<SEC-DOCUMENT>0001193125-19-144229.txt : 20190619
<SEC-HEADER>0001193125-19-144229.hdr.sgml : 20190619
<ACCEPTANCE-DATETIME>20190510160555
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0001193125-19-144229
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20190510

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			Funko, Inc.
		CENTRAL INDEX KEY:			0001704711
		STANDARD INDUSTRIAL CLASSIFICATION:	GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES) [3944]
		IRS NUMBER:				000000000
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		2802 WETMORE AVE
		CITY:			EVERETT
		STATE:			WA
		ZIP:			98201
		BUSINESS PHONE:		425-783-3616

	MAIL ADDRESS:	
		STREET 1:		2802 WETMORE AVE
		CITY:			EVERETT
		STATE:			WA
		ZIP:			98201
</SEC-HEADER>
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<TYPE>CORRESP
<SEQUENCE>1
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<TITLE>Response Letter</TITLE>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">May&nbsp;10, 2019 </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>VIA EDGAR SUBMISSION </B></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Aamira Chaudhry </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Division of Corporation Finance </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Office of Consumer Products </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Securities and Exchange Commission </P> <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">100 F Street, N.E. </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Washington, D.C. 20549 </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="5%" VALIGN="top" ALIGN="left"><B>Re:</B></TD>
<TD ALIGN="left" VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman; " ALIGN="left"><B>Funko, Inc. </B></P></TD></TR></TABLE>
<P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:13%; font-size:10pt; font-family:Times New Roman"><B>Form <FONT STYLE="white-space:nowrap">10-K</FONT> for Fiscal Year Ended December&nbsp;31, 2018 </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:13%; font-size:10pt; font-family:Times New Roman"><B>Filed March&nbsp;6, 2019 </B></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; margin-left:13%; font-size:10pt; font-family:Times New Roman"><B>File <FONT STYLE="white-space:nowrap">No.&nbsp;001-38274</FONT> </B></P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">Dear Ms.&nbsp;Chaudhry: </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Funko, Inc. (the
&#147;Company&#148;) is pleased to respond to the comment of the staff (the &#147;Staff&#148;) of the Securities and Exchange Commission (the &#147;Commission&#148;) contained in your letter dated May&nbsp;6, 2019. For ease of reference, the comment
is repeated in italics below and followed by the Company&#146;s response. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Form <FONT STYLE="white-space:nowrap">10-K</FONT> for the Fiscal Year Ended
December&nbsp;31, 2018 </U></P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</U> </P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U><FONT STYLE="white-space:nowrap">Non-GAAP</FONT> Financial Measures, page 71 </U></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B><I>1.</I></B></TD>
<TD ALIGN="left" VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman; " ALIGN="left"><B><I>The presentation of &#147;adjusted pro forma net income&#148; on page 72 does not appear to be presented
in accordance with the pro forma requirements of Article 11 of Regulation <FONT STYLE="white-space:nowrap">S-X.</FONT> Accordingly, please remove &#147;pro forma&#148; from the description of this measure. </I></B></P></TD></TR></TABLE>
<P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>RESPONSE </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The Company respectfully acknowledges the
Staff&#146;s comment and advises the Staff that it will remove &#147;pro forma&#148; from the description of the current <FONT STYLE="white-space:nowrap">non-GAAP</FONT> measure &#147;adjusted pro forma net income&#148; in future filings with the
Commission. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Liquidity and Capital Resources </U></P>
<P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Operating Activities, page 75 </U></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%">&nbsp;</TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B><I>2.</I></B></TD>
<TD ALIGN="left" VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman; " ALIGN="left"><B><I>Your analysis of changes in net cash provided by operating activities cites <FONT
STYLE="white-space:nowrap">non-cash</FONT> items and changes in net income, which is on the accrual basis, as material factors. Please revise your analysis to focus on factors that actually impact cash. Refer to section IV.B.1 of SEC Release <FONT
STYLE="white-space:nowrap">No.&nbsp;33-8350</FONT> for guidance. </I></B></P></TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>RESPONSE </B></P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The Company respectfully acknowledges the Staff&#146;s comment and advises the Staff that it will revise its future analysis of changes in net cash provided by
