UNITED STATES
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2011July 31, 2021
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
IDW MEDIA HOLDINGS, INC.
(Exact Namename of Registrantregistrant as Specifiedspecified in its Charter)charter)
| Delaware | 26-4831346 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
| (Address of principal executive offices) | (Zip Code) |
973-438-3385
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b)-2 of the Exchange Act:
| Title of each Class | Trading Symbol | Name of exchange of which registered | ||
| Class B common stock, $0.01 par value; authorized shares | IDW | NYSE American |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨☒ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ¨☐ No x☒
As of June 14, 2011,September 13, 2021 the registrant had the following shares outstanding:
| Class B common stock, $0.01 par value: | 12,419,080 shares | |
| Class C common stock, $0.01 par value: | 545,360 shares |
IDW MEDIA HOLDINGS, INC.
TABLE OF CONTENTS
i
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
IDW MEDIA HOLDINGS, INC.
| (in thousands, except per share data) | July 31, 2021 (unaudited) | October 31, (Note 1) | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 9,908 | $ | 10,541 | ||||
| Trade accounts receivable, net | 6,067 | 22,921 | ||||||
| Inventory | 3,327 | 3,754 | ||||||
| Prepaid expenses | 2,380 | 1,361 | ||||||
| Current assets held for sale from discontinued operations | - | 11,171 | ||||||
| Total current assets | 21,682 | 49,748 | ||||||
| Property and equipment, net | 368 | 410 | ||||||
| Right-of-use assets, net | 422 | 771 | ||||||
| Investments | - | 25 | ||||||
| Intangible assets, net | 19 | 52 | ||||||
| Goodwill | 199 | 199 | ||||||
| Television costs, net | 1,502 | 2,926 | ||||||
| Other assets | 463 | 527 | ||||||
| Total assets | $ | 24,655 | $ | 54,658 | ||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Trade accounts payable | $ | 1,026 | $ | 1,406 | ||||
| Accrued expenses | 2,930 | 2,458 | ||||||
| Production costs payable | 2,861 | 1,495 | ||||||
| Deferred revenue | 2,244 | 2,385 | ||||||
| Bank loans payable – current portion | - | 14,204 | ||||||
| Government loans- current portion | 190 | 793 | ||||||
| Operating lease obligations – current portion | 496 | 562 | ||||||
| Other current liabilities | - | 69 | ||||||
| Current liabilities held for sale from discontinued operations | - | 8,540 | ||||||
| Total current liabilities | 9,747 | 31,912 | ||||||
| Non-current liabilities | ||||||||
| Operating lease obligations – long term portion | 24 | 368 | ||||||
| Government loans – long term portion | 1,005 | 403 | ||||||
| Related party loans payable – long term portion | - | 3,750 | ||||||
| Total liabilities | $ | 10,776 | $ | 36,433 | ||||
| Commitments (Note 13) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $0.01 par value; authorized shares – 500; no shares issued and outstanding at July 31, 2021 and October 31, 2020, respectively | - | - | ||||||
| Class B common stock, $0.01 par value; authorized shares – 20,000; 10,033 and 9,986 shares issued and 9,514 and 9,467 shares outstanding at July 31, 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 July 31, 2021 and October 31, 2020, respectively | 5 | 5 | ||||||
| Additional paid-in capital | 94,354 | 111,379 | ||||||
| Accumulated other comprehensive loss | - | (60 | ) | |||||
| Accumulated deficit | (79,378 | ) | (91,996 | ) | ||||
| Treasury stock, at cost, consisting of 519 shares of Class B common stock at July 31, 2021 and October 31, 2020 | (1,196 | ) | (1,196 | ) | ||||
| Total stockholders’ equity | 13,879 | 18,225 | ||||||
| Total liabilities and stockholders’ equity | $ | 24,655 | $ | 54,658 | ||||
| (in thousands) | April 30, 2011 | July 31, 2010 | ||||||
| (Unaudited) | (Note 1) | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 5,681 | $ | 6,516 | ||||
| Short term investment | 1,033 | 1,030 | ||||||
| Trade accounts receivable, net of allowance for doubtful accounts of $708 and $778 at April 30, 2011 and July 31,2010, respectively | 3,290 | 3,496 | ||||||
| Inventory | 1,732 | 1,462 | ||||||
| Prepaid expenses | 856 | 965 | ||||||
| Note receivable – current portion | 225 | 321 | ||||||
| Total current assets | 12,817 | 13,790 | ||||||
| Property and equipment, net | 2,029 | 2,013 | ||||||
| Note receivable – non-current portion | 2,175 | 2,400 | ||||||
| Other assets | 231 | 198 | ||||||
| Total assets | $ | 17, 252 | $ | 18,401 | ||||
| Liabilities and equity | ||||||||
| Current liabilities: | ||||||||
| Trade accounts payable | $ | 1,026 | $ | 1,187 | ||||
| Accrued expenses | 1,423 | 1,539 | ||||||
| Deferred revenue | 1,549 | 2,035 | ||||||
| Due to IDT Corporation | 23 | 38 | ||||||
| Income tax payable | 426 | 770 | ||||||
| Capital lease obligations—current portion | 233 | 227 | ||||||
| Other current liabilities | 1,009 | 646 | ||||||
| Total current liabilities | 5,689 | 6,442 | ||||||
| Capital lease obligations—long-term portion | 348 | 286 | ||||||
| Total Liabilities | 6,037 | 6,728 | ||||||
| Commitments and contingencies | - | - | ||||||
| Stockholders’ Equity: | ||||||||
| CTM Media Holdings, Inc. stockholders’ equity : | ||||||||
| Preferred stock, $0.01 par value; authorized shares—500 and 10,000 shares April 30, 2011 and July 31, 2010, respectively; no shares issued | - | - | ||||||
| Class A common stock, $0.01 par value; authorized shares—6,000 and 35,000 shares at April 30, 2011 and July 31, 2010, respectively; 1,285 shares issued and 1,106 shares outstanding at April 30, 2011 and July 31, 2010 | 13 | 13 | ||||||
| Class B common stock, $0.01 par value; authorized shares—12,000 and 65,000 shares at April 30, 2011 and July 31, 2010, respectively; 6,924 shares issued and 6,126 shares outstanding at April 30, 2011 and July 31, 2010 | 69 | 69 | ||||||
| Class C common stock, $0.01 par value; authorized shares—2,500 and 15,000 shares at April 30, 2011 and July 31, 2010, respectively; 1,091 shares issued and outstanding at April 30, 2011 and July 31, 2010 | 11 | 11 | ||||||
| Additional paid-in capital | 57,388 | 58,548 | ||||||
| Treasury Stock, at cost, consisting of 179 shares of shares of Class A and 797 shares of Class B at April 30, 2011 and July 31, 2010 | (1,070 | ) | (1,070 | ) | ||||
| Accumulated other comprehensive income | 191 | 117 | ||||||
| Accumulated deficit | (45,833 | ) | (46,235 | ) | ||||
| Total CTM Media Holdings, Inc. stockholders’ equity | 10,769 | 11,453 | ||||||
| Non-controlling interests | 446 | 220 | ||||||
| Total stockholders’ equity | 11,215 | 11,673 | ||||||
| Total liabilities and stockholders’ equity | $ | 17,252 | $ | 18,401 | ||||
See accompanying notes to condensed consolidated financial statements.
IDW MEDIA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended April 30, | Nine Months Ended April 30, | |||||||||||||||
| (in thousands, except per share data) | 2011 | 2010 | 2011 | 2010 | ||||||||||||
| Revenues | $ | 6,791 | $ | 6,832 | 23,117 | $ | 21,431 | |||||||||
| Costs and expenses: | ||||||||||||||||
| Direct cost of revenues (exclusive of depreciation and amortization) | 3,446 | 3,605 | 10,919 | 10,587 | ||||||||||||
| Selling, general and administrative (i) | 3,650 | 3,651 | 11,250 | 10,368 | ||||||||||||
| Depreciation and amortization | 200 | 197 | 544 | 653 | ||||||||||||
| Bad debt | (15 | ) | 36 | 69 | 91 | |||||||||||
| Total costs and expenses | 7,281 | 7,489 | 22,782 | 21,699 | ||||||||||||
| (Loss) income from operations | (490 | ) | (657 | ) | 335 | (268 | ) | |||||||||
| Interest income (expense), net | 15 | (15 | ) | 43 | (73 | ) | ||||||||||
| Other income (expense), net | 3 | (156 | ) | 3 | (160 | ) | ||||||||||
| (Loss) income from continuing operations before income taxes | (472 | ) | (828 | ) | 381 | (501 | ) | |||||||||
| Benefit from (provision for) income taxes | 348 | 49 | 264 | (74 | ) | |||||||||||
| (Loss) income from continuing operations | (124 | ) | (779 | ) | 645 | (575 | ) | |||||||||
| Discontinued operations net of tax: (Note 2) | ||||||||||||||||
| Loss from discontinued operations | - | (316 | ) | - | (570 | ) | ||||||||||
| Net (loss) income | (124 | ) | (1,095 | ) | 645 | (1,145 | ) | |||||||||
| Less – net (loss) income attributable to non-controlling interests | 40 | (36) | 243 | 115 | ||||||||||||
| Net (loss) income attributable to CTM Media Holdings, Inc. | (164 | ) | $ | (1,059 | ) | 402 | $ | (1,260 | ) | |||||||
| Amounts Attributable to CTM Media Holdings, Inc. common stockholders: | ||||||||||||||||
| (Loss) income from continuing operations | (164 | ) | (743 | ) | 402 | (690 | ) | |||||||||
| Loss from discontinued operations | - | (316 | ) | - | (570 | ) | ||||||||||
| Net (loss) income attributable to CTM Media Holdings, Inc. | (164 | ) | $ | (1,059 | ) | 402 | $ | (1,260 | ) | |||||||
(Unaudited)
| Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
| (in thousands, except per share data) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Revenues | $ | 6,779 | $ | 8,487 | $ | 25,332 | $ | 28,093 | ||||||||
| Costs and expenses: | ||||||||||||||||
| Direct cost of revenues | 3,813 | 8,093 | 17,771 | 23,004 | ||||||||||||
| Selling, general and administrative | 4,986 | 3,742 | 14,147 | 12,761 | ||||||||||||
| Depreciation and amortization | 62 | 61 | 182 | 190 | ||||||||||||
| Total costs and expenses | 8,861 | 11,896 | 32,100 | 35,955 | ||||||||||||
| Loss from operations | (2,082 | ) | (3,409 | ) | (6,768 | ) | (7,862 | ) | ||||||||
| Interest (expense) income, net | (13 | ) | (13 | ) | 128 | (33 | ) | |||||||||
| Other income (expense), net | 1,154 | - | 1,141 | (61 | ) | |||||||||||
| Net loss from continuing operations | (941 | ) | (3,422 | ) | (5,499 | ) | (7,956 | ) | ||||||||
| Loss from discontinued operations, net | - | (1,126 | ) | (1,280 | ) | (3,818 | ) | |||||||||
| Gain on sale of discontinued operations | - | - | 2,123 | - | ||||||||||||
| Net loss | $ | (941 | ) | $ | (4,548 | ) | $ | (4,656 | ) | $ | (11,774 | ) | ||||
| Basic and diluted loss per share (note 2): | ||||||||||||||||
| Continuing operations | $ | (0.09 | ) | $ | (.35 | ) | $ | (0.34 | ) | $ | (.92 | ) | ||||
| Discontinued operations, net | - | (.12 | ) | (0.13 | ) | (.44 | ) | |||||||||
| Net loss | $ | (0.09 | ) | $ | (.47 | ) | $ | (0.47 | ) | $ | (1.36 | ) | ||||
| Weighted-average number of shares used in the calculation of basic and diluted loss per share: | 9,977 | 9,641 | 9,966 | 8,646 | ||||||||||||
| Dividend declared per common share: | $ | 0.00 | $ | 0.00 | $ | 0.00 | $ | 0.00 | ||||||||
| Basic and diluted income (loss) per share attributable to CTM Media Holdings, Inc. common stockholders: | ||||||||||||||||
| Income (Loss) from continuing operations | $ | (0.02 | ) | $ | (0.13 | ) | $ | 0.05 | $ | (0.11 | ) | |||||
| Loss from discontinued operations | $ | - | $ | (0.05 | ) | $ | - | $ | (0.09 | ) | ||||||
| Net (loss) income | $ | (0.02 | ) | $ | (0.18 | ) | $ | 0.05 | $ | (0.20 | ) | |||||
| Weighted-average number of shares used in calculation of basic and diluted loss (income) per share: | 8,323 | 5,834 | 8,323 | 6,304 | ||||||||||||
| Dividend declared per common share: | $ | 0.06 | 0.25 | $ | 0.18 | 0.25 | ||||||||||
(i) Stock-based compensation included in selling, general and administrative expenses | 113 | 113 | 339 | 245 | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
IDW MEDIA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSCOMPREHENSIVE LOSS
(Unaudited)
| Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Net loss | $ | (941 | ) | (4,548 | ) | $ | (4,656 | ) | $ | (11,774 | ) | |||||
