IDW Media Holdings (IDWM) Risk Analysis

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Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning.

IDW Media Holdings disclosed 40 risk factors in its most recent earnings report. IDW Media Holdings reported the most risks in the “Finance & Corporate” category.

Risk Overview Q4, 2022

Risk Distribution

40% Finance & Corporate

20% Production

18% Ability to Sell

13% Macro & Political

10% Tech & Innovation

0% Legal & Regulatory

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.

Risk Change Over Time

2022

S&P500 Average

Sector Average

Risks removed

Risks added

Risks changed

IDW Media Holdings Risk Factors

New Risk (0)

Risk Changed (0)

Risk Removed (0)

No changes from previous report

The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.

Risk Highlights Q4, 2022

Main Risk Category

Finance & Corporate

With 16 Risks

Finance & Corporate

With 16 Risks

Number of Disclosed Risks

From last report

S&P 500 Average: 32

From last report

S&P 500 Average: 32

Recent Changes

1Risks added

0Risks removed

0Risks changed

Since Jan 2023

1Risks added

0Risks removed

0Risks changed

Since Jan 2023

Number of Risk Changed

-4

From last report

S&P 500 Average: 4

-4

From last report

S&P 500 Average: 4

See the risk highlights of IDW Media Holdings in the last period.

Risk Word Cloud

The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.

Risk Factors Full Breakdown - Total Risks 40

Finance & Corporate

Total Risks: 16/40 (40%)Above Sector Average

Share Price & Shareholder Rights8 | 20.0%

Share Price & Shareholder Rights - Risk 1

There can be no assurances that our Class B common stock will not be subject to potential delisting if we do not continue to maintain the listing requirements of the NYSE American.

We are subject to, among other things, our fulfilling all of the listing requirements of NYSE American. In addition, NYSE American has rules for continued listing, including, without limitation, minimum market capitalization and other requirements. Failure to maintain our listing (i.e., being de-listed from NYSE American), would make it more difficult for stockholders to sell our Class B common stock and more difficult to obtain accurate price quotations on our Class B common stock. This could have an adverse effect on the price of our Class B common stock. Our ability to issue additional securities for financing or other purposes, or otherwise to arrange for any financing we may need in the future, may also be materially and adversely affected if our Class B common stock is not traded on a national securities exchange.

Share Price & Shareholder Rights - Risk 2

Although we do not intend to utilize the "controlled company" exemption that may now or in the future be afforded to us by the NYSE American, we may do so in the future which could limit or reduce the effectiveness of our corporate governance.

The Trusts (as defined below) collectively hold shares that represent approximately 58.6% of the combined voting power of our outstanding stock as of January 17, 2023. See "Eight trusts for the benefit of sons and daughters of Howard S. Jonas, our Chairman of the Board of Directors, hold shares that, in the aggregate, represent more than a majority of the combined voting power of our outstanding capital stock, which may limit the ability of other stockholders to affect our management", below, and "Holders of our Class B common stock have significantly less voting power than holders of our Class C common stock", below. Although we do not believe it to be the case currently, as a result of our current ownership by the Trusts or otherwise we may now or in the future qualify for the exceptions from the NYSE American's corporate governance listing requirements available to us because we are a "controlled company" as defined in section 801(a) of the NYSE American Company Guide. Among other things, a "controlled company" may exempt itself from the requirement that (i) a majority of its directors be independent directors, (ii) its Compensation Committee, Corporate Governance Committee and/or Nominating Committee be comprised entirely of independent directors, and (iii) the Company not have a single Nominating/Corporate Governance Committee. If we currently or in the future qualify as a "controlled company," we do not intend to rely on any applicable exceptions from the NYSE American's corporate governance listing requirements available to us because we are at that time a "controlled company." However, there can be no assurance that we will not in the future, if at that time we are a "controlled company," rely on any or all of the exceptions from the NYSE American's corporate governance listing requirements available to us because we are a "controlled company." If we do rely on any or all of the exceptions from the NYSE American's corporate governance listing requirements because we are then a "controlled company," the effectiveness of our corporate governance could be limited or reduced.

Share Price & Shareholder Rights - Risk 3

Our multi-class structure may render our shares ineligible for inclusion in certain stock market indices, and thus adversely affect the share price of our Class B common stock and its liquidity.

We have issued and outstanding shares of Class B common stock and shares of Class C common stock. Our multi-class structure may render our shares ineligible for inclusion in certain stock market indices, which may adversely affect the share price of our Class B common stock and its liquidity.

Share Price & Shareholder Rights - Risk 4

There is a limited trading market for shares of our Class B common stock and stockholders may find it difficult to sell our shares.

