| Basis of Presentation and Summary of Significant Accounting Policies | 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 have been prepared by management in accordance with generally accepted accounting principles in the United States
of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all information and footnotes
required by U.S. GAAP for complete financial statements. Certain information and footnote disclosures normally included in our annual
consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted consistent with Article 10 of
Regulation S-X. In the opinion of management, all adjustments (consisting principally of normal recurring accruals) considered necessary
for a fair presentation have been included. Interim results of operations are not necessarily indicative of the results for the full
year or for any future period. These financial statements should be read in conjunction with the annual consolidated financial statements
and notes thereto also included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2021. The condensed consolidated
financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. All amounts in these condensed consolidated financial statements and notes to the
condensed consolidated financial statements are reflected on a consolidated basis for all periods presented. The Company’s fiscal year ends on October
31 st Use of Estimates The preparation of the 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. The Company
is actively monitoring the COVID-19 pandemic, the restrictive measures imposed to combat its spread and their potential impact on each
of our operating segments. While we believe that in fiscal 2021 through the first quarter of fiscal 2022, there has been significant
improvement due to global and domestic vaccination efforts, there is uncertainty around the duration and ongoing impact, if any, of COVID-19
related to both known and unknown risks, including future quarantines, closures and other restrictions resulting from the outbreak, and
our operations and our customers and partners may continue to be impacted. The Company has considered information available to it as
of the date of issuance of these 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. 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 chief operating decision maker, or decision-making group, in deciding how to allocate resources and
in assessing performance. The Company’s chief 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 (see note
5) Our principal business consist of the following
segments:
i. IDWP Publishing (“IDWP”), a publishing
company that creates comic books, graphic novels, digital content and games through its imprints IDW, IDW Games, Top Shelf Productions
and Artist’s Editions; and
ii. IDW Entertainment (“IDWE”), 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 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,
we consummated the sale of CTM to an assignee of Howard Jonas, the Company’s Chairman in exchange for (i) the cancelation of $3.75
million of indebtedness we owed to our 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 sale, and (iii) a contingent payment
if CTM is sold within 36 months of the sale 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 condensed consolidated financial statements as discontinued
operations (Note 14 Discontinued Operations). Trade Accounts Receivable, Net Trade accounts receivables are recorded at the
invoiced amount and are generally unsecured as they are uncollateralized. The Company provides an allowance for doubtful accounts to
reduce receivables to their estimated net realizable value. Judgement is exercised in establishing allowances and estimates are based
on the tenants’ payment history and liquidity. Any amounts that were previously recognized as revenue and subsequently determined
to be uncollectible are charged to bad debt expense included in selling, general and administrative expense in the accompanying condensed
consolidated statements of operations. The Company had an allowance for doubtful accounts of $0 as of January 31, 2022 and October 31,
2021. 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. IDWE capitalized cost
of production and amortized it over the applicable product life cycle based upon the ratio of the current period’s revenues to
the estimated remaining total Ultimate Revenues for each production. Advertising, marketing, general and administrative costs are expensed
as incurred. Every quarter, the Company prepares analyses
to support its content amortization expense. Critical assumptions used in determining content amortization include: (i) determining the
grouping of contents (ii) the application of an ultimate revenue forecast model based on the contracts of televisions, (iii) gathering
the schedules of delivered television episodes from the relative customers, (iv) calculating current period amortization, (v) assessing
the accuracy of the Company’s forecasts. The Company continually reviews its estimates and contracts and revises its assumptions
if necessary. Any material adjustments from the Company’s review of the amortization are applied prospectively in the period of
the change for assets. With respect to television series or other television
productions intended for broadcast, the most sensitive factors affecting estimates of Ultimate Revenues are program ratings and the strength
of the advertising market. Program ratings, which are an indication of market acceptance, directly affect the Company’s ability
to generate advertising revenues during the airing of the program. Television development costs for projects that have been abandoned
or have not been set for production within three years are generally written off in the relevant period. Television costs are stated at the lower of cost
less accumulated amortization or fair value. The Company evaluates impairment by the fair value of television costs at the individual
level by considering expected future revenue generation, when an event or change in circumstances indicates a change in the expected
revenue of the television costs or that the fair value of a film or film group may be less than unamortized costs. IDWE regularly enters into agreements for the
production of its television shows. The agreements provide for the rights and obligations related to the agreement including timing,
delivery and payments. IDWE capitalizes the resulting production costs under the agreements in production cost inventory as payments
are made or when the products or services are delivered. Amortization of television costs during the three months ended January 31, 2022
and 2021 were $999,000 and $3,956,0000, respectively. Variable Interest Entities The
Company, through its subsidiary IDWE has arrangements with seven special-purpose entities (“SPEs”), some formed for the sole
purpose of providing production services in Canada for the production of a television pilot and television series, others for production
and writing purposes. The SPEs are independently owned companies that are effectively controlled by IDWE and are parties to the related
bank production financing arrangements. The Company has determined that SPEs are variable interest entities (“VIEs”) and
that the Company is the primary beneficiary of the SPEs activities and obligor on the SPEs’ debt. All financial activity of
the SPEs have been included IDWE’s financial statements, which are part of these consolidated financial statements. IDWE does not
need to provide any support to the VIE’s and therefore there are 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 are presented below:
(in thousands) January 31, October 31,
Cash and cash equivalents $ 192 $ 78 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. 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. 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 enters into production agreements which
provide for the rights and obligations related to the agreement including timing, delivery and payments. In certain productions, IDWE
chooses to have the obligation to pay the Writers Guild of America (“WGA”) residuals for the creative writers of content.
