PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this Prospectus. This summary does not contain all of the information you should
consider before investing in our Class B common stock. You should read this entire prospectus carefully, especially the “Risk Factors”
section of this Prospectus and the financial statements and related notes appearing at the end of this Prospectus before making an investment
decision.
Unless
the context provides otherwise, all references in this Prospectus to “IDW” “we,” “us,” “our,”
“our company,” the “Company,” or similar terms, refer to IDW Media Holdings, Inc. and its wholly owned subsidiaries
on a consolidated basis.
Overview
IDW
Media Holdings, Inc., a Delaware corporation, is a holding company consisting of the following principal businesses:
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IDW
Publishing, or IDWP, creates comic books, graphic novels, digital content and games through its imprints IDW Publishing, IDW Games
and Top Shelf; and
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IDW
Entertainment, or IDWE, leverages properties, primarily from IDWP, into television series developing, producing and distributing
original content worldwide.
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IDWP
is an award-winning publisher of comic books, original graphic novels, and art books as well as board and tabletop games. Founded in
1999, IDWP has a long tradition of supporting original, creator-driven titles. In 2002, IDWP published 30 Days of Night by Steve
Niles and Ben Templesmith followed by other horror titles that kickstarted a resurgence in horror-comic publishing across the industry.
Since then, IDWP has significantly diversified its publications. Joe Hill and Gabriel Rodríguez’s Locke & Key,
Jonathan Maberry’s V Wars, Stan Sakai’s Usagi Yojimbo, Walter Simonson’s Ragnarök, Beau Smith’s
Wynonna Earp, Chris Ryall and Ashley Wood’s Zombies vs Robots, Joe Hill and Martin Simmonds’ Dying is Easy
are among the hundreds of award-winning titles published since IDWP’s inception.
IDWE
is a production company and studio that develops and produces content and formats for global platforms and services.
IDW
Publishing
In
January 2020, IDWP and the Smithsonian Institution announced a multi-year global publishing program, which will create
a library of graphic novels built on the cultural and scientific knowledge of the world’s largest museum, educational, and research
complex. The first product in the Smithsonian line was released in late November 2020 with an additional five titles scheduled for release
in 2021.
In
2020, IDWP also announced a Spanish language initiative to bring graphic novels to Spanish speakers throughout North America. To launch
the initiative, in June 2020 IDWP released a Spanish translation of George Takei’s best-selling memoir, They Called Us Enemy,
which had been named the best graphic novel of 2019 by the Publisher’s Weekly Critics Poll, and which also won
a 2020 Will Eisner Comic Industry Award for best reality-based work. 2020 Spanish translations included Sonic the Hedgehog and
Redbone, with Locke & Key and additional Sonic the Hedgehog translations scheduled for 2021.
In
March 2020, IDW Games, a division of IDWP, closed a Kickstarter campaign for Batman: The Animated Series Adventures at over $1.6
million. The game is scheduled for release in Summer 2021.
In
October 2020, IDWP released the first issue of the long-anticipated Teenage Mutant Ninja Turtles: The Last Ronin series
by creator Kevin Eastman. The second issue and a Director’s Cut were released in February and March 2021, respectively, with issues
three through five scheduled for release later in 2021.
IDWP
has also announced the Star Wars: The High Republic Adventures series with the first issue released in February 2021 and
additional issues released monthly throughout 2021.
IDW
Entertainment
IDWE
has developed and/or produced four series for television that premiered in 2019 and 2020:
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Wynonna
Earp season four aired in two parts due to worldwide COVID-19 related production shutdowns. The first six episodes
of season four premiered July 26, 2020 and the second half of season four began airing on March 5, 2021. The show was created
by Emily Andras and stars Melanie Scrofano and is based on the IDWP comics of Beau Smith. Season four’s twelve episodes are
being produced by Seven24 Films and distributed by IDWE, in partnership with Syfy and CTV Sci-Fi. Cineflix Studios is the co-producer
and global distributor for the series. Season one’s thirteen episodes aired in fiscal 2016. Season two’s twelve episodes
aired in fiscal 2017, and Season three’s twelve episodes aired in fiscal 2018.
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V
Wars, debuted on Netflix on December 5, 2019. The 10-episode vampire thriller stars Ian Somerhalder and was produced by High
Park Entertainment. The series is based upon Jonathan Maberry’s IDWP comic book series of the same name.
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October
Faction premiered on Netflix January 23, 2020. The 10-episode show is based on the IDWP comic books of Steve Niles and Damien
Worm and was adapted by showrunner Damian Kindler and starred Tamara Taylor and J.C. MacKenzie. It was also produced by High Park
Entertainment.
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Locke
& Key premiered on Netflix on February 7, 2020. The show is based on the critically acclaimed graphic novels of Joe
Hill and Gabriel Rodriguez that are published by IDWP. Seasons two and three have been ordered by Netflix and production began in
September 2020.
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CTM
As
a result of the economic downturn related to the COVID-19 pandemic, and the impact it had on the travel and tourist markets, we decided
to make a strategic shift to sell our CTM Media Group, Inc., or CTM, subsidiary and focus on our entertainment and publishing business.
In February 2021, we consummated the sale of CTM to The Brochure Distribution Trust, a South Dakota trust (the assignee of Howard S.
Jonas, our Chairman of the Board). The purchase price was (i) the cancelation of $3.75 million of indebtedness owed to Mr. Jonas (and
assigned by Mr. Jonas to the trust) by us, (ii) a contingent payment of up to $3.25 million based upon a recovery of quarterly revenues
of CTM to 90% of its fiscal 2019 levels during the 18-month period following the closing of the CTM Sale, and (iii) a contingent payment
if CTM is sold within 36 months from closing of the CTM Sale for more than $4.5 million.
Our
Strategy
We
seek to improve our financial performance primarily by focusing on development of entertainment that can generate value across our intellectual
property (“IP”) holdings and to increase coordination between IDWP and IDWE to enhance our development pipeline. IDWP and
IDWE intend to jointly and synergistically develop and produce books and entertainment to allow us to capitalize on the global demand
for original content from streaming services as well as traditional broadcast and other networks and other content services. To date,
we have sold projects to Hulu, Syfy, BBC America, Netflix and Endeavor Content, while others are in active discussion. We believe that
our potential projects would be attractive to a broad range of potential distribution channels and participants.
IDW’s
IP, where we own “all rights”, affords the Company significant production-based fees supplemented by merchandising, games,
video and other fandom-driven revenue opportunities.
As
we have a diverse slate of content, we plan to develop new editorial directives to better suit the ever-changing needs of the publishing
world. We have spent considerable time and financial resources in identifying and cultivating new audiences, additional markets, and
interesting new channels of distribution. We plan to expand and implement our mission of creating, marketing, and releasing captivating
new comic books and graphic novels to the world.
We
continue to seek prospective upside from potential renewals of IDWE’s current line-up, from previously announced deals with Cineflix
and SyFy for distribution of Wynonna Earp and renewal of seasons 2 and 3 of Locke & Key to new deals that IDWE is developing
from IDWP’s growing library of content, where we have media and ancillary rights. We believe that our focus on monetization through
merchandising, games, video on demand, and other fandom-driven channels coupled with the demand from streaming networks for fresh, innovative
shows provides us with a tremendous market opportunity. We believe that our IP portfolio, strong relationships with renowned creators
and holistic approach to development strategically positions us for both near and long-term growth.
Our
Capital Stock
Holders
of shares of Class B common stock are entitled to one-tenth of one vote for each share on all matters to be voted on by the stockholders.
Holders of Class B common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Board
of Directors in its discretion from funds legally available therefor. There are no conversion or redemption rights or sinking fund provisions
with respect to the Class B common stock.
The
Company also has issued and outstanding shares of Class C common stock. Holders of shares of Class C common stock are entitled to three
votes for each share on all matters to be voted on by the stockholders. Holders of Class C common stock are entitled to share ratably
in dividends, if any, as may be declared from time to time by the Board of Directors in its discretion from funds legally available therefor.
Each share of Class C common stock may be converted, at any time and at the option of the holder thereof, into one fully paid and non-assessable
share of Class B common stock, which would cause dilution to the holders of Class B common stock. There are no mandatory conversion rights
for our Class C common stock. There are no sunset provisions or intra-family transfers that would require the conversion of our Class
C common stock.
SUMMARY
OF THE OFFERING
The
following summary of the offering contains basic information about the offering and our Class B common stock and is not intended to be
complete. It does not contain all the information that may be is important to you. For a more complete understanding of our Class B common
stock, please refer to the section of this Prospectus entitled “Description of Capital Stock” on page 60.
Issuer:
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IDW Media Holdings, Inc.
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Securities Offered:
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_______ shares of Class B common stock, at an assumed public offering price of $_____ per share of Class B common stock.
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Over-allotment option:
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We have granted to the representative of the underwriters a 45-day option to purchase up to _______ additional shares of our Class B common stock at the per share public offering price, less the underwriting discounts payable by us, in any combination solely to cover over-allotments, if any (the “Over-Allotment Option”).
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Class B common stock outstanding before this offering:
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9,514,080
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Class B common stock to be outstanding immediately after this offering:
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_______
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The above does not include, as of June 30, 2021, the following:
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up to 327,737 shares of Class B common stock issuable upon the exercise of outstanding options under our 2009 Stock Option and Incentive Plan and our 2019 Stock Option and Incentive Plan (the “2019 Plan”), with a weighted average exercise price of $6.44 per share;
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up to 89,243 shares of Class B common stock at a price per share of $42.02 and up to 98,336 shares of Class B common stock at a price per share of $26.44 issuable upon exercise of outstanding warrants;
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261,483 shares of Class B common stock reserved for future issuance under the 2019 Plan;
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up to 545,360 shares of Class B common stock upon conversion of the outstanding shares of Class C common stock, which are convertible into shares of our Class B common stock on a 1-for-1 basis; and
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up to _________ shares of Class B common stock issued pursuant to the Over-Allotment Option.
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Use of proceeds:
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We estimate that the net proceeds to us from this offering will be approximately $_____ million, or approximately $_____ million if the underwriters exercise their over-allotment option in full, assuming an offering price of $____ per share, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
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We intend to use the net proceeds of this offering primarily for general corporate purposes, including development of original IP, talent and technology investments, as well as potential acquisitions.
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Risk Factors:
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Investing in
our Class B common stock is highly speculative and involves a high degree of risk. You should carefully consider the information
set forth in this Prospectus and, in particular, the specific factors set forth in the “Risk Factors” section
beginning on page 6 of this Prospectus before deciding whether or not to invest in our common stock.
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OTC Ticker Symbol:
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IDWM
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Proposed NYSE American Listing:
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We intend to
apply for listing of our Class B common stock on the NYSE American and have reserved the symbol “IDW.”
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Lock-Up:
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We, our directors,
executive officers, and certain of our stockholders affiliated with our directors and executive officers will agree with the underwriters
not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our Common Stock or securities convertible
into Common Stock, subject to certain exceptions, for a period of 180 days, commencing on the date of this prospectus. See “Underwriting”
for additional information.
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Business
Address and Telephone Number
Our
address is 520 Broad Street, Newark, New Jersey 07102, and our telephone number at such address is (973) 438-3385.
RISK
FACTORS
Investing
in our Class B common stock involves a high degree of risk. You should carefully consider the following information about these risks,
together with the other information appearing elsewhere in this Prospectus, including our consolidated financial statements, the notes
thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”
before deciding to invest in our Class B common stock. The occurrence of any of the following risks could have a material and adverse
effect on our business, reputation, financial condition, results of operations and future growth prospects, as well as our ability to
accomplish our strategic objectives. As a result, the trading price of our Class B common stock could decline and you could lose all
or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also
impair our business operations and the trading price of our Class B common stock. Certain statements contained in this section constitute
forward-looking statements. See the information included in “Cautionary Note Regarding Forward-Looking Statements.”
Risks
Associated with Our Business
Public
health threats could have an adverse effect on the Company’s operations and financial results.
In
early 2020, the spread of the COVID-19 virus resulted in a worldwide pandemic. We are actively monitoring the COVID-19 pandemic, the
restrictive measures imposed to combat its spread and their potential and actual impact on each of our operating segments. While we believe
that, in 2021, there has been significant improvement due to global and domestic vaccination efforts, we cannot predict the ongoing impact,
if any, of COVID-19 related to both known and unknown risks, including future quarantines, closures and other restrictions resulting
from the outbreak, and our operations and our customers and partners may continue to be impacted.
In
February 2021, due to the impact of the COVID-19 pandemic on the travel and tourism markets, we sold CTM. CTM had substantially
suspended operations in March 2020 as key clients closed and tourism halted in key markets and gradually resumed partial operation since
June 2020 in accordance with and as permitted by state and local COVID-19 regulations. In March 2020, CTM furloughed all non-essential
personnel, approximately 90% of its workforce, and has gradually been growing its active personnel roster as needed in its resumption
of operations.
In
April 2020, as a result of the COVID-19 pandemic, IDWP’s direct-market distributor paused the release of new product, including
IDWP’s; the direct-market distributor’s operations resumed in a limited capacity in late May 2020 and continue at an increasing
rate as of the date of this Prospectus, and IDWP’s products have resumed being distributed. Many retailers experienced closures,
reduced operations, or de-prioritization of entertainment products, such as books and games, throughout the COVID-19 pandemic resulting
in decreased sales of certain of IDWP’s products. Additional closures, restrictions, or virus spikes could have a further negative
impact on IDWP’s distribution channels and retail customers. We are unable to accurately predict the full impact that the COVID-19
pandemic will have on distributions, purchasing, sales, returns, cash receipts and overall revenue.
The
COVID-19 pandemic resulted in the production of television shows being periodically suspended depending on local governmental authorities
and regulatory requirements in place at any given time. Due to various uncertainties, including the ultimate geographic spread of
the virus, the rise of variants that may occur, the severity of the disease, the duration of the outbreak, and actions that may be taken
by governmental authorities, further production risks could arise.
For
all these reasons, the COVID-19 pandemic could have a material adverse impact on our business and financial results.
We
have a history of continued operating losses at IDWE and IDWP and cannot be certain of our future profitability.
We
had accumulated a net deficit through October 31, 2020 of approximately $92.0 million. Prior to the CTM Sale, which closed
on February 15, 2021, and until the start of the COVID-19 pandemic in April 2020, we often used cash flows from CTM to partially provide
funding for corporate overhead and for our IDWP and IDWE operations. In Fiscal 2020 IDW Media Holdings and IDWP generated positive cash
flow of $8.0 million and $795,000, respectively, while IDWE and CTM generated negative cash flow of $5.8 million and $1.0 million, respectively.
In Fiscal 2019, IDW Media Holdings and CTM generated positive cash flow of $7.2 million and $2.9 million, respectively, while IDWP and
IDWE generated negative cash flow of $1.9 million and $11.6 million, respectively.
We
expect to incur losses in the foreseeable future as we continue to seek financing for, and invest in, our IDWE and IDWP businesses and
operations. While our Chairman of the Board has previously provided us with financing on favorable terms and conditions, there is no
guarantee that we will be able to secure such financing from our Chairman of the Board in the future on favorable terms or at all. The
time required for us to become profitable is uncertain, and there can be no assurance that we will obtain the financing required or achieve
profitability on a sustained basis, if at all. We expect that our results of operations may also fluctuate significantly in the future
as a result of a variety of factors, including, without limitation: the impact of the COVID-19 pandemic, the ability to finance television
shows without great financial risks; our ability to attract, retain and motivate qualified personnel; specific economic conditions in
the entertainment and publishing markets; and general economic conditions.
Risks
Related to IDW Publishing
IDWP
depends on two main distributors for its direct market and non-direct market publications and such dependence subjects IDWP to the risk
that such distributors may be unable to perform their obligations to IDWP.
IDWP
depends on Diamond Comic Distributors, Inc., or Diamond, and Penguin Random House Publisher Services, or Penguin Random House, to distribute
the vast majority of its publications. Diamond, which handles the vast majority of all comic book publishers’ direct market (i.e.,
comic book stores) distribution, distributes all of IDWP’s products for the direct market. As a result of the COVID-19 pandemic,
IDWP offered full returns in the direct market through Diamond on comic titles through the end of February 2021 and returns are being
monitored on a month-by-month basis until the end of May 2021 when IDWP expects to return to its pre-pandemic return policy. While this
is designed to reduce inventory risk for retailers, there is a possibility the marketplace could experience an irrecoverable downward
trend that may trigger higher returns in a given month or quarter.
Penguin
Random House distributes substantially all of IDWP’s products to non-direct market account (i.e., bookstores, libraries, mass market).
Should either Diamond or Penguin Random House fail to perform under the applicable distribution agreement or if it were to experience
financial difficulties that would hinder its performance, distribution to the direct or non-direct market, respectively, would be significantly
impaired in the short term and/or long term, and IDWP’s ability to distribute and receive proceeds from its publications would
be impaired which would have a material adverse impact on our business and financial results. In the first half of 2020, due to the COVID-19
pandemic, Diamond temporarily ceased distributing IDWP’s comic books but has since resumed distribution.
The
inability or unwillingness of either Diamond or Penguin Random House to perform its distribution obligations to IDWP could have a material
adverse effect on IDWP’s business, prospects and financial condition.
The
loss of one of the two main distributors IDWP depends on for its publications could have a material adverse effect on IDWP’s business,
prospects and financial condition and the agreement with one of the two primary distributors has expired.
IDWP
depends on Diamond and Penguin Random House to distribute the vast majority of its publications. IDWP’s Supply Agreement with Diamond
has expired and the parties have been operating pursuant to the terms of the expired agreement. In the event Diamond terminates its relationship
with IDWP or the parties enter into a new agreement not on as favorable terms as the terms the parties are currently operating under,
IDWP’s business, prospects and financial condition could be materially adversely affected. The loss by IDWP of either Diamond or
Penguin Random House as a distributor of its publications could have a material adverse effect on IDWP’s business, prospects and
financial condition. The fact that the agreement with Diamond has expired may increase the risk that Diamond will cease providing distribution
services to IDWP, which could cause disruption to IDWP’s operations and have an impact on the financial and other terms under which
IDWP’s products are distributed.
IDWP
may not be able to respond to changing consumer preferences and its sales may decline.
IDWP
operates in highly competitive markets that are subject to rapid change, including changes in customer preferences. There are substantial
uncertainties associated with IDWP’s efforts to develop successful publications and products for its customers. New fads, trends,
and shifts in popular culture could affect the type of creative media consumers will purchase. Content in which IDWP has invested significant
resources may fail to attract significant consumer demand at the time it is published. IDWP regularly makes significant investments in
new products that may not be profitable, or whose profitability may be significantly lower than IDWP has experienced historically. A
loss in sales due to the foregoing could have a material adverse effect on IDWP’s business, prospects and financial condition.
Significant
returns of IDWP products sold to mass market stores may have a material impact on IDWP’s cash flow.
Through
its distribution arrangement with Penguin Random House, IDWP sells its publications to mass market bookstores, such as Barnes & Noble,
on a fully returnable basis and IDWP Games sells its products to mass market stores, such as Target. As a result, these customers can
return publications to Penguin Random House or to game distributors for credit, which in turn is charged back to IDWP. There is no time
limit on the customers’ right to return publications distributed to them. In addition to IDWP being charged back the wholesale
cost of the publications, IDWP also incurs a return processing fee by Penguin Random House. Such returns and fees are credited against
IDWP’s current sales revenue from Penguin Random House, which reduces IDWP’s cash flow and operating capital. Product returns
are a normal part of book and games publishing and IDWP estimates and records a reserve for such returns based on its return history
and current trends that are expected to continue. A significant over-estimation of demand for a publication by the mass market bookstores,
however, could result in a larger-than-expected volume of returns that would significantly reduce IDWP’s cash flows and operating
capital. Further, a general downturn in the economy may also result in significant returns as bookstores reduce their outstanding debts
to improve their own cash flow. Any or all of these events that result in significant returns in excess of IDWP’s estimates could
have a material adverse effect on IDWP’s revenue, cash flow and operating results.
IDWP’s
publications may be less successful than anticipated.
IDWP
cannot accurately predict the commercial success of any of its publications or games because the revenue derived from the distribution
of a publication or game depends primarily upon its acceptance by the public, which cannot be accurately predicted. The commercial success
of a publication also depends upon the public’s acceptance of competing publications, critical reviews, the availability of alternative
forms of entertainment and leisure time activities, piracy and unauthorized distribution of publications, general economic conditions,
and other tangible and intangible factors, none of which can be predicted with certainty. Additionally, if the movies or television programs
that IDWP licenses are not successful, or if the characters that IDWP licenses lose some of their popularity, IDWP’s ability to
sell publications based on such characters would decline, which could have a material adverse effect on IDWP’s business, prospects
and financial condition.
If
IDWP fails to maintain positive relationships with its key licensors, authors, illustrators and other creative talent, as well as to
develop relationships with new licensors and creative talent, its business could be adversely affected.
IDWP’s
business is highly dependent on maintaining strong relationships with the entertainment companies that license their entertainment properties
to IDWP, and with authors, illustrators and other creative talent who produce the products that are sold to IDWP’s customers. Any
weakening of these relationships, or the failure to develop successful new relationships, could have an adverse impact on IDWP’s
business and financial performance. IDWP depends on freelance artists who choose how to spend their time and utilize their talents. It
is important for IDWP to maintain strong relationships with those freelance artists so they devote their time and talent to IDWP’s
projects. IDWP’s inability to maintain and secure these relationships could have a material adverse effect on IDWP’s business,
prospects and financial condition
IDWP
cannot control certain publication delays and cancellations which could adversely affect IDWP’s sales and its ability to meet delivery
obligations.
IDWP
does not control the decision to proceed with the production of publications based on characters that it licenses from others, and it
does not have full control of the timing of the releases of those publications, which are often the subject to long and inflexible schedules.
Disruptions, delays or cancellations to those schedules could cause IDWP to incur additional costs, miss an anticipated publication date,
endure long periods without publishing a publication or all of the above, which could hurt IDWP’s associated licensing programs
and business.
IDWP
depends on the internal controls of its distributors for its financial reporting and revenues.
Because
of Diamond’s and Penguin Random House’s role as distributors of IDWP’s publications and the fact that much of IDWP’s
inventory is held at its distributors’ facilities, IDWP depends on the distributors to implement internal controls over financial
reporting and to provide IDWP with information related to those internal controls. Diamond’s and Penguin Random House’s internal
controls might not be sufficient to allow IDWP to meet its internal control obligations or to allow IDWP’s management to properly
assess those controls. The distributors may fail to cure any internal control deficiencies related to the publications that it distributes.
IDWP may be unable to effectively create compensating controls to detect and prevent errors or irregularities in the distributors’
accounting to IDWP and others. Errors in properly tracking publication sales could also negatively impact IDWP’s revenues.
Any
loss of key personnel and the inability to attract and retain qualified employees could have a material adverse impact on IDWP’s
operations.
IDWP
is dependent on the continued services of key executives such as Nachie Marsham. The departure of key personnel without adequate replacement
could severely disrupt IDWP’s business operations. Additionally, IDWP needs qualified managers and skilled employees with industry
experience to operate its businesses successfully. From time to time there may be shortages of skilled labor which may make it more difficult
and expensive for IDWP to attract and retain qualified employees. If IDWP is unable to attract and retain qualified individuals or its
costs to do so increase significantly, its operations would be materially adversely affected.
IDWP
might lose sales and revenue because of piracy of publications.
With
technological advances, the piracy of publications has increased. Unauthorized and pirated copies of IDWP’s publications will reduce
the revenue generated by those publications. If consumers can obtain illegal copies of IDWP’s publications and media, IDWP’s
revenues will decline. IDWP may not be able to identify or enforce violations of its intellectual property rights and even if legal remedies
are available, they could be costly and drain its financial resources. Accordingly, illegal copying of IDWP’s content could negatively
affect its revenues and earnings.
IDWP’s
dependence on printers outside the United States subjects it to the risks of international business.
IDWP’s
publications are printed primarily outside the United States in South Korea, China and Canada. International manufacturing is subject
to a number of risks, including fluctuations and volatility in currency exchange rates, transportation delays and interruptions, political
and economic disruptions, the impositions of tariffs, import and export controls and changes in governmental policies. The impact of
changes in currency rates has been especially heightened by current global economic conditions and significant devaluations of local
currencies in comparison to the U.S. Dollar. Although to date, currency fluctuations have not materially adversely affected IDWP’s
costs, such fluctuations could materially and adversely affect IDWP in the future. Further, added tariffs may be imposed on our printing
activities outside the United States which could increase IDWP’s costs. Possible increases in costs and delays of, or interferences
with, product deliveries could result in losses of revenues, higher costs, reduced profitability and reductions in the goodwill of IDWP’s
customers. Additional factors that may adversely affect IDWP’s printing activities outside of the United States and therefore materially
and adversely affect the business and financial results of IDWP include international political situations, uncertain legal systems and
applications of law, prejudice against foreigners, corrupt practices, uncertain economic policies and potential political and economic
instability that may be exacerbated in foreign countries.
The
competitive pressures IDWP faces in its business could adversely affect its financial performance and growth prospects.
IDWP
is subject to significant competition, including from other publishers, many of which are substantially larger than IDWP and have much
greater resources than it, such as Marvel Comics and DC Comics. To the extent IDWP cannot meet the challenges from existing or new competitors
or develop new product offerings to meet customer preferences or needs, its revenues and profitability could be materially and adversely
affected.
Risks
Related to IDW Entertainment
The
public health risk of COVID-19 and its impact on productions could adversely affect IDWE’s business.
Multiple
television productions of IDWE have been delayed due to the COVD-19 pandemic. Live-action shows must be filmed and shot at locations
with a sizeable crew. Given the public health risk of COVID-19 and related possible local, state and federal guidelines limiting the
filming and production of our live-action shows, IDWE could be adversely affected and experience significant production delays or cancellations.
Production costs of IDWE shows may also rise as additional safety protocols related to the COVID-19 pandemic are necessary on the set
of these shows.
Increased
costs for programming and other rights, as well as judgments we make on the potential performance of IDWE’s content, may adversely
affect IDWE’s profits and balance sheet.
IDWE
has produced a significant amount of original programming and other content and is continuing to invest in this area. IDWE’s core
business involves the development and production of television shows, the costs of which are significant and involve complex negotiations
with numerous third parties. Network buyers and larger studios are also continuing to drive up the cost of talent and in many cases,
locking them to overall deals, which leaves IDWE with less access to high-level writers at a much higher cost of entry. These higher
costs may not be recouped when the content is broadcast or distributed, and higher costs may lead to decreased profitability, losses
or potential write-downs. Unfavorable currency rates both in the production and sale of television shows may also lead to increased costs.
Further, rapid changes in consumer behavior have increased the risk associated with acquired programming, which typically is acquired
pursuant to multi-year agreements.
We
may not have sufficient capital to pursue the most profitable revenue models and finance or co-finance future television shows.
If
IDWE continues to be successful in developing content suitable for successful television shows, it may not have sufficient capital to
finance or co-finance these shows, which usually is the deal structure that offers the greatest control and potential upside but comes
with the greatest risk. While IDWE has shifted its business model to substantially de-risk and diversify its deal structures by utilizing
guaranteed fee structures (such as production company fees, producer fees, and back-end participation) whenever possible whereby the
streaming platform cash-flows production costs, the potential requirement for financing or co-financing remains as part of the business.
As a result of the structure of its production arrangements for its television shows, IDWE may not be able to maximize the benefits of
its well-performing shows and may incur more losses of its poorly-performing shows, all of which would materially and adversely affect
its business and results of operations.
Any
loss of key personnel and the inability to attract and retain qualified employees could have a material adverse impact on IDWE’s
operations.
IDWE
is dependent on the continued services of key personnel with in-depth industry experience. The departure of key personnel without adequate
replacement or temporary skilled coverage could severely disrupt IDWE’s business operations. Additionally, IDWE needs qualified
managers and skilled employees with in-depth industry experience to operate its businesses successfully. From time to time there may
be shortages of skilled labor which may make it more difficult and expensive for IDWE to attract and retain qualified employees. If IDWE
is unable to attract and retain qualified individuals or its costs to do so increase significantly, its operations would be materially
adversely affected.
The
competitive pressures IDWE faces in its business could adversely affect its financial performance and growth prospects.
IDWE
is subject to significant competition, including from other studios/producers/distributors many of which operate with significantly larger
staffs and funding than IDWE. Competitors include (i) smaller independent studios such as Entertainment One, Blumhouse, Annapurna and
Miramax, (ii) major independent studios such as Sony TV and Warner Bros TV; and (iii) vertically integrated studios such as Twentieth
Television, Universal TV, CBS TV Studios and ABC Studios who develop, distribute and produce original television programming. To the
extent IDWE cannot meet the challenges from existing or new competitors or develop new product offerings to meet customer preferences
or needs, its revenues and profitability could be adversely affected.
The
concentration risk of IDWE’s shows currently airing primarily on Netflix and NBC Universal/SyFy could negatively affect IDWE’s
business.
IDWE
shows have primarily aired on Netflix and NBC Universal/SyFy. As such, IDWE has a concentration of customer risk related to Netflix and
NBC Universal/SyFy. While IDWE does not intend to continue to have its shows aired solely on Netflix and NBC Universal/SyFy, it cannot
control which companies may be interested to purchase and/or offer the best terms to finance its shows, nor control whether Netflix or
NBC Universal/SyFy will continue to air its shows.
Risks
Related to Our Intellectual Property
The
success of our businesses is highly dependent on the existence and maintenance of intellectual property rights in the publishing and
entertainment products and services we create.
The
value to us of our intellectual property rights is dependent on the scope and duration of our rights as defined by applicable laws in
the United States and abroad and the manner in which those laws are construed. If those laws are drafted or interpreted in ways that
limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from our intellectual property
may decrease, or the cost of obtaining and maintaining rights may increase.
The
unauthorized use of our intellectual property may increase the cost of protecting rights in our intellectual property or reduce our revenues.
The unauthorized distribution and access to content generally continues to be a significant challenge for intellectual property rights
holders. Inadequate laws or weak enforcement mechanisms to protect entertainment industry intellectual property in one country can adversely
affect the results of the Company’s operations worldwide, despite the Company’s efforts to protect its intellectual property
rights. COVID-19 may increase incentives and opportunities to access content in unauthorized ways, as negative economic conditions coupled
with a shift in government priorities could lead to less enforcement. These developments may require us to devote substantial resources
to protecting our intellectual property against unlicensed use and present the risk of increased losses of revenue as a result of unlicensed
distribution of our content.
With
respect to intellectual property developed by us and rights acquired by us from others, we are subject to the risk of challenges to our
copyright, trademark and patent rights by third parties. Successful challenges to our rights in intellectual property may result in increased
costs for obtaining rights or the loss of the opportunity to earn revenue from the intellectual property that is the subject of challenged
rights.
Our
intellectual property rights may not be protected, which could adversely affect our consolidated financial position and results of operations.
A
substantial portion of our publications are protected by copyright, held either in our name, in the name of the author of the work, or
in the name of a sponsoring professional society. Such copyrights protect our exclusive right to publish the work in many countries abroad
for specified periods. Our ability to continue to achieve our expected results depends, in part, upon our ability to protect our intellectual
property rights. Our consolidated financial position and results of operations may be adversely affected by lack of legal and/or technological
protections for our intellectual property in some jurisdictions and markets.
Failure
to adequately protect and enforce our intellectual property rights could substantially harm our business and operating results.
The
success of our business depends in part on our ability to protect and enforce our trademarks, copyrights, trade secrets and other intellectual
property rights. We attempt to protect our intellectual property under trademark, copyright and trade secret laws, and through a combination
of confidentiality procedures, contractual provisions and other methods, all of which offer only limited protection.
From
time to time, legal action by us may be necessary to enforce our trademarks and other intellectual property rights, to protect our trade
secrets, to determine the validity and scope of the intellectual property rights of others or to defend against claims of infringement
or invalidity. Such litigation could result in substantial costs and diversion of resources, distract management and technical personnel
and negatively affect our business, operating results and financial condition. If we are unable to protect our intellectual property
rights, we may find ourselves at a competitive disadvantage to others who need not incur the additional expense, time and effort required
to create the innovative products that have enabled us to be successful to date. Any inability on our part to protect adequately our
intellectual property may have a material adverse effect on our business, operating results and financial condition.
Risk
Factors Generally Relating to Us and Our Class B Common Stock
Our
Class B common stock may not be approved for listing on the NYSE American.
We
intend to apply to have our Class B common stock traded on the NYSE American and we believe that we will satisfy all the requirements
for that listing. However, our Class B common stock may not be approved for listing on the NYSE American or any other national securities
exchange. We cannot predict how much investor interest in our Company will generate the adequate amount of liquidity in our stock to
create an active trading market for our Class B common stock. It is possible that, even if our Class B common stock is eventually listed
on the NYSE American, an active trading market will not develop or continue, and there can be no assurance as to the price at which our
Class B common stock will trade. The initial share price of our Class B common stock listed on the NYSE American may not be indicative
of prices that will prevail in any future trading market.
There
can be no assurances that our Class B common stock, once listed on the NYSE American, will not be subject to potential
delisting if we do not continue to maintain the listing requirements of the NYSE American.
We
intend to apply to list the shares of our Class B common stock on the NYSE American, under the symbol “IDW.” An approval
of our listing application by NYSE American will be subject to, among other things, our fulfilling all of the listing requirements of
NYSE American. In addition, NYSE American has rules for continued listing, including, without limitation, minimum market capitalization
and other requirements. Failure to maintain our listing (i.e., being de-listed from NYSE American), would make it more difficult for
stockholders to sell our Class B common stock and more difficult to obtain accurate price quotations on our Class B common stock. This
could have an adverse effect on the price of our Class B common stock. Our ability to issue additional securities for financing or other
purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our Class
B common stock is not traded on a national securities exchange.
Although
we do not intend to utilize the “controlled company” exemption that may now or in the future be afforded to us by the NYSE
American, we may do so in the future which could limit or reduce the effectiveness of our corporate governance.
The
Trusts (as defined below) collectively hold shares that represent approximately 67.9% of the combined voting power of our outstanding
stock as of June 30, 2021. See “Eight trusts for the benefit of sons and daughters of Howard S. Jonas, our Chairman of the Board
of Directors, hold shares that, in the aggregate, represent more than a majority of the combined voting power of our outstanding capital
stock, which may limit the ability of other stockholders to affect our management”, below, and “Holders of our Class B common
stock have significantly less voting power than holders of our Class C common stock”, below.
Although
we do not believe it to be the case currently, as a result of our current ownership by the Trusts or otherwise we may now or in the future
qualify for the exceptions from the NYSE American’s corporate governance listing requirements available to us because we are a
“controlled company” as defined in section 801(a) of the NYSE American Company Guide. Among other things, a “controlled
company” may exempt itself from the requirement that (i) a majority of its directors be independent directors, (ii) its Compensation
Committee, Corporate Governance Committee and/or Nominating Committee be comprised entirely of independent directors, and (iii) the Company
not have a single Nominating/Corporate Governance Committee.
If
we currently or in the future qualify as a “controlled company,” we do not intend to rely on any applicable exceptions from
the NYSE American’s corporate governance listing requirements available to us because we are at that time a “controlled company.”
However, there can be no assurance that we will not in the future, if at that time we are a “controlled company,” rely on
any or all of the exceptions from the NYSE American’s corporate governance listing requirements available to us because we are
a “controlled company.” If we do rely on any or all of the exceptions from the NYSE American’s corporate governance
listing requirements because we are then a “controlled company,” the effectiveness of our corporate governance could be limited
or reduced.
Our
multi-class structure may render our shares ineligible for inclusion in certain stock market indices, and thus adversely affect the share
price of our Class B common stock and its liquidity.
We
have issued and outstanding shares of Class B common stock and shares of Class C common stock and intend to apply to have our Class B
common stock traded on the NYSE American. See “Our Class B common stock may not be approved for listing on the NYSE American,”
above. Our multi-class structure may render our shares ineligible for inclusion in certain stock market indices, which may adversely
affect the share price of our Class B common stock and its liquidity.
There
is a limited trading market for shares of our Class B common stock and stockholders may find it difficult to sell our shares.
Currently,
our Class B common stock is quoted on the OTC Pink Markets. As a result, an investor may find it difficult to sell, or to obtain accurate
quotations as to the price of, shares of our Class B common stock. In addition, our Class B common stock may be subject to the penny
stock rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established
customers and accredited investors. The SEC regulations generally define a penny stock to be an equity that has a market price of less
than $5.00 per share, subject to certain exceptions. If we do not obtain or retain a listing on NYSE American and if the price of our
Class B common stock is less than $5.00, our Class B common stock will be deemed a penny stock. Unless an exception is available, those
regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock
market and the risks associated therewith and impose various sales practice requirements on broker-dealers who sell penny stocks to persons
other than established customers and accredited investors (generally institutions and high net worth individuals). In addition, the broker-dealer
must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson
in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account.
Moreover, broker-dealers who recommend such securities to persons other than established customers and accredited investors must make
a special written suitability determination for the purchaser and receive the purchaser’s written agreement to transactions prior
to sale. Regulations on penny stocks could limit the ability of broker-dealers to sell our Class B common stock and thus the ability
of purchasers of our Class B common stock to sell their shares in the secondary market.
We
cannot predict the extent to which investor interest in us and our Class B common stock will lead to the development or continuance of
an active trading market or how liquid that trading market for our Class B common stock might become. If an active trading market for
our Class B common stock does not develop or is not sustained, it may be difficult for investors to sell shares, particularly large quantities,
of our Class B common stock at a price that is attractive or at all. As a result, an investment in our Class B common stock
may be illiquid and investors may not be able to liquidate their investment readily or at all when they desire to sell.
There
is limited liquidity in our Class B common stock, which may adversely affect your ability to sell your shares of our Class B common stock.
The
market price of our Class B common stock may fluctuate significantly in response to a number of factors, some of which are beyond our
control. These factors include, but are not limited to:
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developments
concerning intellectual property rights and regulatory approvals relating to us;
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quarterly
variations in our business and financial results or the business and financial results of
our competitors;
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the
ability or inability of us to generate increases in revenue and profit;
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the ability or inability of us to raise capital, and the terms and conditions
associated with any such raising of capital;
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developments
in our industry and target markets;
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the
number of market makers who are willing to continue to make a market in our stock and the
market or exchange on which they decide to make a market in our stock;
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our
ability to have our Class B common stock listed on the NYSE American; and
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general
market conditions and other factors, including factors unrelated to our own operating performance.
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In
recent years, the stock market in general has experienced extreme price and volume fluctuations. Continued market fluctuations could
result in extreme volatility in the price of shares of our Class B common stock, which could cause a decline in the value of our
shares. Price volatility may be accentuated if trading volume of our Class B common stock is low, which historically has often been
the case. The volatility in our Class B stock may be combined with low trading volume. Any or all of these above factors
could adversely affect your ability to sell your shares of our Class B common stock or, if you are able to sell your shares, to sell
your shares at a price that you determine to be fair or favorable.
We
have no future plans to pay dividends on our Class B common stock.
We
do not pay, and do not intend to pay, cash dividends on our Class B common stock. We currently intend to retain all available funds and
any future earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable
future. In addition, the terms of our current, as well as any future, financing agreements may preclude us from paying any dividends.
As a result, capital appreciation, if any, of our Class B common stock will be investors’ sole source of potential gain for the
foreseeable future.
We
are a “smaller reporting company” and “emerging growth company” and we cannot be certain if the reduced disclosure
requirements applicable to smaller reporting companies and emerging growth companies will make our Class B common stock less attractive
to investors.
We
are a “smaller reporting company,” as defined in Rule 12b-2 under the Exchange Act, and we may take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies, including “emerging growth companies”
such as, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from
the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments
not previously approved. Our status as a “smaller reporting company” is determined on an annual basis. We cannot predict
if investors will find our Class B common stock less attractive or our company less comparable to certain other public companies because
we will rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future financial results
may not be as comparable to the financial results of certain other companies in our industry that adopted such standards. If some investors
find our Class B common stock less attractive as a result, there may be a less active trading market for our Class B common stock and
our stock price may be more volatile.
If
we fail to implement and maintain an effective system of internal controls, we may be unable to accurately report our results of operations,
meet our reporting obligations or prevent fraud.
Under
Section 404 of the Sarbanes-Oxley Act of 2002, a newly public company is not required to comply with either the management or the
auditor reporting requirements related to internal control over financial reporting until its second annual report, if applicable.
Further,
we intend to qualify as an “emerging growth company” as defined in the Jumpstart our Business Startups Act of 2012, or the
JOBS Act. An emerging growth company may take advantage of reduced reporting and other burdens that are otherwise applicable generally
to public companies. These provisions include:
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an
extended transition period to comply with new or revised accounting standards applicable to public companies; and
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an
exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to
the Sarbanes-Oxley Act of 2002.
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We
may take advantage of these provisions until the end of the fiscal year ending after the fifth anniversary of the filing of this registration
statement, or such earlier time that we are no longer an emerging growth company and, if we do, the information that we provide stockholders
may be different than you might receive from other public companies in which you hold equity. We would cease to be an emerging growth
company if we have more than $1.07 billion in annual revenue, have more than $700 million in market value of our shares of common stock
held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period.
In
addition, if we no longer qualify as an emerging growth company, as an accelerated filer, our independent registered public accounting
firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that
our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control
over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing,
may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented,
designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public
company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems
for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.
During
the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may
identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the
adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time,
we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with
Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements
in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our
reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a
decline in the trading price of our stock.
Additionally,
ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject
us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may
also be required to restate our financial statements from prior periods.
The
requirements of being a reporting public company may strain our resources, divert management’s attention and affect our ability
to attract and retain additional executive management and qualified board members.
As
a reporting public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the Dodd-Frank
Act, and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial
compliance costs, making some activities more difficult, time-consuming or costly. This will put increased demand on our systems and
resources, particularly after we are no longer a “smaller reporting company.” The Exchange Act requires, among other things,
that we file annual, quarterly and current reports with respect to our business and results of operations. As a “smaller reporting
company” and “emerging growth company”, as stated above, we receive certain reporting exemptions under The Sarbanes-Oxley
Act.
Changing
laws, regulations and standards relating to corporate governance and public disclosure create uncertainty for public companies, which
increases legal and financial compliance costs and time expenditures for internal personnel. These laws, regulations and standards are
subject to interpretation, which in many cases due to their lack of specificity, their application in practice may evolve over time as
regulators and governing bodies provide new guidance. These changes may result in continued uncertainty regarding compliance matters
and may necessitate higher costs due to ongoing revisions to filings, disclosures and governance practices. We intend to invest resources
to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses
and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts
to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities
related to their application and practice, regulatory authorities may initiate regulatory or legal proceedings against us and our business
may be adversely affected.
As
a public company under these rules and regulations, we expect that it may make it more expensive for us to hire external auditors to
perform requisite outside audited financial statements, as well as obtain director and officer liability insurance, and we may be required
to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for
us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee
and could also make it more difficult to attract qualified executive officers.
As
a result of disclosure of information in this Prospectus and in filings required of a public company, our business and financial condition
will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties.
If such claims are successful, our business and results of operations could be adversely affected, and even if the claims do not result
in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources
of our management and adversely affect our business and results of operations.
General
economic conditions may negatively impact our operations.
Economic
downturns may negatively affect our operations. These conditions may be widespread or isolated to one or more geographic regions in which
we operate. Higher wages, related labor costs, printing costs, leasing costs, energy, insurance and fuel costs and the increasing cost
trends in those markets may decrease our margins. Moreover, economic downturns present an additional challenge to us because a significant
portion of our revenues are from sales through retail stores, which are more likely to close during economic downturns. In addition,
decreases in travel and entertainment spending during economic downturns could impact our businesses, and thereby negatively impact our
operations.
We
could find it difficult to raise additional capital in the future.
We
may need to raise additional capital in order for stockholders to realize increased value on our securities. Given the current global
economy, there can be no assurance that we would be able to obtain funding on commercially reasonable terms in a timely fashion. Failure
to obtain additional funding, if necessary, could have a material adverse effect on our business, prospects and financial condition.
Holders
of our Class B common stock have significantly less voting power than holders of our Class C common stock.
Holders
of our Class B common stock are entitled to one-tenth of a vote per share on all matters on which our stockholders are entitled to vote,
while holders of our Class C common stock are entitled to three votes per share. Because of their voting power, the holders of our Class
C common stock will be able to control matters requiring approval by our stockholders, including the election of all of the directors,
amendment of organizational documents and the approval of significant corporate transactions, including any merger, consolidation or
sale of all or substantially all of our assets. As a result, the ability of any of the holders of our Class B common stock to influence
our management may be limited. In addition, our dual class structure has an anti-takeover effect, and accordingly, the holders of the
shares of Class C common stock have the ability to prevent any change in control transactions that may otherwise be in the best interest
of stockholders
Eight
trusts for the benefit of sons and daughters of Howard S. Jonas, our Chairman of the Board of Directors, hold shares that, in the aggregate,
represent more than a majority of the combined voting power of our outstanding capital stock, which may limit the ability of other stockholders
to affect our management.
Eight
trusts for the benefit of sons and daughters of Howard S. Jonas (the “Trusts”), our Chairman of the Board, collectively have
voting power over 1,733,750 shares of our common stock (which includes 545,360 shares of our Class C common stock (which is all the issued
and outstanding shares of the Class C common stock), which are convertible into shares of our Class B common stock on a 1-for-1 basis,
and 1,188,390 shares of our Class B common stock), representing approximately 67.9% of the combined voting power of our outstanding
capital stock, as of June 30, 2021, or __% after giving effect to this offering). In addition, as of June 30, 2021, Howard S. Jonas
beneficially holds 1,734,962 shares of our Class B common stock, warrants to purchase up to 89,243 shares of our Class B common stock
at a price per share of $42.02 and warrants to purchase up to 98,336 shares of our Class B common stock at a price per share of $26.44.
Each of the Trusts has a different, independent trustee.
Howard
S. Jonas serves as our Chairman of the Board, which is not an officer position. However, he is our founder and served as an executive
officer, including our Chief Executive Officer, for a very significant time period, and the members of the Board and management often
look to him for guidance on major financial, operational and strategic matters.
Howard
S. Jonas does not have the right to direct or control the voting of the shares of our common stock that is held by the Trusts, and the
independent trustees hold sole voting and dispositive power over the common stock held by the Trusts. However, he is the trustor of the
trusts and is the father of each of the beneficiaries of the Trusts and his views may be taken into account by the trustees and others
related to the Trusts.
We
are not aware of any voting agreement between or among any of the Trusts and/or Howard S. Jonas, but if such a voting agreement or other
similar arrangement exists or were to be consummated, if all or several or all of the Trusts were to act in concert, or if we issued
additional Class C common stock, certain or all of the Trusts and/or Howard S. Jonas along with holders of the Class C common stock would
be able to control matters requiring approval by our stockholders, including the election of all of the directors, amendment of organizational
documents and the approval of significant corporate transactions, including any merger, consolidation or sale of all or substantially
all of our assets. As a result, the ability of any of our other stockholders to influence our management may be limited. In addition,
our dual class structure has an anti-takeover effect, and accordingly, the holders of the shares of Class C common stock have the ability
to prevent any change in control transactions that may otherwise be in the best interest of stockholders.
Risks Related
to this Offering
Investors
in this offering will experience immediate and substantial dilution in net tangible book value.
The
public offering price per share is substantially higher than the net tangible book value per share of our outstanding shares of Class
B common stock. As a result, investors in this offering will incur immediate dilution of $____ per share, based on the assumed public
offering price of $_____ per share. Investors in this offering will pay a price per share that substantially exceeds the book value
of our assets after subtracting our liabilities. See “Dilution” for a more complete description of how the value of
your investment will be diluted upon the completion of this offering.
We
have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
Our
management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described
in the section entitled “Use of Proceeds,” and you will not have the opportunity as part of your investment decision to assess
whether the net proceeds will be used appropriately. Because of the number and variability of factors that will determine our use of
the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Our management might
not apply our net proceeds in ways that ultimately increase the value of your investment. We currently intend to use the net proceeds
of this offering primarily for general corporate purposes, including development of original IP, talent and technology investments, as
well as potential acquisitions. See “Use of Proceeds” for additional information.
Our
expected use of net proceeds from this offering represents our current intentions based upon our present plans and business condition.
As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon
the completion of this offering, or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our
actual use of the net proceeds will vary depending on numerous factors, including the commercial success of our systems, as well as the
amount of cash used in our operations. As a result, our management will have broad discretion in the application of the net proceeds,
and investors will be relying on our judgment regarding the application of the net proceeds of this offering.
The
failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds
from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to
our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail
to achieve expected financial results, which could cause our stock price to decline.
If
securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price
and trading volume could decline.
The
trading market for our Class B common stock will depend in part on the research and reports that securities or industry analysts publish
about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities
or industry analysts commence coverage of our company, the trading price for our stock would likely be negatively impacted. In the event
securities or industry analysts initiate coverage, if one or more of the analysts who covers us downgrades our stock or publishes inaccurate
or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company
or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume
to decline.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
Prospectus contains forward-looking statements. All statements other than statements of historical facts contained in this Prospectus,
including statements regarding our future results of operations and financial position, business strategy, prospective products, product
approvals, timing and likelihood of success, plans and objectives of management for future operations, and future results of current
and anticipated products are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important
factors that may cause our actual results, performance or achievements to be materially different from any future results, performance
or achievements expressed or implied by the forward-looking statements.
In
some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,”
“expect,” “plan,” “anticipate,” “could,” “intend,” “target,”
“project,” “contemplates,” “believes,” “estimates,” “predicts,” “potential”
or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Prospectus
are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future
events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking
statements speak only as of the date of this Prospectus and are subject to a number of risks, uncertainties and assumptions described
under the sections in this Prospectus entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and elsewhere in this Prospectus. Because forward-looking statements are inherently subject
to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not
rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking
statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.
Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible
for us to predict all risk factors and uncertainties. Except as required by applicable law, we do not plan to publicly update or revise
any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or
otherwise. All of the forward-looking statements made in this Prospectus are qualified by these cautionary statements.
USE
OF PROCEEDS
Based
upon an assumed public offering price of $ per share, we estimate that we will receive net proceeds from this offering, after deducting
the underwriting discounts and the estimated offering expenses payable by us, of approximately $ million assuming the Underwriter
does not exercise its over-allotment option.
We
plan to use the net proceeds we receive from this offering for the following purposes: most heavily for the development of original IP
and the purchase of associated publishing, media, and merchandise rights to be used across multiple platforms (e.g., print, television,
new media) as well as supplemental IP acquisition and marketing spend for these newly created IPs; additionally for technology
investment for our website, applications, data and business intelligence; talent investment as we look to expand our kids and family
genres, and to further diversify into animation; and to pursue potential acqui-hire and/or bolt-on mergers and acquisition opportunities.
|
Use of Net Proceeds
|
|
working capital
|
$
|
_____
|
|
We
do not have any agreements at this time to potentially acquire other entities or businesses. The foregoing represents our current intentions
based upon our present plans and business conditions to use and allocate the net proceeds of this offering. However, the nature, amounts
and timing of our actual expenditures may vary significantly depending on numerous factors. As a result, our management has and will
retain broad discretion over the allocation of the net proceeds from this offering. We may find it necessary or advisable to use the
net proceeds from this offering for other purposes, and we will have broad discretion in the application of net proceeds from this offering.