| Foreign currency translation adjustments | - | (24 | ) | 39 | (69 | ) | ||||||||||
| Sale of discontinued operations | - | - | 21 | - | ||||||||||||
| Total comprehensive loss | $ | (941 | ) | (4,572 | ) | $ | (4,596 | ) | $ | (11,843 | ) | |||||
See accompanying notes to condensed consolidated financial statements
Nine months ended April 30, (in thousands) | 2011 | 2010 | ||||||
| Operating activities | ||||||||
| Net income (loss) | $ | 645 | $ | (1,145 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Loss from discontinued operations | - | 570 | ||||||
| Depreciation and amortization | 544 | 653 | ||||||
| Provision for doubtful accounts receivable | 69 | 91 | ||||||
| Stock-based compensation | 339 | 245 | ||||||
| Change in assets and liabilities: | ||||||||
| Trade accounts receivable | 143 | 1,184 | ||||||
| Inventory, prepaid, and other assets | (193 | ) | 68 | |||||
| Trade accounts payable, accrued expenses, and other current liabilities | (215 | ) | 163 | |||||
| Deferred revenue | (486 | ) | 41 | |||||
| Net cash provided by operating activities | 846 | 1,870 | ||||||
| Investing activities: | ||||||||
| Capital expenditures | (260 | ) | (320 | ) | ||||
| Purchase of IDW non-controlling interests | - | (414 | ) | |||||
| Payments received on note for sale of assets | 300 | - | ||||||
| Net Cash provided by (used in) investing activities | 40 | (734 | ) | |||||
| Financing activities: | ||||||||
| Distributions to holders of non-controlling interests | (17 | ) | (435 | ) | ||||
| Funding provided by IDT Corporation, net | - | 2,372 | ||||||
| Repurchase of Class A and Class B common stock | - | (1,070 | ) | |||||
| Repayments of capital lease obligations | (205 | ) | (186 | ) | ||||
| Dividends paid | (1,499 | ) | (2,082 | ) | ||||
| Net cash used in financing activities | (1,721 | ) | (1,401 | ) | ||||
| Discontinued operations: | ||||||||
| Net cash used in operating activities | - | (412 | ) | |||||
| Net cash used in investing activities | - | (3 | ) | |||||
| Net cash used in discontinued operations | - | (415 | ) | |||||
| Net decrease in cash and cash equivalents | (835 | ) | (680 | ) | ||||
| Cash and cash equivalents at beginning of period | 6,516 | 6,480 | ||||||
| Cash and cash equivalents at end of period | $ | 5,681 | $ | 5,800 | ||||
| Supplemental schedule of non cash investing and financing activities | ||||||||
| Cash paid for interest | $ | 21 | $ | 18 | ||||
| Purchases of property and equipment through capital lease obligations | $ | 267 | $ | - | ||||
IDW Media Holdings, Inc.
Condensed Consolidated Stockholders’ Equity
Nine Months Ended July 31, 2021 and cash equivalents is not material.2020
(in thousands)
(unaudited)
| Class B Common Stock | Class C Common Stock | Stock | Additional | Accumulated Other | Non- Controlling | Treasury Stock, at Cost | Total | |||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Number of Shares | Amount | Number of Shares | Amount | Subscriptions Receivable | Paid In Capital | Comprehensive Loss | Accumulated Deficit | Interest (“NCI”) | Number of Shares | Amount | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||
| Balance October 31, 2020 | 9,987 | 93 | 545 | 5 | - | 111,379 | (60 | ) | (91,996 | ) | - | 519 | (1,196 | ) | 18,225 | |||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | 246 | - | - | - | - | - | 246 | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock | 46 | 1 | - | - | - | 24 | - | - | - | - | - | 25 | ||||||||||||||||||||||||||||||||||||
| Comprehensive loss | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Sale of discontinued operations | - | - | - | - | - | (17,295 | ) | 21 | 17,274 | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | (4,656 | ) | - | - | - | (4,656 | ) | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | - | 39 | - | - | - | - | 39 | ||||||||||||||||||||||||||||||||||||
| Total comprehensive loss | - | - | - | - | - | - | 60 | (4,656 | ) | - | - | - | (4,596 | ) | ||||||||||||||||||||||||||||||||||
| Balance July 31, 2021 | 10,033 | 94 | 545 | 5 | - | 94,354 | - | (79,378 | ) | - | 519 | (1,196 | ) | 13,879 | ||||||||||||||||||||||||||||||||||
| 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 | - | - | - | - | - | 932 | - | - | - | - | - | 932 | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock | 2,508 | 19 | - | - | - | 13,531 | - | - | - | - | - | 13,550 | ||||||||||||||||||||||||||||||||||||
| Subscriptions receivable | - | - | - | - | 1,000 | 11 | - | - | - | - | - | 1,011 | ||||||||||||||||||||||||||||||||||||
| NCI divestment in subsidiary | - | - | - | - | - | - | - | 259 | (35 | ) | - | - | 224 | |||||||||||||||||||||||||||||||||||
| Comprehensive loss | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | (11,774 | ) | - | - | - | (11,774 | ) | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | - | (69 | ) | - | - | - | - | (69 | ) | ||||||||||||||||||||||||||||||||||
| Total comprehensive loss | - | - | - | - | - | - | (69 | ) | (11,774 | ) | - | - | - | (11,843 | ) | |||||||||||||||||||||||||||||||||
| Balance July 31, 2020 | 9,927 | 93 | 545 | 5 | - | 111,145 | (129 | ) | (89,972 | ) | - | 519 | (1,196 | ) | 19,946 | |||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
IDW Media Holdings, Inc.
Condensed Consolidated Stockholders’ Equity
Three Months Ended July 31, 2021 and 2020
(in thousands)
(unaudited)
| Class B Common Stock | Class C Common Stock | Stock | Additional | Accumulated Other | Non- Controlling | Treasury Stock, at Cost | Total | |||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Number of Shares | Amount | Number of Shares | Amount | Subscriptions Receivable | Paid In Capital | Comprehensive Loss | Accumulated Deficit | Interest (“NCI”) | Number of Shares | Amount | Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||
| Balance April 30, 2021 | 10,024 | 94 | 545 | 5 | - | 94,267 | - | (78,437 | ) | - | 519 | (1,196 | ) | 14,733 | ||||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | 87 | - | - | - | - | - | 87 | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock | 9 | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Comprehensive loss | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Sale of discontinued operations | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | (941 | ) | - | - | - | (941 | ) | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Total comprehensive loss | - | - | - | - | - | - | - | (941 | ) | - | - | - | (941 | ) | ||||||||||||||||||||||||||||||||||
| Balance July 31, 2021 | 10,033 | 94 | 545 | 5 | - | 94,354 | - | (79,378 | ) | - | 519 | (1,196 | ) | 13,879 | ||||||||||||||||||||||||||||||||||
| Balance April 30, 2020 | 9,570 | 89 | 545 | 5 | - | 109,777 | (105 | ) | (85,424 | ) | - | 519 | (1,196 | ) | 23,146 | |||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | 79 | - | - | - | - | - | 79 | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock | 357 | 4 | - | - | - | 1,289 | - | - | - | - | - | 1,293 | ||||||||||||||||||||||||||||||||||||
| Subscriptions receivable | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| NCI divestment in subsidiary | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Comprehensive loss | - | - | - | - | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Net Loss | - | - | - | - | - | - | - | (4,548 | ) | - | - | - | (4,548 | ) | ||||||||||||||||||||||||||||||||||
| Other comprehensive income | - | - | - | - | - | - | (24 | ) | - | - | - | - | (24 | ) | ||||||||||||||||||||||||||||||||||
| Total comprehensive loss | - | - | - | - | - | - | (24 | ) | (4,548 | ) | - | - | - | (4,572 | ) | |||||||||||||||||||||||||||||||||
| Balance July 31, 2020 | 9,927 | 93 | 545 | 5 | - | 111,145 | (129 | ) | (89,972 | ) | - | 519 | (1,196 | ) | 19,946 | |||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
IDW MEDIA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended July 31, (in thousands) | 2021 | 2020 | ||||||
| Operating activities: | ||||||||
| Net loss | $ | (4,656 | ) | $ | (11,774 | ) | ||
| Adjustments to reconcile net loss to net cash provided by provided by operating activities: | ||||||||
| Depreciation and amortization | 369 | 794 | ||||||
| Amortization of finance leases | 108 | 315 | ||||||
| Bad debt expense | (91 | ) | 576 | |||||
| Stock based compensation | 246 | 932 | ||||||
| Amortization of right-of-use asset | 631 | 1,210 | ||||||
| Gain on sale of discontinued operations | (2,123 | ) | - | |||||
| Loss on deconsolidation of subsidiary | - | 35 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Trade accounts receivable | 16,837 | 15,136 | ||||||
| Inventory | 428 | (410 | ) | |||||
| Prepaid expenses | (929 | ) | (33 | ) | ||||
| Television costs | 1,424 | 6,088 | ||||||
| Operating lease liability | (411 | ) | (1,243 | ) | ||||
| Trade accounts payable, accrued expenses, production costs payable and other current liabilities | 1,389 | (767 | ) | |||||
| Deferred revenue | (141 | ) | 649 | |||||
| Gain on extinguishment of PPP loan | (1,264 | ) | - | |||||
| Gain on disposal of ROU assets | (97 | ) | - | |||||
| Deconsolidation of subsidiary | - | 304 | ||||||
| Net cash provided by operating activities | 11,720 | 11,812 | ||||||
| Investing activities: | ||||||||
| Disposition of subsidiary, net of cash received | - | (115 | ) | |||||
| Disposal of discontinued operations | (902 | ) | - | |||||
| Capital expenditures | (128 | ) | (372 | ) | ||||
| Net cash used in investing activities | (1,030 | ) | (487 | ) | ||||
| Financing activities: | ||||||||
| Proceeds from issuance of common stock | 25 | 14,561 | ||||||
| Repayments of finance lease obligations | - | (308 | ) | |||||
| Proceeds of government loans | 1,196 | 2,975 | ||||||
| Proceeds of bank loans | - | 1,021 | ||||||
| Repayments of related party loans | - | (5,300 | ) | |||||
| Repayments of bank loans | (14,204 | ) | (19,726 | ) | ||||
| Net cash used in financing activities | (12,983 | ) | (6,777 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 39 | (69 | ) | |||||
| Net (decrease) increase in cash and cash equivalents | (2,254 | ) | 4,479 | |||||
| Cash and cash equivalents at beginning of period | 12,162 | 10,165 | ||||||
| Cash and cash equivalents at end of period | $ | 9,908 | $ | 14,644 | ||||
| Supplemental schedule of investing and financing activities | ||||||||
| Cash paid for interest | $ | 1,277 | $ | 27 | ||||
| Cash paid for income taxes | $ | - | $ | - | ||||
| Non-cash investing and financing activities | ||||||||
| Extinguishment of related party loan in exchange for sale of CTM | $ | 3,750 | $ | - | ||||
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
Overview
IDW Media Holdings, Inc. (“IDWMH”) together with its subsidiaries (collectively, the “Company”) is a diversified media company with operations in publishing and television entertainment. 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.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements of CTM Media Holdings, Inc. and its subsidiaries (the “Company”) have been prepared by Company management in accordance with generally accepted 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 and Article 10 of Regulation S-X.10-Q. Accordingly, they do not include all of the 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 three and nine months ended April 30, 2011July 31, 2021 are not necessarily indicative of the results that may be expected for the full fiscal year ending JulyOctober 31, 2011.2021. The balance sheet at JulyOctober 31, 20102020 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. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-KRegistration Statement.