Our Class B common stock may be subject to the penny stock rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors. The SEC regulations generally define a penny stock to be an equity that has a market price of less than $5.00 per share, subject to certain exceptions. If we do not retain a listing on NYSE American and if the price of our Class B common stock is less than $5.00, our Class B common stock will be deemed a penny stock. Unless an exception is available, those regulations require the delivery, prior to any transaction involving a penny stock, of a disclosure schedule explaining the penny stock market and the risks associated therewith and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally institutions and high net worth individuals). In addition, the broker-dealer must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. Moreover, broker-dealers who recommend such securities to persons other than established customers and accredited investors must make a special written suitability determination for the purchaser and receive the purchaser's written agreement to transactions prior to sale. Regulations on penny stocks could limit the ability of broker-dealers to sell our Class B common stock and thus the ability of purchasers of our Class B common stock to sell their shares in the secondary market. We cannot predict the extent to which investor interest in us and our Class B common stock will lead to the development or continuance of an active trading market or how liquid that trading market for our Class B common stock might become. If an active trading market for our Class B common stock does not develop or is not sustained, it may be difficult for investors to sell shares, particularly large quantities, of our Class B common stock at a price that is attractive or at all. As a result, an investment in our Class B common stock may be illiquid and investors may not be able to liquidate their investment readily or at all when they desire to sell.

Share Price & Shareholder Rights - Risk 5

There is limited liquidity in our Class B common stock, which may adversely affect your ability to sell your shares of our Class B common stock.

The market price of our Class B common stock may fluctuate significantly in response to a number of factors, some of which are beyond our control. These factors include, but are not limited to: - developments concerning intellectual property rights and regulatory approvals relating to us;- quarterly variations in our business and financial results or the business and financial results of our competitors;- the ability or inability of us to generate increases in revenue and operate profitably;- the ability or inability of us to raise capital, if needed, and the terms and conditions associated with any such raising of capital;- developments in our industry and target markets;- the number of market makers who are willing to continue to make a market in our stock and the market or exchange on which they decide to make a market in our stock;- our ability to have our Class B common stock continue to be listed on the NYSE American; and - general market conditions and other factors, including factors unrelated to our own operating performance. In recent years, the stock market in general has experienced extreme price and volume fluctuations. Continued market fluctuations could result in extreme volatility in the price of shares of our Class B common stock, which could cause a decline in the value of our shares. Price volatility may be accentuated if trading volume of our Class B common stock is low, which historically has often been the case. The volatility in our Class B stock may be combined with low trading volume. Any or all of these above factors could adversely affect your ability to sell your shares of our Class B common stock or, if you are able to sell your shares, to sell your shares at a price that you determine to be fair or favorable.

Share Price & Shareholder Rights - Risk 6

We are a "smaller reporting company" and an "emerging growth company" and we cannot be certain if the reduced disclosure requirements applicable to smaller reporting companies and emerging growth companies will make our Class B common stock less attractive to investors.

We are a "smaller reporting company," as defined in Rule 12b-2 under the Exchange Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including "emerging growth companies" such as, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Our status as a "smaller reporting company" is determined on an annual basis. We cannot predict if investors will find our Class B common stock less attractive or our company less comparable to certain other public companies because we will rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future financial results may not be as comparable to the financial results of certain other companies in our industry that adopted such standards. If some investors find our Class B common stock less attractive as a result, there may be a less active trading market for our Class B common stock and our stock price may be more volatile.

Share Price & Shareholder Rights - Risk 7

Holders of our Class B common stock have significantly less voting power than holders of our Class C common stock.

Holders of our Class B common stock are entitled to one-tenth of a vote per share on all matters on which our stockholders are entitled to vote, while holders of our Class C common stock are entitled to three votes per share. Because of their voting power, the holders of our Class C common stock will be able to control matters requiring approval by our stockholders, including the election of all of the directors, amendment of organizational documents and the approval of significant corporate transactions, including any merger, consolidation or sale of all or substantially all of our assets. As a result, the ability of any of the holders of our Class B common stock to influence our management may be limited. In addition, our dual class structure has an anti-takeover effect, and accordingly, the holders of the shares of Class C common stock have the ability to prevent any change in control transactions that may otherwise be in the best interest of stockholders

Share Price & Shareholder Rights - Risk 8

Eight trusts for the benefit of sons and daughters of Howard S. Jonas, our Chairman and Chairman of the Board, hold shares that, in the aggregate, represent more than a majority of the combined voting power of our outstanding capital stock, which may limit the ability of other stockholders to affect our management.

