| 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 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, 2022. 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 Reclassification of prior year presentation Certain prior year balances have been reclassified
to conform to the current year’s presentation. Amortization of television costs, were previously netted against the change in television
costs, are disclosed separately on the Condensed Consolidated Statement of Cash Flows. Such reclassifications had no effect on net income
(loss). 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. 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. 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 and through the first quarter of fiscal 2023, 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 IDW Publishing’s foreign licenses is also not determinable
as of the date of these financial statements. On March 10, 2023, Silicon Valley Bank (“SVB”) was shut
down, followed on March 11, 2023 by Signature Bank and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as
receiver for those banks. Since that time, there have been reports of instability at other U.S. banks, including First Republic. The Company
maintains an account at First Republic and certain customers make payments to the Company via that account, although the Company does
not generally maintain significant deposits in that account beyond the short term. If First Republic were to fail, we may not be able
to access the payments made by those of our customers who make payments via that account on a timely basis, if at all. Despite the steps
taken to date by U.S. agencies to protect depositors, the follow-on effects of the events surrounding the SVB and Signature Bank failures
and pressure on other banks are unknown, could include failures of other financial institutions to which we face direct or more significant
exposure, and may lead to significant disruptions to our operations, financial position, and reputation. The extent of such impacts
is uncertain, and there may be additional risks that we have not yet identified. We are taking steps to identify any potential impact
and minimize any disruptions to our operations. However, we cannot guarantee that we will be able to avoid negative consequences
directly or indirectly from the foregoing events or other impacts on U.S. financial institutions. 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”) creates comic books, graphic novels and digital content through its imprints IDW, Top Shelf Productions
and Artist’s Editions; and
ii. IDW
Entertainment (“IDWE”) is 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. Allowance for Doubtful Accounts 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 condensed
consolidated statements of operations. The Company had an allowance for doubtful accounts of $0 as of January 31, 2023 and October 31,
2022. 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 three months ended January 31, 2023 and 2022
were a recoupment of $166,000 and amortization of $999,000, 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 condensed 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.
All outstanding loans and other obligations have been paid off and all bank accounts have been closed. The carrying amounts and classification
of the VIEs’ assets are presented below:
(in thousands) January 31, October 31,
Cash and cash equivalents $ - $ 126 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 direct market and book market sales of comic books and graphic novels is recognized, net of an allowance for estimated
sales returns, at the later of the time of the On Sale Date (“OSD”) or shipment by IDWP’s distributors to the distributors’
customers. Revenue from direct-to-consumer sales of comic books, graphic novels, and games is recognized at the later of the OSD or shipment
from the printer or third-party logistics warehouse to the customer. 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. Revenue is 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 become entitled to the Canadian tax credits. The Canada Revenue Agency (“CRA”)
has completed the audit on these productions and the related final tax refunds have been reflected in the Company’s condensed consolidated
statement of operations in the periods they were received. 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 books market distributor offers 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 January 31, 2023 and October
31, 2022, the Company’s estimated returns were $89,000 and $110,000, 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 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. 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 insurance
limits. Historically, the Company has not experienced any losses due to such concentration of credit risk. IDWP has three significant customers, Penguin
Random House (“PRH”), Scholastic Inc. (“Scholastic”), and, for periods prior to June 2022, Diamond Comic Distributors,
Inc. (“Diamond”), that pose a concentration risk. Revenues from PRH, IDWP’s book market distributor
and, beginning June 1, 2022, IDWP’s direct market distributor, represented 70.1% and 21.7% of condensed consolidated revenue for
the three months ended January 31, 2023 and 2022, respectively. The receivable balances represented 65.0% and 63.9% of condensed consolidated
receivables at January 31, 2023 and October 31, 2022, respectively. Revenues from Scholastic, a leading distributor
of children’s books, represented 12.0% and 1.6% of condensed consolidated revenue for the three months ended January 31, 2023 and
2022, respectively. Revenues from Diamond, which was IDWP’s
direct market distributor until June 1, 2022, represented 0% and 15.0% of condensed consolidated revenue for the three months ended January
31, 2023 and 2022, 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 0% and 35.4% of condensed consolidated revenue for the three months ended January 31, 2023 and 2022,
respectively. The receivable balances from Fifth Season represented
15.3% and 17.7% of condensed consolidated receivables at January 31, 2023 and October 31, 2022, respectively. 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 accumulated deficit by $589,000 as of October 31, 2021. This error had no impact on net loss, loss per share, or
net cash provided by operating activities for the year ended October 31, 2021. 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:
As of October 31, 2021
(in thousands) As Reported Adjustment As Revised
Consolidated Balance Sheet
Accumulated deficit $ (80,114 ) $ (589 ) $ (80,703 )
Total stockholders’ equity $ 22,637 $ (589 ) $ 22,048 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. Gain contingencies are not recorded until they are realized. Recently Issued Accounting Pronouncements Adopted 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 |
