| 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., a Delaware corporation,
(“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 IDWMH and its subsidiaries through which various businesses are conducted. Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements
have been prepared by management in accordance with generally accepted accounting principles in the United States of America (“U.S.
GAAP”). The 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 consolidated financial statements and
notes to the 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
consolidated financial statements and accompanying notes. Actual results may differ from those estimates. The Company has considered information
available to it as of the date of issuance of these 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. Risks and Uncertainties 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 World.
The Company is actively monitoring the COVID-19 pandemic, the restrictive measures imposed to combat its spread and their potential impact
on each of its operating segments. While the Company believes that in fiscal 2022, there has been significant improvement in the impact
of the pandemic and the related measures, 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 the Company’s
operations and its customers and partners may continue to be impacted. In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this
action, various nations, including the United States of America, have instituted economic sanctions against the Russian Federation and
Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these financial
statements and the specific impact on the Company’s financial condition, results of operations, and cash flows related to IDWP’s
foreign licenses is also not determinable as of the date of these financial statements. Segment Information Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 280, Segment Reporting, 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). The Company’s principal business consists
of the following segments:
i. IDWP Publishing (“IDWP”), a publishing company that creates comic books, graphic novels and digital content through its imprints IDW, 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 copyrighted intellectual property (“IP”), published in the form of comic books, graphic novels and any other forms of print publication, for a variety of formats including film and television. Prior to February 15, 2021, the Company 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 (“CTM Sale Date”),
the Company 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 the Company owed to the Company’s 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 (which condition was not met), and (iii) a contingent payment if CTM is sold within 36 months of the sale for more than $4.5
million (“CTM Sale”). As of July 31, 2020, CTM was reported as a discontinued operation and CTM’s operations
have since been included in the consolidated financial statements as discontinued operations (See Note 16). As of October 31, 2022, the
18-month period for the contingent payment based upon recovery of quarterly revenue has lapsed and no payment is owed. Cash and Cash Equivalents The Company considers all highly liquid investments
or debt instruments with an original maturity of three months or less when purchased to be cash equivalents. 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
customers’ 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 consolidated
statements of operations. The Company had an allowance for doubtful accounts of $0 as of October 31, 2022 and 2021. Inventory Inventory consists of IDWP’s graphic novels
and comic books. Inventory is stated at the lower of cost or net realizable value determined by the first in, first out
method. Property and Equipment Property and equipment are recorded at cost less
accumulated depreciation. The Company charges the cost of repairs and maintenance, including the cost of replacing minor items not constituting
substantial betterment, to selling, general and administrative expenses as these costs are incurred. Depreciation is recognized over the
estimated useful lives or lease terms as follows:
Asset Category Depreciable Life
Equipment 5 years
Furniture & fixtures 5-7 years
Computer software 1-3 years
Leasehold improvements *
* Leasehold improvements are amortized using the straight-line
method over the shorter of the lease term or estimated useful life of the asset. Long-Lived Assets, Including Definite-Lived
Intangible Assets Intangible assets, which consist of licensing
contracts and capitalized software, are recorded at cost, and are amortized on a straight-line basis over their contractual or estimated
useful lives, whichever is shorter from 5 – 7 years. In accordance with ASC 360, Accounting for
the Impairment or Disposal of Long-Lived Assets Goodwill Goodwill, which represents the excess of purchase
prices over the fair value of nets assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic
assessment for impairment by applying a fair value-based test. Goodwill is evaluated for impairment on an annual basis at a level of reporting