Segment Information
Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 280 (“ASC 280”), Segment Reporting, establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the year ended July 31, 2010, as filed with the U.S. Securitieschief operating decision maker, or decision-making group, in deciding how to allocate resources and Exchange Commission (the “SEC”).in assessing performance.
The Company’s fiscal year endschief operating decision maker is the Chief Executive Officer, who reviews the financial performance and the results of operations of the segments prepared in accordance with U.S. GAAP when making decisions about allocating resources and assessing performance of the Company.
The Company has determined its reportable segments are the following:
IDW 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 July 31. Each reference belowthe 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 which has been written down to nil value; and
IDW Entertainment (“IDWE”)- is a production company and studio that develops, produces and distributes content based on IDWP’s original IP for a variety of formats including film and television.
Prior to February 15, 2021, IDWMH 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 February 15, 2021 (the “CTM Sale Date”), pursuant to a fiscal year refers to the fiscal year ending in the calendar year indicated (e.g., fiscal 2011 refers to the fiscal year endingshare purchase agreement (“SPA”) dated as of July 31, 2011).
IDW MEDIA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1—Basis of fiscal 2010Presentation and accordingly, WMET’s resultsSummary 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 classified asindependently 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 (“VIE”) 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 have been paid off. The carrying amounts and classification of the VIEs’ assets and liabilities are presented below:
| (in thousands) | July 31, 2021 | October 31, 2020 | ||||||
| Cash and cash equivalents | $ | 82 | $ | 732 | ||||
| Accounts receivable | - | 12,420 | ||||||
| Bank loans | - | 14,204 | ||||||
| Total | $ | 82 | $ | 27,356 | ||||
Revenue Recognition
The Company applies the five-step approach as described in ASC 606, Revenue from Contracts with Customers, which consists of the following: (i) identifying the contract with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the performance obligations in the contract and (v) recognizing revenue when (or as) the entity satisfies a performance obligation.
IDWP generates revenue primarily from the sale and licensing of comic books, graphic novels, digital content, and games through IDWP’s imprints IDW Publishing, IDW Games and Top Shelf. Revenue from the direct sale of comic books, graphic novels and games is recognized, net of an allowance for estimated sales returns, at the time of shipment of its graphic novels, comic books and games by IDWP’s distributor to its customers.
IDWE generates revenue primarily from the licensing and distribution of content across various platforms and formats to audiences globally including television series and films. 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. There are possible additional tax credits the Company may be eligible to receive, however due to the uncertainty of the receipt they have not been accrued for.
The timing of the Company’s revenue recognition may differ from the timing of payment by its customers. A receivable is recorded when revenue is recognized prior to payment and the Company has an unconditional right to payment. Alternatively, when payment precedes the satisfaction of performance obligations, the Company records a contract liability on the balance sheets within deferred revenue until the performance obligations are satisfied.
In the ordinary course of business, the Company's reportable segments enter into transactions with one another. The most common types of intersegment transactions include IDWE obtaining rights to produce television series based on content created by IDWP. While intersegment transactions are treated like third-party transactions to determine segment performance, the revenues are eliminated in consolidation and, therefore, do not affect consolidated results.
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.
IDW MEDIA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1—Basis of Presentation and Summary of Significant Accounting Policies (continued)
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.
Use of Estimates
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates.
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to spread throughout the United States. While the disruption is currently expected to be temporary, there is uncertainty around the duration. The Company has considered information available to it as of the date of issuance of these unaudited condensed consolidated financial statements and is not aware of any specific events or circumstances that would require an update to its estimates or judgements, or an adjustment to the carrying value of its assets or liabilities. The accounting estimates and other matters assessed include, but were not limited to, goodwill and other long-lived assets, and revenue recognition. These estimates may change as new events occur and additional information becomes available. Actual results could differ materially from these estimates.
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 40.3% and 17.3% of the total consolidated revenues for the three months ended July 31, 2021 and 2020, respectively, and 30.2% and 17.0% of the total consolidated revenues for the nine months ended July 31, 2021 and 2020, respectively. The receivable balances from this customer represented approximately 18.0% and 3.1% of consolidated trade accounts receivable at July 31, 2021 and October 31, 2020, respectively.
Revenues from PRH, IDWP’S non-direct market distributor amounted to 42.9% and 31.6% of total consolidated revenue in the three months ended July 31, 2021 and 2020, respectively, and 30.2% and 28.2% of the total consolidated revenues for the nine months ended July 31, 2021 and 2020, respectively. The receivable balances represented 26.0% and 8.5% of consolidated receivables at July 31, 2021 and October 31, 2020, respectively.
IDWE has three significant customers Netflix, NBC Universal/SyFy and Cineflix that pose a concentration risk.
Revenue from Netflix, a leading streaming video subscription service, represented 0% and 28.6% of the total consolidated revenues for the nine months ended July 31, 2021 and 2020, respectively. The receivable balances from this customer represented 0% and 15.3% of consolidated trade receivables at July 31,2021 and October 31, 2020, respectively. The fluctuation in revenues is a result of timing differences in delivered shows.
NBC Universal/SyFy, a major television network, accounted for 11.7% and 8.8% of the total consolidated revenues for the nine months ended July 31, 2021 and 2020, respectively.
Cineflix, a major television network, accounted for 23.4% and 6.8% of consolidated trade receivables at July 31, 2021 and October 31, 2020, respectively.
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 duringand has been presented as such in the fiscal year 2010.
IDW MEDIA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1—Basis of Presentation and Summary of Significant Accounting Policies (continued)
During the period in which the discontinued operation was classified as held for sale the net loss (in thousands) beforewas 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.
Reclassification of prior year presentation
Certain prior year amounts have been reclassified for consistency with the current year presentation, these reclassifications have not resulted in impacts to net loss. Stock options have been included with stock based compensation on the Condensed Consolidated Stockholders’ Equity and Condensed Consolidated Statement of Cash Flows. Production costs payable have been broken out of accrued expenses.
Recently Issued Accounting Pronouncements Adopted Subsequent to 2020 Fiscal Year End
In March 2019, the FASB issued Accounting Standard Update (“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 impairments (Note 10) from substantively abandoned television costs which materially impacted the condensed consolidated financial statements, these costs were recorded in direct cost of revenues.
Recently Issued Accounting Standard Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), 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 condensed consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, 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 a material impact on its condensed consolidated financial statements.
In December 2019, the FASB issued ASC Update No. 2019-12,Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The purpose of Update No. 2019-12 is to continue the FASB’s Simplification Initiative to reduce complexity in accounting standards. The amendments in Update No. 2019-12 simplify the accounting for income taxes by removing certain exceptions related to the incremental approach for intraperiod tax allocation, the requirement to recognize or derecognize deferred tax liabilities related to equity method investments that are also foreign subsidiaries, and the methodology for calculating income taxes in an interim period. In addition to removing these exceptions, Update No. 2019-12 also clarifies and simplifies other aspects of WMET, which are included in discontinued operations, were as follows:the accounting for income taxes. Update No. 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company will adopt ASU 2019-12 effective November 1, 2021. The Company does not believe that the adoption of this new accounting guidance will have a material impact on its condensed consolidated financial statements.
Three Months Ended April 30, | Nine Months Ended April 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| Revenue | $ | - | $ | 56 | $ | - | $ | 407 | ||||||||
| Loss before income taxes and net loss | $ | - | $ | (316 | ) | $ | - | $ | (570 | ) | ||||||
IDW MEDIA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3—2—Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) 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 (loss) per share is computed in the same manner as basic earnings (loss) per share except that the number of shares is increased to include non-vested restricted stock still subject to risk of forfeiture (non-vested) using the treasury stock method, unless the effect of such increase iswould be anti-dilutive. In calculatingThe Company excluded 55,999 shares of unvested restricted stock and 317,737 stock options from the weighted average shares used for calculatingcalculation of diluted earnings (loss) per share unvested restricted stocks issued byas the effect would have been anti-dilutive. For periods in which the Company has a net loss, basic and diluted are the same because they would be anti-dilutive.
Note 3—Equity
On July 14, 2021 the shares of authorized Class B Common Stock increased from 12,000,000 to 20,000,000.
On July 16, 2020, the Company settled its founderintercompany payable to CTM totaling $6,982,305 and chairman were treated as if they were fully diluted as these shares carry voting rightssubsequently received a distribution of $6,800,000 from CTM. This transaction was booked into additional paid in capital with CTM and are entitledIDWMH to dividendshave a nil impact and enjoy all other rights and privileges as the other shares.
Restricted Stock
Nine Months Ended April 30, 2011 | ||||||||||||
| Attributable to the Company | Non-controlling Interests | Total | ||||||||||
| (in thousands) | ||||||||||||
| Balance, July 31, 2010 | $ | 11,453 | $ | 220 | $ | 11,673 | ||||||
| Stock based compensation | 339 | - | 339 | |||||||||
| Cash distributions | - | (17 | ) | (17 | ) | |||||||
| Cash dividends | (1,499 | ) | - | (1,499 | ) | |||||||
| Comprehensive income: | ||||||||||||
| Net income | 402 | 243 | 645 | |||||||||
| Other comprehensive income | 74 | - | 74 | |||||||||
| Comprehensive income | 476 | 243 | 719 | |||||||||
| Balance, April 30, 2011 | $ | 10,769 | $ | 446 | $ | 11,215 | ||||||
The fair value of restricted stock of IDT Corporation received, in respect of those restricted shares one share of the Company’s Class A common stock for every three restricted shares of common stock of IDT Corporation that they owned as of the record date of the Spin-Off and one share of the Company’s Class B common stock for everyis determined based on the closing price of the Company’s Class B common stock on the grant date. Share awards generally vest on a graded basis over three years of service.
A summary of the status of the Company’s grants of restricted shares of Class B common stock is presented below:
| Number of Non-vested Shares | Weighted Average Grant Date Fair Value | |||||||
| Outstanding at October 31, 2021 | 38,000 | $ | 8.85 | |||||
| Granted | 40,002 | 3.95 | ||||||
| Vested | (22,003 | ) | 9.52 | |||||
| Cancelled / Forfeited | - | - | ||||||
| Non-vested shares at July 31, 2021 | 55,999 | $ | 5.09 | |||||
At July 31, 2021, there was $256,496 of IDT Corporation that they owned as oftotal unrecognized compensation cost related to non-vested stock-based compensation arrangements, which is expected to be recognized over the record date of the Spin-Off. Those particular shares of the Company’s stocknext 1.8 years.