Eight trusts for the benefit of sons and daughters of Howard S. Jonas (the "Trusts"), our Chairman and Chairman of the Board, collectively have voting power over 1,733,750 shares of our common stock (which includes 545,360 shares of our Class C common stock (which is all the issued and outstanding shares of the Class C common stock), which are convertible into shares of our Class B common stock on a 1-for-1 basis, and 1,188,390 shares of our Class B common stock), representing approximately 58.6% of the combined voting power of our outstanding capital stock, as of January 17, 2023. In addition, as of January 17, 2023, Howard S. Jonas beneficially holds 3,479,934 shares of our Class B common stock, warrants to purchase up to 89,243 shares of our Class B common stock at a price per share of $1.936 and warrants to purchase up to 98,336 shares of our Class B common stock at a price per share of $1.936. Each of the Trusts has a different, independent trustee. Howard S. Jonas serves as our Chairman, an executive officer position, and Chairman of the Board, which is not an officer position. He is our founder and served as an executive officer, including our Chief Executive Officer, for a very significant time period, and the members of the Board and management often look to him for guidance on major financial, operational and strategic matters. Howard S. Jonas does not have the right to direct or control the voting of the shares of our common stock that are held by the Trusts, and the independent trustees hold sole voting and dispositive power over the common stock held by the Trusts. However, Howard S. Jonas is the trustor of the trusts and is the father of each of the beneficiaries of the Trusts and his views may be taken into account by the trustees and others related to the Trusts. We are not aware of any voting agreement between or among any of the Trusts and/or Howard S. Jonas, but if such a voting agreement or other similar arrangement exists or were to be consummated, if all or several or all of the Trusts were to act in concert, or if we issued additional Class C common stock, certain or all of the Trusts and/or Howard S. Jonas along with holders of the Class C common stock would be able to control matters requiring approval by our stockholders, including the election of all of the directors, amendment of organizational documents and the approval of significant corporate transactions, including any merger, consolidation or sale of all or substantially all of our assets. As a result, the ability of any of our other stockholders to influence our management may be limited. In addition, our dual class structure has an anti-takeover effect, and accordingly, the holders of the shares of Class C common stock have the ability to prevent any change in control transactions that may otherwise be in the best interest of stockholders.

Accounting & Financial Operations4 | 10.0%

Accounting & Financial Operations - Risk 1

If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud.

We qualify as an "emerging growth company" as defined in the Jumpstart our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include: - an extended transition period to comply with new or revised accounting standards applicable to public companies; and - an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002. We may take advantage of these provisions until the end of our fiscal year 2026, or such earlier time that we are no longer an emerging growth company and, if we do, the information that we provide stockholders may be different than you might receive from other public companies in which you hold equity. We would cease to be an emerging growth company if we have more than $1.07 billion in annual revenue, have more than $700 million in market value of our shares of common stock held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period. In addition, if we no longer qualify as an emerging growth company, and are considered an accelerated filer, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation. During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our stock. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

Accounting & Financial Operations - Risk 2

We have no future plans to pay dividends on our Class B common stock.

We do not pay, and do not intend to pay, cash dividends on our Class B common stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our businesses and do not anticipate paying any cash dividends in the foreseeable future. In addition, the terms of our current, as well as any future, financing agreements may preclude us from paying any dividends. As a result, capital appreciation, if any, of our Class B common stock will be investors' sole source of potential gain for the foreseeable future.

Accounting & Financial Operations - Risk 3

We have a history of continued operating losses at IDWE and IDWP and cannot be certain of our future profitability.

We had accumulated a net deficit through October 31, 2022, of approximately $81.5 million. Prior to the CTM Sale, which closed on February 15, 2021, and until the start of the COVID-19 pandemic in March 2020, we often used cash flows from CTM to partially provide funding for corporate overhead and for our IDWP and IDWE operations. In fiscal 2022, on a consolidated basis, the Company had negative cash flows of $7.5 million. In fiscal 2021, the Company on a consolidated level generated positive cash flow of $5.4 million, as a result of net proceeds from the offering closed on August 6, 2021, of $9.4 million. We may incur losses in the foreseeable future as we invest in our IDWE and IDWP businesses and operations. IDWE's revenues depend on the delivery of properties and provision of services, which can vary significantly from period to period and be unpredictable. While in certain prior periods, our Chairman of the Board from time to time provided us with financing on favorable terms and conditions, there is no guarantee that we will be able to secure financing from our Chairman of the Board or other sources in the future, or, if available, the terms on which such financing may be provided. The time required for us to become profitable is uncertain, and there can be no assurance that we will obtain the financing required or achieve profitability on a sustained basis, if at all. We expect that our results of operations may also fluctuate significantly in the future as a result of a variety of factors, including, without limitation: the impact of the COVID-19 pandemic, the ability to sell comic books, graphic novels, television and other media related sales to minimize the lag from negotiations to then sell in various theater forms as noted above with a quick enough turn around rate to establish profitability; our ability to attract, retain and motivate qualified personnel; specific economic conditions in the entertainment and publishing markets; and general economic conditions.

Accounting & Financial Operations - Risk 4

IDWP depends on the internal controls of its distributor for its financial reporting and revenues.

Because of PRH's role as the distributor of IDWP's publications and the fact that much of IDWP's inventory is held at its distributor's facilities, IDWP depends on the distributors to implement internal controls over financial reporting and to provide IDWP with information related to those internal controls. PRH's internal controls might not be sufficient to allow IDWP to meet its internal control obligations or to allow IDWP's management to properly assess those controls. The distributors may fail to cure any internal control deficiencies related to the publications that it distributes. IDWP may be unable to effectively create compensating controls to detect and prevent errors or irregularities in the distributors' accounting to IDWP and others. Errors in properly tracking publication sales could also negatively impact IDWP's revenues.

Debt & Financing3 | 7.5%

Debt & Financing - Risk 1

We will likely need additional capital to sustain our operations and will likely need to seek further financing to accelerate our growth, which we may not be able to obtain on acceptable terms or at all. If we are unable to raise additional capital, as needed, the future growth of our business and operations would be severely limited.

A factor limiting our growth, including our ability to enter our proposed markets, attract customers, and develop and deliver our products, is our limited capitalization overall and as compared to other companies in the industry. To sustain our operations, we will rely heavily on the stability and predictability from the publishing business. As these contracts can span out years into the future it allows us to have predictable cash flows and operating stability. If we are unable to generate sufficient revenue and profits from our operations, we may decide to seek additional financing. It is possible we may need additional capital to bring our operations to a sustainable level over the next 15 months. In fiscal 2022, we raised $0, in fiscal 2021, we raised gross proceeds of $10,350,000 and in fiscal 2020 we raised gross proceeds of $12,300,000 inclusive of $4 million debt-to-equity conversion in equity financing. We believe that, in addition to the capital raised thus far, we may require up to an additional $7 to $10 million to satisfy our operating cash needs for the next 36 months after the raise. The above is premised on current operating metrics as we are aiming to become cash positive in 2024. However, there is no guarantee we will achieve our goal. We may also seek additional financing to accelerate our growth. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of the Company held by existing shareholders will be reduced and our shareholders may experience significant dilution. In addition, new securities may contain rights, preferences or privileges that are senior to those of our Class B common stock. If we raise additional capital by incurring debt, this will result in increased interest expense. There can be no assurance that acceptable financing necessary to further implement our plan of operation can be obtained on suitable terms, if at all. Our ability to develop our business could suffer if we are unable to raise additional funds on acceptable terms, which would have the effect of limiting our ability to increase our revenues, develop our products, attain profitable operations, which could result in a significant or complete loss of your investment.

Debt & Financing - Risk 2

The end of a peak period of investment could materially impact revenue and operating results at IDWE.

The entertainment industry is experiencing reductions in both the number of scripted shows being ordered and the amount spent on content. An emerging decline in advertising spending is an additional obstacle that may adversely impact our ability to sell our IPs to companies that produce television content, which could materially impact revenue and operating results at IDWE.

Debt & Financing - Risk 3

We could find it difficult to raise additional capital in the future.

We may need to raise additional capital in order for stockholders to realize increased value on our securities. Given the current global economy, there can be no assurance that we would be able to obtain funding on commercially reasonable terms in a timely fashion. Failure to obtain additional funding, if necessary, could have a material adverse effect on our business, prospects and financial condition.

Corporate Activity and Growth1 | 2.5%

Corporate Activity and Growth - Risk 1

The requirements of being a reporting public company may strain our resources, divert management's attention and affect our ability to attract and retain additional executive management and qualified board members.

As a reporting public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the Dodd-Frank Act, and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, making some activities more difficult, time-consuming or costly. This will put increased demand on our systems and resources, particularly after we are no longer a "smaller reporting company." The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations. As a "smaller reporting company" and "emerging growth company", as stated above, we receive certain reporting exemptions under The Sarbanes-Oxley Act. Changing laws, regulations and standards relating to corporate governance and public disclosure create uncertainty for public companies, which increases legal and financial compliance costs and time expenditures for internal personnel. These laws, regulations and standards are subject to interpretation, which in many cases due to their lack of specificity, their application in practice may evolve over time as regulators and governing bodies provide new guidance. These changes may result in continued uncertainty regarding compliance matters and may necessitate higher costs due to ongoing revisions to filings, disclosures and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management's time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate regulatory or legal proceedings against us, and our business may be adversely affected. As a public company under these rules and regulations, we expect that it may make it more expensive for us to hire external auditors to perform requisite outside audited financial statements, as well as obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee and could also make it more difficult to attract qualified executive officers. As a result of disclosure of information in filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and results of operations could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and results of operations.

Production

Total Risks: 8/40 (20%)Above Sector Average

Manufacturing2 | 5.0%

Manufacturing - Risk 1

IDWE does not control the decisions to produce shows and relies on outside streamers/studios for greenlighting, and if an insufficient number of our properties are put into production, our profitability will be significantly impacted.

Since IDWE does not finance production for film or television, it ultimately rests on the buyers (specifically streamers and studios) of the projects we are developing and seeking to produce to both greenlight and finance productions. Our revenues and profitability are thus dependent on those parties' decisions.

Manufacturing - Risk 2

IDWP cannot control certain publication delays, cancellations and shipping delays which could adversely affect IDWP's sales and its ability to meet delivery obligations.

IDWP does not control the decision to proceed with the production of publications based on characters that it licenses from others, and it does not have full control of the timing of the releases of those publications, which are often the subject to long and inflexible schedules. Disruptions, delays or cancellations to those schedules (especially those connected to COVID-19-related supply and logistics issues) could cause IDWP to incur additional costs, miss an anticipated publication date, endure long periods without publishing a publication or all of the above, which could hurt IDWP's associated licensing programs and business.

Employment / Personnel1 | 2.5%

Employment / Personnel - Risk 1

Any loss of key personnel and the inability to attract and retain qualified employees could have a material adverse impact on our operations.

We are dependent on the continued services of key executives. The departure of key personnel without adequate replacement could severely disrupt our business operations. Additionally, we need qualified managers and skilled employees with industry experience to operate our businesses successfully. From time to time there may be shortages of skilled labor which may make it more difficult and expensive for us to attract and retain qualified employees. If we are unable to attract and retain qualified individuals or our costs to do so increase significantly, our operations would be materially adversely affected.

Supply Chain2 | 5.0%

Supply Chain - Risk 1

IDWP depends on one main distributor for its direct market and non-direct market publications and such dependence subjects IDWP to the risk that such distributor may be unable to perform its obligations to IDWP.

Historically, IDWP depended on Diamond and PRH, to distribute the vast majority of its publications. With the June 2022 change to PRH as IDWP's direct market distributor, Diamond is now the company's largest customer in that sales channel, as they have now become a wholesale client of PRH for IDWP products. PRH has distributed substantially all of IDWP's products to non-direct market accounts (i.e., bookstores, libraries, mass market) and, commencing in June 2022 began distributing to all of IDWP's direct market accounts. Should PRH fail to perform its distribution obligations under the applicable distribution agreement or to experience financial difficulties that would hinder performance, distribution to the direct or non-direct market, respectively, would be significantly impaired in the short term, and IDWP's ability to distribute and receive proceeds from its publications would be impaired which would have a material adverse impact on our business, prospects and financial condition.

Supply Chain - Risk 2

If IDWP fails to maintain positive relationships with its key licensors, authors, illustrators and other creative talent, as well as to develop relationships with new licensors and creative talent, its business could be adversely affected.

IDWP's business is highly dependent on maintaining strong relationships with the entertainment companies that license their entertainment properties to IDWP, and with authors, illustrators and other creative talent who produce the products that are sold to IDWP's customers. Any weakening of these relationships, or the failure to develop successful new relationships, could have an adverse impact on IDWP's business and financial performance. Effective January 1, 2023, our licenses for Transformers and GI Joe titles terminated. While the cancellation of the licenses for Transformers and GI Joe are anticipated to decrease revenues by approximately $1.2 million in fiscal year 2023, IDWP plans to mitigate the loss of revenue by enhancing our other key licensed brands through new initiatives for Star Trek, Godzilla, Dungeons & Dragons, and My Little Pony and an expansion of Teenage Mutant Ninja Turtles: The Last Ronin. We expect these efforts to offset any material impact on our gross margin from the loss of the licensed titles. IDWP depends on freelance creators who choose how to spend their time and utilize their talents. It is important for IDWP to maintain strong relationships with those freelance creators, so they devote their time and talent to IDWP's projects. IDWP's inability to maintain and secure these relationships could have a material adverse effect on IDWP's business, prospects and financial condition.

Costs3 | 7.5%

Costs - Risk 1

IDWP cannot control the increased industry costs in shipping, printing and paper which in turn impact profitability.

Since 2020, the cost of shipping internationally has increased more than 50% above the long-term trend, established since the last recession in 2004, and is expected to continue to rise through 2022. Prices are expected to stabilize in 2023, but at a higher rate than previously seen in the industry. The strong demand for consumer goods is clogging transportation networks worldwide leading to the increased costs to ship internationally. Additionally, once on US soil the goods are subject to increased rail or trucking costs, roughly 23% over 2020. Increased capacity allows transporters to have leverage to continue to increase prices when negotiating contracts, affecting not only trucks and rail, but also seeping into warehouse costs as the supply-chain bottlenecks continue to squeeze capacity. Additionally, rising labor costs are contributing to the increased costs in transportation, printing, and paper, across the industry. As well as, an influx of publishers moving their printing to domestic printers, due to the global shipping costs & delays, causing domestic prices to rise due to capacity concerns on press. With a push from the big 5 US Publishers domestic printers are investing heavily in staff and equipment to increase capacity, but it is not expected to reach the same capacity highs seen in the early 2000's. This increase in capacity should, however, begin to create more competition in the domestic printing market, leading to lower prices in both the domestic and overseas markets overall. The cost of paper has been steadily rising for the last several years due to consolidation of plants and changing operations to accommodate the consumer shipping industry. However, as of the end of 2022, the paper market has begun to stabilize, and many manufacturers are finally showing a small percentage of surplus as they prepare for 2023. This surplus suggests price increases should slow through 2023 compared with the quarterly paper increases seen throughout 2021 and 2022. Foreign paper markets are less affected by the paper market increases as China is the largest producer of paper in the world. Any increase in such costs will impact the Company's profitability.

Costs - Risk 2

Reduction in budgets for content could impact our ability to sell television shows which could materially impact revenue and operating results at IDWE.

Increased competition coupled with slower growth and huge losses indicated presage that there may be a reduction in the streaming business' addressable market. In an attempt to reduce costs, many streamers reduced the number of employees, and vowed to reduce their content spend. Reduction in budgets for content could impact our ability to sell TV shows which could materially impact revenue and operating results at IDWE.

Costs - Risk 3

Increased costs for programming and other rights, as well as judgments we make on the potential performance of IDWE's content, may adversely affect IDWE's profits and balance sheet.

Due to increased costs for programming and other rights, IDWE shifted its investment strategy in content during the 2021-2022 calendar years – evolving its strategy to not fully fund or finance the productions of television shows or feature films. While the business model of fully funding these productions can present significant upside, it is also a major risk. That being said, as a result of being more cost conscious, IDWE's capital it spends on developing properties for media opportunities could ultimately be exhausted in any given year due to rising costs of talent and rights. As a result, IDWE might find itself in a position where it is unable to fund additional development or secure the talent required to take a project forward, and adversely affect its ability to build a significant slate of opportunities for sales to buyers.

Ability to Sell

Total Risks: 7/40 (18%)Above Sector Average

Competition2 | 5.0%

Competition - Risk 1

The competitive pressures IDWE faces in its business could adversely affect its financial performance and growth prospects.

IDWE is subject to significant competition, including from other studios/producers/distributors many of which operate with significantly larger staffs and funding than IDWE. Competitors include (i) smaller independent studios such as Entertainment One, Blumhouse, iTV, Annapurna and Miramax, (ii) major independent studios such as Sony TV and Warner Bros TV, (iii) vertically integrated studios such as Twentieth Television, Universal TV, CBS TV Studios and ABC Studios who develop, distribute and produce original television programming and; (iv) other entertainment divisions of comic book or graphic novel publishers such as Dark Horse, Oni Press, Image and BOOM who develop and produce television and film based on their publishing company's slate of IP. To the extent IDWE cannot meet the challenges from existing or new competitors or develop new product offerings to meet customer preferences or needs, its revenues and profitability could be adversely affected.

Competition - Risk 2

The competitive pressures IDWP faces in its business could adversely affect its financial performance and growth prospects.

IDWP is subject to significant competition, including from other publishers, many of which are substantially larger than IDWP and have much greater resources than it, such as Marvel Comics and DC Comics. To the extent IDWP cannot meet the challenges from existing or new competitors or develop new product offerings to meet customer preferences or needs, its revenues and profitability could be materially and adversely affected.

Demand2 | 5.0%

Demand - Risk 1

IDWP may not be able to respond to changing consumer preferences and its sales may decline.

IDWP operates in highly competitive markets that are subject to rapid change, including changes in customer preferences. There are substantial uncertainties associated with IDWP's efforts to develop successful publications and products for its customers. New fads, trends, and shifts in popular culture could affect the type of creative media consumers will purchase. Content in which IDWP has invested significant resources may fail to attract significant consumer demand at the time it is published. IDWP regularly makes significant investments in new products that may not be profitable, or whose profitability may be significantly lower than IDWP has experienced historically. A loss in sales due to the foregoing could have a material adverse effect on IDWP's business, prospects and financial condition.

Demand - Risk 2

Viewership and revenue declines in historically profitable television programming companies limits their ability to purchase our IP.

The advancing decline in both cable television and linear broadcast television business models and revenue generation limits their ability to purchase our IP, which could materially impact revenue and operating results at IDWE.

Sales & Marketing2 | 5.0%

Sales & Marketing - Risk 1

Significant returns of IDWP products sold to mass market stores may have a material impact on IDWP's cash flow.

Through its distribution arrangement with PRH, IDWP sells its publications to bookstores, such as Barnes & Noble, in which PRH allows to be on a fully returnable basis. As a result, these customers can return publications to PRH for credit, which in turn is charged back to IDWP. There is no time limit on the customers' right to return publications distributed to them. In addition to IDWP being charged back the wholesale cost of the publications, IDWP also incurs a return processing fee by PRH. Such returns and fees are credited against IDWP's current sales revenue from PRH, which reduces IDWP's cash flow and operating capital. Product returns are a normal part of book publishing and IDWP estimates and records a reserve for such returns based on its return history and current trends that are expected to continue. A significant over-estimation of demand for a publication by the mass market bookstores, however, could result in a larger-than-expected volume of returns that would significantly reduce IDWP's cash flows and operating capital. Further, a general downturn in the economy may also result in significant returns as bookstores reduce their outstanding debts to improve their own cash flow. Any or all of these events that result in significant returns in excess of IDWP's estimates could have a material adverse effect on IDWP's revenue, cash flow and operating results.

Sales & Marketing - Risk 2

IDWP might lose sales and revenue because of piracy of publications.

With technological advances, the piracy of publications has increased. Unauthorized and pirated copies of IDWP's publications will reduce the revenue generated by those publications. If consumers can obtain illegal copies of IDWP's publications and media, IDWP's revenues will decline. IDWP may not be able to identify or enforce violations of its intellectual property rights and even if legal remedies are available, they could be costly and drain its financial resources. Accordingly, illegal copying of IDWP's content could negatively affect its revenues and earnings.

Brand / Reputation1 | 2.5%

Brand / Reputation - Risk 1

IDWP's publications may be less successful than anticipated.

IDWP cannot accurately predict the commercial success of any of its publications because the revenue derived from the distribution of a publication depends primarily upon its acceptance by the public, which cannot be accurately predicted. The commercial success of a publication also depends upon the public's acceptance of competing publications, critical reviews, the availability of alternative forms of entertainment and leisure time activities, piracy and unauthorized distribution of publications, general economic conditions, and other tangible and intangible factors, none of which can be predicted with certainty. Additionally, if the movies or television programs that IDWP licenses are not successful, or if the characters that IDWP licenses lose some of their popularity, IDWP's ability to sell publications based on such characters would decline, which could have a material adverse effect on IDWP's business, prospects and financial condition.

Macro & Political

Total Risks: 5/40 (13%)Above Sector Average

Economy & Political Environment1 | 2.5%

Economy & Political Environment - Risk 1

General economic conditions may negatively impact our operations.

Economic downturns may negatively affect our operations. These conditions may be widespread or isolated to one or more geographic regions in which we operate. Higher wages, related labor costs, printing costs, leasing costs, energy, insurance and fuel costs and the increasing cost trends in those markets may decrease our margins. Moreover, economic downturns present an additional challenge to us because a significant portion of our revenues are from sales through retail stores, which are more likely to close during economic downturns. In addition, decreases in travel and entertainment spending during economic downturns could impact our businesses, and thereby negatively impact our operations.

International Operations1 | 2.5%

International Operations - Risk 1

IDWP's dependence on printers outside the United States subjects it to the risks of international business.

IDWP's publications are printed primarily outside the United States in South Korea, China and Canada. International manufacturing is subject to a number of risks, including fluctuations and volatility in currency exchange rates, transportation delays and interruptions, political and economic disruptions, the impositions of tariffs, import and export controls and changes in governmental policies. The impact of changes in currency rates has been especially heightened by current global economic conditions and significant devaluations of local currencies in comparison to the U.S. Dollar. Although to date, currency fluctuations have not materially adversely affected IDWP's costs, such fluctuations could materially and adversely affect IDWP in the future. Further, added tariffs may be imposed on our printing activities outside the United States which could increase IDWP's costs. Possible increases in costs and delays of, or interferences with, product deliveries could result in losses of revenues, higher costs, reduced profitability and reductions in the goodwill of IDWP's customers. Additional factors that may adversely affect IDWP's printing activities outside of the United States and therefore materially and adversely affect the business and financial results of IDWP include international political situations, uncertain legal systems and applications of law, prejudice against foreigners, corrupt practices, uncertain economic policies and potential political and economic instability that may be exacerbated in foreign countries.

Natural and Human Disruptions3 | 7.5%

Natural and Human Disruptions - Risk 1

Added

The collapse of certain U.S. banks and potentially other financial institutions may have adverse impacts on certain of our vendors and customers or our ability to access payments from certain customers which could negatively impact our operations and financial condition.

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. None

Natural and Human Disruptions - Risk 2

Public health threats could have an adverse effect on the Company's operations and financial results.

In early 2020, the spread of the COVID-19 virus resulted in a worldwide pandemic. We are actively monitoring the COVID-19 pandemic, the restrictive measures imposed to combat its spread and their potential and actual impact on each of our operating segments. While we believe that currently there has been significant improvement due to global and domestic vaccination efforts, we cannot predict the ongoing impact, if any, of COVID-19 related to both known and unknown risks, including future quarantines, closures and other restrictions resulting from the outbreak, and our operations and our customers and partners may continue to be impacted. In April 2020, as a result of the COVID-19 pandemic, IDWP's direct-market distributor paused the release of new product, including IDWP's, although such operations were subsequently restarted. Many retailers experienced closures, reduced operations, or de-prioritization of entertainment products, such as books and games, throughout the COVID-19 pandemic resulting in decreased sales of certain of IDWP's products. COVID-19 continues to impact domestic and international printing and shipping. Costs are beginning to level off as of the end of 2022 and the strain on the logistics network is easing, but prices and timing are still considerably higher than the pre-pandemic levels. Additional closures, restrictions, or virus spikes could have a further negative impact on IDWP's distribution channels and retail customers. We are unable to accurately predict the full impact that the COVID-19 pandemic will have on distributions, purchasing, sales, returns, cash receipts and overall revenue. The COVID-19 pandemic resulted in the production of television shows being periodically suspended depending on local governmental authorities and regulatory requirements in place at any given time. Due to various uncertainties, including the ultimate geographic spread of the virus, the rise of variants that may occur, the severity of the disease, the duration of the outbreak, and actions that may be taken by governmental authorities, further production risks could arise. For all these reasons, the COVID-19 pandemic could have a material adverse impact on our business and financial results.

Natural and Human Disruptions - Risk 3

The public health risk of COVID-19 and its impact on productions could adversely affect IDWE's business.

Multiple television productions of IDWE had been delayed due to the COVID-19 pandemic. Given the potential public health risk of COVID-19 and related possible imposition of new local, state and federal guidelines limiting the filming and production of our live-action shows, IDWE could be adversely affected and experience significant production delays or cancellations. Production costs of IDWE shows may also rise as additional safety protocols related to the COVID-19 pandemic are necessary on the set of these shows.

Tech & Innovation

Total Risks: 4/40 (10%)Below Sector Average

Trade Secrets3 | 7.5%

Trade Secrets - Risk 1

The success of our businesses is highly dependent on the existence and maintenance of intellectual property rights in the publishing and entertainment products and services we create.

The value to us of our intellectual property rights is dependent on the scope and duration of our rights as defined by applicable laws in the United States and abroad and the manner in which those laws are construed. If those laws are drafted or interpreted in ways that limit the extent or duration of our rights, or if existing laws are changed, our ability to generate revenue from our intellectual property may decrease, or the cost of obtaining and maintaining rights may increase. The unauthorized use of our intellectual property may increase the cost of protecting our rights in our intellectual property or reduce our revenues. The unauthorized distribution and access to content generally continues to be a significant challenge for intellectual property rights holders. Inadequate laws or weak enforcement mechanisms to protect entertainment industry intellectual property in one country can adversely affect the results of the Company's operations worldwide, despite the Company's efforts to protect its intellectual property rights. COVID-19 may increase incentives and opportunities to access content in unauthorized ways, as negative economic conditions coupled with a shift in government priorities could lead to less enforcement. These developments may require us to devote substantial resources to protecting our intellectual property against unlicensed use and present the risk of increased losses of revenue as a result of unlicensed distribution of our content. With respect to intellectual property developed by us and rights acquired by us from others, we are subject to the risk of challenges to our copyright, trademark, and patent rights by third parties. Successful challenges to our rights in intellectual property may result in increased costs for obtaining rights or the loss of the opportunity to earn revenue from the intellectual property that is the subject of such challenges .

Trade Secrets - Risk 2

Our intellectual property rights may not be protected, which could adversely affect our consolidated financial position and results of operations.

A substantial portion of our publications are protected by copyright, held either in our name, in the name of the author of the work, or in the name of a sponsoring professional society. Such copyrights protect our exclusive right to publish the work in many countries abroad for specified periods. Our ability to continue to achieve our expected results depends, in part, upon our ability to protect our intellectual property rights. Our consolidated financial position and results of operations may be adversely affected by lack of legal and/or technological protections for our intellectual property in some jurisdictions and markets.

Trade Secrets - Risk 3

Failure to adequately protect and enforce our intellectual property rights could substantially harm our business and operating results.

The success of our business depends in part on our ability to protect and enforce our trademarks, copyrights, trade secrets, and other intellectual property rights. We attempt to protect our intellectual property under trademark, copyright and trade secret laws, and through a combination of confidentiality procedures, contractual provisions and other methods, all of which offer only limited protection. From time to time, legal action by us may be necessary to enforce our trademarks and other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the intellectual property rights of others or to defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources, distract management and technical personnel and negatively affect our business, operating results and financial condition. If we are unable to protect our intellectual property rights, we may find ourselves at a competitive disadvantage to others who need not incur the additional expense, time and effort required to create the innovative products that have enabled us to be successful to date. Any inability on our part to adequately protect our intellectual property may have a material adverse effect on our business, operating results, and financial condition.

Technology1 | 2.5%

Technology - Risk 1

Failures in information technology could have an adverse effect on the Company's operations.

We rely on both internal systems and third parties to provide information technology for many aspects of our business operations. Failures in information technology that could impact the Company's operations include cybersecurity, business continuity and related operational risks, as well as other security failures or breaches of our internal systems or those of our customers, partners, service providers or other third parties.

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?

Risk factors are any situations or occurrences that could make investing in a company risky.

The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.

They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.

It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.

How do companies disclose their risk factors?

Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.

Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.

Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.

According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.

How can I use TipRanks risk factors in my stock research?

Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.

You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.

Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.

A simplified analysis of risk factors is unique to TipRanks.

What are all the risk factor categories?

TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.

1. Financial & Corporate

Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.

2. Legal & Regulatory

Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
Regulation – risks related to compliance, GDPR, and new legislation.
Environmental / Social – risks related to environmental regulation and to data privacy.
Taxation & Government Incentives – risks related to taxation and changes in government incentives.

3. Production

Costs – risks related to costs of production including commodity prices, future contracts, inventory.
Supply Chain – risks related to the company’s suppliers.
Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.

4. Technology & Innovation

Innovation / R&D – risks related to innovation and new product development.
Technology – risks related to the company’s reliance on technology.
Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.

5. Ability to Sell

Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
Competition – risks related to the company’s competition including substitutes.
Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
Brand & Reputation – risks related to the company’s brand and reputation.

6. Macro & Political

Economy & Political Environment – risks related to changes in economic and political conditions.
Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
International Operations – risks related to the global nature of the company.
Capital Markets – risks related to exchange rates and trade, cryptocurrency.

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