UNITED
STATES SECURITIES AND EXCHANGE COMMISSION




Washington,
D.C. 20549




FORM
10-K




þ  Annual report
pursuant to section 13 or 15(d) of the securities exchange act of 1934 for the
fiscal year ended July 31, 2009, or




o Transition report
pursuant to section 13 or 15(d) of the securities exchange act of
1934.




Commission
File Number: 000-53718




CTM
MEDIA HOLDINGS, INC.





(Exact
name of registrant as specified in its charter)




Delaware
              
              26-4831346(State
      or other jurisdiction of incorporation
                or
      organization)
              
              (I.R.S.
      Employer Identification No.)




11
Largo Drive South, Stamford, CT 06907


(Address
of principal executive offices, zip code)




(203)
323-5161


(Registrant’s
telephone number, including area code)




Securities
registered pursuant to Section 12(b) of the Act: None




Securities
registered pursuant to section 12(g) of the Act:




Class A
common stock, par value $0.01 per share


Class B
common stock, par value $0.01 per share







Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.   Yes o   No þ




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.   Yes o    No þ




Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.   Yes þ   No o




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o    No
o




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. þ











Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.




Large
      accelerated filer  o
            Accelerated
      filer                    
      oNon-accelerated
      filer    o
            Smaller
      reporting company    þ





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).  Yes o    No þ




As of
October 20, 2009, the registrant had outstanding 1,285,818 shares of Class
A common stock, 6,923,450 shares of Class B common stock, and 1,090,775
shares of Class C common stock. No shares of stock were held in treasury by CTM
Media Holdings, Inc.





DOCUMENTS
INCORPORATED BY REFERENCE




The
Information Statement relating to the registrant’s Written Consent in Lieu of an
Annual Meeting of Stockholders, is incorporated by reference into Part III of
this Form 10-K to the extent described therein.
















Index




CTM
Media Holdings, Inc.




Annual
Report on Form 10-K




Part I
              1Item 1.
      Business.
              1Item 1A. Risk
      Factors.
              10Item 1B. Unresolved Staff
      Comments.
              14Item 2.
      Properties.
              14Item 3. Legal
      Proceedings.
              14Item 4. Submission of Matters to
      a Vote of Security Holders.
              14Part II
              15Item 5. Market for Registrant’s
      Common Equity, Related Stockholders Matters and Issuer Purchases of Equity
      Securities.
              15Item 6. Selected Financial Data.
              15Item 7. Management’s Discussion
      and Analysis of Financial Condition and Results of
      Operations.
              15Item 7A. Quantative and
      Qualitative Disclosures about Market Risks.
              24Item 8. Financial Statements and
      Supplementary Data.
              24Item 9. Changes in and
      Disagreements with Accountants on Accounting and Financial
      Disclosure.
              24Item 9A(T). Controls and
      Procedures.
              24Item 9B. Other
      Information.
              24Part III
              25Item 10. Directors, Executive
      Officers and Corporate Governance.
              25Item 11. Executive
      Compensation.
              25Item 12. Security Ownership of
      Certain Beneficial Owners and Management and Related Stockholder
      Matters.
              25Item 13. Certain Relationships
      and Related Transactions, and Director
      Independence.
              25Item 14. Principal Accounting
      Fees and Services.
              25Part IV
              26Item 15. Exhibits, Financial
      Statements Schedules.
              26Signatures
              27










Part
I




As
used in this Annual Report, unless the context otherwise requires, the terms
“the Company,” “Holdings,” “we,” “us,” and “our” refer to CTM Media Holdings,
Inc., a Delaware corporation and its subsidiaries, collectively. Each reference
to a fiscal year in this Annual Report refers to the fiscal year ending in the
calendar year indicated (for example, fiscal 2009 refers to the fiscal year
ended July 31, 2009).




Item 1.
Business.


OVERVIEW


CTM Media
Holdings, Inc., a Delaware corporation, is a holding company consisting of the
following principal businesses:




•
            CTM
      Media Group, our brochure distribution company and other advertising-based
      product initiatives focused on small to medium sized
      businesses;




•
            Our
      majority interest in Idea and Design Works, LLC, which is a comic book and
      graphic novel publisher that creates and licenses intellectual property;
      and




•
            The
      WMET-AM radio station in the Washington, D.C. metropolitan
      area.




Our
business consists of the following segments: CTM and IDW. The results of
operations of WMET do not comprise a separate segment and are reported under the
heading “Other.” Each of our businesses is described in more detail
below.




Financial
information by segment is presented below under the heading “Business Segment
Information” in the Notes to our Consolidated Financial Statements in this
Annual Report.




Our main
offices are located at 11 Largo Drive South, Stamford, Connecticut 06907. The
telephone number at our headquarters is (203) 323-5161 and our website is
www.ctmholdings.com.




We will
make available free of charge through the investor relations page of our website
(http://ir.ctmholdings.com)
our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K and all amendments to these reports, and all beneficial ownership
reports on Forms 3, 4 and 5 filed by directors, officers and beneficial owners
of more than 10% of our equity as soon as reasonably practicable after such
material is electronically filed with the Securities and Exchange Commission
(the “SEC”). We have adopted a code of business conduct and ethics for all of
our employees, including our chief executive officer and chief financial
officer. Copies of the code of business conduct and ethics are available on our
website.




Our
website and the information contained therein or incorporated therein are not
incorporated into this Annual Report on Form 10-K or our other filings with the
SEC.




KEY
EVENTS IN OUR HISTORY


We were
incorporated in the State of Delaware in May 2009.




On
September 14, 2009, IDT Corporation, which we refer to as IDT, our former parent
corporation, completed a tax-free spinoff (the “Spin-Off”) of us through a pro
rata distribution of our common stock to its stockholders of record as of the
close of business on August 3, 2009 (the “record date”). As a result of the
Spin-Off, each of IDT’s stockholders received: (i) one share of our Class A
common stock for every three shares of IDT’s common stock held on the record
date; (ii) one share of our Class B common stock for every three shares of IDT’s
Class B common stock held on the record date; (iii) one share of our Class C
common stock for every three shares of the IDT’s Class A common stock held on
the record date; and (iv) cash in lieu of a fractional share of all classes of
our common stock.




CTM


CTM Media
Group, Inc., which we refer to as CTM, develops and distributes print and
mobile-based advertising and information in targeted tourist markets.
Advertisers include entertainment venues, tourist attractions, and cultural
sites as well as their related service providers including dining, lodging, and
transport services. CTM leverages its regional network of more than 11,000
proprietary brochure display stations to distribute over 135 million printed
brochures and cards per year to tourists, and to drive mobile and Internet
traffic to its online tourist information services.






-1-




CTM is
headquartered at 11 Largo Drive South, Stamford, Connecticut. CTM has 165
employees, 14 of whom are part-time and 151 of whom are full-time, including
management, sales, distribution, graphic designers, and corporate support. CTM
has 16 field offices and over 30 distribution facilities within its territory.
CTM’s strategically located display stations are managed by a dedicated
organization utilizing over 30 warehouses, branded delivery vans, and a
uniformed distribution and delivery team.




CTM was
an independent brochure distribution company until it was purchased by IDT in
June 2000. At that time, CTM’s primary business centered on the distribution of
brochures promoting Broadway shows within the greater New York City metropolitan
area. Additional territories included Boston and other locations in New England,
Toronto, Ottawa, Philadelphia, Southeast Florida, and Detroit.




Since its
acquisition by IDT, CTM has grown both geographically and by developing related
lines of business. Geographic growth has been driven both by organic expansion
to new territories and through selective purchases of regional
businesses.




CTM’s
client base includes over 3,000 advertisers in 30 states and provinces in the
United States (including Puerto Rico) and Canada. Its distribution territory in
the United States includes the Northeast, Mid-Atlantic, and Midwestern states.
CTM is a brochure distribution market leader in each of the following greater
metro areas: New York City, Boston, Toronto, Ottawa, Miami, Ft. Lauderdale,
Philadelphia, Chicago, St. Louis, Kansas City, Minneapolis/St. Paul, Detroit and
Cleveland.




CTM’s
client base is diverse. No single advertiser contributes a significant portion
of CTM revenues. However, CTM is the leading distributor of Broadway show
brochures and derives approximately 10% to 15%of its revenues from
Broadway and its affiliated advertising agencies.




Throughout
its operating region, CTM operates five integrated and complimentary business
lines: Brochure Distribution, Design & Print, Publishing, RightCardTM, and
Digital Distribution.




Brochure
Distribution


CTM
distributes client brochures through its network of more than 11,000
strategically located display stations. Brochure distribution is CTM’s largest
line of business generating roughly 90% of CTM’s revenues in fiscal
2009.




CTM’s
extensive distribution and display station network is the key value driver and
differentiator in this line of business. The large quantity and diversity of its
display station locations allows CTM to segment its visitor audience and tailor
targeted marketing programs for its clients. Locations are typically hosted
within facilities serving the travel, tourism and entertainment industry,
including: hotels and other lodgings, corporate and community venues,
transportation terminals and hubs, tourist attractions and entertainment venues.
CTM also contracts with public transportation authorities and high volume retail
chains to host a small percentage of its brochure display stations.




CTM has
developed strong relationships with its display station hosts and its regional
client advertisers. These relationships constitute a significant barrier to
entry that CTM believes discourages competition within metropolitan
markets.




In fiscal
2009, CTM remained the largest traveland
tourism brochure display company in the Eastern and Midwestern United States,
and the second largest nationally. Privately held Certified Folder Display is
the national market leader with over 23,000 display station locations, primarily
in the Western United States. Certified’s key metropolitan areas include San
Francisco, Seattle, Los Angeles, Phoenix and Las Vegas. An estimated 20 to 30
other distribution companies competing from smaller regional bases comprise the
remainder of the brochure distribution and display industry.




Design
& Print


CTM
leverages its in-house design team and large print volumes to provide clients
with cost-effective custom design and print services. Design & Print
services contributed approximately 8% of CTM’s revenues in fiscal
2009.




Publishing


CTM
publishes maps with integrated display advertising and identified tourist
locations. Current maps cover key metropolitan areas within CTM’s territory
including Boston/New England, Chicago, Kansas City, Minneapolis/St. Paul, New
York City, Philadelphia, Southeast Florida, St. Louis, and Toronto. Publishing
accounted for approximately 1% of CTM revenues in fiscal 2009.




RightCardTM


CTM
designs and prints RightCardsTM –
pocket-sized cards in a consistent format distributed through a network of
specialized display stations in high-traffic areas. The RightCardTM
content format includes a discount or value offer, map and contact information
in both print and online. RightCardsTM are
distributed at approximately 600 locations. The RightCardTMprogram contributed approximately 1% of CTM’s revenues in fiscal
2009.






-2-




Digital
Distribution


CTM’s
digital distribution business helps CTM clients effectively target and reach
tourists who use mobile devices and/or the Internet. In 2008, CTM launched its
“City in the Pocket” series with mobile New York (www.cipnyc.mobi).
Subsequently, CTM introduced comparable mobile sites for Philadelphia, Chicago,
Boston, Florida and Toronto. Additionally, in fiscal 2009, CTM began to run a
text alert program in eight markets offering tourists the ability to subscribe
to and receive text alerts of offers and news from local attractions and venues.
The text alert program resulted in over 50,000 text messages to the subscribers
every month.




CTM’s
telephone number at its headquarters is (203) 323-9345 and its website is www.ctmmediagroup.com.




IDW


Idea and
Design Works, LLC, which we refer to as IDW, is an independent comic book
publisher pre-eminent in the horror and action genres, boasting such
high-profile titles as 30 Days of Night, Angel, Doctor Who, G.I. Joe, Locke and
Key, Star Trek and The Transformers.


In 1999,
four entertainment executives and artists established IDW as a creative-service
company providing artwork and graphic design to entertainment companies. In
2001, IDW formed its publishing division, IDW Publishing, which initially
focused on producing a small number of high-quality publications and has since
grown into a fully staffed publishing company. In June 2007, a subsidiary of IDT
purchased a 53% interest in IDW. Founders of IDW, including Ted Adams, its
current CEO, retained the remaining ownership interests in IDW.




IDW has
established itself as a significant player in the comic book and graphic novel
marketplace. IDW has been named Publisher of the Year in 2003, 2004, 2005, 2007
and 2008 by Diamond Comic Distributors, Inc. In 2007, Hasbro named IDW as their
“Transformers Licensee of the Year – Publishing” and the nationally televised
Spike Awards named 30 Days of Night as the “Best Comic Book.” In 2008, IDW won
an Eisner Award for its series “The Complete Terry and the Pirates.” In 2007 and
2008, IDW was the only comic publisher named by Global License as one on the
“Top Global Licensees.”




IDW’s
comic book and trade paperback publications are distributed through two
channels: (i) to comic book specialty stores on a non-returnable basis (the
“direct market”), and (ii) to traditional retail outlets, including bookstores
and newsstands, on a returnable basis (the “mass market”). In addition, IDW
provides clients with custom comic books and artwork/graphic design services
(“creative services”). In fiscal 2007, 2008 and 2009, the direct market
accounted for 56%, 50% and 50%, respectively, of IDW’s revenues, while the mass
market accounted for 29%, 34% and 38%, respectively, and creative services
accounted for 10%, 11% and 6%, respectively. IDW has other less significant
sources of revenues. IDW’s primary customer is Diamond Comic Distributors, Inc.
(“Diamond”), an unaffiliated entity that handles the vast majority of all comic
publishers’ direct market distribution. Diamond purchases IDW’s publications and
subsequently sells them to both the direct and non-direct markets. Retail stores
are also indirect IDW customers.




IDW’s
business cycle is driven by its publishing schedule and movie release dates (of
movies for which IDW publishes comic books and graphic novels) which are set by
third party studios.




In an
effort to increase availability of versions of its content at retail outlets,
IDW has entered into a number of digital distribution agreements this year, and
IDW’s publications are currently available for purchase via mobile phones,
primarily iPhones/iPod Touch. IDW titles are also available direct-to-desktop
via several websites and are expected to be available on Sony’s PSP and PSP Go
by the end of calendar 2009.




IDW faces
significant competition from other publishers such as Marvel Comics, DC Comics
and Dark Horse Comics, many of which are substantially larger than IDW and have
much greater resources than IDW.




In fiscal
2009, IDW generated revenues of $12.6 million and operating loss of $0.1
million, which included the impact of a goodwill impairment of $1.8 million
related to IDT’s acquisition of IDW. In fiscal 2008, IDW generated revenues of
$9.9 million and operating income of $0.5 million.




IDW
currently employs 22 full-time employees and three part-time
employees.




IDW’s
telephone number at its headquarters is (858) 270-1315 and its website is
www.idwpublishing.com.




WMET


We own
and operate WMET 1160 AM, a radio station in the Washington, D.C. metropolitan
area, which we refer to as WMET. In July, 2002, IDT purchased Beltway
Acquisition Corporation, the entity holding WMET’s Federal Communications
Commission (“FCC”) broadcast license for a Class B AM station in Gaithersburg,
Maryland. The station broadcasts at 50 kilowatt power daytime and 1.5 kilowatt
after sunset  serving the Washington, D.C. metropolitan area, the
nation’s ninth-largest radio market, including the corridor from Baltimore,
Maryland to Richmond, Virginia. WMET is a reseller of radio broadcast time to
outside parties.




In
addition to broadcasting in the Washington, D.C. metropolitan area, WMET’s radio
signal is simultaneously broadcast via Web-streaming technology. WMET’s
customers, who buy airtime, provide a balance of entertainment and information
programming, including Spanish and Ethiopian programming. WMET offers studio
personnel providing technical support which it feels is a competitive advantage
over its competitors.






-3-




In the
format as a primary reseller of radio broadcast to outside parties, WMET earns
revenues through the rental of airtime slots as well as the sale of advertising.
In fiscal 2009, WMET generated revenues of $1.2 million and operating loss
of $1.9 million. Included in the operating loss in fiscal 2009 was goodwill
impairment of $1.1 million related to IDT’s acquisition of WMET. In fiscal 2008,
WMET generated revenues of $1.2 million and operating loss of $4.6 million,
which included a $3.5 million impairment of fixed assets.




The types
of properties required to support WMET include an office, studios and a tower
and antenna site. The tower and antenna site is located in an area that provides
maximum market coverage.




Pursuant
to FCC rules and regulations, many AM radio stations, including WMET, are
authorized to operate only at a reduced power during the nighttime broadcasting
hours, which results in reducing the radio station’s coverage during the
nighttime hours of operation.




The radio
broadcasting industry is subject to extensive and changing regulation of, among
other things, program content, advertising content, technical operations and
business and employment practices. The ownership, operation and sale of radio
stations are subject to the jurisdiction of the FCC. Among other things, the
FCC:




•
            assigns
      frequency bands for broadcasting;




•
            determines
      the particular frequencies, locations, operating powers and other
      technical parameters of stations;




•
            issues,
      renews, revokes, conditions and modifies station
  licenses;




•
            determines
      whether to approve changes in ownership or control of station
      licenses;




•
            regulates
      equipment used by stations; and




•
            adopts
      and implements regulations and policies that directly affect the
      ownership, operation and employment practices of
  stations.




The FCC
has the power to impose penalties for violations of its rules or the
Communications Act of 1934 ( the “Communications Act”), including the imposition
of monetary forfeitures, the issuance of short-term licenses, the imposition of
a condition on the renewal of a license, non-renewal of licenses and the
revocation of operating authority. The following is a brief summary of some
provisions of the Communications Act and of specific FCC regulations and
policies. The summary is not a comprehensive listing of all of the regulations
and policies affecting radio stations. For further information concerning the
nature and extent of Federal regulation of radio stations, you should refer to
the Communications Act, FCC rules and public notices, and the rulings of the FCC
and applicable courts.




FCC
AM Radio Licenses


Radio
stations operate pursuant to renewable broadcasting licenses that are ordinarily
granted by the FCC for maximum terms of eight years. A station may continue to
operate beyond the expiration date of its license if a timely filed license
renewal application is pending. During the periods when renewal applications are
pending, petitions to deny license renewals can be filed by interested parties,
including members of the public. The FCC is required to hold hearings on a
station’s renewal application if a substantial or material question of fact
exists as to whether the station has served the public interest, convenience and
necessity. If, as a result of an evidentiary hearing, the FCC determines that
the licensee has failed to meet certain requirements and that no mitigating
factors justify the imposition of a lesser sanction, then the FCC may deny a
license renewal application. Historically, FCC licenses have generally been
renewed. WMET’s FCC license expires on October 1, 2011. We have no reason to
believe that our license for WMET will not be renewed in the ordinary course,
although there can be no assurance to that effect. The non-renewal of that
license would have a material adverse effect on our radio business.