Detailed below are restricted under the same terms as the corresponding IDT Corporation restricted shares in respect of which they were issued. Upon completion of the Spin-Off on September 14, 2009, there were 0.3 million shares of Class A unvested restricted stock and 0.5 million shares of Class B unvested restricted stock.Common Stock issued to the Chairman, for payment of interest on the loan agreement, the related party loan has been paid off. (Note 5). There is an additional 14,902 shares issued in fiscal 2020 for interest on the related party bridge loan paid off in fiscal 2020.
| Number of Shares | ||||||||
| Date | Fiscal 2021 | Fiscal 2020 | ||||||
| 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 | 6,710 | 71,447 | ||||||
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 Chairman 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 July 13, 2020, the Company issued 314,070 shares of Class B Common Stock to the Chairman, pursuant to a Loan Modification Agreement in which the Chairman and the Company agreed to convert $1.25 million of indebtedness owed by the Company to the Chairman to such 314,070 shares.
IDW MEDIA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 3—Equity (Continued)
Warrants
Detailed below are outstanding warrants issued to the Chairman associated with the two loans made by the Chairman to the Company ( which have subsequently been repaid):
| Number of Shares | Type of Share | Price | Expiration | |||||||||
| 98,336 | Class B Common Stock | $ | 26.44 | March 30, 2022 | ||||||||
| 89,243 | Class B Common Stock | $ | 42.02 | August 21, 2023 | ||||||||
| Stock Options | Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in thousands) | ||||||||||||
| Outstanding at October 31, 2020 | 242,735 | $ | 6.13 | 1.36 | $ | - | ||||||||||
| Granted | 95,002 | 4.14 | 2.63 | 2 | ||||||||||||
| Exercised | - | - | - | - | ||||||||||||
| Cancelled / Forfeited | (20,000 | ) | 4.00 | - | - | |||||||||||
| Outstanding at July 31, 2021 | 317,737 | $ | 5.67 | 1.74 | $ | 7 | ||||||||||
| Exercisable at July 31, 2021 | 104,403 | $ | 7.76 | 1.72 | $ | 2 | ||||||||||
Note 4—Stock Based Compensation
On March 14, 2019, the Company’s Board of Directors adopted the 2019 Incentive 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 Incentive Plan, subject to adjustment. Incentives available under the 2019 Incentive 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 the number of shares of Class B Common Stock reserved for the grant of awards under the 2019 Incentive Plan to 450,000, subject to adjustment. On March 11, 2021, the Board of Directors of the Company increased the number of shares of Class B Common Stock reserved for the grant of awards under the 2019 Incentive Plan to 700,000, subject to adjustment. As of July 31, 2021, 261,483 shares remained available to be awarded under the 2019 Incentive Plan.
IDW MEDIA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 4—Stock Based Compensation (continued)
On September 3, 2009, the Company’s Compensation Committee ratified the Company’s 2009 Stock Option and Incentive Plan (the “Company’s Stock Option and Incentive Plan”), which was previously adopted by the Company’s Board of Directors and approved by IDT Corporation as the Company’s sole stockholder, to provide incentives to executive officers, employees, directors and consultants of the Company and/or its subsidiaries. The maximum number of shares of the Company’s Class B common stockCommon Stock reserved for the grant of awards under the Company’s Stock Option and2009 Incentive Plan is 383,020, subjectwas 285,860 shares. Incentives that were available to adjustment. Incentives availablebe granted under the Company’s Stock Option and2009 Incentive Plan may includeincluded stock options, stock appreciation rights, limited stock appreciation rights, restricted stock and deferred stock units. Pursuant to the 2009 Incentive Plan, as of August 2019 no new awards may be issued under that plan. As of July 31, 2021, there remained outstanding 10,000 options that were awarded under the 2009 Incentive Plan.
Non-cash compensation included in selling, general and administrative expenses for continuing operations was $87,000 and $47,000 in the three months ended July 31, 2021 and 2020, respectively. Non-cash compensation included in selling, general and administrative expenses for continuing operations was $246,000 and $577,000 in the nine months ended July, 2021 and 2020, respectively.
Note 5—Loans
Related party loans
On August 21, 2018, the Company entered into a loan agreement with the Company’s Stock OptionChairman of the Board of Directors $5,000,000. Interest accrued at prime rate plus 1% and Incentive Plan,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 price of each option award shall not be less than one hundred percent of the fair market valueCompany, be paid in shares of Class B common stock (and the Company’sremaining amount in cash) with such shares valued based on the average closing prices for the Class B common stock on the date of grant. Each option agreement shall provideten trading days immediately prior to the exercise schedule forapplicable interest due date. The cumulative shares issued in connection with the option as determined byloan interest was 63,255. The interest was to be paid quarterly on the Compensation Committee. The exercise period will be ten years fromloan. In conjunction with the date ofloan, the grant ofCompany issued the option unless otherwise determined by the Compensation Committee. No awards have been granted under the Company’s Stock Option and Incentive Planlender a warrant to date.
Bank Loans
On November 21, 2018, a VIE (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 its total outstanding capital stockproceeds of the related license agreements and tax credits, including interest based on the prime rate. IDWE is the guarantor on the loan. The loan has been paid off in full on May 3, 2021.
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 has been paid off in full on May 10, 2021.
Government loans
On April 2, 2021, 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 time.
On April 27, 2020, the Company received loan proceeds of $1,195,679 (the “IDWMH PPP Loan”) 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 amountform of $0.25a Note dated April 15, 2020 issued by the Company, matures on April 15, 2022 and bears interest at a rate of 1% per share (approximately $2.1 millionannum, 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 aggregate), $0.06 per share (approximately $0.5 million inCARES Act. Under the aggregate), and $0.12 per share (approximately $1.0 million in the aggregate), on March 15, 2010, June 15, 2010 and November 9, 2010, respectively, to stockholders of record as of March 8, 2010, May 3, 2010 and November 1, 2010, respectively,terms of the Company’s Class A, Class B and Class C common stock.
IDW MEDIA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 6—Comprehensive Income (Loss)
Three Months Ended April 30, | Nine Months Ended April 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
| (in thousands) | (in thousands) | |||||||||||||||
| Net (loss) income | $ | (124 | ) | $ | (1,095 | ) | $ | 645 | $ | (1,145 | ) | |||||
| Foreign currency translation adjustments | 26 | (10 | ) | 74 | (11 | ) | ||||||||||
| Comprehensive (loss) income | (98 | ) | (1,105 | ) | 719 | (1,156 | ) | |||||||||
| Comprehensive (loss) income attributable to non-controlling interests | 40 | (36 | ) | 243 | 115 | |||||||||||
| Comprehensive (loss) income attributable to CTM Media Holdings, Inc. | $ | (138 | ) | $ | (1069 | ) | $ | 476 | $ | (1,271 | ) | |||||
The Company has the following three reportable business segments: IDWP, IDWE and CTM and IDW. CTM consists of our brochure distribution company and other advertising-based new product initiatives focused on small to medium sized businesses. IDW is a comic book and graphic novel publisher that creates and licenses original intellectual property. The Company owns 76.665% of IDW.(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 management.
Total Assets (in thousands)
July 31, 2021 for IDWP $13,485, IDWE $4,150 and IDWMH $7,020
July 31, 2020 for IDWP $12,836, IDWE $29,972 and IDWMH $9,258
Operating results for the business segments of the Company are as follows:
| (in thousands) (unaudited) | IDWP(a) | IDWE(b) | CTM | IDWMH(c) | Total | |||||||||||||||
| (discontinued operations) | (unallocated overhead) | |||||||||||||||||||
| Three months ended July 31, 2021 | �� | |||||||||||||||||||
| Revenues | $ | 6,779 | $ | - | $ | - | $ | - | $ | 6,779 | ||||||||||
| Income (loss) from operations | 74 | (1,842 | ) | - | (314 | ) | (2,082 | ) | ||||||||||||
| Loss from discontinued operations, net | - | - | - | - | - | |||||||||||||||
| Net income (loss) | 74 | (1,890 | ) | - | 875 | (941 | ) | |||||||||||||
| Three months ended July 31, 2020 | ||||||||||||||||||||
| Revenues | $ | 5,216 | $ | 3,271 | $ | - | $ | - | $ | 8,487 | ||||||||||
| Loss from operations | (40 | ) | (3,232 | ) | - | (137 | ) | (3,409 | ) | |||||||||||
| (Loss) income from discontinued operations, net | - | - | (1,126 | ) | - | (1,126 | ) | |||||||||||||
| Net (loss) income | (40 | ) | (3,232 | ) | (1,126 | ) | (150 | ) | (4,548 | ) | ||||||||||
| (in thousands) | CTM | IDW | Total | |||||||||
| Three months ended April 30, 2011 | ||||||||||||
| Revenues | $ | 3,714 | $ | 3,077 | $ | 6,791 | ||||||
| (Loss) income from operations | (657 | ) | 167 | (490 | ) | |||||||
| Depreciation and amortization | 195 | 5 | 200 | |||||||||
| Total assets at April 30, 2011 | 10,371 | 6,881 | 17,252 | |||||||||
| Three months ended April 30, 2010 | ||||||||||||
| Revenues | $ | 4,051 | $ | 2,781 | $ | 6,832 | ||||||
| (Loss) from operations | (343 | ) | (314 | ) | (657 | ) | ||||||
| Depreciation and amortization | 186 | 11 | 197 | |||||||||
| Total assets at April 30, 2010 (i) | 7,269 | 6,584 | 16,189 | |||||||||
| Nine months ended April 30, 2011 | ||||||||||||
| Revenues | $ | 12,754 | $ | 10,363 | $ | 23,117 | ||||||
| (Loss) income from operations | (689 | ) | 1,024 | 335 | ||||||||
| Depreciation and amortization | 518 | 26 | 544 | |||||||||
| Nine months ended April 30, 2010 | ||||||||||||
| Revenues | $ | 12,890 | $ | 8,541 | $ | 21,431 | ||||||
| Income (loss) from operations | 44 | (312 | ) | (268 | ) | |||||||
| Depreciation and amortization | 586 | 67 | 653 | |||||||||
| (in thousands) (unaudited) | IDWP(a) | IDWE(b) | CTM | IDWMH | Total | |||||||||||||||
| (discontinued operations) | (unallocated overhead) | |||||||||||||||||||
| Nine months ended July 31, 2021 | ||||||||||||||||||||
| Revenues | $ | 18,416 | $ | 6,916 | $ | - | $ | - | $ | 25,332 | ||||||||||
| Loss from operations | (808 | ) | (5,178 | ) | - | (782 | ) | (6,768 | ) | |||||||||||
| Loss from discontinued operations, net | - | - | (1,280 | ) | - | (1,280 | ) | |||||||||||||
| Net (loss) income | (808 | ) | (5,063 | ) | (1,280 | ) | 2,495 | (4,656 | ) | |||||||||||
| Nine months ended July 31, 2020 | ||||||||||||||||||||
| Revenues | $ | 16,197 | $ | 11,896 | $ | - | - | $ | 28,093 | |||||||||||
| Loss from operations | (594 | ) | (6,622 | ) | - | (646 | ) | (7,862 | ) | |||||||||||
| Loss from discontinued operations, net | - | - | (3,818 | ) | - | (3,818 | ) | |||||||||||||
| Net loss | (593 | ) | (6,623 | ) | (3,818 | ) | (740 | ) | (11,774 | ) | ||||||||||
| (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) | IDWE includes Thought Bubble LLC and Word Balloon LLC which consist of only television costs. |
| (c) | IDWMH reported net income in the three and nine months ended July 31, 2021 as a result of PPP loan forgiveness and the sale of CTM. |
IDW MEDIA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 7—Trade Accounts Receivable and Deferred Revenue
Trade accounts receivable consisted of the following:
| (in thousands) | July 31, 2021 | October 31, 2020 | ||||||
| Accounts receivable | $ | 6,235 | $ | 23,246 | ||||
| Less allowance for sales returns | (168 | ) | (296 | ) | ||||
| Less allowance for doubtful accounts | - | (29 | ) | |||||
| Accounts receivable, net | $ | 6,067 | $ | 22,921 | ||||
The opening balance of trade accounts receivable as of November 1, 2019 was $43,462,000.
