RISK FACTORS

Investing in our Class B common stock involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this Prospectus, including our consolidated financial statements, the notes thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding to invest in our Class B common stock. The occurrence of any of the following risks could have a material and adverse effect on our business, reputation, financial condition, results of operations and future growth prospects, as well as our ability to accomplish our strategic objectives. As a result, the trading price of our Class B common stock could decline and you could lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations and the trading price of our Class B common stock. Certain statements contained in this section constitute forward-looking statements. See the information included in “Cautionary Note Regarding Forward-Looking Statements.”

Risks Associated with Our Business

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 and its potential and actual impact on each of our operating segments. Due to both known and unknown risks, including future quarantines, closures and other restrictions resulting from the outbreak, 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; the direct-market distributor’s operations resumed in a limited capacity in late May 2020 and continue at an increasing rate as of the date of this Prospectus, and IDWP’s products have resumed being distributed. 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. 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.

Due to various uncertainties, including the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and actions that may be taken by governmental authorities, we anticipate production of television shows of IDWE to be periodically suspended, or perhaps unexpectedly cancelled, for a significant time.

For all these reasons, the COVID-19 pandemic could have a material adverse impact on our business and financial results.

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

We have accumulated a net deficit through July 31, 2020 of approximately $89.9 million. Prior to the CTM Sale, which is expected to close in calendar 2020, we often used cash flows from CTM to partially provide funding for corporate overhead and for our IDWP and IDWE operations. In Fiscal 2019, CTM generated $3.0 million of positive cash flow while IDWP and IDWE generated negative cash flow of $1.1 million and $11.6 million, respectively.

We expect to incur losses in the foreseeable future as we continue to seek financing for, and invest in, our IDWE and IDWP businesses and operations. The time required for us to become profitable is uncertain, and there can be no assurance that we will 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 finance television shows without great financial risks; our ability to attract, retain and motivate qualified personnel; specific economic conditions in the entertainment and publishing markets; and general economic conditions.

Risks Related to IDW Publishing

IDWP depends on two distributors for its publications and such dependence subjects IDWP to the risk that such distributors may be unable to perform its obligations to IDWP.

Diamond Comic Distributors, Inc., or Diamond, which handles the vast majority of all comic book publishers’ direct market (i.e., comic book stores) distribution, distributes all of IDWP’s products for the direct market. As a result of COVID-19 pandemic, IDWP is offering full returns in the direct market through Diamond on comic titles through the end of calendar 2020 and then returns will be monitored on a month-by-month basis. While this is designed to reduce inventory risk for retailers, there is a possibility the marketplace could experience an irrecoverable downward trend that may trigger higher returns in a given month or quarter.

Penguin Random House Publisher Services, or Penguin Random House, distributes substantially all of IDWP’s products to non-direct market account (i.e., bookstores, libraries, mass market). Should either Diamond or Penguin Random House fail to perform under the applicable distribution agreement or if it were to experience financial difficulties that would hinder its performance, distribution to the direct or non-direct market, respectively, would be significantly impaired in the short term and/or long 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 and financial results. In the first half of 2020, due to the COVID-19 pandemic, Diamond did temporarily cease distributing IDWP’s comic books.

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 respond to 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.

Significant returns of IDWP sold to mass market bookstores may have a material impact on IDWP’s cash flow.

Through its distribution arrangement with Penguin Random House, IDWP sells its publications to mass market bookstores, such as Barnes & Noble, on a fully returnable basis and IDWP Games sells its products to mass market stores, such as Target. As a result, these customers can return publications to Penguin Random House or to game distributors 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 Penguin Random House. Such returns and fees are credited against IDWP’s current sales revenue from Penguin Random House, which reduces IDWP’s cash flow and operating capital. Product returns are a normal part of book and games 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.

IDWP’s publications may be less successful than anticipated.

IDWP cannot accurately predict the commercial success of any of its publications or games because the revenue derived from the distribution of a publication or game 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 could have a material adverse effect on IDWP’s business, prospects and financial condition.

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. IDWP depends on freelance artists who choose how to spend their time and utilize their talents. It is important for IDWP to maintain strong relationships with those freelance artists 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

IDWP cannot control certain publication delays and cancellations 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 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.

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

Because of Diamond’s and Penguin Random House’s role as distributors of IDWP’s publications and the fact that much of IDWP’s inventory is held at its distributors’ facilities, IDWP depends on the distributors to implement internal controls over financial reporting and to provide IDWP with information related to those internal controls. Diamond’s and Penguin Random House’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.

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

The departure of key personnel without adequate replacement could severely disrupt IDWP’s business operations. Additionally, IDWP needs qualified managers and skilled employees with industry experience to operate its businesses successfully. From time to time there may be shortages of skilled labor which may make it more difficult and expensive for IDWP to attract and retain qualified employees. If IDWP is unable to attract and retain qualified individuals or its costs to do so increase significantly, its operations would be materially adversely affected.

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.

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.

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.

Risks Related to IDW Entertainment

The public health risk of COVID-19 and its impact on productions.