Pursuant
to FCC rules and regulations, many AM radio stations, including WMET, are
authorized to operate only at a reduced power during the nighttime broadcasting
hours, which results in reducing the radio station’s coverage during the
nighttime hours of operation.




WMET
currently is licensed to serve Gaithersburg, Maryland as a Class B AM station on
1160 MHz with 50 kW of effective radiated power during the daytime hours and 1.5
kW during the nighttime hours.




Transfers
or Assignment of AM Radio License


The
Communications Act prohibits the assignment of broadcast licenses or the
transfer of control of a broadcast licensee without the prior approval of the
FCC. In determining whether to grant such approval, the FCC considers a number
of factors pertaining to the licensee and proposed licensee,
including:






-4-






•
            compliance
      with the various rules limiting common ownership of media properties in a
      given market;




•
            the
      character of the licensee and those persons holding attributable interests
      in the licensee; and




•
            compliance
      with the Communications Act’s limitations on foreign ownership as well as
      compliance with other FCC regulations and
  policies.




If we
determine that it is in our best interest to sell the WMET license to a third
party, we will need to obtain the prior consent of the FCC before consummating
such sale.




From time
to time we may evaluate the corporate entities and structure that controls WMET
and may determine that is in our best interest to reorganize that structure. If
we determine it is in our best interest to modify that ownership structure, we
will need to obtain prior FCC approval of a pro forma transfer control of the
license if there is a less than 50% change in the ownership
interest.




WMET
currently employs six full time employees and between three and six part-time
employees.




WMET’s
telephone number at its headquarters is (202) 969-9884 and its website is
www.wmet1160.com.








-5-








UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL DATA




We are a
former subsidiary of IDT. As a result of the Spin-Off, on September 14, 2009, we
became an independent public company. In the Spin-Off, each of IDT’s
stockholders received (i) one share of our Class A common stock for every three
shares of IDT’s common stock held on the record date, (ii) one share of our
Class B common stock for every three shares of IDT’s Class B common stock held
on the record date, (iii) one share of our Class C common stock for every three
shares of IDT’s Class A common stock held on the record date, and (iv) cash in
lieu of a fractional share of all classes of our common stock.




The
unaudited pro forma consolidated financial statements following consist of an
unaudited pro forma consolidated balance sheet as of July 31, 2009 and unaudited
pro forma consolidated statement of operations for the fiscal year ended July
31, 2009. The unaudited pro forma consolidated financial statements should be
read in conjunction with our “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” and our audited consolidated financial
statements for the fiscal years ended July 31, 2009 and 2008 and the notes
thereto, all of which are included elsewhere in this Annual Report. Our
unaudited pro forma consolidated financial statements were prepared on the same
basis as our audited consolidated financial statements and, in the opinion of
management, include all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly our pro forma financial position and
results of operations for these periods.




The pro
forma consolidated balance sheet adjustments assume that the Spin-Off occurred
as of July 31, 2009. The pro forma adjustments to the consolidated statement of
operations for the year ended July 31, 2009 assume that the Spin-Off occurred as
of August 1, 2008.




The
unaudited pro forma consolidated financial statements assume that all services
provided by IDT to us will be provided for compensation to IDT in amounts
similar to those previously charged via inter-company billings by IDT to us.
Accordingly, the unaudited pro forma consolidated financial statements assume
that the Master Services Agreement, dated September 14, 2009 between us and IDT,
pursuant to which IDT provides to us, among other things, certain administrative
and other services, is structured in such a manner that will not result in a
significantly different impact on our results of operations as compared to
periods preceding the Spin-Off.




In
addition, pursuant to the Master Services Agreement, IDT will provide certain
additional services to us, on an interim basis, as a separate publicly-traded
company. Such services include assistance with our periodic reports required to
be filed with the SEC as well as maintaining our minutes, books and records of
meetings of the Board of Directors, Audit Committee and Compensation Committee,
as well as assistance with our corporate governance. The cost of these
additional services are not included in our historical results of operations or
in the pro forma adjustments, as they were not applicable for periods that we
were not a separate public company. We do not believe the costs that will be
incurred for these services will be material.




The
following unaudited pro forma consolidated financial statements reflect IDT’s
transfer to us of all of its assets and liabilities related to us, the
contribution of $2 million in cash by IDT in September 2009, the conversion of
our debt to IDT into a capital contribution, and the distribution by IDT to its
stockholders of approximately 1.3 million shares of our Class A common stock,
approximately 5.1 million shares of our Class B common stock and approximately
1.1 million shares of our Class C common stock. The number of shares of our
Class A common stock, Class B common stock and Class C common stock is based on
the actual number of shares that were distributed by IDT on September 14,
2009.




The
unaudited pro forma consolidated balance sheet and statement of operations
included in this Annual Report have been derived from our audited consolidated
financial statements included elsewhere in this Annual Report and do not purport
to represent what our financial position or results of operations actually would
have been had the Spin-Off occurred on the date indicated, or to project our
financial performance for any future period.






-6-






CTM
MEDIA HOLDINGS, INC.


PROFORMA
CONSOLIDATED BALANCE SHEET


AS
OF JULY 31, 2009


(in
thousands)


(unaudited)




Historical
            
            
            Pro
      Forma
                adjustments
            
            
            
            
            
            Pro
      FormaAssetsCurrent
      assets:Cash and cash
      equivalents
            
            $
            6,480
            
            
            $
            2,000
            
            
            (A)
            
            
            $
            8,480Short term
      investment
            
            
            1,024
            
            
            
            
            
            
            
            
            
            
            1,024Trade accounts
      receivable, net
            
            
            3,908
            
            
            
            
            
            
            
            
            
            
            
            3,908Inventory
            
            
            1,405
            
            
            
            
            
            
            
            
            
            
            
            1,405Prepaid expenses
            
            
            983
            
            
            
            
            
            
            
            
            
            
            
            983Total current
      assets
            
            
            13,800
            
            
            
            
            
            
            
            
            
            
            
            15,800Property and
      equipment, net
            
            
            4,243
            
            
            
            
            
            
            
            
            
            
            
            4,243Licenses and other
      intangibles, net
            
            
            587
            
            
            
            
            
            
            
            
            
            
            
            587Other assets
            
            
            159
            
            
            
            
            
            
            
            
            
            
            
            159Total assets
            
            $
            18,789
            
            
            
            
            
            
            
            
            
            
            $
            20,789Liabilities
      and stockholders’ equityCurrent
      liabilities:Trade accounts
      payable
            
            $
            1,024
            
            
            
            
            
            
            
            
            
            
            $
            1,024Accrued expenses
            
            
            2,050
            
            
            
            
            
            
            
            
            
            
            
            2,050Deferred revenue
            
            
            1,731
            
            
            
            
            
            
            
            
            
            
            
            1,731Due to IDT
      Corporation
            
            
            24,921
            
            
            
            (24,921
            )
            
            (B)
            
            
            
            —Capital lease
      obligations—current portion
            
            
            222
            
            
            
            
            
            
            
            
            
            
            
            222Other current
      liabilities
            
            
            563
            
            
            
            
            
            
            
            
            
            
            
            563Total current
      liabilities
            
            
            30,511
            
            
            
            
            
            
            
            
            
            
            
            5,590Capital lease
      obligations—long-term portion
            
            
            529
            
            
            
            
            
            
            
            
            
            
            
            529Total
      liabilities
            
            
            31,040
            
            
            
            
            
            
            
            
            
            
            
            6,119minority
      interests
            
            
            1,967
            
            
            
            
            
            
            
            
            
            
            
            1,967Stockholders’
      equity:Preferred
      stock, $.01 par value; authorized shares—10,000; no shares
      issued
            
            
            —
            
            
            
            
            
            
            
            
            
            
            
            —Class
      A common stock, $.01 par value; authorized shares—35,000; pro forma 1,286
      shares issued and outstanding
            
            
            —
            
            
            
            13
            
            
            (C)
            
            
            
            13Class
      B common stock, $.01 par value; authorized shares—65,000; pro forma 5,138
      shares issued and outstanding
            
            
            —
            
            
            
            51
            
            
            (C)
            
            
            
            51Class
      C common stock, $.01 par value; authorized shares—15,000; pro forma 1,091
      shares issued and outstanding
            
            
            —
            
            
            
            11
            
            
            (C)
            
            
            
            11Additional paid-in
      capital
            
            
            33,141
            
            
            
            26,846
            
            
            (A,
      B, C)
            
            
            
            59,987Accumulated other
      comprehensive income
            
            
            124
            
            
            
            
            
            
            
            
            
            
            
            124Accumulated  deficit
            
            
            (47,483
            )
            
            
            
            
            
            
            
            
            
            
            (47,483
            )Total stockholders’
      equity
            
            
            (14,218
            )
            
            
            
            
            
            
            
            
            
            
            12,703Total liabilities and
      stockholders’ equity
            
            $
            18,789
            
            
            
            
            
            
            
            
            
            
            $
            20,789








-7-





CTM
MEDIA HOLDINGS, INC.


PROFORMA
CONSOLIDATED STATEMENT OF OPERATIONS


FOR
THE YEAR ENDED JULY 31, 2009


(in
thousands, except per share data)


(unaudited)




Historical
            
            
            Pro
      Forma
              Adjustments
            
            
            
            
            
            Pro
      FormaRevenues
            
            $
            33,683
            
            
            
            
            
            
            
            
            
            
            $
            33,683Costs
      and expenses:Direct
      cost of revenues (exclusive of depreciation and
    amortization)
            
            
            14,640
            
            
            
            
            
            
            
            
            
            
            
            14,640Selling, general and
      administrative
            
            
            15,707
            
            
            
            
            
            
            
            
            
            
            
            15,707Depreciation and
      amortization
            
            
            1,438
            
            
            
            
            
            
            
            
            
            
            
            1,438Bad debt
            
            
            1,003
            
            
            
            
            
            
            
            
            
            
            
            1,003Impairment and
      severance charges
            
            
            33,335
            
            
            
            
            
            
            
            
            
            
            
            33,335Total costs and
      expenses
            
            
            66,123
            
            
            
            
            
            
            
            
            
            
            
            66,123Loss from
      operations
            
            
            (32,440
            )
            
            
            
            
            
            
            
            
            
            
            (32,440
            )Interest expense,
      net
            
            
            (53
            )
            
            
            
            
            
            
            
            
            
            
            (53
            )Other income,
      net
            
            
            8
            
            
            
            
            
            
            
            
            
            
            
            8Loss before minority
      interests and income taxes
            
            
            (32,485
            )
            
            
            
            
            
            
            
            
            
            
            (32,485
            )Minority
      interests
            
            
            (1,230
            )
            
            
            
            
            
            
            
            
            
            
            (1,230
            )Provision for income
      taxes
            
            
            (145
            )
            
            
            
            
            
            (D)
            
            
            
            (145
            )Net loss
            
            $
            (33,860
            )
            
            
            
            
            
            
            
            
            
            $
            (33,860
            )Loss
      per share:Basic and
      diluted
            
            
            
            
            
            
            
            
            
            (E)
            
            
            
            (4.51
            )Weighted
      average number of shares used in calculating basic and diluted loss per
      share
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            7,514






-8-







CTM
MEDIA HOLDINGS, INC.


NOTES
AND MANAGEMENT’S ASSUMPTIONS


TO
THE PROFORMA CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)




The
following is a description of the pro forma adjustments to the consolidated
financial statements:




(A)
            Reflected
      as if IDT made the $2 million contribution of cash on July 31,
      2009.




(B)
            Reflected
      as if the amounts due from us to IDT were converted into a capital
      contribution on July 31, 2009.




(C)
            Reflected
      as if the 1.3 million shares of Class A common stock, 5.1 million shares
      of Class B common stock and 1.1 million shares of Class C common stock
      were issued on July 31, 2009.




(D)
            The
      Company’s financial statements include provisions for federal, state and
      foreign income taxes on a separate tax return basis for all periods
      presented. Accordingly, no provision for income taxes is provided as a pro
      forma adjustment.




(E)
            Earnings
      per share is calculated as if 1.3 million shares of Class A common stock,
      5.1 million shares of Class B common stock and 1.1 million shares of Class
      C common stock were issued and outstanding for all of fiscal
      2009.






-9-




Item 1A.Risk
Factors.





RISK
FACTORS


Our
business, operating results or financial condition could be materially adversely
affected by any of the following risks associated with any one of our
businesses, as well as the other risks highlighted elsewhere in this document,
particularly the discussions about competition. The trading price of our common
stock could decline due to any of these risks. Note that references to “our”,
“us”, “we”, etc. used in each risk factor below refers to the business about
which such risk factor is provided.




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 the tourist and travelers 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. In the current recession of the global
economy, discretionary spending levels have already dropped
significantly.




Without
limitation, some events that tend to reduce travel and, therefore, could reduce
CTM’s sales and revenues include:




•
            price
      escalation in the airline industry or other travel-related
      industries;




•
            airline
      or other travel related strikes;




•
            pandemics
      or other widespread health risks;




•
            regional
      hostilities and terrorism;




•
            unusual
      extended periods of bad weather;




•
            fuel
      price escalation;




•
            reduction
      of capacity by travel suppliers;




•
            labor
      force stoppages that impact the Broadway theater
  industry;




•
            increased
      occurrence of travel-related accidents;
and




•
            economic
      downturns and recessions.




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 travel and tourism industry, such as those caused by
terrorist attacks or general economic slowdowns such as the current recession,
could negatively affect CTM’s business.


CTM’s
brochure distribution business relies on the health and growth of the travel and
tourism industry. Travel is highly sensitive to traveler safety concerns, and
thus has historically declined after acts of terrorism such as those on
September 11, 2001. A terrorist attack or the perceived threat of one in New
York City in particular (as a significant portion of CTM’s revenue is derived
from the distribution of brochures related to Broadway shows–see “Trends and changes in
the theater industry could adversely affect CTM’s revenues”) could significantly
reduce tourism and theater attendance. These effects, depending on their scope
and duration, could significantly reduce travel and tourism, 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 affect 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.






-10-




Trends
and changes in the theater industry could adversely affect CTM’s
revenues.


A
significant portion of CTM’s revenue (approximately 10% to 15%) is derived from
its distribution of brochures 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. Accordingly, economic downturns,
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 that cause the “lights to go
off” on Broadway could adversely affect CTM’s revenues.




Rapid
technological changes and reliance on the Internet may decrease the
attractiveness of CTM’s services to customers.


In order
to remain competitive in the brochure industry, CTM must continue to enhance its
services. If CTM fails to continually improve its services, it could lag behind
competitors or it could become obsolete due to its customers’ and the public’s
reliance on technology and the Internet. In particular, the increasing
popularity and availability of access content and the Internet through wireless
devices may reduce the appeal of advertising through brochure
displays.




CTM may
need to develop technology or modify its services accordingly to retain its
customers and grow its customer base. Such development and modifications may
require CTM to incur substantial costs and expenses to respond. Such costs and
expenses may have a material adverse effect on CTM’s business, financial
condition and results of operations. It is possible that CTM may not be able to
adapt as Internet technologies and customer demands continue to evolve. To be
successful, CTM must adapt to its rapidly changing market by continually
enhancing the technologies used in its Internet products and services, and by
introducing new technology to address the changing needs of its business and
consumers. If CTM is unable, for technical, legal, financial or other reasons,
to adapt in a timely manner in response to changing market conditions or
business and consumer customer requirements, its business, prospects and
financial condition and results of operations could be materially adversely
affected.




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.




Risks
Related to IDW




IDW
depends on a single distributor for its publications and such dependence
subjects IDW to the risk that such distributor may be unable to perform its
obligations to IDW.


Diamond
Comic Distributors, Inc. or Diamond, which handles the vast majority of all
comic publishers’ direct market distribution, distributes all of IDW’s products
for both the direct and non-direct markets. Should Diamond fail to perform under
its distribution agreement or if it were to experience financial difficulties
that would hinder its performance, although the non-direct market may have other
distributors that could fill Diamond’s role, distribution to the direct market
would be significantly impaired in the short term and IDW’s ability to
distribute and receive proceeds from its publications would be
impaired.




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


Because
of Diamond’s role as distributor of IDW’s publications, IDW depends on Diamond
to implement internal controls over financial reporting and to provide IDW with
information related to those internal controls. Diamond’s internal controls
might not be sufficient to allow IDW to meet its internal control obligations,
to allow IDW’s management to properly assess those controls or to allow IDW’s
independent registered public accounting firm to attest to IDW’s management’s
assessment. Diamond might fail to cure any internal control deficiencies related
to the publications that it distributes. IDW may be unable to effectively create
compensating controls to detect and prevent errors or irregularities in
Diamond’s accounting to IDW and others. Errors in properly tracking publication
sales could also negatively impact IDW’s revenues.




IDW’s
publications might be more expensive to make than anticipated.


Expenses
associated with producing IDW’s publications could increase beyond anticipated
amounts because of, among other things, an escalation in compensation rates of
talent working on the publications, and unexpected increase in the number of
personnel required to work on publications, creative problems, or an increase in
printing costs.






-11-




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


IDW is
dependent on the continued services of key executives such as its CEO, Ted
Adams; its Executive Vice-President, Robbie Robbins; and certain creative
employees. IDW currently has employment contracts with its CEO and Executive
Vice-President, but does not have employment agreements with any other officers
or employees. The departure of key personnel without adequate replacement could
severely disrupt IDW’s business operations. Additionally, IDW 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 IDW to attract and
retain qualified employees. If IDW is unable to attract and retain qualified
individuals or its costs to do so increase significantly, its operations would
be materially adversely affected.




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


IDW
operates in highly competitive markets that are subject to rapid change,
including changes in customer preferences. There are substantial uncertainties
associated with IDW’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. IDW has no professionally
gathered demographic data, but anecdotal evidence and management experience
indicate that the majority of IDW’s readers are males between the ages of 18 and
35. Content in which IDW has invested significant resources may fail to respond
to consumer demand at the time it is published. IDW regularly makes significant
investments in new products that may not be profitable, or whose profitability
may be significantly lower than IDW has experienced historically. A loss in
sales due to the foregoing could have a material adverse effect on IDW’s
business, prospects, and financial condition.




Significant
returns of IDW publications sold to mass market book stores may have a material
impact on IDW’s cash flow.


Through
its exclusive distribution arrangement with Diamond, IDW sells its publications
to mass market books stores (such as Borders and Barnes & Noble) on a fully
returnable basis. As a result, these stores can return publications to Diamond
for credit, which in turn is charged back to IDW. There is no time limit on the
stores’ right to return publications distributed to them. In addition to IDW
being charged back the wholesale cost of the publications, IDW also incurs a
return processing fee by Diamond. Such returns and fees are credited against
IDW’s current sales revenue from Diamond reducing IDW’s current cash flow.
Product returns are a normal part of book publishing and IDW 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 book stores, however, could result in a
large volume of returns significantly reducing IDW’s operating capital. Further,
the general downturn in the economy may also result in significant returns as
book stores reduce their outstanding debts to improve their own cash
flow.





IDW’s
publications may be less successful than anticipated.


IDW
cannot 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. The
commercial failure of just one of IDW’s publications could have a material
adverse effect on IDW’s results of operations in both the year of release and in
the future.




If
IDW fails to maintain strong relationships with its 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.


IDW’s
business is highly dependent on maintaining strong relationships with the
entertainment companies that license their entertainment properties to IDW, and
with authors, illustrators and other creative talent who produce the products
that are sold to IDW’s customers. Any weakening of these relationships, or the
failure to develop successful new relationships, could have an adverse impact on
IDW’s business and financial performance. IDW has an exclusive relationship with
only one artist. IDW therefore depends on freelance artists who choose how to
spend their time and utilize their talents. It is important for IDW to maintain
strong relationships with those freelance artists so they devote their time and
talent to IDW’s projects.




A
decrease in the level of media exposure or popularity of IDW’s licensed
characters could adversely affect its financial results.


If the
movies or television programs that IDW licenses are not successful, or if the
characters that IDW licenses lose some of their popularity, IDW’s ability to
sell publications based on such characters will decline.




IDW
cannot control certain publication delays and cancellations which could
adversely affect IDW’s sales and its ability to meet delivery
obligations.


IDW does
not control the decision to proceed with the production of publications based on
characters that it licenses from others, and it does not control the timing of
the releases of those publications, which are subject to long and inflexible
schedules. Disruptions, delays or cancellations to those schedules could cause
IDW to incur additional costs, miss an anticipated publication date, endure long
periods without publishing a publication or all of the above, and could hurt
IDW’s associated licensing programs and business, generally.






-12-






IDW
might be disadvantaged by changes or disruptions in the way publications are
distributed.


The
manner in which consumers access content has undergone rapid and dramatic
changes. IDW cannot assure that new distribution channels, such as digital
distribution, will be as profitable for its industry as are today’s channels or
that it will successfully exploit any new channels. IDW can also not assure that
current distribution channels will maintain their profitability. In addition,
publications are distributed internationally and are subject to risks inherent
in international trade including war and acts of terrorism, instability of
foreign governments or economies, fluctuating foreign exchange rates and changes
in laws and policies affecting the trade of publications.




IDW
might lose potential sales because of piracy of publications.


With
technological advances, the piracy of publications has increased. Unauthorized
and pirated copies of IDW’s publications will reduce the revenue generated by
those publications. If consumers can obtain illegal copies of IDW’s publications
and media, IDW’s revenues will decline. IDW 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 IDW’s content could negatively affect its
revenues.




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


IDW’s
publications are printed in South Korea and occasionally in Canada on an
as-needed basis. International manufacturing is subject to a number of risks,
including extreme 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 adversely affected IDW’s costs, such fluctuations could
adversely affect IDW in the future. Possible increases in costs and delays of,
or interferences with, product deliveries could result in losses of revenues,
reduced profitability and reductions in the goodwill of IDW’s customers.
Additional factors that may adversely affect IDW’s printing activities outside
of the United States 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 IDW faces in its business could adversely affect its
financial performance and growth prospects.


IDW is
subject to significant competition, including from other publishers, many of
which are substantially larger than IDW and have much greater resources than it,
such as Marvel Comics, DC Comics and Dark Horse Comics. To the extent IDW 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.





Risk
Factors Generally Relating to Us and Our Common Stock




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


Prior to
the Spin-Off, there was no public trading market for shares of our common stock.
Our Class A common stock and 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 common stock. In addition,
our 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 common stock
and thus the ability of purchasers of our common stock to sell their shares in
the secondary market.




Investors
may suffer dilution.


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 common stock.






-13-





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 IDW because a significant portion of IDW’s 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
have limited resources and could find it difficult to raise additional
capital.


As a
result of the Spin-Off, we are now independent of IDT. We have limited operating
history as an independent company, and no current sources of financing. Any
financing formerly provided to any of our businesses by IDT is no longer
available. 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.




We
are controlled by our principal stockholder, which limits the ability of our
other stockholders to affect the management of the Company.


Howard S.
Jonas, our Chairman of the Board and founder has voting power over 2,545,577
shares of our common stock (which includes 497,237 shares of our Class A
common stock, 957,565 shares of our Class B common stock and 1,090,775 shares of
our Class C common stock which are convertible into shares of our Class A common
stock on a 1-for-1 basis), representing approximately 76.2% of the combined
voting power of our outstanding capital stock, as of October 12, 2009. Mr. Jonas
is able to control matters requiring approval by our stockholders, including the
approval of significant corporate matters, such as 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 the management of our Company is
limited.




Item 1B. Unresolved Staff
Comments.


None.




Item 2.Properties.


Our
headquarters are located in CTM’s headquarters at 11 Largo Drive South,
Stamford, Connecticut in approximately 9,000 square feet of leased office space
and 22,000 square feet of warehouse space.




We also
lease office space in Silver Spring, Maryland, which houses WMET’s
studio.




IDW
leases 5,000 square feet (approximately 4,300 square feet of leased office space
and approximately 700 square feet of warehouse space) in a stand alone building
in San Diego, California under a 4-year lease expiring in February
2012.




Item 3. Legal
Proceedings.


On
January 30, 2009, IDW received a letter from a law firm representing George and
Ginger Criswell and Green School Network, Inc. demanding $500,000 as a result of
alleged infringement of intellectual property of the Criswells related to the
Michael Recycle book published by IDW. In June 2009, the parties agreed to a
settlement consisting of the following material terms: (a) upfront remuneration
from IDW of $25,000; (b) a co-existence agreement and full release; (c) a book
publication contract from IDW for Ms. Criswell’s Recycle Michael: I’ll Do My
Part book; (d) IDW’s right of first refusal regarding the publication of
a second Recycle
Michael title by Ms. Criswell; and (e) a royalty of 1.5% of net sales
arising from IDW’s publication of the book entitled Michael Recycle Meets Litterbug
Doug.




In
addition to the foregoing, we are subject to other legal proceedings that have
arisen in the ordinary course of business and have not been finally adjudicated.
Although there can be no assurance in this regard, in the opinion of our
management, none of the legal proceedings to which we are a party, whether
discussed above or otherwise, will have a material adverse effect on our results
of operations, cash flows or financial condition.




Item 4. Submission of Matters to a Vote of
Security Holders.


None.






-14-




Part
II




Item 5.Market for Registrant’s Common
Equity, Related Stockholders Matters and Issuer Purchases of Equity
Securities.





PRICE
RANGE OF COMMON STOCK AND DIVIDEND POLICY




Our Class
A common stock and Class B common stock are quoted on the Pink OTC Markets and
trade under the symbols “CTMMA” and “CTMMB,” respectively.




On
October 21, 2009, there were 55 holders of record of our Class A common
stock and 118 holders of record of our Class B common stock. These numbers do
not include the number of persons whose shares are in nominee or in “street
name” accounts through brokers. On October 27, 2009, the last sales price
reported on the Pink OTC Markets for our Class A common stock was $0.60 per
share and for our Class B common stock was $0.83 per share.




We were
formed in May 2009 and have never paid cash dividends. We do not expect to pay
any cash dividends for the foreseeable future. Our current policy is to retain
all of our earnings to finance future growth. Any future declaration of
dividends will be subject to the discretion of our Board of
Directors.




The
information required by Item 201(d) of Regulation S-K will be contained in
our Information Statement for our Written Consent in Lieu of an Annual
Stockholders Meeting (the “Information Statement”), which we will file with the
SEC within 120 days after July 31, 2009, and which is incorporated by
reference herein.




Item 6.Selected Financial Data.


Smaller
reporting companies are not required to provide the information required by this
Item. In accordance with Item 10-(f)(2)(ii) of Regulation S-K, we qualify as a
“smaller reporting company” because our public float was below $75 million,
calculated based on the actual share price on the date of the Spin-Off, which
was September 14, 2009, and the aggregate number of shares distributed to
non-affiliates. We therefore followed the disclosure requirements of Regulation
S-K applicable to smaller reporting companies in this Annual Report on Form
10-K.




Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operations.


This
Annual Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including statements that contain the words
“believes,” “anticipates,” “expects,” “plans,” “intends” and similar words and
phrases. These forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from the results projected
in any forward-looking statement. In addition to the factors specifically noted
in the forward-looking statements, other important factors, risks and
uncertainties that could result in those differences include, but are not
limited to, those discussed under Item 1A to Part I “Risk Factors” in this
Annual Report. The forward-looking statements are made as of the date of this
Annual Report, and we assume no obligation to update the forward-looking
statements, or to update the reasons why actual results could differ from those
projected in the forward-looking statements. Investors should consult all of the
information set forth in this report and the other information set forth from
time to time in our reports filed with the SEC pursuant to the Securities Act of
1933 and the Securities Exchange Act of 1934, including our reports on
Form 8-K and in the future, Form 10-Q.





The
following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto included in Item 8 of this Annual
Report.




OVERVIEW


We are a
former subsidiary of IDT. As a result of the Spin-Off, on September 14, 2009, we
became an independent public company. While many of the costs of being a public
company were already borne by our business units – either directly or by
allocation of corporate overhead from IDT, we now need to incur additional costs
for the infrastructure to perform the necessary accounting, internal control and
reporting functions. We expect to incur incremental costs of $300,000-$500,000
for these functions. A significant portion of these functions will be provided
by IDT pursuant to the Master Services Agreement, dated September 14, 2009,
between us and IDT.






-15-




Our
principal businesses consist of:




•
            CTM
      Media Group, our brochure distribution company and other advertising-based
      new product initiatives focused on small to medium sized
      businesses;




•
            Our
      majority interest in Idea and Design Works, LLC, which is a comic book and
      graphic novel publisher that creates and licenses intellectual property;
      and




•
            The
      WMET-AM radio station in the Washington, D.C. metropolitan
      area.




Our
operations face challenges, including those discussed under Item 1A to Part
I “Risk Factors” in this Annual Report. In particular, we face
challenges:




•
            related
      to the current state of the United States and global economies and its
      impact on travel and other discretionary
  spending;




•
            from
      technological changes; and




•
            from
      alternatives to our products and
services.




We are
developing plans and changes to our businesses to address each of these
identified challenges.




The
current economic situation, including reductions in compensation, increases in
unemployment and the relatively low level of consumer confidence, has led to a
decrease in travel and spending on entertainment, which has a negative impact on
CTM’s  operations. While the segment of the travel industry that CTM
targets is less impacted by the downturn, and certain consumers may look to more
modest travel options, including car travel as opposed to air travel, which
could increase the demand for the offerings of CTM’s customers, any negative
impact on travel and entertainment spending could negatively impact CTM’s
business.




In
addition, we believe that several important customers of CTM, specifically,
those in the theater industry and particularly those on Broadway, are currently
experiencing financial challenges, and those challenges could become more
severe, including possible bankruptcy, which could impact CTM’s collections and
future revenues.




CTM has
increased its monitoring of customers’ financial condition and is seeking to
target those sectors of the market that it believes to be less impacted by the
current economic situation.


IDW’s
products are directly impacted to a lesser degree by the economic situation, but
IDW is experiencing challenges to its distribution efforts as certain retail
stores, which are an important outlet through which its products are sold, are
experiencing pressure and some may close.




CTM and
IDW both anticipate challenges to their businesses from new entrants,
technological developments and developments of alternative products and are
addressing these challenges by developing their own competitive
offerings.




CTM sees
a continuation of the trend away from print advertising. CTM is, therefore,
seeking to maintain its market share by developing and marketing internet-based
services to existing and other customers and to upgrade its offerings to compete
with alternative providers. In addition, CTM has developed offerings for newer
applications, such as text messaging to mobile phones.


IDW is
also impacted by declines in the publishing industry. To counteract that
decline, IDW is increasing its presence in the digital book area.




IDW's
performance in recent quarters included sales of comic book and graphic novel
products linked to successful movie properties. To replicate this performance,
IDW needs to obtain access to other big name properties and/or sequels to the
recent successful movies. Blockbuster movies are hard to predict and those from
major developers often have their own outlets for comic book and graphic novel
development. IDW will continue to seek out attractive opportunities, and will
attempt to increase sales of other properties to maintain its overall revenue
figures.




CTM


CTM
develops and distributes print and mobile-based advertising and information in
targeted tourist markets. CTM operates five integrated and complimentary
business lines: Brochure Distribution, Design & Print, Publishing,
RightCardTM, and
Digital Distribution. CTM offers its customers a comprehensive media marketing
approach through these business lines. In fiscal 2009, CTM serviced over 3,000
clients and maintained more than 11,000 display stations in over 30 states and
provinces in the United States (including Puerto Rico) and Canada. CTM’s display
stations are located in travel, tourism and entertainment venues, including
hotels and other lodgings, corporate and community venues, transportation
terminals and hubs, tourist attractions and entertainment venues. CTM’s revenues
represented 59.0% of consolidated revenues in fiscal 2009 and 66.2% in fiscal
2008.






-16-




IDW


IDW is a
comic book and graphic novel publisher that creates and licenses intellectual
property. IDW’s revenues represented 37.5% of consolidated revenues in fiscal
2009 and 30.2% in fiscal 2008.




WMET


WMET 1160
AM is a radio station serving the Washington, D.C. metropolitan area. WMET’s
revenues represented 3.5% of consolidated revenues in fiscal 2009 and 3.6% in
fiscal 2008.





REPORTABLE
SEGMENTS




We have
the following two reportable business segments: CTM and IDW. The results of
operations of WMET do not comprise a separate reportable segment and are
reported under the heading “Other.”





PRESENTATION
OF FINANCIAL INFORMATION




Basis
of presentation


The
consolidated financial statements for the periods reflect our financial
position, results of operations, changes in stockholders’ equity and cash flows
as if the current structure existed for all periods presented. The financial
statements have been prepared using the historical basis for the assets and
liabilities and results of operations.





CRITICAL
ACCOUNTING POLICIES


Our
financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America (“U.S.
GAAP”).The preparation of financial statements requires management to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenue and expenses as well as the disclosure of contingent assets
and liabilities. Critical accounting policies are those that require application
of management’s most subjective or complex judgments, often as a result of
matters that are inherently uncertain and may change in subsequent periods. Our
critical accounting policies include those related to the allowance for doubtful
accounts, goodwill and intangible assets with indefinite useful lives and
valuation of long-lived assets including intangible assets with finite useful
lives. Management bases its estimates and judgments on historical experience and
other factors that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates under different assumptions or
conditions. See Note 1 to the Consolidated Financial Statements in this Annual
Report for a complete discussion of our significant accounting
policies.




Allowance
for Doubtful Accounts


We
maintain allowances for doubtful accounts receivable for estimated losses, which
result from the inability or unwillingness of our customers to make required
payments. We base our allowances on our determination of the likelihood of
recoverability of trade accounts receivable based on past experience and current
collection trends that are expected to continue. In addition, we perform ongoing
credit evaluations of our significant customers, but historically we have not
required collateral to support trade accounts receivable from our customers. Our
estimates of recoverability of customer accounts may change due to new
developments, changes in assumptions or changes in our strategy, which may
impact our allowance for doubtful accounts balances. We continually assess the
likelihood of potential amounts or ranges of recoverability and adjust our
allowances accordingly, however actual collections and write-offs of trade
accounts receivables may materially differ from our estimates.




Goodwill
and Intangible Assets with Indefinite Useful Lives


In
accordance with Financial Accounting Standards Board (“FASB”) Statement of
Financial Accounting Standards (“SFAS”) No. 142, Goodwill and Other Intangible
Assets, goodwill and other intangible assets deemed to have indefinite
lives are not amortized. These assets are reviewed annually (or more frequently
under various conditions) for impairment using a fair value approach. Other
intangible assets with definite lives are amortized over their estimated useful
lives.




The
goodwill impairment assessment involves estimating the fair value of the
reporting unit and comparing it to its carrying amount (which is known as Step
1). If the carrying value of the reporting unit exceeds its estimated fair
value, additional steps are followed to determine if an impairment of goodwill
is required. In fiscal 2009, we recorded aggregate goodwill impairment charges
of $32.6 million, which reduced the carrying amount our goodwill to zero. We
estimated the fair value of our reporting units using discounted cash flow
methodologies, as well as considering third party market value indicators.
Calculating the fair value of the reporting units, and allocating the estimated
fair value to all of the tangible assets, intangible assets and liabilities,
required significant estimates and assumptions by management.




At July
31, 2009, the carrying value of our FCC licenses, which are deemed to have
indefinite lives and are not amortized, was $0.5 million. We will have to
continue to review our FCC licenses for impairment at least annually. Should our
estimates or assumptions regarding the fair value of our FCC licenses prove to
be incorrect, we may record additional impairment in future
periods.






-17-






Valuation
of Long-Lived Assets including Intangible Assets with Finite Useful
Lives


We test
the recoverability of our long-lived assets including identifiable intangible
assets with finite useful lives whenever events or changes in circumstances
indicate that the carrying value of any such asset may not be recoverable. Such
events or changes in circumstances include:




•
            significant
      actual underperformance relative to expected performance or projected
      future operating results;


•
            significant
      changes in the manner or use of the asset or the strategy of our overall
      business; and


•
            significant
      adverse changes in the business climate in which we
    operate.





If we
determine that the carrying value of certain long-lived assets may not be
recoverable and may exceed its fair value based upon the existence of one or
more of the above indicators, we will test for impairment based on the projected
undiscounted cash flows to be derived from such asset. If the projected
undiscounted future cash flows are less than the carrying value of the asset, we
will record an impairment loss based on the difference between the estimated
fair value and the carrying value of the asset. We generally measure fair value
by considering sale prices for similar assets or by discounting estimated future
cash flows from the asset using an appropriate discount rate. Cash flow
projections and fair value estimates require significant estimates and
assumptions by management. Should our estimates and assumptions prove to be
incorrect, we may be required to record impairments in future periods and such
impairments could be material.




RESULTS
OF OPERATIONS


We
evaluate the performance of our operating business segments based primarily on
income (loss) from operations. Accordingly, the income and expense line items
below income (loss) from operations are only included in our discussion of the
consolidated results of operations.




Year
Ended July 31, 2009 Compared To Year Ended July 31, 2008


We
recorded aggregate goodwill impairment charges of $32.6 million in fiscal 2009.
At July 31, 2009, the carrying amount of our goodwill was reduced to zero as a
result of these impairment charges. Our operating results for fiscal 2009, which
included these significant goodwill impairment charges, are not necessarily
indicative of the results that may be expected in the future. Goodwill
impairment is not a cash expenditure therefore it did not impact our liquidity
at July 31, 2009, nor will these charges impact our future
liquidity.




Consolidated




(in
      millions)
            
            
            
            
            
            
            
            ChangeYear
      ended July 31,
            
            2009
            
            
            2008
            
            
            $
            
            
            %RevenuesCTM
            
            $
            19.9
            
            
            $
            21.6
            
            
            $
            (1.7
            )
            
            
            (7.9%)IDW
            
            
            12.6
            
            
            
            9.8
            
            
            
            2.8
            
            
            
            28.1Other
            
            
            1.2
            
            
            
            1.2
            
            
            
            0.0
            
            
            
            0.1Total
      revenues
            
            $
            33.7
            
            
            $
            32.6
            
            
            $
            1.1
            
            
            
            3.2%





Revenues.The increase in
consolidated revenues in fiscal 2009 compared to fiscal 2008 was primarily due
to the increase in IDW revenues, partially offset by a decrease in CTM revenues.
The increase in IDW revenues in fiscal 2009 compared to fiscal 2008 was as a
result of an increase in titles sold. The decrease in CTM revenues was primarily
due to the global economic slowdown and a decrease in advertising and customer
spending and in some cases certain of our customers going out of business.
Offsetting this decrease in CTM’s distribution revenues was an increase in
printing revenues during the fiscal 2009.




(in
      millions)
            
            
            
            
            
            
            
            ChangeYear  ended
      July 31,
            
            2009
            
            
            2008
            
            
            $
            
            
            %Costs
      and expensesDirect
      cost of revenues
            
            $
            14.6
            
            
            $
            12.5
            
            
            $
            2.1
            
            
            
            16.5%Selling,
      general and administrative
            
            
            15.7
            
            
            
            18.3
            
            
            
            (2.6
            )
            
            
            (13.7)Depreciation
      and amortization
            
            
            1.4
            
            
            
            2.1
            
            
            
            (0.7
            )
            
            
            (30.8)Bad
      debt expense
            
            
            1.0
            
            
            
            0.5
            
            
            
            0.5
            
            
            
            112.5Impairment
      and severance charges
            
            
            33.4
            
            
            
            3.7
            
            
            
            29.7
            
            
            nmTotal
      costs and expenses
            
            $
            66.1
            
            
            $
            37.1
            
            
            $
            29.0
            
            
            
            78.3%





nm—not
meaningful





Direct Cost of Revenues.The
increase in direct cost of revenues in fiscal 2009 compared to fiscal 2008
reflects the increases in IDW’s and CTM’s direct cost of revenues. The increase
in IDW’s direct cost of revenues in fiscal 2009 compared to fiscal 2008 was a
result of the increase in revenues. The increase in CTM’s direct cost of
revenues was the result of a shift in costs as a result of the decrease in
distribution revenues and an increase in printing revenues. Printing revenues
are a lower margin business compared to our higher margin distribution business.
However, we maintain the printing business as a method to solidify our
relationship with our customers by providing this requested
service.






-18-




Overall
gross margin decreased from 61.5% in fiscal 2008 to 56.5% in fiscal 2009 due to
a decrease in CTM’s gross margin, which was primarily due to the mix of products
as a result of an increase in lower margin printing revenues.




Selling, General and Administrative.The decrease in selling, general and administrative expenses in fiscal
2009 compared to fiscal 2008 was due to a decrease in the selling, general and
administrative expenses of CTM. CTM’s selling, general and administrative
expenses decreased in fiscal 2009 compared to fiscal 2008 due primarily to the
exit from certain unprofitable lines of businesses, consisting of Traffic Pull
and Local Pull, our Internet search position enhancement ventures, and
Click2Talk, our Web-based communications product. The exit from these lines of
business was a process that commenced in the fourth quarter of fiscal 2008 and
is mostly completed. The Local Pull product is still being offered by CTM,
however the business model has been reworked and Local Pull is being marketed
through outsourced channels, which is more cost effective for us. Total selling,
general and administrative expenses for these exited businesses was $1.1 million
and $3.5 million in fiscal 2009 and fiscal 2008, respectively. As a percentage
of total revenues, selling, general and administrative expenses decreased from
55.8% in fiscal 2008 to 46.6% in fiscal 2009 as selling, general and
administrative expenses decreased while revenues increased.




On
October 14, 2009, our Board of Directors granted our Chairman and founder,
Howard S. Jonas, 1.8 million restricted shares of our Class B common stock with
a value of $1.25 million on the date of grant in lieu of a cash base salary for
the next five years. The restricted shares will vest in equal thirds on each of
October 14, 2011, October 14, 2012 and October 14, 2013. Unvested shares would
be forfeited if we terminate Mr. Jonas’ employment other than under
circumstances where the accelerated vesting applies. The shares are subject to
adjustments or acceleration based on certain corporate transactions, changes in
capitalization, or termination, death or disability of Mr. Jonas. If Mr.
Jonas is terminated by us for cause, a pro rata portion of the shares would
vest. This arrangement does not impact Mr. Jonas’ cash compensation from the
date of the Spin-Off through the pay period including the grant date. Total
unrecognized compensation cost on the grant date was $1.25 million. The
unrecognized compensation cost is expected to be recognized over the vesting
period from October 14, 2009 through October 14, 2014.




Bad Debt Expense.The
increase in bad debt expense in fiscal 2009 compared to fiscal 2008 was due
primarily to an increase in bad debt expense of CTM as a result of several of
its customers going out of business.




Impairment and Severance Charges.We recorded aggregate goodwill impairment charges of $32.6 million in
fiscal 2009. In the second quarter of fiscal 2009, the following events and
circumstances indicated that the fair value of certain of our reporting units
may be below their carrying value: (1) a significant adverse change in the
business climate, (2) operating losses of reporting units, and (3) significant
revisions to internal forecasts. We measured the fair value of our reporting
units by discounting their estimated future cash flows using an appropriate
discount rate. The carrying value including goodwill of CTM, IDW and WMET
exceeded their estimated fair value, therefore we performed additional steps for
these reporting units to determine whether an impairment of goodwill was
required. As a result of this analysis, in fiscal 2009, we recorded goodwill
impairment of $29.7 million in CTM, $1.8 million in IDW, and $1.1 million in
WMET, which reduced the carrying amount of the goodwill in each of these
reporting units to zero. Calculating the fair value of the reporting units, and
allocating the estimated fair value to all of the tangible assets, intangible
assets and liabilities, requires significant estimates and
assumptions.




The
primary drivers in our assumptions that resulted in the goodwill impairment in
fiscal 2009 were (1) lower than expected revenues since our prior annual
goodwill impairment test conducted as of May 1, 2008 that caused us to reduce
our revenue and cash flow projections at December 31, 2008, the date of our
interim impairment test, (2) an increase in the discount rates used at December
31, 2008 compared to May 1, 2008, (3) reductions in the terminal value growth
rates used at December 31, 2008 compared to May 1, 2008, and (4) no expectation
of an economic recovery in our cash flow projections. The primary drivers behind
our changed expectations for future results, cash flows and liquidity were (1)
the global economic slowdown, (2) lower than expected revenue including a
decrease in customer spending, (3) certain of our customers experiencing
financial challenges including bankruptcy, and (4) specifically related to CTM,
new lines of business that did not perform as expected and were discontinued
beginning in the fourth quarter of fiscal 2008. All of these factors contributed
to the reduction in the revenue and cash flow projections at December 31, 2008
compared to May 1, 2008.




Impairment
and severance charges in fiscal 2008 included mainly impairment charges of $3.5
million related to WMET’s property and equipment.




(in
      millions)
            
            
            
            
            
            
            
            ChangeYear
      ended July 31,
            
            2009
            
            
            2008
            
            
            $
            
            
            %Loss
      from operations
            
            $
            (32.5
            )
            
            $
            (4.5
            )
            
            $
            (28.0
            )
            
            nmInterest
      income, net
            
            
            —
            
            
            
            0.1
            
            
            
            (0.1
            )
            
            
            (191.9)%Other
      expense, net
            
            
            —
            
            
            
            (0.1
            )
            
            
            0.1
            
            
            
            (108.0)Minority
      interests
            
            
            (1.2
            )
            
            
            (0.4
            )
            
            
            (1.0
            )
            
            nmProvision
      for income taxes
            
            
            (0.2
            )
            
            
            (0.4
            )
            
            
            0.3
            
            
            
            —Net
      loss
            
            $
            (33.9
            )
            
            $
            (5.3
            )
            
            $
            (28.7
            )
            
            nm





nm—not
meaningful






-19-





Minority Interests.Minority
interests arise from the 47% interest held by the minority owners of
IDW.




Income Taxes.Provision for
income taxes in fiscal 2009 decreased compared to fiscal 2008 primarily due to
decreases in our state and local income tax expense. Our foreign income tax
expense was substantially the same in fiscal 2009 and fiscal 2008. We had no
federal income tax expense or benefit in either fiscal 2009 or fiscal 2008. Our
foreign income tax expense results from income generated by our foreign
subsidiaries that cannot be offset against losses generated in the United
States.




We and
IDT entered into a Tax Separation Agreement, dated as of September 14, 2009, to
provide for certain tax matters including the assignment of responsibility for
the preparation and filing of tax returns, the payment of and indemnification
for taxes, entitlement to tax refunds and the prosecution and defense of any tax
controversies. Pursuant to this agreement, IDT indemnified us from all liability
for taxes of ours and our subsidiaries for periods ending on or before September
14, 2009, and we indemnified IDT from all liability for taxes of our and our
subsidiaries accruing after September 14, 2009. Also, for periods ending on or
before September 14, 2009, IDT shall have the right to control the conduct of
any audit, examination or other proceeding brought by a taxing authority. We
shall have the right to participate jointly in any proceeding that may affect
our tax liability unless IDT has indemnified us. Finally, we and our
subsidiaries agreed not to carry back any net operating losses, capital losses
or credits for any taxable period ending after September 14, 2009 to a taxable
period ending on or before September 14, 2009 unless required by applicable law,
in which case any refund of taxes attributable to such carry back shall be for
the account of IDT.




CTM




(in
      millions)
            
            
            
            
            
            
            
            ChangeYear
      July 31,
            
            2009
            
            
            2008
            
            
            $
            
            
            %Revenues
            
            $
            19.9
            
            
            $
            21.6
            
            
            $
            (1.7
            )
            
            
            (7.9)%Direct
      cost of revenues
            
            
            7.5
            
            
            
            7.0
            
            
            
            0.5
            
            
            
            7.0Selling,
      general and administrative
            
            
            11.0
            
            
            
            13.7
            
            
            
            (2.7
            )
            
            
            (19.7)Depreciation
      and amortization
            
            
            0.8
            
            
            
            0.7
            
            
            
            0.1
            
            
            
            10.3Bad
      debt expense
            
            
            0.7
            
            
            
            0.3
            
            
            
            0.4
            
            
            
            154.9Impairment
      and severance charges
            
            
            30.3
            
            
            
            0.2
            
            
            
            30.1
            
            
            nmLoss
      from operations
            
            $
            (30.4
            )
            
            $
            (0.3
            )
            
            $
            (30.1
            )
            
            nm





nm—not
meaningful





Revenues.The decrease in
CTM’s revenues in fiscal 2009 compared to fiscal 2008 was primarily due to a
decrease in distribution revenues attributable to the global economic slowdown
and a decrease in advertising and customer spending and in some cases certain
customers going out of business. We experienced these declines in the majority
of the states that we operate in while certain states such as Connecticut and
New York remained flat. Offsetting this decrease in distribution revenues was an
increase in printing revenues in fiscal 2009. We are beginning to see positive
signs of a gradual recovery in our business such that we expect our fiscal 2010
revenues to be slightly higher than our fiscal 2009 revenues.




Direct Cost of Revenues.Direct cost of revenues consist primarily of distribution and fulfillment
payroll, warehouse and vehicle distribution expenses, and print and design
expenses. The increase in direct cost of revenues in fiscal 2009 compared to
fiscal 2008 reflects a shift in costs as a result of the decrease in
distribution revenues and an increase in printing revenues. Printing revenues
are a lower margin business compared to our higher margin distribution business.
However, we maintain the printing business as a method to solidify our
relationship with our customers by providing this requested
service.




CTM’s
aggregate gross margin decreased in fiscal 2009 to 62.2% from 67.5% in fiscal
2008. The decrease was primarily due to the mix of products as a result of an
increase in lower margin printing revenues.




Selling, General and Administrative.Selling, general and administrative expenses consist primarily of payroll
and related benefits, facilities costs and insurance. Selling, general and
administrative expenses decreased in fiscal 2009 compared to fiscal 2008
primarily due to the exit from certain unprofitable lines of businesses,
consisting of Traffic Pull, Local Pull and Click2Talk. The exit from these lines
of business was a process that commenced in the fourth quarter of fiscal 2008
and is mostly completed. The Local Pull product is still being offered by CTM,
however the business model has been reworked and Local Pull is being marketed
through outsourced channels, which is more cost effective for us. Total selling,
general and administrative expenses for these exited businesses was $1.1 million
and $3.5 million in fiscal 2009 and fiscal 2008, respectively. As a percentage
of CTM’s aggregate revenues, selling, general and administrative expenses
decreased in fiscal 2009 to 55.5% from 63.3% in fiscal 2008, as selling, general
and administrative expenses decreased at a faster rate than
revenues.




Impairment and severance charges.In the second quarter of fiscal 2009, certain events and circumstances
indicated that the fair value of CTM, which is one of our reporting units, may
be below its carrying value. We measured the fair value of CTM by discounting
its estimated future cash flows using an appropriate discount rate. CTM’s
carrying value including goodwill exceeded its estimated fair value, therefore
additional steps were performed to determine whether an impairment of goodwill
was required. As a result of this analysis, in fiscal 2009, CTM recorded
goodwill impairment of $29.7 million, which reduced the carrying amount of its
goodwill to zero.




-20-






IDW




(in
      millions)
            
            
            
            
            
            
            
            ChangeYear
      ended July 31,
            
            2009
            
            
            2008
            
            
            $
            
            
            %Revenues
            
            $
            12.6
            
            
            $
            9.9
            
            
            $
            2.7
            
            
            
            28.1
            %Direct
      cost of revenues
            
            
            7.1
            
            
            
            5.5
            
            
            
            1.6
            
            
            
            28.5Selling,
      general and administrative
            
            
            3.6
            
            
            
            3.2
            
            
            
            0.4
            
            
            
            11.4Depreciation
      and amortization
            
            
            0.2
            
            
            
            0.7
            
            
            
            (0.5
            )
            
            nmImpairment
      and severance charges
            
            
            1.8
            
            
            
            —
            
            
            
            1.8
            
            
            nmLoss
      (income) from operations
            
            $
            (0.1
            )
            
            $
            0.5
            
            
            $
            (0.6
            )
            
            nm





nm—not
meaningful





Revenues.The increase in
IDW’s revenues in fiscal 2009 compared to fiscal 2008 was due to new editorial
hires, which have resulted in more and better products and an increase in the
number of titles we are releasing on a weekly and monthly basis, and the success
of our Presidential Material comic books, particularly a volume featuring Barack
Obama, and our licensed comics, particularly books based on Angel, Star Trek,
and Transformers. In addition, the fourth quarter of fiscal 2009 was
particularly strong due to the numerous Spring and Summer comic book movie
releases such as Transformers: Revenge of the Fallen, Star Trek (2009),
Terminator Salvation, and G.I. Joe: The Rise of Cobra. We do not expect IDW’s
fiscal 2010 revenues to be as strong as that experienced in fiscal
2009.




In an
effort to increase availability of versions of its content at retail outlets,
IDW has entered into a number of digital distribution agreements this year, and
IDW’s publications are currently available for purchase via mobile phones,
primarily iPhones/iPod Touch. IDW titles are also available direct-to-desktop
via several websites and are expected to be available on Sony’s PSP and PSP Go
by the end of calendar 2009.




Direct Cost of Revenues.Direct cost of revenues consists primarily of printing expenses and costs
of artist and writers. The increase in direct cost of revenues in fiscal 2009
compared to fiscal 2008 reflects the increase in revenues.




IDW’s
aggregate gross margin decreased slightly in fiscal 2009 to 43.6% from 43.7% in
fiscal 2008. The decrease in fiscal 2009 was primarily due to the mix of
products.




Selling, General and Administrative.Selling, general and administrative expenses increased in fiscal 2009
compared to fiscal 2008 primarily due to expense increases relating to the
increase in titles sold and the increase in the number of employees, as well as
moving to new facilities to accommodate the growth which carries higher costs.
In addition, in fiscal 2009, IDW increased its attendance at comic book
conventions to drive market share and in late fiscal 2009, IDW added a Chief
Operating Officer, and implemented a more structured bonus plan as compared to
fiscal 2008, all of which resulted in an increase in selling, general and
administrative expense. As a percentage of IDW’s aggregate revenues, selling,
general and administrative expenses decreased in fiscal 2009 to 28.1% from 32.2%
in fiscal 2008, as revenues increased at a faster rate than selling, general and
administrative expenses.




Impairment and severance charges.In the second quarter of fiscal 2009, certain events and circumstances
indicated that the fair value of IDW, which is one of our reporting units, may
be below its carrying value. We measured the fair value of IDW by discounting
its estimated future cash flows using an appropriate discount rate. IDW’s
carrying value including goodwill exceeded its estimated fair value, therefore
additional steps were performed to determine whether an impairment of goodwill
was required. As a result of this analysis, in fiscal 2009, IDW recorded
goodwill impairment of $1.8 million, which reduced the carrying amount of its
goodwill to zero.




LIQUIDITY
AND CAPITAL RESOURCES




Historically,
we satisfied our cash requirements primarily through cash provided by CTM’s
operating activities and funding from IDT.




(in
      millions)
            
            Year
      ended July 31,2009
            
            
            2008Cash
      flows provided by (used in):Operating
      activities
            
            $
            1.1
            
            
            $
            (0.2
            )Investing
      activities
            
            
            (1.7
            )
            
            
            (1.0
            )Financing
      activities
            
            
            1.5
            
            
            
            1.1Increase
      (decrease) in cash and cash equivalents
            
            $
            0.9
            
            
            $
            (0.1
            )





Operating
Activities


Our cash
flow from operations varies from quarter to quarter and from year to year,
depending on our operating results and the timing of operating cash receipts and
payments, specifically trade accounts receivable and trade accounts payable. In
the fourth quarter of fiscal 2008, we commenced to exit from certain
unprofitable lines of businesses of CTM, consisting of Traffic Pull, Local Pull
and Click2Talk. The exit from these lines of business is mostly completed. The
Local Pull product is still being offered by CTM, however the business model has
been reworked and Local Pull is being marketed through outsourced channels,
which is more cost effective for us. Cash used in operating activities from
these exited businesses was approximately $0.9 million and $4.1 million in
fiscal 2009 and fiscal 2008, respectively.






-21-




Investing
Activities


Our
capital expenditures were $0.7 million in fiscal 2009 and $0.9 million in fiscal
2008. We currently anticipate that total capital expenditures for all of our
divisions in fiscal 2010 will be approximately $0.3 million. In previous
periods, CTM upgraded its fleet of trucks and brochure distribution display
stations as well as moved to a new location, which resulted in reduced capital
expenditures in fiscal 2009 and the anticipated additional reduction in fiscal
2010. We expect to fund our capital expenditures with our cash, cash equivalents
and short term investment on hand and the $2.0 million of cash that we received
from IDT in September 2009.




In fiscal
2009, IDW invested $1.0 million in a short-term certificate of
deposit.





Financing
Activities


During
all periods presented, IDT, our parent company, provided us with the required
liquidity to fund our working capital requirement and investments for some of
our businesses. We used any excess cash provided by our operations to repay IDT.
In fiscal 2009 and in fiscal 2008, IDT provided cash to us of $2.0 million and
$1.8 million, respectively. At July 31, 2009, the amount due to IDT was $24.9
million. In September 2009, the amount due to IDT of $27.5 million was converted
into a capital contribution.




We
distributed cash of $0.3 million in fiscal 2009 and $0.5 million in fiscal 2008
to the minority shareholders of IDW.




We repaid
capital lease obligations of $0.2 million in fiscal 2009 and $0.1 million in
fiscal 2008.





CHANGES
IN TRADE ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS


Gross
trade accounts receivable decreased to $4.6 million at July 31, 2009 compared to
$4.7 million at July 31, 2008. The decrease in fiscal 2009 is due to higher
collections in IDW. The allowance for doubtful accounts as a percentage of gross
trade accounts receivable increased to 14.7% at July 31, 2009 compared to 2.9%
at July 31, 2008. The main reason for the increase in the allowance for
doubtful accounts is due to changes in WMET’s allowance as result of new
management re-evaluating the adequacy of WMET’s allowance.




Other
Sources and Uses of Resources


We intend
to, where appropriate, make strategic investments and acquisitions to
complement, expand, and/or enter into new businesses. In considering
acquisitions and investments, we search for opportunities to profitably grow our
existing businesses, to add qualitatively to the range of businesses in our
portfolio and to achieve operational synergies. Historically, such acquisitions
have not exceeded $0.5 million, with the average acquisition being less than
$0.1 million. If we were to pursue an acquisition in excess of $0.5 million we
would likely need to secure financing arrangements. At this time, we cannot
guarantee that we will be presented with acquisition opportunities that meet our
return on investment criteria, or that our efforts to make acquisitions that
meet our criteria will be successful.




Historically,
we satisfied our cash requirements primarily through cash provided by CTM’s
operating activities and funding from IDT. The conversion of our balance due to
IDT into a capital contribution in September 2009 significantly improved our
working capital balance. We do not currently have any material debt obligations.
With the exit of certain lines of businesses within CTM, we expect our
operations in the next twelve months and the balance of cash, cash equivalents
and short term investment that we held as of July 31, 2009, as well as the $2.0
million cash contribution from IDT that we received in September 2009 will be
sufficient to meet our currently anticipated working capital and capital
expenditure requirements, capital lease obligations, make limited acquisitions
and investments, and to fund any potential operating cash flow deficits within
any of our segments for at least the next twelve months. In addition, we
anticipate that our expected cash balances as well as cash flows from our
operations will be sufficient to meet our long term liquidity needs. The
foregoing is based on a number of assumptions, including that we will collect on
our receivables, effectively manage our working capital requirements, and
maintain our revenue levels and liquidity. Predicting these matters is
particularly difficult in the current worldwide economic situation and overall
decline in consumer demand. Failure to generate sufficient revenue and operating
income could have a material adverse effect on our results of operations,
financial condition and cash flows.





FOREIGN
CURRENCY RISK


Revenues
from our international operations represented 7.4% and 9.3% of our consolidated
revenues for fiscal 2009 and fiscal 2008, respectively. A significant portion of
these revenues is in currencies other than the U.S. Dollar, primarily Canadian
dollars and recently in Euros, although our revenues in Euros are not
significant at this time. Our foreign currency exchange risk is somewhat
mitigated by our ability to offset the majority of these non
U.S. Dollar-denominated revenues with operating expenses that are paid in
the same currencies. While the impact from fluctuations in foreign exchange
rates affects our revenues and expenses denominated in foreign currencies, the
net amount of our exposure to foreign currency exchange rate changes at the end
of each reporting period is generally not material.





OFF-BALANCE
SHEET ARRANGEMENTS


We do not
have any “off-balance sheet arrangements,” as defined in relevant SEC
regulations that are reasonably likely to have a current or future effect on our
financial condition, results of operations, liquidity, capital expenditures or
capital resources.




-22-






RECENTLY
ADOPTED ACCOUNTING STANDARDS


In
February 2008, the FASB issued FASB Staff Position (“FSP”) No. FAS 157-2, Effective Date of FASB Statement
No. 157, which postponed the effective date of SFAS No. 157, Fair Value Measurements, for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (that is, at least annually). Nonrecurring nonfinancial assets and
nonfinancial liabilities include those measured at fair value in goodwill
impairment testing, indefinite lived intangible assets measured at fair value
for impairment testing, those initially measured at fair value in a business
combination, and nonfinancial liabilities initially measured at fair value for
exit or disposal activities. We adopted SFAS 157 for nonrecurring nonfinancial
assets and nonfinancial liabilities on August 1, 2009, which did not have a
material impact on our financial position, results of operations or cash flows.
We will apply the provisions of SFAS 157 to nonrecurring nonfinancial assets and
nonfinancial liabilities at such time as a fair value measurement is required,
which may result in a fair value that is materially different than would have
been measured prior to the adoption of SFAS 157.





On August
1, 2009, we adopted SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51. SFAS
160 clarifies that a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the
consolidated financial statements. Also, SFAS 160 requires consolidated net
income (loss) to include the amounts attributable to both the parent and the
noncontrolling interest, and it requires disclosure of the amounts of net income
(loss) attributable to the parent and to the noncontrolling interest. Finally,
SFAS 160 requires increases and decreases in the noncontrolling ownership
interest amount to be accounted for as equity transactions, and the gain or loss
on the deconsolidation of a subsidiary will be measured using the fair value of
any noncontrolling equity investment rather than the carrying amount of the
retained investment. We will change the classification and presentation of
noncontrolling interests in our financial statements, which is referred to as
minority interests in the accompanying consolidated financial statements, for
the quarter ending October 31, 2009. We do not expect the adoption of SFAS 160
to have a material impact on our financial position, results of operations or
cash flows.




In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations. SFAS
141(R) establishes principles and requirements for how the acquirer:
(a) recognizes and measures the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree,
(b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase, and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. SFAS
141(R) requires the acquiring entity in a business combination to recognize
the full fair value of the assets acquired and liabilities assumed in the
transaction at the acquisition date; in-process research and development will be
recorded at fair value as an indefinite-lived intangible asset at the
acquisition date; the immediate expense recognition of transaction costs;
changes in deferred tax asset valuation allowances and income tax uncertainties
after the acquisition date generally will affect income tax expense; and
restructuring plans will be accounted for separately from the business
combination, among other things. In April 2009, the FASB issued FSP 141(R)-1,
Accounting for Assets Acquired
and Liabilities Assumed in a Business Combination That Arise from
Contingencies, which amends and clarifies SFAS 141(R) with regards
to the initial recognition and measurement, subsequent measurement and
accounting, and disclosure of assets and liabilities arising from contingencies
in a business combination. We are required to apply SFAS 141(R) and FSP
141(R)-1 to business combinations with an acquisition date on or after
August 1, 2009. SFAS 141(R) fundamentally changed many aspects of
previous accounting requirements for business combinations. As such, if we enter
into any business combinations, a transaction may significantly impact our
financial position and results of operations, but not cash flows, when compared
to acquisitions accounted for under previous U.S. GAAP.





On August
1, 2009, we adopted FSP No. FAS 142-3, Determination of the Useful Life of
Intangible Assets. This FSP amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible
Assets. The guidance in FSP 142-3 for determining the useful life of a
recognized intangible asset shall be applied prospectively to intangible assets
acquired after adoption, and the disclosure requirements shall be applied
prospectively to all intangible assets recognized as of, and subsequent to,
adoption. The adoption of FSP 142-3 had no impact on our consolidated financial
statements.





In April
2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments, which amends SFAS 107, Disclosures about Fair Value of
Financial Instruments, to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This FSP also amends APB Opinion No.
28, Interim Financial
Reporting, to require those disclosures in summarized financial
information at interim reporting periods. The FSP also requires entities to
disclose the methods and significant assumptions used to estimate fair value of
financial instruments in interim financial statements, and to highlight any
changes in the methods and assumptions from prior periods. FSP 107-1 became
effective for our financial statements beginning on May 1, 2009. We will include
the disclosures required by FSP 107-1 in our consolidated financial statements
for the quarter ending October 31, 2009.





In May
2009, the FASB issued SFAS No. 165, Subsequent Events, to
establish principles and requirements for subsequent events, in particular: (a)
the period after the balance sheet date during which management of a reporting
entity shall evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, (b) the circumstances
under which an entity shall recognize events or transactions occurring after the
balance sheet date in its financial statements, and (c) the disclosures that an
entity shall make about events or transactions that occurred after the balance
sheet date. In accordance with SFAS 165, our management evaluated events or
transactions that occurred after July 31, 2009 through October 26, 2009for potential recognition or
disclosure in the financial statements.






-23-





Recently
Issued Accounting Standards Not Yet Adopted





In June
2009, the FASB issued SFAS No. 166, Accounting for Transfers of
Financial Assets-an amendment of FASB Statement No. 140.SFAS 166 amends
SFAS 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, by (a) eliminating the concept of a qualifying
special-purpose entity (“QSPE”), (b) clarifying and amending the derecognition
criteria for a transfer to be accounted for as a sale, (c) amending and
clarifying the unit of account eligible for sale accounting, and (d) requiring
that a transferor initially measure at fair value and recognize all assets
obtained and liabilities incurred as a result of a transfer of an entire
financial asset or group of financial assets accounted for as a sale.
Additionally, on and after the effective date, existing QSPEs must be evaluated
for consolidation by reporting entities in accordance with the applicable
consolidation guidance. SFAS 166 requires enhanced disclosures about, among
other things, (a) a transferor’s continuing involvement with transfers of
financial assets accounted for as sales, (b) the risks inherent in the
transferred financial assets that have been retained, and (c) the nature and
financial effect of restrictions on the transferor’s assets that continue to be
reported in the statement of financial position. We are required to adopt SFAS
166 on August 1, 2010. We are currently evaluating the impact of SFAS 166 on our
consolidated financial statements.





In June
2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation
No. 46(R). SFAS 167 amends FIN 46(R), Consolidation of Variable Interest
Entities, and changes the consolidation guidance applicable to a variable
interest entity (“VIE”). SFAS 167 also amends the guidance governing the
determination of whether an enterprise is the primary beneficiary of a VIE, and
is, therefore, required to consolidate an entity, by requiring a qualitative
analysis rather than a quantitative analysis. The qualitative analysis will
include, among other things, consideration of who has the power to direct the
activities of the entity that most significantly impact the entity’s economic
performance and who has the obligation to absorb losses or the right to receive
benefits of the VIE that could potentially be significant to the VIE. This
standard also requires continuous reassessments of whether an enterprise is the
primary beneficiary of a VIE. Previously, FIN 46(R) required reconsideration of
whether an enterprise was the primary beneficiary of a VIE only when specific
events had occurred. QSPEs, which were previously exempt from the application of
this standard, will be subject to the provisions of this standard when it
becomes effective. FAS No. 167 also requires enhanced disclosures about an
enterprise’s involvement with a VIE. We are required to adopt SFAS 167 on August
1, 2010. We do not expect the adoption of SFAS 166 to have an impact on our
consolidated financial statements as we do not currently have any
VIEs.





In June
2009, the FASB issued SFAS No. 168, The FASB Accounting Standards
CodificationTM and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162.SFAS 168 establishes the FASB Accounting Standards
CodificationTM (“Codification”) as the source of authoritative U.S. GAAP
for all non-governmental entities. Rules and interpretive releases of the SEC
under authority of federal securities laws are also sources of authoritative
U.S. GAAP for SEC registrants. The Codification organizes and simplifies U.S.
GAAP literature by reorganizing U.S. GAAP pronouncements into approximately 90
accounting topics within a consistent structure. The Codification is not
intended change or alter existing U.S. GAAP. SFAS 168 is effective for financial
statements issued for interim and annual periods ending after September 15,
2009. Therefore, all references to U.S. GAAP in our financial statements for the
quarter ending October 31, 2009 will follow the Codification. We do not expect
SFAS 168 to have any impact on our financial position, results of operations or
cash flows.





Item 7A. Quantative and Qualitative
Disclosures about Market Risks.


Smaller
reporting companies are not required to provide the information required by this
item.




Item 8.Financial Statements and
Supplementary Data.


The
Consolidated Financial Statements and supplementary data of the Company and the
report of the independent registered public accounting firm thereon are set
forth starting on page F-1 herein are incorporated herein by
reference.




Item 9.Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure.


None.





Item 9A(T). Controls and
Procedures.




Evaluation
of Disclosure Controls and Procedures


This
annual report does not include a report of management’s assessment regarding
internal control over financial reporting or an attestation report of the
Company’s registered public accounting firm due to a transition period
established by rules of the SEC for newly public companies.




Item 9B. Other
Information.


None.






-24-






Part
III




Item 10.
Directors,
Executive Officers and Corporate Governance.


The
following is a list of our executive officers and directors along with the
specific information required by Rule 14a-3 of the Securities Exchange Act of
1934:




Executive
Officers


Howard
      S. Jonas - Chairman of the Board


Marc
      E. Knoller - Chief Executive Officer and
  President


Leslie
      B. Rozner - Chief Financial Officer, Treasurer and Corporate
      Secretary





Management
Directors


Howard
      S. Jonas


Marc
      E. Knoller





Independent
Directors


Jan
Buchsbaum - Management Associate at New York Life Insurance
Company.
  Perry
Davis - Partner at Perry Davis Associates, Inc. (“PDA”), an international
consulting firm providing management and development assistance to non-profit
organizations. Mr. Davis is a founder of PDA and has been its President since
1986.
  Dr. Elion
Krok - Founder, President and Director of Natron, Inc. Natron, Inc. markets and
sells consumer household products, including Wipease®.


The
remaining information required by this Item will be contained in the Information
Statement, which will be filed with the SEC within 120 days after July 31,
2009, and which is incorporated by reference herein.




We make
available free of charge through the investor relations page of our website
(http://ir.ctmholdings.com)our annual reports on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all
amendments to those reports, and all beneficial ownership reports on Forms 3, 4
and 5 filed by directors, officers and beneficial owners of more than 10% of our
equity, as soon as reasonably practicable after such reports are electronically
filed with the SEC. We have adopted a code of business conduct and ethics for
all of our employees, including our principal executive officer, principal
financial officer. A copy of the code of business conduct and ethics is
available on our website.




Our
website and the information contained therein or incorporated therein are not
intended to be incorporated into this Annual Report on Form 10-K or our other
filings with the SEC.




Item 11. Executive
Compensation.


The
information required by this Item will be contained in the Information
Statement, which will be filed with the SEC within 120 days after July 31, 2009,
and which is incorporated by reference herein.




Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters.


The
information required by this Item will be contained in the Information
Statement, which will be filed with the SEC within 120 days after July 31, 2009,
and which is incorporated by reference herein.




Item 13.Certain Relationships and
Related Transactions, and Director Independence.


The
information required by this Item will be contained in the Information
Statement, which will be filed with the SEC within 120 days after July 31, 2009,
and which is incorporated by reference herein.




Item 14. Principal Accounting Fees and
Services.


The
information required by this Item will be contained in the Information
Statement, which will be filed with the SEC within 120 days after July 31, 2009,
and which is incorporated by reference herein.






-25-






Part
IV




Item 15.Exhibits, Financial Statements
Schedules.




(a)
            The
      following documents are filed as part of this
  Report:




1.
            Report
      of Independent Registered Public Accounting Firms on Consolidated
      Financial Statements




Consolidated
      Financial Statements covered by Report of Independent Registered Public
      Accounting Firm




2.
            Financial
      Statement Schedule.




All
      schedules have been omitted since they are either included in the Notes to
      Consolidated Financial Statements or not required or not
      applicable.




3.
            The
      exhibits listed in paragraph (b) of this
  item.




(b)
            Exhibits.




Exhibit
              Number
            Description
      of Exhibits2.1*
            Separation
      and Distribution Agreement, dated September 14, 2009.3.1*
            Second
      Restated Certificate of Incorporation of the
Registrant.3.2(1)
            By-laws
      of the Registrant.10.1(1)
            2009
      Stock Option and Incentive Plan of CTM Media Holdings,
    Inc.#10.2*
            Master
      Service Agreement, dated September 14, 2009.10.3*
            Tax
      Separation Agreement, dated September 14, 2009.14.1*
            Code
      of Business Ethics and Conduct, adopted on August 18,
  2009.21.1*
            Subsidiaries
      of the Registrant.23.1*
            Consent
      of Zwick & Steinberger P.L.L.C.31.1*
            Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2*
            Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1*
            Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.32.2*
            Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.





* Filed
herewith.




#
Management contract or compensatory plan or arrangement.




(1)
            Incorporated
      by reference to the Company’s Form 10-12G/A filed August 10,
      2009.






-26-






Signatures


Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant has duly caused this Annual Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized.




CTM
      MEDIA HOLDINGS, INC.By:
            /s/   Marc
      E. KnollerMarc
      E. Knoller
              Chief Executive Officer





Date:    October 29,
2009





Pursuant
to the requirements of the Securities Exchange Act of 1934, this Annual Report
on Form 10-K has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.




Signature
            Titles
            Date/s/  Howard
      S.
      Jonas
              Howard
      S. Jonas
            Chairman
      of the Board and Director
            October
      29, 2009/s/ Marc
      E.
      Knoller
              Marc
      E. Knoller
            Chief
      Executive Officer, President and Director
              (Principal
      Executive Officer)
            October
      29, 2009/s/  Leslie
      B.
      Rozner
              Leslie
      B. Rozner
            Chief
      Financial Officer, Treasurer and Corporate Secretary (Principal Financial
      Officer and Principal Accounting Officer)
            October
      29, 2009/s/  Jan
      Buchsbaum
              Jan
      Buchsbaum
            Director
            October
      29, 2009/s/  Perry
      Davis
              Perry
      Davis
            Director
            October
      29, 2009/s/  Elion
      Krok
              Dr.
      Elion Krok
            Director
            October
      29, 2009






-27-







INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS




Report
      of Independent Registered Public Accounting Firm on Consolidated Financial
      Statements
            F-2Consolidated
      Balance Sheets as of  July 31, 2009 and
2008
            F-3Consolidated
      Statements of Operations for the Years Ended July 31, 2009 and
      2008
            F-4Consolidated
      Statements of Stockholders’ Equity for the Years Ended July 31, 2009
      and 2008
            F-5Consolidated
      Statements of Cash Flows for the Years Ended July 31, 2009 and
      2008
            F-6Notes
      to Consolidated Financial Statements
            F-7






F-1







REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON


CONSOLIDATED
FINANCIAL STATEMENTS




The Board
of Directors and Stockholders of CTM Media Holdings, Inc,




We have
audited the accompanying consolidated balance sheets of CTM Media Holdings, Inc.
as of July 31, 2009 and 2008, and the related consolidated statements of
operations, stockholders’ equity, and cash flows for each of the two years in
the period ended July 31, 2009. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.




We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.




In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of CTM Media Holdings,
Inc. at July 31, 2009 and 2008, and the consolidated results of their
operations and their cash flows for each of the two years in the period ended
July 31, 2009, in conformity with generally accepted accounting principles
in the United States of America.




/s/  Zwick
      & Steinberger,
      P.L.L.C.





Zwick
& Steinberger, P.L.L.C.


Southfield,
Michigan





October
26, 2009






F-2







CTM
MEDIA HOLDINGS, INC.


CONSOLIDATED
BALANCE SHEETS




July 31
              (in thousands)
            
            2009
            
            
            2008ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
            
            $
            6,480
            
            
            $
            5,590Short
      term investment
            
            
            1,024
            
            
            
            —Trade
      accounts receivable, net
            
            
            3,908
            
            
            
            4,563Inventory
            
            
            1,405
            
            
            
            806Prepaid
      expenses
            
            
            983
            
            
            
            805TOTAL
      CURRENT ASSETS
            
            
            13,800
            
            
            
            11,764Property
      and equipment, net
            
            
            4,243
            
            
            
            4,594Goodwill
            
            
            —
            
            
            
            32,643Licenses
      and other intangibles, net
            
            
            587
            
            
            
            825Other
      assets
            
            
            159
            
            
            
            184TOTAL
      ASSETS
            
            $
            18,789
            
            
            $
            50,010LIABILITIES
      AND STOCKHOLDERS’ EQUITYCURRENT
      LIABILITIES:Trade
      accounts payable
            
            $
            1,024
            
            
            $
            1,374Accrued
      expenses
            
            
            2,050
            
            
            
            1,530Deferred
      revenue
            
            
            1,731
            
            
            
            2,118Due
      to IDT Corporation
            
            
            24,921
            
            
            
            22,924Capital
      lease obligations—current portion
            
            
            222
            
            
            
            156Other
      current liabilities
            
            
            563
            
            
            
            646TOTAL
      CURRENT LIABILITIES
            
            
            30,511
            
            
            
            28,748Capital
      lease obligations—long-term portion
            
            
            529
            
            
            
            476TOTAL
      LIABILITIES
            
            
            31,040
            
            
            
            29,224Minority
      interests
            
            
            1,967
            
            
            
            1,077Commitments
      and contingencies
            
            
            
            
            
            
            —STOCKHOLDERS’
      EQUITY:Preferred
      stock, $.01 par value; authorized shares—10,000; no shares
      issued
            
            
            —
            
            
            
            —Class
      A common stock, $.01 par value; authorized shares—35,000; no shares
      issued
            
            
            —
            
            
            
            —Class
      B common stock, $.01 par value; authorized shares—65,000; no shares
      issued
            
            
            —
            
            
            
            —Class
      C common stock, $.01 par value; authorized shares—15,000; no shares
      issued
            
            
            —
            
            
            
            —Additional
      paid-in capital
            
            
            33,141
            
            
            
            33,144Accumulated
      other comprehensive income
            
            
            124
            
            
            
            188Accumulated
      deficit
            
            
            (47,483
            )
            
            
            (13,623
            )TOTAL
      STOCKHOLDERS’ EQUITY
            
            
            (14,218
            )
            
            
            19,709TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
            
            $
            18,789
            
            
            $
            50,010





See
accompanying notes to consolidated financial statements.




F-3






CTM
MEDIA HOLDINGS, INC.


CONSOLIDATED
STATEMENTS OF OPERATIONS




Year
      ended July 31
              (in
      thousands)
            
            2009
            
            
            2008REVENUES
            
            $
            33,683
            
            
            $
            32,626COSTS
      AND EXPENSES:Direct
      cost of revenues (exclusive of depreciation and
    amortization)
            
            
            14,640
            
            
            
            12,566Selling,
      general and administrative
            
            
            15,707
            
            
            
            18,277Depreciation
      and amortization
            
            
            1,438
            
            
            
            2,078Bad
      debt
            
            
            1,003
            
            
            
            472Impairment
      and severance charges
            
            
            33,335
            
            
            
            3,683TOTAL
      COSTS AND EXPENSES
            
            
            66,123
            
            
            
            37,076Loss
      from operations
            
            
            (32,440
            )
            
            
            (4,450
            )Interest
      (expense) income, net
            
            
            (53
            )
            
            
            57Other
      income (expense), net
            
            
            8
            
            
            
            (99
            )Loss
      before minority interests and income taxes
            
            
            (32,485
            )
            
            
            (4,492
            )Minority
      interests
            
            
            (1,230
            )
            
            
            (378
            )Provision
      for income taxes
            
            
            (145
            )
            
            
            (457
            )NET
      LOSS
            
            $
            (33,860
            )
            
            $
            (5,327
            )





See
accompanying notes to consolidated financial statements.




F-4




CTM
MEDIA HOLDINGS, INC.




CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’EQUITY




(in
thousands)




Additional
                paid-in
                capital
              
              
              Accumulated
                Other
                Comprehensive
                Income
      (Loss)
              
              
              Accumulated
      deficit
              
              
              Total
                Stockholders’
      EquityBALANCE
      AT JULY 31, 2007
              
              $
              33,077
              
              
              $
              99
              
              
              $
              (8,296
              )
              
              $
              24,880Stock
      based compensation
              
              
              67
              
              
              
              —
              
              
              
              —
              
              
              
              67Foreign
      currency translation adjustment
              
              
              —
              
              
              
              89
              
              
              
              —
              
              
              
              89Net
      loss for the year ended July 31, 2008
              
              
              —
              
              
              
              (5,327
              )
              
              
              (5,327
              )
              
              
              (5,327
              )Comprehensive
      loss
              
              
              
              
              
              $
              (5,238
              )BALANCE
      AT JULY 31, 2008
              
              
              33,144
              
              
              
              188
              
              
              
              (13,623
              )
              
              
              19,709Stock
      based compensation
              
              
              (3
              )
              
              
              —
              
              
              
              —
              
              
              
              (3
              )Foreign
      currency translation adjustment
              
              
              —
              
              
              
              (64
              )
              
              
              —
              
              
              
              (64
              )Net
      loss for the year ended July 31, 2009
              
              
              —
              
              
              
              (33,860
              )
              
              
              (33,860
              )
              
              
              (33,860
              )Comprehensive
      loss
              
              
              
              
              
              $
              (33,924
              )BALANCE
      AT JULY 31, 2009
              
              $
              33,141
              
              
              $
              124
              
              
              $
              (47,483
              )
              
              $
              (14,218
              )




See
accompanying notes to consolidated financial statements.




F-5




CTM
MEDIA HOLDINGS, INC.




CONSOLIDATED
STATEMENTS OF CASH FLOWS




Year
      ended July 31
              (in
      thousands)
            
            2009
            
            
            2008OPERATING
      ACTIVITIESNet
      loss
            
            $
            (33,860
            )
            
            $
            (5,327
            )Adjustments
      to reconcile net loss to net cash provided by (used in) operating
      activities:Depreciation
      and amortization
            
            
            1,438
            
            
            
            2,078Impairment
            
            
            32,617
            
            
            
            3,480Minority
      interests
            
            
            1,230
            
            
            
            378Provision
      for doubtful accounts receivable
            
            
            1,003
            
            
            
            472Stock-based
      compensation
            
            
            (3
            )
            
            
            67Change
      in assets and liabilities:Trade
      accounts receivable
            
            
            (345
            )
            
            
            (1,900
            )Inventory,
      prepaid and other assets
            
            
            (732
            )
            
            
            (845
            )Trade
      accounts payable, accrued expenses, and other current
      liabilities
            
            
            162
            
            
            
            1,622Deferred
      revenue
            
            
            (387
            )
            
            
            (207
            )Net
      cash provided by (used in) operating activities
            
            
            1,123
            
            
            
            (182
            )INVESTING
      ACTIVITIESCapital
      expenditures
            
            
            (689
            )
            
            
            (907
            )Purchases
      of short term investment
            
            
            (1,018
            )
            
            
            —Purchase
      of businesses by CTM
            
            
            —
            
            
            
            (158
            )Net
      cash used in investing activities
            
            
            (1,707
            )
            
            
            (1,065
            )FINANCING
      ACTIVITIESDistributions
      to minority shareholders of subsidiaries
            
            
            (340
            )
            
            
            (520
            )Funding
      provided by IDT Corporation, net
            
            
            1,997
            
            
            
            1,777Repayments
      of capital lease obligations
            
            
            (183
            )
            
            
            (117
            )Net
      cash provided by financing activities
            
            
            1,474
            
            
            
            1,140Net
      increase (decrease) in cash and cash equivalents
            
            
            890
            
            
            
            (107
            )Cash
      and cash equivalents at beginning of year
            
            
            5,590
            
            
            
            5,697Cash
      and cash equivalents at end of year
            
            $
            6,480
            
            
            $
            5,590SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONCash
      payments made for interest
            
            $
            48
            
            
            $
            25Cash
      payments made for income taxes
            
            $
            124
            
            
            $
            65SUPPLEMENTAL
      SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIESPurchases
      of property and equipment through capital lease
obligations
            
            $
            299
            
            
            $
            398





The
effect of exchange rate changes on cash and cash equivalents is not
material.




See
accompanying notes to consolidated financial statements.




F-6




CTM
MEDIA HOLDINGS, INC.




NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS




Note
1—Description of Business and Summary of Significant Accounting
Policies




Description
of Business


CTM Media
Holdings, Inc. (“Holdings” or the “Company”) is a holding company consisting of
the following principal businesses:




•
            CTM
      Media Group (“CTM”), the Company’s brochure distribution company and other
      advertising-based product initiatives focused on small to medium sized
      businesses;




•
            The
      Company’s majority interest in Idea and Design Works, LLC (“IDW”), which
      is a comic book and graphic novel publisher that creates and licenses
      intellectual property; and




•
            The
      WMET-AM radio station in the Washington, D.C. metropolitan area
      (“WMET”).




Holdings
was formerly a subsidiary of IDT Corporation. On September 14, 2009, Holdings
was spun-off by IDT and became an independent public company. IDT transferred
its ownership in all of the entities that became Holdings’ consolidated
subsidiaries to Holdings prior to the spin-off. The entities that become direct
or indirect subsidiaries of the Holdings are: CTM; Beltway Acquisition
Corporation; IDT Local Media, Inc. (which conducted certain operations related
to CTM that are no longer active) and IDT Internet Mobile Group, Inc. (“IIMG”).
IIMG owns approximately 53% of the equity interests in IDW. All indebtedness
owed by any of these entities to IDT Corporation or its affiliates was converted
into a capital contribution.





Holdings’
authorized capital stock consists of (a) 35 million shares of Class A
common stock, (b) 65 million shares of Class B common stock, (c) 15 million
shares of Class C common stock, and (d) 10 million shares of Preferred
Stock. IDT Corporation completed the spin-off through a pro rata distribution of
Holdings common stock to IDT Corporation’s stockholders of record as of the
close of business on August 3, 2009 (the “record date”). As a result of the
spin-off, each of IDT Corporation’s stockholders received: (i) one share of
Holdings’ Class A common stock for every three shares of IDT Corporation’s
common stock held on the record date; (ii) one share of Holdings’ Class B common
stock for every three shares of IDT Corporation’s Class B common stock held on
the record date; (iii) one share of Holdings’ Class C common stock for every
three shares of the IDT Corporation’s Class A common stock held on the record
date; and (iv) cash from IDT Corporation in lieu of a fractional share of all
classes of Holdings’ common stock. Upon completion of the spin-off, Holding’s
had 1.3 million shares of Class A common stock, 5.1 million shares of Class B
common stock and 1.1 million shares of Class C common stock
outstanding.





Prior to
the spin-off, IDT Corporation provided certain services to the entities that
became Holdings’ consolidated subsidiaries. Holdings and IDT Corporation entered
into the Master Services Agreement, dated September 14, 2009, pursuant to which
IDT Corporation will continue to provide, among other things, certain
administrative and other services. In addition, pursuant to the Master Services
Agreement, IDT Corporation will provide certain additional services to Holdings,
on an interim basis, as a separate publicly-traded company. Such services
include assistance with periodic reports required to be filed with the SEC as
well as maintaining minutes, books and records of meetings of the Board of
Directors, Audit Committee and Compensation Committee, as well as assistance
with corporate governance. The cost of these additional services are not
included in Holdings’ historical results of operations, as they were not
applicable for periods that Holdings was not a separate public
company.





Basis
of Accounting and Consolidation


Holdings
was incorporated in May 2009 in the state of Delaware. The consolidated
financial statements include the assets, liabilities, results of operations and
cash flows of the entities included in Holdings that were spun-off, and are
reflected as if Holdings existed and owned these entities in all periods
presented, or from the date an entity was acquired, if later. All material
intercompany balances and transactions have been eliminated in consolidation.
The historical cost basis of assets and liabilities has been reflected in these
financial statements. Historically, the businesses included in Holdings operated
independently on a stand-alone basis. Direct expenses incurred by IDT
Corporation on behalf of the businesses included in the consolidated financial
statement are reflected in these financial statements. The most significant
expenses are as follows: Medical and dental benefits were allocated to the
Company based on rates similar to COBRA health benefit provision rates charged
to former IDT Corporation employees. Stock-based compensation and retirement
benefits under the defined contribution plan were allocated to the Company based
on specific identification. Insurance was allocated to the Company based on a
combination of headcount and specific policy identification. Facility costs as
well as payroll of certain IDT Corporation departments or functions consisting
of payroll, human resources, network and telephone services, legal, security and
travel were allocated to the Company based on estimates of the incremental cost
incurred by IDT Corporation related to Holdings. Management believes that the
assumptions and methods of allocation used underlying the consolidated financial
statements are reasonable. However, the costs as allocated to the Company are
not necessarily indicative of the costs that would have been incurred if the
Company operated as a stand-alone entity. Therefore, the consolidated financial
statements may not necessarily be indicative of the financial position, results
of operations, changes in stockholders’ equity and cash flows of the Company to
be expected in the future or what they would have been had the Company been a
separate stand-alone entity during the periods presented.






F-7




Use
of Estimates


The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America (“U.S. GAAP”) requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results may differ from
those estimates.




Revenue
Recognition


Revenues
from CTM brochure distribution services are recognized on a straight-line basis
over the services arrangement, which is typically between six months and one
year. Brochure distribution services include distribution of marketing materials
to display stations and straightening and refilling of the stations. Revenues
from CTM printing services are recognized based on delivery of the print job by
subcontractors to CTM’s warehouse. Revenues from CTM publication guides are
recognized based on the publication release date of guides, which is the same
date as distribution. IDW's primary revenue is recognized, net of an
allowance for estimated sales returns, at the time of shipment of its graphic
novels and comic books by IDW's distributor to its customers, and when all of
the conditions specified by Statement of Financial Accounting Standards (“SFAS”)
No. 48, Revenue Recognition
When Right of Return Exists,are met. Sales returns allowances represent
a reserve for products that may be returned due to dating, competition or other
marketing matters, or certain destruction in the field. Sales returns are
generally estimated and recorded based on historical sales and returns
experience and current trends that are expected to continue. Licensing revenues
are recognized upon execution of the agreement for such rights, and other
creative revenues are recognized upon completion of services rendered on a
contractual basis. WMET recognizes revenue through rental of airtime slots as
well as the sale of advertising, upon the airing of the programming or
advertising.




Direct
Cost of Revenues


Direct
cost of revenues excludes depreciation and amortization expense. Direct cost of
revenues for CTM consist primarily of distribution and fulfillment payroll,
warehouse and vehicle distribution expenses, and print and design expenses.
Direct cost of revenues for IDW consists primarily of printing expenses and
costs of artist and writers.




Cash
and Cash Equivalents


The
Company considers all highly liquid investments with an original maturity of
three months or less when purchased to be cash equivalents.




Inventory


Inventory
consists of IDW’s graphic novels and comic books. Inventory is stated at the
lower of cost or market determined by the first in, first out
method.




Property
and Equipment


Radio
tower, equipment, vehicles and computer software are recorded at cost and are
depreciated on a straight-line basis over their estimated useful lives, which
range as follows: radio tower—20 years; equipment—5, 7 or 20 years; vehicles—5
years and computer software—2, 3 or 5 years. Leasehold improvements are recorded
at cost and are depreciated on a straight-line basis over the term of the lease
or their estimated useful lives, whichever is shorter.




Long-Lived
Assets


In
accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, the Company tests the recoverability of
its long-lived assets with finite useful lives whenever events or changes in
circumstances indicate that the carrying value of the asset may not be
recoverable. The Company tests for impairment based on the projected
undiscounted cash flows to be derived from such asset. If the projected
undiscounted future cash flows are less than the carrying value of the asset,
the Company will record an impairment loss based on the difference between the
estimated fair value and the carrying value of the asset. The Company generally
measures fair value by considering sale prices for similar assets or by
discounting estimated future cash flows from such asset using an appropriate
discount rate. Cash flow projections and fair value estimates require
significant estimates and assumptions by management. Should the estimates and
assumptions prove to be incorrect, the Company may be required to record
impairments in future periods and such impairments could be
material.




Goodwill
and Other Intangibles


Goodwill
is the excess of the acquisition cost of businesses over the fair value of the
identifiable net assets acquired. In accordance with SFAS No. 142, Goodwill and Other Intangible
Assets, goodwill and other indefinite lived intangible assets are not
amortized. These assets are reviewed annually (or more frequently under various
conditions) for impairment using a fair value approach. The goodwill impairment
assessment involves estimating the fair value of the reporting unit and
comparing it to its carrying amount. If the carrying value of the reporting unit
exceeds its estimated fair value, additional steps are followed to determine if
an impairment of goodwill is required. The fair value of the reporting units is
estimated using discounted cash flow methodologies, as well as considering third
party market value indicators. Goodwill impairment is measured by the excess of
the carrying amount of the reporting unit’s goodwill over its implied fair
value. Calculating the fair value of the reporting units, and allocating the
estimated fair value to all of the tangible assets, intangible assets and
liabilities, requires significant estimates and assumptions by
management.






F-8




Costs
associated with obtaining the right to use licenses owned by third parties are
capitalized and amortized on a straight-line basis over the approximately 4-year
term of the licenses. Customer lists are amortized on a straight-line basis over
the 5-year period of expected cash flows.




Advertising
Expense


The
majority of the Company’s advertising expense is incurred by CTM. In fiscal 2009
and fiscal 2008, advertising expense included in selling, general and
administrative expense was $0.2 million and $0.1 million,
respectively.




Repairs
and Maintenance


The
Company charges the cost of repairs and maintenance, including the cost of
replacing minor items not constituting substantial betterment, to selling,
general and administrative expenses as these costs are incurred.




Foreign
Currency Translation


Assets
and liabilities of foreign subsidiaries denominated in foreign currencies are
translated to U.S. Dollars at end-of-period rates of exchange, and their monthly
results of operations are translated to U.S. Dollars at the average rates of
exchange for that month. Gains or losses resulting from such foreign currency
translations are recorded in “Accumulated other comprehensive income” in the
accompanying consolidated balance sheets.




Income
Taxes


These
financial statements include provisions for federal, state and foreign income
taxes on a separate tax return basis. The Company recognizes deferred tax assets
and liabilities for the future tax consequences attributable to temporary
differences between the financial statements carrying amounts of existing assets
and liabilities and their respective tax bases. A valuation allowance is
provided when it is more likely than not that some portion or all of a deferred
tax asset will not be realized. The ultimate realization of deferred tax assets
depends on the generation of future taxable income during the period in which
related temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in its assessment of a valuation allowance. Deferred
tax assets and liabilities are measured using the enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date of such change.




Effective
August 1, 2007, the Company adopted Financial Accounting Standards Board
(“FASB”) Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income
Taxes—an interpretation of FASB Statement No. 109. FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an
entity’s financial statements in accordance with SFAS 109 and prescribes
that a company should use a more-likely-than-not recognition threshold based on
the technical merits of the tax position taken or expected to be taken. Tax
positions that meet the more-likely-than-not recognition threshold should be
measured in order to determine the tax benefit to be recognized in the financial
statements. Additionally, FIN 48 provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition.




Commitments
and Contingencies


The
Company records and discloses commitments and contingencies in accordance with
SFAS No. 5, Accounting
for Contingencies, and related Interpretations. The Company accrues for
loss contingencies when both (a) information available prior to issuance of
the financial statements indicates that it is probable that a liability had been
incurred at the date of the financial statements and (b) the amount of loss
can reasonably be estimated. When the Company accrues for loss contingencies and
the reasonable estimate of the loss is within a range, the Company records its
best estimate within the range. When no amount within the range is a better
estimate than any other amount, the Company accrues the minimum amount in the
range. In accordance with SFAS 5, an estimated possible loss or a range of
loss is disclosed when it is at least reasonably possible that a loss may have
been incurred.




Stock-Based
Compensation


The
Company accounted for stock-based compensation granted to its employees by IDT
Corporation in accordance with the fair value recognition provisions of
SFAS No. 123 (revised 2004), Share-Based Payment. Under
SFAS 123(R), compensation cost recognized based on the grant-date fair
value. In accordance with Staff Accounting Bulletin (“SAB”) No. 107,
stock-based compensation is included in selling, general and administrative
expense.




Vulnerability
Due to Certain Concentrations


Financial
instruments that potentially subject the Company to concentration of credit risk
consist principally of cash, cash equivalents, short term investment and trade
accounts receivable. The Company holds cash and cash equivalents at several
major financial institutions, which often exceed FDIC insured limits.
Historically, the Company has not experienced any losses due to such
concentration of credit risk. The Company’s temporary cash investments policy is
to limit the dollar amount of investments with any one financial institution and
monitor the credit ratings of its counterparties. While the Company may be
exposed to credit losses due to the nonperformance of its counterparties, the
Company does not expect the settlement of these transactions to have a material
effect on its results of operations, cash flows or financial
condition.






F-9




IDW has
one single customer, Diamond Comic Distributors, Inc., which is the major
distributor of comic books in the United States. Revenues from this customer
represented approximately 33.4% and 24.8% of the total consolidated revenues for
the years ended July 31, 2009 and 2008, respectively. No other single customer
accounted for more than 10% of consolidated revenues in fiscal 2009 or fiscal
2008. The receivable balances from this customer represented approximately 30.3%
and 20.8% of the total consolidated trade accounts receivable at July 31,
2009 and 2008, respectively. This concentration of customers increases the
Company’s risk associated with nonpayment by those customers. For CTM,
concentration of credit risk with respect to trade accounts receivable is
limited due to the large number of customers in various geographic regions
comprising the Company’s customer base.




Sales
Returns and Allowances


IDW
offers its sole distributor, Diamond Comic Distributors, a right of return with
no expiration date. Diamond Comic Distributors then offers this same right of
return to its largest chain retailers. IDW records an estimate for sales return
reserves from such retailers based on historical sales and return experience and
current trends that are expected to continue.




The
change in the allowance for sales returns is as follows:




Year
      ended July 31
              (in
      thousands)
            
            Balance
      at
              beginning of
              year
            
            
            Balance
      at acquisition
            
            
            Additions
              charged to
              revenues
            
            
            Actual
      returns
            
            
            Balance at
              end of year2009Reserves
      deducted from accounts receivable:Allowance
      for sales returns
            
            $
            149
            
            
            $
            —
            
            
            $
            2,597
            
            
            $
            (2,372
            )
            
            $
            3742008Reserves
      deducted from accounts receivable:Allowance
      for sales returns
            
            $
            523
            
            
            $
            —
            
            
            $
            1,156
            
            
            $
            (1,530
            )
            
            $
            149





Allowance
for Doubtful Accounts


The
allowance for doubtful accounts reflects the Company’s best estimate of probable
losses inherent in the accounts receivable balance. The allowance is determined
based on known troubled accounts, historical experience and other currently
available evidence.




The
change in the allowance for doubtful accounts is as follows:




Year
      ended July 31
              (in
      thousands)
            
            Balance
      at
              beginning of
              year
            
            
            Additions
              charged to
              costs
      and
              expenses
            
            
            Deductions(1)
            
            
            Balance at
              end of year2009Reserves
      deducted from accounts receivable:Allowance
      for doubtful accounts
            
            $
            137
            
            
            $
            1,003
            
            
            $
            (467
            )
            
            $
            6732008Reserves
      deducted from accounts receivable:Allowance
      for doubtful accounts
            
            $
            218
            
            
            $
            472
            
            
            $
            (553
            )
            
            $
            137





(1)
Uncollectible accounts written off, net of recoveries.




Fair
Value of Financial Instruments


The
estimated fair value of financial instruments has been determined using
available market information or other appropriate valuation methodologies.
However, considerable judgment is required in interpreting this data to develop
estimates of fair value. Consequently, the estimates are not necessarily
indicative of the amounts that could be realized or would be paid in a current
market exchange. At July 31, 2009 and 2008, the carrying value of the
Company’s trade accounts receivable, inventory, prepaid expenses, trade accounts
payable, accrued expenses, deferred revenue, due to IDT Corporation, capital
lease obligations-current portion, and other current liabilities approximate
fair value because of the short period of time to maturity. At July 31,
2009 and 2008, the carrying value of the long term portion of the Company’s
capital lease obligations approximate fair value as their contractual interest
rates approximate market yields for similar debt instruments.




Fair
Value Measurements


In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS
157 defines fair value, establishes a framework for measuring fair value in U.S.
GAAP, establishes a hierarchy that categorizes and prioritizes the sources to be
used to estimate fair value, and expands disclosures about fair value
measurements. SFAS 157 defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. To increase consistency and
comparability in fair value measurements and related disclosures, the SFAS 157
fair value hierarchy prioritizes the inputs to valuation techniques used to
measure fair value into the following three broad levels:






F-10






Level 1
            –
            quoted
      prices (unadjusted) in active markets for identical assets or
      liabilities.




Level 2
            –
            quoted
      prices for similar assets and liabilities in active markets or inputs that
      are observable for the asset or liability, either directly or indirectly
      through market corroboration, for substantially the full term of the
      financial instrument.




Level 3
            –
            unobservable
      inputs based on the Company’s assumptions used to measure assets and
      liabilities at fair value.




A financial
asset or liability’s classification within the hierarchy is determined based on
the lowest level input that is significant to the fair value measurement. The
assessment of the significance of a particular input to the fair value
measurement requires judgment, and may affect the valuation of the assets and
liabilities being measured and their placement within the fair value
hierarchy.




In
February 2008, the FASB issued Staff Position (“FSP”) No. FAS 157-2, Effective Date of FASB Statement
No. 157, which postponed the effective date of SFAS 157 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (that is, at least annually). Nonrecurring nonfinancial assets and
nonfinancial liabilities include those measured at fair value in goodwill
impairment testing, indefinite lived intangible assets measured at fair value
for impairment testing, those initially measured at fair value in a business
combination, and nonfinancial liabilities initially measured at fair value for
exit or disposal activities. The Company adopted SFAS 157 except as permitted
under FSP 157-2 as of August 1, 2008, which did not have a material impact
on its financial position, results of operations or cash flows. The Company
adopted SFAS 157 for nonrecurring nonfinancial assets and nonfinancial
liabilities on August 1, 2009, which did not have a material impact on its
financial position, results of operations or cash flows. The Company will apply
the provisions of SFAS 157 to nonrecurring nonfinancial assets and nonfinancial
liabilities at such time as a fair value measurement is required, which may
result in a fair value that is materially different than would have been
measured prior to the adoption of SFAS 157.





On
October 10, 2008, the FASB issued FSP No. FAS 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active, which
clarifies application of SFAS 157 in a market that is not active. FSP 157-3 was
effective upon issuance, including prior periods for which financial statements
have not been issued. On April 9, 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly, which
superseded FSP 157-3. FSP 157-4 provides additional guidance on (a) how to
determine when markets become inactive and thus potentially require significant
adjustment to transactions or quoted prices and (b) how to determine if a
transaction or group of transactions is forced or distressed (that is, not
orderly), and amends the disclosure provisions of SFAS 157. The Company was
required to apply FSP 157-4 beginning on May 1, 2009. FSP 157-4 did not have a
material impact on the Company’s financial position, results of operations or
cash flows.





Effective
August 1, 2008, the Company adopted SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities—Including an Amendment of SFAS 115. SFAS
159 permits companies to choose to measure selected financial assets and
liabilities at fair value. SFAS 159 also establishes presentation and disclosure
requirements designed to facilitate comparisons between companies that choose
different measurement attributes for similar types of assets and liabilities.
The Company chose not to elect the fair value option for the valuation of any of
its eligible assets or liabilities, therefore the adoption of SFAS 159 had no
impact on the Company’s financial position, results of operations or cash
flows.




Other
Recently Adopted Accounting Standards


On August
1, 2009, the Company adopted SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of ARB No. 51. SFAS
160 clarifies that a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the
consolidated financial statements. Also, SFAS 160 requires consolidated net
income (loss) to include the amounts attributable to both the parent and the
noncontrolling interest, and it requires disclosure of the amounts of net income
(loss) attributable to the parent and to the noncontrolling interest. Finally,
SFAS 160 requires increases and decreases in the noncontrolling ownership
interest amount to be accounted for as equity transactions, and the gain or loss
on the deconsolidation of a subsidiary will be measured using the fair value of
any noncontrolling equity investment rather than the carrying amount of the
retained investment. The Company will change the classification and presentation
of noncontrolling interests in its financial statements, which is referred to as
minority interests in the accompanying consolidated financial statements, for
the quarter ending October 31, 2009. The Company does not expect SFAS 160 to
have a material impact on its financial position, results of operations or cash
flows.






F-11




In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), Business Combinations. SFAS
141(R) establishes principles and requirements for how the acquirer:
(a) recognizes and measures the identifiable assets acquired, the
liabilities assumed, and any noncontrolling interest in the acquiree,
(b) recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase, and (c) determines what
information to disclose to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. SFAS
141(R) requires the acquiring entity in a business combination to recognize
the full fair value of the assets acquired and liabilities assumed in the
transaction at the acquisition date; in-process research and development will be
recorded at fair value as an indefinite-lived intangible asset at the
acquisition date; the immediate expense recognition of transaction costs;
changes in deferred tax asset valuation allowances and income tax uncertainties
after the acquisition date generally will affect income tax expense; and
restructuring plans will be accounted for separately from the business
combination, among other things. In April 2009, the FASB issued FSP No. FAS
141(R)-1, Accounting for
Assets Acquired and Liabilities Assumed in a Business Combination That Arise
from Contingencies, which amends and clarifies SFAS 141(R) with
regards to the initial recognition and measurement, subsequent measurement and
accounting, and disclosure of assets and liabilities arising from contingencies
in a business combination. The Company is required to apply SFAS 141(R) and
FSP 141(R)-1 to business combinations with an acquisition date on or after
August 1, 2009. SFAS 141(R) fundamentally changed many aspects of
previous accounting requirements for business combinations. As such, if the
Company enters into any business combinations, a transaction may significantly
impact the Company’s financial position and results of operations, but not cash
flows, when compared to acquisitions accounted for under previous U.S.
GAAP.




In June
2009, the SEC issued SAB No. 112 to amend or rescind portions of the
interpretive guidance included in the Staff Accounting Bulletin Series in order
to make the relevant interpretive guidance consistent with current authoritative
accounting and auditing guidance and SEC rules and regulations. Specifically,
the staff updated the Series in order to bring existing guidance into conformity
with SFAS 141(R) and SFAS 160. SAB 112 was effective in June 2009. The adoption
of SAB 112 did not have a material impact on the Company’s financial position,
results of operations or cash flows.





On August
1, 2009, the Company adopted FSP No. FAS 142-3, Determination of the Useful Life of
Intangible Assets. This FSP amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible
Assets. The guidance in FSP 142-3 for determining the useful life of a
recognized intangible asset shall be applied prospectively to intangible assets
acquired after adoption, and the disclosure requirements shall be applied
prospectively to all intangible assets recognized as of, and subsequent to,
adoption. The adoption of FSP 142-3 had no impact on the Company’s consolidated
financial statements.




In April
2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments, which amends SFAS 107, Disclosures about Fair Value of
Financial Instruments, to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies
as well as in annual financial statements. This FSP also amends APB Opinion No.
28, Interim Financial
Reporting, to require those disclosures in summarized financial
information at interim reporting periods. The FSP also requires entities to
disclose the methods and significant assumptions used to estimate fair value of
financial instruments in interim financial statements, and to highlight any
changes in the methods and assumptions from prior periods. FSP 107-1 became
effective for the Company’s financial statements beginning on May 1, 2009. The
Company will include the disclosures required by FSP 107-1 in its consolidated
financial statements for the quarter ending October 31, 2009.




In May
2009, the FASB issued SFAS No. 165, Subsequent Events, to
establish principles and requirements for subsequent events, in particular: (a)
the period after the balance sheet date during which management of a reporting
entity shall evaluate events or transactions that may occur for potential
recognition or disclosure in the financial statements, (b) the circumstances
under which an entity shall recognize events or transactions occurring after the
balance sheet date in its financial statements, and (c) the disclosures that an
entity shall make about events or transactions that occurred after the balance
sheet date. In accordance with SFAS 165, the Company’s management evaluated
events or transactions that occurred after July 31, 2009 through October 20,
2009 for potential recognition or disclosure in the financial
statements.




Recently
Issued Accounting Standards Not Yet Adopted


In June
2009, the FASB issued SFAS No. 166, Accounting for Transfers of
Financial Assets-an amendment of FASB Statement No. 140.SFAS 166 amends
SFAS 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities, by (a) eliminating the concept of a qualifying
special-purpose entity (“QSPE”), (b) clarifying and amending the derecognition
criteria for a transfer to be accounted for as a sale, (c) amending and
clarifying the unit of account eligible for sale accounting, and (d) requiring
that a transferor initially measure at fair value and recognize all assets
obtained and liabilities incurred as a result of a transfer of an entire
financial asset or group of financial assets accounted for as a sale.
Additionally, on and after the effective date, existing QSPEs must be evaluated
for consolidation by reporting entities in accordance with the applicable
consolidation guidance. SFAS 166 requires enhanced disclosures about, among
other things, (a) a transferor’s continuing involvement with transfers of
financial assets accounted for as sales, (b) the risks inherent in the
transferred financial assets that have been retained, and (c) the nature and
financial effect of restrictions on the transferor’s assets that continue to be
reported in the statement of financial position. The Company is required to
adopt SFAS 166 on August 1, 2010. The Company is currently evaluating the impact
of SFAS 166 on its consolidated financial statements.






F-12





In June
2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation
No. 46(R). SFAS 167 amends FIN 46(R), Consolidation of Variable Interest
Entities, and changes the consolidation guidance applicable to a variable
interest entity (“VIE”). SFAS 167 also amends the guidance governing the
determination of whether an enterprise is the primary beneficiary of a VIE, and
is, therefore, required to consolidate an entity, by requiring a qualitative
analysis rather than a quantitative analysis. The qualitative analysis will
include, among other things, consideration of who has the power to direct the
activities of the entity that most significantly impact the entity’s economic
performance and who has the obligation to absorb losses or the right to receive
benefits of the VIE that could potentially be significant to the VIE. This
standard also requires continuous reassessments of whether an enterprise is the
primary beneficiary of a VIE. Previously, FIN 46(R) required reconsideration of
whether an enterprise was the primary beneficiary of a VIE only when specific
events had occurred. QSPEs, which were previously exempt from the application of
this standard, will be subject to the provisions of this standard when it
becomes effective. FAS No. 167 also requires enhanced disclosures about an
enterprise’s involvement with a VIE. The Company is required to adopt SFAS 167
on August 1, 2010. The Company does not expect the adoption of SFAS 166 to have
an impact on its consolidated financial statements as the Company does not
currently have any VIEs.





In June
2009, the FASB issued SFAS No. 168, The FASB Accounting Standards CodificationTM
and the Hierarchy of Generally Accepted Accounting Principles, a replacement of
FASB Statement No. 162. SFAS 168 establishes the FASB Accounting Standards
CodificationTM (“Codification”) as the source of authoritative U.S. GAAP for all
non-governmental entities. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative U.S. GAAP
for SEC registrants. The Codification organizes and simplifies U.S. GAAP
literature by reorganizing U.S. GAAP pronouncements into approximately 90
accounting topics within a consistent structure. The Codification is not
intended to change or alter existing U.S. GAAP. SFAS 168 is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. Therefore, all references to U.S. GAAP in the Company’s
financial statements for the quarter ending October 31, 2009 will follow the
Codification. The Company does not expect SFAS 168 to have any impact on its
financial position, results of operations or cash flows.