To the extent that the net proceeds we receive from this offering are not immediately used for the above purposes, we intend to invest
our net proceeds in short-term, interest-bearing bank deposits or debt instruments.
MARKET
FOR OUR CLASS B COMMON STOCK AND RELATED STOCKHOLDER MATTERS
On
June 30, 2021, there were 140 holders of record of our Class B common stock, which is quoted on
the OTC Pink Market under the trading symbol “IDWM,” and 8 holders of record of our Class C common stock, which is
not quoted on the OTC Pink Markets. These numbers do not include the number of persons whose shares are in nominee or in “street
name” accounts through brokers. On July 2, 2021, the last sales price reported on the OTC Pink Markets for our Class B common
stock was $4.00 per share.
DIVIDEND
POLICY
We
have not paid dividends on our Class B common stock, and currently do not intend to pay any cash dividends on our Class B common stock
in the foreseeable future. Our current policy is to retain all of our earnings to finance future growth. Any future declaration of dividends
will be subject to the discretion of our Board of Directors.
In
addition, we may incur debt financing in the future, the terms of which will likely prohibit us from paying cash dividends or distributions
on our Class B common stock. Even if we are permitted to pay cash dividends in the future, we currently anticipate that we will retain
all future earnings, if any, to fund the operation and expansion of our business and for general corporate purposes.
CAPITALIZATION
Set
forth below is our cash and capitalization as of April 30, 2021:
|
●
|
on
a pro forma as adjusted basis to reflect the issuance and sale of the shares by us in this
offering at the public offering price of $ per share, after deducting the estimated
underwriting discounts and the estimated offering expenses payable by us.
|
You
should read the information in the below table together with our consolidated financial statements and related notes, and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” each included elsewhere in this prospectus.
(in
thousands)
|
|
Actual
(unaudited)
|
|
|
Pro
Forma
(unaudited)
|
|
|
Pro
Forma As
Adjusted
(unaudited)
|
|
Cash
and restricted cash
|
|
$
|
7,607
|
|
|
$
|
|
|
|
$
|
|
|
Total
debt at face value
|
|
|
14,055
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $.01 par value; authorized shares – 500; no shares issued at April 30, 2021 and October 31, 2020
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Class
B common stock, $0.01 par value; authorized shares – 12,000; 10,024 and 9,987 shares issued and 9,505 and 9,467 shares outstanding
at April 30, 2021 and October 31, 2020
|
|
|
94
|
|
|
|
|
|
|
|
|
|
Class
C common stock, $0.01 par value; authorized shares – 2,500; 545 shares issued and outstanding at April 30, 2021 and October
31, 2020
|
|
|
5
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
94,267
|
|
|
|
|
|
|
|
|
|
Accumulated
(deficit)
|
|
|
(78,437
|
)
|
|
|
|
|
|
|
|
|
Accumulated
other comprehensive loss
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Treasury
stock, at cost, consisting of 519 shares of Class B common stock at April 30, 2021 and October 31, 2020
|
|
|
(1,196
|
)
|
|
|
|
|
|
|
|
|
Total
stockholders’ equity
|
|
|
14,733
|
|
|
|
|
|
|
|
|
|
Capitalization
|
|
$
|
678
|
|
|
$
|
|
|
|
$
|
|
|
DILUTION
If
you invest in our Shares in this offering, your interest will be diluted to the extent of the difference between the public offering
price per share of Class B common stock and the as adjusted net tangible book value per share of Class B common stock immediately after
this offering.
Our
historical net tangible book value as of April 30, 2021 was $14,504,000, or $1.44 per share of Class B and Class C Common Stock. Our
historical net tangible book value is the amount of our total tangible assets less our liabilities. Historical net tangible book value
per share of Common Stock is our historical net tangible book value divided by the number of outstanding shares of Class B and Class
C Common Stock as of April 30, 2021.
Our
adjusted net tangible book value (deficit) of our Class B common stock will be $ or $ per share. Adjusted net tangible book
value (deficit) per share represents adjusted net tangible book value divided by the total number of shares outstanding after giving
effect to the sale of the shares in this offering at the assumed public offering price of $ per share, after deducting underwriting
discounts and commissions and other estimated offering expenses payable by us. This represents an immediate increase in as adjusted net
tangible book value of $ per share to existing stockholders and an immediate dilution of $ per share to investors purchasing
shares of common stock in this offering at the assumed public offering price.
The
following table illustrates this dilution:
Assumed public offering price per share
|
|
$
|
|
|
Net tangible book value per Class B common stock as of April 30, 2021
|
|
$
|
1.44
|
|
Increase in pro forma net tangible book value per share attributable to this offering
|
|
$
|
|
|
Pro forma as adjusted net tangible book value per share, after this offering
|
|
$
|
|
|
Dilution per share to new investors in this offering
|
|
$
|
|
|
A
$0.50 increase (decrease) in the assumed public offering price of $ per share of Class B common stock, would increase (decrease)
the pro forma as adjusted net tangible book value per share by $ , and increase (decrease) dilution to new investors by $ per
share, in each case assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the
same and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.
The
foregoing discussion and table do not take into account further dilution to new investors that could occur upon the exercise of outstanding
warrants having a per share exercise or conversion price less than the per share offering price to the public in this offering.
If
the underwriters exercise in full their option to purchase additional Class B common stock in this offering, the pro forma as adjusted
net tangible book value after the offering would be $ per share, the increase in net tangible book value to existing stockholders
would be $ per share, and the dilution to new investors would be $ per share, in each case assuming a public offering price of $ per
share.
The
number of shares of Class B common stock that will be outstanding after this offering is based on shares of Class B common stock
outstanding as of June 30, 2021 and excludes the following as of that date:
|
●
|
up
to 327,737 shares of Class B common stock issuable upon the exercise of outstanding options
under our 2009 Stock Option and Incentive Plan and our 2019 Stock Option and Incentive
Plan (the “2019 Plan”), with a weighted average exercise price of $6.44 per share;
|
|
●
|
up
to 89,243 shares of Class B common stock at a price per share of $42.02 and up to 98,336
shares of Class B common stock at a price per share of $26.44 issuable upon exercise of outstanding
warrants;
|
|
●
|
261,483
shares of Class B common stock reserved for future issuance under the 2019 Plan;
|
|
●
|
up
to 545,360 shares of Class B common stock issuable upon conversion of the outstanding shares
of Class C common stock, which are convertible into shares of our Class B common stock on
a 1-for-1 basis; and
|
|
●
|
up
to shares of Class B common stock issued pursuant to the Over-Allotment Option.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This
Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements
that reflect Management’s current views with respect to future events and financial performance. You can identify these statements
by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,”
“estimate” and “continue,” or similar words. Those statements include statements regarding the intent, belief
or current expectations of us and members of our management team as well as the assumptions on which such statements are based. Prospective
investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties,
and that actual results may differ materially from those contemplated by such forward-looking statements.
Readers
are urged to carefully review and consider the various disclosures made by us in this Prospectus and in our other documents filed with
the Securities and Exchange Commission. Important factors currently known to management could cause actual results to differ materially
from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed
assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that our assumptions
are based upon reasonable data derived from and known about our business and operations. No assurances are made that actual results of
operations or the results of our future activities will not differ materially from our assumptions. Factors that could cause differences
include, but are not limited to, expected market demand for our products, fluctuations in pricing for our products, and competition.
The
following discussion provides information that management believes is relevant to an assessment and understanding of our past financial
condition and plan of operations. The discussion below should be read in conjunction with the consolidated financial statements and related
notes thereto included elsewhere in this Prospectus.
As
used below, unless the context otherwise requires, the terms “IDWMH,” “the Company,” “we,” “us,”
and “our” refer to IDW Media Holdings, Inc., a Delaware corporation, and our subsidiaries.
OVERVIEW
Our
principal businesses consist of:
|
i.
|
IDW
Media Publishing, or IDWP, is a publishing company that creates comic books, graphic novels, digital content and games through its
imprints IDW, IDW Games and Top Shelf Productions. In addition, since April 1, 2020, we own a 19.9% interest in Clover
Press, a boutique publishing company that focuses on the book trade and direct market; since April 1, 2020, when our interest in
Clover Press decreased to 19.9%, we no longer consolidate the operations of Clover Press but rather value our investment at cost
which has been written down to a nil value.
|
|
ii.
|
IDW
Entertainment, or IDWE, is a company that develops, produces, and distributes content across various platforms and formats to audiences
globally. IDWE licenses its intellectual property primarily from IDWP, thereby gaining exclusive access to stories and characters
from IDWP’s diverse library of comic books and graphic novels.
|
Prior
to February 15, 2021, we also owned CTM, a company that develops and distributes print and digital-based advertising and information
advertising for tourist destinations in targeted tourist markets in 32 states / provinces in the US and Canada. On July 14, 2020, we
and Howard Jonas, our Chairman of the Board of Directors, executed a share purchase agreement pursuant to which we agreed to sell all
of the stock of CTM to Mr. Jonas or his assignee (the “CTM Sale”) for (i) the cancelation of $3.75 million of indebtedness
owed to Mr. Jonas by us, (ii) a contingent payment of up to $3.25 million based upon a recovery of quarterly revenues of CTM to 90% of
its fiscal 2019 levels during the 18-month period following the closing of the CTM Sale, and (iii) a contingent payment if CTM is sold
within 36 months for more than $4.5 million.
The
sale was consummated on February 15, 2021.
COVID-19:
Overview of Impacts
The
COVID-19 pandemic had the following impact on us and our business operations:
|
●
|
IDWMH:
Received two PPP loans related to core IDWE and IDWP operations.
|
|
○
|
$1,195,679
on April 27, 2020
|
|
○
|
$1,195,680
on April 2, 2021
|
|
●
|
IDWE:
Industry-wide production suspensions halted filming and production of Wynonna Earp Season
four after the completion of six of twelve episodes. IDWE continued its program to
develop, package and pitch from its library on remote basis. Writer’s rooms have transitioned
to virtual operations.
|
|
●
|
IDWP:
Direct market distribution was halted on April 1, 2020 by Diamond Comic Distributors Inc.,
the industry’s primary distributor, and IDWP subsequently furloughed approximately
25% of its workforce. Using the proceeds of PPP loans, IDWP was able to bring back 50% of
the furloughed workforce. IDWP transitioned to focus on direct-to-consumer (“DTC”)
and indirect market channels, and was able to offset the lost direct market sales. Diamond
resumed partial operations on May 20, 2020. In recent months, direct market sales
volumes have begun to increase, reaching pre-pandemic levels. Additionally, although
most products sold through Diamond, a traditionally non-returnable market, have been made
returnable, this has not resulted in a significant increase in returns and sales through
Penguin Random House, a largely returnable market, have seen decreased overall returns. IDWP
renegotiated the terms of one of its lease agreements due to COVID-19 impacts. Per ASC 842
guidance the lease liabilities were remeasured as of the modification dates as
if the leases were new leases commencing at such time. Accordingly, the Right-of-Use
assets were adjusted by amounts equal to the adjustments to the lease liabilities.
|
REPORTABLE
SEGMENTS
We
have the following reportable business segments: IDWP and IDWE, and CTM (discontinued operations).
IDWP
IDWP
is an award-winning publisher of comic books, original graphic novels, and art books as well as board and tabletop games. In 2020, IDWP
won prestigious Will Eisner Comic Industry Awards (“Eisner Awards”) for George Takei’s They Called Us Enemy
and Stan Sakai’s Usagi Yojimbo. Other selected and notable Eisner Awards in the past 10 years are listed below:
Author
|
|
Title
|
|
Year
|
|
Award
|
James
Kolchaka
|
|
Johnny
Boo and the Ice Cream Computer
|
|
2019
|
|
Best
early readers
|
John
Lewis, Andrew Aydin and Nate Powell
|
|
March:
Book Three
|
|
2017
|
|
Best
reality-based work
|
John
Lewis, Andrew Aydin and Nate Powell
|
|
March:
Book Two
|
|
2016
|
|
Best
reality-based work
|
Chris
Samnee
|
|
Rocketeer:
Cargo of Doom
|
|
2013
|
|
Best
artist/penciller/inker
|
Darwyn
Cooke
|
|
“The
Seventh” in Richard Stark’s Parker: The Martini Edition
|
|
2012
|
|
Best
short story
|
James
Kolchaka
|
|
Dragon
Puncher Island
|
|
2012
|
|
Best
early readers
|
Joe
Hill
|
|
Locke
& Key
|
|
2011
|
|
Best
writer
|
Founded
in 1999, IDWP has a long tradition of supporting original, creator-driven titles. In 2002, IDWP published 30 Days of Night by
Steve Niles and Ben Templesmith followed by other horror titles that kickstarted a resurgence in horror-comic publishing across the industry.
Since then, IDWP has significantly diversified its publications. Joe Hill and Gabriel Rodríguez’s Locke & Key,
Jonathan Maberry’s V Wars, Stan Sakai’s Usagi Yojimbo, Walter Simonson’s Ragnarök, Beau Smith’s
Wynonna Earp, Chris Ryall and Ashley Wood’s Zombies vs Robots, and Joe Hill’s and Martin Simmonds’ Dying
is Easy are among the hundreds of award-winning titles published by IDW. Titles such as Canto, Ghost Tree, Road of Bones and
Mountainhead are in active development.
In
2015, IDWP acquired Top Shelf Productions, an award-winning, critically acclaimed publisher of graphic novels, which continues to operate
as an imprint. Top Shelf is known for publishing works of literary significance including the #1 New York Times and Washington Post bestselling
trilogy, March, by Congressman John Lewis, Andrew Aydin, and Nate Powell. March is the only graphic novel to have won the
National Book Award. In July 2019, Top Shelf released George Takei’s graphic memoir, They Called Us Enemy, which debuted
at #2 on the New York Times Paperback Nonfiction Best Sellers list and as a #1 bestseller on Amazon. They Called Us Enemy was
named a “Best Book of the Year” by NPR, Amazon, Forbes, Publishers Weekly, School Library Journal, Kirkus Reviews, and the
New York Public Library.
In
addition to its core of creator-driven franchises, IDWP has also partnered with the owners of major licensed brands to publish many successful
licensed titles, including: Hasbro’s Transformers, G.I. Joe, and My Little Pony; Sega’s Sonic The Hedgehog;
CBS’s Star Trek; Sony’s Ghostbusters; Viacom’s Teenage Mutant Ninja Turtles; the Marvel Action’s
line of middle-grade comic books designed for younger readers; Toho’s Godzilla; and Lucasfilm’s Star Wars Adventures.
These licensed titles often bring with them diverse built-in audiences and also build cache and retailer support for IDWP. With licensed
franchises, IDWP’s strategy is to focus on licenses that not only have eager, built-in fan followings but also ongoing licensor
support through other channels, such as toys, animation, and film. This strategy enables IDWP to expand its audience reach and to pursue
sub-license opportunities with foreign publishers. IDWP also collaborates with other comic publishers to co-publish certain titles, including
Batman vs. Teenage Mutant Ninja Turtles (with DC Comics) and Rick & Morty vs. Dungeons and Dragons (with Oni
Press, Inc.).
IDWP’s
largest segment is the publication of comic books and graphic novels, which are primarily distributed through three channels:
|
●
|
to
comic book specialty stores, non-returnable basis (the “direct market”), by Diamond Comic Distributors, Inc. Direct market
sales have traditionally been non-returnable; in light of COVID-19 returnability is being offered on the majority of products sold
to the direct market;
|
|
|
|
|
●
|
to
traditional retail outlets, including bookstores and mass market stores, on a returnable basis (the “non-direct market”),
by Penguin Random House Publisher Services (“Penguin Random House”) to customers such as Amazon, Barnes & Noble,
Baker & Taylor, Ingram, Follett, Target, and Walmart; and
|
|
|
|
|
●
|
to
Ebook distributors (“digital publishers”). While digital publishers are a third and growing channel, it is still significantly
smaller than the direct market and non-direct market book channels.
|
IDWP’s
publications are widely available digitally through popular distributors such as Comixology, Amazon, Apple iTunes and iBooks, Google
Play, Hoopla, Overdrive, and via IDWP’s own website (idwpublishing.com). Through the direct market and non-direct market,
IDWP sold over 4 million units in fiscal year 2020 and is recognized as the fifth largest publisher based on units sold as calculated
and reported by Diamond market share ratings, covering both comics and graphic novels in the direct market.
Data
for Diamond’s sales charts — which includes the market shares and all top product charts — are compiled by Diamond
Comic Distributors from sales made to thousands of comic book specialty shops located in North America and around the world. Additional
sales made to online merchants and other specialty retailers may be included in the calculations as well. Unit and dollar market shares
are calculated based upon orders for comic books, graphic novels, and magazines invoiced and shipped to Diamond customers during 2019,
which comprises pre-orders, advance reorders, and reorders, minus any copies that are received back from a title marked as returnable.
IDWP
publishes under specialized, acclaimed imprints that account for a smaller part of our revenue, including: (i) The Library of American
Comics (publishing classic comic reprints); (ii) EuroComics (bringing foreign language comics to an English-speaking audience); (iii)
Yoe! Books (specializing in creative historical comic collections); (iv) Artist’s Editions (publishing scans of original art printed
at the same size they were drawn); and (v) Sunday Press (producing restorations of classic American comic strips while enhancing their
visibility, reach of distribution and marketing).
Many
of IDWP’s titles are available in a variety of languages worldwide through foreign licensing. In 2019, IDW also announced a major
new initiative to release key titles as Spanish-language graphic novels in the North American market. This initiative kicked off in Summer
2020 with the release of Spanish-language editions of They Called Us Enemy, Red Panda & Moon Bear, and Sonic
the Hedgehog.
IDWP’s
IDW Games develops and publishes card, board, and tabletop games. Similar to IDWP’s book content, IDW Games offers a mix of popular
licensed titles, such as Dragon Ball Z and Batman the Animated Series, as well as creator-developed strategic hobby games,
such as Towers of Arkhanos and Tonari. IDW Games’ products are sold to distributors worldwide and are available through
retailers such as Gamestop, Barnes & Noble, Amazon, and independent games and comics stores, as well as the direct-to-consumer channel
through its website and marketing campaigns.
To
further expand and build creator-owned properties beyond publishing, IDWP works with IDWE, as well as other outside partners, to bring
creator-owned franchises to television and film through licensing arrangements.
As
a result of the COVID-19 pandemic, Diamond ceased the direct market distribution of our new comic books from April 1, 2020 through May
19, 2020. Accordingly, IDWP did not publish any new comic books during this period. Based upon distributor capacity, new comic book releases began following
a reduced distribution schedule beginning May 20, 2020, with the capacity for new product increasing over the subsequent months.
During this period of reduced output, IDWP paused creative work on many projects, furloughed staff, and experienced a limited number
of layoffs. With the receipt of PPP loans and direct market distribution coming back online, furloughed staff have since resumed working
and creative work has recommenced.
In
order to expand its business and counter a persistent industry-wide decline in direct market sales, IDWP continues to focus on launching
new creator-owned titles and partnering with established brands to bring fan-favorite properties to the comic book market. IDWP is also
expanding the reach of existing and new products through the development of specialty, library, and education markets; increased direct-to-consumer
initiatives; and broadening the reach of creator-driven series through licensing opportunities.
In
May 2019, IDWMH invested in a new publishing entity, Clover Press, established by Ted Adams and Robbie Robbins, co-founders of IDWP.
Clover Press is a separate entity and operates independently from IDWP. Due to its size, and nature of the business, activity related
to Clover Press was included with IDWP for presentation purposes while it was a consolidated entity. Effective April 1, 2020, IDWMH’s
interest in Clover Press decreased to 19.9%, as a result it is now an investment valued at cost and no longer consolidated.
IDWP’s
revenues represented 59% and 63% of our consolidated revenues in the three and six months ended April 30, 2021, respectively. IDWP’s
revenues represented 51% and 56% of our consolidated revenues in the three and six months ended April 30, 2020, respectively.
IDWP’s
revenues represented 62.5% and 46.9% of our consolidated revenues in the fiscal years ended October 31, 2020 and 2019, respectively.
IDWE
IDWE
is a production company and studio that develops, produces and distributes content for global platforms and services.
IDWE
was formed on September 20, 2013 to leverage IDWP properties into television series, features and other forms of media by developing
and producing original content. IDWE maintains a robust development slate of properties based on IDWP properties primarily for the
adult series marketplace and is in advanced conversations with various global studios and networks for their exploitation. IDWE
actively recruits and acquires new franchise material for exploitation primarily in the series format.
IDWE
has developed and/or produced four series for television that premiered in calendar 2019 and 2020:
|
●
|
Wynonna
Earp season four aired in two parts due to worldwide COVID-19 related production shutdowns. The first six episodes
of season four premiered July 26, 2020 and the second half of season four began airing on March 5, 2021. The show was created
by Emily Andras and stars Melanie Scrofano and is based on the IDWP comics of Beau Smith. Season four’s twelve episodes are
being produced by Seven24 Films and distributed by IDWE, in partnership with Syfy and CTV Sci-Fi. Cineflix Studios is the co-producer
and global distributor for the series. Season one’s thirteen episodes aired in fiscal 2016. Season two’s twelve episodes
aired in fiscal 2017, and Season three’s twelve episodes aired in fiscal 2018.
|
|
●
|
V
Wars, debuted on Netflix on December 5, 2019. The 10-episode vampire thriller stars Ian Somerhalder and was produced by High
Park Entertainment. The series is based upon Jonathan Maberry’s IDWP’s comic book series of the same name.
|
|
●
|
October
Faction premiered on Netflix January 23, 2020. The 10-episode show is based on the IDWP comic books of Steve Niles and Damien
Worm of the same name and was adapted by showrunner Damian Kindler and starred Tamara Taylor and J.C. MacKenzie. It was also produced
by High Park Entertainment.
|
|
●
|
Locke
& Key premiered on Netflix on February 7, 2020. The show is based on the graphic novels of Joe Hill and Gabriel Rodriguez
of the same name that are published by IDWP. Seasons two and three have been ordered by Netflix and production began in September
2020.
|
Previously,
IDWE and Ideate Media partnered with AMC Studios to license to BBC America the U.S. broadcast and streaming video on demand (SVOD) rights
to Dirk Gently, a live-action series based on the Douglas Adams novels and related comic books on the same name published
by IDWP. Season one of the series premiered October 22, 2016 in the United States on BBC America. The second and final season aired on
BBC America in 2017. Netflix currently streams both seasons worldwide.
IDWE’s
revenues represented 41% and 37% of our consolidated revenues in the three and six months ended April 30, 2021,respectively. IDWE’s
revenues represented 49% and 44% of our consolidated revenues in the three and six months ended April 30, 2020,respectively.
IDWE’s
revenues represented 37.5% and 53.1% of our consolidated revenues in the fiscal years ended October 31, 2020 and 2019, respectively.
CTM
CTM
Discontinued Operations:
|
●
|
As
a result of the economic downturn related to the COVID-19 pandemic, and the impact it had on CTM, the Company decided to sell CTM
and focus on our entertainment and publishing business. On July 14, 2020, we and Howard Jonas, our Chairman of the Board of
Directors, executed a share purchase agreement pursuant to which we agreed to sell all of the stock of CTM to Mr. Jonas or his
assignee (the “CTM Sale”) for (i) the cancelation of $3.75 million of indebtedness owed to Mr. Jonas by us, (ii) a
contingent payment of up to $3.25 million based upon a recovery of quarterly revenues of CTM to 90% of its fiscal 2019 levels during
the 18-month period following the closing of the CTM Sale, and (iii) a contingent payment if CTM is sold within 36 months for more
than $4.5 million. The CTM Sale closed on February 15, 2021 and CTM is only consolidated up until the sale date with the gain
reflected separately in the Condensed Consolidated Statement of Operations.
|
|
●
|
CTM
has met the criteria for discontinued operations and has been presented as such in the financial statements. In accordance with ASU
2014-08, “Reporting of Discontinued Operations and Disclosures of Disposals of Components of an Entity,” a disposal is
categorized as a discontinued operation if the disposal group is a component of an entity or group of components that meets the held
for sale criteria, is disposed of by sale, or is disposed of other than by sale, and represents a strategic shift that has or will
have a major effect on an entity’s operations and financial results.
|
The
following unaudited pro forma consolidated balance sheet as of October 31, 2019 gives effect to the disposition of CTM in which the assets
are classified as held for sale. The unaudited pro forma consolidated statement of operations for the three months ended and fiscal year
ended October 31, 2019 give pro forma effect to the Company as if CTM was a discontinued operation during last fiscal year.
IDW
Media Holdings, Inc.
Pro
Forma Consolidated Balance Sheet for the Period Ended October 31, 2019
(Unaudited)
(in
thousands, except per share data)
|
|
Historical
IDWMH
(audited)
|
|
|
Pro
Forma
adjustments
(a)(b)
|
|
|
Pro
Forma
Combined
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
10,165
|
|
|
$
|
2,622
|
|
|
$
|
7,543
|
|
Trade
accounts receivable, net
|
|
|
45,253
|
|
|
|
1,791
|
|
|
|
43,462
|
|
Inventory
|
|
|
3,313
|
|
|
|
-
|
|
|
|
3,313
|
|
Prepaid
expenses
|
|
|
2,092
|
|
|
|
773
|
|
|
|
1,319
|
|
Total
current assets
|
|
|
60,823
|
|
|
|
5,186
|
|
|
|
55,637
|
|
Property
and equipment, net
|
|
|
3,078
|
|
|
|
2,516
|
|
|
|
562
|
|
Non-current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxes
receivable
|
|
|
513
|
|
|
|
-
|
|
|
|
513
|
|
Intangible
assets, net
|
|
|
455
|
|
|
|
340
|
|
|
|
115
|
|
Goodwill
|
|
|
2,309
|
|
|
|
2,110
|
|
|
|
199
|
|
Television
costs
|
|
|
9,388
|
|
|
|
-
|
|
|
|
9,388
|
|
Other
assets
|
|
|
571
|
|
|
|
199
|
|
|
|
372
|
|
Total
non-current assets
|
|
|
16,314
|
|
|
|
5,165
|
|
|
|
11,149
|
|
Total
assets
|
|
$
|
77,137
|
|
|
$
|
10,351
|
|
|
$
|
66,786
|
|
Liabilities
and stockholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade
accounts payable
|
|
$
|
2,625
|
|
|
$
|
480
|
|
|
$
|
2,145
|
|
Accrued
expenses
|
|
|
4,173
|
|
|
|
1,137
|
|
|
|
3,036
|
|
Deferred
revenue
|
|
|
2,255
|
|
|
|
1,197
|
|
|
|
1,058
|
|
Bank
loans payable – current portion
|
|
|
29,242
|
|
|
|
-
|
|
|
|
29,242
|
|
Related
party loans payable – current portion
|
|
|
4,550
|
|
|
|
-
|
|
|
|
4,550
|
|
Income
taxes payable
|
|
|
73
|
|
|
|
73
|
|
|
|
-
|
|
Finance
lease obligations – current portion
|
|
|
396
|
|
|
|
396
|
|
|
|
-
|
|
Other
current liabilities
|
|
|
2,068
|
|
|
|
61
|
|
|
|
2,007
|
|
Total
current liabilities
|
|
|
45,382
|
|
|
|
3,344
|
|
|
|
42,038
|
|
Non-current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance
lease obligations – long term portion
|
|
|
683
|
|
|
|
683
|
|
|
|
-
|
|
Bank
loans payable – long term portion
|
|
|
10,500
|
|
|
|
-
|
|
|
|
10,500
|
|
Related
party loans payable – long term portion
|
|
|
4,500
|
|
|
|
-
|
|
|
|
4,500
|
|
Total
non-current liabilities
|
|
|
15,683
|
|
|
|
683
|
|
|
|
15,000
|
|
Total
liabilities
|
|
$
|
61,065
|
|
|
$
|
4,027
|
|
|
$
|
57,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity (see note 3):
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.01 par value; authorized shares – 500; no shares issued at October 31, 2019
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Class
B common stock, $0.01 par value; authorized shares – 12,000; 7,419 shares issued and 6,899 shares outstanding at October 31,
2019
|
|
|
74
|
|
|
|
-
|
|
|
|
74
|
|
Class
C common stock, $0.01 par value; authorized shares – 2,500; 545 shares issued and outstanding at October 31, 2019
|
|
|
5
|
|
|
|
-
|
|
|
|
5
|
|
Stock
subscription receivable
|
|
|
(1,000
|
)
|
|
|
-
|
|
|
|
(1,000
|
)
|
Additional
paid-in capital (b)
|
|
|
96,671
|
|
|
|
43,404
|
|
|
|
53,267
|
|
Accumulated
other comprehensive loss
|
|
|
(60
|
)
|
|
|
(60
|
)
|
|
|
-
|
|
Accumulated
deficit
|
|
|
(78,457
|
)
|
|
|
(37,020
|
)
|
|
|
(41,437
|
)
|
Treasury
stock, at cost, consisting of 519 shares of Class B common stock at October 31, 2019
|
|
|
(1,196
|
)
|
|
|
-
|
|
|
|
(1,196
|
)
|
Total
IDW Media Holdings Inc. stockholders’ equity
|
|
|
16,037
|
|
|
|
6,324
|
|
|
|
9,713
|
|
Non-controlling
interest
|
|
|
35
|
|
|
|
-
|
|
|
|
35
|
|
Total
stockholders’ equity
|
|
|
16,072
|
|
|
|
6,324
|
|
|
|
9,748
|
|
Total
liabilities and stockholders’ equity
|
|
$
|
77,137
|
|
|
$
|
10,351
|
|
|
$
|
66,786
|
|
IDW
Media Holdings, Inc.
Pro
Forma Consolidated Statement of Operations
(Unaudited)
|
|
Three Months
Ended
|
|
|
Fiscal Year
Ended
|
|
|
|
October 31,
2019
|
|
|
October 31,
2019
|
|
(in
thousands, except per share data)
|
|
Historical
IDWMH
(unaudited)
|
|
|
Pro
Forma
Adjustments
(a)
|
|
|
Pro
Forma
Combined
|
|
|
Historical
IDWMH
(audited)
|
|
|
Pro
Forma
Adjustments
(a)
|
|
|
Pro
Forma
Combined
|
|
Revenues
|
|
$
|
33,901
|
|
|
$
|
5,525
|
|
|
$
|
28,376
|
|
|
$
|
62,599
|
|
|
$
|
19,764
|
|
|
$
|
42,835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
costs
|
|
|
42,002
|
|
|
|
1,849
|
|
|
|
40,153
|
|
|
|
56,184
|
|
|
|
7,031
|
|
|
|
49,153
|
|
Selling,
general and administrative
|
|
|
8,718
|
|
|
|
2,570
|
|
|
|
6,148
|
|
|
|
31,152
|
|
|
|
12,737
|
|
|
|
18,415
|
|
Depreciation
and amortization
|
|
|
369
|
|
|
|
301
|
|
|
|
68
|
|
|
|
1,513
|
|
|
|
1,227
|
|
|
|
286
|
|
Bad
debt expense
|
|
|
31
|
|
|
|
31
|
|
|
|
-
|
|
|
|
113
|
|
|
|
80
|
|
|
|
33
|
|
Total
costs and expenses
|
|
|
51,120
|
|
|
|
4,751
|
|
|
|
46,369
|
|
|
|
88,962
|
|
|
|
21,075
|
|
|
|
67,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
income from operations
|
|
|
(17,219
|
)
|
|
|
774
|
|
|
|
(17,993
|
)
|
|
|
(26,363
|
)
|
|
|
(1,311
|
)
|
|
|
(25,052
|
)
|
Interest
expense, net
|
|
|
(17
|
)
|
|
|
(6
|
)
|
|
|
(11
|
)
|
|
|
(208
|
)
|
|
|
(35
|
)
|
|
|
(173
|
)
|
Other
income (expense), net
|
|
|
39
|
|
|
|
44
|
|
|
|
(5
|
)
|
|
|
41
|
|
|
|
56
|
|
|
|
(15
|
)
|
(Loss)
income before income taxes
|
|
|
(17,197
|
)
|
|
|
812
|
|
|
|
(18,009
|
)
|
|
|
(26,530
|
)
|
|
|
(1,290
|
)
|
|
|
(25,240
|
)
|
(Provision
for) benefit from income taxes
|
|
|
57
|
|
|
|
13
|
|
|
|
44
|
|
|
|
38
|
|
|
|
(4
|
)
|
|
|
42
|
|
Net
(loss) income
|
|
|
(17,140
|
)
|
|
|
825
|
|
|
|
(17,965
|
)
|
|
|
(26,492
|
)
|
|
|
(1,294
|
)
|
|
|
(25,198
|
)
|
Net
loss attributable to non-controlling interests
|
|
|
35
|
|
|
|
-
|
|
|
|
35
|
|
|
|
63
|
|
|
|
-
|
|
|
|
63
|
|
Net
(loss) income attributable to IDW Media Holdings, Inc
|
|
$
|
(17,105
|
)
|
|
$
|
825
|
|
|
$
|
(17,930
|
)
|
|
$
|
(26,429
|
)
|
|
$
|
(1,294
|
)
|
|
$
|
(25,135
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share
|
|
$
|
(2.29
|
)
|
|
$
|
0.11
|
|
|
$
|
(2.40
|
)
|
|
$
|
(3.90
|
)
|
|
$
|
(0.19
|
)
|
|
$
|
(3.71
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of shares used in the calculation of basic and diluted income per share:
|
|
|
7,444
|
|
|
|
7,444
|
|
|
|
7,444
|
|
|
|
6,768
|
|
|
|
6,768
|
|
|
|
6,768
|
|
Notes
to the unaudited pro forma statements:
|
(a)
|
Reflects
the elimination of 100% of the CTM segment in the Consolidated Balance Sheets and Consolidated
Statements of Operations.
|
|
(b)
|
Reflects
the intercompany balance with CTM that has been settled and nets to $0.
|
PRESENTATION
OF FINANCIAL INFORMATION
Basis
of presentation
The
condensed consolidated financial statements for the periods reflect our financial position, results of operations, and cash flows. The
financial statements have been prepared using the historical basis for the assets and liabilities and results of operations.
CRITICAL
ACCOUNTING POLICIES
Our
condensed consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted
in the United States. Our significant accounting policies are described in Note 1 to the consolidated financial statements. The preparation
of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses as well as the disclosure of contingent assets and liabilities. Critical accounting policies are those that require
application of management’s most subjective or complex judgments, often as a result of matters that are inherently uncertain and
may change in subsequent periods. Our critical accounting policies include those related to the allowance for doubtful accounts, intangible
assets with indefinite useful lives, valuation of long-lived assets including intangible assets with finite useful lives and ultimate
revenues for television costs. Management bases its estimates and judgments on historical experience and other factors that are believed
to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Results
of Operations
We
evaluate the performance of our operating business segments based primarily on income (loss) from operations. Accordingly, the income
and expense line items below income (loss) from operations are only included in our discussion of the consolidated results of operations.
Net
income IDW Media Holdings, Inc.
Consolidated
(in
thousands) (unaudited)
|
|
|
|
|
|
|
|
Change
|
|
Three
months ended April 30,
|
|
2021
|
|
|
2020
|
|
|
$
|
|
|
%
|
|
Income
from continuing operations
|
|
$
|
433
|
|
|
$
|
1,329
|
|
|
$
|
(896
|
)
|
|
|
(67.4
|
%)
|
Interest
income (expense), net
|
|
|
156
|
|
|
|
(10
|
)
|
|
|
166
|
|
|
|
(1,660.0
|
%)
|
Other
expense, net
|
|
|
(12
|
)
|
|
|
(35
|
)
|
|
|
23
|
|
|
|
(65.7
|
%)
|
Provision
for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
nm
|
|
Net
income from continuing operations
|
|
|
577
|
|
|
|
1,284
|
|
|
|
(707
|
)
|
|
|
(55.1
|
%)
|
Net
loss from discontinued operations
|
|
|
(159
|
)
|
|
|
(1,638
|
)
|
|
|
1,479
|
|
|
|
(90.3
|
%)
|
Gain
on sale of discontinued operations
|
|
|
2,123
|
|
|
|
-
|
|
|
|
2,123
|
|
|
|
nm
|
|
Net
income (loss)
|
|
$
|
2,541
|
|
|
$
|
(354
|
)
|
|
$
|
2,895
|
|
|
|
(817.8
|
%)
|
(in
thousands) (unaudited)
|
|
|
|
|
|
|
|
Change
|
|
Six
months ended April 30,
|
|
2021
|
|
|
2020
|
|
|
$
|
|
|
%
|
|
Loss
from continuing operations
|
|
$
|
(4,687
|
)
|
|
$
|
(4,454
|
)
|
|
$
|
(233
|
)
|
|
|
5.2
|
%
|
Interest
income (expense), net
|
|
|
142
|
|
|
|
(20
|
)
|
|
|
162
|
|
|
|
(810.0
|
%)
|
Other
expense, net
|
|
|
(13
|
)
|
|
|
(61
|
)
|
|
|
48
|
|
|
|
(78.7
|
%)
|
Provision
for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
nm
|
|
Net
loss from continuing operations
|
|
|
(4,558
|
)
|
|
|
(4,535
|
)
|
|
|
(23
|
)
|
|
|
0.5
|
%
|
Net
loss from discontinued operations
|
|
|
(1,280
|
)
|
|
|
(2,692
|
)
|
|
|
1,412
|
|
|
|
(52.5
|
%)
|
Gain
on sale of discontinued operations
|
|
|
2,123
|
|
|
|
-
|
|
|
|
2,123
|
|
|
|
nm
|
|
Net
loss
|
|
$
|
(3,715
|
)
|
|
$
|
(7,227
|
)
|
|
$
|
3,512
|
|
|
|
(48.6
|
%)
|
nm—not meaningful
Income from operations. Income from
operations decreased by ($896,000) for the three months ended April 30, 2021 compared to the three months ended April 30, 2020 due to
a decrease in operating income from IDWE of ($945,000) and an increase in corporate overhead of ($87,000), partially offset by an increase
in operating income at IDWP of $136,000. These changes are more fully described in the separate segment analyses below.
Loss
from operations increased by ($233,000) for the six months ended April 30, 2021 compared to the six months ended April 30, 2020 due to
an increase in operating losses from IDWP of ($329,000) offset by a decrease in losses at IDWE of $54,000 and a decrease in corporate
overhead of $42,000. These changes are more fully described in the separate segment analyses below.
Interest
income (expense), net increased for the three months and six months ended April 30, 2021 compared to the three and six months
ended April 30, 2020 by $166,000 and $162,000, respectively, due to the interest income from the CRA tax credits.
Net
loss from discontinued operations. Net loss from discontinued operations decreased by $1,479,000 for the three months ended April
30, 2021 compared to the three months ended April 30, 2020 due to the sale of CTM which resulted in our not consolidating their financials
into the Company as of February 15, 2021.
Net
loss from discontinued operations decreased by $1,412,000 for the six months ended April 30, 2021 compared to the six months ended April
30, 2020 due to the sale of CTM which resulted in our not consolidating their financials into the Company as of February 15, 2021.
Gain
on sale of discontinued operations increased by $2,132,000 for the three and six months ended April 30, 2021 compared to April 30,
2020 as a result of the sale of CTM.
IDWP
(in
thousands) (unaudited)
|
|
|
|
|
|
|
|
Change
|
|
Three
months ended April 30,
|
|
2021
|
|
|
2020
|
|
|
$
|
|
|
%
|
|
Revenues
|
|
$
|
5,988
|
|
|
$
|
4,681
|
|
|
$
|
1,307
|
|
|
|
27.9
|
%
|
Direct
cost of revenues
|
|
|
3,335
|
|
|
|
2,505
|
|
|
|
830
|
|
|
|
33.1
|
%
|
Selling,
general and administrative
|
|
|
3,102
|
|
|
|
2,770
|
|
|
|
332
|
|
|
|
12.0
|
%
|
Depreciation
and amortization
|
|
|
50
|
|
|
|
52
|
|
|
|
(2
|
)
|
|
|
(3.8
|
%)
|
Bad
debt expense
|
|
|
11
|
|
|
|
-
|
|
|
|
11
|
|
|
|
nm
|
|
Loss
from operations
|
|
$
|
(510
|
)
|
|
$
|
(646
|
)
|
|
$
|
136
|
|
|
|
(21.1
|
%)
|
(in
thousands) (unaudited)
|
|
|
|
|
|
|
|
Change
|
|
Six
months ended April 30,
|
|
2021
|
|
|
2020
|
|
|
$
|
|
|
%
|
|
Revenues
|
|
$
|
11,636
|
|
|
$
|
10,981
|
|
|
$
|
655
|
|
|
|
6.0
|
%
|
Direct
cost of revenues
|
|
|
6,506
|
|
|
|
6,033
|
|
|
|
473
|
|
|
|
7.8
|
%
|
Selling,
general and administrative
|
|
|
5,903
|
|
|
|
5,391
|
|
|
|
512
|
|
|
|
9.5
|
%
|
Depreciation
and amortization
|
|
|
99
|
|
|
|
111
|
|
|
|
(12
|
)
|
|
|
(10.8
|
%)
|
Bad
debt expense
|
|
|
11
|
|
|
|
-
|
|
|
|
11
|
|
|
|
nm
|
|
Loss
from operations
|
|
$
|
(883
|
)
|
|
$
|
(554
|
)
|
|
$
|
(329
|
)
|
|
|
59.4
|
%
|
nm—not meaningful
Included
in IDWP’s segment from June 1, 2019 through March 31, 2020 is Clover Press. As of April 1, 2020, Clover Press is no longer a consolidated
entity and became a cost method investment. Therefore all the Clover Press changes noted below are a result of a nil balance in April
30, 2021.
Revenues.
Revenues increased by $1,307,000 in the three months ended April 30, 2021, compared to the three months ended April 30, 2020. IDWP revenue
increased $1,425,000 driven by several high-performing direct market titles and increased direct-to-consumer sales, and due to the temporary
halt of direct sales in 2020. Games revenue increased $106,000 due to fulfillment of a direct-to-consumer Galaxy Hunters games
campaign. Digital sales decreased ($219,000) largely related to increased revenues from several new platforms in 2020. Licensing and
royalty revenues increased $111,000 due primarily to an increase in foreign license revenue. This cumulative increase was offset by an
overall increase in sales returns and discounts of ($58,000). Additionally, Clover Press revenues decreased by ($58,000) as they are
no longer consolidated in the three months ended April 30, 2021.
Revenues
increased by $655,000 in the six months ended April 30, 2021, compared to the six months ended April 30, 2020. Publishing revenue increased
$1,348,000 driven by several high-performing direct market titles and increased direct-to-consumer sales and due to temporary halt of
direct sales in 2020, offset by a decrease in book market sales. Games revenue decreased in the six months ended April 30, 2021 by ($760,000)
due to fulfillment of a TMNT: Adventure Game direct-to-consumer games campaign in the six months ended April 30, 2020. Digital
sales increased $62,000 due to continued strong sales across all platforms, licensing and royalty revenues increased $80,000 driven by
increased foreign license revenue, and sales returns and discounts decreased by $56,000. Additionally, Clover Press revenues decreased
by ($131,000) as they are no longer consolidated in the six months ended April 30, 2021.
Direct cost of revenues. IDWP direct cost of revenues increased by
$830,000 in the three months ended April 30, 2021 compared to the three months ended April 30, 2020. Direct cost of revenues increased
by $473,000 in the six months ended April 30, 2021, compared to the six months ended April 30, 2020. IDWP direct cost of revenues consists
primarily of printing expenses, costs of artists and writers, and royalties. Additionally, as of April 30, 2021 IDWP performed a full
review of game development costs. As a result, it was determined that capitalized creative costs, advanced royalties, and vendor deposits
of $231,000 related to games that would no longer be manufactured, and these amounts were expensed. This adjustment is a one-time write-down
and will not have impact on financial statements in future periods. Additionally, Clover Press direct cost of revenues decreased by ($26,000)
in the three months ended April 30, 2021 compared to the three months ended April 30, 2020. Clover Press direct cost of revenues decreased
by ($55,000) in the six month ended April 30, 2021 compared to the six months ended April 30, 2020 as they are no longer consolidated.
A portion of inventory was donated by the owners for the start-up of the Company.
IDWP’s
gross margin for the three months ended April 30, 2021 decreased to 44.3% from 46.5% for the three months ended April 30, 2020. Gross
margin for the six months ended April 30, 2021 decreased to 44.1% from 45.1% for the six months ended April 30, 2020.
Selling,
General and Administrative. IDWP selling, general and administrative expenses increased by $332,000 in the three months ended April
30, 2021 compared to the three months ended April 30, 2020 primarily due to increases in salaries and benefits of $365,000, overhead
allocations of $252,000, repairs and maintenance of $44,000 and other net changes of $6,000. These were offset by decreases in marketing
expenses of ($193,000) and occupancy and related expenses of ($45,000). Additionally, Clover Press consolidated selling, general, and
administrative decreased by ($97,000) as they are no longer consolidated in the three months ended April 30, 2021.
IDWP
selling, general and administrative expenses increased by $512,000 in the six months ended April 30, 2021 compared to the six months
ended April 30, 2020 primarily due to increases in salaries and benefits of $633,000, overhead allocations of $464,000, repairs and maintenance
of $55,000, and employee recruitment of $33,000. These were offset by decreases in marketing expenses of ($199,000), occupancy and related
expenses of ($91,000), selling & distribution expenses of ($42,000), and other net changes of ($25,000). Additionally, Clover Press
consolidated selling, general, and administrative decreased by ($316,000) as they are no longer consolidated in the six months ended
April 30, 2021.
As
a percentage of IDWP’s revenues, selling, general and administrative expenses in the three months ended April 30, 2021 were 59.05%
compared to 50.51% in the three months ended April 30, 2020, and 62.72% in the six months ended April 30, 2021 compared to 56.01% in
the six months ended April 30, 2020.
IDWE
(in
thousands) (unaudited)
|
|
|
|
|
|
|
|
Change
|
|
Three
months ended April 30,
|
|
2021
|
|
|
2020
|
|
|
$
|
|
|
%
|
|
Revenues
|
|
$
|
4,152
|
|
|
$
|
4,587
|
|
|
$
|
(435
|
)
|
|
|
(9.5
|
%)
|
Direct
cost of revenues
|
|
|
1,394
|
|
|
|
790
|
|
|
|
604
|
|
|
|
76.5
|
%
|
Selling,
general and administrative
|
|
|
1,533
|
|
|
|
1,627
|
|
|
|
(94
|
)
|
|
|
(5.8
|
%)
|
Depreciation
and amortization
|
|
|
9
|
|
|
|
9
|
|
|
|
-
|
|
|
|
0.0
|
%
|
Income
from operations
|
|
$
|
1,216
|
|
|
$
|
2,161
|
|
|
$
|
(945
|
)
|
|
|
(43.7
|
%)
|
(in thousands) (unaudited)
|
|
|
|
|
|
|
|
Change
|
|
Six
months ended April 30,
|
|
2021
|
|
|
2020
|
|
|
$
|
|
|
%
|
|
Revenues
|
|
$
|
6,916
|
|
|
$
|
8,624
|
|
|
$
|
(1,708
|
)
|
|
|
(19.8
|
%)
|
Direct
cost of revenues
|
|
|
7,453
|
|
|
|
8,878
|
|
|
|
(1,425
|
)
|
|
|
(16.1
|
%)
|
Selling,
general and administrative
|
|
|
2,781
|
|
|
|
3,119
|
|
|
|
(338
|
)
|
|
|
(10.8
|
%)
|
Depreciation
and amortization
|
|
|
18
|
|
|
|
17
|
|
|
|
1
|
|
|
|
5.9
|
%
|
Loss
from operations
|
|
$
|
(3,336
|
)
|
|
$
|
(3,390
|
)
|
|
$
|
54
|
|
|
|
(1.6
|
%)
|
nm—not meaningful
Revenues.
For the three months ended April 30, 2021 revenues decreased by ($435,000) compared to the three months ended April 30, 2020. The
revenues for the three months ended April 30, 2021 include; Wynonna Earp television revenue of $655,000, Wynonna Earp
merchandise of $19,000, and the completion of the CRA audit which established the final tax credit for V Wars and October
Faction of $3,331,000. In the three months ended April 30, 2020, we recognized revenues on delivery of episodes of Locke
& Key in the amount of ($4,000,000) and Dirk Gently in the amount of ($440,000).
For the six months ended April 30, 2021, revenues
decreased by ($1,708,000) compared to the six months ended April 30, 2020. The revenues from the six months ended April 30, 2021 includes;
Wynonna Earp television revenue of $3,375,000, Wynonna Earp merchandise of $58,000, and the completion of the CRA audit
which established the final tax credit for V Wars and October Faction of $3,331,000. In the six months ended April 30, 2020,
we recognized revenues on delivery of episodes of October Faction in the amount of ($4,032,000), Locke & Key in the
amount of ($4,000,000) and Dirk Gently in the amount of ($440,000).
Direct
costs of revenues. Direct cost of revenues consists primarily of the amortization of production costs that were capitalized during
the production of the television episodes and direct costs related to revenue recognized during related periods.
Direct
costs of revenues in the three months ended April 30, 2021 increased by $604,000 compared to the three months ended April 30, 2020. The
increase is related to the amortization from episodes of Wynonna Earp Season 4 in the amount of $970,000 that were delivered in
the three months ended April 30, 2021. In the three months ended April 30, 2020 the related amortization costs were from Locke &
Key in the amount of ($1,333,000) and cost refinements from V Wars and October Faction in the amount of $971,000, and
other costs of ($4,000).
Direct
costs of revenues for the six months ended April 30, 2021 decreased by ($1,425,000) compared to the six months ended April 30, 2020.
For the six months ended April 30, 2020 the amortization costs were from Locke & Key in the amount of ($1,333,000), cost refinements
from October Faction and V Wars in the amount of ($7,070,000) and other costs of ($4,000). Offset by the amortization for
the six months ended April 30, 2021 from episodes of Wynonna Earp Season 4 in the amount of $4,918,000 and the impairment charges
of $2,064,000.
IDWE’s
gross margin for the three months ended April 30, 2021 was 66.4% compared to 82.8% for the three months ended April 30, 2020. Gross margin
for the six months ended April 30, 2021 was (7.8%) compared to (2.9%) for the six months ended April 30, 2020. These gross margin figures
are aligned with the rationale provided for revenues and direct costs of revenues.
Selling, General and Administrative. Selling,
General and Administrative expenses decreased by ($94,000) during the three months ended April 30, 2021 compared to the three months ended
April 30, 2020. The decrease was driven by decrease in marketing of ($123,000), travel and entertainment of ($13,000), and promotional
production materials ($292,000), offset by higher salary and benefits of $141,000, consulting fees of $57,000, legal fees of $40,000,
accounting fees of $34,000, overhead allocations of $55,000, and other expenses of $7,000.
Selling, general and administrative expenses decreased by ($338,000)
during the six months ended April 30, 2021 compared to the six months ended April 30, 2020. The decrease was driven by lower rent of ($27,000),
marketing of ($275,000), travel and entertainment of ($55,000), and promotional production materials ($446,000), offset by salary and
benefits of $232,000, legal fees of $54,000, recruitment fees of $92,000, overhead allocations of $83,000 and other expenses of $4,000.
As a percentage of IDWE’s revenues, selling, general and administrative
expenses in the three months ended April 30, 2021 were 40.95% compared to 49.49% in the three months ended April 30, 2020, and 37.28%
in the six months ended April 30, 2021 compared to 43.99% in the six months ended April 30, 2020.