operating activities to focus on factors that actually impact cash, as opposed to discussing <FONT STYLE="white-space:nowrap">non-cash</FONT> items and changes in net income. Please see the following example of the type of disclosure regarding the
net change in cash provided by operating activities that we would provide in future periods: </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">Net cash provided by operating activities was
$[&#9679;] million for the year ended December&nbsp;31, 20[&#9679;], compared to $[&#9679;] million for the year ended December&nbsp;31, 20[&#9679;]. Changes in net cash provided by (used in) operating activities result primarily from cash received
from net sales and cash payments for product costs and royalty expenses paid to our licensors. Other drivers of the changes in net cash provided by </P>
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operating activities include shipping and freight costs, selling, general and administrative expenses (including personnel expenses and commissions and rent and facilities costs) and interest
payments made for our short-term borrowings and long-term debt. Our accounts receivable typically are short term and settle in approximately 30 to 90 days. </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The increase for the year ended December&nbsp;31, 20[&#9679;] compared to the year ended December&nbsp;31, 20[&#9679;] was primarily due to an
increase in net income, excluding <FONT STYLE="white-space:nowrap">non-cash</FONT> adjustments, of $[&#9679;] million, driven primarily by an increase in net sales and a decrease in interest expense, net (excluding the effect of a $[&#9679;] million
decrease in <FONT STYLE="white-space:nowrap">non-cash</FONT> adjustments related to accretion of discount on long-term debt and amortization of debt issuance costs), primarily offset by an increase in cost of sales (exclusive of depreciation and
amortization) and selling, general and administrative expenses. The increase in net cash provided by operating activities was also partially offset by a decrease in the changes in working capital. Changes in working capital reduced net cash provided
by operating activities by $[&#9679;] million and were primarily due to a decrease in accounts payable of $[&#9679;] million and an increase in accounts receivable of $[&#9679;] million, partially offset by increases in prepaid expenses and other
assets, accrued royalties and inventory of $[&#9679;] million, $[&#9679;] million and $[&#9679;] million, respectively. </P> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><U>Notes to the Consolidated
Financial Statements, page 91 </U></P> <P STYLE="font-size:6pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P>
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<TD WIDTH="4%" VALIGN="top" ALIGN="left"><B><I>3.</I></B></TD>
<TD ALIGN="left" VALIGN="top"> <P STYLE=" margin-top:0pt ; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman; " ALIGN="left"><B><I>In view of the risk factor disclosed on page 43 in regard to your status as a holding company and that
you have no independent means of generating revenue or cash flow, and your ability to pay dividends in the future, if any, is dependent upon the financial results and cash flows of FAH, LLC and its subsidiaries and distributions you receive from
FAH, LLC, please explain to us your consideration of Rules <FONT STYLE="white-space:nowrap">4-08(e),</FONT> 5.04(c) Schedule I and <FONT STYLE="white-space:nowrap">12-04</FONT> of Regulation <FONT STYLE="white-space:nowrap">S-X.</FONT>
</I></B></P></TD></TR></TABLE> <P STYLE="margin-top:18pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman"><B>RESPONSE </B></P> <P STYLE="margin-top:6pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The Company
respectfully acknowledges the Staff&#146;s comment and advises the Staff that for the year ended December&nbsp;31, 2018 and at the time of filing the Form <FONT STYLE="white-space:nowrap">10-K</FONT> on March&nbsp;6, 2019, the Company qualified as a
&#147;smaller reporting company&#148; as defined in Rule <FONT STYLE="white-space:nowrap">12b-2</FONT> of the Securities Exchange Act of 1934, as amended. In accordance with Article 8 of Regulation <FONT STYLE="white-space:nowrap">S-X</FONT> and the
Staff&#146;s guidance in Section&nbsp;5350 of the Financial Reporting Manual, the requirements of Rules <FONT STYLE="white-space:nowrap">4-08(e),</FONT> 5.04(c) Schedule I and <FONT STYLE="white-space:nowrap">12-04</FONT> of Regulation <FONT
STYLE="white-space:nowrap">S-X</FONT> are not applicable to smaller reporting companies. Therefore, the Company believed that these requirements were not applicable to the Company&#146;s Form <FONT STYLE="white-space:nowrap">10-K</FONT> for the year
ended December&nbsp;31, 2018. </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The Company nonetheless has reviewed the Staff&#146;s further guidance in Section&nbsp;5350 of the Financial Reporting
Manual, which provides that: </P> <P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">&#147;[W]hen the restricted net assets of a smaller reporting company&#146;s consolidated subsidiaries are a
significant proportion of consolidated net assets (not necessarily applying the 25% threshold test) as of the most recently completed fiscal year end, the amount and nature of those restrictions may be important to understanding the smaller
reporting company&#146;s liquidity and its ability to pay interest and principal on debt or dividends. In these circumstances, the smaller reporting company should fully discuss, in MD&amp;A, the nature of the restrictions on its subsidiaries net
assets, the amount of those net assets, and the potential impact on the company&#146;s liquidity (see <FONT STYLE="white-space:nowrap">S-K</FONT> 303(a) and Instruction 5). Disclosures within MD&amp;A similar to the parent company condensed
financial information specified by <FONT STYLE="white-space:nowrap">S-X</FONT> <FONT STYLE="white-space:nowrap">5-04</FONT> and <FONT STYLE="white-space:nowrap">4-08(e)</FONT> may be necessary to facilitate this discussion.&#148; </P>
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 <P STYLE="margin-top:0pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">In light of this guidance, the Company will prepare its future filings with the Commission to include
additional discussion in the liquidity and capital resources section for the areas discussed in the Staff&#146;s guidance outlined above. In future filings, the Company intends to include disclosure substantially similar to the following: </P>
<P STYLE="margin-top:6pt; margin-bottom:0pt; margin-left:8%; font-size:10pt; font-family:Times New Roman">The New Credit Facilities are secured by substantially all assets of the Borrowers and any of their existing or future material domestic
subsidiaries, subject to customary exceptions. We are a holding company with no material assets and we do not conduct any business operations of our own. We have no independent means of generating revenue or cash flow, and our ability to pay
dividends in the future, if any, is dependent upon the financial results and cash flows of FAH, LLC and its subsidiaries and distributions we receive from FAH, LLC. Under the terms of the New Credit Facilities, our operating subsidiaries are
currently limited in their ability to pay cash dividends to the Company, subject to certain customary exceptions, including the ability to pay, so long as there is no current or ongoing event of default, amounts required to be paid under the Tax
Receivable Agreement, certain expenses associated with being a public company and reimbursement of expenses required by the LLC Agreement or the Registration Rights Agreement, as well as to make other distributions of up to $10&nbsp;million during
any period of four fiscal quarters to pay dividends to the common unit holders of FAH, LLC (including the Company) as long as the funds received by the Company are used to pay dividends to the Company&#146;s stockholders, the Leverage Ratio (as
defined in the New Credit Facilities) is not in excess of 2.00:1.00 and there is remaining Availability (as defined in the New Credit Facilities) under the New Credit Facilities of at least $25&nbsp;million. We expect these limitations to continue
in the future under the terms of the New Credit Facilities and that they may continue under the terms of any future credit agreement or any future debt or preferred equity securities of ours or of our subsidiaries. </P>
<P STYLE="margin-top:12pt; margin-bottom:0pt; font-size:10pt; font-family:Times New Roman">The Company further advises the Staff that, to the extent that the Company does not qualify as a smaller reporting company in future periods, the
Company&#146;s filings with the Commission will comply with the requirements of Rules <FONT STYLE="white-space:nowrap">4-08(e),</FONT> 5.04(c) Schedule I and <FONT STYLE="white-space:nowrap">12-04</FONT> of Regulation
<FONT STYLE="white-space:nowrap">S-X.</FONT> </P> <P STYLE="margin-top:12pt; margin-bottom:0pt; text-indent:8%; font-size:10pt; font-family:Times New Roman">Please do not hesitate to telephone the undersigned at <FONT STYLE="white-space:nowrap"><FONT
STYLE="white-space:nowrap">425-261-0440</FONT></FONT> if you have any questions regarding this response letter. </P> <P STYLE="font-size:12pt;margin-top:0pt;margin-bottom:0pt">&nbsp;</P><DIV ALIGN="right">
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<TD VALIGN="top">Very truly yours,</TD></TR>
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<TD HEIGHT="16"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-top:0pt; margin-bottom:1pt; border-bottom:1px solid #000000; font-size:10pt; font-family:Times New Roman">/s/ Russell Nickel</P></TD></TR>
<TR STYLE="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Russell Nickel</TD></TR>
<TR STYLE="page-break-inside:avoid ; font-family:Times New Roman; font-size:10pt">
<TD VALIGN="top">Chief Financial Officer</TD></TR>
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