referred to as the reporting unit, and more frequently if adverse events or changes in circumstances indicate that the asset may be impaired. Goodwill is tested for impairment at the reporting
unit level by first performing a qualitative assessment to determine whether it is more likely than not (that is, a likelihood of more
than 50%) that the fair value of the reporting unit is less than its carrying amount. The qualitative assessment considers macroeconomic
conditions, industry and market considerations, cost factors and overall company financial performance. If the reporting unit does not
pass the qualitative assessment, the carrying amount of the reporting unit, including goodwill, is compared to its fair value. When the
carrying amount of the reporting unit exceeds its fair value, a goodwill impairment loss is recognized up to a maximum amount of the recorded
goodwill related to the reporting unit. Goodwill impairment losses are not reversed. There was no impairment loss of goodwill for the
fiscal years ended October 31, 2022 and 2021. Television Costs The Company capitalizes television production,
participation and residual costs and amortizes them 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 the Company’s estimate
of Ultimate Revenues decreases, amortization of film and television costs may be accelerated. Conversely, if the Company’s 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. Advertising, marketing, general and administrative costs are expensed as incurred. Every quarter, the Company undertakes an analysis
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. 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 fiscal years ended October 31, 2022 and 2021
were $1,348,000 and $5,414,000, respectively. Variable Interest Entities The Company, through its subsidiary IDWE has arrangements with seven
special-purpose entities (“SPEs”). Some SPEs were formed for the sole purpose of providing production services of a television
pilot and series in Canada, and other SPEs were formed 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
was the obligor on the SPEs’ debt. All financial activity of the SPEs has been included in IDWE’s financial statements,
which are part of these consolidated financial statements. IDWE is not obligated to provide any support to the VIE’s and therefore,
there are no additional losses foreseen. The SPEs have finished all 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) October 31, October 31,
Cash and cash equivalents $ 126 $ 78 Revenue Recognition The Company applies the five-step approach as
described in ASC 606, Revenue from Contracts with Customers IDWP generates revenue primarily from the sale
and licensing of comic books, graphic novels, digital content, and games through IDWP’s imprints IDW, Top Shelf, and Artist’s
Editions. Revenue from the 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 comic books, graphic novels, and games by IDWP’s distributors 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 the content promised in an executed contract is transferred to the customer in an amount that reflects the
consideration to which the Company expects to be entitled in exchange for the content. Beginning in the third fiscal quarter of 2022,
revenue was also generated from serving as a co-studio and executive producer of content across various platforms and formats to audiences
globally including television series and films. This revenue is recognized when the services promised in the contract are transferred
to the customer in an amount that reflects the consideration to which the Company expects to be entitled in exchange for the services.
IDWE also earns revenue from the sale of the option to purchase the media rights for IDWP properties to studios and streamers. This revenue
is recognized when the goods promised in the contract are transferred to the customer in an amount that reflects the consideration to
which the Company expects to be entitled in exchange for the goods. IDWE enters into production agreements which provide for the rights
and obligations related to the agreement including timing, delivery, and payments. In certain productions in which IDWE is the distributor,
IDWE has the obligation to pay artist, director, and writer guilds for residuals for the creative writers of content. 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 qualified for tax credits in Canada. These credits were recorded as
either revenue or 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. As of October 31,
2022, the consolidated statements of operations reflect final tax refund amounts. 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. All intersegment transactions are eliminated in consolidation and,
therefore, do not affect consolidated results. Revenue Recognition When Right of Return Exists IDWP’s book market distributors offer a
right of return to retail customers with no expiration date in accordance with general industry practices. IDWP generally does not offer
the right of return on the sale of comic books. 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 October 31, 2022 and 2021, the
Company’s estimated returns were $110,000 and $127,000, respectively. Direct Cost of Revenues Direct cost of revenues excludes depreciation and amortization expense.