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 consisted of the following:
| (in thousands) | ||||
| Beginning balance, October 31, 2020 | $ | 2,385 | ||
| Deferral of revenue | 591 | |||
| Recognition of deferred revenue | (710 | ) | ||
| Return of previously collected funds | (22 | ) | ||
| Ending balance, July 31, 2021 | $ | 2,244 | ||
The Company expects to satisfy its remaining performance obligations and recognize approximately 100% of the deferred revenue balance over the next 12 months ending July 31, 2022.
Note 8—Inventory
Inventory is stated at the lower of cost or market determined by the first in, first out method for print.
Inventory consist of the following:
| (in thousands) | July 31, 2021 | October 31, 2020 | ||||||
| Work in progress | $ | 584 | $ | 1,004 | ||||
| Finished goods | 2,743 | 2,750 | ||||||
| Total | $ | 3,327 | $ | 3.754 | ||||
Note 9—Prepaid Expenses
Prepaid expenses consisted of the following:
| (in thousands) | July 31, 2021 | October 31, 2020 | ||||||
| Royalties and deposits | $ | 2,007 | $ | 1,061 | ||||
| Insurance | 89 | 134 | ||||||
| Other prepaids | 284 | 166 | ||||||
| Total | $ | 2,380 | $ | 1.361 | ||||
IDW MEDIA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 8— Income Taxes10—Television costs and amortization
Television costs consisted of the following:
| (in thousands) | July 31, 2021 | October 31, 2020 | ||||||
| In-production | $ | - | $ | 435 | ||||
| In-development | 1,502 | 2,491 | ||||||
| Total | $ | 1,502 | $ | 2,926 | ||||
| Three Months Ended July 31, | Nine Months Ended July 31, | |||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Television cost amortization | $ | - | $ | 5,320 | $ | 5,341 | $ | 14,182 | ||||||||
| Television cost impairments | - | - | 2,065 | - | ||||||||||||
| Total | $ | $ | 5,320 | $ | 7,406 | $ | 14,182 | |||||||||
Amortization expense decreasedfor television costs is expected to be approximately $1,204,000 over the next twelve months ending July 31, 2022. The impairment relates to the adoption of ASU 2019-02 (Note 1).
Note 11—Accrued Expenses
Accrued expenses consisted of the following:
| (in thousands) | July 31, 2021 | October 31, 2020 | ||||||
| Royalties | $ | 1,040 | $ | 1,268 | ||||
| Payroll, bonus, accrued vacation and payroll taxes | 1,176 | 844 | ||||||
| Other | 714 | 346 | ||||||
| Total | $ | 2,930 | $ | 2,458 | ||||
Note 12—Property and Equipment
Property and equipment consisted of the following:
| (in thousands) | July 31, 2021 | October 31, 2020 | ||||||
| Equipment | $ | 526 | $ | 424 | ||||
| Furniture and fixtures | 106 | 105 | ||||||
| Leasehold improvements | 826 | 826 | ||||||
| Computer software | 24 | 20 | ||||||
| 1,482 | 1,375 | |||||||
| Less accumulated depreciation | (1,114 | ) | (965 | ) | ||||
| Property and equipment, net | $ | 368 | $ | 410 | ||||
Depreciation expense totaled $62,000, and $61,000 for the three months ended July 31, 2021 and 2020, respectively, and $182,000 and $190,000 for the nine months ended July 31, 2021 and 2020, respectively.
IDW MEDIA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 13—Commitments
Leases
The Company has various lease agreements with terms up to 3 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 and the weighted-average discount rate was 4.59% as of July 31, 2021.
The Company recognized lease expense for its operating leases of $124,960 and $374,880 for the three and nine months ended April 30, 2011 compared to the similar period in fiscal 2010 due to decreases in stateJuly 31, 2021, respectively and local$139,437 and foreign income tax expense which was partially offset by an increase in US Alternative Minimum Tax expense. State and local income tax expense decreased in$493,149 for the three and nine months ended April 30, 2011 comparedJuly 31, 2020, respectively. The cash paid under operating leases was $149,651 and $436,577 for the three and nine months ended July 31, 2021, respectively and $178,508 and $543,561for the three and nine months ended July 31, 2020, respectively.
At July 31, 2021, the Company had a right-of-use-asset related to operating leases of $1,037,434, accumulated amortization related to operating leases of $615,463, 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.
As of July 31, 2021, future minimum lease payments required under operating leases are as follows:
| Maturity of Lease Liability (in thousands) | Total | |||
| Fiscal years ending October 31: | ||||
| Rest of 2021 | $ | 157 | ||
| 2022 | 354 | |||
| 2023 | 13 | |||
| 2024 | 7 | |||
| Thereafter | - | |||
| Total minimum lease payments | $ | 531 | ||
| Less: imputed interest | (12 | ) | ||
| Present value of future minimum lease payments | $ | 519 | ||
IDW MEDIA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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) | Nine Month Ended July 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 expense on the condensed consolidated statements of operations for the three and nine months ended July 31, 2020. 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) | Nine Month Ended July 31, 2020 | |||
| The balance of cash and cash equivalents deconsolidated | $ | (115 | ) | |
IDW MEDIA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 15—Discontinued Operations
As a result of the economic downturn related to the similar periodsoutbreak of the COVID-19 virus, and the impact it had on small businesses in fiscal 2010 duethe tourist markets, the Company decided to make a strategic shift to dispose of CTM and to focus on its entertainment and publishing businesses.
On February 15, 2021, pursuant to a SPA dated as of July 14, 2020 IDWMH sold all of the stock of CTM to an assignee of the Chairman in exchange for (i) the cancelation of $3.75 million of indebtedness owed by IDWMH to the utilizationChairman’s designee, (ii) a contingent payment of Net Operating Losses (NOL’s)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 CTM Sale Date, and (iii) a contingent payment if CTM is sold within 36 months the CTM Sale Date for more than $4.5 million. Prior to executing the SPA, the Company obtained a third-party’s valuation of CTM and a fairness opinion that were not availablestated the consideration being received by the Company in the prior periods and the release of accrued tax liability dueCTM Sale was fair. In addition to the expirationCompany’s Board of Directors approving the CTM Sale, the Audit Committee of the statuteBoard of limitation. Our foreign income tax expense results from income generatedDirectors, 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 our foreign subsidiaries that cannot be offset against losses(1) stockholders representing a majority of ourthe 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 the Chairman or immediate family members of the Chairman, including, without limitation, trusts or other subsidiaries.
As of July 31, 2020, CTM was reported as a discontinued operation and CTM’s operations have since been included in the ASC Topic 820 (Fair Value Measurementsfinancial statements as discontinued operations. On February 15, 2021, the Company closed the CTM Sale. The loan of $3,750,000 was forgiven in part of the sale and Disclosures). ASU 2010-06 requires new disclosuresthe Company recorded 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 amountfinancial statements for the periods following the CTM Sale Date and reason for transfersCTM’s operations are only consolidated in and outthe Company’s condensed consolidated statements of Level 1 and 2 fair value measurements. ASU 2010-06 also requires disclosure of activities, including purchases, sales, issuances, and settlements withinoperations results until the Level 3 fair value measurements and clarifies existing disclosure requirements on levels of disaggregation and disclosures about inputs and valuation techniques. Except for otherwise provided, ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009.CTM Sale Date. There was no contingent gain recorded since there was no foreseeable contingent payments to the Company.
Pursuant to ASC 205-20-45-9 general corporate overhead should not be allocated to discontinued operations. The adoption of this standardCompany did not have a material effect onallocate any corporate overhead to CTM when it began being classified as held for sale in the Company’s financial statements.third quarter of 2020 and continued to not allocate any expenses.
The condensed consolidated statements of operations include the following operating results related to the CTM discontinued operations:
| Results of discontinued operations | Three months ended July 31, | Nine months ended, July 31, | ||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Revenue | $ | - | $ | 1,272 | $ | 1,427 | $ | 7,367 | ||||||||
| Direct cost of revenue | - | 718 | 946 | 3,645 | ||||||||||||
| Selling, general and administrative | - | 1,321 | 1,649 | 6,124 | ||||||||||||
| Depreciation and amortization | - | 355 | 295 | 919 | ||||||||||||
| Bad Debt | - | 95 | (109 | ) | 577 | |||||||||||
| Total costs and expenses | - | 2,489 | 2,781 | 11,265 | ||||||||||||
| Loss from operations | - | (1,217 | ) | (1,354 | ) | (3,898 | ) | |||||||||
| Interest expense (income), net | - | (30 | ) | 6 | (49 | ) | ||||||||||
| Other income, net | - | 121 | 68 | 129 | ||||||||||||
| Loss before income taxes | - | (1,126 | ) | (1,280 | ) | (3,818 | ) | |||||||||
| (Provision for) benefit from income taxes | - | - | - | - | ||||||||||||
| Loss from discontinued operations, net | $ | - | $ | (1,126 | ) | $ | (1,280 | ) | $ | (3,818 | ) | |||||
| (i) | Stock based compensation for discontinued operations included in selling, general and administrative expenses is $0 for the nine months ended July 31, 2021. |
| (ii) | CTM is no longer consolidated into the Company as of February 15, 2021 the CTM Sale Date. |
IDW MEDIA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 15—Discontinued Operations (continued)
Cash flows of CTM’s depreciation and amortization, capital expenditures and notable activities for the FASB issued ASU No. 2010-09, “Amendmentsdiscontinued operation include:
| Nine months ended July 31, | ||||||||
| (in thousands) | 2021 | 2020 | ||||||
| Depreciation and amortization | $ | 185 | $ | 604 | ||||
| Amortization of finance lease | 109 | 315 | ||||||
| Capital expenditure | (22 | ) | (322 | ) | ||||
Gain on extinguishment of PPP loan | (68 | ) | - | |||||
Significant cash flow transactions recorded on IDWMH as a result of the sale of discontinued operations include:
| ● | Gain on sale of CTM of $2,123,000 |
| ● | Gain on disposal of ROU assets of $97,000 |
| ● | Disposal of discontinued operations of ($902,000) |
The accompanying condensed consolidated balance sheets include the following carrying amounts of assets and liabilities related to Certain Recognition and Disclosure Requirements” (“ASU 2010-09”), which is included in ASC Topic 855 (Subsequent Events). ASU 2010-09 clarifies that an SEC filer is required to evaluatethe CTM discontinued operations:
| Assets and liabilities of Discontinued Operations | July 31, | 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 | ||||||
| Intangible 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. |
IDW MEDIA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 16—Subsequent events
Management has evaluated subsequent events through September 13, 2021, the date thaton which the condensed consolidated financial statements arewere available to be issued. ASU 2010-09 was effective upon the issuanceThere were no material subsequent events that require recognition or additional disclosures in these condensed consolidated financial statements, except as follows:
On August 6, 2021, IDW Media Holdings, Inc. closed a registered public offering of Class B common stock and EF Hutton, division of Benchmark Investments, Inc. (“EF Hutton”), as representative of the final update and did not have any impact onunderwriters listed (the “Underwriters”) exercised the overallotment option included as part of the offering in full. The Company sold an aggregate of 2,875,000 shares of the Company’s financial statements.Class B common stock for gross consideration of $10,350,000 less Underwriters commissions of $724,500 and Underwriters expenses of $75,000.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with the accompanying condensed consolidated financial statements and the associated notes thereto of this Quarterly Report, and the audited consolidatedcombined financial statements and the notes thereto and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Reportthe Company’s Registration Statement on Form 10-K for the fiscal year ended July 31, 2010,S-1 as amended filed with the U.S. Securities and Exchange Commission (the “SEC”).