Results
of operations for the year ended October 31, 2020
Net
(loss) IDW Media Holdings, Inc.
Consolidated
(in thousands)
|
|
|
|
|
|
|
|
Change
|
|
Fiscal
year ended October 31,
|
|
2020
|
|
|
2019
|
|
|
$
|
|
|
%
|
|
Loss
from operations
|
|
$
|
(9,324
|
)
|
|
$
|
(25,052
|
)
|
|
$
|
15,728
|
|
|
|
(62.8
|
%)
|
Interest
income (expense), net
|
|
|
(46
|
)
|
|
|
(173
|
)
|
|
|
127
|
|
|
|
(73.4
|
%)
|
Other
income (expense), net
|
|
|
(318
|
)
|
|
|
(15
|
)
|
|
|
(303
|
)
|
|
|
2020.0
|
%
|
(Benefit
from) provision for income taxes
|
|
|
-
|
|
|
|
42
|
|
|
|
(42
|
)
|
|
|
(100.0
|
%)
|
Net
loss from continuing operations
|
|
|
(9,688
|
)
|
|
|
(25,198
|
)
|
|
|
15,510
|
|
|
|
(61.6
|
%)
|
Net
loss from discontinued operations
|
|
|
(4,110
|
)
|
|
|
(1,294
|
)
|
|
|
(2,816
|
)
|
|
|
217.6
|
%
|
Net
loss
|
|
|
(13,798
|
)
|
|
|
(26,492
|
)
|
|
|
12,694
|
|
|
|
(47,9
|
%)
|
Net
income (loss) income attributable to non-controlling interest
|
|
|
-
|
|
|
|
63
|
|
|
|
(63
|
)
|
|
|
(100.0
|
%)
|
Net
loss attributable to IDW Media Holdings, Inc.
|
|
$
|
(13,798
|
)
|
|
$
|
(26,429
|
)
|
|
$
|
12,631
|
|
|
|
(47.8
|
%)
|
Loss
from operations. The Company’s loss from operations decreased by $15,728,000 for the fiscal year ended October 31, 2020 compared
to the fiscal year ended October 31, 2019 due to decreases in operating losses from IDWP and IDWE in the amounts of $5,102,000, and $11,258,000.
These changes were the result of lower costs and improved gross profits. Additionally, starting in the first quarter of 2020, IDWMH stopped
allocating all of its costs to the operating segments thus reducing the operating losses at the segments and increasing the total operating
loss by ($632,000) for the fiscal year ended October 31, 2020. These changes are more fully described in the separate segment analyses
below.
Interest
expense, net. Interest expense decreased by $127,000 for the fiscal year ended October 31, 2020, compared to the fiscal year ended
October 31, 2019, principally due to changes in the financing operations in the IDWE segment.
Other
expenses. Other expenses increased by $303,000 for the fiscal year ended October 31, 2020 compared to the fiscal year ended October
31, 2019 due to the AMT tax refund received by IDWMH and split with CTM.
Income
tax expense. Income tax expense is nil as at October 31, 2020 as compared to October 31, 2019 which had a tax benefit resulting in
a decrease of ($42,000).
Income
attributable to non-controlling interest. On May 15, 2019, the Company acquired a majority ownership in Clover Press through capital
funding. The minority owners include former IDWMH executives and IDWP founders, Ted Adams and Robbie Robbins. Effective April 1, 2020,
our interest in Clover Press decreased to 19.9% and IDWMH no longer consolidates the operations of Clover Press, but rather values the
investment at cost.
Net
loss from discontinued operations. Net loss from discontinued operations increased by $2,816,000 for the fiscal year ended October
31, 2020 compared to the fiscal year ended October 31, 2019 due to the COVID-19 impacts on the travel and tourism industry.
IDWP
(in
thousands)
|
|
|
|
|
|
|
|
Change
|
|
Fiscal
year ended October 31,
|
|
2020
|
|
|
2019
|
|
|
$
|
|
|
%
|
|
Revenues
|
|
$
|
23,850
|
|
|
$
|
20,094
|
|
|
$
|
3,756
|
|
|
|
18.7
|
%
|
Direct
cost of revenues
|
|
|
12,663
|
|
|
|
12,842
|
|
|
|
(179
|
)
|
|
|
(1.4
|
%)
|
Selling,
general and administrative
|
|
|
11,074
|
|
|
|
12,158
|
|
|
|
(1,084
|
)
|
|
|
(8.9
|
%)
|
Depreciation
and amortization
|
|
|
216
|
|
|
|
265
|
|
|
|
(49
|
)
|
|
|
(18.5
|
%)
|
Bad
debt expense
|
|
|
-
|
|
|
|
34
|
|
|
|
(34
|
)
|
|
|
(100.0
|
%)
|
Loss
from operations
|
|
$
|
(103
|
)
|
|
$
|
(5,205
|
)
|
|
$
|
5,102
|
|
|
|
(98.0
|
%)
|
Included
in the IDWP segment from June 1, 2019 through March 31, 2020 are IDWP and Clover Press, two publishing entities which operate independently
of one another. As of April 1, 2020, Clover Press is no longer a consolidated entity and became a cost method investment.
Revenues.
IDWP’s revenues increased by $3,756,000 in the fiscal year ended October 31, 2020 compared to the fiscal year ended October 31,
2019.
IDWP’s
revenues increased by $3,739,000 in the fiscal year ended October 31, 2020 compared to the fiscal year ended October 31, 2019. Strong
holiday sales in the first quarter combined with continued robust book market sales and reduced returns in the following quarters led
to a $2,705,000 increase in publishing revenue. Games revenue increased $155,000 largely related to the fulfillment of a direct to consumer
games campaign in fiscal year ended October 31, 2020. Digital sales increased $633,000 due to strong sales in the second through fourth
quarters. An increase in foreign licensing revenue and royalty revenues related to titles co-published at other publishers led to a $428,000
increase in licensing & royalty revenue. These increases were offset by other net revenue changes of ($182,000) primarily related
to decreased creative service revenue due to custom projects in fiscal year ended October 31, 2019.
Clover
Press consolidated revenues were $130,000 for the fiscal year ended October 31, 2020 and $113,000 for the fiscal year ended October 31,
2019. All sales pertained to book sales.
Direct
cost of revenues. IDWP’s direct cost of revenues decreased by ($179,000) in the fiscal year ended October 31, 2020 compared
to the fiscal year ended October 31, 2019.
IDWP
direct cost of revenues consists primarily of printing expenses, costs of artists and writers, and royalties. IDWP direct costs of revenues
decreased in the fiscal year ended October 31, 2020 compared to the fiscal year ended October 31, 2019 by ($219,000).
Clover
Press direct cost of revenues relate to publishing costs and were $55,000 and $15,000 for the fiscal years ended October 31, 2020 and
October 31, 2019, respectively. A portion of inventory was donated by the owners for the start-up of the Company.
IDWP’s
gross margin for the fiscal year ended October 31, 2020 increased to 46.9% from 36.1% for the fiscal year ended October 31, 2019. The
increase was principally as a result of higher revenues, change in product mix, and delayed new releases, which generally have a higher
initial cost than backlist sales, in the current periods.
Selling,
General and Administrative. IDWP’s selling, general, and administrative expenses decreased by ($1,084,000) in the fiscal year
ended October 31, 2020 compared to the fiscal year ended October 31, 2019.
IDWP
selling, general and administrative expenses decreased by ($979,000) in the fiscal year ended October 31, 2020, compared to the fiscal
year ended October 31, 2019 due primarily to decreases in overhead allocations of ($618,000), salaries and benefits (including non-cash
compensation) of ($301,000), and occupancy of ($114,000), and other net changes of ($27,000). Decreased expenses were partially offset
by increases in marketing expenses of $20,000 and selling & distribution expenses of $61,000.
Clover
Press consolidated selling, general, and administrative expenses were $315,000 and $420,000 for the fiscal years ended October 31, 2020
and October 31, 2019, respectively. These costs mostly relate to payroll and rent.
As
a percentage of IDWP’s revenues, selling, general and administrative expenses in fiscal years ended October 31, 2020 and October
31, 2019 were 46.4% and 60.5%, respectively.
IDWE
(in thousands)
|
|
|
|
|
|
|
|
Change
|
|
Fiscal
year ended October 31,
|
|
2020
|
|
|
2019
|
|
|
$
|
|
|
%
|
|
Revenues
|
|
$
|
14,312
|
|
|
$
|
22,741
|
|
|
$
|
(8,429
|
)
|
|
|
(37.1
|
%)
|
Direct
cost of revenues
|
|
|
16,867
|
|
|
|
36,310
|
|
|
|
(19,443
|
)
|
|
|
(53.5
|
%)
|
Selling,
general and administrative
|
|
|
5,568
|
|
|
|
6,256
|
|
|
|
(688
|
)
|
|
|
(11.0
|
%)
|
Depreciation
and amortization
|
|
|
33
|
|
|
|
22
|
|
|
|
11
|
|
|
|
50.0
|
%
|
Bad
debt expense
|
|
|
433
|
|
|
|
-
|
|
|
|
433
|
|
|
|
100.0
|
%
|
Loss
from operations
|
|
$
|
(8,589
|
)
|
|
$
|
(19,847
|
)
|
|
$
|
11,258
|
|
|
|
(56.7
|
%)
|
Revenues.
IDWE’s revenues decreased by ($8,429,000) in the fiscal year ended October 31, 2020 compared to the fiscal year ended October 31,
2019. The decrease is due to decreases in revenues from V Wars of ($13,437,000) and October Faction of ($5,072,000), partially
offset by increases in revenues from Wynonna Earp of $5,421,000 Locke & Key of $4,000,000 and Dirk Gently of
$659,000.
Direct
costs of revenues. IDWE’s direct costs of revenues generally consist of film cost amortization as calculated per the guidelines
of the individual film forecast method (IFF) as well as costs required to distribute the shows. Direct cost of revenues decreased by
($19,443,000) in the fiscal year ended October 31, 2020 compared to the fiscal year ended October 31, 2019. The change in direct cost
of revenues for the periods relate principally to the decrease of V Wars production costs of ($16,647,000), October Faction
pilot costs of ($7,415,000) and Dirk Gently of ($3,102,000), net of increases in direct costs of Wynonna Earp of $6,502,000,
Locke & Key of $1,214,000, and other net changes of $5,000.
IDWE’s
gross margin for the fiscal year ended October 31, 2020 was (17.9%) compared to (59.7%) for the fiscal year ended October 31, 2019. The
increase in gross margin for fiscal year ended October 31, 2020 is a result of the higher production costs and overages associated with
V Wars and October Faction in fiscal 2019.
Selling,
General and Administrative. IDWE’s selling, general and administrative expenses decreased by ($688,000) in the fiscal year
ended October 31, 2020 compared to the fiscal year ended October 31, 2019. The decrease reflects decreases in SG&A allocation from
the Company of ($991,000), non-cash comp of ($513,000), insurance of ($50,000), travel, lodging and meals of ($32,000), offset by increases
in marketing of $93,000, compensation and benefits of $368,000, rent of $64,000, professional fees of $23,000, cost of capital of $287,000,
office supplies and freight cost $46,000 and other net changes of $17,000.
As
a percentage of IDWE’s revenues, selling, general and administrative expenses was 38.9% in the fiscal year ended October 31, 2020
compared to 27.5% in the fiscal year ended October 31, 2019.
Liquidity
and Capital Resources
General
We satisfy our cash requirements primarily through
cash provided by the Company’s financing and operating activities.
|
|
Six
months ended
April 30,
|
|
(in
thousands) (unaudited)
|
|
2021
|
|
|
2020
|
|
Cash
flows (used in) provided by:
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
$
|
(2,301
|
)
|
|
$
|
8,665
|
|
Investing
activities
|
|
|
(974
|
)
|
|
|
(414
|
)
|
Financing
activities
|
|
|
(1,319
|
)
|
|
|
(2,504
|
)
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
39
|
|
|
|
(45
|
)
|
Net
(decrease) increase in cash and cash equivalents
|
|
$
|
(4,555
|
)
|
|
$
|
5,702
|
|
Operating Activities. Our cash flow from
operations varies from quarter to quarter and from year to year, depending on our operating results and the timing of operating cash receipts
and payments, specifically trade accounts receivable and trade accounts payable. Cash flows were used in operating activities based on
these factors amounting to approximately ($2,301,000) and $8,665,000 for the six months ended April 30, 2021 and 2020, respectively.
Investing
Activities. Our capital expenditures were approximately $72,000 and $299,000 in the six months ended April 30, 2021 and 2020, respectively.
Financing Activities. During the six months
ended April 30, 2021 and 2020 we repaid bank loans in the amounts of $2,540,000 and $13,732,000, respectively. In the six months ended
April 30, 2021 and 2020 we received PPP loans of $1,195,680 and $1,195,679, respectively. In addition, we issued common stock for proceeds
of $25,000 and $783,000 in the six months ended April 30, 2021 and 2020, respectively.
|
|
Fiscal
year ended October 31,
|
|
(in
thousands)
|
|
2020
|
|
|
2019
|
|
Cash
flows (used in) provided by:
|
|
|
|
|
|
|
|
|
Operating
activities
|
|
$
|
15,989
|
|
|
$
|
(24,990
|
)
|
Investing
activities
|
|
|
(350
|
)
|
|
|
(1,125
|
)
|
Financing
activities
|
|
|
(13,642
|
)
|
|
|
22,667
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
-
|
|
|
$
|
168
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
$
|
1,997
|
|
|
$
|
(3,280
|
)
|
Operating
Activities. Our cash flow from operations varies from quarter to quarter and from year to year, depending on our operating results
and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable. Cash flows
were used in operating activities based on these factors amounting to approximately $15,989,000 and ($24,990,000) for the fiscal years
ended October 31, 2020 and 2019, respectively.
Investing
Activities. Our capital expenditures were approximately $420,000 and $1,113,000 in the fiscal years ended October 31, 2020 and 2019,
respectively.
Financing
Activities. During the fiscal years ended October 31, 2020 and 2019 we repaid finance/capital lease obligations in the amounts of
$404,000 and $410,000, respectively, and repaid bank loans in the amounts of $26,559,000 and $9,378,000, respectively. We received funds
from our bank loans in the amounts of $1,021,000 and $19,382,000 for the fiscal years ended October 31, 2020 and 2019, respectively. We
repaid the loan facility with our Chairman in the amounts of $5,300,000 and $19,000,000 in the fiscal years ended October 31, 2020 and
2019, respectively. In March 2020, we issued common stock for proceeds of $8,306,000 net of financing costs in connection with a private
placement offering. In April 2019, we issued common stock for net proceeds of $19,004,000 in connection with a rights offering.
Changes
in Trade Accounts Receivables and Allowance for Doubtful Accounts
Trade
accounts receivable decreased to approximately $22,063,000 at April 30, 2021 compared to $22,921,000 at October 31, 2020 principally
due to changes in the accruals and collection of IDWE revenue, as well as the timing of receipts of payments of other receivable
balances. The allowance for doubtful accounts as a percentage of gross trade accounts receivable was 0.65% at April 30, 2021 compared
to 0.13% at October 31, 2020, reflecting the decrease in receivable balances and our collectible receivable experience.
Trade
accounts receivable decreased to approximately $22,921,000 at October 31, 2020 compared to $43,462,000 at October 31, 2019 principally
due to changes in the collection of IDWE revenue, as well as the timing of collections of other receivable balances. The allowance for
doubtful accounts as a percentage of gross trade accounts receivable was 0.13% at October 31, 2020 compared to 0.07% at October 31, 2019,
reflecting the decrease in receivable balances and our collectible receivable experience, principally related to CTM segment receivables.
Other
Sources and Uses of Resources
Where
appropriate, we evaluate strategic investments and acquisitions to complement, expand, and/or enter into new businesses. In considering
acquisitions and investments, we search for opportunities to profitably grow our existing businesses, to add qualitatively to the range
of businesses in our portfolio and to achieve operational synergies. At this time, we cannot guarantee that we will be presented with
acquisition opportunities that meet our return on investment criteria, or that our efforts to make acquisitions that meet our criteria
will be successful.
The
COVID-19 pandemic has had a negative financial impact on our business with regard to (a) significant losses of revenues and profits at
CTM due to the significant decline of tourism in the United States and the closing of Broadway shows,(b) the temporary closure of IDWP’s comic book distributor due to COVID-19 disruptions, and (c) production delays of IDWE’s television show
Wynonna Earp. Its production schedule has been delayed which was a direct result of the COVID-19 pandemic that has affected virtually
the entire filmed entertainment industry. This production delay has negatively impacted the delivery, which in turn will push out
our cash receipts.
In
the fourth quarter of fiscal 2020 we paid “pull down” costs pursuant to a previously announced, multi-year agreement with
Cineflix related to international sales of Wynonna Earp. Specifically, under this agreement, IDWE purchased the distribution rights to
seasons one and two of Wynonna Earp from the current licensor (Netflix) and has agreed to transfer those rights to Cineflix. Cineflix
will be the international distributor of all four seasons of Wynonna Earp. Due to changes in competition as well as the COVID-19
pandemic, the Cineflix deal is not expected to contribute as much as originally expected to IDW’s revenue and operating cash flow
in fiscal years 2021 and 2022 as originally anticipated at the inception of the deal in 2019.
We
anticipate that our expected cash inflows from operations during the next twelve months together with our working capital, including
the balance of cash and cash equivalents held as April 30, 2021 and proceeds from the private placement closed March 9, 2020, will be
sufficient to sustain our next year of operations.
The
Company plans to use the net proceeds we receive from this offering for the following purposes: most heavily for the development of original
IP and the purchase of associated publishing, media, and merchandise rights to be used across multiple platforms (e.g., print, television,
new media) as well as supplemental IP acquisition and marketing spend for these newly created IP franchises; additionally for
technology investment for our website, applications, data and business intelligence; talent investment as we look to expand our kids,
middle grade, young adult, and family genres, and to further diversify into animation; and to pursue potential acqui-hire and/or bolt-on
mergers and acquisition opportunities, should such opportunities arise.
We
do not have any agreements at this time to potentially acquire other entities or businesses. The foregoing represents our current intentions
based upon our present plans and business conditions to use and allocate the net proceeds of this offering. However, the nature, amounts
and timing of our actual expenditures may vary significantly depending on numerous factors. As a result, our management has and will
retain broad discretion over the allocation of the net proceeds from this offering. We may find it necessary or advisable to use the
net proceeds from this offering for other purposes, and we will have broad discretion in the application of net proceeds from this offering.
To the extent that the net proceeds we receive from this offering are not immediately used for the above purposes, we intend to invest
our net proceeds in short-term, interest-bearing bank deposits or debt instruments.
PPP
Funds
On
April 2, 2021, we received loan proceeds of $1,195,680 (the “PPP Loan”)
from Bank of America, N.A. pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES
Act, as amended. The PPP Loan, which was in the form of a Note dated April 1, 2021 issued by the Company, matures on April 1, 2026 and
bears interest at a rate of 1% per annum, payable monthly commencing on November 2, 2021. The Note may be prepaid by the Company at any
time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue
group health care benefits, mortgage payments, rent, utilities, and interest on certain other debt obligations. The Company intends to
use the entire PPP Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the PPP Loan may be forgiven if
they are used for qualifying expenses as described in the CARES Act.
On
April 27, 2020, IDWMH. (inclusive of IDWP and IDWE) received loan proceeds of $1,195,679 from Bank of America, N.A. pursuant to the PPP
under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The IDWMH PPP Loan, which was in the form of a Note dated
April 15, 2020 issued by the Company, matures on April 15, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing
on November 24, 2020. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties, and under the
terms of the loan, payments can be deferred for six months. Funds from the IDWMH PPP Loan may be used primarily for payroll costs and
costs used to continue group health care benefits, and, up to a limited extent, on mortgage payments, rent, utilities, interest and other
expenses as described in the CARES Act. Under the terms of the PPP, certain amounts of the IDWMH PPP Loan may be forgiven if they are
used for those qualifying expenses. The Company used the entire IDWMH PPP Loan amount for those qualifying expenses.
IDWE
The
two capital raises described assisted IDWE in achieving its long-term strategic plans.
The
Company’s 2020 private placement of shares of Class B Common Stock at $6.00 per share, pursuant to which the Company issued 2,051,002
shares of Class B Common Stock for gross proceeds of approximately $12,300,000 inclusive of $4.0 million debt-to-equity conversion by
the Company’s Chairman of the Board of Directors and former Chief Executive Officer, Howard S. Jonas to pay down the remaining
down bridge loan.
Total
proceeds of the issuance of Class B Common Stock in the amount of $23,605,000 from the Company’s 2019 three rounds of offerings,
in connection with the Company’s private placements, provided a portion of the funding for IDWE’s operations, in addition
to the Company’s other working capital needs. $8,000,000 was used to partially pay back the bridge loan.
Dividends
In
light of the current growth initiatives of the Company, particularly the television property development of IDWE, the Board of Directors
determined to continue the suspension of the payment of cash dividends. Projects that have already been approved and commenced
are placing demands on the Company’s resources, and management and the Board determined that it was in the best interests of the
stockholders to utilize available cash resources for investment in these promising and exciting growth opportunities. This position
may continue depending on the timing of projects, the cash generation of the Company’s operations and any financing that the Company
may consummate. Decisions as to the payment of dividends in future periods will depend on the financial position, results of operations,
prospects and current and projected competing demands for cash resources at the relevant time. The Company continues its position
of prudent and conservative cash management and is committed to using all of its resources to maximize stockholder value, balancing short,
medium and long-term interests.
Foreign
Currency Risk
Beginning in 2018, IDWE is the obligor on Canadian loans. There is
a foreign currency exchange risk, as the value of liabilities denominated in CAD will fluctuate due to changes in exchange rates, which
will affect our production costs. These loans mature on May 31, 2021 and they have been fully paid off on May 3, 2021 and May 10, 2021.
Foreign
Exchange Balances Held in CAD ( in thousands)
|
|
|
April 30,
2021
|
|
|
|
October 31,
2020
|
|
Cash
and cash equivalents
|
|
$
|
876
|
|
|
$
|
937
|
|
Accounts
receivable
|
|
|
20,021
|
|
|
|
16,355
|
|
Bank
loans
|
|
|
14,329
|
|
|
|
18,917
|
|
Total
|
|
$
|
35,226
|
|
|
$
|
36,209
|
|
Off-
Balance Sheet Arrangements
We
do not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that are reasonably likely to have
a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.
BUSINESS
Overview
We
were incorporated in the State of Delaware in May 2009.
On
September 14, 2009, IDT Corporation, our former parent corporation, completed a tax-free spinoff (the “Spin-Off”) of us through
a pro rata distribution of our common stock to its stockholders of record as of the close of business on August 3, 2009.
The
Company is a holding company consisting of the following principal businesses:
|
●
|
IDW
Publishing (“IDWP”), a publishing company that creates comic books, graphic novels,
digital content and games through its imprints IDW, IDW Games and Top Shelf Productions;
and
|
|
●
|
IDW
Entertainment (“IDWE”), a company that leverages properties, principally those
of IDWP, into television series developing, producing and distributing original content worldwide.
|
IDW
Publishing
IDWP
is an award-winning publisher of comic books, original graphic novels, and art books as well as board and tabletop games. Founded in
1999, IDWP has a long tradition of supporting original, creator-driven titles. In 2002, IDWP published 30 Days of Night by Steve
Niles and Ben Templesmith followed by other horror titles that kickstarted a resurgence in horror-comic publishing across the industry.
Since then, IDWP has significantly diversified its publications. Joe Hill and Gabriel Rodríguez’s Locke & Key,
Jonathan Maberry’s V Wars, Stan Sakai’s Usagi Yojimbo, Walter Simonson’s Ragnarök, Beau Smith’s
Wynonna Earp, Chris Ryall and Ashley Wood’s Zombies vs Robots, Joe Hill and Martin Simmonds’ Dying is Easy
are among the hundreds of award-winning titles published since IDWP’s inception. Titles such as Canto, Ghost Tree, Road
of Bones, Mountainhead, and others in active development now.
In
2015, IDWP acquired Top Shelf Productions, an award-winning, critically-acclaimed publisher of graphic novels, which continues to operate
as an imprint. Top Shelf is known for publishing works of literary significance including the #1 New York Times and Washington Post bestselling
trilogy, March, by Congressman John Lewis, Andrew Aydin, and Nate Powell. March is the only graphic novel to have won the
National Book Award. In July 2019, Top Shelf released George Takei’s graphic memoir, They Called Us Enemy, which debuted
at #2 on the New York Times Paperback Nonfiction Best Sellers list and as a #1 bestseller on Amazon. They Called Us Enemy was
named a “Best Book of the Year” by NPR, Amazon, Forbes, Publishers Weekly, School Library Journal, Kirkus Reviews, and the
New York Public Library.
In
addition to its core of creator-driven franchises, IDWP has also partnered with the owners of major licensed brands to publish many successful
licensed titles, including: Hasbro’s Transformers, G.I. Joe, and My Little Pony; Sega’s Sonic The Hedgehog;
CBS’s Star Trek; Sony’s Ghostbusters; Viacom’s Teenage Mutant Ninja Turtles; the Marvel Action’s
line of middle-grade comic books designed for younger readers; Toho’s Godzilla; and Lucasfilm’s Star Wars Adventures.
These licensed titles often bring with them diverse built-in audiences and also build cache and retailer support for IDWP. With licensed
franchises, IDWP strategy is to focus on licenses that not only have eager, built-in fan followings but also ongoing licensor support
through other channels, such as toys, animation, and film. This strategy enables IDWP to expand its audience reach and to pursue sub-license
opportunities with foreign publishers. IDWP also collaborates with other comic publishers to co-publish certain titles, including Batman
vs. Teenage Mutant Ninja Turtles (with DC Comics) and Rick & Morty vs. Dungeons and Dragons (with Oni Press, Inc.).
IDWP’s
largest segment is the publication of comic books and graphic novels, which are primarily distributed through three channels:
|
(i)
|
to
comic book specialty stores non-returnable basis (the “direct market”), by Diamond Comic Distributors, Inc, which serves
as IDWP’s distributor to the direct market, worldwide.
|
|
(ii)
|
to
traditional retail outlets, including bookstores and mass market stores, on a returnable basis (the “non-direct market”),
by IDWP’s non-direct market distributor, Penguin Random House. IDWP works hand-in-hand with Penguin Random House to sell-in
and promote IDWP titles to buyers at non-direct market customers such as Amazon, Barnes & Noble, Baker & Taylor, Ingram,
Follett, Target, Walmart, and more; and
|
|
(iii)
|
to
Ebook distributors (“digital publishers”), where IDWP’s publications are widely available digitally through
popular distributors such as Comixology, Amazon, Apple iTunes and iBooks, Google Play, Hoopla, Overdrive, and via IDWP’s own
website, idwpublishing.com.
|
IDWP’s
agreement with Penguin Random House has a three-year term and automatically renews for another three years unless terminated earlier.
Pursuant to the agreement, Penguin Random House is the exclusive worldwide distributor for all IDWP products other than periodical comic
books for the non-direct market channel, and provides of the following services: warehousing, customer service, order fulfilment, shipping,
returns processing, billing/collections, customer credit management, sales, sales reporting, stock control and Web-access to sales and
inventory information. In addition, to the non-direct market channel, IDWP’s agreement allows for Penguin Random House to
provide distribution on a non-exclusive basis for the direct-to-consumer channel through Penguin Random House online consumer sites in
the United States and Canada.
The
agreement obligates Penguin Random House to, among other things, use reasonable skill and care in accordance with its usual practice
in providing the services; and maintain a reserve against future returns. The agreement provides for the allocation of risk related to
the products to be distributed between the IDWP and Penguin Random House and related to collection of amounts owing.
The
agreement provides that both IDWP and Penguin Random House will not be liable to each other for failure to perform any obligation under
the agreement to the extent that and so long as the failure is caused matters beyond their control.
The
agreement also provides that either party may terminate the agreement upon a material or persistent uncured breach by the other party,
or, on six months’ notice following a change of control of either party or either party’s parent.
The
agreement also contains customary indemnification and confidentiality provisions.
IDWP’s
publications are widely available digitally through popular distributors such as Comixology, Amazon, Apple iTunes and iBooks, Google
Play, Hoopla, Overdrive, and via IDWP’s own website (idwpublishing.com). Through the direct market and non-direct market,
IDWP sold over 4 million units in fiscal year 2020 and is recognized as the fifth largest publisher based on units sold as calculated
and reported by Diamond market share ratings, covering both comics and graphic novels in the direct market. Data for Diamond’s
sales charts — which includes the market shares and all top product charts — are compiled by Diamond Comic Distributors from
sales made to thousands of comic book specialty shops located in North America and around the world. Additional sales made to online
merchants and other specialty retailers may be included in the calculation as well. Unit and dollar market shares are calculated based
upon orders for comic books, graphic novels, and magazines invoiced and shipped to Diamond customers during 2019, which comprises pre-orders,
advance reorders, and reorders, minus any copies that are received back from a title marked as returnable.
IDWP
publishes under specialized, acclaimed imprints that account for a smaller part of our revenue, including: (i) The Library of American
Comics (publishing classic comic reprints); (ii) EuroComics (bringing foreign language comics to an English-speaking audience); (iii)
Yoe! Books (specializing in creative historical comic collections); (iv) Artist’s Editions (publishing scans of original art printed
at the same size they were drawn); and (v) Sunday Press (producing restorations of classic American comic strips while enhancing their
visibility, reach of distribution and marketing).
Many
of IDWP’s titles are available in a variety of languages worldwide through foreign licensing. In 2019, IDW also announced a major
new initiative to release key titles as Spanish-language graphic novels in the North American market. This initiative kicked off in Summer
2020 with the release of Spanish-language editions of They Called Us Enemy, Red Panda & Moon Bear, and Sonic
the Hedgehog.
In
2014, IDWP launched the IDW Games imprint to develop and publish card, board, and tabletop games. Similar to IDWP’s book content,
IDW Games offers a mix of popular licensed titles, such as Dragon Ball Z and Batman the Animated Series, as well as creator
developed strategic hobby games, such as Towers of Arkhanos and Tonari. IDW Games’ products are sold to distributors
worldwide and are available through retailers such as Gamestop, Barnes & Noble, and Amazon, independent games and comics stores,
as well as the direct-to-consumer channel through its website and marketing campaigns.
To
further expand and build creator-owned properties beyond publishing, IDWP works with IDWE, as well as other outside partners, to bring
creator-owned franchises to television and film through licensing arrangements.
As
a result of the COVID-19 pandemic, Diamond ceased the direct market distribution of our new comic books from April 1, 2020 through May
19, 2020. Accordingly, IDWP did not publish any new comic books during this period. Based upon distributor capacity, new comic book releases began following
a reduced distribution schedule beginning May 20, 2020, with the capacity for new product increasing over the subsequent months.
The delay in comic book releases will also have an impact on the publication dates of the related collections in all markets. Additionally,
sales made through Diamond, a traditionally non-returnable market, had been made returnable, although this has not resulted in a
significant increase in returns. Effective in April 2021, the return policies reverted back to pre- COVID. During this period of reduced
output, IDWP paused creative work on many projects, furloughed staff, and experienced a limited number of layoffs. With the receipt of
PPP loans and direct market distribution coming back online, furloughed staff have since resumed working and creative work has recommenced.
In
order to expand its business and counter a persistent industry-wide decline in direct market sales, IDWP continues to focus on launching
new creator-owned titles and partnering with established brands to bring fan-favorite properties to the comic book market. IDWP is also
expanding the reach of existing and new products through the development of specialty, library, and education markets; increased direct-to-consumer
initiatives; and broadening the reach of creator-driven series through licensing opportunities.
In
May 2019, we invested in a new publishing entity, Clover Press, established by Ted Adams and Robbie Robbins, co-founders of IDWP. Clover
Press is a separate entity and operates independently from IDWP.
IDWP’s
revenues represented 59% and 63% of our consolidated revenues in the three and six months ended April 30, 2021, respectively. IDWP’s
revenues represented 51% and 56% of our consolidated revenues in the three and six months ended April 30, 2020, respectively.
IDWP’s
revenues represented 62.5% and 46.9% of our consolidated revenues in the fiscal years ended October 31, 2020 and 2019, respectively.
IDW
Entertainment
IDWE
is a production company and studio that develops, produces and distributes content for global platforms and services.
IDWE
was formed on September 20, 2013 to leverage IDWP properties into television series, features and other forms of media by developing
and producing original content. IDWE maintains a robust development slate of properties based on IDWP properties primarily for the
adult series marketplace and is in advanced conversations with various global studios and networks for their exploitation. IDWE
actively recruits and acquires new franchise material for exploitation primarily in the series format.
IDWE
has developed and/or produced four series for television that premiered in calendar 2019 and 2020:
|
●
|
Wynonna
Earp season four aired in two parts due to worldwide COVID-19 related production shutdowns. The first six episodes
of season four premiered July 26, 2020 and the second half of season four began airing on March 5, 2021. The show was created
by Emily Andras and stars Melanie Scrofano and is based on the IDWP comics of Beau Smith. Season four’s twelve episodes are
being produced by Seven24 Films and distributed by IDWE, in partnership with Syfy and CTV Sci-Fi. Cineflix Studios is the co-producer
and global distributor for the series. Season one’s thirteen episodes aired in fiscal 2016. Season two’s twelve episodes
aired in fiscal 2017, and Season three’s twelve episodes aired in fiscal 2018.
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V
Wars, debuted on Netflix on December 5, 2019. The 10-episode vampire thriller stars Ian Somerhalder and was produced by High
Park Entertainment. The series is based upon Jonathan Maberry’s IDWP’s comic book series of the same name.
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October
Faction premiered on Netflix January 23, 2020. The 10-episode show is based on the IDWP comic books of Steve Niles and Damien
Worm of the same name and was adapted by showrunner Damian Kindler and starred Tamara Taylor and J.C. MacKenzie. It was also produced
by High Park Entertainment.
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Locke
& Key premiered on Netflix on February 7, 2020. The show is based on the graphic novels of Joe Hill and Gabriel Rodriguez
of the same name that are published by IDWP. Seasons two and three have been ordered by Netflix and season two began production in
September 2020.
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Previously,
IDWE and Ideate Media partnered with AMC Studios to license to BBC America the U.S. broadcast and streaming video on demand (SVOD) rights
to Dirk Gently, a live-action series based on the Douglas Adams novels and related comic books on the same name published
by IDWP. Season one of the series premiered October 22, 2016 in the United States on BBC America. The second and final season aired on
BBC America in 2017. Netflix currently streams both seasons worldwide.
IDWE’s
revenues represented 41% and 37% of our consolidated revenues in the three and six months ended April 30, 2021,respectively. IDWE’s
revenues represented 49% and 44% of our consolidated revenues in the three and six months ended April 30, 2020,respectively.
IDWE’s
revenues represented 37.5% and 53.1% of our consolidated revenues in the fiscal years ended October 31, 2020 and October 31, 2019, respectively.
CTM
(Discontinued operations)
CTM
develops and distributes print-based advertising and information in targeted tourist markets. Advertisers include entertainment
venues, tourist attractions, and cultural sites as well as their related service providers including dining, lodging, and transport services.
CTM services its regional network and partner locations of more than 19,000 diverse locations to distribute printed brochures, magazines
and rack cards to the traveling public.
CTM
also develops and distributes digital advertising and information through its affiliate Ettractions Inc.’s website, visitorfun.com,
which was renamed from ettractions.com in December 2017 to be more easily searched and accessed, and its ExploreBoard network of interactive
touch screen kiosks throughout its market areas.
As
a result of the economic downturn related to the outbreak of the COVID-19 pandemic, and the impact it had on small businesses in the
tourist markets, the Company decided to make a strategic shift to sell CTM and focus on our entertainment and publishing business.
Our
Strategy
We
seek to improve our financial performance by primarily focusing on development of entertainment that can generate value from our intellectual
property and to increase coordination between IDWP and IDWE to improve our development pipeline. IDWP and IDWE will seek to jointly and
synergistically develop and produce books and entertainment so as to allow us to capitalize on the global demand for original content
from streaming services as well as traditional broadcast and other networks and other content services. To date, we have sold projects
to Hulu, Syfy, BBC America, Netflix and Endeavor Content, while others are in active discussion. We believe that our potential projects
would be attractive to a broad range of potential distribution channels and participants.
We
seek to own “all rights” to intellectual property (“IP”) of our content in order to, afford us significant production-based
fees supplemented by merchandising, games, video and other fandom-driven revenue opportunities.
We
believe that our key strategic points of differentiation include:
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●
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IP
creation, control and ownership through a creator-friendly (e.g., Steve Niles, Joe Hill) publishing engine and high-value
licenses (e.g. Hasbro, Marvel).
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TV
and film development, production and distribution (e.g., Locke & Key, V Wars) through “cost plus”
business model amidst content arms race.
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Merchandise
via partnerships and direct-to-consumer sales.
|
Given
recent developments surrounding COVID-19, IDWP has revised its ongoing release schedule to better align with the needs and capacity of
the changing retail marketplace. IDWP continues to serve both the direct and non-direct markets through its distribution partners and
has added an increased focus on direct to consumer, digital initiatives, and development of merchandise. Content generation remains a
key priority for IDWP as we continue to launch new creator-owned titles and expand partnerships with established brands to bring fan-favorite
properties to the comics, graphic novel, and games markets. During the market slowdown, IDWP was able to quickly reduce ongoing content
production to better suit the needs of the organization at the time, picking back up as the market showed signs of recovery.
In
an effort to manage the risks associated with COVID-19, IDWE diversified its development slate and staffed appropriately to focus on
both kids and adult animation projects, which minimize the effects of COVID-19 through remote work-from-home initiatives. IDWE can shift
into work-from-home protocols seamlessly thanks to our centralized filing and workflow systems. Though television will remain the core
business, we are also expanding into podcasts, and other digital content as a way to increase the creation of IP.
Competition
IDWP
competes most directly with both public and privately held companies that publish or license for publishing comic books and graphic novels,
and further develop their franchises through digital media including shows and feature films. Public company competitors for IDWP include
Disney (Marvel) and ATT/Time Warner (DC), as well as smaller capitalized companies such as Wildbrain. Privately held competitors include
Skybound Entertainment, Oni Press, Legendary Entertainment, Dark Horse and Image Comics.
IDWE
competes with all forms of entertainment. A significant number of companies produce and/or distribute television shows and films, and
provide pay television and SVOD programming services. IDWE also competes to obtain creative talents and story properties that are essential
to the success of our IDWE business.
The
success of our operations is heavily dependent upon public taste and preferences. In addition, operating results fluctuate due to the
timing and performance of releases in the television and book markets. Release dates are determined by several factors, including competition
and the timing of vacation and holiday periods.
Intellectual
Property
There
are two primary sources of the content that IDWP develops, publishes, and exploits across a range of distribution channels:
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Original,
creator-owned material that marks its debut to the consuming public via IDWP’s published products (“Creator Content”);
and
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Content
that has already been successfully exploited in other media (“Licensed Content”).
|
IDWP
enters into publishing agreements with owners of both Creator Content and Licensed Content pursuant to which IDWP licenses the right
to exploit such content (“Publishing Agreements”).
IDWP’s
Publishing Agreements grant to IDWP exclusive, long term, worldwide rights to publish and sell the licensed content in all languages
via traditional channels such as print and digital comics, graphic novels, and trade collections, and niche channels such as board games,
coloring books, audio on demand, and high-end limited edition publications (“Publishing Rights”).
A
smaller percentage of Publishing Agreements cover a more limited range of licensed rights in order to accommodate pre-existing products
and markets already established by licensors such as foreign publishers seeking to have IDWP publish an English only version, licensed
content owners seeking expansion into niche markets that can be more successfully exploited by IDWP, and establish authors who have already
enjoyed publishing success prior to partnering with IDWP.
Many
of IDWP’s Creator Content Publishing Agreements also grant to IDWP exclusive film, television, merchandising, and other ancillary
worldwide rights in all formats, languages, and current and future media and delivery technologies (“Ancillary Rights”) that
can then be exploited through IDWE or otherwise.
IDWP
exploits the Publishing Rights via sales to comic book specialty stores, traditional retail outlets, and direct to consumers, and via
sublicenses to digital distribution platforms and foreign territory sub-publishers.
IDWP
exploits the Ancillary Rights primarily via its relationship with IDWE, but also through other third-party buyers.
IDWP
owns or co-owns the copyright to certain published products that were developed pursuant to Publishing Agreements with first time authors,
but most copyrights filed by IDWP are registered in the name of the licensor.
IDWP
has registered and owns domain names that it uses to digitally promote and sell its products. It also has trademarked its name and logo,
as well as the name and logo of its Top Shelf Productions imprint, and Micro Fun Packs product.
IDWP
has developed game mechanics for certain of its game products that it treats as proprietary intellectual property in its Publishing Agreements.
Regulation
The
County of Los Angeles, in the state of California, has been subject to regulatory protocols associated with reopening the music, television
and film production industries, which were closed as a result of COVID-19. Effective June 12, 2020, the County of Los Angeles Department
of Public Health adopted a staged approach, supported by science and public health expertise, to allow music, television and film production
to resume. These protocols, which are required to be adhered, cover (1) workplace policies and practices to protect employee health;
(2) measures to ensure physical distancing; (3) measures to ensure infection control; (4) communication with employees and the public;
and (5) measures to ensure equitable access to critical services. We are complying with all regulatory protocols associated with the
County of Los Angeles Department of Public Health.
Employees
As
of June 3, 2021, the Company had 81 full-time United States employees, including 62 at IDWP, 11 at IDWE, and 8 at IDW Media Holdings.
Properties
IDW
Media Holdings is headquartered at 520 Broad St, Newark, New Jersey, fourth floor. The term of the lease commenced on December 1, 2018
and is month-to-month with 30 days written notice upon termination. Currently, the annual rent expense is $19,200.
IDWP
is headquartered in 18,344 square feet of leased space at 2765/2785 Truxtun Road, San Diego, CA. In addition, IDWP leases 18,000 square
feet of warehouse space at 4937 Market Street, San Diego CA. This lease expires May 2022 and the fiscal 2020 rent is $164,998.
IDWE
is headquartered at 11969 Ventura Blvd., Suite 100, Studio City, CA. The annual rent for fiscal 2020 is $129,117 and the lease term expires
May 31, 2022.
Legal
Proceedings
From
time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. We
are not currently a party to any legal proceedings, the adverse outcome of which, in our management’s opinion, individually or
in the aggregate, would have a material adverse effect on the results of our operations or financial position. There are no material
proceedings in which any of our directors, officers or affiliates or any registered or beneficial holder of more than 5% of our Class
B common stock is an adverse party or has a material interest adverse to our interest.
MANAGEMENT
Directors,
Executive Officers, Named Executive Officer and Key Employees
Set
forth below is certain information with respect to the individuals who are our directors, executive officers and key employees as of
the date of this Prospectus:
Name
|
|
Age
|
|
Position
|
Ezra
Y. Rosensaft
|
|
49
|
|
Chief
Executive Officer and Named Executive Officer
|
Karina
M. Fedasz
|
|
48
|
|
Chief
Financial Officer
|
Brooke
T. Feinstein
|
|
31
|
|
Chief
Accounting Officer and Named Executive Officer
|
Howard
S. Jonas
|
|
64
|
|
Chairman
of the Board, Former Chief Executive Officer and Named Executive Officer
|
Perry
Davis
|
|
72
|
|
Director
|
Allan
I. Grafman
|
|
67
|
|
Director
|
Irwin
Katsof
|
|
66
|
|
Director
|
Marc
E. Knoller
|
|
60
|
|
Director,
Former Interim Chief Executive Officer and Named Executive Officer
|
Chris
McGurk
|
|
64
|
|
Director
|
Nachie
Marsham
|
|
44
|
|
Key
Employee, Publisher, IDW Publishing
|
Ezra
Y. Rosensaft, CFA, has been the Company’s Chief Executive Officer since July 2020. He was previously our Chief Financial Officer
from August 2018 until September 2020, and prior to that, the Executive Vice President of Finance of the Company’s IDW Entertainment
division from November 2017 until August 2018. Immediately prior to joining the Company, Mr. Rosensaft worked in the Corporate Development
and Financial Planning & Analysis groups of Genie Energy (NYSE: GNE) from 2016 to 2017. From 2002 to 2015, Mr. Rosensaft served as
SVP of Financial Planning & Analysis at HBO, a division of Time Warner, now Warner Media owned by AT&T (NYSE: T; previously,
NYSE: TWX), and was responsible for HBO’s finance and strategy functions, overseeing budgets, long-term plans, financial operations
for content and original programming, theatrical output deals, corporate development, competitive analysis, investor relations with parent
company, Time Warner, and creating innovative business models such as HBO’s over-the-top strategy (HBO OTT). Mr. Rosensaft was
integrally involved in the financial oversight and growth of HBO’s Emmy-award winning original programming slate including shows
such as Curb Your Enthusiasm, Sex and the City, Sopranos, and Game of Thrones. Prior to his tenure at HBO, Mr. Rosensaft
held positions at Primedia (NYSE: PRM), a B2B and B2C media company, and KPMG LLP. Mr. Rosensaft holds a BSc in Accounting from Yeshiva
University, an MBA in Finance from Fordham University and is a CFA charterholder.
Karina
M. Fedasz has been the Company’s Chief Financial Officer since January 2021. She was previously a consultant to the Company
from August 2019 to January 2021. Prior to joining the Company, Ms. Fedasz was the Chief Financial Officer for MOCEAN from 2018 to 2019,
where she managed the strategic plan including goals around strategy, operations, human capital, and the financial objectives and KPI’s
around those. From 2013 to 2017, she served in a variety of leadership roles and consulting opportunities involving operations, sales,
and business development. From 2009 to 2012, she served as the Chief Financial Officer of Machinima, Inc., the premier online entertainment
network for the video game generation, which was subsequently acquired by Warner Bros. Digital Networks. She has also previously served
as Senior Director of Business Development at Technicolor (NYSE: TMS) during momentous change, where she was responsible for corporate
development including several international deals, as well as promoting the video game services work that leveraged existing creative
pipelines. Her early career was spent at JPMorgan in M&A, and at Deloitte as an auditor. Ms. Fedasz holds a B.A. from UCLA (Phi Beta
Kappa honors), an MBA in finance from Columbia Business School and a CPA (inactive) from the state of California. She is currently a
Director on the Board of the WISH Charter Schools in Los Angeles and serves as Board President of its supporting organization, WISHForward
Educational Foundation.
Brooke
T. Feinstein has been the Company’s Chief Accounting Officer since July 2020 and immediately prior to that she was our Controller
since November 2018. Before joining the Company, she worked as a Supervisor in the auditing and accounting quality control department
at Buchbinder Tunick & Company LLP from 2016 to 2018. From 2012 to 2015, Mrs. Feinstein worked at Grant Thornton LLP as a Senior
Accountant obtaining international experience in both GAAP and IFRS. Mrs. Feinstein has her BBA from Wilfrid Laurier University; she
is a Certified Public Accountant (CPA) and also is a Charted Professional Accountant (CPA)/Charted Accountant (CA) in Canada.
Board
of Directors
Howard
S. Jonas has served as our Chairman of the Board since our inception and served as our Chief Executive Officer from February 2019
through April 2020. Mr. Jonas founded IDT Corporation in August 1990, and has served as its Chairman of the Board of Directors since
its inception. Mr. Jonas served as Chief Executive Officer of IDT from October 2009 through December 2013 and from December 1991 until
July 2001. IDT spun off the Company to its stockholders in September 2009. Mr. Jonas is also the founder and has been President of Jonas
Media Group (formerly Jonas Publishing) since its inception in 1979. From January 2014 until November 2017, Mr. Jonas served as the Chief
Executive Officer of Genie Energy Ltd., a former subsidiary of IDT that was spun off to stockholders in October 2011, and has served
as Chairman of the board of directors of Genie Energy since the spin-off. From June 2016 to November 2016, Mr. Jonas served as the Chairman
of the Board of Zedge, Inc., a former subsidiary of IDT that was spun off to stockholders in June 2016. Mr. Jonas has served as the Vice
Chairman of Zedge, Inc. since November 2016. Mr. Jonas also has served as the Chairman of the Board of Rafael Holdings, Inc., a former
subsidiary of IDT since it was spun off to stockholders in March 2018, since the spin-off, and also as the Chief Executive Officer until
May 2021. Mr. Jonas has been a director of Rafael Pharmaceuticals, Inc. (f/k/a Cornerstone Pharmaceuticals) since April 2013 and was
appointed Chairman of the Board in April 2016. Mr. Jonas received his B.A. in Economics from Harvard University.
Key
Attributes, Experience and Skills:
As
founder of the Company and Chairman of the Board since its inception, Mr. Jonas brings to the Board significant knowledge of all aspects
of our Company and each of the industries in which it operates. In addition, having Mr. Jonas on the Board provides our Company with
effective leadership.
Perry
Davis has been a director of the Company since August 2009. Mr. Davis is a partner at Perry Davis Associates, Inc. (PDA), an
international consulting firm providing management and development assistance to non-profit organizations. Mr. Davis is a founder of
PDA and has been its President since 1986. Mr. Davis received his B.A. in Political Science from Yeshiva College and his Ph.D. in Public
Law and Government from Columbia University.
Key
Attributes, Experience and Skills:
Mr.
Davis has extensive experience providing management advice to entities of different sizes and provides input to the Company’s management
on organizational and other matters. His long tenure with the Company provides important perspective on the Company’s future development.
Allan
I. Grafman has been a director of the Company since May 2019. Mr. Grafman has served since 1996 as founder and Chief Executive Officer
of All Media Ventures, which provides executive, board and advisory services to media and technology companies. Since July 2020, Mr.
Grafman has served on the Board of HappyNest REIT, Inc., a real estate investment trust. Mr. Grafman served as Chairman of the Board
of Majesco from 2007 to 2014. From 2005 to 2013, Mr. Grafman served as Operating Partner of Mercury Capital. From 2003 to 2005, Mr. Grafman
served as President of Archie Comics. Previous executive roles included those at Hallmark Entertainment, Tribune Entertainment and CCB/ABC/Disney.
He has served on 12 boards of companies that are either publicly traded or private equity/venture capital-sponsored. Mr. Grafman received
his B.A. in Russian Language and literature from Indiana University (Phi Beta Kappa), his Masters in International Affairs from Columbia
University (International Fellow) and his MBA in Finance from Columbia University (Beta Gamma Sigma).
Key
Attributes, Experience and Skills:
As
having previously served on 11 boards of directors of both public and private companies, Mr. Grafman brings significant experience
as a board member in addition to his experiences as a media operating executive and investment banker for growth, turnaround, VC and
PE portfolio companies. Mr. Grafman is an innovator known for monetizing content, brands and intellectual property for investors and
companies, domestic and international, public and private.
Irwin
Katsof has been a director of the Company since October 2010. Mr. Katsof is the founder and the President of Katsof Consulting.
In 2014, Mr. Katsof formed TradeMissions.Org, which has organized more than 30 international trade missions in partnership with the U.S.