These extend to 25 years after distribution and are recorded in the consolidated statements of operations as a direct cost of revenue.
In addition, IDWE has the right to receive participation rights recoupment based on viewership of the cumulative production. The Company
is unable to make an estimate as the recoupment is based on future viewership and therefore revenue will be recognized at a future date
once the amount is known. IDWE’s production activities included some
of 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 SPEs 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 IDWP offers its book market distributors, a right
of return with no expiration date in accordance with general industry practices. These distributors then offer this same right of return
to their book market retail customers. 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. As of January 31, 2022 and October 31, 2021, the Company’s accrual for estimated returns were $91,000 and $127,000, respectively. Direct Cost of Revenues Direct cost of revenues excludes
depreciation and non-production cost amortization expense. Direct cost of revenues for IDWP consists primarily of printing expenses
and costs of artist and writers. Direct cost of revenues for IDWE consists primarily of the amortization of production costs that
were capitalized during the production of the television episodes, accrued third party participation, and distribution fees directly
related to revenue. 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. Concentration Risks Financial instruments that potentially subject
the Company to concentration of credit risk consist principally of cash, cash equivalents, short term investment and trade accounts receivable.
The Company holds cash and cash equivalents at several major financial institutions, which often exceed FDIC insurance limits. Historically,
the Company has not experienced any losses due to such concentration of credit risk. The Company’s temporary cash investments policy
is to limit the dollar amount of investments with any one financial institution and monitor the credit ratings of those institutions.
While the Company may be exposed to credit losses due to the nonperformance
of its counterparties, the Company does not expect the settlement of these transactions to have a material effect on its results of operations,
cash flows or financial condition. IDWP has two significant customers Penguin Random
House Publisher Services (“PRHPS”) and Diamond Comic Distributors, Inc. (“Diamond”), that pose a concentration
risk. Revenues from PRHPS, IDWP’s non-direct
market distributor, represented 21.7% and 28.2% of condensed consolidated revenue for the three months ended January 31, 2022 and
2021, respectively. The receivable balances from PRHPS represented 52.9% and 52.0% of condensed consolidated receivables at January
31, 2022 and October 31, 2021, respectively. Beginning June 1, 2022, PRHPS will replace Diamond as IDWP’s distributor to the
direct market. Revenues from Diamond, IDWP’s direct
market distributor, represented 15.0% and 27.3% of condensed consolidated revenue for the three months ended January 31, 2022 and
2021, respectively. The receivable balances from Diamond represented 18.9% and 20.0% of condensed consolidated receivables at
January 31, 2022 and October 31, 2021, respectively. IDWE has two significant customers, Netflix and
NBC Universal/SyFy, that pose a concentration risk. Revenues from Netflix, a leading streaming video
subscription service, represented 35.4% and 0.0% of condensed consolidated revenue for the three months ended January 31, 2022
and 2021, respectively. Revenues from NBC Universal/SyFy, a major television
network, represented 0% and 29.4% of condensed consolidated revenue for the three months ended January 31, 2022 and 2021, respectively. Discontinued Operations CTM meets the criteria for discontinued operations
and has been presented as such in the condensed consolidated financial statements. In accordance with ASU 2014-08, “Reporting of
Discontinued Operations and Disclosures of Disposals of Components of an Entity,” a disposal is categorized as a discontinued operation
if the disposal group is a component of an entity or group of components that meets the held for sale criteria, is disposed of by sale,
or is disposed of other than by sale, and represents a strategic shift that has or will have a major effect on an entity’s operations
and financial results . During the period in which the discontinued operation
was classified as held for sale, the net loss was reclassified as a separate line item in the Condensed Consolidated 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 condensed consolidated 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 Statements of Stockholders’
Equity and Condensed Consolidated Statement of Cash Flows. Recently Issued Accounting Pronouncements
Adopted 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 11) from substantively abandoned television costs which materially impacted the consolidated
financial statements. These costs were recorded in direct cost of revenues. In December 2019, the FASB issued ASC Update No.
2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. 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. The Company will adopt the new standard on November 1, 2023. The Company is 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 |