As used below, unless the context otherwise requires, the terms “the Company,” “we,” “us,” and “our” refer to CTMIDW Media Holdings, Inc., a Delaware corporation, and our subsidiaries.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words “believes,” “anticipates,” “expects,” “plans,” “intends,” and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties that could result in those differences include, but are not limited to, those discussed under Item 1A to Part I “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended July 31, 2010.Registration Statement. The forward-looking statements are made as of the date of this report and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our reports filed with the SEC pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934,1934.
Overview
Our principal businesses consist of:
| i. | 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 |
| ii. | IDWE, is a production company and studio that develops, produces and distributes content based on IDWP’s original IP for a variety of formats including film and television. |
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. IDWMH has announced an agreement to sell CTM. Pursuant to a SPA dated as of July 14, 2020 IDWMH sold all of the stock of CTM to an assignee of the Chairman in exchange for (i) the cancelation of $3.75 million of indebtedness owed by IDWMH to the Chairman’s designee, (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 CTM Sale Date, and (iii) a contingent payment if CTM is sold within 36 months of the CTM Sale Date 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. The sale was consummated on February 15, 2021.
Reportable Segments
We have the following three reportable business segments: IDWP, 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. Founded in 1999, IDWP has a long tradition of supporting original, powerful 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 and Martin Simmonds’ Dying is Easy are just a few of the hundreds of outstanding, award-winning titles published since its inception. Titles such as Canto, Ghost Tree, Road of Bones, Mountainhead, and others are in active development now and IDWP will contunie to focus on creator driven titles.
In 2015, IDWP acquired Top Shelf Productions, an award-winning critically-acclaimed publisher of graphic novels, which continues to operate as a thriving imprint. Top Shelf is renowned for publishing works of literary significance including our Annual Reportthe #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 and is the second most taught graphic novel in schools. In July 2019, Top Shelf Productions released George Takei’s graphic memoir, They Called Us Enemy, which debuted at #2 on Form 10-Kthe 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, the New York Public Library, and more.
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 line of middle-grade comic books designed for younger readers; Toho’s Godzilla; and Lucasfilm’s Star Wars Adventures. These licensed titles bring with them diverse built-in audiences and also build cache and retailer support for IDWP. With licensed franchises, IDWP strategy is to focus not only on licenses that 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 is also home to the acclaimed imprints The Library of American Comics (publishing classic comic reprints); EuroComics (bringing foreign language comics to an English-speaking audience); Yoe! Books (specializing in creative historical comic collections); Artist’s Editions (scans of original art printed at the same size they were drawn, with all the distinctive creative nuances that make original art unique); and Sunday Press (producing restorations of classic American comic strips).
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 largest segment is the publication of comic book and trade paperback products. Its comics and graphic novels are primarily distributed through three channels: (i) to comic book specialty stores (the “direct market”). Diamond Comic Distributors, Inc. 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”). IDWP’s non-direct market distributor is PRH. IDWP works hand-in-hand with PRH 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”). 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, including its imprint Top Shelf, sold over 4.1 million units in fiscal year ended July 31, 2010.2020 and was recognized as the fourth largest publisher in its category in calendar year 2019.
In 2014 IDWP launched IDW Games 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 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 Spin-Off, on September 14, 2009, we became an independent public company. IDT CorporationCOVID-19 pandemic, the direct market ceased distribution of new products from April 1, 2020 through May 19, 2020. Accordingly, IDWP did not publish any new comics during this period. Based upon distributor capacity new comic 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 releases continues to provide certain functions pursuant to a Master Services Agreement, dated September 14, 2009. Duringhave an impact on the nine months ended April 30, 2011 and 2010, our selling, general and administrative expenses included $122,000 and $500,000, respectively, for all services and allocated expenses charged by IDT Corporation to us. At April 30, 2011 and July 31, 2010 the amount owed to IDT Corporation was $23,000 and $38,000, respectively.
In order to expand its business, (other than working capital). WMET 1160 AMcounter a persistent industry-wide decline in direct market sales and outperform its industry competitors, IDWP continues to focus on launching new creator-owned titles and partnering with established brands to bring fan-favorite properties to the comics market. IDWP is 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 radio station serving the Washington, D.C. metropolitan area. The sale price for the WMET assets was $4 million in a combination of cashseparate entity and a promissory noteoperates independently from IDWP. Due to its size, and nature of the buyer that is secured by the assets sold. $1.3 million of the purchase pricebusiness, activity related to Clover Press was paidincluded with IDWP for presentation purposes while it was a consolidated entity. Effective April 1, 2020 IDWMH’s interest in cash at the closing and the remainder is owed pursuantClover Press decreased to a two-year promissory note, which is extendable in part to three years at the option of the buyer. The sale met the criteria to be reported19.9%, as a discontinued operation in the third quarter of fiscal 2010result it is now an investment valued at cost and accordingly, WMET’s results are classified as part of discontinued operations during the fiscal year 2010.no longer consolidated.
IDWP’s revenues represented 55.2%100.0% and 60.1%61.5% of our consolidated revenues in the three months ended July 31, 2021 and 2020, respectively and 72.7% and 57.7% in the nine months ended April 30, 2011July 31, 2021 and 2010,2020, respectively.
IDWE
IDWE is a production company and studio that develops, produces and distributes content based on IDWP’s original IP for a variety of formats including film and television.
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 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 was based upon Jonathan Maberry’s IDW Publishing comic book series of the same name. |
| ● | October Faction premiered on Netflix on January 23, 2020. The 10-episode show was based on the IDW Publishing comics 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. |
| ● | 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 published by IDWP. Season two has been set to air in October 2021 and Season three has been ordered by Netflix. |
Previously, IDWE, in partnership with Ideate Media, partnered with AMC Studios to license 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 bookbooks published by IDWP, to BBC America. Season one of the series premiered October 22, 2016 in the U.S. on BBC America. The second and graphic novel publisher that creates and licenses intellectual property. IDW’sfinal season aired on BBC America in 2017. Netflix currently streams both seasons worldwide.
IDWE’s revenues represented 44.8%0% and 39.9%38.5% of our consolidated revenues in the three months ended July 31, 2021 and 2020, respectively and 27.3% and 42.3% in the nine months ended April 30, 2011July 31, 2021 and 2010,2020, respectively.
CTM (Discontinued Operations)
As a result of the transaction, we own a 76.665% interest in IDW.
COVID-19: Overview of Impacts
| ● | IDWMH: Received two PPP loans related to core IDWE and IDWP operations. | |
| o | $1,195,679 on April 27, 2020, subsequently forgiven on July 20, 2021 |
| o | $1,195,680 on April 2, 2021 |
| ● | IDWE: Industry-wide production suspensions halted filming and production ofWynonna EarpSeason 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 in April 1, 2020 by Diamond, 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 PRH, a largely returnable market, have seen decreased overall returns. Effective in April 2021 the return policies have reverted back to pre- COVID. 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 ROU assets were adjusted by amounts equal to the adjustments to the lease liabilities. Although the delay in comic releases continues to have an impact on the industry, the impact has been slowly decreasing and returning to pre-COVID-19 levels. |
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 as if the current structure existed for all periods presented.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 generally accepted accounting principles generally accepted in the United States (“U.S. GAAP”). Our significant accounting policies are described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for fiscal 2010.States. 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, and intangible assets with indefinite useful lives, and valuation of long-lived assets including intangible assets with finite useful lives.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. For additionalSee Note 1 to the condensed consolidated financial statements in the Registration Statement for a complete discussion of our criticalsignificant accounting policies, see our Management’s Discussion and Analysis of Financial Condition and policies.
Results of Operations in our Annual Report on Form 10-K for fiscal 2010.
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. Also, we did
Net income IDW Media Holdings, Inc.
Consolidated
| (in thousands) (unaudited) | Change | |||||||||||||||
| Three months ended July 31, | 2021 | 2020 | $ | % | ||||||||||||
| (Loss) from continuing operations | $ | (2,082 | ) | $ | (3,409 | ) | $ | 1,327 | (38.9 | %) | ||||||
| Interest expense, net | (13 | ) | (13 | ) | - | 0.0 | % | |||||||||
| Other income, net | 1,154 | - | 1,154 | nm | ||||||||||||
| Provision for income taxes | - | - | - | nm | ||||||||||||
| Net loss from continuing operations | (941 | ) | (3,422 | ) | 2,481 | (72.5 | %) | |||||||||
| Net loss from discontinued operations | - | (1,126 | ) | 1,126 | (100.0 | %) | ||||||||||
| Net loss | $ | (941 | ) | $ | (4,548 | ) | $ | 3,607 | (79.3 | %) | ||||||
| (in thousands) (unaudited) | Change | |||||||||||||||
| Nine months ended July 31, | 2021 | 2020 | $ | % | ||||||||||||
| Loss from continuing operations | $ | (6,768 | ) | $ | (7,862 | ) | $ | 1,094 | (13.9 | %) | ||||||
| Interest income (expense), net | 128 | (33 | ) | 161 | (487.9 | %) | ||||||||||
| Other income (expense), net | 1,141 | (61 | ) | 1,202 | (1970.5 | %) | ||||||||||
| Provision for income taxes | - | - | - | nm | ||||||||||||
| Net loss from continuing operations | (5,499 | ) | (7,956 | ) | 2,457 | (30.9 | %) | |||||||||
| Net loss from discontinued operations | (1,280 | ) | (3,818 | ) | 2,538 | (66.5 | %) | |||||||||
| Gain on sale of discontinued operations | 2,123 | - | 2,123 | - | ||||||||||||
| Net loss | $ | (4,656 | ) | $ | (11,774 | ) | $ | 7,118 | (60.5 | %) | ||||||
nm—not include a separate discussion of WMET’s results of operation since themeaningful
Loss from operations. Loss from operations were not significant.
| (in thousands) | Three months ended April 30, | Change | Nine months ended April 30, | Change | ||||||||||||||||||||||||||||
| 2011 | 2010 | $ | % | 2011 | 2010 | $ | % | |||||||||||||||||||||||||
| Revenues | ||||||||||||||||||||||||||||||||
| CTM | $ | 3,714 | $ | 4,051 | $ | (337 | ) | (8.3 | ) | $ | 12,754 | $ | 12,890 | $ | (136 | ) | (1.1 | ) | ||||||||||||||
| IDW | 3,077 | 2,781 | 296 | 10.6 | 10,363 | 8,541 | 1,822 | 21.3 | ||||||||||||||||||||||||
| Total revenues | $ | 6,791 | $ | 6,832 | $ | (41 | ) | ( 0.6 | ) | $ | 23,117 | $ | 21,431 | $ | 1,686 | 7.9 | ||||||||||||||||
Loss from operations decreased for the nine month period ended April 30, 2011 principally due to the decrease in print revenues. The increase in IDW’s revenues was primarily due to a net increase in publishing revenues, digital publishing revenues, and royalty income.
| (in thousands) | Three Months ended April 30, | Change | Nine months ended April 30, | Change | ||||||||||||||||||||||||||||
| 2011 | 2010 | $ | % | 2011 | 2010 | $ | % | |||||||||||||||||||||||||
| Costs and expenses | ||||||||||||||||||||||||||||||||
| Direct cost of revenues | $ | 3,446 | $ | 3,605 | $ | (159 | ) | (4.4 | ) | $ | 10,919 | $ | 10,587 | $ | 332 | 3.1 | ||||||||||||||||
| Selling, general and administrative | 3,650 | 3,651 | (1 | ) | 0.0 | 11,250 | 10,368 | 882 | 8.5 | |||||||||||||||||||||||
| Depreciation and amortization | 200 | 197 | 3 | 1.5 | 544 | 653 | (109 | ) | (16.7 | ) | ||||||||||||||||||||||
| Bad debt expense | (15 | ) | 36 | (51 | ) | (141.7 | ) | 69 | 91 | (22 | ) | (24.2 | ) | |||||||||||||||||||
| Total costs and expenses | $ | 7,281 | $ | 7,489 | $ | (208 | ) | (2.8 | ) | $ | 22,782 | $ | 21,699 | $ | 1,083 | 5.0 | ||||||||||||||||
Interest income (expense), net increased in the nine months ended July 31, 2021 compared to the similar period in fiscal 2010 was principally as a result the corresponding increase in its related revenues. Overall consolidated direct cost of revenues declined during the three month periodnine months ended April 30, 2011 comparedJuly 31, 2020 by $161,000 due to the similar period in fiscal 2010 primarily due to a decreases in direct cost of revenues at our CTM and IDW segments. Overall gross margininterest income from the CRA tax credits.
Other income (expense), net increased to 49.3% and 52.8% infor both the three and nine months ended April 30, 2011 respectively, from 47.2% and 50.6% inJuly 31, 2021compared to the three and nine months ended April 30, 2010 respectively. This increase wasJuly 31, 2020 as a result of an increase in overall gross margins at our CTMthe PPP loan forgiveness of $1,195,680.
Net loss from discontinued operations. Net loss from discontinued operations decreased by $1,126,000 and IDW segments
Gain on sale of discontinued operations increased by $2,132,000 for the nine months ended April 30, 2011 was due primarily to a decrease in bad debt expense at our CTM segment.
| (in thousands) | Three Months ended April 30, | Change | Nine Months ended April 30, | Change | ||||||||||||||||||||||||||||
| 2011 | 2010 | $ | % | 2011 | 2010 | $ | % | |||||||||||||||||||||||||
| (Loss) income from operations | $ | (490 | ) | $ | (657 | ) | $ | 167 | 25.4 | $ | 335 | $ | (268 | ) | $ | 603 | 225.0 | |||||||||||||||
| Interest income (expense) | 15 | (15 | ) | 30 | 200.0 | 43 | (73 | ) | 116 | 158.9 | ||||||||||||||||||||||
| Other income (expense) | 3 | (156 | ) | 159 | 101.9 | 3 | (160 | ) | 163 | 101.9 | ||||||||||||||||||||||
| Benefit from (provision for) income taxes | 348 | 49 | 299 | 610.2 | 264 | (74 | ) | 338 | 456.8 | |||||||||||||||||||||||
| Loss related to discontinued operations | - | (316 | ) | 316 | 100.0 | - | (570 | ) | 570 | 100.0 | ||||||||||||||||||||||
| Net (loss) income | (124 | ) | (1,095 | ) | 971 | 88.7 | 645 | (1,145 | ) | 1,790 | 156.3 | |||||||||||||||||||||
| Less: Net (loss) income attributable to non - controlling interest | 40 | (36 | ) | 76 | 211.1 | 243 | 115 | 128 | 111.3 | |||||||||||||||||||||||
| Net (loss) income attributable to CTM Media Holdings, Inc. | $ | (164 | ) | $ | (1,059 | ) | $ | 895 | 84.5 | $ | 402 | $ | (1,260 | ) | $ | 1,662 | 131.9 | |||||||||||||||
| (in thousands) | Three months ended April 30, | Change | Nine Months ended April 30, | Change | ||||||||||||||||||||||||||||
| 2011 | 2010 | $ | % | 2011 | 2010 | $ | % | |||||||||||||||||||||||||
| Revenues | $ | 3,714 | $ | 4,051 | $ | (337 | ) | (8.3 | ) | $ | 12,754 | $ | 12,890 | $ | (136 | ) | (1.1 | ) | ||||||||||||||
| Direct cost of revenues | 1,566 | 1,714 | (148 | ) | (8.6 | ) | 4,709 | 5,090 | (381 | ) | (7.5 | ) | ||||||||||||||||||||
| Selling, general and administrative | 2,625 | 2,458 | 167 | 6.8 | 8,147 | 7,080 | 1,067 | 15.1 | ||||||||||||||||||||||||
| Depreciation and amortization | 195 | 187 | 8 | 4.3 | 518 | 586 | (68) | (11.6 | ) | |||||||||||||||||||||||
| Bad debt expense | (16 | ) | 36 | (52 | ) | (144.4 | ) | 69 | 91 | (22 | ) | (24.2 | ) | |||||||||||||||||||
| (Loss) income from operations | $ | (656 | ) | $ | (344 | ) | $ | (312 | ) | 90.7 | $ | (689 | ) | $ | 43 | $ | (732 | ) | (1,702.3 | ) | ||||||||||||
IDWP
| (in thousands) (unaudited) | Change | |||||||||||||||
| Three months ended July 31, | 2021 | 2020 | $ | % | ||||||||||||
| Revenues | $ | 6,779 | $ | 5,216 | $ | 1,563 | 30.0 | % | ||||||||
| Direct cost of revenues | 3,509 | 2,770 | 739 | 26.7 | % | |||||||||||
| Selling, general and administrative | 3,139 | 2,434 | 705 | 29.0 | % | |||||||||||
| Depreciation and amortization | 52 | 52 | - | 0.0 | % | |||||||||||
| Bad debt expense | 5 | - | 5 | nm | ||||||||||||
| Income (loss) from operations | $ | 74 | $ | (40 | ) | $ | 114 | (285.0 | %) | |||||||
| (in thousands) (unaudited) | Change | |||||||||||||||
| Nine months ended July 31, | 2021 | 2020 | $ | % | ||||||||||||
| Revenues | $ | 18,416 | $ | 16,197 | $ | 2,219 | 13.7 | % | ||||||||
| Direct cost of revenues | 10,015 | 8,803 | 1,212 | 13.8 | % | |||||||||||
| Selling, general and administrative | 9,041 | 7,824 | 1,217 | 15.6 | % | |||||||||||
| Depreciation and amortization | 151 | 164 | (13 | ) | (7.9 | %) | ||||||||||
| Bad debt expense | 17 | - | 17 | nm | ||||||||||||
| Income (loss) from operations | $ | (808 | ) | $ | (594 | ) | $ | (214 | ) | 36.0 | % | |||||
nm—not meaningful
Included in CTM's revenuesIDWP’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.
Revenues. Revenues increased by $1,563,000 in the three months ended July 31, 2021, compared to the three months ended July 31, 2020. Publishing revenue increased $1,504,000 driven primarily by several high-performing direct market titles and increased direct-to-consumer sales, and due to the temporary halt of direct market sales in part of 2020 as a result of COVID-19. Games revenue increased $270,000 due to several large games sales. Digital sales increased by $136,000 due to strong sales across all platforms. The foregoing gains were partially offset by decreased licensing and royalty revenues of $240,000 due primarily to co-publishing royalty revenue in 2020. Additionally overall increases in sales returns and discounts of $107,000 related to the increased sales volume.
Revenues increased by $2,219,000 in the nine months ended April 30, 2011July 31, 2021, compared to the similar periodsnine months ended July 31, 2020. Publishing revenue increased $2,850,000 driven by several high-performing direct market titles, increased direct-to-consumer sales and from the temporary halt of direct market sales in fiscal 2010 was2020 as a result of COVID-19. Digital sales increased $199,000 due to continued strong sales across all platforms. The foregoing increases were partially offset by decreased games revenue of $488,000 due to fulfillment of a direct-to-consumer games campaign in 2020 and decreased licensing and royalty revenues of $160,000 primarily due to decreasesco-publishing royalty revenue in distribution revenues2020. Sales returns and printing revenues. Distribution revenues declined principallydiscounts increased by $51,000 due to our US operations. Printingincreased sales volume. Additionally, Clover Press revenues declined due to our exit from the printing businessdecreased by $131,000 as they are no longer consolidated in the US and conversion into a commission based print referral model duringnine months ended July 31, 2021.
Direct cost of revenues. Publishing direct cost of revenues increased by $739,000 in the third quarter of fiscal 2010.
| (in thousands) | Three Months ended April 30, | Change | Nine Months ended April 30, | Change | ||||||||||||||||||||||||||||
| 2011 | 2010 | $ | % | 2011 | 2010 | $ | % | |||||||||||||||||||||||||
| Revenues | $ | 3,077 | $ | 2,782 | $ | 295 | 10.6 | $ | 10,363 | $ | 8,541 | $ | 1,822 | 21.3 | ||||||||||||||||||
| Direct cost of revenues | 1,880 | 1,892 | (12 | ) | (0.6 | ) | 6,209 | 5,498 | 711 | 12.9 | ||||||||||||||||||||||
| Selling, general and administrative | 1,025 | 1,193 | (168 | ) | (14.1 | ) | 3,104 | 3,288 | (184 | ) | (5.6 | ) | ||||||||||||||||||||
| Depreciation and amortization | 5 | 11 | (6 | ) | (54.5 | ) | 26 | 67 | (41 | ) | (61.2 | ) | ||||||||||||||||||||
| Income from operations | $ | 167 | $ | (314 | ) | $ | 481 | 153.2 | $ | 1,024 | $ | (312 | ) | $ | 1,336 | 428.2 | ||||||||||||||||
IDWP’s gross margin for the three months ended July 31, 2021 increased to 48.2% from 46.9% for the three months ended July 31, 2020. Gross margin for the nine months ended July 31, 2021 decreased to 45.6% from 45.7% for the nine months ended July 31, 2020. Increase is principally due to changes in product mix.
Selling, General and Administrative. IDWP selling, general and administrative expenses increased by $705,000 in the three months ended July 31, 2021 compared to the three months ended July 31, 2020 primarily due to increases in salaries and benefits of $370,000, consulting of $288,000, selling and distribution expenses of $85,000, and legal fees of $30,000. These were offset by decreases in marketing expenses of $33,000, occupancy and related expenses of $10,000, and other net decreases of $25,000.
IDWP selling, general and administrative expenses increased by $1,217,000 in the nine months ended July 31, 2021 compared to the nine months ended July 31, 2020 primarily due to increases in salaries and benefits of $1,035,000, overhead allocations of $451,000, consulting fees of $354,000, and selling and distribution fees of $44,000. These were offset by decreases in marketing expenses of $250,000 and occupancy and related expenses of $101,000. Additionally, Clover Press consolidated selling, general, and administrative decreased by $316,000 as they are no longer consolidated in the nine months ended July 31, 2021.
As a percentage of IDWP’s revenues, selling, general and administrative expenses in the three months ended July 31, 2021 were 46.3% compared to 46.7% in the three months ended July 31, 2020, and 49.1% in the nine months ended July 31, 2021 compared to 48.3% in the nine months ended July 31, 2020.
IDWE
| (in thousands) (unaudited) | Change | |||||||||||||||
| Three months ended July 31, | 2021 | 2020 | $ | % | ||||||||||||
| Revenues | $ | - | $ | 3,271 | $ | (3,271 | ) | (100.0 | %) | |||||||
| Direct cost of revenues | 305 | 5,323 | (5,018 | ) | (94.3 | %) | ||||||||||
| Selling, general and administrative | 1,528 | 1,172 | 356 | 30.4 | % | |||||||||||
| Depreciation and amortization | 9 | 8 | 1 | 12.5 | % | |||||||||||
| Income from operations | $ | (1,842 | ) | $ | (3,232 | ) | $ | 1,390 | (43.0 | %) | ||||||
| (in thousands) (unaudited) | Change | |||||||||||||||
| Nine months ended July 31, | 2021 | 2020 | $ | % | ||||||||||||
| Revenues | $ | 6,916 | $ | 11,896 | $ | (4,980 | ) | (41.9 | %) | |||||||
| Direct cost of revenues | 7,757 | 14,201 | (6,444 | ) | (45.4 | %) | ||||||||||
| Selling, general and administrative | 4,310 | 4,292 | 18 | 0.4 | % | |||||||||||
| Depreciation and amortization | 27 | 25 | 2 | 8.0 | % | |||||||||||
| Loss from operations | $ | (5,178 | ) | $ | (6,622 | ) | $ | 1,444 | (21.8 | %) | ||||||
nm—not meaningful
Revenues. For the three months ended July 31, 2021 revenues decreased by $3,271,000 compared to the three months ended July 31, 2020, due to significant revenue-generating events in the fiscal 2020 period. In the three months ended July 31, 2020 revenues consisted of delivered episodes from Wynonna Earp of $2,472,000, tax credit for October Faction of $787,000 and other revenues of $12,000.