Department of Commerce to countries including Brazil, Canada, Switzerland, Germany, Israel, Singapore, India, the United Kingdom, Sweden,
and Hong Kong. From 2010 to present, Mr. Katsof has also been Executive Director of America’s Voices In Israel, which arranges
weeklong, all-expense paid trips to Israel for celebrities and athletes, including from broadcast shows such as House MD, Scandal, Grey’s
Anatomy, Hawaii Five-O and athletes such as NFL Quarterback Deshaun Watson and NBA Hall of Famer Ray Allen. Mr. Katsof received his B.A.
in Psychology and Organizational Development from Loyola College – Concordia University, Montreal and his Rabbinical Ordination
from Yeshivat Aish Hatorah, Jerusalem. Mr. Katsof also completed his Series 7 exams.
Key
Attributes, Experience and Skills:
Mr.
Katsof’s breadth of experience brings important perspectives to the Company’s Board. He has important contacts in the entertainment,
publishing and other industries as well as in the public sector. His skills in interpersonal relationships and working with disparate
groups is useful in enabling the Company’s business units to work in a collaborative and mutually beneficial manner.
Marc
E. Knoller has been a director of the Company since our inception. Mr. Knoller has served as the Chief Executive Officer of CTM Media
Group, Inc. since its inception. Mr. Knoller served as the Company’s Interim Chief Executive Officer from March 2020 to July 2020,
the Company’s Chief Executive Officer and President from inception to March 2015, and as Chief Operating Officer from March 2015
through December 2018. Prior to the Spin- Off, Mr. Knoller had served as an Executive Vice President of IDT since December 1998 and served
as a director of IDT from March 1996 to August 2007. Mr. Knoller joined IDT as a Vice President in March 1991 and also served as a director
of its predecessor. Mr. Knoller has served as Vice President of Jonas Media Group (f/k/a Jonas Publishing) since 1991. Mr. Knoller received
his B.B.A. from Baruch College.
Key
Attributes, Experience and Skills:
Mr.
Knoller’s long experience with the Company and his past service as CEO and COO provide him with institutional knowledge about all
of the Company’s businesses. His perspective on past efforts is important in developing and overseeing growth plans for the Company.
Chris
McGurk has been a director of the Company since December 2019. Mr. McGurk has served as Chairman of the Board and Chief Executive
Officer of Cinedigm Corp., NASDAQ-listed digital distribution and streaming channel company, since 2011. Mr. McGurk currently serves
on the Strategic Advisory Board of LIVX, a NASDAQ-listed music streaming Company. Mr. McGurk also serves on the Board of Directors of
the Creative Coalition and ASPIRE (Academy for Special Purpose in Responsible Entertainment). Mr. McGurk was the founder and CEO of Overture
Films from 2006 until 2010 and was also CEO of Anchor Bay Entertainment, which distributed Overture Films’ product to the home
entertainment industry. From 1999 to 2005, McGurk was Vice Chairman of the Board and Chief Operating Officer of Metro-Goldwyn-Mayer Inc.
(“MGM”), acting as the company’s lead operating executive until MGM was sold for approximately $5 billion to a consortium
of investors. Mr. McGurk joined MGM from Universal Pictures, where he served in various executive capacities, including President and
Chief Operating Officer, from 1996 to 1999. From 1988 to 1996, McGurk served in several senior executive roles at The Walt Disney Studios,
including Studios CFO and President of The Walt Disney Motion Picture Group. McGurk has previously served on the boards of BRE Properties,
Inc., DivX Inc., DIC Entertainment, Pricegrabber.com, LLC and MGM Studios, Inc. Mr. McGurk received his B.S. (summa cum laude) from Syracuse
University School of Management, and his MBA from the University of Chicago Graduate School of Business.
Key
Attributes, Experience and Skills:
In
addition to Mr. McGurk’s service on the board of directors of six major corporations, Mr. McGurk has had a long and successful
career in the film and television industry which provides invaluable guidance and oversight for IDW Entertainment business.
Key
Employees
Nachie
Marsham is the Publisher of IDW Publishing overseeing all publishing operations, and has been working in publishing since 1997. Prior
to IDW Publishing, Mr. Marsham was Executive Editor at Disney Publishing Worldwide from 2015 to 2020, overseeing editorial teams working
with various creative divisions of The Walt Disney Company, working on books including original and extension content for a variety of
franchises, and working on new IP development for best-selling series from Disney. From 2018 to 2020, Mr. Marsham led the Marvel Press
imprint of Disney Publishing Worldwide, editing and providing creative direction for prose and picture books, in addition to asset creation
for both the vertical publishing division and the licensed business. Previous to his time at Disney Publishing, Mr. Marsham spent over
eight years in editorial at DC Comics across a wide variety of titles and age ranges, and before that spent years in different positions
within Wizard Entertainment.
CORPORATE
GOVERNANCE
Director
Independence
The
Corporate Governance Guidelines adopted by the Board of Directors provide that a majority of the members of the Board of Directors, and
each member of the Audit and Compensation Committees, must meet the independence requirements set forth therein. The full text of the
Corporate Governance Guidelines, including the independence requirements, is available for your review in the Governance section of our
website at https://idwmediaholdings.com/investor-relations/corporate-governance/governance-documents. For a director to be considered
independent, the Board of Directors must determine that a director meets the Independent Director Qualification Standards set forth in
the Corporate Governance Guidelines, and upon our intended listing on the NYSE American which we expect to be in conjunction with the
effectiveness of this Registration Statement, will comply with the NYSE American Company Guide definitions of independent, and is free
from any material relationship with the Company and its executive officers. The Board of Directors considers all relevant facts and circumstances
known to it in making an independence determination, and not merely from the standpoint of the director, but also from that of persons
or organizations with which the director has an affiliation or significant financial interest. In addition to considering all relevant
information available to it, the Board of Directors uses the following categorical Independent Director Qualification Standards in determining
the “independence” of its directors:
Director
Selection Process
The
Nominating Committee considers candidates suggested by its members, other directors, senior management and stockholders in anticipation
of upcoming elections and actual or expected board vacancies. The Nominating Committee has not adopted a formal diversity policy or established
specific minimum criteria or qualifications because from time to time the needs of the Board and the Company may change. All candidates,
including those recommended by stockholders, are evaluated on the same basis in light of the entirety of their credentials and the needs
of the Board of Directors and the Company. Of particular importance is the candidate’s wisdom, integrity, ability to make independent
analytical inquiries, understanding of the business environment in which the Company operates, as well as his or her potential contribution
to the diversity of the Board of Directors and his or her willingness to devote adequate time to fulfill his or her duties as a director.
The Nominating Committee will consider director candidates recommended by the Company’s stockholders. Stockholders may recommend
director candidates by contacting the Chairman of the Board as provided under the heading “Communications with the Board of Directors.”
Board
Leadership Structure
Our
Board of Directors has no formal policy with respect to separation of the positions of Chairman of the Board and Chief Executive Officer
or with respect to whether the Chairman should be a member of management or an independent director, and believes that these are matters
that should be discussed and determined by the Board from time to time based on the position and direction of the Company and the membership
of the Board. The Board has determined that having Howard S. Jonas, although not considered independent due to his former position as
Chief Executive Officer, serve as Chairman is in the best interest of the Company’s stockholders at this time due to his extensive
knowledge of the Company and its industries.
Risk
Management
Our
Board of Directors believes that risk management is an important component of the Company’s corporate strategy. While
the Board assesses specific risks at its committee levels, the Board, as a whole, oversees our risk management process, and discusses
and reviews with management major policies with respect to risk assessment and risk management. The Board is regularly informed through
its interactions with management and committee reports about risks we currently face, as well as the most likely areas of future risk,
in the course of our business including economic, financial, operational, legal and regulatory risks.
Committees
of the Board of Directors
Our
Board of Directors has established an Audit Committee, a Nominating Committee, a Compensation Committee, and, prior to any listing on
the NYSE American, will establish a Corporate Governance Committee. All members of the Audit and Compensation Committees meet the criteria
for independence as established by our Corporate Governance Guidelines and under the Sarbanes-Oxley Act of 2002. Each of the Committees
is described in greater detail below. The Board of Directors has established written charters for each of the Committees, which are available
on our website in the Corporate Governance section located at https://idwmediaholdings.com/investor-relations/corporate-governance/committees
and which are also available in print to any stockholder upon request to the Corporate Secretary. Any changes to the charters are promptly
reflected on our website.
Audit
Committee
Messrs.
Davis, Grafman (Chairman), and Katsof have been designated as members of our Audit Committee. The principal duties of the Audit Committee
under its written charter include: (i) responsibilities associated with our external and internal audit staffing and planning; (ii) accounting
and financial reporting issues associated with our financial statements and filings with the SEC; (iii) financial and accounting organization
and internal controls; (iv) auditor independence and approval of non-audit services; and (v) “whistle-blower” procedures
for reporting questionable accounting and audit practices.
The
Audit Committee charter requires that the Committee be comprised of at least two directors, both of whom must be independent under our
Corporate Governance Guidelines and the Sarbanes-Oxley Act of 2002. In addition, each member of the Audit Committee is financially literate
within the meaning of our Corporate Governance Guidelines, and our Board of Directors has determined that Mr. Grafman has sufficient
accounting or financial management expertise to qualify as an “audit committee financial expert,” in accordance with SEC
rules.
Nominating
Committee
Messrs.
Jonas (Chairman) and Knoller have been designated as members of our Nominating Committee. The principal duties of the Nominating Committee
under its charter include: (i) developing the criteria and qualifications for membership on the Board of Directors; (ii) recommending
candidates to fill new or vacant positions on the Board of Directors; and (iii) conducting appropriate inquiries into the backgrounds
of potential candidates.
Compensation
Committee
Messrs.
Davis, Grafman and Katsof (Chairman) have been designated as members of our Compensation Committee. The principal duties of the Compensation
Committee under its charter include: (i) ensuring that a succession plan for the Chief Executive Officer is in place; (ii) reviewing
management’s recommendations for executive officers and making recommendations to the Board of Directors; (iii) approving the compensation
for the Chief Executive Officer; (iv) reviewing and approving compensation policies and practices for other executive officers including
their annual salaries; (v) reviewing and approving major changes in employee benefit plans; (vi) reviewing short and long-term incentive
plans and equity grants; and (vii) recommending to the full Board of Directors changes to the compensation of the independent members
of the Board of Directors, such as retainers, committee and other fees, stock option, restricted stock and other stock awards, and other
similar items as deemed appropriate. The Compensation Committee confers with our executive officers when making the above determinations.
The Compensation Committee charter requires that the Committee be comprised of at least two directors, both of whom must be independent
under our Corporate Governance Guidelines.
Governance
Practices
We
observe corporate governance practices and have adopted principal governance documents which are designed to ensure that we maximize
stockholder value in a manner that is consistent with both the legal requirements applicable to us and a business model that requires
our employees to conduct business with the highest standards of integrity. Our Board of Directors has adopted and adheres to corporate
governance principles which the Board of Directors and senior management believe promote this purpose, are sound and represent best practices,
and will review these governance practices, the corporate laws of the State of Delaware under which we are incorporated and the regulations
of the SEC, as well as best practices recognized by governance authorities to benchmark the standards under which it operates. Our principal
governance documents are as follows:
|
●
|
Corporate
Governance Guidelines;
|
|
●
|
Board
of Directors committee charters, including:
|
|
●
|
Audit
Committee charter;
|
|
●
|
Nominating
Committee charter; and
|
|
●
|
Compensation
Committee charter.
|
|
●
|
Code
of Business Conduct and Ethics.
|
Our
governance documents are available on our website at www.idwmediaholdings.com.
Our
Board of Directors, with assistance from its Corporate Governance Committee if formed, will regularly assess our governance practices
in light of legal requirements and governance best practices.
Executive
Director Sessions
Under
our Corporate Governance Guidelines, the non-employee directors meet in regularly scheduled executive sessions without management.
Communications
with the Board of Directors
Stockholders
and other interested persons seeking to communicate directly with the Board of Directors, the independent directors as a group or any
of the Audit, Compensation, Nominating or Corporate Governance (if formed) Committees of the Board of Directors, should submit their
written comments c/o Corporate Secretary, Karina M. Fedasz, Stockholder Communications at our principal executive offices at 520 Broad
Street, Newark, New Jersey 07102 and should indicate in the address whether the communication is intended for the Chairman of the Board,
the Independent Directors or a Committee Chair. The Chairman of the Board will review any such communication at the next regularly scheduled
Board of Directors meeting unless, in his or her judgment, earlier communication to the Board of Directors is warranted.
If
a stockholder communication raises concerns about our ethical conduct of the ethical conduct of our management, it should be sent directly
to our Corporate Secretary at our principal executive offices. The Corporate Secretary will promptly forward a copy of any such communication
to the Chairman of the Audit Committee and, if appropriate, our Chairman of the Board, and take such actions as they authorize to ensure
that the subject matter is addressed by the appropriate committee of the Board of Directors, by management and/or by the full Board of
Directors.
At
the direction of the Board of Directors, we reserve the right to screen all materials sent to its directors for potential security risks,
harassment purposes or routine solicitations.
Code
of Business Conduct and Ethics
Our
Board of Directors has adopted a Code of Business Conduct and Ethics which applies to our directors, Chief Executive Officer, Chief Financial
Officer and other employees.
Review
of Related Person Transactions
Our
Board of Directors has adopted a Statement of Policy with Respect to Related Person Transactions which is administered by our Audit Committee.
This policy applies to any transaction or series of transactions in which (i) the Company or a subsidiary is a participant, (ii) the
amount involved exceeds the lesser of $120,000 or 1% of the average of the Company’s total assets at year-end for the last two
completed fiscal years and (iii) a Related Person has a direct or indirect material interest. Related Persons include directors, director
nominees, executive officers, any beneficial holder of more than 5% of any class of the Company’s voting securities, and any immediate
family member of any of the foregoing persons. Under the Policy, the Company’s legal department will determine whether a transaction
meets the requirements of a Related Person Transaction requiring review by the Audit Committee. Transactions that fall within this definition
will be referred to the Audit Committee for approval, ratification or other action. Based on its consideration of all of the relevant
facts and circumstances, the Audit Committee will decide whether or not to approve such transaction and will approve only those transactions
that are in the best interests of the Company and its stockholders. If the Company becomes aware of an existing Related Person Transaction
that has not been approved under this Policy, the matter will be referred to the Audit Committee. The Audit Committee will evaluate all
options available, including ratification, revision or termination of such transaction.
Compensation
Committee Interlocks and Insider Participation
None
of our executive officers has served as a member of a compensation committee (or other committee serving an equivalent function) of any
other entity whose executive officers served as one of our directors.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets forth information concerning the total compensation received by, or earned by, during Fiscal 2019 and Fiscal 2020
our named executive officers, Ezra Y. Rosensaft, our Chief Executive Officer and former Chief Financial Officer, Brooke T. Feinstein,
our chief accounting officer (Fiscal 2020 only), Howard S. Jonas, our former Chief Executive Officer, Marc E. Knoller, our former Interim
Chief Executive Officer (Fiscal 2020 only), and Davidi Jonas, our former Chief Strategy Officer (collectively, the “Named Executive
Officers”).
Name
and Principal Position
|
|
Fiscal
Year
|
|
|
Salary
($)(1)
|
|
|
Bonus
($)(1)
|
|
|
Share
Awards
($)(2)
|
|
|
Option
Awards
($)(3)
|
|
|
All
other Compensation
($)
|
|
|
Total
($)
|
|
Ezra
Y. Rosensaft
|
|
2020
|
|
|
|
310,000
|
|
|
|
213,000
|
(5)
|
|
|
—
|
|
|
|
357,763
|
(6)
|
|
|
60,330
|
(7)
|
|
|
941,093
|
|
Chief
Executive Officer and former Chief Financial Officer(4)
|
|
2019
|
|
|
|
220,000
|
|
|
|
80,000
|
(8)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brooke
T. Feinstein
|
|
2020
|
|
|
|
132,250
|
|
|
|
20,000
|
(10)
|
|
|
—
|
|
|
|
7,500
|
(11)
|
|
|
—
|
|
|
|
159,750
|
|
Chief
Accounting Officer(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Howard
S. Jonas
|
|
2020
|
|
|
|
0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Former
Chief Executive Officer(12)
|
|
2019
|
|
|
|
0
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marc
E. Knoller
Former Interim Chief Financial Officer(13)
|
|
2020
|
|
|
|
371,077
|
|
|
|
60,000
|
(14)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
421,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Davidi
Jonas
|
|
2020
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
240,212
|
(16)
|
|
|
—
|
|
|
|
240,212
|
|
Former
Chief Strategy Officer(15)
|
|
2019
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
(1)
|
The
amounts shown in these columns reflect salary and annual performance-based bonus for performance
during the relevant period irrespective of when such salary and bonus was paid.
|
(2)
|
The
amounts shown in this column reflect the aggregate grant date fair value of restricted share
awards computed off the average common stock price on the grant date in accordance with FASB
ASC Topic 718.
|
(3)
|
The
amounts shown in this column reflect the aggregate grant date fair value of option awards computed off the average common stock price
on the grant date in accordance with FASB ASC Topic 718.
|
(4)
|
Ezra
Rosensaft has served as Chief Executive Officer since July 2020 and served as Chief Financial Officer from August 2018 until September
2020.
|
(5)
|
Consists
of (i) a cash bonus of $75,000 paid to Ezra Rosensaft on or about February 7, 2020, (ii) a cash bonus of $50,000 paid
to Mr. Rosensaft on or about July 16, 2020, and (iii) a cash bonus of $88,000 paid to Mr. Rosensaft on or about January 21, 2021
for services performed in fiscal 2020.
|
(6)
|
Consists
of the value of (i) a grant to Ezra Rosensaft on January 23, 2020 of an option to purchase up to 25,000 shares of Class B Common
Stock, which has a 10-year term, an exercise price of $10.50 per share and the following vesting schedule: 10,000 immediately
upon grant and 5,000 on each of January 23, 2021, January 23, 2022 and January 23, 2023, and (ii) a grant to Ezra Rosensaft on July
14, 2020 of an option to purchase up to 120,000 shares of Class B Common Stock, which has a 10-year term, an exercise price of $3.98
per share and the following vesting schedule: 40,000 on each of July 14, 2021, July 14, 2022 and July 14, 2023.
|
(7)
|
Consists
of payments to Mr. Rosensaft for unused and accrued paid time off.
|
(8)
|
Consists
of (i) a cash bonus of $50,000 paid to Ezra Rosensaft on or about March 8, 2019, and (ii) a cash bonus of $30,000 paid to Mr. Rosensaft
on or about September 11, 2019.
|
(9)
|
Brooke
Feinstein has served as Chief Accounting Officer since July 2020 and served as the Company’s Controller since November 2018.
|
(10)
|
Consists
of a cash bonus paid to Brooke Feinstein of $20,000 paid on or about January 21, 2021 for services performed in fiscal 2020.
|
(11)
|
Consists
of the value of a grant to Brooke Feinstein on September 10, 2020 of an option to purchase up to 5,000 shares of Class B Common Stock,
which has a 10-year term, an exercise price of $3.35 per share and vests as follows: 1,667 on each of September 10, 2021
and September 10, 2022 and 1,666 on September 10, 2023.
|
(12)
|
Howard
S. Jonas served as Chief Executive Officer from February 2019 through April 2020.
|
(13)
|
Mr.
Knoller served as the Interim Chief Executive Officer from March 2020 to July 2020, the Chief Executive Officer and President from
inception to March 2015, and as Chief Operating Officer from March 2015 through December 2018.
|
(14)
|
Consists
of a cash bonus paid to Marc E. Knoller on or about November 25, 2020 for services performed in Fiscal 2020.
|
(15)
|
Davidi
Jonas served as the Chief Strategy Officer from December 2018 to January 2020.
|
(16)
|
Consists
of the value of a grant to Davidi Jonas on January 23, 2020 of an option to purchase up to 42,735 shares of Class B Common Stock,
which was fully vested upon grant, has a 10-year term and an exercise price of $10.50 per share.
|
Narrative
Disclosure Regarding Summary Compensation Table
Employment
Agreements
We
have not entered into any employment agreements with any of our Named Executive Officers or directors.
On
March 14, 2019, the Company’s Board of Directors adopted the 2019 Stock Option and Incentive Plan (the “2019 Plan”)
to provide incentives to executive officers, employees, directors and consultants of the Company and/or its subsidiaries. The Company
has reserved 700,000 shares of Class B Common Stock for the grant of awards under the 2019 Plan, subject to adjustment. Incentives
available under the 2019 IPlan may include stock options, stock appreciation rights, limited stock appreciation rights, restricted stock
and deferred stock units. As of June 30, 2021, 261,483 shares remained available to be awarded under the 2019 Plan.
During
Fiscal 2020, the Company made the following equity grants to its Named Executive Officers:
|
●
|
On
January 23, 2020, we granted to our current Chief Executive Officer and former Chief Financial Officer options to purchase 25,000
shares of Class B common stock with a 10-year term at an exercise price of $10.50 per share pursuant to the 2019 Plan with such options
vesting as follows: 10,000 immediately and 5,000 on each of January 23, 2021, January 23, 2022 and January 23, 2023.
|
|
|
|
|
●
|
On
July 14, 2020, we granted to our current Chief Executive Officer and former Chief Financial Officer options to purchase 120,000 shares
of Class B Common Stock with a 10-year term at an exercise price of $3.98 per share pursuant to the 2019 Plan with such options vesting
as follows: 40,000 on each of July 14, 2021, July 14, 2022 and July 14, 2023.
|
|
|
|
|
●
|
On
January 23, 2020, we granted to our former Chief Strategy Officer options to purchase 42,735 shares of Class B common stock with
a 10-year term at an exercise price of $10.50 per share pursuant to the 2019 Plan with such options vesting in full upon grant.
|
|
|
|
|
●
|
On
September 10, 2020, we granted to our Chief Accounting Officer options to purchase 5,000 shares of Class B Common Stock with a 10-year
term at an exercise price of $3.35 per share pursuant to the 2019 Plan with such options vesting as follows: 1,667 on
each of September 10, 2021 and September 10, 2022 and 1,666 on September 10, 2023.
|
The
following table presents certain data for our 2019 Stock Option and Incentive Plan as of October 31, 2020.
Plan
|
|
Total
shares of
Class B
common stock
reserved
under plan
|
|
|
Shares
available
for future grants
under plan
|
|
|
Aggregate
number of
options
exercised
|
|
|
Aggregate
number of
options
outstanding
|
|
|
Weighted
average
exercise
price of
options
outstanding
|
|
2019
Stock Option and Incentive Plan
|
|
|
450,000
|
|
|
|
126,487
|
|
|
|
0
|
|
|
|
252,735
|
|
|
$
|
7.11
|
|
The
following table presents certain data for our 2009 Stock Option and Incentive Plan as of October 31, 2020.
Plan
|
|
Total
shares of
Class B
common stock
reserved
under plan
|
|
|
Shares
available
for future grants
under plan
|
|
|
Aggregate
number of
options
exercised
|
|
|
Aggregate
number of
options
outstanding
|
|
|
Weighted
average
exercise
price of
options
outstanding
|
|
2009
Stock Option and Incentive Plan
|
|
|
285,860
|
|
|
|
94,656
|
(1)
|
|
|
0
|
|
|
|
10,000
|
|
|
$
|
31.00
|
|
|
(1)
|
Pursuant
to the terms and conditions of the 2009 Stock Option and Incentive Plan, grants may no longer
be awarded under this plan.
|
Outstanding
Equity Awards at 2020 Fiscal Year-End
The
following table provides information on the current holdings of stock options and unvested Restricted Stock by our Named Executive Officers
at October 31, 2020.
|
|
|
|
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
Name
|
|
Option
Grant
Date
|
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of Shares
or Units of
Stock That Have
Not
Vested
(#)
|
|
|
Market
Value of Shares or
Units of
Stock That
Have Not
Vested (1)
($)
|
|
Ezra
Y. Rosensaft
|
|
|
01/23/2020
|
|
|
|
10,000
|
|
|
|
15,000
|
|
|
|
10.50
|
|
|
|
01/22/2030
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
07/14/2020
|
|
|
|
—
|
|
|
|
120,000
|
|
|
|
3.98
|
|
|
|
07/13/2030
|
|
|
|
|
|
|
|
|
|
Brooke
T. Feinstein
|
|
|
09/10/2020
|
|
|
|
—
|
|
|
|
5,000
|
|
|
|
3.35
|
|
|
|
09/09/2030
|
|
|
|
—
|
|
|
|
—
|
|
Howard
S. Jonas
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Marc
E. Knoller
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Davidi
Jonas
|
|
|
01/23/2020
|
|
|
|
42,735
|
|
|
|
—
|
|
|
|
10.50
|
|
|
|
01/22/2030
|
|
|
|
—
|
|
|
|
—
|
|
Potential
Payments upon Termination or Change-in-Control
There
are no potential payments to any of our Named Executive Officers upon termination or change-in-control.
Director
Compensation
Until
March 11, 2021, each non-employee director of the Company who attended at least 75% of the meetings of the Board of Directors during
a calendar year received an annual cash retainer of $12,000. Such payment was made in January of the calendar year following attendance
of at least 75% of the Board of Directors meetings during the preceding year, and is pro-rated for non-employee directors who join the
Board of Directors or depart from the Board of Directors during the prior year, if such director attended 75% of the applicable Board
of Directors meetings for such partial year. The Company’s Chief Executive Officer may, in his discretion, waive the requirement
of 75% attendance by a director to receive the annual retainer in the case of mitigating circumstances. The Compensation Committee periodically
reviews our director compensation practices.
On
March 11, 2021, the Compensation Committee (1) increased the above-described $12,000 cash retainer to $18,000 effective immediately,
resulting in the payment to be made in January 2022 to each non-employee director to be $18,000 instead of $12,000, (2) authorized the
grant to each non-employee director of fully vested restricted shares of our Class B common stock issued pursuant to the Company’s
2019 Plan valued at $6,,000 based on the closing stock trading price of our Class B common stock on March 10, 2021, resulting in
1,500 shares being issued to each non-employee director, for service to be provided in 2021, and (3) effective January 5, 2022, each
non-employee director will receive a grant of fully vested restricted shares of our Class B common stock issued pursuant to the
Company’s 2019 Plan valued at $6,000 based on the average of the high and low stock trading price of our Class B common stock
on the business day immediately prior to the grant date, for service to be provided in forthcoming calendar year.
The
Compensation Committee believes that our director compensation is fair and appropriate in light of the responsibilities and obligations
of our directors.
Fiscal
2020 Director Compensation Table
The
following table lists the Fiscal 2020 compensation for each person who served as a non-employee director during fiscal 2020. This
table does not include compensation to Howard S. Jonas and Marc E. Knoller, who serve as directors now and served as directors during
fiscal 2020. Each of Messrs. Jonas and Knoller is a Named Executive Officer, as neither received compensation for his service as a director
during fiscal 2020. Each of Messrs. Jonas’ and Knoller’s compensation is set forth in the Executive Compensation section
of this Prospectus. Mr. Knoller is Chief Executive Officer of CTM Media Group, Inc, a former subsidiary of the Company, and was Interim
Chief Executive Officer from March 2020 until July 2020.
Name
|
|
Dates
of
Board Service
During Fiscal 2020
|
|
Fees
Earned or
Paid in
Cash
($)
|
|
|
Fees
Earned or
Paid in
Stock
($)
|
|
|
Stock
Awards
($)
|
|
|
All
Other Compensation ($)
|
|
|
Total
($)
|
|
Perry Davis
|
|
11/01/2019 – 10/31/2020
|
|
|
24,500
|
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,500
|
|
Allan I. Grafman
|
|
11/01/2019 – 10/31/2020
|
|
|
37,000
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
37,000
|
|
Irwin Katsof
|
|
11/01/2019 – 10/31/2020
|
|
|
12,000
|
(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
12,000
|
|
Chris McGurk
|
|
12/09/2019 – 10/31/2020
|
|
|
24,500
|
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,500
|
|
(1)
|
Consists
of (a) $12,000, which represents the annual Board of Directors retainer earned in Fiscal 2020 and (b) $12,500, which represents the
fee earned in Fiscal 2020 for service on the Special Committee Regarding the Potential Sale of CTM Media (“CTM Sale Committee”).
|
(2)
|
Consists
of (a) $12,000, which represents the annual Board of Directors retainer earned in Fiscal 2020, (b) $12,500, which represents the
fee earned in Fiscal 2020 for service on the CTM Sale Committee, and (c) $12,500, which represents the fee earned in Fiscal 2020
for service as the Chairman of the CTM Sale Committee.
|
(3)
|
Represents
the annual Board of Directors retainer earned in Fiscal 2020.
|
Compensation
Committee Interlocks and Insider Participation
None
of the members of the Compensation Committee has served as an officer or employee of the Company or has any relationship with the Company
that is required to be disclosed under the heading “Related Person Transactions.” No executive officer of the Company served
or serves on the compensation committee (or other board committee performing equivalent functions) of any company that employed or employs
as an executive officer any member of the Company’s Compensation Committee.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Certain
Relationships and Related Party Transactions
Transactions
with Related Persons, Promoters and Certain Control Persons
On
August 21, 2018, the Company entered into a loan agreement with Howard Jonas, the Company’s Chairman of the Board of Directors
(who, at the time was also the Company’s Chief Executive Officer and majority stockholder) (the “Chairman”) for $5,000,000.
Interest accrued at prime rate plus 1% and the loan had a maturity date of August 20, 2022. Payment of principal and interest were payable
from 70% of the Free Cash Flow, as defined in the loan agreement, of the Company’s CTM Media Group Inc. subsidiary. All outstanding
shares of CTM Media Group Inc. stock were pledged as security under the agreement. On December 1, 2019, the Company amended the agreement
providing that up to 60% of the interest due may, at the option of the Company, be paid in shares of Class B common stock (and the remaining
amount in cash) with such shares valued based on the average closing prices for the Class B common stock on the ten trading days immediately
prior to the applicable interest due date. The shares issued in connection with the loan interest was 63,255. Interest on the loan was
due and payable quarterly. In conjunction with the loan, the Company issued the Chairman a warrant to purchase up to 89,243 shares
of the Company’s Class B Common Stock at a price per share of $42.02. The warrant expires August 21, 2023. On July 13, 2020 $1,250,000
was converted into 314,070 shares of Class B Common Stock. On February 15, 2021 the Company closed the previously announced CTM Sale
and since the cancelation of the indebtedness was the purchase price the Company wrote down the loan of $3,750,000, the outstanding balance
as at April 30, 2021 was nil.
On
September 21, 2018, the Company entered into a bridge loan facility agreement with Howard Jonas for up to $26,000,000. On December 1,
2019, the Company amended the agreement providing that up to 60% of the interest due may, at the option of the Company, be paid in shares
of Class B common stock (and the remaining amount in cash) with such shares valued based on the average closing prices for the Class
B common stock on the ten trading days immediately prior to the applicable interest due date. Pursuant to the applicable amendment, the
maturity date of the bridge loan facility was extended to August 21, 2022.To date, the shares issued in connection with the loan interest
was 14,902. The interest is to be paid quarterly on the loan. The proceeds from the private placement offering on March 9, 2020 were
used to pay off the remaining $4,000,000 of the loan facility. $8,000,000 of the loan facility was paid off in connection with the 2019
offering. The balance due under the facility was $0 at October 31, 2020. In conjunction with the amendment to the loan, the Company
issued the Chairman a warrant to purchase up to 98,336 shares of the Company’s Class B Common Stock at a price per share of $26.44.
The warrant expires on March 30, 2022.
For
the three and six months ended April 30, 2021, interest on the loan agreement amounted to $27,000. For the three and six months ended
April 30, 2020, interest on the bridge facility loan and loan agreement amounted to $177,000. Both were charged to production cost.
For
the fiscal year ended October 31, 2020 interest on the loan agreement amounted to $406,000. For the fiscal year October 31, 2019 interest
on the bridge facility loan and loan agreement amounted to $1,204,403. Both were charged to production cost.
CTM
has an arrangement with ETR Brochure Distributors (“ETR”) to manage all aspects of its brochure distribution operations,
principally located in the Washington D.C area. ETR is a company owned by the Chairman. The arrangement provides for a split of revenue
and costs of brochure and advertising media distribution in the areas presently serviced by ETR and expands both the CTM and ETR distribution
networks.
In
fiscal 2020 and 2019, CTM billed ETR $5,000 and $18,000, respectively and ETR billed CTM approximately $54,000 and $110,000 for distribution
services, respectively. ETR purchased management services from CTM for the fiscal years ended October 31, 2020 and October 31, 2019 in
the amounts of approximately $59,000 and $111,000, respectively. The balance owed by ETR to CTM was approximately $140,000 and $130,000
as of October 31, 2020 and 2019, respectively.
On
July 14, 2020, the Company and Howard Jonas executed a share purchase agreement pursuant to which the Company agreed to sell all of the
stock of CTM to Mr. Jonas or his assignee (the “CTM Sale”) for (i) the cancelation of $3.75 million of indebtedness owed
to Mr. Jonas by the Company, (ii) a contingent payment of up to $3.25 million based upon a recovery of quarterly revenues of CTM to 90%
of its fiscal 2019 levels during the 18-month period following the closing of the CTM Sale, and (iii) a contingent payment if CTM is
sold within 36 months from the closing of the CTM Sale for more than $4.5 million. Prior to executing the share purchase agreement, the
Company obtained a third-party’s valuation of CTM and a fairness opinion that stated the consideration being received by the Company
in the CTM Sale was fair. In addition to the Company’s Board of Directors approving the CTM Sale, the Audit Committee of the Board
of Directors, which is comprised entirely of independent directors, approved the CTM Sale in compliance with the Company’s Statement
of Policy with respect to Related Person Transactions. The CTM Sale closed on February 15, 2021, and we do not expect to have significant
continuing involvement with CTM subsequent to the sale.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The
following table sets forth certain information regarding the beneficial ownership of the Company’s Class B common stock (“Class
B Common Stock”) and the Company’s Class C common stock (“Class C Common Stock”) by (i) each person
known by the Company to be the beneficial owner of more than 5% of the outstanding shares of the Class B Common Stock or Class C
Common Stock, (ii) each of the Company’s directors, and Named Executive Officers, and (iii) all directors and executive officers
of the Company as a group. Unless otherwise noted in the footnotes to the table, to the best of the Company’s knowledge, the persons
named in the table have sole voting and investing power with respect to all shares indicated as being beneficially owned by them and
except as otherwise noted, the address of the referenced individual is c/o IDW Media Holdings, Inc. 520 Broad Street, Newark, New Jersey
07102.
Unless
otherwise noted, the security ownership information provided below is given as of June 30, 2021 and all shares are owned directly. Percentage
ownership information is based on 9,514,080 shares of Class B Common Stock issued and outstanding and 545,360 shares of Class C Common
Stock issued and outstanding. In computing the number of shares of Class B Common Stock beneficially owned by a person and
the percentage ownership of that person, we considered shares of Class B Common Stock subject to options and warrants held by that
person that are currently exercisable or exercisable within sixty days of June 30, 2021.
Name
|
|
Number
of Shares
of Class C
Common Stock
|
|
|
Percentage
of
Ownership of Class C
Common Stock
|
|
|
Number
of Shares
of Class B
Common Stock
|
|
|
Percentage
of
Ownership of Class B
Common Stock
|
|
|
|
Percentage
of
Aggregate
Voting Power δ
|
|
Howard
S. Jonas
|
|
|
|
|
|
|
|
|
|
|
1,922,541
|
(1)
|
|
|
19.8
|
%
|
|
|
|
6.7
|
%
|
The
Liora Jonas Stein 2020 Florida Trust, Alan Grayson, Trustee, dd. 04/06/2020(2)
|
|
|
68,170
|
|
|
|
12.5
|
%
|
|
|
148,549
|
|
|
|
1.6
|
%
|
|
|
|
8.5
|
%
|
The
Michael Jonas 2020 New Jersey Trust, Mark Berger, Trustee, dd. 04/06/2020(2)
|
|
|
68,170
|
|
|
|
12.5
|
%
|
|
|
148,549
|
|
|
|
1.6
|
%
|
|
|
|
8.5
|
%
|
The
Miriam Jonas 2020 New Jersey Trust, Liore Alroy, Trustee, dd. 04/06/2020(2)
|
|
|
68,170
|
|
|
|
12.5
|
%
|
|
|
148,549
|
|
|
|
1.6
|
%
|
|
|
|
8.5
|
%
|
The
Samuel Jonas 2020 New Jersey Trust, Jason Cyrulnik, Trustee, dd. 04/06/2020(2)
|
|
|
68,170
|
|
|
|
12.5
|
%
|
|
|
148,549
|
|
|
|
1.6
|
%
|
|
|
|
8.5
|
%
|
The
Jonathan Jonas 2020 South Dakota Trust, Bridgeford Trust Company, Trustee, dd. 04/06/2020(2)
|
|
|
68,170
|
|
|
|
12.5
|
%
|
|
|
148,549
|
|
|
|
1.6
|
%
|
|
|
|
8.5
|
%
|
The
Joseph Jonas 2020 Alaska Trust, Peak Trust Company – Ak, Trustee, dd. 04/06/2020(2)
|
|
|
68,170
|
|
|
|
12.5
|
%
|
|
|
148,549
|
|
|
|
1.6
|
%
|
|
|
|
8.5
|
%
|
The
Rachel Jonas 2020 Nevada Trust, Premier Trust, Inc., Trustee, dd. 04/06/2020(2)
|
|
|
68,170
|
|
|
|
12.5
|
%
|
|
|
148,548
|
|
|
|
1.6
|
%
|
|
|
|
8.5
|
%
|
The
Tamar Jonas 2020 Nevada Trust, Peak Trust Company – Nv, Trustee, dd. 04/06/2020(2)
|
|
|
68,170
|
|
|
|
12.5
|
%
|
|
|
148,548
|
|
|
|
1.6
|
%
|
|
|
|
8.5
|
%
|
Entities
affiliated with Nantahala Capital Management, LLC, 130 Main Street 2nd Floor, New Canaan, CT 06840
|
|
|
|
|
|
|
|
|
|
|
1,242,243
|
(3)
|
|
|
13.1
|
%
|
|
|
|
4.8
|
%
|
Raging
Capital Master Fund, Ltd., 10 Princeton Avenue, Rocky Hill, NJ 08553
|
|
|
|
|
|
|
|
|
|
|
1,354,248
|
(4)
|
|
|
14.2
|
%
|
|
|
|
5.2
|
%
|
Ezra
Y. Rosensaft
|
|
|
|
|
|
|
|
|
|
|
57,002
|
(5)
|
|
|
*
|
|
|
|
|
*
|
|
Brooke
T. Feinstein
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
*
|
|
|
|
|
*
|
|
Davidi
Jonas
|
|
|
|
|
|
|
|
|
|
|
42,375
|
(6)
|
|
|
*
|
|
|
|
|
*
|
|
Perry
Davis
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
|
|
*
|
|
|
|
|
*
|
|
Allan
I. Grafman
|
|
|
|
|
|
|
|
|
|
|
4.500
|
|
|
|
*
|
|
|
|
|
*
|
|
Irwin
Katsof
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
|
|
*
|
|
|
|
|
*
|
|
Marc
E. Knoller
|
|
|
|
|
|
|
|
|
|
|
105,434
|
|
|
|
1.1
|
%
|
|
|
|
*
|
|
Chris
McGurk
|
|
|
|
|
|
|
|
|
|
|
1,500
|
|
|
|
*
|
|
|
|
|
*
|
|
All
directors, Named Executive Officers and executive officers as a group (10 persons)
|
|
|
|
|
|
|
|
|
|
|
2,136,878
|
|
|
|
21.8
|
%
|
|
|
|
7.2
|
%
|
|
δ
|
Voting
power represents combined voting power of our Class C Common Stock (three votes per
share) and our Class B Common Stock and Preferred Stock (one-tenth of one vote per share).
Excludes stock options and warrants.
|
|
(1)
|
Consists
of (i) 26,755 shares of Class B Common Stock held by Mr. Howard Jonas, directly, (ii)
1,675,957 shares of Class B Common Stock held by the HSJ 2020 IDW-Zedge Annuity Trust, (iii)
32,000 shares of Class B Common Stock owned by the Jonas Foundation, (iv) an aggregate of
250 shares of Class B Common Stock beneficially owned by a custodial account for the benefit
of a child of Mr. Howard Jonas (of which Mr. Howard Jonas is the custodian), and
(v) warrants to purchase up to 89,243 shares of Class B Common Stock at a price per share
of $42.02 and up to 98,336 shares of Class B Common Stock at a price per share of $26.44.
Does not include (a) an aggregate of 1,766,511 shares of Class B Common Stock beneficially
owned by trusts for the benefit of the children of Mr. Howard Jonas, as Mr. Howard
Jonas does not exercise or share investment control of these shares and (b) 105,550 shares
of Class B Common Stock owned by the Howard S. & Deborah Jonas Foundation, as Mr. Howard
Jonas does not beneficially own these shares.
|
|
(2)
|
Shares
of Class B Common Stock and Class C Common Stock held by the trusts for the benefit of Mr.
Howard Jonas’ children were transferred from Mr. Howard Jonas on April 6, 2020 and
Mr. Howard Jonas is the trustor of the trusts with the power to replace the trustee.
|
|
(3)
|
Amounts
include the shares of Class B Common Stock held by managed funds and/or separate accounts
affiliated with Nantahala Capital Management, LLC. Nantahala Capital Management, LLC
is a registered investment adviser and has been delegated the legal power to vote and/or
direct the disposition of such shares as a general partner or investment manager and would
be considered the beneficial owner of such shares. The above shall not be deemed to be an
admission by the record owners that they are themselves beneficial owners of these securities
for purposes of Section 13(d) of the Exchange Act or any other purpose. Wilmot Harkey and
Daniel Mack are managing members of Nantahala Capital Management, LLC and may be deemed to
have voting and dispositive power over the reported shares.
|
|
(4)
|
Includes
19,342 shares owned by William Martin directly, who has investment and voting control over
the shares of Raging Capital Master Fund, Ltd.
|
|
(5)
|
Consist
of (i) 2,002 shares of Class B Common Stock held directly, and (ii) options to purchase 55,000 shares
of Class B Common Stock that are currently exercisable or exercisable within sixty days
of June 30, 2021.
|
|
(6)
|
Consist
of options to purchase 42,375 shares of Class B Common Stock, all of which are
currently exercisable.
|
DESCRIPTION
OF CAPITAL STOCK
The
Company’s authorized capital stock consists of Class B Common Stock, Class C Common Stock and Preferred Stock. As of October 1,
2020, there were 12,000,000 shares of Class B Common Stock authorized, 2,500,000 shares of Class C Common Stock authorized and 500,000
shares of Preferred Stock authorized.
Class
B Common Stock
Holders
of shares of Class B Common Stock are entitled to one-tenth of one vote for each share on all matters to be voted on by the stockholders.
Holders of Class B Common Stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Board
of Directors in its discretion from funds legally available therefor. There are no conversion or redemption rights or sinking fund provisions
with respect to the Class B Common Stock.
Class
C Common Stock
Holders
of shares of Class C common stock are entitled to three votes for each share on all matters to be voted on by the stockholders. Holders
of Class C common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Board of Directors
in its discretion from funds legally available therefor. Each share of Class C common stock may be converted, at any time and at the
option of the holder thereof, into one fully paid and non-assessable share of Class B common stock. In the event a holder of shares of
Class C common stock transfers such shares to a transferee other than to a Permitted Transferee, upon transfer, each share of Class C
common stock is automatically converted into one fully paid and non-assessable share of Class B common stock.
A
Permitted Transferee is defined in our Third Restated Certificate of Incorporation as follows:
|
(i)
|
In
the case of any stockholder, the Corporation or any one or more of its directly or indirectly wholly owned subsidiaries;
|
|
|
|
|
(ii)
|
In
the case of a stockholder who is a natural person:
|
The
spouse of such stockholder (the “Spouse”), any lineal ancestor of such stockholder or of the Spouse, and any person who is
a lineal descendant of a grandparent of such stockholder or of the Spouse, or a spouse of any such lineal descendent or such lineal ancestor
(collectively, the “Family Members”);
A
trust (including a voting trust) exclusively for the benefit of one or more of (x) such stockholder, (y) one or more of his or her Family
Members or (z) an organization to which contributions are deductible under 501(c)(3) of the Internal Revenue Code of 1986, as amended,
or any successor provision (the “Internal Revenue Code”) or for estate or gift tax purposes (a “Charitable Organization”);
provided that such trust may include a general or special power of appointment for such stockholder or Family Members (a “Trust”);
provided, further, that if by reason of any change in the beneficiaries of such Trust, such Trust would not have qualified, at the time
of the transfer of Class C common stock to such Trust (for purposes of this sub-paragraph (B), the “Transfer Date”), as a
Permitted Transferee, all shares of Class C common stock so transferred to such Trust shall, effective on the date of such change of
beneficiary, be automatically converted, without further act on anyone’s part, into an equal number of shares of Class B common
stock, and the stock certificates formerly representing such shares of Class C common stock shall thereupon and thereafter be deemed
to represent the like number of shares of Class B Stock;
A
Charitable Organization established solely by one or more of such stockholder or a Family Member;
An
Individual Retirement Account, as defined in Section 408(a) of the Internal Revenue Code, of which such stockholder is a participant
or beneficiary, provided that such stockholder has the power to direct the investment of funds deposited into such Individual Retirement
Account and to control the voting of securities held by such Individual Retirement Account (an “IRA”);
A
pension, profit sharing, stock bonus or other type of plan or trust of which such Stockholder is a participant or beneficiary and which
satisfies the requirements for qualification under Section 401(k) of the Internal Revenue Code, provided that such Stockholder has the
power to direct the investment of funds deposited into such plan or trust and to control the voting of securities held by such plan or
trust (a “Plan”);
Any
corporation or partnership directly or indirectly controlled, individually or as a group, only by such stockholder and/or any of his
Permitted Transferees as determined under this clause (ii); provided, that if by reason of any change in the direct or indirect control
of such corporation or partnership, such corporation or partnership would not have qualified, at the time of the Transfer of Class C
common stock to such corporation or partnership, as a Permitted Transferee of such stockholder, all shares of Class C common stock so
transferred to such corporation or partnership shall, effective on the date of such direct or indirect change in control, be automatically
converted, without further act on anyone’s part, into an equal number of shares of Class B common stock, and the stock certificates
formerly representing such shares of Class C common stock shall thereupon and thereafter be deemed to represent the like number of shares
of Class B common stock; and
The
estate, executor, executrix or other personal representative, custodian, administrator or guardian of such Stockholder.
|
(iii)
|
In
the case of a stockholder holding the shares of Class C common stock in question as trustee of an IRA, a Plan or a Trust, “Permitted
Transferee” means (x) the person who transferred Class C common stock to such IRA, such Plan or such Trust, (y) any Permitted
Transferee of any such person determined pursuant to this Section 2(e) and (z) any successor trustee or trustees in such capacity
of such IRA, such Plan or such Trust;
|
|
(iv)
|
In
the case of a stockholder which is a partnership, “Permitted Transferee” means any other person, directly or indirectly
controlling, controlled by or under direct or indirect common control with such partnership, provided that, if by reason of any change
in the direct or indirect control of such person, such person would not have qualified, at the time of the transfer of the Class
C common stock to such person, as a Permitted Transferee of such partnership, all shares of Class C common stock so transferred to
such person shall, effective on the date of such direct or indirect change in control, be automatically converted, without further
act on anyone’s part, into an equal number of shares of Class B common stock, and the stock certificates formerly representing
such shares of Class C common stock shall thereupon and thereafter be deemed to represent the like number of shares of Class B common
stock;
|
|
|
|
|
(v)
|
In
the case of a stockholder which is a corporation (other than a Charitable Organization) “Permitted Transferee” means
any other person directly or indirectly controlling, controlled by or under direct or indirect common control with such corporation;
provided that if by reason of any change in the direct or indirect control of such person, such person would not have qualified,
at the time of the Transfer of the Class C common stock to such person, as a Permitted Transferee of such corporation, all shares
of Class C common stock so transferred to such person shall, effective on the date of such direct or indirect change in control be
automatically converted, without further act on anyone’s part, into an equal number of shares of Class B common stock, and
the stock certificates formerly representing such shares of Class C common stock shall thereupon and thereafter be deemed to represent
the like number of shares of Class B common stock; and
|
|
|
|
|
(vi)
|
In
the case of a stockholder which is the estate of a deceased stockholder or who is the executor, executrix or other personal representative,
custodian or administrator of such stockholder, or guardian of a disabled or adjudicated incompetent Stockholder or which is the
estate of a bankrupt or insolvent stockholder, which owns the shares of Class C common stock in question, “Permitted Transferee”
means a Permitted Transferee of such deceased, or adjudicated incompetent, disabled, bankrupt or insolvent stockholder as otherwise
determined pursuant to this Section 2(e).
|
To
the extent issued and outstanding shares of Class C common stock are converted to Class B common stock or in the event shares of Class
C common stock are issued in the future and subsequently converted to Class B common stock, holders of our Class B common stock may suffer
dilution.
As
of June 30, 2021, there were 9,514,080 shares of Class B common stock and 545,360 shares of Class C common stock issued and outstanding
(excluded from these numbers are 519,360 shares of Class B common stock we hold in treasury)
Preferred
Stock
The
Board of Directors has the authority to fix the price, rights, preferences, privileges and restrictions, including voting rights, of
those shares without any further vote or action by the stockholders.
As
of June 30, 2021, no shares of Preferred Stock were outstanding.
Options
As
of June 30, 2021, we had options to purchase 327,737 Class B common stock outstanding pursuant to the 2009 and 2019 Plans with a weighted
average exercise price of $6.44 per share.
Warrants
As
of June 30, 2021, the Company has outstanding warrants issued to Howard Jonas to purchase up to (i) 89,243 shares of Class B common stock,
par value $0.01 per share at a price of $42.02 per share and (ii) 98,336 shares of Class B common stock, par value $0.01 per share at
a price of $26.44 per share. The warrants have a term of five and three years, respectively.
Anti-Takeover
Effects of Our Charter and By-Laws
Some
provisions of Delaware law and our Certificate of Incorporation and By-Laws could make the following more difficult:
|
●
|
acquisition
of us by means of a tender offer;
|
|
●
|
acquisition
of us by means of a proxy contest or otherwise; or
|
|
●
|
removal
of our incumbent officers and directors.
|
These
provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions also
are designed to encourage persons seeking to acquire control of us to first negotiate with our Board of Directors. We believe that the
benefits of increased protection give us the potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal
to acquire or restructure us and outweigh the disadvantages of discouraging those proposals because negotiation of them could result
in an improvement of their terms.
Certificate
of Incorporation; By-Laws
Our
Certificate of Incorporation and By-Laws contain provisions that could make more difficult the acquisition of us by means of a tender
offer, a proxy contest or otherwise. These provisions are summarized below.
Undesignated
Preferred Stock. The authorization of our undesignated preferred stock makes it possible for our Board of Directors to issue
our preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us.
These and other provisions may have the effect of deferring hostile takeovers or delaying changes of control of our management.
Size
of Board and Vacancies. Our Certificate of Incorporation provides that the number of directors on our Board of Directors will
be fixed exclusively by our Board of Directors. Newly created directorships resulting from any increase in our authorized number of directors
or any vacancies in our Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other
cause will be filled solely by the vote of our remaining directors in office.
Stockholder
Meetings. Under our By-Laws, only (i) our Chairman of the Board, (ii) our Chief Executive Officer, (iii) our President, (iv)
our Corporate Secretary, (v) a majority of our Board of Directors, or (vi) stockholders owning issued and outstanding capital stock of
us representing not less than a majority of the voting power of all of our issued and outstanding capital stock may call special meetings
of our stockholders.
