( 0.28 ) $ ( 3.19 )

For the years ended December 31, 2024, 2023 and 2022 an aggregate of 6.3 million, 9.9 million and 11.6 million of potentially dilutive securities, respectively, were excluded from the weighted-average in the computation of diluted (loss) earnings per share of Class A common stock because the effect would have been anti-dilutive.

For the years ended December 31, 2025, 2024 and 2023 an aggregate of 6.2 million, 6.3 million and 9.9 million of potentially dilutive securities, respectively, were excluded from the weighted-average in the computation of diluted loss per share of Class A common stock because the effect would have been anti-dilutive.

For the years ended December 31, 2025, 2024 and 2023 anti-dilutive securities included 0.8 million, 2.0 million and 4.0 million of common units of FAH, LLC that are convertible into Class A common stock, but were excluded from the computations of diluted loss per share because the effect would have been anti-dilutive under the if-converted method.

13 unchanged sentences

Tax receivable agreement liability adjustment 427 ( 547 ) 100,223

Equity in net income (loss) of subsidiaries ( 186 ) ( 114,697 ) ( 8,040 )

Equity in net loss of subsidiaries ( 56,153 ) ( 186 ) ( 114,697 )

Loss before income taxes ( 67,360 ) ( 14,775 ) ( 25,381 )

3 unchanged sentences

Condensed Financial Information of Registrant (continued)

CONDENSED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(PARENT COMPANY ONLY)

3 unchanged sentences

Net loss $ ( 67,360 ) $ ( 14,718 ) $ ( 154,079 )

Other comprehensive (loss) income:

Other comprehensive income (loss):

Foreign currency translation (loss) gain, net of tax effect of $ 0 , $ 0 and $( 770 ) for the years ended December 31, 2025, 2024 and 2023, respectively

17 unchanged sentences

Current portion of liabilities under tax receivable agreement $ 120 $ 547

Accrued expenses and other current liabilities — 370

Total current liabilities 120 547

6 unchanged sentences

Additional paid-in-capital 357,330 343,472

Accumulated other comprehensive loss ( 1,676 ) ( 180 )

Accumulated other comprehensive income (loss) 4,621 ( 1,676 )

Accumulated deficit ( 176,142 ) ( 108,782 )

12 unchanged sentences

operating activities:

Equity in net loss (income) of subsidiaries 186 114,697 8,040

Equity in net loss of subsidiaries 56,153 186 114,697

Equity-based compensation 11,536 13,602 10,534

Deferred tax expense (benefit) ( 57 ) 123,124 ( 17,173 )

Deferred tax (benefit) expense — ( 57 ) 123,124

Tax receivable liability adjustment ( 427 ) 547 ( 100,223 )

2 unchanged sentences

Due from related parties, net 2,121 5,778 436

Prepaid expenses and other assets — — ( 11,019 )

Income taxes payable — — ( 14,684 )

Accrued expenses and other liabilities — ( 374 ) 370

Net cash provided by (used in) operating activities 5,074 2,078 ( 19,617 )

Net cash provided by operating activities 2,023 5,074 2,078

Investing Activities

Capital contribution to FAH, LLC — — ( 73,980 )

Net cash used in investing activities — — —

Financing Activities

Tax distribution received from FAH, LLC — — 38,811

Tax receivable agreement payments — ( 8,960 ) ( 4 )

Proceeds from exercise of equity-based options 227 1,410 749

Net cash (used in) provided by financing activities ( 7,550 ) 745 32,565

Other ( 22 ) — —

Net cash provided by (used in) financing activities 205 ( 7,550 ) 745

Net change in cash and cash equivalents 2,228 ( 2,476 ) 2,823

2 unchanged sentences

Supplemental Cash Flow Information

Income tax payments $ — $ — $ 18,999

Establishment of liabilities under tax receivable agreement — 547 —

Issuance of equity instruments for acquisitions — — 1,487

See accompanying notes to condensed financial information.

19 unchanged sentences

An intercompany receivable was owed to the Parent Company by FAH, LLC of $ 110.9 million and $ 113.0 million as of December 31, 2025 and 2024, respectively.

On May 3, 2022, the Parent Company entered into a common unit subscription agreement with FAH, LLC pursuant to which the Parent Company purchased 4,251,701 newly issued common units in exchange for a capital contribution of approximately $ 74.0 million (the “Capital Contribution”).

Following the Capital Contribution, (i) the common units of FAH, LLC were recapitalized through a reverse unit split in order to maintain a one -to-one ratio between the number of common units owned by the Parent Company and the number of outstanding shares of Class A common stock in accordance with the FAH LLC Agreement, and (ii) approximately 0.9 million outstanding shares of Class B common stock were cancelled.

Related party amounts that were not eliminated in the consolidated financial statements include the Parent Company's liabilities under the tax receivable agreement, which totaled $ 0.1 million and $ 0.5 million as of December 31, 2025 and 2024, respectively.

11 unchanged sentences

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

The information required by this Item 9 was previously reported in the Company's Current Report on Form 8-K that was filed with the Securities and Exchange Commission on April 12, 2024, as amended on May 9, 2024.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data