For the nine months ended July 31, 2021, revenues decreased by $4,980,000 compared to the nine months ended July 31, 2020, due to significant revenue-generating events in the fiscal 2020 period. The revenues from the nine months ended July 31, 2021 included delivered episodes from Wynonna Earp of $3,433,000, the completion of the CRA audit which established the final tax credit for V Wars and October Faction of $3,331,000 and foreign receipts from Dirk Gently of $113,000. In the nine months ended July 31, 2020, revenues consisted of delivered episodes and tax credits from October Faction of $4,819,000. Additionally delivered episodes from Wynonna Earp in the amount of $2,485,000, Locke & Key in the amount of $4,000,000 and foreign sales from Dirk Gently in the amount of $553,000.
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, 2011 asJuly 31, 2021 decreased by $5,018,000 compared to the similar periodthree months ended July 31, 2020 mainly due to decreases in fiscal 2010 slightly decreased as a resultrevenues. In the three months ended July 31,2021, direct costs consisted of decrease in cost refinements to Wynonna Earpof merchandise sold, writers’$305,000. In the three months ended July 31, 2020 the related amortization costs were from Wynonna Earp of $3,389,000 and artists’ fees, which were partially offset by an increase in royalty expenses and printing costs. The increase in direct cost refinements from V Wars of $1,934,000.
Direct costs of revenues infor the nine months ended April 30, 2011 asJuly 31, 2021 decreased by $6,444,000 compared to the similar period in fiscal 2010 was principally attributablenine months ended July 31, 2020 mainly due to cost refinements. The amortized television costs for the increase in revenues.
IDWE’s gross margin increased infor the three month periodmonths ended July 31, 2021 was 0% compared to 38.9% from 32.0% and increased to 40.1% from 35.6% innegative 62.7% for the three months ended July 31, 2020. Gross margin for the nine month periodmonths ended April 30, 2011. The increase inJuly 31, 2021 was negative 12.2% compared to negative 19.4% for the nine months ended July 31, 2020. These gross margins was primarily attributable to increased publishingmargin figures are aligned with the explanations provided for revenues and lower printdirect costs .of revenues.
Selling, General and Administrative.
Selling, general and administrative expenses increased by $18,000 during the nine months ended July 31, 2021 compared to the nine months ended July 31, 2020. The increase was driven by salary and benefits of $452,000, legal fees of $18,000, recruitment fees of $156,000, overhead allocations of $343,000, equipment rentals of $35,000 and other expenses of $6,000, offset by lower rent of $43,000, marketing of $382,000, promotional production materials $512,000 and accounting fees of $55,000.
As a percentage of IDWE’s revenues, selling, general and administrative expenses in the three months ended July 31, 2021 were 0% compared to 35.8% in the three months ended July 31, 2020, and 62.3% in the nine months ended April 30, 2011 decreased asJuly 31, 2021 compared to the similar periods36.1% in fiscal 2010. The decrease in Selling, general and administrative expenses was principally on account of a decrease in personnel costs which were partially offset by an increase in marketing costs. As a percentage of IDW’s aggregate revenues, selling, general and administrative expenses decreased in the three and nine months ended April 30, 2011 to 33.3%July 31, 2020.
Liquidity and 30.0%, respectively, from 42.9% and 38.5% in the similar periods in fiscal 2010, as revenues increased while selling, general and administrative expenses declined.
General
We satisfy our cash requirements primarily through cash provided by CTM’sthe Company’s financing and operating activities and funding from IDT.activities. As more fully discussed below, additional sources of financing will be needed to finance the growth of IDWE.
| Nine months ended July 31, | ||||||||
| (in thousands) (unaudited) | 2021 | 2020 | ||||||
| Cash flows (used in) provided by: | ||||||||
| Operating activities | $ | 11,720 | $ | 11,812 | ||||
| Investing activities | (1,030 | ) | (487 | ) | ||||
| Financing activities | (12,983 | ) | (6,777 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 39 | (69 | ) | |||||
| Net (decrease) increase in cash and cash equivalents | $ | (2,254 | ) | $ | 4,479 | |||
| (in thousands) | Nine months ended April 30, | |||||||
| 2011 | 2010(i) | |||||||
| Cash flows provided by (used in): | ||||||||
| Operating activities | $ | 846 | $ | 1,870 | ||||
| Investing activities | 40 | (734 | ) | |||||
| Financing activities | (1,721 | ) | (1,401 | ) | ||||
| Decrease in cash and cash equivalents from continuing operations | $ | (835 | ) | $ | (265 | ) | ||
| Discontinued operations | - | (415 | ) | |||||
| Decrease in cash and cash equivalents | (835 | ) | (680 | ) | ||||
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. The delivery of episodes from IDWE fluctuates the timing of cash receipts. Cash flows provided bywere used in operating activities based on some these factors were $846,000amounting to approximately $11,720,000 and $1,870,000$11,812,000 for the nine months ended April 30, 2011July 31, 2021 and 2010,2020, respectively.
Investing Activities.
Our capital expenditures were $260,000approximately $128,000 and $320,000 during$372,000 in the nine months ended April 30, 2011July 31, 2021 and 2010,2020, respectively.
Financing Activities
During the nine months ended 2011July 31, 2021 and 2020 we also received $300,000 payments on notes receivable related to salerepaid bank loans in the amounts of WMET during fiscal 2010. During$14,204,000 and $19,726,000, respectively. In the nine months ended April 30, 2010July 31, 2021 and July 31, 2020 the Company received PPP loans of $1,195,680 and $1,195,679, respectively related to IDW operations. In addition, we paid $414,000 towards acquiring additional interestsissued common stock for $25,000 and $14,561,000 in IDW. We currently anticipate that total capital expenditures for all of our divisions in fiscal 2011 will be approximately $300,000. We expect to fund our capital expenditures with our cash, cash equivalents and short term investments on hand.
Changes in Trade Accounts Receivables and Allowance for some of our businesses. We used any excess cash provided by our operations to repay IDT. In the three months ended October 31, 2009, IDT Corporation provided cash to us of $2,400,000. In September 2009, the amount due to IDT Corporation of $25.3 million was converted into a capital contribution.
Trade accounts receivable decreased to $3,998,000 at April 30, 2011 compared to $4,274,000approximately $6,067,000 at July 31, 2010.2021 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 marginally decreased to 17.7% at April 30, 2011 compared to 18.2%was 2.77% at July 31, 2010.2021 compared to 0.13% at October 31, 2020, reflecting the decrease in receivable balances and our collectible receivable experience.
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.
Other Sources and Uses of Resources
Where appropriate, makewe 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. Historically, such acquisitions have not exceeded $500,000, with the average acquisition being less than $100,000 If we were to pursue an acquisition in excess of $500,000 we would likely need to secure financing arrangements. 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 pay(a) the regular quarterly dividends in the amounttemporary closure of $0.06 per share, subjectIDWP’s comic book distributor due to confirmation by our management that there is sufficient surplus asCOVID-19 disruptions, and (b) production delays of IDWE’s television show Wynonna Earp. Its production schedule has been delayed which was a direct result of the proposed future payment dates and other circumstances existing atCOVID-19 pandemic that has affected virtually the relevant times.
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 priortwo of Wynonna Earp from the current licensor (Netflix) and has agreed to our separation from IDT, funding from IDT Corporation. The conversion of our balance duetransfer those rights to IDT Corporation into a capital contribution in September 2009 significantly improved our working capital balance. We do not currently have any material debt obligations. With the exit of certain lines of businesses within CTM, we expect that our operations in fiscal 2011 and the balance of cash, cash equivalents and short term investment that we held as of April 30, 2011,Cineflix. Cineflix will be sufficientthe international distributor of all four seasons of Wynonna Earp. Due to meet our currently anticipated working capitalchanges in competition as well as the COVID-19 pandemic, the Cineflix deal is not expected to contribute as much as originally expected to IDWE’s revenue and capital expenditure requirements, capital lease obligations, make limited acquisitions and investments, pay the currently announced and any future declared dividends and fund any potential operating cash flow deficits within anyin fiscal years 2021 and 2022 as originally anticipated at the inception of our segmentsthe deal.
The Offering
On August 6, 2021, IDW Media Holdings, Inc. closed a registered public offering of Class B common stock and EF Hutton, as representative of the Underwriters exercised the overallotment option included as part of the offering in full. The Company sold an aggregate of 2,875,000 shares of the Company’s Class B common stock for at least the next twelve months. In addition, wegross consideration of $10,350,000 less Underwriters commissions of $724,500 and Underwriters expenses of $75,000.
We anticipate that our expected cash balances,inflows from operations during the next twelve months together with our working capital, including the balance of cash and cash equivalents held as well as cash flowsJuly 31, 2021 and proceeds from our operations,the offering closed on August 6, 2021 will be sufficient to meetsustain our long-term liquidity needs. next year of operations.
The foregoing is based on a number of assumptions, including thatCompany plans to use the net proceeds we will collect our receivables, effectively manage our working capital requirements, and maintain our revenue levels and liquidity. Predicting these matters is particularly difficult inreceive from the current worldwide economic situation and overall decline in consumer demand. Failure to generate sufficient revenues and operating income could have a material adverse effect on our results of operations, financial condition and cash flows.
We do not have any “off-balance sheet arrangements,”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.
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 definedto the payment of dividends in relevant SEC regulations that are reasonably likely to have a current or future effectperiods will depend on ourthe financial condition,position, results of operations, liquidity, capital expenditures or capital resources.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 shareholder value, balancing short, medium and long-term interests.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
There have been no significant changes in our market risk exposures from those described in the Registration Statement.
Foreign Currency Risk
IDWE is the obligor on certain loans from Canadian lenders that are denominated in CAD. 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.
Foreign Exchange Balances Held in CAD ( in thousands) | July 31, 2021 | October 31, 2020 | ||||||
| Cash and cash equivalents | $ | 102 | $ | 937 | ||||
| Accounts receivable | - | 16,355 | ||||||
| Bank loans | - | 18,917 | ||||||
| Total | $ | 102 | $ | 36,209 |
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures.
Changes in Internal Control over Financial Reporting.
There were no changes in our internal control over financial reporting during thePART II. OTHER INFORMATION
Item 1. Legal Proceedings.Proceedings
None
Item 1A. Risk Factors.Factors
There are no material changes from the risk factors previously disclosedincluded in Item 1A to Part I of our Annual ReportRegistration Statement on Form 10-K for the year endedS-1 filed on July 31, 2010.6, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.Proceeds
None
Item 3. Defaults Uponupon Senior Securities.Securities
None
Item 4. Removed and ReservedMine Safety Disclosures
None
Item 5. Other Information
None
Item 6. Exhibits Financial Statement Schedules.
Exhibit Number | Description | |
| 31.1* | Certification of Chief Executive Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2* | Certification of Chief Financial Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1* | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2* | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS* | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
| 101.SCH* | XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
| Filed or furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| IDW Media Holdings, Inc. | |||
| Date: September 13, 2021 | By: | /s/ Ezra Y. Rosensaft | |
| Name: | Ezra Y. Rosensaft | ||
| Title: | Chief Executive Officer | ||
| By: | /s/ | ||
| Name: | Karina M. Fedasz | ||
| Title: | |||
Chief Financial Officer | |||
35