Indemnification
and Limitation of Liability of Directors and Officers
Our
Certificate of Incorporation provides that, to the fullest extent permitted by the Delaware General Corporate Law (“DGCL”),
our directors shall not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director.
Section 102(7) of the DGCL, however, states that such a provision may not eliminate or limit the liability of a director (i) for any
breach of the director’s duty of loyalty to us or our stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, relating to unlawful dividends, distributions
or the repurchase or redemption of stock or (iv) for any transaction from which the director derives an improper personal benefit.
Our
By-Laws provide we shall indemnify and hold harmless, to the fullest extent permitted by the DGCL, any person against expenses (including
attorneys’ fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred in connection with any threatened,
pending or completed legal proceedings in which such person is involved by reason of the fact that he is or was a director or officer
of ours if he acted in good faith and in a manner that he reasonably believed to be in or not opposed to our best interests, and, with
respect to any criminal action or proceeding, if he had no reasonable cause to believe that his conduct was unlawful. If the legal proceeding,
however, is by or in our right, such director or officer may not be indemnified in respect of any claim, issue or matter as to which
he shall have been adjudged to be liable to us unless a court determines otherwise.
We
may enter into agreements to indemnify our directors and officers in addition to the indemnification provided for in our Certificate
of Incorporation. Such agreements, among other things, would indemnify our directors and officers for certain expenses (including attorneys’
fees), judgments, fines and settlement amounts incurred by such person in any action or proceeding, including any action by or in our
rights, on account of services as our director or officer or as a director or officer of any subsidiary of ours, or as a director or
officer of any other company or enterprise to which the person provides services at our request.
We
obtain directors’ and officers’ liability insurance providing coverage to our directors and officers.
Registration
Rights Agreements
Pursuant
to substantially similar Registration Rights Agreements (the “RRAs”) entered into between the Company and each of the purchasers
of 2,051,002 shares of Class B Common Stock (the “Resale Shares”) on or about March 2, 2020, the Company agreed to file,
as soon as reasonably practicable following the closing of the sale by the Company of the Resale Shares, with the Securities and Exchange
Commission (the “SEC”) a registration statement covering the resale of the Resale Shares; provided, however, that with respect
to 66,667 of the Resale Shares, the Company agreed to use commercially reasonable best efforts to file the Registration Statement with
the SEC as soon as reasonably practicable but in any event no later April 20, 2020. The Company agreed to pay all expenses related to
such registration. Pursuant to the RRAs, the Company and each of the purchasers agreed to indemnify and hold harmless the other party
with certain conditions.
Pursuant
to the RRAs, the Company also agreed to, as expeditiously as possible:
(a)
use commercially reasonable efforts to cause the applicable Registration Statement to become effective and to remain continuously effective
for a period that will terminate upon the earlier of (i) the date on which all Registrable Securities, covered by such Registration Statement,
as amended from time to time, have been sold, and (ii) the date on which all Registrable Securities may be sold pursuant to Rule 144
of the Securities Act without volume or manner of sale restrictions (“Registration Period”);
(b)
prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement and the Prospectus as may be
necessary to keep the Registration Statement effective for the Registration Period and to comply with the provisions of the Securities
Act and the Exchange Act with respect to the distribution of all Registrable Securities;
(c)
furnish to each Stockholder and their legal counsel (i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company (but not later than four (4) business days after the filing date, receipt date or sending date, as the
case may be), a reasonable number of copies of any Registration Statement and any amendment thereto, each preliminary prospectus and
Prospectus and each amendment or supplement thereto, and each letter written by or on behalf of the Company to the SEC or the staff of
the SEC, and each item of correspondence from the SEC or the staff of the SEC, in each case relating to such Registration Statement (other
than any portion of any thereof which contains information for which the Company has sought confidential treatment), and (ii) such number
of copies of a Prospectus, including a preliminary prospectus, and all amendments and supplements thereto and such other documents as
such Stockholder may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Stockholder;
(d)
immediately notify each Stockholder, at any time when a Prospectus relating to the Registrable Securities is required to be delivered
under the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the Prospectus included in such
Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing and at the
request of any Stockholder, promptly prepare and furnish to such Stockholder a reasonable number of copies of a supplement to or an amendment
of such Prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities;
(e)
with a view to making available to the Stockholder the benefits of Rule 144 promulgated under the Securities Act and other rules and
regulations of the SEC that may at any time permit a Stockholder to sell securities of the Company to the public without registration,
the Company covenants that it will (i) file in a timely manner all reports and other documents required, if any, to be filed by it under
the Securities Act and the Exchange Act and (ii) make available information necessary to comply with Rule 144, if available with respect
to resales of the Registrable Securities under the Securities Act, at all times, all to the extent required from time to time to enable
a Stockholder without registration under the Securities Act within the limitation of the exemptions provided by (x) Rule 144 promulgated
under the Securities Act (if available with respect to resales of the Registrable Securities), as such rules may be amended from time
to time or (y) any other rules or regulations now existing or hereafter adopted by the SEC. Upon the reasonable request of a Stockholder,
the Company will deliver to such Stockholder a written statement as to whether it has complied with such information;
(f)
use commercially reasonable efforts to prevent the issuance of any stop order or other suspension of effectiveness and, if such order
is issued, obtain the withdrawal of any such order at the earliest possible moment;
(g)
cause all Registrable Securities covered by a Registration Statement to be listed on each securities exchange, interdealer quotation
system or other market on which the Company Class B Common Stock is then listed;
(h)
in the case of certificated Registrable Securities, cooperate with the Stockholder to facilitate the timely preparation and delivery
of certificates representing Registrable Securities sold pursuant to a Registration Statement;
(i)
provide and cause to be maintained a transfer agent and registrar for all such Registrable Securities that are Company Class B Common
Stock from and after the effective date of the applicable Registration Statement; and
(j)
otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the SEC under the Securities Act
and the Exchange Act, and take such other actions as may be reasonably necessary to facilitate the registration of the Registrable Securities
hereunder.
Certain
of the RRAs were amended on or about March 25, 2020 to extend the deadline to file the Registration Statement with the SEC as soon as
reasonably practicable but in any event no later than September 2020 or September 1, 2020, as applicable. On July 1, 2021, the Registration
Statement on Form S-1 registering the Resale Shares with the SEC was declared effective.
Listing
Our
Class B common stock is quoted on OTC Pink Market under the trading symbol “IDWM”. We intend to apply to have our Class B
common stock listed on the NYSE American and request the symbol “IDW.”
Transfer
Agent
American
Stock Transfer & Trust Company will serve as our transfer agent and registrar. Its address is 59 Maiden Lane Plaza Level, New York,
New York 10038, and its telephone number is (800) 937-5449.
SHARES
ELIGIBLE FOR FUTURE SALE
Prior
to this offering, shares of our common stock were quoted on the OTC Pink Markets under the symbol “IDWM.” Future sales of
substantial amounts of our Class B common stock in the public market, including shares issued upon the exercise of outstanding options
or warrants, or upon debt conversion, or the anticipation of these sales, could adversely affect market prices prevailing from time to
time and could impair our ability to raise capital through sales of equity securities.
Upon
completion of this offering we estimate that we will have _________ outstanding shares of our Class B common stock, calculated as of
________, 2021, assuming no exercise of outstanding options or warrants, and no sale of shares reserved for the underwriter for over-allotment
allocation, if any.
Sale
of Restricted Securities
The
shares of our Class B common stock sold pursuant to this offering will be registered under the Securities Act or 1933, as amended, and
therefore freely transferable, except for our affiliates. Our affiliates will be deemed to own “control” securities that
are not registered for resale under the registration statement covering this prospectus. Individuals who may be considered our affiliates
after this offering include individuals who control, are controlled by or are under common control with us, as those terms generally
are interpreted for federal securities law purposes. These individuals may include some or all of our directors and executive officers.
Individuals who are our affiliates are not permitted to resell their shares of our Class B common stock unless such shares are separately
registered under an effective registration statement under the Securities Act or an exemption from the registration requirements of the
Securities Act is available, such as Rule 144.
Rule
144
In
general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated), including an affiliate, who beneficially
owns “restricted securities” (i.e. securities that are not registered by an effective registration statement) of a “reporting
company” may not sell these securities until the person has beneficially owned them for at least six months. Thereafter, affiliates
may not sell within any three-month period a number of shares in excess of the greater of: (i) 1% of the then outstanding shares of Class
B common stock as shown by the most recent report or statement published by the issuer; and (ii) the average weekly reported trading
volume in such securities during the four preceding calendar weeks.
Sales
under Rule 144 by our affiliates will also be subject to restrictions relating to manner of sale, notice and the availability of current
public information about us and may be affected only through unsolicited brokers’ transactions.
Persons
not deemed to be affiliates who have beneficially owned “restricted securities” for at least six months but for less than
one year may sell these securities, provided that current public information about the Company is “available,” which means
that, on the date of sale, we have been subject to the reporting requirements of the Exchange Act for at least 90 days and are current
in our Exchange Act filings. After beneficially owning “restricted securities” for one year, our non-affiliates may engage
in unlimited re-sales of such securities.
Shares
received by our affiliates in this offering or upon exercise of stock options or upon vesting of other equity-linked awards may be “control
securities” rather than “restricted securities.” “Control securities” are subject to the same volume limitations
as “restricted securities” but are not subject to holding period requirements.
Rule
701
Rule 701
generally allows a stockholder who purchased shares of the Company’s Class B common stock pursuant to a written compensatory plan
or contract and who is not deemed to have been an affiliate of the Company during the immediately preceding 90 days to sell these
shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation,
or notice provisions of Rule 144. Rule 701 also permits affiliates of the Company to sell their Rule 701 shares under
Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however,
are required to wait until 90 days after the date of this prospectus before selling such shares pursuant to Rule 701 and until
expiration of the lock-up period described below.
Lock-Up
Agreements
The
Company, each of our directors and executive officers, and certain of our stockholders affiliated with our directors and executive officers
will agree not to, subject to certain limited exceptions, offer, pledge, sell, contract to sell, grant any option to purchase, or otherwise
dispose of our common stock or any securities convertible into or exchangeable or exercisable for common stock, or to enter into any
hedge or other arrangement or any transaction that transfers, directly or indirectly, the economic consequence of ownership of the shares
of our common stock, for a period of 180 days after the date of this prospectus, without the prior written consent of the underwriter.
See “Underwriting—Lock-up Agreements.”
MATERIAL
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The
following is a summary of the material U.S. federal income tax considerations relating to the purchase, ownership and disposition of
our Class B common stock purchased in this offering, which we refer to collectively as our securities, but is for general information
purposes only and does not purport to be a complete analysis of all the potential tax considerations. This summary is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the “Code”), final, temporary and proposed Treasury regulations
promulgated thereunder, administrative rulings and pronouncements and judicial decisions, all as of the date hereof. These authorities
may change, possibly retroactively, resulting in U.S. federal income and estate tax consequences different from those set forth below.
There can be no assurance that the Internal Revenue Service (the “IRS”) will not challenge one or more of the tax consequences
described herein, and we have not obtained, and do not intend to obtain, an opinion of counsel or ruling from the IRS with respect to
the U.S. federal income tax considerations relating to the purchase, ownership or disposition of our securities.
This
summary does not address any alternative minimum tax considerations, any considerations regarding the Medicare tax, any considerations
regarding the tax on net investment income, or the tax considerations arising under the laws of any state, local or non-U.S. jurisdiction,
or under any non-income tax laws, including U.S. federal gift and estate tax laws, except to the limited extent set forth below. In addition,
this summary does not address all of the tax consequences that may be relevant to investors, nor does it address tax considerations applicable
to an investor’s particular circumstances or to investors that may be subject to special tax rules, including, without limitation:
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banks,
insurance companies or other financial institutions;
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tax-exempt
entities or governmental organizations, including agencies or instrumentalities thereof;
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regulated
investment companies and real estate investment trusts;
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controlled
foreign corporations, passive foreign investment companies and corporations that accumulate earnings to avoid U.S. federal income
tax;
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brokers
or dealers in securities or currencies;
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traders
in securities that elect to use a mark-to-market method of accounting for their securities holdings;
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persons
that own, or are deemed to own, more than five percent of our capital stock (except to the extent specifically set forth
below);
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tax-qualified
retirement plans;
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certain
former citizens or long-term residents of the United States;
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partnerships
or entities or arrangements classified as partnerships for U.S. federal income tax purposes and other pass-through entities
including S corporations and trusts (and any investors therein);
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persons
who hold our securities as a position in a hedging transaction, “straddle,” “conversion transaction” or
other risk reduction transaction or integrated investment;
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persons
who do not hold our securities as a capital asset within the meaning of Section 1221 of the Code; or
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persons
deemed to sell our securities under the constructive sale provisions of the Code, or persons holding the securities as part of a
“straddle,” hedge, conversion transaction, integrated transaction or other similar transaction.
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In
addition, if a partnership (or entity or arrangement classified as a partnership for U.S. federal income tax purposes) holds our securities,
the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership. Accordingly,
partnerships that hold our securities, and partners in such partnerships, should consult their tax advisors.
You
are urged to consult your own tax advisors with respect to the application of the U.S. federal income tax laws to your particular situation,
as well as any tax consequences of the purchase, ownership and disposition of our securities arising under the U.S. federal estate or
gift tax laws or under the laws of any state, local, non-U.S., or other taxing jurisdiction or under any applicable tax treaty.
Consequences
to U.S. Holders
The
following is a summary of the U.S. federal income tax consequences that will apply to a U.S. holder of our securities. For purposes of
this discussion, you are a U.S. holder if, for U.S. federal income tax purposes, you are a beneficial owner of our securities, other
than a partnership, that is:
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an
individual citizen or resident of the United States;
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a
corporation or other entity taxable as a corporation created or organized in the United States
or under the laws of the United States, any State thereof or the District of Columbia;
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an
estate or trust whose income is subject to U.S. federal income tax regardless of its source; or
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a
trust (x) whose administration is subject to the primary supervision of a U.S. court and
which has one or more “United States persons” (within the meaning of Section
7701(a)(30) of the Code) who have the authority to control all substantial decisions of the
trust or (y) which has made a valid election to be treated as a “United States person.”
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Distributions
As
described in the section titled “Market for Our Class B common stock - Dividend Policy,” we do not pay cash dividends on
our Class B common stock and do not anticipate paying any dividends on our Class B common stock in the foreseeable future. However, if
we do make distributions in cash or other property on our Class B common stock, those payments will constitute dividends for U.S. tax
purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles.
To the extent our distributions exceed both our current and our accumulated earnings and profits, the excess will constitute a return
of capital that will first reduce your basis in our Class B common stock, but not below zero, and then will be treated as gain from the
sale or other disposition of stock as described below under “—Sale, Exchange or Other Taxable Disposition of Class B common
stock.”
Dividend
income may be taxed to an individual U.S. holder at rates applicable to long-term capital gains, provided that a minimum holding period
and other limitations and requirements are satisfied, with certain exemptions. Any dividends that we pay to a U.S. holder that is a corporation
will qualify for the dividends received deduction if the requisite holding period is satisfied, subject to certain limitations. U.S.
holders should consult their own tax advisors regarding the holding period and other requirements that must be satisfied in order to
qualify for the reduced tax rate on dividends or the dividends-received deduction.
Sale,
Exchange or Other Taxable Disposition of Class B common stock
A
U.S. holder will generally recognize capital gain or loss on the sale, exchange or other taxable disposition of our Class B common stock.
The amount of gain or loss will equal the difference between the amount realized on the sale and such U.S. holder’s adjusted tax
basis in such Class B common stock. The amount realized will include the amount of any cash and the fair market value of any other property
received in exchange for such Class B common stock. A U.S. holder’s adjusted tax basis in its Class B common stock will generally
equal the U.S. holder’s acquisition cost or purchase price, less any prior distributions treated as a return of capital. Gain or
loss will be long-term capital gain or loss if the U.S. holder has held the Class B common stock for more than one year. Long-term capital
gains of non-corporate U.S. holders are generally taxed at preferential rates. The deductibility of capital losses is subject to certain
limitations.
Information
Reporting and Backup Withholding
In
general, information reporting requirements may apply to dividends paid to a U.S. holder and to the proceeds of the sale or other disposition
of our Class B common stock, unless the U.S. holder is an exempt recipient. Backup withholding may apply to such payments if the U.S.
holder fails to provide a taxpayer identification number, a certification of exempt status or has been notified by the IRS that it is
subject to backup withholding (and such notification has not been withdrawn).
Any
amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a U.S. holder’s U.S. federal
income tax liability provided the required information is timely furnished to the IRS.
Unearned
Income Medicare Tax
A
3.8% Medicare contribution tax will generally apply to all or some portion of the net investment income of a U.S. holder that is an individual
with adjusted gross income that exceeds a threshold amount ($200,000, or $250,000 if married filing jointly).
Consequences
to Non-U.S. Holders
The
following is a summary of the U.S. federal income tax consequences that will apply to a non-U.S. holder of our securities. A “non-U.S.
holder” is a beneficial owner of our securities (other than a partnership or an entity or arrangement treated as a partnership
for U.S. federal income tax purposes) that, for U.S. federal income tax purposes, is not a U.S. holder. The term “non-U.S. holder”
includes:
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a
non-resident alien individual (other than certain former citizens and residents of the U.S. subject to U.S. tax as
expatriates);
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an
estate or trust that is not a U.S. holder; or
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any
other Person that is not a U.S. holder
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but
generally does not include an individual who is present in the U.S. for 183 days or more or who is otherwise treated as a U.S. resident
in the taxable year. If you are such an individual, you should consult your tax advisor regarding the U.S. federal income tax consequences
of the acquisition, ownership or sale or other disposition of our securities.
Distributions
Subject
to the discussion below regarding effectively connected income, any distribution paid to a non-U.S. holder, to the extent paid out of
our current or accumulated earnings and profits (as determined under U.S. federal income tax principles) generally will constitute a
dividend for U.S. federal income tax purposes and, provided such dividends are not effectively connected with the non-U.S. holder’s
conduct of a trade or business within the U.S., will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of
the dividend or such lower rate as may be specified by an applicable income tax treaty. In order to receive a reduced treaty rate, a
non-U.S. holder must provide us with an IRS Form W-8BEN, IRS Form W-8BEN-E or other applicable IRS Form W-8 properly certifying qualification
for the reduced rate. These forms must be provided prior to the payment of dividends and must be updated periodically. A non-U.S. holder
eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty should consult with its individual tax advisor to
determine if it may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. If
a non-U.S. holder holds our securities through a financial institution or other agent acting on the non-U.S. holder’s behalf, the
non-U.S. holder will be required to provide appropriate documentation to the agent, which then may be required to provide certification
to us or our paying agent, either directly or through other intermediaries.
Dividends
received by a non-U.S. holder that are effectively connected with its conduct of a U.S. trade or business (and, if required by an applicable
income tax treaty, attributable to a permanent establishment or fixed base maintained by the non-U.S. holder in the United States) are
generally exempt from such withholding tax if the non-U.S. holder satisfies certain certification and disclosure requirements. In order
to obtain this exemption, the non-U.S. holder must provide us with an IRS Form W-8ECI or other applicable IRS Form W-8 properly certifying
such exemption. Such effectively connected dividends, although not subject to withholding tax, are taxed at the same graduated U.S. federal
income tax rates applicable to U.S. holders, net of certain deductions and credits. In addition, dividends received by a corporate non-U.S.
holder that are effectively connected with its conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate
of 30% or such lower rate as may be specified by an applicable income tax treaty. Non-U.S. holders should consult their own tax advisors
regarding any applicable tax treaties that may provide for different rules.
Any
distribution not constituting a dividend will be treated first as reducing (but not below zero) the Non-U.S. holder’s adjusted
tax basis in its Class B common stock and, to the extent such distribution exceeds the Non-U.S. holder’s adjusted tax basis, as
gain realized from the sale or other disposition of the Class B common stock, which will be treated as described under “Non-U.S.
Holders — Gain on Sale, Exchange or Other Taxable Disposition of Class B common stock” below.
Gain
on Sale, Exchange or Other Taxable Disposition of Class B common stock
Subject
to the discussion below regarding backup withholding and foreign accounts, a non-U.S. holder generally will not be required to pay U.S.
federal income tax on any gain realized upon the sale, exchange or other taxable disposition of our Class B common stock unless:
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the
gain is effectively connected with the non-U.S. holder’s conduct of a U.S. trade or
business (and, if required by an applicable income tax treaty, the gain is attributable to
a permanent establishment or fixed base maintained by the non-U.S. holder in the United States);
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the
non-U.S. holder is a non-resident alien individual who is present in the United States for
a period or periods aggregating 183 days or more during the calendar year in which the sale
or disposition occurs and certain other conditions are met; or
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shares
of our Class B common stock constitute U.S. real property interests by reason of our status
as a “United States real property holding corporation” (a USRPHC) for U.S. federal
income tax purposes at any time within the shorter of the five-year period preceding the
non-U.S. holder’s disposition of, or the non- U.S. holder’s holding period for,
our Class B common stock (provided that an exception does not apply), and, in the case where
shares of our Class B common stock are regularly traded on an established securities market,
the Non-U.S. holder has owned, directly or constructively, more than 5% of our Class B common
stock at any time within the shorter of the five-year period preceding the disposition or
such Non-U.S. holder’s holding period for the shares of our Class B common stock.
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We
believe that we are not currently and will not become a USRPHC for U.S. federal income tax purposes, and the remainder of this discussion
so assumes. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property
relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future.
Even if we become a USRPHC, however, as long as our Class B common stock is regularly traded on an established securities market, such
Class B common stock will be treated as U.S. real property interests only if the non-U.S. holder actually or constructively hold more
than five percent of such regularly traded Class B common stock at any time during the shorter of the five-year period preceding the
non-U.S. holder’s disposition of, or the non-U.S. holder’s holding period for, our Class B common stock.
If
the non-U.S. holder is described in the first bullet above, it will be required to pay tax on the net gain derived from the sale, exchange
or other taxable disposition under regular graduated U.S. federal income tax rates, and a corporate non-U.S. holder described in the
first bullet above also may be subject to the branch profits tax at a rate of 30%, or (in each case) such lower rate as may be specified
by an applicable income tax treaty. An individual non-U.S. holder described in the second bullet above will be required to pay a flat
30% tax (or such lower rate specified by an applicable income tax treaty) on the gain derived from the sale, exchange or other taxable
disposition, which gain may be offset by U.S. source capital losses for the year (provided the non-U.S. holder has timely filed U.S.
federal income tax returns with respect to such losses). Non-U.S. holders should consult their own tax advisors regarding any applicable
income tax or other treaties that may apply.
Federal
Estate Tax
Class
B common stock beneficially owned by an individual who is not a citizen or resident of the United States (as defined for U.S. federal
estate tax purposes) at the time of their death will generally be includable in the decedent’s gross estate for U.S. federal estate
tax purposes. Such shares, therefore, may be subject to U.S. federal estate tax, unless an applicable estate tax treaty provides otherwise.
Backup
Withholding and Information Reporting
Generally,
we must report annually to the IRS the amount of dividends paid to you, your name and address and the amount of tax withheld, if any.
A similar report will be sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports
available to tax authorities in your country of residence.
A
Non-U.S. holder may have to comply with certification procedures to establish that it is not a United States person in order to avoid
information reporting and backup withholding requirements. The certification procedures required to claim a reduced rate of withholding
under a treaty generally will satisfy the certification requirements necessary to avoid the backup withholding as well for example, by
properly certifying your non-U.S. status on an IRS Form W-8BEN or IRS Form W-8BEN-E or other applicable IRS Form W-8.Notwithstanding
the foregoing, backup withholding and information reporting may apply if either we or our paying agent has actual knowledge, or reason
to know, that you are a U.S. person.
Backup
withholding is not an additional tax; rather, the U.S. federal income tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained
from the IRS, provided that the required information is furnished to the IRS in a timely manner.
Foreign
Account Tax Compliance
The
Foreign Account Tax Compliance Act (“FATCA”) generally imposes withholding tax at a rate of 30% on dividends on and gross
proceeds from the sale or other disposition of our securities paid to a “foreign financial institution” (as specially defined
under these rules), unless any such institution (1) enters into, and complies with, an agreement with the IRS to report, on an annual
basis, information with respect to interests in, and accounts maintained by, the institution that are owned by certain U.S. persons and
by certain non-U.S. entities that are wholly or partially owned by U.S. persons and to withhold on certain payments, or (2) if required
under an intergovernmental agreement between the United States and an applicable foreign country, reports such information to its local
tax authority, which will exchange such information with the U.S. authorities. An intergovernmental agreement between the United States
and an applicable foreign country may modify these requirements. Accordingly, the entity through which our securities are held will affect
the determination of whether such withholding is required. Similarly, dividends in respect of our securities held by an investor that
is a non-financial non-U.S. entity that does not qualify under certain exceptions will generally be subject to withholding at a rate
of 30%, unless such entity either (1) certifies to us or the applicable withholding agent that such entity does not have any “substantial
United States owners” or (2) provides certain information regarding the entity’s “substantial United States owners,”
which will in turn be provided to the U.S. Department of Treasury. Non-U.S. holders should consult their own tax advisors regarding the
possible implications of this legislation on their investment in our securities.
Each
prospective investor should consult its own tax advisor regarding the particular U.S. federal, state and local and non-U.S. tax consequences
of purchasing, owning and disposing of our securities, including the consequences of any proposed changes in applicable laws.
UNDERWRITING
We
are offering our shares of Class B common stock described in this prospectus through the underwriters named below. EF Hutton, division of Benchmark Investments, Inc. (“Kingswood”) is acting as the sole representative of the underwriters.
We have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement,
each of the underwriters has severally agreed to purchase, and we have agreed to sell to the underwriters, the number of shares of Common
Stock listed next to its name in the following table.
Underwriters
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Number of
Shares
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EF Hutton, division of Benchmark Investments, Inc.
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Total
|
|
|
|
|
The
underwriting agreement provides that the underwriters must buy all of the shares of Class B common stock if they buy any of them. However,
the underwriters are not required to take or pay for the shares covered by the underwriters’ option to purchase additional shares
as described below. Our shares of Class B common stock are offered subject to a number of conditions, including:
|
●
|
receipt
and acceptance of shares of our Class B common stock by the underwriters; and
|
|
●
|
the
underwriters’ right to reject orders in whole or in part.
|
We
have been advised by EF Hutton that the underwriters intend to make a market in our shares of Class B common stock but that they are
not obligated to do so and may discontinue making a market at any time without notice.
In
connection with this offering, certain of the underwriters or securities dealers may distribute prospectuses electronically.
Option
to Purchase Additional Shares
We
have granted the underwriters an option to buy up to an aggregate of additional shares of Class B common stock (representing 15% of the
shares offered). The underwriters have 45 days from the date of this prospectus to exercise this option. If the underwriters exercise
this option, they will each purchase additional shares of Class B common stock approximately in proportion to the amounts specified in
the table above.
Underwriting
Discount
Shares
sold by the underwriters to the public will initially be offered at the initial offering price set forth on the cover of this
prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to
$ per share from the public offering price. The underwriters may
offer the shares through one or more of their affiliates or selling agents. If all the shares are not sold at the public offering
price, EF Hutton may change the offering price and the other selling terms. Upon execution of the underwriting agreement, the
underwriters will be obligated to purchase the shares at the prices and upon the terms stated therein.
The
underwriting discount is equal to the public offering price per share, less the amount paid by the underwriters to us per share. The
underwriting discount was determined through an arms’ length negotiation between us and the underwriters. We have agreed to sell
the shares of Class B common stock to the underwriters at the offering price of $ per share, which represents the public offering price
of our shares set forth on the cover page of this prospectus less a 7% underwriting discount.
The
following table shows the per share and total underwriting discount we will pay to the underwriters assuming both no exercise and full
exercise of the underwriters’ option to purchase up to additional shares.
|
|
|
No
Exercise
|
|
|
Full
Exercise
|
|
Per
share
|
|
$
|
|
|
$
|
|
|
Total
|
|
$
|
|
|
$
|
|
|
We
have agreed to pay EF Hutton’s out-of-pocket accountable expenses, including EF Hutton’s legal fees, up to a maximum amount
of $75,000, subject to a maximum of $25,000 if the offering is not consummated.
We
estimate that the total expenses of the offering payable by us, not including the underwriting discount, will be approximately $ . We
have also agreed to reimburse the underwriters for certain expenses incurred by them.
Lock-up
Agreements
The
Company, each of our directors and executive officers, and certain of our, and certain of our stockholders affiliated with our directors
and executive officers will agree not to, subject to certain limited exceptions, offer, pledge, sell, contract to sell, grant any option
to purchase, or otherwise dispose of our common stock or any securities convertible into or exchangeable or exercisable for common stock,
or to enter into any hedge or other arrangement or any transaction that transfers, directly or indirectly, the economic consequence of
ownership of the shares of our common stock, for a period of 180 days after the date of this prospectus, without the prior written consent
of Kingswood.
Indemnification
We
have agreed to indemnify the several underwriters against certain liabilities, including certain liabilities under the Securities Act.
If we are unable to provide this indemnification, we have agreed to contribute to payments the underwriters may be required to make in
respect of those liabilities.
Other
Relationships
Some
of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings
in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions
for these transactions.
Stock
Exchange
Our
Class B common stock is currently quoted on the OTC Pink Market under the trading symbol “IDWM”.
Price
Stabilization, Short Positions
In
connection with this offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our
shares of Class B common stock during and after this offering, including:
|
●
|
stabilizing
transactions;
|
|
●
|
purchases
to cover positions created by short sales;
|
|
●
|
imposition
of penalty bids; and
|
|
●
|
syndicate
covering transactions.
|
Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our shares
of Class B common stock while this offering is in progress. Stabilization transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum. These transactions may also include making short sales of our shares
of Class B common stock, which involve the sale by the underwriters of a greater number of shares of Class B common stock than they are
required to purchase in this offering and purchasing shares of Class B common stock on the open market to cover short positions created
by short sales. Short sales may be “covered short sales,” which are short positions in an amount not greater than the underwriters’
option to purchase additional shares referred to above, or may be “naked short sales,” which are short positions in excess
of that amount.
The
underwriters may close out any covered short position by either exercising their option, in whole or in part, or by purchasing shares
in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for
purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option.
Naked
short sales are short sales made in excess of the over-allotment option. The underwriters must close out any naked short position by
purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there
may be downward pressure on the price of the shares of Common Stock in the open market that could adversely affect investors who purchased
in this offering.
The
underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the
underwriting discount received by it because EF Hutton has repurchased shares sold by or for the account of that underwriter in
stabilizing or short covering transactions.
These
stabilizing transactions, short sales, purchases to cover positions created by short sales, the imposition of penalty bids and syndicate
covering transactions may have the effect of raising or maintaining the market price of our Class B common stock or preventing or retarding
a decline in the market price of our Class B common stock. As a result of these activities, the price of our Class B common stock may
be higher than the price that otherwise might exist in the open market. The underwriters may carry out these transactions on the NYSE
American, in the over-the-counter market or otherwise. Neither we nor the underwriters make any representation or prediction as to the
effect that the transactions described above may have on the price of the shares. Neither we, nor any of the underwriters make any representation
that the underwriters will engage in these stabilization transactions or that any transaction, once commenced, will not be discontinued
without notice.
Determination
of Offering Price
The
principal factors to be considered in determining the public offering price include:
|
●
|
the information set forth in this prospectus and otherwise available
to EF Hutton;
|
|
●
|
our
history and prospects and the history and prospects for the industry in which we compete;
|
|
●
|
our
past and present financial performance;
|
|
●
|
our
prospects for future earnings and the present state of our development;
|
|
●
|
the
general condition of the securities market at the time of this offering;
|
|
●
|
the
recent market prices of, and demand for, publicly traded shares of generally comparable companies;
and
|
|
●
|
other
factors deemed relevant by the underwriters and us.
|
The
assumed public offering price set forth on the cover page of this preliminary prospectus is subject to change as a result of market conditions
and other factors. Neither we nor the underwriters can assure investors that an active trading market will develop for our shares of
Class B common stock or that the shares of Class B common stock will trade in the public market at or above the public offering price.
Affiliations
The
underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include
securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment,
hedging, financing and brokerage activities. The underwriters and their affiliates may from time to time in the future engage with us
and perform services for us or in the ordinary course of their business for which they will receive customary fees and expenses. In the
ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array
of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including
bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve
securities and/or instruments of us. The underwriters and their respective affiliates may also make investment recommendations and/or
publish or express independent research views in respect of these securities or instruments and may at any time hold, or recommend to
clients that they acquire, long and/or short positions in these securities and instruments.
Electronic
Distribution
A
prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more
of the underwriters participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms
online and, depending upon the particular underwriter, prospective investors may be allowed to place orders online. The underwriters
may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online
distributions will be made by the underwriters on the same basis as other allocations. Other than the prospectus in electronic format,
the information on any underwriter’s website and any information contained in any other website maintained by an underwriter is
not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed
by us or any underwriter in its capacity as underwriter and should not be relied upon by investors.
Selling
Restrictions
Canada
The
shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined
in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted
clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any
resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements
of applicable securities laws.
Securities
legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus
(including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by
the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser
should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars
of these rights or consult with a legal advisor.
Pursuant
to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of
National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure
requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
European
Economic Area
In
relation to each Member State of the European Economic Area which has implemented the Prospectus Regulation, or each, a Relevant Member
State, an offer to the public of any shares of our Class B common stock may not be made in that Relevant Member State, except that an
offer to the public in that Relevant Member State of any shares of our Class B common stock may be made at any time under the following
exemptions under the Prospectus Regulation, if they have been implemented in that Relevant Member State:
|
(i)
|
to
any legal entity which is a qualified investor as defined in the Prospectus Regulation;
|
|
(ii)
|
to
fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Regulation), subject to obtaining
the prior consent of the representatives for any such offer; or
|
|
(iii)
|
in
any other circumstances falling within Article 1(4) of the Prospectus Regulation, provided that no such offer of shares of our Class
B common stock shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of
the Prospectus Regulation.
|
For
the purposes of this provision, the expression an “offer to the public” in relation to any shares of our Class B common stock
in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer
and any shares of our Class B common stock to be offered so as to enable an investor to decide to purchase any shares of our Class B
common stock, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
United
Kingdom
Each
underwriter has represented and agreed that:
|
(a)
|
it
has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement
to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (“FSMA”)
received by it in connection with the issue or sale of the shares of our Class B common stock in circumstances in which Section 21(1)
of the FSMA does not apply to us; and
|
|
(b)
|
it
has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares
of our Class B common stock in, from or otherwise involving the United Kingdom.
|
Hong
Kong
Shares
of our Class B common stock may not be offered or sold by means of any document other than (i) in circumstances which do not constitute
an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), (ii) to “professional investors”
within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder or (iii) in other
circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32,
Laws of Hong Kong), and no advertisement, invitation or document relating to shares of our Class B common stock may be issued or may
be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or
the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong
Kong) other than with respect to shares of our Class B common stock which are or are intended to be disposed of only to persons outside
Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of
Hong Kong) and any rules made thereunder.
Japan
No
registration pursuant to Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended)
(the “FIEL”) has been made or will be made with respect to the solicitation of the application for the acquisition of the
shares of Class B common stock.
Accordingly,
the shares of Class B common stock have not been, directly or indirectly, offered or sold and will not be, directly or indirectly, offered
or sold in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including
any corporation or other entity organized under the laws of Japan) or to others for re-offering or re-sale, directly or indirectly, in
Japan or to, or for the benefit of, any resident of Japan except pursuant to an exemption from the registration requirements, and otherwise
in compliance with, the FIEL and the other applicable laws and regulations of Japan.
For
Qualified Institutional Investors (“QII”)
Please
note that the solicitation for newly-issued or secondary securities (each as described in Paragraph 2, Article 4 of the FIEL) in relation
to the shares of Class B common stock constitutes either a “QII only private placement” or a “QII only secondary distribution”
(each as described in Paragraph 1, Article 23-13 of the FIEL). Disclosure regarding any such solicitation, as is otherwise prescribed
in Paragraph 1, Article 4 of the FIEL, has not been made in relation to the shares of Class B common stock. The shares of Class B common
stock may only be transferred to QIIs.
For
Non-QII Investors
Please
note that the solicitation for newly-issued or secondary securities (each as described in Paragraph 2, Article 4 of the FIEL) in relation
to the shares of Class B common stock constitutes either a “small number private placement” or a “small number private
secondary distribution” (each as is described in Paragraph 4, Article 23-13 of the FIEL). Disclosure regarding any such solicitation,
as is otherwise prescribed in Paragraph 1, Article 4 of the FIEL, has not been made in relation to the shares of Class B common stock.
The shares of Class B common stock may only be transferred en bloc without subdivision to a single investor.
Singapore
This
prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other
document or material in connection with the offer or sale, or invitation for subscription or purchase, of shares of our Class B common
stock may not be circulated or distributed, nor may the shares of our Class B common stock be offered or sold, or be made the subject
of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional
investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or the SFA, (ii) to a relevant person, or any
person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant
to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where
shares of our Class B common stock are subscribed or purchased under Section 275 by a relevant person which is: (i) a corporation (which
is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one
or more individuals, each of whom is an accredited investor; or (ii) a trust (where the trustee is not an accredited investor) whose
sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures
of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for 6 months after that corporation
or that trust has acquired shares of our Class B common stock under Section 275 except: (a) to an institutional investor under Section
274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in
Section 275 of the SFA; (b) where no consideration is given for the transfer; or (c) by operation of law.
EXPERTS
Our
financial statements for the fiscal years ended October 31, 2020 and 2019 have been audited by Zwick & Banyai, PLLC, an independent
registered public accounting firm as set forth in its report and are included in reliance upon such report given on the authority of
such firm as experts in accounting.
LEGAL
MATTERS
Schwell Wimpfheimer &
Associates LLP., New York, New York, will pass upon the validity of the shares of our Class B common stock to be sold in this offering.
Attorneys at Schwell Wimpfheimer & Associates own shares of the Company’s Class B Common Stock with an aggregate value of $100,000
as of July 2, 2021. Certain legal matters will be passed upon on behalf of the underwriters by Nelson Mullins Riley & Scarborough
LLP, Washington, DC.
WHERE
YOU CAN FIND ADDITIONAL INFORMATION
We
have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the securities we are offering
to sell. This prospectus, which constitutes part of the registration statement, does not include all of the information contained in
the registration statement and the exhibits, schedules and amendments to the registration statement. For further information with respect
to us and our securities, we refer you to the registration statement and to the exhibits and schedules to the registration statement.
Statements contained in this Prospectus about the contents of any contract, agreement or other document are not necessarily complete,
and, in each instance, we refer you to the copy of the contract, agreement or other document filed as an exhibit to the registration
statement. Each of these statements is qualified in all respects by this reference.
You
may read and copy the registration statement of which this Prospectus is a part at the SEC’s public reference room, which is located
at 100 F Street, N.E., Room 1580, Washington, DC 20549. You can request copies of the registration statement by writing to the Securities
and Exchange Commission and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation
of the SEC’s public reference room. In addition, the SEC maintains a website, which is located at www.sec.gov, that contains
reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. You may access
the registration statement of which this Prospectus is a part at the SEC’s website.
Upon
effectiveness of this registration statement, we will be subject to the information reporting requirements of the Securities Exchange
Act of 1934, and we will file reports, proxy statements and other information with the SEC. All documents filed with the SEC are available
for inspection and copying at the public reference room and website of the SEC referred to above. We maintain a website at https://idwmediaholdings.com/.
You may access our reports, proxy statements and other information free of charge at this website as soon as reasonably practicable after
such material is electronically filed with, or furnished to, the SEC. The information on such website is not incorporated by reference
and is not a part of this Prospectus.
IDW
MEDIA HOLDINGS, INC.
TABLE
OF CONTENTS
IDW
MEDIA HOLDINGS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands,
except per share data)
|
|
April
30,
2021 (unaudited)
|
|
|
October
31,
2020
(Note
1)
|
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
7,607
|
|
|
$
|
10,541
|
|
Trade accounts receivable,
net
|
|
|
22,063
|
|
|
|
22,921
|
|
Inventory
|
|
|
3,667
|
|
|
|
3,754
|
|
Prepaid expenses
|
|
|
2,178
|
|
|
|
1,361
|
|
Current assets held
for sale from discontinued operations
|
|
|
-
|
|
|
|
11,171
|
|
Total current assets
|
|
|
35,515
|
|
|
|
49,748
|
|
Property and equipment,
net
|
|
|
364
|
|
|
|
410
|
|
Right-of-use assets,
net
|
|
|
539
|
|
|
|
771
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Investments
|
|
|
-
|
|
|
|
25
|
|
Intangible assets, net
|
|
|
30
|
|
|
|
52
|
|
Goodwill
|
|
|
199
|
|
|
|
199
|
|
Television costs, net
|
|
|
1,270
|
|
|
|
2,926
|
|
Other assets
|
|
|
325
|
|
|
|
527
|
|
Total assets
|
|
$
|
38,242
|
|
|
$
|
54,658
|
|
Liabilities and stockholders’
equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
1,163
|
|
|
$
|
1,406
|
|
Accrued expenses
|
|
|
5,424
|
|
|
|
3,953
|
|
Deferred revenue
|
|
|
2,125
|
|
|
|
2,385
|
|
Bank loans payable –
current portion
|
|
|
11,664
|
|
|
|
14,204
|
|
Government loans- current
portion
|
|
|
1,320
|
|
|
|
793
|
|
Operating lease obligations
– current portion
|
|
|
603
|
|
|
|
562
|
|
Other current liabilities
|
|
|
80
|
|
|
|
69
|
|
Current
liabilities held for sale from discontinued operations
|
|
|
-
|
|
|
|
8,540
|
|
Total current liabilities
|
|
|
22,379
|
|
|
|
31,912
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Operating lease obligations
– long term portion
|
|
|
59
|
|
|
|
368
|
|
Government loans –
long term portion
|
|
|
1,071
|
|
|
|
403
|
|
Related
party loans payable – long term portion
|
|
|
-
|
|
|
|
3,750
|
|
Total non-current liabilities
|
|
|
1,130
|
|
|
|
4,521
|
|
Total liabilities
|
|
$
|
23,509
|
|
|
$
|
36,433
|
|
Stockholders’
equity (see note 3):
|
|
|
|
|
|
|
|
|
Preferred stock, $.01
par value; authorized shares – 500; no shares issued at April 30, 2021 and October 31, 2020
|
|
|
-
|
|
|
|
-
|
|
Class B common stock,
$0.01 par value; authorized shares – 12,000; 10,024 and 9,987 shares issued and 9,505 and 9,467 shares outstanding at April
30, 2021 and October 31, 2020, respectively
|
|
|
94
|
|
|
|
93
|
|
Class C common stock,
$0.01 par value; authorized shares – 2,500; 545 shares issued and outstanding at April 30, 2021 and October 31, 2020
|
|
|
5
|
|
|
|
5
|
|
Additional paid-in capital
|
|
|
94,267
|
|
|
|
111,379
|
|
Accumulated
other comprehensive loss
|
|
|
-
|
|
|
|
(60
|
)
|
Accumulated deficit
|
|
|
(78,437
|
)
|
|
|
(91,996
|
)
|
Treasury
stock, at cost, consisting of 519 shares of Class B common stock at April 30, 2021 and October 31, 2020
|
|
|
(1,196
|
)
|
|
|
(1,196
|
)
|
Total stockholders’
equity
|
|
|
14,733
|
|
|
|
18,225
|
|
Total liabilities and
stockholders’ equity
|
|
$
|
38,242
|
|
|
$
|
54,658
|
|
See
accompanying notes to condensed consolidated financial statements.
IDW
MEDIA HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three
Months Ended
April 30,
|
|
|
Six
Months Ended
April 30,
|
|
(in
thousands, except per share data)
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Revenues
|
|
$
|
10,140
|
|
|
$
|
9,268
|
|
|
$
|
18,552
|
|
|
$
|
19,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
cost of revenues
|
|
|
4,726
|
|
|
|
3,295
|
|
|
|
13,959
|
|
|
|
14,912
|
|
Selling,
general and administrative
|
|
|
4,910
|
|
|
|
4,583
|
|
|
|
9,149
|
|
|
|
9,019
|
|
Depreciation
and amortization
|
|
|
60
|
|
|
|
61
|
|
|
|
120
|
|
|
|
128
|
|
Bad
debt expense
|
|
|
11
|
|
|
|
-
|
|
|
|
11
|
|
|
|
-
|
|
Total
costs and expenses
|
|
|
9,707
|
|
|
|
7,939
|
|
|
|
23,239
|
|
|
|
24,059
|
|
Income
(loss) from operations
|
|
|
433
|
|
|
|
1,329
|
|
|
|
(4,687
|
)
|
|
|
(4,454
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income (expense), net
|
|
|
156
|
|
|
|
(10
|
)
|
|
|
142
|
|
|
|
(20
|
)
|
Other
expense, net
|
|
|
(12
|
)
|
|
|
(35
|
)
|
|
|
(13
|
)
|
|
|
(61
|
)
|
Income
(loss) before income taxes
|
|
|
577
|
|
|
|
1,284
|
|
|
|
(4,558
|
)
|
|
|
(4,535
|
)
|
Provision
for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net income
(loss) from continuing operations
|
|
|
577
|
|
|
|
1,284
|
|
|
|
(4,558
|
)
|
|
|
(4,535
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net
|
|
|
(159
|
)
|
|
|
(1,638
|
)
|
|
|
(1,280
|
)
|
|
|
(2,692
|
)
|
Gain
on sale of discontinued operations
|
|
|
2,123
|
|
|
|
-
|
|
|
|
2,123
|
|
|
|
-
|
|
Net
income (loss)
|
|
$
|
2,541
|
|
|
$
|
(354
|
)
|
|
$
|
(3,715
|
)
|
|
$
|
(7,227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
and diluted income (loss) per share (note 2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
0.27
|
|
|
$
|
0.15
|
|
|
$
|
(0.24
|
)
|
|
$
|
(0.56
|
)
|
Discontinued
operations
|
|
|
(0.02
|
)
|
|
|
(0.19
|
)
|
|
|
(0.13
|
)
|
|
|
(0.33
|
)
|
Net
loss
|
|
$
|
0.25
|
|
|
$
|
(0.04
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
(0.89
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of shares used in the calculation of basic and diluted income (loss) per share:
|
|
|
9,972
|
|
|
|
8,845
|
|
|
|
9,962
|
|
|
|
8,143
|
|
See
accompanying notes to condensed consolidated financial statements
IDW
MEDIA HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|
Three
Months Ended
April 30,
|
|
|
Six
Months Ended
April 30,
|
|
(in
thousands)
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Net
income (loss)
|
|
$
|
2,541
|
|
|
$
|
(354
|
)
|
|
$
|
(3,715
|
)
|
|
$
|
(7,227
|
)
|
Foreign
currency translation adjustments
|
|
|
72
|
|
|
|
4
|
|
|
|
60
|
|
|
|
(45
|
)
|
Total
comprehensive income (loss)
|
|
$
|
2,613
|
|
|
$
|
(350
|
)
|
|
$
|
(3,655
|
)
|
|
$
|
(7,272
|
)
|
See
accompanying notes to condensed consolidated financial statements
IDW
MEDIA HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Six
Months Ended April 30, 2021 and 2020
(Unaudited)
|
|
Class
B Common Stock
|
|
|
Class
C Common Stock
|
|
|
Stock
|
|
|
Additional
|
|
|
Accumulated
Other
|
|
|
|
|
|
Non-
Controlling
|
|
|
Treasury
Stock, at Cost
|
|
|
Total
|
|
|
|
Number
of
|
|
|
|
|
|
Number
of
|
|
|
|
|
|
Subscriptions
|
|
|
Paid
In
|
|
|
Comprehensive
|
|
|
Retained
|
|
|
Interest
|
|
|
Number of
|
|
|
|
|
|
Shareholders’
|
|
(in
thousands)
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Receivable
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
(“NCI”)
|
|
|
Shares
|
|
|
Amount
|
|
|
Equity
|
|
Balance
October 31, 2020
|
|
|
9,987
|
|
|
|
93
|
|
|
|
545
|
|
|
|
5
|
|
|
|
-
|
|
|
|
111,379
|
|
|
|
(60
|
)
|
|
|
(91,996
|
)
|
|
|
-
|
|
|
|
519
|
|
|
|
(1,196
|
)
|
|
|
18,225
|
|
Stock
based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82
|
|
Issuance
of common stock
|
|
|
37
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
Issuance
of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77
|
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale
of discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,295
|
)
|
|
|
21
|
|
|
|
17,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,715
|
)
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
Total
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
|
|
|
|
(3,715
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
(3,655
|
)
|
Balance
April 30, 2021
|
|
|
10,024
|
|
|
|
94
|
|
|
|
545
|
|
|
|
5
|
|
|
|
-
|
|
|
|
94,267
|
|
|
|
-
|
|
|
|
(78,437
|
)
|
|
|
-
|
|
|
|
519
|
|
|
|
(1,196
|
)
|
|
|
14,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
October 31, 2019
|
|
|
7,419
|
|
|
|
74
|
|
|
|
545
|
|
|
|
5
|
|
|
|
(1,000
|
)
|
|
|
96,671
|
|
|
|
(60
|
)
|
|
|
(78,457
|
)
|
|
|
35
|
|
|
|
519
|
|
|
|
(1,196
|
)
|
|
|
16,072
|
|
Stock
based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
520
|
|
Issuance
of common stock
|
|
|
2,151
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,257
|
|
Subscriptions
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,011
|
|
Issuance
of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
333
|
|
NCI
divestment in subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
259
|
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
|
|
224
|
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,227
|
)
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45
|
)
|
Total
comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(45
|
)
|
|
|
(7,227
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(7,272
|
)
|
Balance
April 30, 2020
|
|
|
9,570
|
|
|
|
89
|
|
|
|
545
|
|
|
|
5
|
|
|
|
-
|
|
|
|
109,777
|
|
|
|
(105
|
)
|
|
|
(85,425
|
)
|
|
|
-
|
|
|
|
519
|
|
|
|
(1,196
|
)
|
|
|
23,145
|
|
See
accompanying notes to condensed consolidated financial statements
IDW
MEDIA HOLDINGS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months
ended April 30,
(in thousands)
|
|
2021
|
|
|
2020
|
|
Operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,715
|
)
|
|
$
|
(7,227
|
)
|
Adjustments
to reconcile net income to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
307
|
|
|
|
527
|
|
Amortization
of finance leases
|
|
|
108
|
|
|
|
165
|
|
Bad
debt expense
|
|
|
(97
|
)
|
|
|
482
|
|
Stock
based compensation
|
|
|
82
|
|
|
|
520
|
|
Stock
options
|
|
|
77
|
|
|
|
333
|
|
Amortization
of right-of-use asset
|
|
|
513
|
|
|
|
995
|
|
Gain
on sale of discontinued operations
|
|
|
(2,123
|
)
|
|
|
-
|
|
Loss
on deconsolidation of subsidiary
|
|
|
-
|
|
|
|
35
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade
accounts receivable
|
|
|
847
|
|
|
|
8,591
|
|
Inventory
|
|
|
88
|
|
|
|
(820
|
)
|
Prepaid
expenses and other assets
|
|
|
(589
|
)
|
|
|
115
|
|
Television
costs
|
|
|
1,656
|
|
|
|
6,872
|
|
Right-of-use
assets
|
|
|
(269
|
)
|
|
|
(814
|
)
|
Trade
accounts payable, accrued expenses and other current liabilities
|
|
|
1,239
|
|
|
|
(2,702
|
)
|
Deferred
revenue
|
|
|
(260
|
)
|
|
|
1,254
|
|
Gain
on extinguishment of PPP loan
|
|
|
(68
|
)
|
|
|
-
|
|
Gain
on disposal of ROU assets
|
|
|
(97
|
)
|
|
|
-
|
|
Deconsolidation
of subsidiary
|
|
|
-
|
|
|
|
339
|
|
Net
cash (used in) provided by operating activities
|
|
|
(2,301
|
)
|
|
|
8,665
|
|
Investing
activities:
|
|
|
|
|
|
|
|
|
Disposition
of subsidiary, net of cash received
|
|
|
-
|
|
|
|
(115
|
)
|
Disposal
of discontinued operations
|
|
|
(902
|
)
|
|
|
-
|
|
Capital
expenditures
|
|
|
(72
|
)
|
|
|
(299
|
)
|
Net
cash used in investing activities
|
|
|
(974
|
)
|
|
|
(414
|
)
|
Financing
activities:
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
25
|
|
|
|
13,268
|
|
Repayments
of finance lease obligations
|
|
|
-
|
|
|
|
(207
|
)
|
Proceeds
of bank loans
|
|
|
-
|
|
|
|
2,217
|
|
Proceeds
from government loans
|
|
|
1,196
|
|
|
|
-
|
|
Repayments
of related party loans
|
|
|
-
|
|
|
|
(4,050
|
)
|
Repayments
of bank loans
|
|
|
(2,540
|
)
|
|
|
(13,732
|
)
|
Net
cash used in financing activities
|
|
|
(1,319
|
)
|
|
|
(2,504
|
)
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
39
|
|
|
|
(45
|
)
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(4,555
|
)
|
|
|
5,702
|
|
Cash
and cash equivalents at beginning of period
|
|
|
12,162
|
|
|
|
10,165
|
|
Cash
and cash equivalents at end of period
|
|
$
|
7,607
|
|
|
$
|
15,867
|
|
|
|
|
|
|
|
|
|
|
Supplemental
schedule of investing and financing activities
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
-
|
|
|
$
|
18
|
|
Cash
paid for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
See
accompanying notes to condensed consolidated financial statements.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
1—Basis of Presentation and Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated
financial statements of IDW Media Holdings, Inc. (the “Company”) have been prepared by Company management in accordance with
accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information
and with the instructions to Form 10-Q. Accordingly, they do not include all information and footnotes required by U.S. GAAP for complete
financial statements. In the opinion of management, all adjustments (consisting principally of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the six months ended April 30, 2021 are not necessarily indicative
of the results that may be expected for the full fiscal year ending October 31, 2021. The balance sheet at October 31, 2020 has been
derived from the Company’s audited financial statements at that date but does not include all of the information and footnotes
required by U.S. GAAP for complete financial statements.
Description
of Business and Segment Information
IDW
Media Holdings, Inc. together with its subsidiaries is a diversified media company with operations in publishing, television entertainment
and media distribution.
The
terms “Company,” “we,” “us,” and “our” are used in this report to refer collectively
to the parent company and the subsidiaries through which various businesses are conducted. The term IDWMH is used to refer to the parent
company.
The
following are our principal businesses and segments:
Publishing
(“IDWP”), a publishing company that creates comic books, graphic novels, digital content and games through its imprints IDW,
IDW Games, Top Shelf Productions, Artist’s Editions, The Library of American Comics, Yoe! Books, Sunday Press, and EuroComics;
and Clover Press, a boutique publishing company that focuses on the book trade and direct market. Effective April 1, 2020, our
interest in Clover Press decreased to 19.9% and IDWMH no longer consolidates the operations of Clover Press, but rather values the investment
at cost; and
IDW
Entertainment (“IDWE”), is a production company and studio that develops and produces content and formats for global platforms
and services.
Prior
to February 15, 2021, we also owned CTM Media Group (“CTM”), a Company that develops and distributes print and digital-based
advertising and information advertising for tourist destinations in targeted tourist markets in 32 states / provinces in the US and Canada.
On July 14, 2020, the Company and Howard Jonas, our Chairman of the Board of Directors, executed a share purchase agreement pursuant
to which we agreed to sell all of the stock of CTM to Mr. Jonas or his assignee (the “CTM Sale”) for (i) the cancelation
of $3.75 million of indebtedness owed to Mr. Jonas by us, (ii) a contingent payment of up to $3.25 million based upon a recovery of quarterly
revenues of CTM to 90% of its fiscal 2019 levels during the 18-month period following the closing of the CTM Sale, and (iii) a contingent
payment if CTM is sold within 36 months for more than $4.5 million. As of July 31, 2020, CTM was reported as a discontinued operation
and CTM’s operations have since been included in the financial statements as discontinued operations(See Note 12- Discontinued
Operations). The sale was consummated on February 15, 2021(the “CTM Sale Date”).
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
1—Basis of Presentation and Summary of Significant Accounting Policies (continued)
Variable
Interest Entities
The
Company, through its subsidiary IDWE has arrangements with seven special-purpose entities (“SPEs”), some formed for the sole
purpose of providing production services in Canada for the production of a television pilot and television series, others for production
and writing purposes. The SPEs are independently owned companies that are effectively controlled by IDWE, that are parties to the related
bank production financing arrangements. The Company has determined that SPEs are variable interest entities and that the Company is the
primary beneficiary of the SPEs activities and obligor on the SPEs’ debt. All financial activity of the SPEs have been included
IDWE’s financial statements, which are part of these condensed consolidated financial statements. IDWE does not need to provide
any support to the VIE’s and therefore no foreseen potential losses associated. They have finished all of the productions and these
shows have been delivered. The outstanding loans will be paid off by the tax credits in the receivable balances. The carrying amounts
and classification of the VIEs’ assets and liabilities are presented below:
(in
thousands)
|
|
April
30,
2021
|
|
|
October
31,
2020
|
|
Cash and cash equivalents
|
|
$
|
714
|
|
|
$
|
732
|
|
Accounts receivable
|
|
|
16,297
|
|
|
|
12,420
|
|
Bank loans
|
|
|
11,664
|
|
|
|
14,204
|
|
Total
|
|
$
|
28,675
|
|
|
$
|
27,356
|
|
Revenue
Recognition
IDWP’s
primary revenue is recognized, net of an allowance for estimated sales returns, at the time of shipment of its graphic novels and comic
books by IDWP’s distributor to its customers. IDWE’s revenue is recognized when evidence of a sale or licensing arrangement
exists, the product is complete, has been delivered or is available for immediate and unconditional delivery, the license period has
begun, the fee is fixed or determinable, and collection is reasonably assured. IDWE’s production activities included those provided
by Canadian SPEs, and some of those productions qualify for tax credits in Canada. These credits are recorded as reductions in production
cost when the SPE becomes entitled to the Canadian tax credits. The Canada Revenue Agency (“CRA”) has completed the audit
on these productions and the related tax refunds are no longer estimates.
Revenue
Recognition When Right of Return Exists
Sales
returns allowances represent a reserve for IDWP products that may be returned due to dating, competition or other marketing matters,
or certain destruction in the field. Sales returns are generally estimated and recorded based on historical sales and returns experience
and current trends that are expected to continue. Licensing revenues are recognized upon execution of the agreement for such rights,
and other creative revenues are recognized upon completion of services rendered on a contractual basis.
Use
of Estimates
The
preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
1—Basis of Presentation and Summary of Significant Accounting Policies (continued)
Concentration
Risks
IDWP
has two significant customers Diamond Comic Distributors, Inc. (“Diamond”) and Penguin Random House (“PRH”),
that pose a concentration risk.
Revenues
from Diamond, IDWP’s direct market distributor, represented 25.7% and 13.9% of the total consolidated revenues for the three months
ended April 30, 2021 and 2020, respectively, and 26.5% and 16.8% of the total consolidated revenues for the six months ended April 30,
2021 and 2020, respectively. The receivable balances from this customer represented approximately 4.2% and 4.7% of consolidated trade
accounts receivable at April 30, 2021 and October 31, 2020, respectively.
Revenues
from PRH amounted to 23.2% and 26.3% of consolidated revenue in the three months ended April 30, 2021 and 2020, respectively, and 25.5%
and 26.7% of the total consolidated revenues for the six months ended April 30, 2021 and 2020, respectively. The receivable balances
represented 5.7% and 10.5% of consolidated receivables at April 30, 2021 and October 31, 2020, respectively.
IDWE
has two significant customers Netflix and NBC Universal/SyFy that pose a concentration risk.
Revenue
from Netflix, a leading streaming video subscription service, represented 0% and 43.2% of consolidated revenue in the three months ended
April 30, 2021 and 2020, respectively, and 0% and 41% of the total consolidated revenues for the six months ended April 30, 2021 and
2020, respectively. The receivable balances from this customer represented 0% and 15.3% of consolidated trade receivables at April 30,
2021 and October 31, 2020, respectively.
NBC
Universal/SyFy, a major television network, which accounted for 4.9% and 0% of consolidated revenue in the three months ended April 30,
2021 and 2020, respectively, and 16% and 0% of the total consolidated revenues for the six months ended April 30, 2021 and 2020, respectively.
The receivable balances from this customer represented 0% of consolidated trade receivables at both April 30, 2021 and October 31, 2020.
Deferred
Revenue
The
Company records deferred revenue upon invoicing for contracted commitments for products and services. Revenue is recognized on the date
such product or service is provided or delivered in accordance with the contract.
Discontinued
Operations
CTM
has met the criteria for discontinued operations and has been presented as such in the financial statements. In accordance with ASU 2014-08,
“Reporting of Discontinued Operations and Disclosures of Disposals of Components of an Entity,” a disposal is categorized
as a discontinued operation if the disposal group is a component of an entity or group of components that meets the held for sale criteria,
is disposed of by sale, or is disposed of other than by sale, and represents a strategic shift that has or will have a major effect on
an entity’s operations and financial results.
During
the period in which the discontinued operation was classified as held for sale the net loss was reclassified as a separate line item
in the Statement of Operations. Additionally, the gain from the sale was presented as a separate line item on the Statement of Operations.
Assets and liabilities are also separately reclassified in the balance sheet for all periods presented, prior to the sale. CTM’s
assets are no longer reflected on the financial statements for the periods following the CTM Sale Date. Cash flows from a discontinued
operation and the continuing business are presented together without separate identification within cash flows from operating, investing
and financing activities. Cash flows of CTM’s depreciation, amortization, capital expenditures and significant noncash operating
and investing activities for the discontinued operation are presented separately.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
1—Basis of Presentation and Summary of Significant Accounting Policies (continued)
Recently
Issued Accounting Pronouncements Adopted Subsequent to 2020 Fiscal Year End
In
March 2019, the FASB issued ASU No. 2019-02, Improvements to Accounting for Costs of Films and License Agreements for Program Materials.
ASU 2019-02 aligns the accounting for production costs of episodic television series with the accounting for production costs of films.
It also requires an entity to test a film or license agreement within the scope of Subtopic 920-350 for impairment at the film group
level, when the film or license agreement is predominantly monetized with other films and/or license agreements. The Company adopted
this ASU on November 1, 2020 and is applying its provisions prospectively. In connection with this adoption the Company has evaluated
this guidance and determined that there are $2,064,509 worth of impairments from substantively abandoned television costs which materially
impacted the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations.
Recently
Issued Accounting Standard Not Yet Adopted
In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial
Instruments, that changes the impairment model for most financial assets and certain other instruments. For receivables, loans and other
instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the
earlier recognition of allowance for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit
losses in a manner similar to current practice, except the losses will be recognized as allowances instead of reductions in the amortized
cost of the securities. In addition, an entity will have to disclose significantly more information about allowances, credit quality
indicators and past due securities. The new guidance becomes effective for fiscal years beginning after December 15, 2022, though early
adoption is permitted. The new provisions will be applied as a cumulative-effect adjustment to retained earnings. We will adopt the new
standard on November 1, 2023. We are evaluating the impact that the new standard will have on our consolidated financial statements.
In
January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350), which simplifies the measurement of goodwill
by eliminating the Step 2 impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting
unit’s goodwill with the carrying amount of that goodwill. The new guidance requires an entity to compare the fair value of a reporting
unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s
fair value. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the
reporting unit when measuring the goodwill impairment loss, if applicable. The new guidance becomes effective for goodwill impairment
tests in fiscal years beginning after December 15, 2022, though early adoption is permitted. The company will adopt this guideline prospectively
for fiscal year November 1, 2023. The Company does not believe that the adoption of this new accounting guidance will have any material
impact on its consolidated financial statements.
Note
2—Earnings Per Share
Basic
earnings per share is computed by dividing net income attributable to all classes of common stockholders by the weighted average number
of shares of all classes of common stock outstanding during the applicable period. Diluted earnings per share is computed in the same
manner as basic earnings per share except that the number of shares is increased to include restricted stock still subject to risk of
forfeiture (non-vested) using the treasury stock method, unless the effect of such increase would be anti-dilutive. The Company excluded
46,999 shares of unvested restricted stock and 302,737 stock options from the calculation of diluted earnings per share as the effect
would have been anti-dilutive.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
3—Equity
Non-cash
compensation included in selling, general and administrative expenses was $95,422 and $207,251 in the three months ended April 30, 2021
and 2020, respectively. Non-cash compensation included in selling, general and administrative expenses was $160,009 and $853,127 in the
six months ended April 30, 2021 and 2020, respectively.
Detailed
below are shares of Class B Common Stock to Howard S. Jonas, the Company’s Chairman of the Board of Directors and former Chief
Executive Officer, for payment of interest on loans:
Date
|
|
Number
of Shares
|
|
December 31, 2020
|
|
|
6,710
|
|
September 30, 2020
|
|
|
9,710
|
|
June 30, 2020
|
|
|
10,335
|
|
March 31, 2020
|
|
|
14,816
|
|
January 9, 2020
|
|
|
36,586
|
|
Total shares
|
|
|
78,157
|
|
On
July 13, 2020, the Company issued 314,070 shares of Class B Common Stock to Howard S. Jonas, the Company’s Chairman of the Board
of Directors and former Chief Executive Officer, pursuant to a Loan Modification Agreement in which Mr. Jonas and the Company agreed
to convert $1.25 million of indebtedness owed by the Company to Mr. Jonas to such 314,070 shares.
On
July 16, 2020, the Company settled its intercompany payable to CTM totaling $6,982,305 and subsequently received a distribution of $6,800,000
from CTM. This transaction was booked into additional paid in capital with CTM and IDWMH to have a nil impact and did not trigger any
tax impacts.
On
March 9, 2020, the Company closed a private placement of shares of Class B Common Stock at $6.00 per share, pursuant to which the Company
issued 2,051,002 shares of Class B Common Stock for gross proceeds of approximately $12,300,000 inclusive of $4.0 million debt-to-equity
conversion by the Company’s Chairman of the Board of Directors and former Chief Executive Officer, Howard S. Jonas. The shares
issued were subject to a contractual restriction on transfer for six months following the closing of the placement and are subject to
other restrictions under applicable law. The proceeds from the issuance of Class B Common Stock have been netted with $415,000 of costs
related to the private placement.
On
April 24, 2019, the Company closed the initial round of a private placement of shares of Class B Common Stock to certain existing stockholders
at $18.00 per share. In connection with this initial round, on April 24, 2019, the Company issued 767,630 shares of Class B Common Stock
for gross proceeds of $13,817,337.
On
May 7, 2019, the Company closed the follow-on round of the placement and issued 345,792 shares of Class B Common Stock for gross proceeds
of $5,186,885. The follow-on round involved participants in the initial round of the placement who elected to participate in the purchase
of unsubscribed shares of Class B Common Stock at $15.00 per share. In the offering, the Company issued a total of 1,113,422
shares of Class B Common Stock and received total gross proceeds of $19,004,229. The shares issued in the offering were subject
to a contractual restriction on transfer for six months following the closing of the offering as well as other restrictions under applicable
law.
In
connection with a private placement offering, on June 15, 2019, the Company issued 269,478 shares of Class B Common Stock at a price
of $17.07 per share for aggregate proceeds of approximately $4,600,000.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
3—Equity (continued)
On March 14, 2019, the Company’s Board
of Directors adopted the 2019 Plan to provide incentives to executive officers, employees, directors and consultants of the Company and/or
its subsidiaries. The Company reserved 300,000 shares of Class B Common Stock for the grant of awards under the 2019 Plan, subject
to adjustment. Incentives available under the 2019 Plan may include stock options, stock appreciation rights, limited stock appreciation
rights, restricted stock and deferred stock units. On July 13, 2020, the Board of Directors of the Company increased by 150,000, to 450,000,
the number of shares of Class B Common Stock reserved for the grant of awards under the 2019 Plan, subject to adjustment. On March
11, 2021, the Board of Directors of the Company increased by 250,000, to 700,000, the number of shares of Class B Common Stock reserved
for the grant of awards under the 2019 Plan, subject to adjustment. As of April 30, 2021, 285,483 shares remained available to be
awarded under the 2019 Plan.
Note
4—Loans
Related
party loans
On
August 21, 2018, the Company entered into a loan agreement with the Company’s Chairman of the Board of Directors (who, at the time
was also the Company’s Chief Executive Officer and majority stockholder) (the “Chairman”) for $5,000,000. Interest
accrued at prime rate plus 1% and the loan was due to mature on August 20, 2022. Payment of principal and interest were payable from
70% of the Free Cash Flow, as defined in the loan agreement, of the Company’s CTM Media Group Inc. subsidiary. All outstanding
shares of CTM Media Group Inc. stock were pledged as security under the agreement. On December 1, 2019, the Company amended the agreement
providing that up to 60% of the interest due may, at the option of the Company, be paid in shares of Class B common stock (and the remaining
amount in cash) with such shares valued based on the average closing prices for the Class B common stock on the ten trading days immediately
prior to the applicable interest due date. As at April 30, 2021 the cumulative shares issued in connection with the loan interest was
63,255. The interest is was to be paid quarterly on the loan. In conjunction with the loan, the Company issued the lender a warrant
to purchase up to 89,243 shares of the Company’s Class B Common Stock at a price per share of $42.02. The warrant expires August
21, 2023. On July 13, 2020 $1,250,000 was converted into 314,070 shares of Class B Common Stock (Note 3- Equity). On February 15, 2021
the Company closed the previously announced CTM Sale and since the cancelation of the indebtedness was the purchase price the Company
wrote down the loan of $3,750,000, the outstanding balance as at April 30, 2021 was nil.
Bank
Loans
On
November 21, 2018, a Variable Interest Entity (the “VIE”) (see Note 1) controlled by IDWE entered into a loan agreement with
a bank that provides for a production financing commitment in the aggregate amount up to CAD 27,700,000. The loan is secured by the VIE’s
assets, rights in the related television production’s episodes and distribution agreements for the production and is repayable
from the assignment of proceeds of the related license agreements and tax credits, including interest based on the prime rate. IDWE is
the guarantor on the loan. The loan matures on May 31, 2021. At April 30, 2021, $5,206,000 was outstanding under the commitment.
On
June 21, 2018, a VIE controlled by IDWE entered into a loan agreement with a bank that provides for a production financing commitment
in the aggregate amount up to CAD 23,521,000. The loan is secured by the VIE’s assets, rights in the related television production’s
episodes and distribution agreements for the production and is repayable from the assignment of proceeds of the related license agreements,
including interest based on the prime rate. IDWE is the guarantor on the loan. This loan was refinanced on January 4, 2021 with Royal
Bank of Canada for a credit facility of CAD 7,868,000 for the purpose of interim financing certain receivables. The loan matures on May
31, 2021.At April 30, 2021 $6,458,000 was outstanding under the commitment.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
4—Loans (continued)
Government
loans
On
April 2, 2021, IDW Media Holdings, Inc. (the “Company”) received loan proceeds of $1,195,680 (the “PPP Loan”)
from Bank of America, N.A. pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES
Act, as amended. The PPP Loan, which was in the form of a Note dated April 1, 2021 issued by the Company, matures on April 1, 2026 and
bears interest at a rate of 1% per annum, payable monthly commencing on November 2, 2021. The Note may be prepaid by the Company at any
time prior to maturity with no prepayment penalties. Funds from the PPP Loan may only be used for payroll costs, costs used to continue
group health care benefits, mortgage payments, rent, utilities, and interest on certain other debt obligations. Under the terms of the
PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. The Company
intends to use the entire PPP Loan amount for qualifying expenses.
On
April 27, 2020, the Company (inclusive of IDWP and IDWE) received loan proceeds of $1,195,679 (the “IDWMH PPP Loan”) from
Bank of America, N.A. pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act,
which was enacted March 27, 2020. The IDWMH PPP Loan, which was in the form of a Note dated April 15, 2020 issued by the Company,
matures on April 15, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on November 24, 2020. The Note may
be prepaid by the Company at any time prior to maturity with no prepayment penalties, and under the terms of the loan, payments can be
deferred for six months. Funds from the IDWMH PPP Loan may be used primarily for payroll costs and costs used to continue group health
care benefits, and, up to a limited extent, on mortgage payments, rent, utilities, interest and other expenses as described in the CARES
Act. Under the terms of the PPP, certain amounts of the IDWMH PPP Loans may be forgiven if they are used for those qualifying expenses. The
Company used the entire IDWMH PPP Loan amount for those qualifying expenses.
On
December 24, 2020, the Company applied for forgiveness on the IDWMH PPP loan. Forgiveness was applied for under SBA form 3508,
using the 24-week Alternative Payroll Covered Period. As 100% of the loan was used during this period for payroll and related payroll
expenses, the Company anticipates that the IDWMH PPP loan will be forgiven in its entirety.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
5—Business Segment Information
The
Company has the following three reportable business segments: Publishing, IDWE and CTM (discontinued operations).
The
Company’s reportable segments are distinguished by types of service, customers and methods used to provide their services. The
operating results of these business segments are regularly reviewed by the Company’s chief decision making officers.
The
accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the performance
of its business segments based primarily on operating income. There are no other significant asymmetrical allocations to segments.
Operating
results for the business segments of the Company are as follows:
(in thousands)
(unaudited)
|
|
Publishing(a)
|
|
|
IDWE(b)
|
|
|
CTM
|
|
|
IDW
Media Holdings
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
(discontinued operations)
|
|
|
(unallocated overhead)
|
|
|
|
|
Three months ended April 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
5,988
|
|
|
$
|
4,152
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
10,140
|
|
(Loss)
income from operations
|
|
|
(510
|
)
|
|
|
1,216
|
|
|
|
-
|
|
|
|
(273
|
)
|
|
|
433
|
|
Loss
from discontinued operations, net
|
|
|
-
|
|
|
|
-
|
|
|
|
(159
|
)
|
|
|
-
|
|
|
|
(159
|
)
|
Net
(loss) income
|
|
|
(508
|
)
|
|
|
1,382
|
|
|
|
(159
|
)
|
|
|
1,826
|
(c)
|
|
|
2,541
|
|
Total assets at
April 30, 2021
|
|
|
12,886
|
|
|
|
21,194
|
|
|
|
-
|
|
|
|
4,162
|
|
|
|
38,242
|
|
Three
months ended April 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
4,681
|
|
|
$
|
4,587
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
9,268
|
|
(Loss)
income from operations
|
|
|
(646
|
)
|
|
|
2,161
|
|
|
|
-
|
|
|
|
(186
|
)
|
|
|
1,329
|
|
Loss
from discontinued operations, net
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,638
|
)
|
|
|
-
|
|
|
|
(1,638
|
)
|
Net
(loss) income
|
|
|
(647
|
)
|
|
|
2,161
|
|
|
|
(1,638
|
)
|
|
|
(230
|
)
|
|
|
(354
|
)
|
Total assets at
April 30, 2020
|
|
|
12,540
|
|
|
|
36,178
|
|
|
|
12,463
|
|
|
|
11,712
|
|
|
|
72,893
|
|
(in
thousands) (unaudited)
|
|
Publishing(a)
|
|
|
IDWE(b)
|
|
|
CTM
|
|
|
IDW
Media Holdings
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
(discontinued operations)
|
|
|
(unallocated overhead)
|
|
|
|
|
Six months ended April 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
11,636
|
|
|
$
|
6,916
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
18,552
|
|
Loss
from operations
|
|
|
(883
|
)
|
|
|
(3,336
|
)
|
|
|
-
|
|
|
|
(468
|
)
|
|
|
(4,687
|
)
|
Loss
from discontinued operations, net
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,280
|
)
|
|
|
-
|
|
|
|
(1,280
|
)
|
Net
(loss) income
|
|
|
(883
|
)
|
|
|
(3,171
|
)
|
|
|
(1,280
|
)
|
|
|
1,619
|
(c)
|
|
|
(3,715
|
)
|
Total assets at
April 30, 2021
|
|
|
12,886
|
|
|
|
21,194
|
|
|
|
-
|
|
|
|
4,162
|
|
|
|
38,242
|
|
Six
months ended April 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
10,981
|
|
|
$
|
8,624
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
19,605
|
|
Loss
from operations
|
|
|
(554
|
)
|
|
|
(3,390
|
)
|
|
|
-
|
|
|
|
(510
|
)
|
|
|
(4,454
|
)
|
Loss
from discontinued operations, net
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,692
|
)
|
|
|
-
|
|
|
|
(2,692
|
)
|
Net
loss
|
|
|
(555
|
)
|
|
|
(3,390
|
)
|
|
|
(2,692
|
)
|
|
|
(590
|
)
|
|
|
(7,227
|
)
|
Total assets at
April 30, 2020
|
|
|
12,540
|
|
|
|
36,178
|
|
|
|
12,463
|
|
|
|
11,712
|
|
|
|
72,893
|
|
(a)
|
IDWP
includes Clover Press through March 31, 2020. As of April 1, 2020, Clover Press was valued
at the cost method and was no longer consolidated.
|
(b)
|
Included
in IDWE is Thought Bubble LLC and Word Balloon LLC in which consist of only television costs.
|
(c)
|
IDW
Media Holdings segment reported net income in the three and six months ended April 30, 2021
due to the sale of CTM.
|
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
6—Trade Accounts Receivable and Deferred Revenue
Trade
accounts receivable consists of the following:
(in thousands)
|
|
April
30,
2021
|
|
|
October
31,
2020
|
|
Trade accounts receivable
|
|
$
|
22,207
|
|
|
$
|
23,246
|
|
Less allowance for sales returns
|
|
|
(144
|
)
|
|
|
(296
|
)
|
Less allowance for doubtful
accounts
|
|
|
-
|
|
|
|
(29
|
)
|
Trade accounts receivable,
net
|
|
$
|
22,063
|
|
|
$
|
22,921
|
|
Allowance
for Doubtful Accounts
The
allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance.
The allowance is determined based on known troubled accounts, historical experience and other currently available evidence.
Changes
in deferred revenue consist of the following:
(in thousands)
|
|
|
|
Beginning balance, October 31, 2020
|
|
$
|
2,385
|
|
Deferral of revenue
|
|
|
170
|
|
Recognition of deferred
revenue
|
|
|
(420
|
)
|
Return
of previously collected funds
|
|
|
(10
|
)
|
Ending balance, April 30, 2021
|
|
$
|
2,125
|
|
The
Company expects to recognize approximately 100% of this revenue over the next 12 months.
Note
7- Television costs and amortization
(in thousands)
|
|
April
30,
2021
|
|
|
October
31,
2020
|
|
In-production
|
|
$
|
-
|
|
|
$
|
435
|
|
In-development
|
|
|
1,270
|
|
|
|
2,491
|
|
Total
|
|
$
|
1,270
|
|
|
$
|
2,926
|
|
|
|
Three
Months Ended
|
|
|
Six
Months Ended
|
|
(in
thousands)
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Television cost amortization
|
|
$
|
1,385
|
|
|
$
|
773
|
|
|
$
|
5,341
|
|
|
$
|
8,862
|
|
Television cost impairments
|
|
|
-
|
|
|
|
-
|
|
|
|
2,065
|
|
|
|
-
|
|
Total
|
|
$
|
1,385
|
|
|
$
|
773
|
|
|
$
|
7,406
|
|
|
$
|
8,862
|
|
Amortization
expense for television costs are expected to be $1,204,000 over the next twelve months.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
8—Accrued Expenses
Accrued
expenses consist of the following:
(in
thousands)
|
|
April
30,
2021
|
|
|
October
31,
2020
|
|
Royalties
|
|
$
|
956
|
|
|
$
|
1,268
|
|
Payroll, accrued vacation & payroll taxes
|
|
|
449
|
|
|
|
511
|
|
Bonus
|
|
|
145
|
|
|
|
333
|
|
Production costs and participation
|
|
|
3,504
|
|
|
|
1,495
|
|
Other
|
|
|
370
|
|
|
|
346
|
|
Total
|
|
$
|
5,424
|
|
|
$
|
3,953
|
|
Note
9—Property and Equipment
Property
and equipment consist of the following:
(in
thousands)
|
|
April
30,
2021
|
|
|
October
31,
2020
|
|
Equipment
|
|
$
|
469
|
|
|
$
|
424
|
|
Furniture & Fixtures
|
|
|
107
|
|
|
|
105
|
|
Leasehold improvements
|
|
|
826
|
|
|
|
826
|
|
Computer software
|
|
|
24
|
|
|
|
20
|
|
|
|
|
1,426
|
|
|
|
1,375
|
|
Less accumulated depreciation
and amortization
|
|
|
(1,062
|
)
|
|
|
(965
|
)
|
Property and equipment,
net
|
|
$
|
364
|
|
|
$
|
410
|
|
Depreciation
expense of all property and equipment was $49,290, and $60,831 for the three months ended April 30, 2021 and 2020, respectively, and
$119,746 and $128,915 for the six months ended April 30, 2021 and 2020, respectively.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
10—Commitments
Lease
Commitments
The
Company has various lease agreements with terms up to 10 years, including leases of office space, warehouses, and various equipment.
Some leases include options to purchase, terminate or extend for one or more years. These options are included in the lease term when
it is reasonably certain that the option will be exercised.
The
assets and liabilities from operating and finance leases are recognized at the commencement date based on the present value of remaining
lease payments over the lease term using the Company’s secured incremental borrowing rates or implicit rates, when readily determinable.
Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.
The
Company’s operating leases do not provide an implicit rate that can readily be determined. Therefore, we use a discount rate based
on our incremental borrowing rate, which was determined using the Company’s interest rate on its line of credit.
The
Company’s weighted-average remaining lease term relating to its operating leases is 1.17 years, with a weighted-average discount
rate of 4.59%.
The
Company recognized lease expense for its operating leases of $124,960 and $249,920 for the three and six months ended April 30, 2021,
respectively and $180,885 and $355,767 for the three and six months ended April 30, 2020, respectively. The cash paid under operating
leases was $142,516 and $286,926 for the three and six months ended April 30, 2021, respectively and $168,968 and $367,109 for the three
and six months ended April 30, 2020, respectively.
At
April 30, 2021, the Company had a right-of-use-asset related to operating leases of $1,037,434, accumulated amortization related to operating
leases of $497,580, both of which are included as a component of right-of-use assets. At October 31, 2020, the Company had a right-of-use-asset
related to operating leases of $1,037,434 and accumulated amortization related to operating leases of $266,488.
The
following table presents information about the amount and timing of cash flows arising from the Company’s operating leases as of
April 30, 2021.
Maturity
of Lease Liability
(in thousands)
|
|
Total
|
|
Fiscal years ending October 31:
|
|
|
|
2021
|
|
$
|
307
|
|
2022
|
|
|
354
|
|
2023
|
|
|
13
|
|
2024
|
|
|
7
|
|
Thereafter
|
|
|
-
|
|
Total undiscounted operating
lease payments
|
|
$
|
681
|
|
Less: imputed interest
|
|
|
(19
|
)
|
Present value of operating
lease liabilities
|
|
$
|
662
|
|
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
11—Deconsolidation of Subsidiary
|
a.
|
Effective April 1, 2020,
the Company’s interest in Clover Press decreased to 19.9% and IDWMH no longer consolidates the operations of Clover Press.
Accordingly, the Company derecognized related assets, liabilities and noncontrolling interests of Clover Press.
|
|
b.
|
Analysis
of assets and liabilities over which the Company lost control
|
(in thousands)
|
|
March
31,
2020
|
|
Current assets
|
|
|
|
Cash and
cash equivalents
|
|
$
|
215
|
|
Trade accounts receivable
|
|
|
1
|
|
Inventory
|
|
|
62
|
|
Other current assets
|
|
|
9
|
|
Noncurrent assets
|
|
|
|
|
Intangible assets, net
|
|
|
10
|
|
Right-of-use assets
|
|
|
226
|
|
Other noncurrent assets
|
|
|
64
|
|
Current liabilities
|
|
|
|
|
Trade accounts payable
|
|
|
(38
|
)
|
Operating lease obligation-
current
|
|
|
(64
|
)
|
Related party notes
payable
|
|
|
(50
|
)
|
Non-current liabilities
|
|
|
|
|
Operating
lease obligations -long term
|
|
|
(169
|
)
|
Net assets deconsolidated
|
|
$
|
266
|
|
|
c.
|
Loss on deconsolidation
of subsidiary
|
(in
thousands)
|
|
|
|
Fair value of interest retained
|
|
$
|
25
|
|
Consideration received
|
|
|
100
|
|
Carrying amount of interest retained:
|
|
|
|
|
Net assets deconsolidated
|
|
|
(266
|
)
|
Noncontrolling interests
|
|
|
106
|
|
Loss on deconsolidation
of subsidiary
|
|
$
|
(35
|
)
|
Loss
on deconsolidation of subsidiary was included in other expenses. The technique used to measure fair value was calculating the net present
value of future EBITDA projected over five years. The transaction was not with a related party. The continuing involvement consists of
19.9% ownership and an officer of IDWMH has one of three seats on the board.
|
d.
|
Net
cash outflow arising from deconsolidation of the subsidiary
|
(in
thousands)
|
|
|
|
The balance
of cash and cash equivalents deconsolidated
|
|
$
|
(115
|
)
|
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
12—Discontinued Operations
As
a result of the economic downturn related to the outbreak of the COVID-19 virus, and the impact it had on small businesses in the tourist
markets, the Company decided to make a strategic shift to dispose of CTM and to focus on its entertainment and publishing businesses.
On
July 14, 2020, the Company and Howard S. Jonas, the Company’s Chairman of the Board of Directors and former Chief Executive Officer,
executed a share purchase agreement pursuant to which the Company agreed to sell all of the stock of CTM to Mr. Jonas or his assignee
(the “SPA”) for (i) the cancelation of $3.75 million of indebtedness owed to Mr. Jonas by the Company, (ii) a contingent
payment of up to $3.25 million based upon a recovery of quarterly revenues of CTM to 90% of its fiscal 2019 levels during the 18-month
period following the closing of the CTM Sale, and (iii) a contingent payment if CTM is sold within 36 months for more than $4.5 million.
Prior to executing the share purchase agreement, the Company obtained a third-party’s valuation of CTM and a fairness opinion that
stated the consideration being received by the Company in the CTM Sale was fair. In addition to the Company’s Board of Directors
approving the CTM Sale, the Audit Committee of the Board of Directors, which is comprised entirely of independent directors, approved
the CTM Sale in compliance with the Company’s Statement of Policy with respect to Related Person Transactions. The CTM Sale was
also approved by (1) stockholders representing a majority of the combined voting power of the Company’s outstanding capital stock
and (2) stockholders representing a majority of the combined voting power of the Company’s outstanding capital stock not held by
Mr. Jonas or immediate family members of Mr. Jonas, including, without limitation, trusts or other vehicles for the benefit of any of
such immediate family members or entities under the control of such persons. On December 15, 2020, the right, title and interest
to the SPA were assigned to The Brochure Distribution Trust, a South Dakota trust. The Company does not expect to have
significant continuing involvement with CTM after the sale closes.
As
of July 31, 2020, CTM was reported as a discontinued operation and CTM’s operations have since been included in the financial
statements as discontinued operations. On February 15, 2021, the Company closed the previously announced CTM Sale. The Company wrote
down the loan of $3,750,000 and record a gain of $2,123,219 based on CTM’s net asset value as of the CTM Sale Date. CTM’s
assets are no longer reflected on the financial statements for the periods following the CTM Sale Date and CTM’s operations are
only consolidated in the Company’s Condensed Consolidated Statements of Operations results until the CTM Sale Date. There was no
contingent gain recorded since there was no foreseeable contingent payments to the Company.
According
to ASC 205-20-45-9 general corporate overhead should not be allocated to discontinued operations. The Company did not allocate any corporate
overhead to CTM when it began being classified as held for sale in the third quarter of 2020 and continued to not allocate any expenses
for the six months ending April 30, 2021.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
12—Discontinued Operations (continued)
Following
is a summary of the Company’s results of: discontinued operations for the three and six months ended for April 30, 2021 and April
30, 2020, cash flows of CTM’s depreciation, amortization, capital expenditures and significant noncash operating and investing
activities for the discontinued operation for the six months ended April 30, 2021 and April 30, 2020 and a schedule of assets and liabilities
from discontinued operations as of April 30, 2021 and October 31, 2020.
Results
of discontinued operations
|
|
Three
months ended
April 30,
|
|
|
Six
months ended,
April 30,
|
|
(in
thousands)
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Revenue
|
|
$
|
207
|
|
|
$
|
2,287
|
|
|
$
|
1,427
|
|
|
$
|
6,095
|
|
Direct cost of revenue
|
|
|
105
|
|
|
|
1,236
|
|
|
|
946
|
|
|
|
2,927
|
|
Selling, general and administrative
|
|
|
227
|
|
|
|
1,955
|
|
|
|
1,649
|
|
|
|
4,803
|
|
Depreciation and amortization
|
|
|
45
|
|
|
|
293
|
|
|
|
295
|
|
|
|
564
|
|
Bad Debt
|
|
|
1
|
|
|
|
431
|
|
|
|
(109
|
)
|
|
|
482
|
|
Total costs and expenses
|
|
|
378
|
|
|
|
3,915
|
|
|
|
2,781
|
|
|
|
8,776
|
|
Loss from operations
|
|
|
(171
|
)
|
|
|
(1,628
|
)
|
|
|
(1,354
|
)
|
|
|
(2,681
|
)
|
Interest expense, net
|
|
|
19
|
|
|
|
(9
|
)
|
|
|
6
|
|
|
|
(18
|
)
|
Other (expense) income,
net
|
|
|
(7
|
)
|
|
|
(1
|
)
|
|
|
68
|
|
|
|
7
|
|
Loss before income taxes
|
|
|
(159
|
)
|
|
|
(1,638
|
)
|
|
|
(1,280
|
)
|
|
|
(2,692
|
)
|
Provision for income
taxes
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Net
loss
|
|
$
|
(159
|
)
|
|
$
|
(1,638
|
)
|
|
$
|
(1,280
|
)
|
|
$
|
(2,692
|
)
|
(i)
|
Stock
based compensation for discontinued operations included in selling, general and administrative
expenses is $0 in both the three and six months ended April 30, 2021 and 2020, respectively.
|
(ii)
|
CTM
is no longer consolidated into the Company as of February 15, 2021 the CTM Sale Date.
|
Cash
flows from discontinued operations for the six months ended April, 30
(in
thousands)
|
|
2021
|
|
|
2020
|
|
Depreciation and amortization
|
|
$
|
185
|
|
|
$
|
399
|
|
Amortization of finance lease
|
|
|
109
|
|
|
|
165
|
|
Capital expenditure
|
|
|
(22
|
)
|
|
|
(299
|
)
|
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
12—Discontinued Operations (continued)
Assets and liabilities of Discontinued Operations
|
|
April 30,
|
|
|
October 31,
|
|
(in
thousands)
|
|
2021
|
|
|
2020
|
|
Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
-
|
|
|
$
|
1,621
|
|
Trade receivables, net
|
|
|
-
|
|
|
|
844
|
|
Prepaid expenses
|
|
|
-
|
|
|
|
368
|
|
Total
current assets*
|
|
|
-
|
|
|
|
|
|
Property and equipment,
net
|
|
|
-
|
|
|
|
1,274
|
|
Right-of-use assets,
net
|
|
|
-
|
|
|
|
4,649
|
|
Intangibles assets, net
|
|
|
-
|
|
|
|
142
|
|
Goodwill
|
|
|
-
|
|
|
|
2,110
|
|
Other assets
|
|
|
-
|
|
|
|
163
|
|
Total Assets
|
|
$
|
-
|
|
|
$
|
11,171
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
|
-
|
|
|
|
891
|
|
Accrued expenses
|
|
|
-
|
|
|
|
368
|
|
Deferred revenue
|
|
|
-
|
|
|
|
664
|
|
Government loan- current portion
|
|
|
-
|
|
|
|
1,125
|
|
Operating lease obligations-current portion
|
|
|
-
|
|
|
|
909
|
|
Finance lease obligations- current portion
|
|
|
-
|
|
|
|
342
|
|
Income taxes payable
and other current liabilities
|
|
|
-
|
|
|
|
71
|
|
Total
current liabilities*
|
|
|
-
|
|
|
|
|
|
Government loan- long term portion
|
|
|
-
|
|
|
|
684
|
|
Operating lease obligations – long term
portion
|
|
|
-
|
|
|
|
3,034
|
|
Finance lease obligations
– long term portion
|
|
|
-
|
|
|
|
452
|
|
Total
non-current liabilities*
|
|
|
-
|
|
|
|
|
|
Total
Liabilities
|
|
$
|
-
|
|
|
$
|
8,540
|
|
*
|
The
assets and liabilities of the disposal group classified as held for sale are all classified
as current on Assets and Liabilities of Discontinued Operations since it’s probable
the sale will occur and proceeds will be collected within one year. Therefore, no sub totals
between current and non-current have been displayed. Since the sale of the discontinued operations
the assets and liabilities are no longer reflected above.
|
Note
13—Reclassification of prior year presentation
Certain
prior year amounts have been reclassified for consistency with the current year presentation.
Note
14—Subsequent events
Management
has evaluated subsequent events through June 14, 2021, the date on which the consolidated financial statements were available to be issued.
There were no material subsequent events that require recognition or additional disclosures in these consolidated financial statements,
except as follows:
On
May 3, 2021 and May 10, 2021 both bank loans held by the VIEs controlled by IDWE were subsequently paid off and there are no remaining
balances.
ANNUAL
REPORT OF IDW MEDIA HOLDINGS, INC.
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
IDW
MEDIA HOLDINGS, INC.
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Board
of Directors and Stockholder
IDW
Media Holdings, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of IDW Media Holdings, Inc. and its Subsidiaries (the “Company”)
as of October 31, 2020 and 2019, and the related consolidated statements of operations, comprehensive loss, stockholders’ equity
and cash flows for each of the two years in the period ended October 31, 2020 and the related notes (collectively referred to as the
“financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company as of October 31, 2020 and 2019, and the results of its operations and its cash flows for each
of the two years in the period ended October 31, 2020 in conformity with accounting principles generally accepted in the United States
of America.
Basis
for Opinion
These
consolidated financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion
on these consolidated financial statements 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. 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. 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. the Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits 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 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.
We believe that our audits provide a reasonable basis for our opinion.
ZWICK
& BANYAI, PLLC
We
have served as the Company’s auditor since 2010.
Southfield,
Michigan
January
25, 2021
IDW
MEDIA HOLDINGS, INC.
CONSOLIDATED
BALANCE SHEETS
(in thousands,
except per share data)
|
|
October
31,
2020
|
|
|
October 31,
2019
|
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
10,541
|
|
|
$
|
7,543
|
|
Trade accounts receivable,
net
|
|
|
22,921
|
|
|
|
43,462
|
|
Inventory
|
|
|
3,754
|
|
|
|
3,313
|
|
Prepaid expenses
|
|
|
1,361
|
|
|
|
1,319
|
|
Current
assets held for sale from discontinued operations
|
|
|
11,171
|
|
|
|
5,186
|
|
Total current assets
|
|
|
49,748
|
|
|
|
60,823
|
|
Property and equipment,
net
|
|
|
410
|
|
|
|
562
|
|
Right-of-use assets,
net
|
|
|
771
|
|
|
|
-
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
Taxes receivable
|
|
|
-
|
|
|
|
513
|
|
Investments
|
|
|
25
|
|
|
|
-
|
|
Intangible assets, net
|
|
|
52
|
|
|
|
115
|
|
Goodwill
|
|
|
199
|
|
|
|
199
|
|
Television costs, net
|
|
|
2,926
|
|
|
|
9,388
|
|
Other assets
|
|
|
527
|
|
|
|
372
|
|
Non-current
assets held for sale from discontinued operations
|
|
|
-
|
|
|
|
5,165
|
|
Total assets
|
|
$
|
54,658
|
|
|
$
|
77,137
|
|
Liabilities and stockholders’
equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
$
|
1,406
|
|
|
$
|
2,145
|
|
Accrued expenses
|
|
|
3,953
|
|
|
|
3,036
|
|
Deferred revenue
|
|
|
2,385
|
|
|
|
1,058
|
|
Bank loans payable –
current portion
|
|
|
14,204
|
|
|
|
29,242
|
|
Related party loans payable
– current portion
|
|
|
-
|
|
|
|
4,550
|
|
Government loans- current
portion
|
|
|
793
|
|
|
|
-
|
|
Operating lease obligations
– current portion
|
|
|
562
|
|
|
|
-
|
|
Other current liabilities
|
|
|
69
|
|
|
|
2,007
|
|
Current
liabilities held for sale from discontinued operations
|
|
|
8,540
|
|
|
|
3,344
|
|
Total
current liabilities
|
|
|
31,912
|
|
|
|
45,382
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
Operating lease obligations
– long term portion
|
|
|
368
|
|
|
|
-
|
|
Bank loans payable –
long term portion
|
|
|
-
|
|
|
|
10,500
|
|
Government loans –
long term portion
|
|
|
403
|
|
|
|
-
|
|
Related party loans payable
– long term portion
|
|
|
3,750
|
|
|
|
4,500
|
|
Non-current
liabilities held for sale from discontinued operations
|
|
|
-
|
|
|
|
683
|
|
Total
non-current liabilities
|
|
|
4,521
|
|
|
|
15,683
|
|
Total liabilities
|
|
$
|
36,433
|
|
|
$
|
61,065
|
|
Stockholders’ equity (see note 4):
|
|
|
|
|
|
|
|
|
Preferred stock, $.01
par value; authorized shares – 500; no shares issued at October 31, 2020 and October 31, 2019
|
|
|
-
|
|
|
|
-
|
|
Class
B common stock, $0.01 par value; authorized shares – 12,000; 9,987 and 7,419 shares issued and 9,467 and 6,899 shares outstanding
at October 31, 2020 and October 31, 2019, respectively
|
|
|
93
|
|
|
|
74
|
|
Class
C common stock, $0.01 par value; authorized shares – 2,500; 545 shares issued and outstanding at October 31, 2020 and October
31, 2019
|
|
|
5
|
|
|
|
5
|
|
Stock subscription receivable
|
|
|
-
|
|
|
|
(1,000
|
)
|
Additional paid-in capital
|
|
|
111,379
|
|
|
|
96,671
|
|
Accumulated other comprehensive
loss
|
|
|
(60
|
)
|
|
|
(60
|
)
|
Accumulated deficit
|
|
|
(91,996
|
)
|
|
|
(78,457
|
)
|
Treasury
stock, at cost, consisting of 519 shares of Class B common stock at October 31, 2020 and October 31, 2019
|
|
|
(1,196
|
)
|
|
|
(1,196
|
)
|
Total
IDW Media Holdings Inc. stockholders’ equity
|
|
|
18,225
|
|
|
|
16,037
|
|
Non-controlling
interest
|
|
|
-
|
|
|
|
35
|
|
Total
stockholders’ equity
|
|
|
18,225
|
|
|
|
16,072
|
|
Total liabilities and
stockholders’ equity
|
|
$
|
54,658
|
|
|
$
|
77,137
|
|
IDW
MEDIA HOLDINGS, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|
Fiscal
Years Ended
October 31,
|
|
(in
thousands, except per share data)
|
|
2020
|
|
|
2019
|
|
Revenues
|
|
$
|
38,162
|
|
|
$
|
42,835
|
|
|
|
|
|
|
|
|
|
|
Costs
and expenses:
|
|
|
|
|
|
|
|
|
Direct
cost of revenues
|
|
|
29,530
|
|
|
|
49,153
|
|
Selling,
general and administrative
|
|
|
17,270
|
|
|
|
18,415
|
|
Depreciation
and amortization
|
|
|
252
|
|
|
|
286
|
|
Bad
debt expense
|
|
|
434
|
|
|
|
33
|
|
Total
costs and expenses
|
|
|
47,486
|
|
|
|
67,887
|
|
Loss
from operations
|
|
|
(9,324
|
)
|
|
|
(25,052
|
)
|
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
|
(46
|
)
|
|
|
(173
|
)
|
Other
income (expense), net
|
|
|
(318
|
)
|
|
|
(15
|
)
|
Loss
before income taxes
|
|
|
(9,688
|
)
|
|
|
(25,240
|
)
|
(Provision
for) benefit from income taxes
|
|
|
-
|
|
|
|
42
|
|
Net
loss from continuing operations
|
|
|
(9,688
|
)
|
|
|
(25,198
|
)
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations,
net
|
|
|
(4,110
|
)
|
|
|
(1,294
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(13,798
|
)
|
|
|
(26,492
|
)
|
|
|
|
|
|
|
|
|
|
Net
income attributable to non-controlling interests
|
|
|
-
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
Net
loss attributable to IDW Media Holdings, Inc
|
|
$
|
(13,798
|
)
|
|
$
|
(26,429
|
)
|
|
|
|
|
|
|
|
|
|
Basic
and diluted income (loss) per share (note 3):
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
(1.08
|
)
|
|
$
|
(3.71
|
)
|
Discontinued
operations, net
|
|
|
(0.46
|
)
|
|
|
(0.19
|
)
|
Net
loss
|
|
$
|
(1.54
|
)
|
|
$
|
(3.90
|
)
|
|
|
|
|
|
|
|
|
|
Weighted-average
number of shares used in the calculation of basic and diluted loss per share:
|
|
|
8,982
|
|
|
|
6,768
|
|
|
|
|
|
|
|
|
|
|
Dividend declared per common
share:
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
See
accompanying notes to consolidated financial statements.
IDW
MEDIA HOLDINGS, INC.
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
|
|
Fiscal
Years Ended
October
31,
|
|
(in
thousands)
|
|
2020
|
|
|
2019
|
|
Net loss
|
|
$
|
(13,798
|
)
|
|
$
|
(26,492
|
)
|
Foreign
currency translation adjustments
|
|
|
-
|
|
|
|
168
|
|
Comprehensive loss
|
|
|
(13,798
|
)
|
|
|
(26,324
|
)
|
Comprehensive
loss attributable to non-controlling interest
|
|
|
-
|
|
|
|
63
|
|
Total
comprehensive loss
|
|
$
|
(13,798
|
)
|
|
$
|
(26,261
|
)
|
See
accompanying notes to consolidated financial statements
IDW
Media Holdings, Inc.