Direct cost of revenues for IDWP consists primarily of printing expenses and costs of artists 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,
residuals, 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. Advertising Expense Advertising costs are expensed as incurred, including
digital and print advertisements. In fiscal 2022 and fiscal 2021, advertising expenses were approximately $363,000 and $329,000, respectively. Stock-Based Compensation The Company accounts for stock-based compensation
granted to its employees in accordance with the fair value recognition provisions of ASC 718, Stock Compensation Leases The company determines if an arrangement is a
lease at inception. Under the new standard, operating leases are included in right-of-use (“ROU”) assets, operating leases
obligations – current portion, and operating lease obligations – long term portion in the consolidated balance sheets. Leases
with an initial term of 12 months or less are not recorded on the balance sheet. Fixed lease expense for lease payments is recognized
in the consolidated statements of operations on a straight-line basis over the lease term and variable lease payments in the period in
which the obligation for those payments is incurred. ROU assets represent the Company’s
right to use an underlying asset over the lease term and lease liabilities represent its obligation to make lease payments arising
from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease
payments over the lease term. As most of the leases do not provide an implicit rate, the Company estimated its incremental borrowing
rate to discount the lease payments based on information available at lease commencement. The Company uses the implicit rate when
readily determinable. The Company’s incremental borrowing rate is the rate of interest we would have to pay to borrow on a
collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. The operating
ROU assets also includes any lease payments made before the lease commencement date less any lease incentives received. The lease
terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise the options.
The lease agreements with lease and non-lease components are generally accounted as a single component. Distinguishing Liabilities from Equity The Company accounts for freestanding financial
instruments, including warrants issued in consideration of debt instruments, as either equity-classified or liability-classified instruments
based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB’s ASC 480, Distinguishing
Liabilities from Equity Derivatives and Hedging Concentration Risks Financial instruments that potentially subject
the Company to concentration of credit risk consist principally of cash, cash equivalents, and trade accounts receivable. The Company
holds cash and cash equivalents at major financial institutions, which often exceed Federal Deposit Insurance Corporation’s (“FDIC”)
insurance limits. Historically, the Company has not experienced any losses due to such concentration of credit risk. During fiscal years 2022 and 2021, IDWP had two
significant customers, Penguin Random House (“PRH”) and Diamond Comic Distributors, Inc. (“Diamond”), that posed
a concentration risk. From June 1, 2022, only PRH Revenues from PRH, IDWP’s non-direct market
distributor and beginning June 1, 2022, IDWP’s direct market distributor, represented 37.2% and 32.8% of consolidated revenue in
the fiscal years ended October 31, 2022 and 2021, respectively. The receivable balances represented 63.9% and 52.0% of consolidated receivables
at October 31, 2022 and 2021, respectively. Revenues from Diamond, which was IDWP’s
direct market distributor until June 1, 2022, represented 13.6% and 32.2% of the total consolidated revenues for the fiscal years ended
October 31, 2022 and 2021, respectively. The receivable balances from Diamond represented 0% and 20% of consolidated receivables at October
31, 2022 and 2021, respectively. IDWE has two significant customers, Netflix and
Fifth Season (formerly Endeavor Content LLC), that pose a concentration risk. Revenue from Netflix, a leading streaming video
subscription service, represented 25.0% and 0.5% of the total consolidated revenue in the fiscal years ended October 31, 2022 and 2021,
respectively. The receivable balances from Fifth Season represented
17.7% and 0% of consolidated receivables at October 31, 2022 and 2021, respectively. Discontinued Operations CTM met the criteria for discontinued operations
and has been presented as such in the consolidated financial statements. In accordance with Accounting Standard Update (“ASU”)
No. 2014-08, Reporting of Discontinued Operations and Disclosures of Disposals of Components of an Entity, . 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 consolidated statement of operations. Additionally,
the gain from the sale was presented as a separate line item on the consolidated statement of operations. Assets and liabilities were
also separately reclassified in the consolidated balance sheet for all periods presented, prior to the sale. CTM’s assets. liabilities,
and cash flows are no longer reflected on the 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. CTM’s depreciation, amortization, capital expenditures and significant noncash operating
and investing activities for the discontinued operation are presented separately. Revision of previously issued consolidated financial statements During the quarter ended April 30, 2022, the Company