Multiple television productions of IDWE have been delayed due to the COVD-19 pandemic. IDWE intends to diversify into animation which can largely be worked on with minimal impacts from the COVID-19 pandemic, but the timeline for producing animation is often longer than live action and thus takes longer to recognize revenue. Live-action shows must be filmed and shot at locations with a sizeable crew. Given the public health risk of COVID-19 and related possible 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.

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.

IDWE has produced a significant amount of original programming and other content and is continuing to invest in this area. IDWE’s core business involves the development and production of television shows, the costs of which are significant and involve complex negotiations with numerous third parties. Network buyers and larger studios are also continuing to drive up the cost of talent and in many cases, locking them to overall deals, which leaves IDWE with less access to high-level writers at a much higher cost of entry. These higher costs may not be recouped when the content is broadcast or distributed, and higher costs may lead to decreased profitability, losses or potential write- downs. Unfavorable currency rates both in the production and sale of television shows may also lead to increased costs. Further, rapid changes in consumer behavior have increased the risk associated with acquired programming, which typically is acquired pursuant to multi-year agreements.

We may not have sufficient capital to pursue the most profitable revenue models and finance or co-finance future television shows.

If IDWE continues to be successful in developing content suitable for successful television shows, it may not have sufficient capital to finance or co-finance these shows, which usually is the deal structure that offers the greatest control and potential upside but comes with the greatest risk. While IDWE has shifted its business model to substantially de-risk and diversify its deal structures by utilizing guaranteed fee structures (such as production company fees, producer fees, and back-end participation) whenever possible whereby the streaming platform cash-flows production costs, the potential requirement for financing or co-financing remains as part of the business. As a result of the structure of its production arrangements for its television shows, IDWE may not be able to maximize the benefits of its well-performing shows and may incur more losses of its poorly-performing shows, all of which would materially and adversely affect its business and results of operations.

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

IDWE is dependent on the continued services of key executives such as Lydia Antonini. The departure of key personnel without adequate replacement or temporary skilled coverage could severely disrupt IDWE’s business operations. Additionally, IDWE needs qualified managers and skilled employees with in-depth industry experience to operate its businesses successfully. From time to time there may be shortages of skilled labor which may make it more difficult and expensive for IDWE to attract and retain qualified employees. If IDWE is unable to attract and retain qualified individuals or its costs to do so increase significantly, its operations would be materially adversely affected.

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, Annapurna and Miramax, (ii) major independent studios such as Sony TV and Warner Bros TV; and (iii) vertically integrated studios such as Twentieth Television, Universal TV, CBS TV Studios and ABC Studios who develop, distribute and produce original television programming. 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.

The concentration risk of IDWE’s shows currently airing primarily on Netflix and NBC Universal/SyFy could negatively affect IDWE’s business.

IDWE shows have primarily aired on Netflix and NBC Universal/SyFy. As such, IDWE has a concentration of customer risk related to Netflix and NBC Universal/SyFy. While IDWE does not intend to continue to have its shows aired solely on Netflix and NBC Universal/SyFy, it cannot control which companies may be interested to purchase and/or offer the best terms to finance its shows, nor control whether Netflix or NBC Universal/SyFy will remain a going concern.

Risks Related to CTM

General economic downturns and other factors could negatively impact the tourism industry and reduce CTM’s revenues.

CTM’s brochure distribution business is closely linked to the travel and tourism industry. Travel is highly sensitive to business and personal discretionary spending levels, and thus tends to decline during general economic downturns. CTM’s sales and revenues would be significantly reduced as a result of a decline in travel as its business targets tourists in the locations its brochures are displayed. Reductions in tourism could also result in reduced tourism revenues for attractions, reducing the resources available to attractions to purchase CTM’s services. Further, during economic downturns, governments decrease funding for tourism which also negatively affects CTM’s revenues. In the current recession of the global economy related to the COVID-19 pandemic and other factors, discretionary spending levels have already dropped significantly which has negatively affected the business and financial results of CTM.

Reduction in travel and tourism could reduce CTM’s sales and revenues.

A reduction in overall or regional travel or tourism could negatively affect the business of CTM. Some events that tend to reduce travel and, therefore, could reduce CTM’s sales and revenues include:

If any of the foregoing factors results in a downturn in the tourism and travel industry, there could be a material adverse effect on CTM’s business, prospects and financial condition.

Declines or disruptions in the New York City travel and tourism industry such as those due to terrorist attack or pandemics such as COVID-19, or general economic slowdowns such as the current recession, could negatively affect CTM’s business.

CTM’s brochure distribution business relies on the health of the New York City travel and tourism industry. Travel and tourism are highly sensitive to traveler safety concerns, and thus has historically declined after acts of terrorism such as those on September 11, 2001 or pandemics such as the current COVID-19 pandemic, particularly in New York City. These effects, depending on their scope and duration, could significantly reduce travel and tourism in New York City, which in turn could negatively impact the demand for CTM’s services. Reductions in travel and tourism could negatively impact CTM’s business, and if continuing, could have a material adverse effect on its business, prospects and financial condition.