Consolidated
Stockholders’ Equity
Fiscal
Years Ended October 31, 2020 and 2019
(in
thousands)
|
|
Class
B Common Stock
|
|
|
Class
C Common Stock
|
|
|
Stock
|
|
|
Additional
|
|
|
Accumulated
Other
|
|
|
|
|
|
Non-
Controlling
|
|
|
Treasury
Stock, at Cost
|
|
|
Total
|
|
|
|
Number
of
|
|
|
|
|
|
Number
of
|
|
|
|
|
|
Subscriptions
|
|
|
Paid
In
|
|
|
Comprehensive
|
|
|
Retained
|
|
|
Interest
|
|
|
Number of
|
|
|
|
|
|
Shareholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Receivable
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
(“NCI”)
|
|
|
Shares
|
|
|
Amount
|
|
|
Equity
|
|
Balance
October 31, 2019
|
|
|
7,419
|
|
|
|
74
|
|
|
|
545
|
|
|
|
5
|
|
|
|
(1,000
|
)
|
|
|
96,671
|
|
|
|
(60
|
)
|
|
|
(78,457
|
)
|
|
|
35
|
|
|
|
519
|
|
|
|
(1,196
|
)
|
|
|
16,072
|
|
Stock
based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
722
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
722
|
|
Issuance
of common stock
|
|
|
2,568
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,585
|
|
Subscriptions
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,011
|
|
Issuance
of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
409
|
|
NCI
divestment in subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
259
|
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
|
|
224
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,798
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,798
|
)
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Total
comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
(13,798
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
(13,798
|
)
|
Balance
October 31, 2020
|
|
|
9,987
|
|
|
|
93
|
|
|
|
545
|
|
|
|
5
|
|
|
|
-
|
|
|
|
111,379
|
|
|
|
(60
|
)
|
|
|
(91,996
|
)
|
|
|
-
|
|
|
|
519
|
|
|
|
(1,196
|
)
|
|
|
18,225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
October 31, 2018
|
|
|
6,072
|
|
|
|
61
|
|
|
|
545
|
|
|
|
5
|
|
|
|
-
|
|
|
|
69,780
|
|
|
|
(228
|
)
|
|
|
(51,930
|
)
|
|
|
|
|
|
|
519
|
|
|
|
(1,196
|
)
|
|
|
16,492
|
|
Stock
based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,123
|
|
Issuance
of common stock
|
|
|
1,347
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,605
|
|
Subscriptions
receivable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,000
|
)
|
Issuance
of warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118
|
|
Issuance
of stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
Acquisition
of subsidiary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(98
|
)
|
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Comprehensive
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,429
|
)
|
|
|
(63
|
)
|
|
|
|
|
|
|
|
|
|
|
(26,492
|
)
|
Other
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
168
|
|
Total
comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
168
|
|
|
|
(26,429
|
)
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(26,261
|
)
|
Balance
October 31, 2019
|
|
|
7,419
|
|
|
|
74
|
|
|
|
545
|
|
|
|
5
|
|
|
|
(1,000
|
)
|
|
|
96,671
|
|
|
|
(60
|
)
|
|
|
(78,457
|
)
|
|
|
35
|
|
|
|
519
|
|
|
|
(1,196
|
)
|
|
|
16,072
|
|
See
accompanying notes to consolidated financial statements.
IDW
MEDIA HOLDINGS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
Fiscal years ended October 31,
|
|
|
|
|
|
|
(in thousands)
|
|
2020
|
|
|
2019
|
|
Operating activities:
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(13,798
|
)
|
|
$
|
(26,492
|
)
|
Adjustments
to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
1,017
|
|
|
|
1,513
|
|
Amortization
of finance leases
|
|
|
411
|
|
|
|
-
|
|
Bad
debt expense
|
|
|
680
|
|
|
|
113
|
|
Stock
based compensation
|
|
|
722
|
|
|
|
3,123
|
|
Stock
options
|
|
|
409
|
|
|
|
-
|
|
Warrants
issued
|
|
|
-
|
|
|
|
118
|
|
Amortization
of right-of-use asset
|
|
|
1,557
|
|
|
|
-
|
|
Loss
on deconsolidation of subsidiary
|
|
|
35
|
|
|
|
-
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade
accounts receivable
|
|
|
20,807
|
|
|
|
(28,960
|
)
|
Inventory
|
|
|
(442
|
)
|
|
|
297
|
|
Prepaid
expenses and other assets
|
|
|
760
|
|
|
|
(443
|
)
|
Investment
|
|
|
(25
|
)
|
|
|
-
|
|
Television
costs
|
|
|
6,462
|
|
|
|
28,527
|
|
Operating
lease liability
|
|
|
(1,597
|
)
|
|
|
-
|
|
Trade
accounts payable, accrued expenses and other liabilities
|
|
|
(2,108
|
)
|
|
|
(3,501
|
)
|
Deferred
revenue
|
|
|
795
|
|
|
|
715
|
|
Deconsolidation
of subsidiary
|
|
|
304
|
|
|
|
-
|
|
Net
cash provided by (used in) operating activities
|
|
|
15,989
|
|
|
|
(24,990
|
)
|
Investing
activities:
|
|
|
|
|
|
|
|
|
Business
acquisitions
|
|
|
-
|
|
|
|
(12
|
)
|
Proceeds
on disposition of long lived assets
|
|
|
185
|
|
|
|
-
|
|
Disposition
of subsidiary, net of cash received
|
|
|
(115
|
)
|
|
|
-
|
|
Capital
expenditures
|
|
|
(420
|
)
|
|
|
(1,113
|
)
|
Net
cash used in investing activities
|
|
|
(350
|
)
|
|
|
(1,125
|
)
|
Financing
activities:
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
14,596
|
|
|
|
22,663
|
|
Financing
under capital leases
|
|
|
-
|
|
|
|
360
|
|
Repayments
of capital lease obligations
|
|
|
-
|
|
|
|
(410
|
)
|
Repayments
of finance lease obligation
|
|
|
(404
|
)
|
|
|
-
|
|
Proceeds
of related party loans
|
|
|
-
|
|
|
|
9,050
|
|
Proceeds
of government loans
|
|
|
3,004
|
|
|
|
-
|
|
Proceeds
of bank loans
|
|
|
1,021
|
|
|
|
19,382
|
|
Repayments
of related party loans
|
|
|
(5,300
|
)
|
|
|
(19,000
|
)
|
Repayments
of bank loans
|
|
|
(26,559
|
)
|
|
|
(9,378
|
)
|
Net
cash (used in) provided by financing activities
|
|
|
(13,642
|
)
|
|
|
22,667
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
-
|
|
|
|
168
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
$
|
1,997
|
|
|
$
|
(3,280
|
)
|
Cash
and cash equivalents at beginning of period
|
|
|
10,165
|
|
|
|
13,445
|
|
Cash
and cash equivalents at end of period
|
|
$
|
12,162
|
|
|
$
|
10,165
|
|
|
|
|
|
|
|
|
|
|
Supplemental
schedule of investing and financing activities
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
200
|
|
|
$
|
228
|
|
Cash
paid for income taxes
|
|
$
|
98
|
|
|
$
|
25
|
|
Purchases
of property and equipment through capital lease obligations
|
|
$
|
-
|
|
|
$
|
360
|
|
Received
from sale of long lived assets
|
|
$
|
154
|
|
|
$
|
-
|
|
The
effect of exchange rate changes on cash and cash equivalents is not material.
See
accompanying notes to consolidated financial statements.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
1—Basis of Presentation
The
accompanying consolidated financial statements of IDW Media Holdings, Inc. and its subsidiaries (the “Company”) have been
prepared by management in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
In the opinion of management, all adjustments (consisting principally of normal recurring accruals) considered necessary for a fair presentation
have been included. Any reference to quarterly information is unaudited.
The
Company’s fiscal year ends on October 31st. Each reference below to a fiscal year refers to the fiscal year ending in
the calendar year indicated (e.g., fiscal 2020 refers to the fiscal year ended October 31, 2020).
Description
of Business and Segment Information
IDW
Media Holdings, Inc. together with its subsidiaries is a diversified media company with operations in publishing, television entertainment
and media distribution.
The
terms “Company,” “we,” “us,” and “our” are used herein to refer collectively to the parent
company and the subsidiaries through which various businesses are conducted. The term IDWMH is used to refer to the parent company.
The
following are our principal businesses and segments:
Publishing
(“IDWP”), a publishing company that creates comic books, graphic novels, digital content and games through its imprints IDW,
IDW Games, Top Shelf Productions, Artist’s Editions, The Library of American Comics, Yoe! Books, Sunday Press, and EuroComics;
and Clover Press, a boutique publishing company that focuses on the book trade and direct market. Effective April 1, 2020, our
interest in Clover Press decreased to 19.9% and IDWMH no longer consolidates the operations of Clover Press, but rather values the investment
at cost.
IDW
Entertainment (“IDWE”), is a production company and studio that develops and produces content and formats for global platforms
and services.
CTM
Media Group (“CTM”), a Company that develops and distributes print and digital-based advertising and information advertising
for tourist destinations in targeted tourist markets in 32 states / provinces in the US and Canada. On July 14, 2020, the Company and
Howard Jonas, our Chairman of the Board of Directors, executed a share purchase agreement pursuant to which we agreed to sell all of
the stock of CTM to Mr. Jonas or his assignee (the “CTM Sale”) for (i) the cancelation of $3.75 million of indebtedness owed
to Mr. Jonas by us, (ii) a contingent payment of up to $3.25 million based upon a recovery of quarterly revenues of CTM to 90% of its
fiscal 2019 levels during the 18-month period following the closing of the CTM Sale, and (iii) a contingent payment if CTM is sold within
36 months for more than $4.5 million. We expect to close the sale of CTM in the first calendar quarter of 2021.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
1—Basis of Presentation (continued)
Variable
Interest Entities
The
Company, through its subsidiary IDWE has arrangements with seven special-purpose entities (“SPEs”), some formed for the sole
purpose of providing production services in Canada for the production of a television pilot and television series, others for production
and writing purposes. The SPEs are independently owned companies that are effectively controlled by IDWE, that are parties to the related
bank production financing arrangements. The Company has determined that SPEs are variable interest entities and that the Company is the
primary beneficiary of the SPEs activities and obligor on the SPEs’ debt. All financial activity of the SPEs have been included
IDWE’s financial statements, which are part of these consolidated financial statements. IDWE does not need to provide any support
to the VIE’s and therefore no foreseen potential losses associated. They have finished all of the productions and these shows have
been delivered. The outstanding loans will be paid off by the tax credits in the receivable balances. The carrying amounts and classification
of the VIE’s assets and liabilities are presented below:
Fiscal
year October 31 (in thousands)
|
|
2020
|
|
|
2019
|
|
Cash and cash equivalents
|
|
$
|
732
|
|
|
$
|
231
|
|
Accounts receivable
|
|
|
12,420
|
|
|
|
16,103
|
|
Bank loans payable
|
|
|
14,204
|
|
|
|
39,743
|
|
Total
|
|
$
|
27,356
|
|
|
$
|
56,077
|
|
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.
GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying
notes. Actual results may differ from those estimates.
Revenue
Recognition
IDWP’s
primary revenue is recognized, net of an allowance for estimated sales returns, at the time of shipment of its graphic novels and comic
books by IDWP’s distributor to its customers. IDWE’s revenue is recognized when evidence of a sale or licensing arrangement
exists, the product is complete, has been delivered or is available for immediate and unconditional delivery, the license period has
begun, the fee is fixed or determinable, and collection is reasonably assured. IDWE’s production activities included those provided
by Canadian SPEs, and some of those productions qualify for tax credits in Canada. These credits are recorded as reductions in production
cost when the SPE becomes entitled to the Canadian tax credits. These tax credits have been estimated and are currently being audited
by the Canada Revenue Agency and are subject to change. IDWE and IDWP revenues are product revenues and since CTM is disclosed as a discontinued
operation there are no service revenues.
Revenue
Recognition When Right of Return Exists
Sales
returns allowances represent a reserve for IDWP products that may be returned due to dating, competition or other marketing matters,
or certain destruction in the field. Sales returns are generally estimated and recorded based on historical sales and returns experience
and current trends that are expected to continue. Licensing revenues are recognized upon execution of the agreement for such rights,
and other creative revenues are recognized upon completion of services rendered on a contractual basis.
Deferred
Revenue
The
Company records deferred revenue upon invoicing for contracted commitments for products and services. Revenue is recognized on the date
such product or service is provided or delivered in accordance with the contract.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
1—Basis of Presentation (continued)
Direct
Cost of Revenues
Direct
cost of revenues excludes depreciation and amortization expense. Direct cost of revenues for IDWP consists primarily of printing expenses
and costs of artist and writers. Direct cost of revenues for IDWE consists primarily of the amortization of production costs that were
capitalized during the production of the television episodes, accrued third party participation, and distribution fees directly related
to revenue.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Inventory
Inventory
consists of IDWP’s graphic novels and comic books (print), and costs related to IDWE productions (production costs). Inventory
is stated at the lower of cost or market determined by the first in, first out method for print.
IDWE
Television Costs - We expense television production, participation and residual costs over the applicable product life cycle based upon
the ratio of the current period’s revenues to the estimated remaining total revenues (Ultimate Revenues) for each production. If
our estimate of Ultimate Revenues decreases, amortization of film and television costs may be accelerated. Conversely, if our estimate
of Ultimate Revenues increases, film and television cost amortization may be slowed. For television series, Ultimate Revenues include
revenues that are expected to be earned within ten years from delivery of the first episode, or if still in production, five years from
delivery of the most recent episode, if later.
With
respect to television series or other television productions intended for broadcast, the most sensitive factors affecting estimates of
Ultimate Revenues are program ratings and the strength of the advertising market. Program ratings, which are an indication of market
acceptance, directly affect the Company’s ability to generate advertising revenues during the airing of the program. Television
development costs for projects that have been abandoned or have not been set for production within three years are generally written
off in the relevant period.
Property
and Equipment
Equipment,
furniture and fixtures, and computer software are recorded at cost and are depreciated on a straight-line basis over their estimated
useful lives, which range as follows: equipment - 5 & 7 years; furniture & fixtures- 5 years;; and computer software and digital
display equipment - 2, 3 & 5 years. Leasehold improvements are recorded at cost and are depreciated on a straight-line basis over
the term of the lease or their estimated useful lives, whichever is shorter.
Intangible
Assets
Licensing
contracts are recorded at cost and are amortized on a straight-line basis over their contractual or estimated useful lives, whichever
is shorter from 5 - 7 years.
Goodwill
Goodwill
is not amortized but is instead tested for impairment if events or changes in circumstances indicate that an impairment loss may have
occurred. In the impairment test, the carrying amount of the reporting unit, including goodwill, is compared to its fair value. When
the carrying amount of the reporting unit exceeds its fair value, a goodwill impairment loss is recognized up to a maximum amount of
the recorded goodwill related to the reporting unit. Goodwill impairment losses are not reversed.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
1—Basis of Presentation (continued)
Long-Lived
Assets
In
accordance with ‘ASC 360’ - Accounting for the Impairment or Disposal of Long-Lived Assets-, the Company tests the
recoverability of its long-lived assets with finite useful lives whenever events or changes in circumstances indicate that the carrying
value of the asset may not be recoverable. The Company tests for impairment based on the projected undiscounted cash flows to be derived
from such asset. If the projected undiscounted future cash flows are less than the carrying value of the asset, the Company will record
an impairment loss based on the difference between the estimated fair value and the carrying value of the asset. The Company generally
measures fair value by considering sale prices for similar assets or by discounting estimated future cash flows from such asset using
an appropriate discount rate. Cash flow projections and fair value estimates require significant estimates and assumptions by management.
Should the estimates and assumptions prove to be incorrect, the Company may be required to record impairments in future periods and such
impairments could be material.
Advertising
Expense
Non-direct
response advertising is expensed as incurred. In fiscal 2020 and fiscal 2019, advertising expenses were approximately $274,000 and $127,000,
respectively.
Repairs
and Maintenance
The
Company charges the cost of repairs and maintenance, including the cost of replacing minor items not constituting substantial betterment,
to selling, general and administrative expenses as these costs are incurred.
Foreign
Currency Translation
Assets
and liabilities of foreign subsidiaries denominated in foreign currencies are translated to U.S. Dollars at end-of-period rates of exchange,
and their monthly results of operations are translated to U.S. Dollars at the average rates of exchange for that month.
Income
Taxes
The
Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between
the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is
provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization
of deferred tax assets depends on the generation of future taxable income during the period in which related temporary differences become
deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning
strategies in its assessment of a valuation allowance. Deferred tax assets and liabilities are measured using the enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of such change.
The
Company uses a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return. The Company
determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related
appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not
recognition threshold, the Company presumes that the position will be examined by the appropriate taxing authority that has full knowledge
of all relevant information. Tax positions that meet the more-likely-than-not recognition threshold are measured to determine the amount
of tax benefit to recognize in the financial statements or the amount of allowance against any previously recognized benefit. The tax
position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement.
Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in one
or more of the following: an increase in a liability for income taxes payable, a reduction of an income tax refund receivable, a reduction
in a deferred tax asset, or an increase in a deferred tax liability.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
1—Basis of Presentation (continued)
Commitments
and Contingencies
The
Company accrues for loss contingencies when both (a) information available prior to issuance of the financial statements indicates
that it is probable that a liability had been incurred at the date of the financial statements and (b) the amount of loss can reasonably
be estimated. When the Company accrues for loss contingencies and the reasonable estimate of the loss is within a range, the Company
records its best estimate within the range. When no amount within the range is a better estimate than any other amount, the Company accrues
the minimum amount in the range. The Company discloses an estimated possible loss or a range of loss when it is at least reasonably possible
that a loss may have been incurred.
Earnings
per Share
Basic
earnings per share is computed by dividing net income attributable to all classes of common stockholders by the weighted average number
of shares of all classes of common stock outstanding during the applicable period. Diluted earnings per share is computed in the same
manner as basic earnings per share, except that the number of shares is increased to include restricted stock still subject to risk of
forfeiture (non-vested) using the treasury stock method, unless the effect of such increase is anti-dilutive.
The
weighted-average number of shares used in the calculation of basic and diluted earnings per share attributable to the Company’s
common stockholders consists of the following:
Fiscal Year
ended October 31 (in thousands)
|
|
2020
|
|
|
2019
|
|
Basic
weighted-average number of shares
|
|
|
8,982
|
|
|
|
6,768
|
|
Effect
of dilutive securities:
|
|
|
|
|
|
|
|
|
Non-vested
restricted common stock
|
|
|
-
|
|
|
|
-
|
|
Diluted
weighted-average number of shares
|
|
|
8,982
|
|
|
|
6,768
|
|
Stock-Based
Compensation
The
Company accounted for stock-based compensation granted to its employees in accordance with the fair value recognition provisions of ‘ASC’
718 Share-Based Payment. Under ‘ASC’ 718, compensation costs are recognized based on the grant-date fair value. Stock-based
compensation is included in selling, general and administrative expense.
Vulnerability
Due to Certain Concentrations
Financial
instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents, short
term investment and trade accounts receivable. The Company holds cash and cash equivalents at several major financial institutions, which
often exceed FDIC insurance limits. Historically, the Company has not experienced any losses due to such concentration of credit risk.
The Company’s temporary cash investments policy is to limit the dollar amount of investments with any one financial institution
and monitor the credit ratings of those institutions. While the Company may be exposed to credit losses due to the nonperformance of
its counterparties, the Company does not expect the settlement of these transactions to have a material effect on its results of operations,
cash flows or financial condition.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
1—Basis of Presentation (continued)
IDWP
has two significant customers Diamond Comic Distributors, Inc. (“Diamond”) and Penguin Random House (“PRH”),
that pose a concentration risk.
Revenues
from Diamond, IDWP’s direct market distributor, represented 18.5 % and 19.1% of the total consolidated revenues for the fiscal
years ended October 31, 2020 and 2019, respectively. The receivable balances from this customer represented approximately 4.7% and 2.3%
of consolidated trade accounts receivable at October 31, 2020 and 2019, respectively.
Revenues
from PRH amounted to 38.4% and 6.8% of consolidated revenue in the fiscal years ended October 31, 2020 and 2019, respectively. The receivable
balances represented 10.5% and 2.7% of consolidated receivables at October 31, 2020 and 2019, respectively.
Diamond
and PRH in turn sell to their book market customers with right of return. No other single customer accounted for more than 10% of consolidated
revenues in the fiscal year ended October 31, 2020 or 2019. This concentration of customers increases the Company’s risk associated
with non-payment by those customers.
IDWE
has three significant customers Netflix, NBC Universal/SyFy and Cineflix that pose a concentration risk.
IDWE
recognizes its revenue based on the completed episodes it delivers. Netflix, a leading streaming video subscription service, that represented
10.6% and 53.3% of consolidated revenue in the fiscal years ended October 31, 2020 and 2019, respectively. The receivable balances from
this customer represented 15.3% and 52.6% of consolidated trade receivables at October 31, 2020 and 2019, respectively.
NBC
Universal/SyFy, a major television network, which accounted for 4.9% and 0% of consolidated revenue for the fiscal years ended October
31, 2020 and 2019, respectively. The accounts receivable accounted for 0% and 0% of consolidated receivables at October 31, 2020 and
2019, respectively.
Cineflix,
an international distributor accounted for 21.5% and 0% of consolidated revenue for the fiscal years ended October 31, 2020 and 2019,
respectively. The accounts receivable accounted for 6.8% and 0% of consolidated receivables at October 31, 2020 and 2019, respectively.
Collaborative
Agreements
IDWE
regularly enters into agreements for the production of its television shows. The agreements provide for the rights and obligations related
to the agreement including timing, delivery and payments. IDWE capitalizes the resulting production costs under the agreements in production
cost inventory as payments are made or when the products or services are delivered. Amortization of television costs during the fiscal
years ended October 31, 2020 and 2019 were $16,808,000 and $36,310,000, respectively.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
1—Basis of Presentation (continued)
Discontinued
Operations
CTM
has met the criteria for discontinued operations and has been presented as such in the financial statements. In accordance with ASU 2014-08,
“Reporting of Discontinued Operations and Disclosures of Disposals of Components of an Entity,” a disposal is categorized
as a discontinued operation if the disposal group is a component of an entity or group of components that meets the held for sale criteria,
is disposed of by sale, or is disposed of other than by sale, and represents a strategic shift that has or will have a major effect on
an entity’s operations and financial results.
As
the discontinued operation is classified as held for sale, the pre-tax net income or loss, income tax or benefit, and gain or loss on
the disposal of assets held for sale are reclassified as a separate line item in the income statement. Assets and liabilities are also
separately reclassified in the balance sheet for all periods presented. Cash flows from a discontinued operation and the continuing business
are presented together without separate identification within cash flows from operating, investing and financing activities. However
total operating and investing cash flows for discontinued operations are disclosed separately for all periods presented.
Sales
Returns and Allowances
IDWP
offers its book market distributors, a right of return with no expiration date in accordance with general industry practices. These distributors
then offer this same right of return to their book market retail customers. IDWP records an estimate for sales return reserves from such
retailers based on historical sales and return experience and current trends that are expected to continue. In fiscal 2020 and 2019 actual
returns exceeded estimated returns by approximately $264,000 and $8,000, respectively.
The
change in the allowance for sales returns is as follows:
Fiscal Year
ended October 31 (in thousands)
|
|
Balance
at
beginning of
year
|
|
|
Additions
charged to
revenues
|
|
|
Actual
returns
|
|
|
Balance at
end of year
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted from accounts receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for sales returns
|
|
$
|
152
|
|
|
$
|
2,493
|
|
|
$
|
(2,349
|
)
|
|
$
|
296
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted from accounts
receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for sales returns
|
|
$
|
160
|
|
|
$
|
2,077
|
|
|
$
|
(2,085
|
)
|
|
$
|
152
|
|
Allowance
for Doubtful Accounts
The
allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance.
The allowance is determined based on known troubled accounts, historical experience and other currently available evidence.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
1—Basis of Presentation (continued)
The
change in the allowance for doubtful accounts is as follows:
Fiscal Year
ended October 31 (in thousands)
|
|
Balance
at
beginning of
year
|
|
|
Additions
charged to
costs and
expenses
|
|
|
Deductions
(1)
|
|
|
Balance at
end of year
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted from
accounts receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for doubtful accounts
|
|
$
|
29
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
29
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves deducted from accounts
receivable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful
accounts
|
|
$
|
27
|
|
|
$
|
2
|
|
|
$
|
-
|
|
|
$
|
29
|
|
(1)
|
Uncollectible
accounts written off, net of recoveries.
|
Fair
Value of Financial Instruments
The
estimated fair value of financial instruments has been determined using available market information or other appropriate valuation methodologies.
However, considerable judgment is required in interpreting this data to develop estimates of fair value. Consequently, the estimates
are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.
At
October 31, 2020 and 2019, the carrying value of the Company’s current assets of trade accounts receivable, inventory, prepaid
expenses, trade accounts payable, accrued expenses, deferred revenue, bank loans payable, related party loans payable, government loans,
operating lease obligations, and other current liabilities approximated fair value because of the short period of time to maturity. At
October 31, 2020 and 2019, the carrying value of the long-term portion of the Company’s operating lease obligations, related
party loans, government loans and bank loans approximate fair value as their contractual interest rates approximate market yields for
similar debt instruments.
Principles
of Consolidation
All
significant intercompany accounts and transactions have been eliminated in consolidation. All amounts in these Consolidated Financial
Statements and notes to the Consolidated Financial Statements are reflected on a consolidated basis for all periods presented.
Joint
Venture
As
of April 1, 2020 Clover Press,LLC (“Clover Press”) was no longer a joint venture as the Company only owns a 19.9% ownership.
However, prior to this IDWMH consolidated Clover Press into the IDWP reporting segment.
As
at the fiscal year ending October 31, 2019 Clover Press was joint venture of which the Company held an 80.5% ownership stake and consolidated
into its operations. The minority owners included former Company executives and IDWP founders, Ted Adams and Robbie Robbins.
The Company acquired its interest effective June 1, 2019 in exchange for funding commitments and other obligations. Clover Press
focuses on progressive projects, creator-owned endeavors, and celebration of classic works from authors and artists. Clover Press
will target the book market and direct-to-consumer prestige format publications as a progressive, eclectic, boutique publisher.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
1—Basis of Presentation (continued)
Recently
Issued Accounting Pronouncements Adopted Subsequent to 2019 Fiscal Year End
In
February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, Leases (Topic 842), which
requires lessees to recognize most leases on their balance sheets as a right-of-use asset with a corresponding lease liability. Lessor
accounting under the standard is substantially unchanged. Additional qualitative and quantitative disclosures are also required. The
Company adopted the standard effective November 1, 2019 using the modified retrospective adjustment transition method, which applies
the provisions of the standard at the effective date without adjusting the comparative periods presented. The Company adopted the following
practical expedients and elected the following accounting policies related to this standard update:
|
●
|
The
option to not reassess prior conclusions related to the identification, classification and accounting for initial direct costs for
leases that commenced prior to November 1, 2019;
|
|
●
|
Short-term
lease accounting policy election allowing lessees to not recognize right-of-use assets and liabilities for leases with a term of
12 months or less;
|
|
●
|
The
option to not separate lease and non-lease components for certain equipment lease asset categories such as freight car, vehicles
and work equipment; and
|
|
●
|
The
package of practical expedients applied to all of its leases, including (i) not reassessing
whether any expired or existing contracts are or contain leases, (ii) not reassessing the
lease classification for any expired or existing leases, and (iii) not reassessing initial
direct costs for any existing leases.
|
Adoption
of this standard resulted in the recognition of operating lease right-of-use assets of $6,746,149 and lease liabilities of $6,980,233
on the consolidated balance sheet as of November 1, 2019. The Company’s accounting for finance leases remained substantially unchanged.
The standard did not materially impact operating results or liquidity. Disclosures related to the amount, timing and uncertainty of cash
flows arising from leases are included in Note 10, Commitments.
On
November 1, 2019 we adopted the FASB ASU 2018-07 to provide guidance about which changes to the terms or conditions of a share-based
payment award require an entity to apply modification accounting. Pursuant to this ASU, an entity should account for the effects of a
modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement
method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement
method is used) of the original award immediately before the original award is modified (if the modification does not affect any of the
inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately
before and after the modification); (2) the vesting conditions of the modified award are the same as the vesting conditions of the original
award immediately before the original award is modified; and (3) the classification of the modified award as an equity instrument or
a liability instrument is the same as the classification of the original award immediately before the original award is modified. The
company has adopted this guideline for the fiscal year beginning November 1, 2019. The Company has evaluated this guidance and determined
there is no material effect on the financial statements.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
1—Basis of Presentation (continued)
Recently
Issued Accounting Standard Not Yet Adopted
In
January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350), which simplifies the measurement of goodwill
by eliminating the Step 2 impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting
unit’s goodwill with the carrying amount of that goodwill. The new guidance requires an entity to compare the fair value of a reporting
unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s
fair value. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the
reporting unit when measuring the goodwill impairment loss, if applicable. The new guidance becomes effective for goodwill impairment
tests in fiscal years beginning after December 15, 2019, though early adoption is permitted. The company will adopt this guideline prospectively
for fiscal year November 1, 2020. The Company does not believe that the adoption of this new accounting guidance will have any material
impact on its consolidated financial statements.
In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial
Instruments, that changes the impairment model for most financial assets and certain other instruments. For receivables, loans and other
instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the
earlier recognition of allowance for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit
losses in a manner similar to current practice, except the losses will be recognized as allowances instead of reductions in the amortized
cost of the securities. In addition, an entity will have to disclose significantly more information about allowances, credit quality
indicators and past due securities. The new provisions will be applied as a cumulative-effect adjustment to retained earnings. The new
guidance becomes effective in fiscal years beginning after December 15, 2019. We will adopt the new standard on November 1, 2020. We
are evaluating the impact that the new standard will have on our consolidated financial statements.
In
March 2019, the FASB issued ASU No. 2019-02, Improvements to Accounting for Costs of Films and License Agreements for Program Materials.
ASU 2019-02 aligns the accounting for production costs of episodic television series with the accounting for production costs of films.
It also requires an entity to test a film or license agreement within the scope of Subtopic 920-350 for impairment at the film group
level, when the film or license agreement is predominantly monetized with other films and/or license agreements. The new guidance becomes
effective in fiscal years beginning after December 15, 2019. The changes in this standard are effective for the fiscal year beginning
November 1, 2020, with early adoption permitted. The Company is currently evaluating the impact the adoption of the prospective disclosure
requirements will have on its consolidated financial statements.
Note
2—Dividends
The
Company does not pay a regular dividend. The declaration of dividends will be at the discretion of our Board of Directors and will depend
on our financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination
by the Board that dividends are in the best interest of our stockholders at that time, subject to confirmation by the Company’s
management that there is sufficient surplus as of the proposed future payment dates and other circumstances existing at the relevant
times.
Note
3—Earnings Per Share
Basic
earnings per share is computed by dividing net income attributable to all classes of common stockholders by the weighted average number
of shares of all classes of common stock outstanding during the applicable period. Diluted earnings per share is computed in the same
manner as basic earnings per share except that the number of shares is increased to include restricted stock still subject to risk of
forfeiture (non-vested) using the treasury stock method, unless the effect of such increase would be anti-dilutive. The Company excluded
38,000 shares of unvested restricted stock from the calculation of diluted earnings per share as the effect would have been anti-dilutive.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
4—Equity
Non-cash
compensation included in selling, general and administrative expenses is $1,131,000 and $2,523,000 in the fiscal years ended October
31, 2020 and 2019, respectively.
On
September 30, 2020, the Company issued 9,710 shares of its Class B common stock (“Class B Common Stock”)to Howard S. Jonas,
the Company’s Chairman of the Board of Directors and former Chief Executive Officer, for payment of certain interest payable on
a loan made by Mr. Jonas to the Company.
On September 10, 2020, the Company granted to
its Chief Accounting Officer options to purchase 5,000 shares of its Class B Common Stock, with a 10-year term and an exercise price
of $3.35, under the Company’s 2019 Stock Option and Incentive Plan, as amended and restated (the “2019 Plan”), with
such options scheduled to vest in substantially equal one-third installments on September 10, 2021, September 10, 2022, and September
10, 2023.
On
each of May 12, 2020 and August 31, 2020, the Company cancelled 400 shares of unvested restricted shares of Class B Common Stock (“Restricted
Stock”) that were previously issued under the Company’s 2009 Stock Option and Incentive Plan, as amended and restated (the
“2009 Incentive Plan”), because of the applicable former employee then leaving the employ of the Company.
On August 19, 2020, the Company granted to an
employee of the Company options to purchase 5,000 shares of Class B Common Stock, with a 10-year term and an exercise price of $3.49,
under the 2019 Plan, with such options scheduled to vest in substantially equal one-third installments on August 19, 2021, August 19,
2022, and August 19, 2023.
On August 4, 2020, the Company granted to a former
employee of the Company 21,879 shares of Restricted Stock under the 2019 Plan, with such shares vesting in full upon grant.
On
July 16, 2020 IDWMH settled its intercompany payable to CTM totaling $6,982,305 and subsequently received a distribution of $6,800,000
from CTM. This transaction was booked into additional paid in capital with CTM and IDWMH to have a nil impact and did not trigger any
tax impacts.
On July 14, 2020, the Company granted to its
Chief Executive Officer and former Chief Financial Officer options to purchase 120,000 shares of Class B Common Stock, with a 10-year
term and an exercise price of $3.98, under the 2019 Plan, with such options scheduled to vest in equal one-third installments on July
14, 2021, July 14, 2022, and July 14, 2023.
On
July 13, 2020, the Company issued 314,070 shares of Class B Common Stock to Howard S. Jonas, the Company’s Chairman of the Board
of Directors and former Chief Executive Officer, pursuant to a Loan Modification Agreement in which Mr. Jonas and the Company agreed
to convert $1.25 million of indebtedness owed by the Company to Mr. Jonas to such 314,070 shares.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
4—Equity (continued)
On July 3, 2020, the Company granted options
to purchase an aggregate of 25,000 shares of Class B Common Stock, each with a 10-year term and an exercise price of $4.00, under the
2019 Plan, to three employees of the Company with 20,000 of such options scheduled to vest in approximately equal one-third installments
on June 25, 2021, June 25, 2022, and June 25, 2023 and 5,000 of such options scheduled to vest in approximately equal one-third installments
on July 1, 2021, July 1, 2022, and July 1, 2023. On November 5, 2020, an option to purchase 10,000 of these shares of Class B Common
Stock was cancelled because one of the employees left the Company.
On June 30, 2020, the Company issued 10,335 shares
of Class B Common Stock to Howard S. Jonas, the Company’s Chairman of the Board of Directors and former Chief Executive Officer,
for payment of certain interest payable on a loan made by Mr. Jonas to the Company.
On June 8, 2020, the Company granted 3,000 restricted
shares of Class B Common Stock (“Restricted Stock”) under the 2019 Plan to a consultant of the Company with such shares of
Restricted Stock scheduled to vest in equal one-third installments on March 15, 2021, March 15, 2022, and March 15, 2023.
On March 31, 2020, the Company issued 14,816
shares of Class B Common Stock to Howard S. Jonas, the Company’s Chairman of the Board of Directors and former Chief Executive
Officer, for payment of certain interest payable on loans made by Mr. Jonas to the Company.
On March 10, 2020, the Company granted options
to purchase 5,000 shares of Class B Common Stock, with a 10-year term and an exercise price of $6.40, and 2,500 shares of Restricted
Stock, each under the 2019 Plan, to each of two non-executive officers of the Company, with such options and shares of Restricted Stock
scheduled to vest in approximately equal one-third installments on March 15, 2021, March 15, 2022, and March 15, 2023.
On March 10, 2020, the Company granted an aggregate
of 25,000 shares of Restricted Stock under the 2019 Plan to five individuals who provide legal services to the Company, with such shares
scheduled to vest in approximately equal one-third installments on March 15, 2021, March 15, 2022, and March 15, 2023.
On March 9, 2020, the Company granted to an employee
of the Company 13,699 shares of Restricted Stock under the 2019 Plan, with such shares originally scheduled to vest in full on March
9, 2021. On June 2, 2020, pursuant to a Separation Agreement with the employee, the Company agreed to change the scheduled vesting of
these 13,699 shares of Restricted Stock to October 31, 2020. On July 13, 2020, pursuant to Amendment No. 1 to the Separation Agreement,
the scheduled vesting of these 13,699 shares of Restricted Stock vested on August 4, 2020.
On March 9, 2020, the Company closed a private
placement of shares of Class B Common Stock at $6.00 per share, pursuant to which the Company issued 2,051,002 shares of Class B Common
Stock for gross proceeds of approximately $12,300,000 inclusive of $4.0 million debt-to-equity conversion by the Company’s Chairman
of the Board of Directors and former Chief Executive Officer, Howard S. Jonas. The shares issued were subject to a contractual restriction
on transfer for six months following the closing of the placement and are subject to other restrictions under applicable law. The proceeds
from the issuance of common stock have been netted with $415,000 of costs related to the private placement.
On February 4, 2020, the Company granted options
to purchase 10,000 shares of Class B Common Stock, with a 10-year term and an exercise price of $9.99, under the 2019 Plan to an employee
with the options vesting: 1,667 upon grant, 834 on March 1, 2020, 833 on April 1, 2020, 833 on May 1, 2020, 834 on June 1, 2020, 833
on July 1, 2020, 833 on August 1, 2020, 834 on September 1, 2020, 833 on October 1, 2020, 833 on November 1, 2020 and 833 on December
1, 2020.
On
January 23, 2020, the Company granted to its then Chief Financial Officer and current Chief
Executive Officer options to purchase 25,000 shares of Class B Common Stock, with a 10-year
term and an exercise price of $10.50, pursuant to the 2019 Plan. Options with respect
to 10,000 shares vested on grant and the remainder are scheduled to vest as to 5,000 shares
on each of January 23, 2021, January 23, 2022 and January 23, 2023.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
4—Equity (continued)
On
January 23, 2020, the Company granted to its former Chief Strategy Officer options to purchase 42,735 shares of Class B Common Stock,
with a 10-year term and an exercise price of $10.50, pursuant to the 2019 Plan with such options vesting in full upon grant.
On
January 9, 2020, the Company issued 36,586 shares of Class B Common Stock to Howard S. Jonas, the Company’s Chairman of the Board
of Directors and former Chief Executive Officer, for payment of certain interest payable on loans made by Mr. Jonas to the Company.
On
April 24, 2019, the Company closed the initial round of a private placement of shares of Class B Common Stock to certain existing stockholders
at $18.00 per share. In connection with this initial round, on April 24, 2019, the Company issued 767,630 shares of Class B Common Stock
for gross proceeds of $13,817,337.
On
May 7, 2019, the Company closed the follow-on round of the placement and issued 345,792 shares of Class B Common Stock for gross proceeds
of $5,186,885. The follow-on round involved participants in the initial round of the placement who elected to participate in the purchase
of unsubscribed shares of Class B Common Stock at $15.00 per share. In the offering, the Company issued a total of 1,113,422
shares of Class B Common Stock and received total gross proceeds of $19,004,229. The shares issued in the offering were subject
to a contractual restriction on transfer for six months following the closing of the offering as well as other restrictions under applicable
law.
In
connection with a private placement offering, on June 15, 2019, the Company issued 269,478 shares of Class B Common Stock at a price
of $17.07 per share for aggregate proceeds of approximately $4,600,000.
On April 17, 2019, the Company agreed to grant
to a consultant 5,000 shares of Restricted Stock under the 2019 Plan on or about each of May 1, 2019, January 2, 2020 and January 2,
2021. On May 1, 2019, 5,000 shares of Restricted Stock were issued to the consultant, with such shares having vested on January 1, 2020.
On January 2, 2020, 5,000 shares of Restricted Stock were issued to the consultant, with such shares scheduled to vest on January 2,
2021.
On March 14, 2019, the Company’s Board
of Directors adopted the 2019 Plan to provide incentives to executive officers, employees, directors and consultants of the Company and/or
its subsidiaries. The Company reserved 300,000 shares of Class B Common Stock for the grant of awards under the 2019 Plan, subject
to adjustment. Incentives available under the 2019 Plan may include stock options, stock appreciation rights, limited stock appreciation
rights, restricted stock and deferred stock units. On July 13, 2020, the Board of Directors of the Company increased by 150,000, to 450,000,
the number of shares of Class B Common Stock reserved for the grant of awards under the 2019 Plan, subject to adjustment. As of
October 31, 2020, 126,487 shares remained available to be awarded under the 2019 Plan.
On
December 24, 2018, an employee was granted 1,370 shares of Class B Common Stock. In addition, in fiscal 2018, the Company agreed
to grant this employee 15,000 shares of Restricted Stock pursuant to the 2009 Incentive Plan, with such shares scheduled vest in
equal monthly installments over the 12-month period beginning on October 15, 2018. This employee left the employ of the Company on
February 13, 2019 and therefore only 5,000 shares of Restricted Stock vested on January 24, 2019, and the remaining 10,000 shares of
unvested Restricted Stock were cancelled due to the executive no longer being an employee of the Company.
On
November 26, 2018, the Company agreed to issue to an employee 3,030 shares of Restricted Stock under the 2009 Incentive Plan, which vested
in equal monthly installments ending on December 10, 2019. In addition, 758 shares of fully vested Restricted Stock were granted
to this same employee on March 14, 2019.
In
fiscal 2018, the Company granted to an employee 1,000 shares of Restricted Stock under the 2009 Incentive Plan, with 666 of such shares
vesting on June 20, 2018 and the remaining 334 shares originally scheduled to vest on September 20, 2019 and which are now scheduled
to vest on September 30, 2020. On March 20, 2019, the Company issue options to purchase 10,000 shares of Class B Common Stock,
with a 10-year term and an exercise price of $31.00, under the 2009 Incentive Plan to this employee with the options being fully vested
as of December 1, 2019.
In fiscal 2018, the Company agreed to grant to
a consultant 750 fully vested shares of Restricted Stock per month during the term of his consulting agreement. Accordingly, on
March 14, 2019, the consultant was granted under the 2009 Incentive Plan 3,000 fully vested shares of Restricted Stock, for service provided
in December 2018, January 2019, February 2019 and March 2019, and 750 fully vested shares of Restricted Stock on each of April 15, 2019
and May 15, 2019 for service provided in the applicable month. On each of June 15, 2019, July 15, 2019, August 15, 2019 and September
15, 2019, the Company granted to the consultant under the 2019 Plan 750 fully vested shares of Restricted Stock for service provided
in the applicable month.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
5—Notes Payable
Related
party loans
On
August 21, 2018, the Company entered into a loan agreement with the Company’s Chairman of the Board of Directors (who, at the time
was also the Company’s Chief Executive Officer and majority stockholder) (the “Chairman”) for $5,000,000. Interest
accrues at prime rate plus 1% and the loan matures August 20, 2022. Payment of principal and interest are payable from 70% of the Free
Cash Flow, as defined in the loan agreement, of the Company’s CTM Media Group Inc. subsidiary. All outstanding shares of CTM Media
Group Inc. stock are pledged as security under the agreement. On December 1, 2019, the Company amended the agreement providing that up
to 60% of the interest due may, at the option of the Company, be paid in shares of Class B common stock (and the remaining amount in
cash) with such shares valued based on the average closing prices for the Class B common stock on the ten trading days immediately prior
to the applicable interest due date. As at October 31, 2020 the shares issued in connection with the loan interest was 56,545. The interest
is to be paid quarterly on the loan. In conjunction with the loan, the Company issued the Chairman a warrant to purchase up to 89,243
shares of the Company’s Class B Common Stock at a price per share of $42.02. The warrant expires August 21, 2023. On July 13, 2020
$1,250,000 was converted into 314,070 shares of Class B Common Stock (Note 4- Equity). The outstanding amount at October 31, 2020 was
$3,750,000.
On
September 21, 2018, the Company entered into a bridge loan facility agreement with its Chairman for up to $26,000,000. The balance due
under the facility was $0 at October 31, 2020. The proceeds from the private placement offering on March 9, 2020 were used to pay off
the remaining $4,000,000 of the loan facility (Note 4- Equity). $8,000,000 of the loan facility was paid off in connection with the 2019
offering. As at October 31, 2020 the shares of Class B common stock issued by the Company was 14,902. In conjunction with the amendment
to the loan, the Company issued the Chairman a warrant to purchase up to 98,336 shares of the Company’s Class B Common Stock at
a price per share of $26.44. The warrant expires March 30, 2022.
For
the fiscal year ended October 31, 2020 interest on the above loans amounted to $406,000 and for the fiscal year October 31, 2019 interest
amounted to $1,204,403, which was charged to production cost.
The
maturities under the loan agreement are anticipated to be as follows:
Date
|
|
Amount
|
|
2021
|
|
$
|
-
|
|
2022
|
|
|
3,750,000
|
|
Total
|
|
$
|
3,750,000
|
|
Bank
loans
On
November 21, 2018, a Variable Interest Entity (the “VIE”) (see Note 1) controlled by IDWE entered into a loan agreement with
a bank that provides for a production financing commitment in the aggregate amount up to CAD 27,700,000. The loan is secured by the VIE’s
assets, rights in the related television production’s episodes and distribution agreements for the production and is repayable
from the assignment of proceeds of the related license agreements and tax credits, including interest based on the prime rate. The loan
matures on January 31, 2021. On October 31, 2020, $8,149,000 was outstanding under the commitment.
On
June 21, 2018, a VIE controlled by IDWE entered into a loan agreement with a bank that provides for a production financing commitment
in the aggregate amount up to CAD 23,521,000. The loan is secured by the VIE’s assets, rights in the related television production’s
episodes and distribution agreements for the production and is repayable from the assignment of proceeds of the related license agreements,
including interest based on the prime rate. The loan matures on January 31, 2021. On October 31, 2020 $6,055,000 was outstanding under
the commitment.
Future
maturities under the VIE bank loans are as follows:
Date
|
|
Amount
|
|
2021
|
|
$
|
14,204,000
|
|
Total
|
|
$
|
14,204,000
|
|
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
5—Notes Payable (continued)
Government
loans
On
April 27, 2020, the Company (inclusive of IDWP and IDWE) received loan proceeds of $1,195,679 (the “IDWMH PPP Loan”) from
Bank of America, N.A. pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act,
which was enacted March 27, 2020. The IDWMH PPP Loan, which was in the form of a Note dated April 15, 2020 issued by the Company,
matures on April 15, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on November 24, 2020. The Note may
be prepaid by the Company at any time prior to maturity with no prepayment penalties, and under the terms of the loan, payments can be
deferred for six months. Funds from the IDWMH PPP Loan may be used primarily for payroll costs and costs used to continue group health
care benefits, and, up to a limited extent, on mortgage payments, rent, utilities, interest and other expenses as described in the CARES
Act. Under the terms of the PPP, certain amounts of the IDWMH PPP Loans may be forgiven if they are used for those qualifying expenses. The
Company used the entire IDWMH PPP Loan amount for those qualifying expenses.
Note
6—Business Segment Information
The
Company has the following three reportable business segments: IDWP, IDWE and CTM.
The
Company’s reportable segments are distinguished by types of service, customers and methods used to provide their services. The
operating results of these business segments are regularly reviewed by the Company’s chief decision making officers.
The
accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the performance
of its business segments based primarily on operating income. There are no other significant asymmetrical allocations to segments.
Operating
results for the business segments of the Company are as follows:
(in
thousands) (unaudited)
|
|
IDWP(a)
|
|
|
IDWE
|
|
|
CTM
|
|
|
IDWMH
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
(discontinued
|
|
|
(unallocated
|
|
|
|
|
|
|
|
|
|
|
|
|
operations)
|
|
|
overhead)
|
|
|
|
|
Fiscal year ended October
31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
23,850
|
|
|
$
|
14,312
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
38,162
|
|
Loss from operations
|
|
|
(103
|
)
|
|
|
(8,589
|
)
|
|
|
-
|
|
|
|
(632
|
)
|
|
|
(9,324
|
)
|
Loss from discontinued operations, net
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,110
|
)
|
|
|
-
|
|
|
|
(4,110
|
)
|
Net loss
|
|
|
(103
|
)
|
|
|
(8,589
|
)
|
|
|
(4,110
|
)
|
|
|
(996
|
)
|
|
|
(13,798
|
)
|
Total assets at October 31, 2020
|
|
|
15,189
|
|
|
|
22,091
|
|
|
|
11,171
|
|
|
|
6,207
|
|
|
|
54,658
|
|
Fiscal year ended October
31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
20,094
|
|
|
$
|
22,741
|
|
|
$
|
-
|
|
|
|
NA
|
(b)
|
|
$
|
42,835
|
|
Loss from operations
|
|
|
(5,205
|
)
|
|
|
(19,847
|
)
|
|
|
-
|
|
|
|
NA
|
(b)
|
|
|
(25,052
|
)
|
Loss from discontinued operations, net
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,294
|
)
|
|
|
-
|
|
|
|
(1,294
|
)
|
Net loss
|
|
|
(5,187
|
)
|
|
|
(20,011
|
)
|
|
|
(1,294
|
)
|
|
|
NA
|
(b)
|
|
|
(26,492
|
)
|
Total assets at October 31, 2019
|
|
|
10,994
|
|
|
|
55,792
|
|
|
|
10,351
|
|
|
|
NA
|
(b)
|
|
|
77,137
|
|
|
(a)
|
IDWP
includes Clover Press through March 31, 2020. As of April 1, 2020, Clover Press was valued
at the cost method and was no longer consolidated.
|
|
(b)
|
In
prior fiscal year 100% of IDWMH overhead was allocated to business segments.
|
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
7—Fair Value Measurement
In
determining fair value, the Company uses a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair
value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level
1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement). The three levels of the fair value hierarchy are
described below:
Level
l Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company
has the ability to access.
Level
2 Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level
3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The
asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the most conservative level
of input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and
minimize the use of unobservable inputs.
The
valuation methods described below may produce a fair value calculation that may not be indicative of net realizable value or reflective
of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market
participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result
in different fair value measurement at the reporting date.
The
following tables set forth by level, within the fair value hierarchy, the Plan’s assets at fair value as of October 31, 2020 and
2019:
(in
thousands)
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Investments as of October
31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
Clover Press investment
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
25
|
|
|
$
|
25
|
|
Total Investments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
25
|
|
|
$
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments as of October
31,2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total Investments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Level
3 Gains and Losses
The
following table sets forth a summary of changes in the fair value of Level 3 assets:
(in thousands)
|
|
|
|
Beginning balance, October 31, 2019
|
|
$
|
-
|
|
Acquisition
|
|
|
25
|
|
Sales
|
|
|
-
|
|
Realized gains, net
|
|
|
-
|
|
Unrealized losses, net
|
|
|
-
|
|
Ending balance, October 31, 2020
|
|
$
|
25
|
|
The
investment in Clover Press does not have readily determined fair values and are valued at cost. There have been no events or changes
in circumstances to indicate any signs of impairment as at October 31, 2020. Due to the small nature of the investment a change in the
fair value would not be a significant impact to the Company’s performance or cash flows. There have not been any transfers between
investment levels.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
8—Trade Accounts Receivable and Deferred Revenue
Trade
accounts receivable consists of the following:
October
31 (in thousands)
|
|
2020
|
|
|
2019
|
|
Trade accounts receivable
|
|
$
|
23,246
|
|
|
$
|
43,643
|
|
Less allowance for sales returns
|
|
|
(296
|
)
|
|
|
(152
|
)
|
Less allowance for doubtful
accounts
|
|
|
(29
|
)
|
|
|
(29
|
)
|
Trade accounts receivable,
net
|
|
$
|
22,921
|
|
|
$
|
43,462
|
|
Allowance
for Doubtful Accounts
The
allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance.
The allowance is determined based on known troubled accounts, historical experience and other currently available.
Changes
in deferred revenue consist of the following:
(in thousands)
|
|
|
|
Beginning balance, October 31, 2019
|
|
$
|
1,058
|
|
Deferral of revenue
|
|
|
2,725
|
|
Recognition
of deferred revenue
|
|
|
(1,398
|
)
|
Ending balance, October 31, 2020
|
|
$
|
2,385
|
|
We
expect to recognize approximately 100% of this revenue over the next 12 months.
Note
9—Accrued Expenses
Accrued
expenses consist of the following:
October
31 (in thousands)
|
|
2020
|
|
|
2019
|
|
Royalties
|
|
$
|
1,268
|
|
|
$
|
813
|
|
Payroll & payroll taxes
|
|
|
110
|
|
|
|
803
|
|
Bonus
|
|
|
333
|
|
|
|
162
|
|
Production costs and participation
|
|
|
1,495
|
|
|
|
196
|
|
Other
|
|
|
747
|
|
|
|
1,062
|
|
Total
|
|
$
|
3,953
|
|
|
$
|
3,036
|
|
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
10—Property and Equipment
Property
and equipment consist of the following:
October
31 (in thousands)
|
|
2020
|
|
|
2019
|
|
Equipment
|
|
$
|
424
|
|
|
$
|
378
|
|
Furniture & Fixtures
|
|
|
105
|
|
|
|
100
|
|
Leasehold improvements
|
|
|
826
|
|
|
|
829
|
|
Computer software
|
|
|
20
|
|
|
|
20
|
|
|
|
|
1,375
|
|
|
|
1,327
|
|
Less accumulated depreciation
and amortization
|
|
|
(965
|
)
|
|
|
(765
|
)
|
Property and equipment,
net
|
|
$
|
410
|
|
|
$
|
562
|
|
Depreciation
expense of all property and equipment was $200,000 and $182,000 for the fiscal 2020 and 2019, respectively.
Note
11—Intangible Assets
The
tables below present information on the Company’s intangible assets and goodwill:
(in thousands)
|
|
Amortization
Period
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Net
Balance
|
|
Amortized intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensing Contracts
|
|
|
7
years
|
|
|
|
893
|
|
|
|
(841
|
)
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of October 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Licensing Contracts
|
|
|
7
years
|
|
|
|
903
|
|
|
|
(788
|
)
|
|
|
115
|
|
Amortization
expense of intangible assets was $52,000 and $104,000 in fiscal 2020 and 2019, respectively.
Future
estimated amortization expense as of October 31, 2020 is as follows:
(in
thousands)
|
|
|
|
2021
|
|
$
|
45
|
|
2022
|
|
|
7
|
|
Total
|
|
$
|
52
|
|
The
Company’s Goodwill is summarized as follows:
Fiscal
Year Ended October 31 (in thousands)
|
|
2020
|
|
|
2019
|
|
Beginning balance
|
|
$
|
199
|
|
|
$
|
199
|
|
Additions – business acquisitions
|
|
|
-
|
|
|
|
-
|
|
Impairments
|
|
|
-
|
|
|
|
-
|
|
Total
goodwill
|
|
$
|
199
|
|
|
$
|
199
|
|
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
12—Commitments
Lease
Commitments
The
Company has various lease agreements with terms up to 4 years, including leases of office space, warehouses, and equipment. Some leases
include options to purchase, terminate or extend for one or more years. These options are included in the lease term when it is reasonably
certain that the option will be exercised.
The
assets and liabilities from operating leases are recognized at the commencement date based on the present value of remaining lease payments
over the lease term using the Company’s secured incremental borrowing rates or implicit rates, when readily determinable. Short-term
leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.
The
Company’s operating leases do not provide an implicit rate that can readily be determined. Therefore, we use a discount rate based
on our incremental borrowing rate, which is determined using the Company’s interest rate on its line of credit.
The
Company’s weighted-average remaining lease term relating to its operating leases is 1.65 years, with a weighted-average discount
rate of 4.59%.
The
Company recognized lease expense for its operating leases of $618,109 for the fiscal year ended October 31, 2020, respectively. The cash
paid under operating leases during the fiscal year ended October 31, 2020 was $686,078.
At
October 31, 2020, the Company had a right-of-use-asset related to operating leases of $1,329,086, accumulated amortization related to
operating leases of $558,140 both of which are included as a component of right-of-use assets.
The
lease commitments for the continuing operations are presented below:
Maturity
of Lease Liability
(in
thousands)
|
|
Total
|
|
Fiscal years ending October 31:
|
|
|
|
2021
|
|
$
|
594
|
|
2022
|
|
|
354
|
|
2023
|
|
|
13
|
|
2024
|
|
|
7
|
|
2025
|
|
|
-
|
|
Thereafter
|
|
|
-
|
|
Total undiscounted operating
lease payments
|
|
$
|
968
|
|
Less: imputed interest
|
|
|
(38
|
)
|
Present value of operating
lease liabilities
|
|
$
|
930
|
|
Note
13—Income Taxes
Significant
components of the Company’s deferred tax assets and deferred tax liabilities consist of the following:
Fiscal
year Ended October 31 (in thousands)
|
|
2020
|
|
|
2019
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Bad debt reserve
|
|
$
|
8
|
|
|
$
|
-
|
|
Accrued expenses
|
|
|
303
|
|
|
|
140
|
|
Exercise of stock options and lapsing of restrictions
on restricted stock
|
|
|
1,360
|
|
|
|
1,459
|
|
Impairment
|
|
|
391
|
|
|
|
437
|
|
Amortization
|
|
|
2,686
|
|
|
|
3,581
|
|
Net operating loss
|
|
|
12,280
|
|
|
|
8,760
|
|
Total deferred tax assets
|
|
|
17,028
|
|
|
|
14,377
|
|
Valuation allowance
|
|
|
(17,028
|
)
|
|
|
(14,377
|
)
|
Net
Deferred Tax Assets
|
|
$
|
-
|
|
|
$
|
-
|
|
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
13—Income Taxes (continued)
The
(benefit from) provision for income taxes consists of the following:
Fiscal
year ended October 31 (in thousands)
|
|
2020
|
|
|
2019
|
|
Current:
|
|
|
|
|
|
|
Federal
|
|
$
|
-
|
|
|
$
|
(42
|
)
|
State and local
|
|
|
-
|
|
|
|
-
|
|
Foreign
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
$
|
(42
|
)
|
Deferred:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
State and local
|
|
|
-
|
|
|
|
-
|
|
Foreign
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
(Benefit
from) provision for income taxes
|
|
$
|
-
|
|
|
$
|
(42
|
)
|
The
differences between income taxes expected at the U.S. federal statutory income tax rate and income taxes provided are as follows:
Fiscal
year ended October 31 (in thousands)
|
|
2020
|
|
|
2019
|
|
U.S. federal income tax at statutory
rate
|
|
$
|
(2,034
|
)
|
|
$
|
(5,300
|
)
|
Change in valuation allowance
|
|
|
2,651
|
|
|
|
7,020
|
|
State and local income tax, net of federal
benefit
|
|
|
-
|
|
|
|
(1,747
|
)
|
Tax law change
|
|
|
(620
|
)
|
|
|
(42
|
)
|
Non-deductible expenses
|
|
|
3
|
|
|
|
27
|
|
(Benefit
from) provision for income taxes
|
|
$
|
-
|
|
|
$
|
(42
|
)
|
At
October 31, 2020, the Company had federal net operating loss carryforwards of approximately $44 million. These carry-forward losses are
available to offset future U.S. federal taxable income. The pre-fiscal year 2019 net operating loss carryforwards will start to expire
in fiscal 2030 and post 2019 losses of $36 million will not expire.
The
change in the valuation allowance in fiscal 2020 was as follows:
(in thousands)
|
|
Balance
at
beginning of
year
|
|
|
Additions
charged to
costs and
expenses
|
|
|
Deductions
|
|
|
Balance
at
end of year
|
|
Reserves deducted from deferred income taxes, net:
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation
allowance
|
|
$
|
14,377
|
|
|
$
|
2,651
|
|
|
$
|
-
|
|
|
$
|
17,028
|
|
At
October 31, 2018, the company performed an analysis of its deferred tax assets and determined that it is not more likely than not that
they will be utilized and has established a valuation allowance against the asset. The valuation allowance remains.
At
October 31, 2020 and 2019, the Company did not have any unrecognized income tax benefits. There were no changes in the balance of unrecognized
income tax benefits in fiscal 2020 and fiscal 2019. At October 31, 2020, the Company did not expect any changes in unrecognized income
tax benefits during the next twelve months. In fiscal 2020 and fiscal 2019, the Company did not record any interest and penalties on
income taxes. At October 31, 2020 and 2019, there was no accrued interest included in current income taxes payable.
The
Company currently remains subject to examinations of its tax returns as follows: U.S. federal tax returns for fiscal 2018 to fiscal 2020,
state and local tax returns generally for fiscal 2017 to fiscal 2020.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
14—Deconsolidation of Subsidiary
|
a.
|
Effective
April 1, 2020, the Company’s interest in Clover Press decreased to 19.9% and IDWMH no longer consolidates the operations of
Clover Press. Accordingly, the Company derecognized related assets, liabilities and noncontrolling interests of Clover Press.
|
|
b.
|
Analysis
of assets and liabilities over which the Company lost control
|
(in thousands)
|
|
March
31,
2020
|
|
Current assets
|
|
|
|
Cash and cash
equivalents
|
|
$
|
215
|
|
Trade accounts receivable
|
|
|
1
|
|
Inventory
|
|
|
62
|
|
Other current assets
|
|
|
9
|
|
Noncurrent assets
|
|
|
|
|
Intangible assets, net
|
|
|
10
|
|
Right-of-use assets
|
|
|
226
|
|
Other noncurrent assets
|
|
|
64
|
|
Current liabilities
|
|
|
|
|
Trade accounts payable
|
|
|
(38
|
)
|
Operating lease obligation-
current
|
|
|
(64
|
)
|
Related party notes payable
|
|
|
(50
|
)
|
Non-current liabilities
|
|
|
|
|
Operating
lease obligations -long term
|
|
|
(169
|
)
|
Net assets deconsolidated
|
|
$
|
266
|
|
|
c.
|
Loss
on deconsolidation of subsidiary
|
(in
thousands) Fiscal year ended October 31, 2020
|
|
|
|
Fair value of interest retained
|
|
$
|
25
|
|
Consideration received
|
|
|
100
|
|
Carrying amount of interest retained:
|
|
|
|
|
Net assets deconsolidated
|
|
|
(266
|
)
|
Noncontrolling interests
|
|
|
106
|
|
Loss on deconsolidation
of subsidiary
|
|
$
|
(35
|
)
|
Loss
on deconsolidation of subsidiary was included in other expenses. The technique used to measure fair value was calculating the net present
value of future EBITDA projected over five years. The transaction was not with a related party. The continuing involvement consists of
19.9% ownership and an officer of IDWMH has one of three seats on the board.
|
d.
|
Net
cash outflow arising from deconsolidation of the subsidiary
|
(in
thousands)
|
|
Fiscal
Year
Ended
October 31,
2020
|
|
The balance
of cash and cash equivalents deconsolidated
|
|
$
|
(115
|
)
|
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
15—Discontinued Operations
As
a result of the economic downturn related to the outbreak of the COVID-19 virus, and the impact it had on small businesses in the tourist
markets, the Company decided to make a strategic shift to dispose of CTM and to focus on its entertainment and publishing businesses.
On
July 14, 2020, the Company and Howard S. Jonas, the Company’s Chairman of the Board of Directors and former Chief Executive Officer,
executed a share purchase agreement pursuant to which the Company agreed to sell all of the stock of CTM to Mr. Jonas or his assignee
(the “SPA”) for (i) the cancelation of $3.75 million of indebtedness owed to Mr. Jonas by the Company, (ii) a contingent
payment of up to $3.25 million based upon a recovery of quarterly revenues of CTM to 90% of its fiscal 2019 levels during the 18-month
period following the closing of the CTM Sale, and (iii) a contingent payment if CTM is sold within 36 months for more than $4.5 million.
Prior to executing the share purchase agreement, the Company obtained a third-party’s valuation of CTM and a fairness opinion that
stated the consideration being received by the Company in the CTM Sale was fair. In addition to the Company’s Board of Directors
approving the CTM Sale, the Audit Committee of the Board of Directors, which is comprised entirely of independent directors, approved
the CTM Sale in compliance with the Company’s Statement of Policy with respect to Related Person Transactions. The CTM Sale was
also approved by (1) stockholders representing a majority of the combined voting power of the Company’s outstanding capital stock
and (2) stockholders representing a majority of the combined voting power of the Company’s outstanding capital stock not held by
Mr. Jonas or Immediate family members of Mr. Jonas, including, without limitation, trusts or other vehicles for the benefit of any of
such immediate family members or entities under the control of such persons. The Company will no longer have significant
continuing involvement with CTM.
According
to ASC 205-20-45-9 general corporate overhead should not be allocated to discontinued operations. The Company did not allocate any corporate
overhead to CTM when it began being classified as held for sale in the third quarter of 2020 and continued to not allocate any expenses
for the quarter ending October 31, 2020. In the prior quarters in 2020 corporate allocated a specific percentage and in fiscal 2019 100%
of IDWMH overhead was allocated to business segments.
There
is no loss to recognize on the classification of CTM as held for sale since the sale price of $3.75 million is greater than the net assets
of $2.63 million.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
15—Discontinued Operations (continued)
Following
is a summary of the Company’s results of discontinued operations for the fiscal years ended for 2020 and 2019, a schedule of assets
and liabilities of discontinued operations as of October 31, 2020 and October 31, 2019, and total operating and investing cash flows
of CTM operations for October 31, 2020 and October 31, 2019.
Results
of discontinued operations
|
|
Fiscal
year ended,
October 31,
|
|
(in
thousands)
|
|
2020
|
|
|
2019
|
|
Revenue
|
|
$
|
9,264
|
|
|
$
|
19,764
|
|
Direct cost of revenue
|
|
|
4,480
|
|
|
|
7,033
|
|
Selling, general and administrative
|
|
|
7,413
|
|
|
|
12,736
|
|
Depreciation and amortization
|
|
|
1,175
|
|
|
|
1,226
|
|
Bad Debt
|
|
|
680
|
|
|
|
80
|
|
Total costs and expenses
|
|
|
13,748
|
|
|
|
21,075
|
|
Loss from operations
|
|
|
(4,484
|
)
|
|
|
(1,311
|
)
|
Interest expense, net
|
|
|
(78
|
)
|
|
|
(36
|
)
|
Other income (expense),
net
|
|
|
452
|
|
|
|
56
|
|
Loss before income taxes
|
|
|
(4,110
|
)
|
|
|
(1,291
|
)
|
(Provision for) benefit
from income taxes
|
|
|
-
|
|
|
|
(3
|
)
|
Net
loss
|
|
$
|
(4,110
|
)
|
|
$
|
(1,294
|
)
|
Stock
based compensation for discontinued operations included in selling, general and administrative expenses is $0 and $600,000 in the fiscal
years ended October 31, 2020 and 2019, respectively.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
15—Discontinued Operations (continued)
Assets and liabilities of discontinued operations
|
|
|
|
|
|
|
October
31(in thousands)
|
|
2020
|
|
|
2019
|
|
Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
1,621
|
|
|
$
|
2,622
|
|
Trade receivables, net
|
|
|
844
|
|
|
|
1,791
|
|
Prepaid expenses
|
|
|
368
|
|
|
|
773
|
|
Total
current assets*
|
|
|
|
|
|
|
5,186
|
|
Property and equipment,
net
|
|
|
1,274
|
|
|
|
2,516
|
|
Right-of-use assets,
net
|
|
|
4,649
|
|
|
|
-
|
|
Intangibles assets, net
|
|
|
142
|
|
|
|
340
|
|
Goodwill
|
|
|
2,110
|
|
|
|
2,110
|
|
Other assets
|
|
|
163
|
|
|
|
199
|
|
Total Assets
|
|
$
|
11,171
|
|
|
$
|
10,351
|
|
Liabilities
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
|
891
|
|
|
|
479
|
|
Accrued expenses
|
|
|
368
|
|
|
|
1,138
|
|
Deferred revenue
|
|
|
664
|
|
|
|
1,197
|
|
Government loan- current portion
|
|
|
1,125
|
|
|
|
-
|
|
Operating lease obligations-current portion
|
|
|
909
|
|
|
|
-
|
|
Finance lease obligations- current portion
|
|
|
342
|
|
|
|
396
|
|
Income taxes payable
& other current liabilities
|
|
|
71
|
|
|
|
134
|
|
Total
current liabilities*
|
|
|
|
|
|
|
3,344
|
|
Government loan- long term portion
|
|
|
684
|
|
|
|
-
|
|
Operating lease obligations – long term
portion
|
|
|
3,034
|
|
|
|
-
|
|
Finance lease obligations
– long term portion
|
|
|
452
|
|
|
|
683
|
|
Total
non-current liabilities*
|
|
|
4,170
|
|
|
|
683
|
|
Total
Liabilities
|
|
$
|
8,540
|
|
|
$
|
4,027
|
|
|
*
|
The
assets and liabilities of the disposal group classified as held for sale are all classified
as current on the October 31,2020 balance sheet since its probable the sale will occur and
proceeds will be collected within one year. Therefore, no sub totals between current and
non-current have been displayed.
|
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
15—Discontinued Operations (continued)
Operating
and investing cash flows from discontinued operations for the fiscal years ended October, 31
(in
thousands)
|
|
2020
|
|
|
2019
|
|
Operating Activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,110
|
)
|
|
$
|
(1,294
|
)
|
Depreciation and amortization
|
|
|
764
|
|
|
|
1,226
|
|
Bad debt
|
|
|
680
|
|
|
|
80
|
|
Amortization of finance lease
|
|
|
411
|
|
|
|
-
|
|
Amortization of right-of-use asset
|
|
|
1,329
|
|
|
|
-
|
|
Trade accounts receivable
|
|
|
266
|
|
|
|
(215
|
)
|
Prepaid expenses and other assets
|
|
|
441
|
|
|
|
(463
|
)
|
Trade accounts payable, accrued expenses and
other current liabilities
|
|
|
(606
|
)
|
|
|
402
|
|
Deferred revenue
|
|
|
(533
|
)
|
|
|
83
|
|
Operating lease liability
|
|
|
(970
|
)
|
|
|
-
|
|
Net cash used in operating
activities
|
|
$
|
(2,328
|
)
|
|
$
|
(181
|
)
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
Business activities
|
|
|
-
|
|
|
|
(12
|
)
|
Capital expenditure
|
|
|
(381
|
)
|
|
|
(929
|
)
|
Proceeds on disposition
of long lived assets
|
|
|
185
|
|
|
|
-
|
|
Net cash used in investing
activities
|
|
$
|
(196
|
)
|
|
$
|
(941
|
)
|
Note
16—Labor Agreements
IDWE
produces its television shows utilizing primarily union-based employees, whether through its own special purpose subsidiaries or through
independent production companies. Those unions represent employees that are subject to collective bargaining agreements and IDWE’s
costs and scheduling of production are subject to those agreements.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
17—Related Party Transactions
On
August 21, 2018, the Company entered into a loan agreement with the Company’s Chairman of the Board of Directors (who, at the time
was also the Company’s Chief Executive Officer and majority stockholder) (the “Chairman”) for $5,000,000. Interest
accrues at prime rate plus 1% and the loan matures August 20, 2022. Payment of principal and interest are payable from 70% of the Free
Cash Flow, as defined in the loan agreement, of the Company’s CTM Media Group Inc. subsidiary. All outstanding shares of CTM Media
Group Inc. stock are pledged as security under the agreement. On December 1, 2019, the Company amended the agreement providing that up
to 60% of the interest due may, at the option of the Company, be paid in shares of Class B common stock (and the remaining amount in
cash) with such shares valued based on the average closing prices for the Class B common stock on the ten trading days immediately prior
to the applicable interest due date. As at October 31, 2020 the shares issued in connection with the loan interest was 56,545. The interest
is to be paid quarterly on the loan. In conjunction with the loan, the Company issued the Chairman a warrant to purchase up to 89,243
shares of the Company’s Class B Common Stock at a price per share of $42.02. The warrant expires August 21, 2023. On July 13, 2020
$1,250,000 was converted into 314,070 shares of Class B Common Stock (Note 4- Equity). The outstanding amount at October 31, 2020 was
$3,750,000.
On
September 21, 2018, the Company entered into a bridge loan facility agreement with its Chairman for up to $26,000,000. The balance due
under the facility was $0 at October 31, 2020. The proceeds from the private placement offering on March 9, 2020 were used to pay off
the remaining $4,000,000 of the loan facility (Note 4- Equity). $8,000,000 of the loan facility was paid off in connection with the 2019
offering. As at October 31, 2020 the shares of Class B common stock issued by the Company was 14,902. In conjunction with the amendment
to the loan, the Company issued the Chairman a warrant to purchase up to 98,336 shares of the Company’s Class B Common Stock at
a price per share of $26.44. The warrant expires March 30, 2022.
For
the fiscal year ended October 31, 2020 interest on the above loans amounted to $406,000 and for the fiscal year October 31, 2019 interest
amounted to $1,204,403, which was charged to production cost.
On
July 14, 2020, the Company and Howard S. Jonas, the Company’s Chairman of the Board of Directors and former Chief Executive Officer,
executed a share purchase agreement pursuant to which the Company agreed to sell all of the stock of CTM to Mr. Jonas or his assignee
(the “SPA”) for (i) the cancelation of $3.75 million of indebtedness owed to Mr. Jonas by the Company, (ii) a contingent
payment of up to $3.25 million based upon a recovery of quarterly revenues of CTM to 90% of its fiscal 2019 levels during the 18-month
period following the closing of the CTM Sale, and (iii) a contingent payment if CTM is sold within 36 months for more than $4.5 million.
Prior to executing the share purchase agreement, the Company obtained a third-party’s valuation of CTM and a fairness opinion that
stated the consideration being received by the Company in the CTM Sale was fair. In addition to the Company’s Board of Directors
approving the CTM Sale, the Audit Committee of the Board of Directors, which is comprised entirely of independent directors, approved
the CTM Sale in compliance with the Company’s Statement of Policy with respect to Related Person Transactions. The CTM Sale was
also approved by (1) stockholders representing a majority of the combined voting power of the Company’s outstanding capital stock
and (2) stockholders representing a majority of the combined voting power of the Company’s outstanding capital stock not held by
Mr. Jonas or Immediate family members of Mr. Jonas, including, without limitation, trusts or other vehicles for the benefit of any of
such immediate family members or entities under the control of such persons. The Company will no longer have significant
continuing involvement with CTM.
The
Company is the sole member of CTM Media Charitable Foundation, an IRS Section 501(c)(3) non-profit corporation (the “Foundation”),
and the Company’s former COO and CFO are the directors and officers of the Foundation. There were no balances outstanding between
the Company and the Foundation as of October 31, 2020 and 2019.
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
18—Defined Contribution Plans
The
Company has a 401(k) Plan that are available to all its employees meeting certain eligibility criteria. The 401(k) Plan permits participants
to contribute a portion of their salary with no minimum deferred required, not to exceed the limits established by the Internal Revenue
Code. The Plan provides for discretionary matching contributions as determined in the Company’s sole discretion, which vest either
immediately or over six years, depending upon the specific plan’s documents. All contributions made by participants vest immediately
into the participant’s account.
The
Company also has a 401(k) matching plan whereby the Company matches a percentage of employee 401(k) contributions, based on maximum employee
deferral rates of calendar year W-2 compensation, as defined in the plans. Funds are added to accounts of employees that are actively
employed in a given calendar year, as defined. Although the Company is fully committed to the plans, the company’s match and the
terms of the match are subject to cancellation and/or change, at any time, without notice.
The
Company contributed approximately $54,000 and $99,000 for the fiscal years ended October 31, 2020 and October 31, 2019 respectively.
For
union contractors, the company contributes to multiemployer pension plans jointly administered by industry and union representatives.
The risk of participating in U.S. multiemployer pension plans is different from single employer pension plans in the following aspects:
a)
Assets contributed to the multiemployer plan by one employer may be used to provide benefits of employment to other participating employers.
b)
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating
employers.
c)
If the Company stops participating in some of its multiemployer pension plans, it may be required to pay those plans an amount based
on the underfunded status of the entire plan, referred to as a withdrawal liability.
The
Company’s participation in these plans for the years ended October 31, 2020 and October 31, 2019 is outlined in the following table.
The information provided by the multi-employer plan is for the plan year 2019 from January 1,2019 to December 31, 2019. The Plan Protection
Act (“PPA”) zone status column ranks the funded status of multiemployer pension plans depending upon a plan’s current
and projected funding. The zone status is based on information that the Company received from the plan. Among other factors, the plan
is in the Red Zone (Critical) if it has a current funded percentage less than 65%. A plan is in the Yellow Zone (Endangered) or Orange
Zone (Seriously Endangered) if it has a current funded percentage of less than 80%, or projects a credit balance deficit within seven
years. A plan is in the Green Zone (Healthy) if it has a current funded percentage greater than 80% and does not have a projected credit
balance deficit within seven years. The Funding Improvement Plan (“FIP”)/Rehabilitation Plan (“RP”) status column
indicates plans for which a FIP or RP is either pending or in place. The following table contains information about the Company’s
multiemployer pension plans for the years ended October 31, 2020 and 2019:
IDW
MEDIA HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE FISCAL YEARS ENDED OCTOBER 31, 2020 AND 2019
Note
18—Defined Contribution Plans (continued)
The
following table contains information about the Company’s multiemployer pension plans for the years ended October 31, 2020 and 2019.
Producer-Writer
Guild of American Pension Plan
Expiration
date of Collective Bargaining Agreement
|
NA
|
|
|
Employer
Identification Number
|
95-2216351
|
Plan
Number
|
001
|
PPA
Status 2020
|
NA
|
PPA
Status 2019
|
Green
|
FIP/RP
Status Pending/Implemented
|
NA
|
Company’s
Contributions 2020
|
$18,555
|
Company’s
Contribution 2019
|
$7,695
|
Center
Contributions > 5% 2020
|
NA
|
Center
Contributions > 5% 2019
|
No
|
Plan’s
year-end
|
Dec
31/2019
|
The
Company currently has no intention of withdrawing from any of the multiemployer pension plans in which they participate.
Note
19—Reclassification of prior year presentation
Certain
prior year amounts have been reclassified for consistency with the current year presentation.
Note
20—Subsequent events
Management
has evaluated subsequent events through January 25, 2021, the date on which the consolidated financial statements were available to be
issued. There were no material subsequent events that require recognition or additional disclosures in these consolidated financial statements,
except as follows:
On
December 24, 2020, the Company applied for forgiveness on the IDWMH PPP loan of $1,195,679. Forgiveness was applied for under SBA
form 3508, using the 24-week Alternative Payroll Covered Period. As 100% of the loan was used during this period for payroll and
related payroll expenses, it is anticipated that the IDWMH PPP loan will be forgiven in its entirety.
________
Shares of Class B Common Stock
Class
B Common Stock
PROSPECTUS
Sole
Bookrunner
EF Hutton
division
of Benchmark Investments, Inc.
,
2021
Through
and including , 2021 (the
25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when
acting as an underwriter and with respect to an unsold allotment or subscription.
Part
II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM
13. Other Expenses of Issuance and Distribution
The
following table sets forth the costs and expenses payable by us in connection with the issuance and distribution of the securities being
registered. None of the following expenses are payable by the Selling Stockholders. All of the amounts shown are estimates,
except for the SEC registration fee.
Securities
and Exchange Commission Registration Fee
|
|
$
|
915.89
|
|
Accountants’
fees and expenses*
|
|
|
|
|
Legal
fees and expenses*
|
|
|
|
|
Miscellaneous*
|
|
|
|
|
Total*
|
|
$
|
|
|
*
|
To
be provided by amendment
|
ITEM
14. Indemnification of Directors and Officers
Our
Third Restated Certificate of Incorporation (our “Certificate of Incorporation”) provides that, to the fullest extent
permitted by the Delaware General Corporate Law (“DGCL”), our directors shall not be personally liable to us or our stockholders
for monetary damages for breach of fiduciary duty as a director. Section 102(7) of the DGCL, however, states that such a provision may
not eliminate or limit the liability of a director (i) for any breach of the director’s duty of loyalty to us or our stockholders,
(ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section
174 of the DGCL, relating to unlawful dividends, distributions or the repurchase or redemption of stock or (iv) for any transaction from
which the director derives an improper personal benefit.
Our
By-Laws provide that we shall indemnify and hold harmless, to the fullest extent permitted by the DGCL, any person against expenses (including
attorneys’ fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred in connection with any threatened,
pending or completed legal proceedings in which such person is involved by reason of the fact that he is or was a director or officer
of ours if he acted in good faith and in a manner that he reasonably believed to be in or not opposed to our best interests, and, with
respect to any criminal action or proceeding, if he had no reasonable cause to believe that his conduct was unlawful. If the legal proceeding,
however, is by or in our right, such director or officer may not be indemnified in respect of any claim, issue or matter as to which
he shall have been adjudged to be liable to us unless a court determines otherwise.
We
may enter into agreements to indemnify our directors and officers in addition to the indemnification provided for in our Certificate
of Incorporation. Such agreements, among other things, would indemnify our directors and officers for certain expenses (including attorneys’
fees), judgments, fines and settlement amounts incurred by such person in any action or proceeding, including any action by or in our
rights, on account of services as our director or officer or as a director or officer of any subsidiary of ours, or as a director or
officer of any other company or enterprise to which the person provides services at our request.
We
have directors’ and officers’ liability insurance providing coverage to our directors and officers within the limits and
subject to the limitations of the policies, against certain expenses in connection with the defense of, and certain liabilities which
might be imposed as a result of, actions, suits or proceedings to which they are parties by reason of being or having been such directors
or officers.
ITEM
15. Recent Sales of Unregistered Securities
On
June 9, 2021, we granted to our Chief Accounting Officer options to purchase 10,000 shares of its Class B Common Stock (“Class
B Common Stock”), with a 10-year term and an exercise price of $4.00, under our 2019 Stock Option and Incentive Plan, as amended
and restated (the “2019 Plan”), with such options scheduled to vest in substantially equal one-third installments on June
20, 2022, June 20, 2023, and June 20, 2024.
On
June 9, 2021, we granted 3,000 restricted shares of Class B Common Stock (“Restricted Stock”) under the 2019 Plan to a consultant
of ours with such shares of Restricted Stock scheduled to vest in equal one-third installments on June 20, 2022, June 20, 2023, and June
20, 2024.
On
June 9, 2021, we granted 3,000 shares of Restricted Stock, each under the 2019 Plan, to each of two non-executive officers, with such
shares of Restricted Stock scheduled to vest in equal one-third installments on June 20, 2022, June 20, 2023, and June 20, 2024.
On
May 20, 2021, we granted to an employee options to purchase 5,000 shares of Class B Common Stock, with a 10-year term and an exercise
price of $3.90, under the 2019 Plan, with such options scheduled to vest in substantially equal one-third installments on May 20, 2022,
May 20, 2023, and May 20, 2024.
On
April 5, 2021, we granted to an employee options to purchase 10,000 shares of Class B Common Stock, with a 10-year term and an exercise
price of $4.00, under the 2019 Plan, with such options scheduled to vest in substantially equal one-third installments on April 5, 2022,
April 5, 2023, and April 5, 2024.
On
March 11, 2021, we granted to a non-executive officer of the Company (1) 10,002 shares of Restricted Stock under the 2019 Plan, with
such shares scheduled to vest in approximately equal one-third installments on March 15, 2022, March 15, 2023, and March 15, 2024, and
(2) options to purchase 10,002 shares of Class B Common Stock, with a 10-year term and an exercise price of $4.00, under the 2019 Plan,
with such options scheduled to vest in equal one-third installments on March 15, 2022, March 15, 2023, and March 15, 2024.
On
March 11, 2021, we granted to four members of the Board of Directors 1,500 shares of Restricted Stock under the 2019 Plan, with such
shares vesting with in full upon grant.
On
January 26, 2021, we granted to our Chief Financial Officer options to purchase 50,000 shares of Class B Common Stock, with a 10-year
term and an exercise price of $4.285, under the 2019 Plan, with such options scheduled to vest in substantially equal one-third installments
on February 15, 2022, February 15, 2023, and February 15, 2024.
On
January 21, 2021, we granted to an employee options to purchase 10,000 shares of Class B Common Stock, with a 10-year term and an exercise
price of $4.10, under the 2019 Plan, with such options scheduled to vest in substantially equal one-third installments on February 15,
2022, February 15, 2023, and February 15, 2024.
On
January 21, 2021, we granted to an individual who provided legal services to us 10,000 unvested shares Restricted Stock under the 2019
Plan, with such shares scheduled to vest in approximately equal one-third installments on January 21, 2022, January 21, 2023, and January
21, 2024.
On
December 31, 2020, we issued 6,710 shares of Class B Common Stock to Howard S. Jonas, our Chairman of the Board of Directors and former
Chief Executive Officer, for payment of certain interest payable on a loan made by Mr. Jonas to the Company.
On
September 30, 2020, we issued 9,710 shares of Class B Common Stock to Howard S. Jonas, our Chairman of the Board of Directors and former
Chief Executive Officer, for payment of certain interest payable on a loan made by Mr. Jonas to the Company.
On
September 10, 2020, we granted to our Chief Accounting Officer options to purchase 5,000 shares of Class B Common Stock, with a 10-year
term and an exercise price of $3.35, under the 2019 Plan, with such options scheduled to vest in substantially equal one-third installments
on September 10, 2021, September 10, 2022, and September 10, 2023.
On
August 19, 2020, we granted to an employee options to purchase 5,000 shares of Class B Common Stock, with a 10-year term and an exercise
price of $3.49, under the 2019 Plan, with such options scheduled to vest in substantially equal one-third installments on August 19,
2021, August 19, 2022, and August 19, 2023.
On
August 4, 2020, we granted to a former employee 21,879 shares of Restricted Stock under the 2019 Plan, with such shares vesting in full
upon grant.
On
July 14, 2020, we granted to our Chief Executive Officer options to purchase 120,000 shares of Class B Common Stock, with a 10-year term
and an exercise price of $3.98, under the 2019 Plan, with such options scheduled to vest in equal one-third installments on July 14,
2021, July 14, 2022, and July 14, 2023.
On
July 13, 2020, we issued 314,070 shares of Class B Common Stock to Howard S. Jonas, our Chairman of the Board of Directors and former
Chief Executive Officer, pursuant to a Loan Modification Agreement in which Mr. Jonas and the Company agreed to convert $1.25 million
of indebtedness owed by us to Mr. Jonas to such 314,070 shares.
On
July 3, 2020, we granted options to purchase an aggregate of 25,000 shares of Class B Common Stock, each with a 10-year term and an exercise
price of $4.00, under the 2019 Plan, to three employees of the Company with 20,000 of such options scheduled to vest in substantially
equal one-third installments on June 25, 2021, June 25, 2022, and June 25, 2023 and 5,000 of such options scheduled to vest in substantially
equal one-third installments on July 1, 2021, July 1, 2022, and July 1, 2023.
On
June 30, 2020, we issued 10,335 shares of Class B Common Stock to Howard S. Jonas, our Chairman of the Board of Directors and former
Chief Executive Officer, for payment of certain interest payable on a loan made by Mr. Jonas to us.
On
June 8, 2020, we granted 3,000 shares of Restricted Stock under the 2019 Plan to a consultant with one-third of such shares of Restricted
Stock becoming vested on March 15, 2021 and the remaining of such shares of Restricted Stock scheduled to vest in equal installments
on March 15, 2022, and March 15, 2023.
On
March 31, 2020, we issued 14,816 shares of Class B Common Stock to Howard S. Jonas, our Chairman of the Board of Directors and former
Chief Executive Officer, for payment of certain interest payable on loans made by Mr. Jonas to us.
On
March 10, 2020, we granted options to purchase 5,000 shares of Class B Common Stock, with a 10-year term and an exercise price of $6.40,
and 2,500 shares of Restricted Stock, each under the 2019 Plan, to each of two non-executive officers, with approximately one-third of
such options and shares of Restricted Stock becoming vested on March 15, 2021 and the remaining of such options and shares of Restricted
Stock scheduled to vest in substantially equal installments on March 15, 2022, and March 15, 2023.
On
March 10, 2020, we granted an aggregate of 25,000 shares of Restricted Stock under the 2019 Plan to five individuals who provide legal
services to us, with approximately one-third of such shares becoming vested on March 15, 2021 and the remaining of such shares scheduled
to vest in substantially equal installments on March 15, 2022, and March 15, 2023.
On
March 9, 2020, we granted to an employee 13,699 shares of Restricted Stock under the 2019 Plan, with such shares originally scheduled
to vest in full on March 9, 2021. On June 2, 2020, pursuant to a Separation Agreement with the employee, we agreed to change the scheduled
vesting of these 13,699 shares of Restricted Stock to October 31, 2020. On July 13, 2020, pursuant to Amendment No. 1 to the Separation
Agreement, the vesting of these 13,699 shares of Restricted Stock occurred on August 4, 2020.
On
March 9, 2020, we closed a private placement of shares of Class B Common Stock at $6.00 per share, pursuant to which we issued 2,051,002
shares of Class B Common Stock for gross proceeds of approximately $12,300,000 inclusive of $4.0 million debt-to-equity conversion by
our Chairman of the Board of Directors and former Chief Executive Officer, Howard S. Jonas. The shares issued were subject to a contractual
restriction on transfer for six months following the closing of the placement and are subject to other restrictions under applicable
law. The proceeds from the issuance of common stock have been netted with $415,000 of costs related to the private placement.
On
February 4, 2020, we granted options to purchase 10,000 shares of Class B Common Stock, with a 10-year term and an exercise price of
$9.99, under the 2019 Plan to an employee with the options becoming vested as follows: 1,667 upon grant, 834 on March 1, 2020, 833 on
April 1, 2020, 833 on May 1, 2020, 834 on June 1, 2020, 833 on July 1, 2020, 833 on August 1, 2020, 834 on September 1, 2020, 833 on
October 1, 2020, 833 on November 1, 2020 and 833 on December 1, 2020.
On
January 23, 2020, we granted our former Chief Financial Officer and current Chief Executive Officer options to purchase 25,000 shares
of Class B Common Stock, with a 10-year term and an exercise price of $10.50, pursuant to the 2019 Plan. Options with respect to 10,000
shares vested on grant, options with respect to 5,000 shares vested on January 23, 2021 and the remainder are scheduled to vest as to
5,000 shares on each of January 23, 2022 and January 23, 2023.
On
January 23, 2020, we granted to our former Chief Strategy Officer options to purchase 42,735 shares of Class B Common Stock, with a 10-year
term and an exercise price of $10.50, pursuant to the 2019 Plan with such options vesting in full upon grant.
On
January 9, 2020, we issued 36,586 shares of Class B Common Stock to Howard S. Jonas, our Chairman of the Board of Directors and former
Chief Executive Officer, for payment of certain interest payable on loans made by Mr. Jonas to us.
On
April 24, 2019, we closed the initial round of a private placement offering of shares of Class B Common Stock to certain existing stockholders
at $18.00 per share. In connection with this initial round, on April 24, 2019, we issued 767,630 shares of Class B Common Stock for gross
proceeds of $13,817,337.
On
May 7, 2019, we closed the follow-on round of the placement and issued 345,792 shares of Class B Common Stock for gross proceeds of $5,186,885.
The follow-on round involved participants in the initial round of the placement who elected to participate in the purchase of unsubscribed
shares of Class B Common Stock at $15.00 per share. In the offering, we issued a total of 1,113,422 shares of Class B Common Stock and
received total gross proceeds of $19,004,229. The shares issued in the offering were subject to a contractual restriction on transfer
for six months following the closing of the offering as well as other restrictions under applicable law.
In
connection with a non-brokered private placement offering, on June 15, 2019, we issued 240,187 shares of Class B Common Stock at a price
of $17.07 per share for aggregate proceeds of approximately $4,600,000.
On
April 17, 2019, we agreed to grant to a consultant 5,000 shares of Restricted Stock under the 2019 Plan on or about each of May 1, 2019,
January 2, 2020 and January 2, 2021. On May 1, 2019, 5,000 shares of Restricted Stock were issued to the consultant, with such shares
having vested on January 1, 2020. On January 2, 2020, 5,000 shares of Restricted Stock were issued to the consultant, with such shares
having vested on January 2, 2021. On January 2, 2021, 5,000 shares of Restricted Stock were issued to the consultant, with such shares
scheduled to vest on January 2, 2022.
On
March 14, 2019, the Company’s Board of Directors adopted the 2019 Plan to provide incentives to executive officers, employees,
directors and consultants of the Company and/or its subsidiaries. The Company reserved 300,000 shares of Class B Common Stock for
the grant of awards under the 2019 Plan, subject to adjustment. Incentives available under the 2019 Plan may include stock options,
stock appreciation rights, limited stock appreciation rights, restricted stock and deferred stock units. On July 13, 2020, the Board
of Directors of the Company increased by 150,000, to 450,000, the number of shares of Class B Common Stock reserved for the grant of
awards under the 2019 Plan, subject to adjustment. On March 11, 2021, the Board of Directors of the Company increased by 250,000,
to 700,000, the number of shares of Class B Common Stock reserved for the grant of awards under the 2019 Plan, subject to adjustment. As
of June 18, 2021, 261,483 shares remained available to be awarded under the 2019 Plan.
On
December 24, 2018, an employee was granted 1,370 shares of Class B Common Stock. In addition, in fiscal 2018, we agreed to grant this
employee 15,000 shares of Restricted Stock pursuant to our 2009 Stock Option and Incentive Plan, as amended and restated (the “2009
Incentive Plan”), with such shares scheduled vest in equal monthly installments over the 12-month period beginning on October 15,
2018. This employee left our employ on February 13, 2019 and therefore only 5,000 shares of Restricted Stock vested on January 24, 2019,
and the remaining 10,000 shares of unvested Restricted Stock were cancelled due to the executive no longer being an employee.
On
November 26, 2018, we agreed to issue to an employee 3,030 shares of Restricted Stock under the 2009 Incentive Plan, which vested in
equal monthly installments ending on December 10, 2019. In addition, 758 shares of fully vested Restricted Stock were granted to this
same employee on March 14, 2019.
In
fiscal 2018, we granted to an employee 1,000 shares of Restricted Stock under the 2009 Incentive Plan, with 666 of such shares vesting
on June 20, 2018 and the remaining 334 shares originally scheduled to vest on September 20, 2019 and which vested on September 30, 2020.
On March 20, 2019, the Company issued options to purchase 10,000 shares of Class B Common Stock, with a 10-year term and an exercise
price of $31.00, under the 2009 Incentive Plan to this employee with the options becoming fully vested as of December 1, 2019.
In
fiscal 2018, we agreed to grant to a consultant 750 fully vested shares of Restricted Stock per month during the term of his consulting
agreement. Accordingly, on March 14, 2019, the consultant was granted under the 2009 Incentive Plan 3,000 fully vested shares of Restricted
Stock, for service provided in December 2018, January 2019, February 2019 and March 2019, and 750 fully vested shares of Restricted Stock
on each of April 15, 2019 and May 15, 2019 for service provided in the applicable month. On each of June 15, 2019, July 15, 2019, August
15, 2019, and September 15, 2019, we granted to the consultant under the 2019 Plan 750 fully vested shares of Restricted Stock for service
provided in the applicable month.
Exemptions
The
sales of the above-described securities were deemed to be exempt from registration under the Securities Act because they were made in
reliance upon the exemption from registration provided under Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.
The
grants of options and restricted shares described above were made in reliance upon the exemption from registration under the Securities
Act under Regulation S or Section 4(a)(2), or under Rule 701 of the Securities Act as transactions pursuant to written compensatory plans
or pursuant to a written contract relating to compensation.
No
underwriters were employed in connection with the securities issuances set forth in this Item 15.
ITEM
16. Exhibits and Financial Statement Schedules.
(a)
Exhibits.
The
exhibits to the registration statement are listed in the Exhibit Index to this registration statement and are incorporated by reference
herein.
(b)
Financial Statement Schedules.
All
financial statement schedules have been omitted, since the required information is not applicable or is not present in amounts sufficient
to require submission of the schedule, or because the information required is included in the financial statements and notes thereto.
ITEM
17. Undertakings.
The
undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements certificates
in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid
by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The
undersigned registrant hereby undertakes that:
(1)
For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time
it was declared effective.
(2)
For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The
undersigned registrant hereby undertakes:
(1)
To file, during any period in which offers, or sales are being made, a post-effective amendment to this registration statement:
(i)
To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933;
(ii)
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration
Fee” table in the effective registration statement;
(iii)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4)
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other
than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the
date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is
part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first
use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement
or made in any such document immediately prior to such date of first use.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Newark, New Jersey on July 6, 2021.
|
IDW
MEDIA HOLDINGS, INC.
|
|
|
|
By:
|
/s/
Ezra Y. Rosensaft
|
|
|
Name:
|
Ezra
Y. Rosensaft
|
|
|
Title:
|
Chief
Executive Officer
|
POWER
OF ATTORNEY
Each
person whose signature appears below constitutes and appoints Joyce Mason and Howard S. Jonas, and each of them severally, acting alone
and without the other, his true and lawful attorney-in-fact, with full power of substitution, and with the authority to execute in the
name of each such person, any and all amendments (including without limitation, post-effective amendments) to this registration statement,
to sign any and all additional registration statements relating to the same offering of securities as this registration statement that
are filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file such registration statements with the Securities
and Exchange Commission, together with any exhibits thereto and other documents therewith, necessary or advisable to enable the registrant
to comply with the Securities Act of 1933, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission
in respect thereof, which amendments may make such other changes in the registration statement as the aforesaid attorney-in-fact executing
the same deems appropriate.
Pursuant
to the requirements of the Securities Act of 1933, as amended, this registration statement has been signed by the following persons in
the capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Ezra Y. Rosensaft
|
|
Chief
Executive Officer
|
|
July
6, 2021
|
Ezra
Y. Rosensaft
|
|
(principal
executive officer)
|
|
|
|
|
|
|
|
/s/
Karina M. Fedasz
|
|
Chief
Financial Officer
|
|
July
6, 2021
|
Karina
M. Fedasz
|
|
(principal
financial officer)
|
|
|
|
|
|
|
|
/s/
Brooke T. Feinstein
|
|
Chief
Accounting Officer
|
|
July
6, 2021
|
Brooke
T. Feinstein
|
|
(principal
accounting officer)
|
|
|
|
|
|
|
|
/s/
Howard S. Jonas
|
|
Director
|
|
July
6, 2021
|
Howard
S. Jonas
|
|
|
|
|
/s/
Perry Davis
|
|
Director
|
|
July
6, 2021
|
Perry
Davis
|
|
|
|
|
|
|
|
|
|
/s/
Allan I. Grafman
|
|
Director
|
|
July
6, 2021
|
Allan
I. Grafman
|
|
|
|
|
|
|
|
|
|
/s/
Irwin Katsof
|
|
Director
|
|
July
6, 2021
|
Irwin
Katsof
|
|
|
|
|
|
|
|
|
|
/s/
Marc E. Knoller
|
|
Director
|
|
July
6, 2021
|
Marc
E. Knoller
|
|
|
|
|
|
|
|
|
|
/s/
Christopher McGurk
|
|
Director
|
|
July
6, 2021
|
Christopher
McGurk
|
|
|
|
|
EXHIBIT
INDEX
Exhibit No.
|
|
Description
of Exhibit
|
1.1***
|
|
Form
of Underwriting Agreement
|
3.1**
|
|
Third Restated Certificate of Incorporation of IDW Media Holdings, Inc.
|
3.2**
|
|
Second Amended and Restated Bylaws of IDW Media Holdings, Inc.
|
4.1**
|
|
Form of Certificate for Common Stock of IDW Media Holdings, Inc.
|
4.2**
|
|
Warrant to Purchase IDW Media Holdings, Inc. Class B Common Stock issued to Howard S. Jonas, dated August 21, 2018.
|
4.3**
|
|
Warrant to Purchase IDW Media Holdings, Inc. Class B Common Stock issued to Howard S. Jonas, dated March 30, 2019.
|
5.1***
|
|
Legal
Opinion of Schwell Wimpfheimer and Associates LLP.
|
10.1**#
|
|
IDW Media Holdings, Inc. 2009 Stock Option and Incentive Plan.
|
10.2**#
|
|
IDW Media Holdings, Inc. 2019 Stock Option and Incentive Plan.
|
10.3**#
|
|
Form of Option Agreement
|
10.4**#
|
|
Form of Restrictive Stock Agreement
|
10.5**
|
|
Form of Registration Rights Agreement between the Company and Stockholders, dated on or about March 2, 2020.
|
10.6**
|
|
Registration Rights Agreement between the Company and Raging Capital, Master Fund, Ltd. dated as of March 5, 2020.
|
10.7**
|
|
Amendment to Registration Rights Agreement, dated March 25, 2020.
|
10.8**
|
|
Paycheck Protection Program Promissory Note in favor of Bank of America, NA dated April 15, 2020.
|
10.9**
|
|
Share Purchase Agreement between IDW Media Holdings, Inc. and Howard S. Jonas, dated as of July 14, 2020.
|
10.10**
|
|
Loan Agreement between IDW Media Holdings, Inc. and Howard S. Jonas, dated as of August 21, 2018.
|
10.11**
|
|
Bridge Loan Facility Agreement between IDW Media Holdings, Inc. and Howard S. Jonas, dated as of September 21, 2018.
|
10.12**
|
|
Loan and Security Agreement between High Park/V-Wars Production, Inc. and Bank Leumi USA, dated June 19, 2018.
|
10.13**
|
|
Royal Bank of Canada Demand credit Facility in favour of Highland Park/October Faction Production Inc., dated November 21, 2018.
|
10.14**±
|
|
The Supply Agreement between Idea and Design Works, LLC and Diamond Comic Distributors, Inc., dated September 30, 2013.
|
10.15**±
|
|
Amendment to the Supply Agreement between Idea and Design Works, LLC and Diamond Comic Distributors, Inc., dated March 1, 2016.
|
10.16**±
|
|
Distribution Agreement between Penguin Random House Publisher Services and Idea and Design Works, LLC, dated June 20, 2016.
|
23.1*
|
|
Consent of Zwick & Banyai, PLLC.
|
23.2***
|
|
Consent
of Schwell Wimpfheimer & Associates LLP (included in Exhibit 5.1).
|
|
**
|
Incorporated
by reference to Form S-1/A, filed June 21, 2021.
|
|
***
|
To
be filed by amendment.
|
|
±
|
Denotes
that fees, payment terms and other business terms have been redacted in accordance with Item
601(b)(10)(iv) of Regulation S-K.
|
|
#
|
Denotes
management compensation plan or contract.
|
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