Annual report [Section 13 and 15(d), not S-K Item 405]

Segment Reporting

v3.25.1
Segment Reporting
 12 Months Ended
Dec. 31, 2024
Segment Reporting [Abstract]  
Segment Reporting

Note 21: Segment Reporting

 

ASC Topic 280 Segment Reporting establishes standards for companies to report in their financial statement information about operating segments, products, services, geographic areas, and major customers. Operating segments are defined as components of an enterprise that engage in business activities from which it may recognize revenues and incur expenses, and for which separate financial information is available that is regularly evaluated by the Company’s chief operating decision maker, or group, in deciding how to allocate resources and assess performance.

 

The Company’s CODM uses revenue and net income (loss) to evaluate the profitability and performance of each operating segment. The CODM does not evaluate the operating segments using asset information and it is therefore not disclosed. Segment operating expenses include operating expenses directly attributable to the segment as well as certain shared corporate administration services and other costs which are allocated to the reportable segments, such as legal expenses, human resources expenses, accounting expenses, insurance expenses, and corporate facilities expenses. Segment operating expenses exclude certain non-recurring items and other costs, such as interest expense, interest income, share-based compensation expense and taxes. Our CODM evaluates the performance of each reportable segment based on segment operating income (loss) because it provides insight to operational leverage and other operational metrics for each segment.

 

The Company has identified two operating segments based on the nature of the products and services offered:

 

Content Production and Distribution segment includes the operations of Kartoon Studios, Inc, Mainframe Studios, and Frederator Studios. These entities are aggregated due to their similar economic characteristics, nature of products and services, production processes, customer types, and distribution methods. This segment is focused on the creation, production, and distribution of animated and live-action content, as well as licensing and royalty revenue from intellectual property.

 

Media Advisory and Advertising Services segment includes The Beacon Media Group and The Beacon Communications Group. These entities provide media advisory and advertising services and marketing services.

 

The CEO (CODM) primarily reviews revenue and net operating results, as allocated based on the nature of the business activity.

 

The following table presents the revenue and net income (loss) within the Company’s two operating segments (in thousands):

               
    Year Ended December 31,  
    2024     2023  
Total Revenues:                
Content Production and Distribution   $ 27,755     $ 39,146  
Media Advisory and Advertising Services     4,836       4,939  
Total Revenues   $ 32,591     $ 44,085  
                 
Net Loss:                
Content Production and Distribution   $ (21,160 )   $ (76,004 )
Media Advisory and Advertising Services     421       (1,099 )
Total Net Loss Attributable to Kartoon Studios, Inc   $ (20,739 )   $ (77,103 )

 

Geographic Information

The following table provides information about disaggregated revenue by geographic area (in thousands):

               
    Year Ended December 31,  
    2024     2023  
Total Revenues:                
United States   $ 17,805     $ 26,833  
Canada     5,769       7,957  
United Kingdom     8,637       8,650  
Other     380       645  
Total Revenues   $ 32,591     $ 44,085  

 

Additional considerations include the use of segment-level budgets and forecasts created by Mainframe Studios, Frederator and Kartoon Studios at the entity level. The additional financial information prepared by the segment managers is discussed at length in meetings with the CODM. The Company determines that the revenue information reviewed by the CODM, combined with the financial information discussed with the segment managers is sufficiently detailed to allow the CODM to assess each component’s performance and make resource allocation decisions. Kartoon Studios, Frederator and Mainframe Studios are separate entities although according to ASC 280-10-50-11 all criteria are met in order to present result in aggregation.

 

When evaluating the Company’s performance and making key decisions regarding resource allocation, the CODM reviews several metrics included in net income or loss, which also include the following:

Segment allocations

    December 31, 2024  
    Content Production and Distribution     Media Advisory and Advertising     Total  
                   
Revenue   $ 27,755     $ 4,836     $ 32,591  
                         
Less Operating Expenses:                        
Selling, Marketing and Direct Operating Costs     24,103       274       24,377  
General and Administrative Expenses     16,351       4,868       21,219  
Other Expenses     –       3       3  
Segment results:   $ (12,699 )   $ (309 )   $ (13,008 )
                         
Reconciliation of net (loss) income:                        
Depreciation Expense   $ 3,120     $ 199     $ 3,319  
Interest Expense     778       1       779  
Stock Based Compensation     669       –       669  
Tax provision     19       (62 )     (43 )
Other     4,077       (868 )     3,209  
Net Loss Attributable to Non-Controlling Interests     (202 )     –       (202 )
                         
Net Income (Loss)   $ (21,160 )   $ 421     $ (20,739 )

 

    December 31, 2023  
    Content Production and Distribution     Media Advisory and Advertising     Total  
                   
Revenue   $ 39,141     $ 4,944     $ 44,085  
                         
Less Operating Expenses:                        
Selling, Marketing and Direct Operating Costs     42,845       206       43,051  
General and Administrative Expenses     22,738       5,420       28,158  
Other Expenses     –       –       –  
Segment results:   $ (26,442 )   $ (682 )   $ (27,124 )
                         
Reconciliation of net (loss) income:                        
Depreciation Expense   $ 4,281     $ 214     $ 4,495  
Interest Expense     3,117       9       3,126  
Stock Based Compensation     2,671       –       2,671  
Tax provision     (973 )     –       (973 )
Other     40,573       186       40,759  
Net Loss Attributable to Non-Controlling Interests     (99 )     –       (99 )
                         
Net Income (Loss)   $ (76,012 )   $ (1,091 )   $ (77,103 )

 

All other segment items included in net income or loss are reported on the consolidated statements of operations and described within their respective disclosures.