If CTM’s access to hotels and other locations for its display stations on the current terms were to be limited, it could negatively impact its results of operations.

CTM’s brochure distribution business relies on access to hotels and other locations for the placement of its display stations as a service or convenience for the customers of those businesses and other users of those facilities. If the owners or operators of those facilities were to restrict or substantially reduce such access, CTM’s brochure distribution business, revenues and results of operations could be materially and adversely affected.

Trends and changes in the theater industry, particularly on Broadway, could adversely affect CTM’s revenues.

A significant portion of CTM’s revenue, 15.3% in fiscal 2019, is derived from its distribution of print and digital media related to Broadway shows. If Broadway theater attendance declines, the demand for CTM’s services to the theater industry could soften, adversely affecting its revenues. Further, economic downturns negatively affect the entertainment industry generally and attendance at Broadway shows in particular. Moreover, new shows may not open.

As a result of the COVID-19 pandemic, Broadway shows have been closed since April 2020, and will remain closed at least through May 2021 as announced on October 9, 2020 by the Broadway League industry group, which has materially and negatively affected the business and financial results of CTM. It is unknown when Broadway shows will re-open.

Accordingly, economic downturns in the theater industry, particularly on Broadway, whether currently or in the future, could adversely impact CTM’s business from the theater industry which could have an adverse effect on its business, prospects and financial condition.

Any labor disputes that cause Broadway shows to close could adversely affect CTM’s revenues.

As a significant portion of CTM’s revenue is derived from its distribution of brochures related to Broadway shows, any strikes or other labor disputes that cause the “lights to go off”, or to otherwise materially reduce or affect the number of shows, on Broadway could adversely affect CTM’s revenues.

Seasonal factors affect CTM’s operating results.

Seasonality of revenues will cause CTM’s revenues to fluctuate. Travel is usually slow during non-summer months and during the non-holiday season and customers are less likely to pay for distribution of brochures during such periods. Accordingly, CTM needs adequate liquidity to finance its operations during off-seasons. Although in the past CTM has consistently had sufficient cash reserves to fund its operations year-round, there can be no assurance that it will have sufficient funds from operations or external sources to fund its operations during slower periods.

Risk Factors Generally Relating to Us and Our Class B Common Stock

Our Class B Common Stock may not be approved for listing on the NYSE American.

We intend to apply to have our Class B common stock traded on the NYSE American and we believe that we will satisfy all the requirements for that listing. However, our Class B common stock may not be approved for listing on the NYSE American or any other national securities exchange. We cannot predict how much investor interest in our Company will generate the adequate amount of liquidity in our stock to create an active trading market for our Class B common stock. It is possible that, if our Class B common stock is eventually listed on the NYSE American, an active trading market will not develop or continue, and there can be no assurance as to the price at which our Class B common stock will trade. The initial share price of our Class B common stock listed on the NYSE American may not be indicative of prices that will prevail in any future trading market.

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 are quoted on the Pink OTC Markets. As a result, an investor may find it difficult to sell, or to obtain accurate quotations as to the price of, shares of our Class B common stock. In addition, 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. 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 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 business 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.

We are a “smaller reporting company” and “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.

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.

Under Section 404 of the Sarbanes-Oxley Act of 2002, a newly public company is not required to comply with either the management or the auditor reporting requirements related to internal control over financial reporting until its second annual report, if applicable.

Further, we intend to 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:

We may take advantage of these provisions until the end of the fiscal year ending after the fifth anniversary of the filing of this registration statement, 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 $1.0 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, as 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.

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 this Prospectus and 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.

Investors may suffer dilution as a result of future financing needs.

We may engage in equity financing to fund our future operations and growth. If we raise additional funds by issuing equity securities, stockholders may experience significant dilution of their ownership interest (both with respect to the percentage of total securities held, and with respect to the book value of their securities) and such securities may have rights senior to those of the holders of our Class B common stock.

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.

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.

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. As a result, the ability of holders of our Class B common stock to influence our management is limited.

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.

Eight trusts for the benefit of sons and daughters of Howard S. Jonas (the “Trusts”), our Chairman of the Board, collectively have voting power over 1,733,752 shares of our common stock (which includes 545,360 shares of our Class C common stock, which are convertible into shares of our Class B common stock on a 1-for-1 basis, and 1,188,392 shares of our Class B common stock), representing approximately 68.0 % of the combined voting power of our outstanding capital stock, as of October 15, 2020. In addition, as of October 15, 2020, Howard S. Jonas holds 1,729,252 shares of our Class B common stock, warrants to purchase up to 89,243 shares of the Company’s Class B Common Stock at a price per share of $42.02 and warrants to purchase up to 98,336 shares of the Company’s Class B Common Stock at a price per share of $26.44. Each of the Trusts has a different, independent trustee. 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, or if all or several or all of the Trusts were to act in concert, certain or all of the Trusts and/or Howard S. Jonas would be able to control matters requiring approval by our stockholders, including the election of all of the directors and the approval of significant corporate matters, 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.