identified errors that caused an understatement of previously reported current liabilities and accumulated deficit. Specifically, the
error related to the lack of accrual for certain actor residuals related to Wynonna Earp incurred in 2016 and 2017. The correction of
these errors increased accrued expenses and accumulated deficit each by $589,000 as of October 31, 2021 and increased accumulated deficit
by $589,000 as of October 31, 2020. This error had no impact on net loss, loss per share, or net cash provided by operating activities
for the years ended October 31, 2021 and 2020. In accordance with Staff Accounting Bulletin (“SAB”)
No. 99, Materiality Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements, The following table presents a summary of the
impact by financial statement line item of the corrections as of October 31, 2021 and 2020:
As of October 31, 2021
(in thousands) As Previously Reported Adjustment As Revised
Consolidated Balance Sheet
Accrued Expenses $ 3,197 $ 589 $ 3,786
Total current liabilities $ 8,741 $ 589 $ 9,330
Total liabilities $ 8,761 $ 589 $ 9,350
Accumulated deficit $ (80,114 ) $ (589 ) $ (80,703 )
Total stockholders’ equity $ 22,637 $ (589 ) $ 22,048
As of October 31, 2020
(in thousands) As Previously Reported Adjustment As Revised
Consolidated Balance Sheet
Accumulated deficit $ (91,996 ) $ (589 ) $ (92,585 )
Total stockholders’ equity $ 18,225 $ (589 ) $ 17,636 Income Taxes The Company recognizes deferred tax assets and
liabilities for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of
existing assets and liabilities and their respective tax bases. A valuation allowance is provided when it is more likely than not that
some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends on the generation
of future taxable income during the period in which related temporary differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in its assessment of a valuation allowance.
Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes the enactment date of such change. The Company uses a two-step approach for recognizing
and measuring tax benefits taken or expected to be taken in a tax return. The Company determines whether it is more-likely-than-not that
a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical
merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, the Company presumes
that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. Tax positions
that meet the more-likely-than-not recognition threshold are measured to determine the amount of tax benefit to recognize in the financial
statements or the amount of allowance against any previously recognized benefit. The tax position is measured at the largest amount of
benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in
a tax return and amounts recognized in the financial statements will generally result in one or more of the following: an increase in
a liability for income taxes payable, a reduction of an income tax refund receivable, a reduction in a deferred tax asset, or an increase
in a deferred tax liability (See Note 14). Commitments and Contingencies The Company accrues for loss contingencies when
both (a) information available prior to issuance of the consolidated financial statements indicates that it is probable that a liability
had been incurred at the date of the consolidated financial statements and (b) the amount of loss can reasonably be estimated. When
the Company accrues for loss contingencies and the reasonable estimate of the loss is within a range, the Company records its best estimate
within the range. When no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount in
the range. The Company discloses an estimated possible loss or a range of loss when it is at least reasonably possible that a loss may
have been incurred. Fair Value of Financial Instruments The estimated fair value of financial instruments
has been determined using available market information or other appropriate valuation methodologies. However, considerable judgment is
required in interpreting this data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the
amounts that could be realized or would be paid in a current market exchange. At October 31, 2022 and 2021, the carrying value
of the Company’s current assets of trade accounts receivable, inventory, prepaid expenses and other current assets, trade accounts
payable, accrued expenses, production costs payable, deferred revenue, and operating lease obligations approximated fair value because
of the short period of time to maturity. At October 31, 2022 and 2021, the carrying value of the long-term portion of the Company’s
operating lease obligations approximate fair value as their contractual interest rates approximate market yields for similar debt instruments. Recently Issued Accounting Pronouncements Adopted In March 2019, the FASB issued ASU No. 2019-02,
Improvements to Accounting for Costs of Films and License Agreements for Program Materials In December 2019, the FASB issued ASU No. 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. In November 2021, the FASB issued ASU 2021-10, Government
Assistance (Topic 832), Recently Issued Accounting Standard Not Yet
Adopted In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments—Credit Losses (Topic 326) In January 2017, the FASB issued ASU No. 2017-04,
Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment |
