Thanks. Welcome to the IDW Media Holdings Inc. Q2 fiscal 2023 earnings conference call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Davidi Jonas. You may begin. Thank you very much. Good afternoon, everybody. We'll get right into the question and answer. I just wanted to make sure that everyone is aware that any statements that we're making today will be subject to our forward-looking statement disclosure. Please see our press release and our Form 10-Q and 10-K from past filings to incorporate the safe harbor statement. With that, I'll turn it over for question and answer. Thank you. Thank you. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from Jeff Silver with Corrado Financial Group. Please proceed. Yeah. Hello, Davidi. Thanks. First of all, thanks for hosting the call. You know, I understand and support what the company's done in terms of slashing costs and delisting. I suspect that that was done so you wouldn't have to clam down existing shareholders by raising money at a, at an incredibly dilutive financing. That you're in a unique position to do this because you have essentially a controlling shareholder. I guess, you know, maybe you can tell us now what the strategy is going forward and where the direction is. I mean, you what are the capabilities of the company? You had a publishing division, you have an entertainment division or had an entertainment division. you know, can you give us a little bit of an indication of whether or not you want to sell the IP or as much of the IP as you can? Are you taking on new publishing projects? Management for a number of years has talked about being a creative partner of choice. I wonder if you can still make that assertion given the reduction in headcount. Maybe you can talk a little bit about your relationship with Penguin. The... On the last call, predecessor mentioned, I think quote unquote, "There are dozens of projects, a dozen projects that have been optioned and are in various stages of development." Basically, the overriding question is, you know, what is the strategy for management going forward? Thanks. Thank you very much for the question. I will, I'll ask you, if you don't mind, if I miss any of the points of the question, just because I apologize, I didn't expect it to have multiple parts, so I'll try to address all of them, but if I fail to touch on any point, please let me know and I'll be happy to circle back. In terms of, in terms of vision for the company going forward, so I'd say there's, you know, different stages to the, to the vision. I mean coming in, as you correctly, as you correctly said, cutting costs and, you know, creating those efficiencies was necessary. It wasn't just to protect shareholders from potential dilution, but it really was, you know, globally to protect the company and its cash flow. I mean, even if, you know, it is possible in the future that, you know, we'll consider capital raising. You know, if we had not taken decisive action when we did, I think there would have been a strong chance of insolvency and/or taking on capital in such a way where it would have been dilution to the point of absurdity, which, at least if there's the need to raise capital now, hopefully it would be from somewhat more of a position of strength and not as dilutive. You know, that's sort of the first step. Next, I'd say, is focusing on getting the company to profitability, and that's a target goal that I have for the company for hopefully the Q4 of this year and into the Q1 of next year, to start seeing the effects of a more efficient operating cost structure, and start to see profitability across the board. Beyond that, you know, I think that there's a bunch of different ways to create meaningful value aside from just profitability. You had talked about selling IP. There's not any interest at this point in time for us to market our IP for sale. I'd say it's more to leverage our intellectual property to create value around it. So whether that be in the form of entertainment or taking other... taking titles that have already had an entertainment life cycle and leveraging the success and the fan base of those titles to create additional revenue opportunities and fan engagement opportunities... I think those are more where we're looking towards, whether that's podcasting or doing a Kickstarter, a new kind of game or, you know, there's different medium where we'd be able to create additional value and engagement for fans. And then, you know, in addition to that, there's, you know, there are other distribution methods that we have not yet taken full advantage of or taken advantage of at all. You know, one might be vertical digital reading, so scrolling, kind of similar to, like, a TikTok scroll, but for reading comics, which is something that IDW hasn't yet done, and that's something that we're looking at, which is a new way for us to take our backlist of content and potentially also, you know, new content, but certainly for our backlist, and create another potential form of engagement for fans and maybe reach a diverse and maybe, you know, a to-date unreached fan audience. I think, if you know, our IDW Publishing website was just recently revamped and, you know, is, I'd say, more current than it has been. You know, utilizing that distribution methodology as a high-value distribution channel, for reaching customers and for offering products in a way where we have better margins as a company, when we're selling direct to consumer through our website. Offering live to consumer engagement, so doing more events over the course of the year where we're directly engaging with fans, creating those unique fan engagement moments, whether it's book readings, partnering with comic stores, going to conferences, working with creative partners, you know, writers, creators, artists, bringing the attention to our store partners, our creator partners, and also generating audio and video content that we can then utilize those spots for further marketing. You know, to show that part of IDW's goal, a big part of IDW's goal is to create that meaningful fan engagement to delight our fans. I think there's also, you know, what a beautiful nexus between fan engagement and value creation. You know, I think the more we engage our fans and give them the type of experiences that they want and better user experiences, whether that's digitally or in person, hopefully, the more likely those experience sets of generating value, and creating, you know, long-term commitment to the franchise and to the brand. Beyond that, there's the possibility that we, you know, at some point might take a view towards creation of content where we have more ownership over the content. You know, right now we basically have licensed content where it's completely, you know, we have a license to produce certain limited, you know, whether it's in print or digital print, but, you know, the license is fairly limited for things like Ninja Turtles and Sonic, where we don't have the big upside if that becomes an entertainment franchise. You know, we don't have the license for that. That's one type of business line, and the other is creator content, where we partner with creators, we partner with artists and writers, and, you know, we have an ownership stake that's joint with partners. In the future, we may invest capital resources and human resources into owning and controlling completely our own IP. That, that might be a differentiator going forward that will, you know, give us a biggest upside for content creation. Those are kind of a few of the views in terms of being a partner of choice. I'd say 100% we will be and are a partner of choice. You know, I jokingly said to someone, "I don't want to be the partner of choice. I want to be the partner you take your parents home to me." That's, that's the way that I think about how we partner with our licensors, with our creators. You know, like I want them to feel a real sense of community and relationship when working with IDW, collaboration, alignment. Certainly, that should continue. I think from the time I've spent with a bunch of creators, there has been great reception. you know, like one creator kind of said to me, "I feel like you're reading off my note sheet here because, like, you're saying all the things I was hoping to ask you questions about, so you're answering everything without, you know, without us, without asking the questions." I hope we'll, you know, I hope we'll strive for excellence in that area. In terms of PRH, I think it's a, it's a great relationship. Really, it's a strong relationship. I actually just, you know, coming back today from having a nice lunch with some of the leadership from PRH, and, you know, they continue to be excited about working with IDW. They're very engaged, and they're giving us good guidance to make sure that we have the greatest likelihood for success in our marketing and sales efforts in partnership with PRH. And in regards to IDW Entertainment, we have a bunch of properties that are in development with different stages of development. Nothing has moved forward in part because of the writers' strike that did put some prospects that felt more immediate a little bit on the sideline. I do hope those will pick up. Entertainment is something of a long sales cycle. You know, Locke & Key, as an example, has been kicking around for, you know, I don't know, maybe almost a decade until it, you know, found its place with Netflix. You know, as a for instance, there's another show that, you know, went to pilot years ago, Brooklyn Animal Control, that, you know, seems to be having a second life. It's a great title, great show. You know, the pilot episode, I think was, you know, pretty well produced years ago and just didn't take off, but now might be a time. I'd say you have a strong library of IP. I think going forward, that library is just going to get stronger and stronger as our editorial team, both at IDW Originals and at Top Shelf, are producing just, you know, great content that's very relevant. And, especially in the case of IDW Originals, almost cinematic in its presentation. And I think is, you know, going to be a great driver for IDW Entertainment. That said, you know, IDW Entertainment is not only a long sales cycle, it's also a long revenue cycle. Even if tomorrow we got a green light on a title, which is unlikely during the Writers' Strike, you know, it could be a year or more before we recognize any revenue, because generally, payment comes when the show is produced and delivered. Obviously, you know, that could take a long period of time. I wouldn't expect any immediate results from IDW Entertainment, but it's not as though, you know, we're abandoning it. It just will take time for those new prospects hopefully to come to market. When they do, we'll hopefully be better positioned to create value surrounding the title from, you know, other sort of ancillary revenue streams that we'd like to create our fan engagement on. I hope that answers at least some of your questions. If there's any part I didn't, please feel welcome to follow up. Yeah, no, see, that was very helpful. If I may, let me just try to triangulate a few things here. Previously, management mentioned that you would be publishing 1,400 SKUs in this fiscal year. I was hoping maybe you could update us on that. As we think about achieving profitability in the fourth and into the first fiscal quarter, you know, I mean, if I do a very simplistic, let's say arithmetic calculation, I think my recollection is you're cutting $4 million of selling costs, you know, over on an annual basis. We could look at the margins, I'll call them the gross margins, which are essentially all on the publishing business. We can make some adjustments accordingly to SG&A. It's not, you know, it's not certainly hard or impossible to see how you could break even on a cash flow basis. I know that last quarter, I think the burden was something like $600,000. But, you know, and in terms of and again, I'm just trying to bring some of this conversation together. You had $9.3 million in cash at the end of the Q1 r, it's $5.6 million in cash in the recent quarter. Maybe you can talk a little bit about whether the activity on the publishing side, meaning the side of the entertainment business, it's not going to contribute, as you say, you know, unlikely to contribute anytime soon. Maybe you can help us to understand some of the moving pieces, in terms of the SKUs, the cash at the end of the quarter, and, you know, how maybe sort of provide, even if it's a qualitative bridge, as to how you then get to profitability in the Q4 and the Q1 or the Q4 for the Q1. Sure. In terms of I don't know that 1,400 SKUs is a entirely accurate number. That may have been aspirational at the time. At this point, I have to get back on a specific number. I think, I feel confident saying over 1,000 SKUs, I have to, you know, I'd want to follow up to be more specific about some different numbers. Let's drill down a little bit. When we're talking about SKUs, we're not talking about individual original titles, because a lot of those SKUs are going to be, you know, variant covers, which, you know, gets counted as a, as a separate SKU, but it's really just a cover of a single issue comic. you know, many comics are going to have maybe 3, 4, 5 sometimes, you know, even more than that, variant covers, where you have different artists doing different covers for a comic. I'd say the real number in terms of like original titles is probably closer to, you know, 300, maybe 350, between Top Shelf, IDW Originals, artist editions and IDW licensed products. Yeah, I'd say probably above 1,000 when you're including the variant covers for those and the trade paperbacks, which are sort of a collected edition of, you know, a number of comics put together and released as a separate collected edition. In terms of kind of how that ties into profitability after you factor in more efficient cost structure, I'm not exactly sure of the question. I mean, I'm not sure how specific we want to get. I don't think we're gonna dive into, you know, specific variant covers and how much value we expect to generate. I'd say on the whole, our forecast for revenue this year is slightly up from last year. You know, that's... You know, I don't wanna say take that to the bank because, you know, we don't know that sales are going to necessarily deliver. The sales forecast that we have at the moment, which, I believe are a fair forecast, anticipate that we'll be slightly up year-over-year. Some of that growth in revenue is attributable to a larger SKU count. You know, I do think that that's part of what will drive profitability. I have lots of other questions, but I'll step back into the queue and let other. No, no. I will say thank you. Thank you for the thoughtful questions and as in many cases, the question may be better than the answer, but I appreciate you taking the time to listen. Well, thank you. Okay, the next question is from Keith Rosenbloom with Cruiser Capital. Please proceed. Davidi, I wanted to echo the prior, questioner's comments and just thank you guys for doing what I think a majority owner should do and take control of the business if it's not moving in the direction that the shareholders need it to. thank you. My question revolves around how you perceive value. If I'm not mistaken, just to level set, looking at your latest results, it looks like your working capital is about $1.20 a share for a stock that's trading at $0.50. Although there did seem to be a discussion about liquidity in the prior question, it seems like the company actually has ample liquidity if you can get the fixed costs under control or the margin profile under control. I wanted to just get your perspective on that in terms of whatever plans that you're articulating here. Do you think the company's balance sheet is appropriately positioned to, one, get you to profitability in the Q4 by the Q4, like you just said, whatever expansion plans you're talking about? Thank you for the question, Keith. I do believe that the cash on hand and the balance sheet is sufficient to get us there. You know, I will add the caveat that, you know, that may change, but I don't foresee that changing. You know, I talked earlier about possibly raising capital or raising some capital. I think the last moment we'd want to raise capital would be when it's, you know, absolutely necessary and there's no money left in the bank. That's a very good caveat, that we might still raise some capital, but I think it would be more to give cushion and, you know, flexibility for us to pursue those long-term goals, not necessarily because we're onto our last dollar. In terms of value of the stock, then to take a different tack on liquidity, I mean, it's hard for me to know what the, you know, the true value of a share of IDW Media Holding stock is. Obviously, I can look at the OTC and look at the ticker and, you know, see what the bid-ask is. But it's hard to form an impression when there's, what, you know, 14 million shares outstanding and, you know, the stock is, you know, trading, I don't know, a few thousand shares a day, you know, maybe 10,000 shares, maybe, you know, a very busy day, maybe it's 25,000 shares. It's just not reflective of a strong market base for the stock. You know, if they... You know, I'm sure if somebody went out tomorrow and tried to sell their stock for, you know, $0.05, somebody's gonna buy it. I'm sure there are buyers for the stock, but I'd have a hard time saying that the market is giving a proper reflection of value. I think it's giving a, you know, whether it's $0.50, $0.45, $0.35, you know, whatever the numbers are, that it's fluctuated at in the last little while. I don't perceive that as being a reflection of long-term value as much as a reflection of years of, you know, disappointing results and, you know, sort of holding on to, I guess, the bottom. You know, maybe that's about as close as it gets to the bottom. You know, if we had $5.6 million at the end of Q2, and, you know, we're being transparent that we're not expecting profitability for Q3, and, you know, there's some costs associated with the reduction in force, then, you know, so Q3 is likely going to have additional losses, like, you know, so somebody's factoring in the value of IDW stock, based on, you know, like its cash position plus some, you know, minute premium and on some days, maybe even no premium. You know, like, is that a true reflection of the vault of IP? Is that a true reflection of the entertaining possibilities? Is that a reflection of our ability to grow direct to consumer and, you know, digital advertising and growth in high value distribution channels? I don't think it reflects any of that. I think it just reflects something close to the bottom. I think that in order for IDW stock to have value, there needs to be demonstration, and on a somewhat consistent basis, that we're actually delivering on our, on our vision. I think for years there's been a lot of vision, but not a whole lot by way of delivery. I think that that's what's caused an erosion in the value. I'd say, whatever the value is today, I would, you know, I wouldn't get terribly confident that that's reflective of the long-term value. I think it's reflective of where the market for IDW is today. If the company is able to demonstrate success over a consistent and ground basis, then I think that the value of IDW should, you know, should grow concurrently. You can tell me if that answers your question. I hope it does, but. Thank you. I think it's getting there. Okay, you can tell me if I need to, if there's somewhere more you want me to go. I don't mean to be the DRQ. Absolutely not. Is there any issue. You've listed your inventory at $5 million, your trade receivables at $6 million, as an example. Obviously, you've got your other elements of current assets, but is there any reason to suspect that the company doesn't have those values, that those values are somehow incorrect, or you couldn't actually ever borrow against them if you ever wanted to? Good question. Let me take a beat. Andrew, do you wanna step in on this question? I'm here with Andrew DeBaker, our SVP of Finance. Andrew, do you wanna take a stab at that? Yes, absolutely. Absolutely. I'll take it two pieces, one at a time. As far as our accounts receivable, as we've stated in our financials, most of our AR is held at PRH. And those are... You know, that's true AR, right? There is no, there's no smoke and mirrors to that. The numbers are the numbers. We historically have had a very low, you know, write off percentage to the point where we don't even have an allowance, a reserve for it. Our AR, you know, is solid. And I would say similar in our inventory. I mean, our inventory, we do a rather robust process of analyzing our inventory, writing down our inventory, making sure that, you know, what we are, we do have on the books is, you know, high value. Yeah, I don't necessarily see, you know, I guess I don't see a concern there offhand. Great. Have you ever had a bad receivable from, you know, Penguin or any other, any of our other current folks? Do you have any bad receivables? Yeah. Yeah, absolutely. Nothing, you know, major of note. It's very, very small. We're talking a couple $1,000 here and there, and it's mainly related to our foreign licensing business. Especially over the past couple of years with, you know, everything that's been going on. I mean, we also work with a few publishers in Russia and Ukraine and that part of the world, right? It's understandable, right, that we might have had a few customers where things, you know, didn't quite go right and weren't able to pay us. It's, you know, again, we're talking the single-digit $1,000s over the course of a year. It's really nothing to, you know, worth mentioning. Got it. In other words, if the company did need some additional liquidity, you've got a pretty healthy balance sheet to borrow against if you ever wanted to. Yeah. I mean, I would say, not my forte, this conversation, but in terms of the strength of it, the AR is rock solid, right? The inventory, you know, with publishing, it's maybe one could argue a little more subjective. I mean, you know, like I said, we follow GAAP, and we do a rigorous, you know, write down process. Of course, you know, to be able to leverage that inventory for potential cash raise in the future, you know, I'm not quite sure that that would be as available to us as maybe the AR. Thank you. Once again, if you have a question or a comment, please indicate so by pressing star one on your touch tone phone. The next question comes from Paul Zunken. He is a private investor. Paul, please proceed. Hi. Should I ask all my questions in one shot, or should we go sequentially? Let's take them all in one shot. I after Jeff's first question, I decided to break out my pen and paper. I'm ready to go. Okay. The first thing, I just want to make a comment that I cannot express how appreciative I am that you are, that you went 10-K current, and that you're having conference calls and disclosing. I guess a lot of other companies would have made different, less shareholder-friendly decisions. You know, I know it's a pain, but I just wanted to express my appreciation. I had a bunch of questions. I guess some of them are nitpicky, not in any particular order. Have you done a Section 382 study, and, like, how much are your NOLs, and are they impaired? Do you have a tax CO in place? Would you consider putting a tax CO in place to avoid the NOLs from becoming impaired? Kind of what's adjacent to that question is that, if you issued equity, it might impair the NOLs and I guess, you know, piggybacking on Keith, what I think Keith was alluding to, I mean, would you consider factoring your receivables instead of issuing equity, especially, you know, kind of when you said that you don't feel as though the market is appreciating the actual value? Next thing is, I guess, are you spending 100% of your time with IDW, or are there other things that you're doing? How much of the general of the corporate overhead was one time? Because I think you might have had some severance. I don't know if you broke that out. With the stock trading at such a discount to its book value, are you going to have to take a write-down for the goodwill and other intangibles? Then a more general question, with content, like, again, I'm not an expert in this market at all, but with Netflix and Disney saying that they're cutting back on content, like I could see where, you know, if you just look at it at face value, that could be a negative for you, but then it could be a positive because, you know, you guys have more cost-effective content. Just wondering if you'd comment on that. Sure. Thank you for all the questions. I'll try to make sure I get to all of them. Yeah. Um- Sorry if you weren't able to write that quickly. No, no, I. Yeah, you're totally accurate. I probably wasn't, but I'll, I'll be sane and attempt. In terms of the NOLs, my understanding, and I, you know, we can take a deeper dive and get back to you. But my understanding is that the NOLs are broken into two categories, and this is, I think, recognized in our most recent 10-K. One, there's $8 million worth of NOL that. I'm not sure if this is what you're referring to as an impairment, but that those NOLs have a shelf life, going up till 2030. And then there's about $50 million of NOLs that, as far as I understand, don't have any time horizon on them. I think that. Yeah, I guess what I'm referring to is if there's an ownership change of more than 50% in a rolling three-year period. Got it. The NOLs become impaired. Okay. You're asking about ownership? Yeah. In terms of so with the caveat that, yeah, if we did anything to potentially compromise the shareholder ownership structure, that could be an issue. As they currently are constituted, there's no anticipation that the NOL should have any impairment. Would you put a tax pill in place to protect those from a potential ownership change, which would be beyond your control? That is a good question. I'm making a note to follow circle back. Actually, the other thing is that there's a whole issue that if you trade on the Pink Sheets and you don't there are no like 13Fs and no Ds or Gs, I guess the question would be is like, how would the IRS even know if there were an ownership change? How would you know if there were an ownership change? I'm just kind of thinking out loud. Sure. I think for insiders, there's still a requirement to file regarding any additional ownership. I think if it was within the family, which would be the only thing that would compromise at this point, would compromise the NOL, but I think that would have to be disclosed. Yeah. In terms of. I'll look into the putting a tax plan in place. It's a fair question, and I can pretty confidently say I don't think anyone's looked at it yet. In terms of raising capital versus sort of leveraging assets, I'd say I'll leave that as something that we'll have to consider as we go forward. There's a possibility that we're not gonna have to raise any capital, but if we do so, whether it's through equity or, you know, through leveraging our accounts receivable or so on, I'd say that probably will be a board decision. You know, I don't want to speak out of turn until we, you know, have a conversation about that. In terms of my personal time, I'd say, you know, I can easily say 100% of my working time is dedicated to IDW. If you're assuming a 40-hour workweek. If you're assuming a 60-hour workweek, I'd say probably 100% is committed to IDW or if you're assuming, I don't know, 90-hour or 150-hour workweek, I'd probably spend a bit of time on a few other things, but IDW is my main focus. In terms of overhead, yeah, I think most of the costs related to the reduction in force will be one-time costs. I mean, some of those are severance payments that will go on for, you know, a certain period of time. I don't know whether it's six months, 12 months. I look forward to the day when we don't have to carry the cost of severance for former executive officers, but most of those costs were one-time costs. I think most of them should be recognized in the third quarter, although, like I said, some will, some will get spread out over a longer period of time. In terms of- If it's possible, like, if it's not too much trouble to just, like, break out the one-time costs, that would be really helpful. Like, either in your written comments, you had a nice table kind of breaking out the segments. You know, again, just like if I had a wish list, that would be one thing. Okay, I'll make you a note of it. No promises, but I am making a note. Mm-hmm. In terms of the write-down on goodwill or intangible, though, Andrew, do you have anything to say about that? Is that based on year-ends or? Sorry, what was that? Oh, I said it may just be done at year-ends. Like... Well- I don't know when that test is. Yeah, sure. Previously, we had reviewed it on a quarterly basis. Breaking up into two pieces. Our goodwill is really related to the acquisition of Top Shelf. ...which going back to, what, 2014, I believe. We've evaluated on a quarterly basis. It really, to be honest, hasn't been an issue. Top Shelf continues to, you know, provide value. Two other titles they called Ephemy and March, continue to be our, you know, among our top 10 sellers every quarter. That analysis, to be honest, is pretty easy every quarter. There's still extremely value in that. In terms of our intangibles, most of our intangibles are related to two things, right? One would be our licensing contracts. That all was amortized. Let's see here. We've amortized the entire $893 thousand as of December of 2021. Net, you know, it's zero on the books. The rest of our intangibles relate to software, so, both our website and our database that we are developing. As David mentioned, we recently switched to our new website, so we're very excited. That went live in the last two, three weeks here. We will see a write-off of some of the costs related to our previous website. You'll see that, you know, below the line in amortization. We will, you know, put the cost of the new website into service and start amortizing that over the course of a period of two years is our normal practice. Just on your last question, Paul, in terms of entertainment, I do think that there is the opportunity for entertainment to drive just to drive value. Like I said, I think it's a longer sales cycle, it will take time to get past the writers strike and then to get things green lit. You know, that is a strong lane which will be able to derive, you know, sort of bottom line value for titles that have already been produced, and then to kind of give them another life and another opportunity for fan engagement and hopefully then to drive the meritorious cycle to, you know, hopefully sell more books and, you know, create additional fan engagements on the print side. Okay. Thank you very much. Thank you. If there are any remaining questions, please indicate so by pressing star one on your touchtone phone. Okay, looks like we have no further questions in queue. We have reached the end of the question and answer session. I will now turn the call over to David and Andrew for closing remarks. First of all, thank you, everyone, for joining, and for accommodating what maybe is somewhat of an unusual structure to just go straight into Q&A. I wanted to particularly say thank you to Andrew DeBaker. This is Andrew's first public conference call, and I think he, you know, hit it out of the park. Thank you very much, Andrew. That was great. Thank you, everybody, for joining. We look forward to continuing to keep you updated. Gary, coming back to Paul's comment, to try and follow best practices to keep our shareholders informed, and look forward to collaborating and sharing information on a timely basis. Thank you so much and have a good evening. Bye. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.