Note
2—Trade Accounts Receivable




Trade
accounts receivable consists of the following:




July 31
              (in
      thousands)
            
            2009
            
            
            2008Trade
      accounts receivable
            
            $
            4,955
            
            
            $
            4,849Less
      allowance for sales returns
            
            
            (374
            )
            
            
            (149
            )Less
      allowance for doubtful accounts
            
            
            (673
            )
            
            
            (137
            )Trade
      accounts receivable, net
            
            $
            3,908
            
            
            $
            4,563


Note
3—Property and Equipment




Property
and equipment consists of the following:




July 31
              (in
      thousands)
            
            2009
            
            
            2008Radio
      tower
            
            $
            3,711
            
            
            $
            3,706Equipment
            
            
            7,095
            
            
            
            6,651Vehicles
            
            
            2,080
            
            
            
            1,834Leasehold
      improvements
            
            
            558
            
            
            
            561Computer
      software
            
            
            703
            
            
            
            68114,147
            
            
            
            13,433Less
      accumulated depreciation and amortization
            
            
            (9,904
            )
            
            
            (8,839
            )Property
      and equipment, net
            
            $
            4,243
            
            
            $
            4,594





In the
fourth quarter of fiscal 2008, the Company assessed the value of its WMET-AM
radio station in the Washington, D.C. metropolitan area. The Company measured
WMET’s fair value by discounting its estimated future cash flows using an
appropriate discount rate. As a result of this assessment, the Company recorded
an impairment charge of $3.5 million on certain of WMET’s property and
equipment, measured by the excess of the carrying amount of the asset group over
the estimated fair value. The Company performed a similar assessment in the
fourth quarter of fiscal 2009 and concluded that no impairment of property and
equipment existed.




Property
and equipment under capital leases were $1.0 million and $0.8 million at
July 31, 2009 and 2008, respectively. The accumulated depreciation related
to these assets under capital leases was $0.4 million and $0.2 million at
July 31, 2009 and 2008, respectively. Depreciation of fixed assets under
capital leases is included in depreciation and amortization expense in the
accompanying consolidated statements of operations. Depreciation and
amortization expense of property and equipment was $1.2 million and $1.4 million
in fiscal 2009 and fiscal 2008, respectively.






F-13




Note
4—Goodwill, Licenses and Other Intangibles




In the
fourth quarter of fiscal 2008, the Company assessed the value and evaluated the
financial performance of its reporting units. The Company measured the fair
value of the reporting units by discounting their estimated future cash flows
using an appropriate discount rate. As a result of this analysis, no impairment
was recorded by the Company on goodwill in fiscal 2008.




The
Company recorded aggregate goodwill impairment charges of $32.6 million in
fiscal 2009. In the second quarter of fiscal 2009, the following events and
circumstances indicated that the fair value of certain of the Company’s
reporting units may be below their carrying value: (1) a significant adverse
change in the business climate, (2) operating losses of reporting units, and (3)
significant revisions to internal forecasts. The Company measured the fair value
of its reporting units by discounting their estimated future cash flows using an
appropriate discount rate. The carrying value including goodwill of CTM, IDW and
WMET exceeded their estimated fair values, therefore additional steps were
performed for these reporting units to determine whether an impairment of
goodwill was required. As a result of this analysis, in fiscal 2009, the Company
recorded goodwill impairment of $29.7 million in CTM, $1.8 million in IDW, and
$1.1 million in WMET, which reduced the carrying amount of the goodwill in each
of these reporting units to zero.




The table
below reconciles the change in the carrying amount of goodwill by operating
segment for the period from July 31, 2007 to July 31,
2009:




(in
      thousands)
              
              CTM
              
              
              IDW
              
              
              WMET
              
              
              TotalBalance as of July 31, 2007
              
              $
              29,530
              
              
              $
              2,731
              
              
              $
              1,150
              
              
              $
              33,411Acquisitions
              
              
              158
              
              
              
              —
              
              
              
              —
              
              
              
              158Purchase
      price allocation of IDW
              
              
              —
              
              
              
              (925
              )
              
              
              —
              
              
              
              (925
              )Foreign
      currency translation adjustments
              
              
              (1
              )
              
              
              —
              
              
              
              —
              
              
              
              (1
              )Balance as of July 31, 2008
              
              $
              29,687
              
              
              $
              1,806
              
              
              $
              1,150
              
              
              $
              32,643Impairments
              
              
              (29,661
              )
              
              
              (1,806
              )
              
              
              (1,150
              )
              
              
              (32,617
              )Foreign
      currency translation adjustments
              
              
              (26
              )
              
              
              —
              
              
              
              —
              
              
              
              (26
              )Balance as of July 31, 2009
              
              $
              —
              
              
              $
              —
              
              
              $
              —
              
              
              $
              —




The table
below presents information on the Company’s licenses and other intangible
assets:




(in
      thousands)
            Weighted
              Average
              Amortization
              Period
            
            Gross
              Carrying
              Amount
            
            
            Accumulated
              Amortization
            
            
            Net
              BalanceAs
      of July 31, 2009:Intangible
      assets with indefinite life:FCC
      licenses
            Indefinite life
            
            $
            499
            
            
            $
            —
            
            
            $
            499Amortized
      intangible assets:Customer
      lists
            5 years
            
            
            25
            
            
            
            (17
            )
            
            
            8Licenses
      and other intangible assets
            2.5 years
            
            
            1,138
            
            
            
            (1,058
            )
            
            
            80Total
      licenses and other intangibles
            
            
            $
            1,662
            
            
            $
            (1,075
            )
            
            $
            587As
      of July 31, 2008:Intangible
      assets with indefinite life:FCC
      licenses
            Indefinite life
            
            $
            499
            
            
            $
            —
            
            
            $
            499Amortized
      intangible assets:Customer
      lists
            5
      years
            
            
            25
            
            
            
            —
            
            
            
            25Licenses
      and other intangible assets
            2.5 years
            
            
            1,138
            
            
            
            (837
            )
            
            
            301Total
      licenses and other intangibles
            
            
            $
            1,662
            
            
            $
            (837
            )
            
            $
            825





Amortization
expense of licenses and other intangible assets was $0.2 million and $0.7
million in fiscal 2009 and fiscal 2008, respectively. The Company estimates that
amortization expense of intangible assets with finite lives will be $0.1 million
in fiscal 2010 at which time they will be fully amortized.






F-14






Note
5—Income Taxes




Significant
components of the Company’s deferred tax assets and deferred tax liabilities
consist of the following:




July 31
              (in
      thousands)
            
            2009
            
            
            2008Deferred
      tax assets:Bad
      debt reserve
            
            $
            269
            
            
            $
            54Accrued
      expenses
            
            
            97
            
            
            
            46Exercise
      of stock options and lapsing of restrictions on restricted
      stock
            
            
            82
            
            
            
            82Impairment
            
            
            13,047
            
            
            
            —Depreciation
      and amortization
            
            
            1,391
            
            
            
            1,392Net
      operating loss
            
            
            2,690
            
            
            
            2,169Total
      deferred tax assets
            
            
            17,576
            
            
            
            3,743Valuation
      allowance
            
            
            (17,576
            )
            
            
            (3,743
            )NET
      DEFERRED TAX ASSETS
            
            $
            —
            
            
            $
            —





The
provision for income taxes consists of the following:




Year
      ended July 31
              (in
      thousands)
            
            2009
            
            
            2008Current:Federal
            
            $
            —
            
            
            $
            —State
      and local
            
            
            39
            
            
            
            325Foreign
            
            
            106
            
            
            
            132145
            
            
            
            457Deferred
            
            
            —
            
            
            
            —PROVISION
      FOR INCOME TAXES
            
            $
            145
            
            
            $
            457





The
differences between income taxes expected at the U.S. federal statutory income
tax rate and income taxes provided are as follows:




Year
      ended July 31
              (in
      thousands)
            
            2009
            
            
            2008U.S.
      federal income tax at statutory rate
            
            $
            (11,370
            )
            
            $
            (1,572
            )Change
      in valuation allowance
            
            
            11,370
            
            
            
            1,572Foreign
      tax rate differential
            
            
            106
            
            
            
            132State
      and local income tax, net of federal benefit
            
            
            39
            
            
            
            310Other
            
            
            —
            
            
            
            15PROVISION
      FOR INCOME TAXES
            
            $
            145
            
            
            $
            457





At
July 31, 2009, the Company had federal and state net operating loss
carry-forwards of approximately $7.0 million. This carry-forward loss is
available to offset future U.S. federal and state taxable income. The net
operating loss carry-forwards will start to expire in fiscal 2026, with fiscal
2009’s loss expiring in fiscal 2030. The Company has no foreign net operating
losses. The utilization of the net operating loss carry-forwards may be subject
to certain limitations as a result of the spin-off.




The
Company has not recorded U.S. income tax expense for foreign earnings, as such
earnings are permanently reinvested outside the U.S. The cumulative
undistributed foreign earnings are included in accumulated deficit in the
Company’s consolidated balance sheets, and consisted of approximately
$1 million at July 31, 2009. Upon distribution of these foreign
earnings, the Company may be subject to U.S. income taxes and foreign
withholding taxes, however, it is not practicable to determine the amount, if
any, which would be paid.




Effective
August 1, 2007, the Company adopted FIN 48, which, among other things,
clarifies the accounting for uncertainty in income taxes recognized in an
entity’s financial statements in accordance with SFAS 109 and prescribes
that a company should use a more-likely-than-not recognition threshold based on
the technical merits of the tax position taken or expected to be taken. The
adoption of FIN 48 resulted in a one-time decrease in the opening balance of
accumulated deficit of $267 thousand.




The table
below summarizes the change in the balance of unrecognized income tax
benefits:




Year
      ended July 31
              (in
      thousands)
            
            2009
            
            
            2008Balance
      at the beginning of the year (excludes interest)
            
            $
            546
            
            
            $
            267Additions
      based on tax positions related to the current year
            
            
            —
            
            
            
            263Additions
      for tax positions of prior years
            
            
            33
            
            
            
            16Reductions
      for tax positions of prior years
            
            
            —
            
            
            
            —Settlements
            
            
            —
            
            
            
            —Lapses
      of statutes of limitations
            
            
            —
            
            
            
            —Balance
      at the end of the year
            
            $
            579
            
            
            $
            546






F-15


The
Company classifies interest and penalties on income taxes as a component of
income tax expense. As of August 1, 2007, accrued interest expense relating
to the unrecognized tax benefits was $15 thousand. In fiscal 2009 and fiscal
2008, the Company recorded additional interest expense of $33 thousand and $16
thousand, respectively. As of July 31, 2009 and 2008, accrued interest
expense included in current income taxes payable was $64 thousand and $31
thousand, respectively.




IDT
Corporation currently remains subject to examinations of its tax returns as
follows: U.S. federal tax returns for fiscal 2005 to fiscal 2009, state and
local tax returns generally for fiscal 2001 to fiscal 2009 and foreign tax
returns generally for fiscal 2002 to fiscal 2009. The IRS is auditing IDT
Corporation’s federal tax returns for fiscal years 2005, 2006 and 2007. No
changes to Holdings is anticipated as a result of this audit.




The
Company and IDT Corporation entered into a Tax Separation Agreement, dated as of
September 14, 2009, to provide for certain tax matters including the assignment
of responsibility for the preparation and filing of tax returns, the payment of
and indemnification for taxes, entitlement to tax refunds and the prosecution
and defense of any tax controversies. Pursuant to this agreement, IDT
Corporation indemnified the Company from all liability for taxes of the Company
and its subsidiaries for periods ending on or before September 14, 2009, and the
Company indemnified IDT Corporation from all liability for taxes of the Company
and its subsidiaries accruing after September 14, 2009. Also, for periods ending
on or before September 14, 2009, IDT Corporation shall have the right to control
the conduct of any audit, examination or other proceeding brought by a taxing
authority. The Company shall have the right to participate jointly in any
proceeding that may affect its tax liability unless IDT Corporation has
indemnified the Company. Finally, the Company and its subsidiaries agreed not to
carry back any net operating losses, capital losses or credits for any taxable
period ending after September 14, 2009 to a taxable period ending on or before
September 14, 2009 unless required by applicable law, in which case any refund
of taxes attributable to such carry back shall be for the account of IDT
Corporation.




Note
6—Additional Paid-in Capital




The
additional paid-in capital represents IDT Corporation’s initial investment in
the consolidated entities and subsequent investments and adjustments resulting
from operations and various transactions between Holdings and IDT Corporation
and its subsidiaries.




Note
7—Stock Based Compensation




IDT
Corporation Share-Based Compensation Plan


The IDT
Corporation 2005 Stock Option and Incentive Plan (the “Stock Option and
Incentive Plan”) is intended to provide incentives to executives, employees,
directors and consultants of IDT Corporation and its subsidiaries. Incentives
available under the Stock Option and Incentive Plan may include stock options,
stock appreciation rights, limited rights, deferred stock units, and restricted
stock. Stock options and restricted stock were granted to employees of the
businesses included in these consolidated financial statements under the Stock
Option and Incentive Plan.




Compensation
cost is generally recognized using the accelerated method over the vesting
period. The compensation cost included in selling, general and administrative
expense for the Company’s share-based compensation was nil for fiscal 2009 and
$0.1 million for fiscal 2008. No income tax benefits were recognized in the
consolidated statements of operations for share-based compensation during fiscal
2009 or fiscal 2008. The Company does not currently recognize the tax benefits
resulting from tax deductions in excess of the compensation cost recognized from
its share-based compensation because the Company does not currently expect to
realize the tax benefit due to the uncertainty of future taxable
income.




Stock
Options


IDT
Corporation option awards were granted with an exercise price equal to the
market price of IDT Corporation’s stock at the date of grant. Option awards vest
on a graded basis over three years of service and have ten-year contractual
terms. No stock options were granted to employees of the businesses included in
these consolidated financial statements in fiscal 2009 or fiscal 2008, however,
options granted by IDT Corporation in fiscal 2007 vested in fiscal 2008 and
fiscal 2009.





Restricted
Stock


The fair
value of nonvested shares of IDT Corporation’s Class B common stock is
determined based on the closing price of IDT Corporation’s Class B common stock
on the grant date. Share awards vest on a graded basis over three years of
service and have ten-year contractual terms.






F-16




A summary
of the status of the IDT Corporation’s nonvested restricted shares as of
July 31, 2009 and changes in fiscal 2009 is presented below:




(in
      thousands)
            
            Number
      of
              Nonvested SharesNonvested
      shares at July 31, 2008
            
            
            131Granted
            
            
            2,452Vested
            
            
            (89
            )Forfeited
            
            
            (1
            )Nonvested
      shares at July 31, 2009
            
            
            2,493





As part
of the spin-off, holders of restricted stock of IDT Corporation received, in
respect of those restricted shares, one share of the Company’s Class A common
stock for every three restricted shares of common stock of IDT Corporation that
they own as of the record date of the spin-off and one share of the Company’s
Class B common stock for every three restricted shares of Class B common stock
of IDT Corporation that they own as of the record date of the spin-off. Those
particular shares of the Company’s stock are restricted under the same terms as
the IDT Corporation restricted shares in respect of which they were issued. The
restricted shares of the Company’s stock received in the spin-off are subject to
forfeiture on the same terms and restrictions as the corresponding IDT
Corporation shares. Upon completion of the spin-off on September 14, 2009, there
were 0.3 million shares of Class A nonvested restricted stock and 0.5 million
shares of Class B nonvested restricted stock.




On
October 14, 2009, Holdings’ Board of Directors granted its Chairman and founder,
Howard S. Jonas, 1.8 million restricted shares of Holdings’ Class B common stock
with a value of $1.25 million on the date of grant in lieu of a cash base salary
for the next five years. The restricted shares will vest in equal thirds on each
of October 14, 2011, October 14, 2012 and October 14, 2013. Unvested shares
would be forfeited if Holdings’ terminates Mr. Jonas’ employment other than
under circumstances where the accelerated vesting applies. The shares are
subject to adjustments or acceleration based on certain corporate transactions,
changes in capitalization, or termination, death or disability of
Mr. Jonas. If Mr. Jonas is terminated by Holdings for cause, a pro rata
portion of the shares would vest. This arrangement does not impact Mr. Jonas’
cash compensation from the date of the spin-off through the pay period including
the grant date. Total unrecognized compensation cost on the grant date was $1.25
million. The unrecognized compensation cost is expected to be recognized over
the vesting period from October 14, 2009 through October 14, 2014.




Holdings
Share-Based Compensation Plan


On
September 3, 2009, the Company’s Compensation Committee ratified the Company’s
2009 Stock Option and Incentive Plan (the “Holdings Stock Option and Incentive
Plan”), which was previously adopted by the Company’s Board of Directors and
approved by IDT Corporation as its sole stockholder, to provide incentives to
executive officers, employees, directors and consultants of the Company and/or
its subsidiaries. The maximum number of shares of the Company’s Class B common
stock reserved for the grant of awards under the Holdings Stock Option and
Incentive Plan shall be 383,020, subject to adjustment. Incentives available
under the Holdings Stock Option and Incentive Plan may include stock options,
stock appreciation rights, limited stock appreciation rights, restricted stock,
and deferred stock units.




Under the
Holdings Stock Option and Incentive Plan, the option price of each option award
shall not be less than one hundred percent of the fair market value of the
Company’s Class B common stock on the date of grant. Each option agreement shall
provide the exercise schedule for the option as determined by the Compensation
Committee. The exercise period will be ten years from the date of the grant of
the option unless otherwise determined by the Compensation Committee. No awards
have been granted under the Holdings Stock Option and Incentive Plan to
date.




Note
8—Accumulated Other Comprehensive Income




The
accumulated balances of comprehensive income (loss) related to foreign currency
translation was as follows:




(in
      thousands)
            
            Foreign
              currency
              translationBalance
      at July 31, 2007
            
            $
            99Change
      during the period
            
            
            89Balance
      at July 31, 2008
            
            
            188Change
      during the period
            
            
            (64
            )BALANCE
      AT JULY 31, 2009
            
            $
            124





Note
9—Impairment and Severance Charges




In fiscal
2008, WMET recorded an impairment charge of $3.5 million related to certain of
its property and equipment (see Note 3). In fiscal 2009, the Company recorded
aggregate goodwill impairment charges of $32.6 million (see Note 4). Severance
charges related to workforce reductions.






F-17




Note
10—Commitments and Contingencies




Legal
Proceedings


On
January 30, 2009, IDW received a letter from a law firm representing George and
Ginger Criswell and Green School Network, Inc. demanding $500,000 as a result of
alleged infringement of intellectual property of the Criswells related to the
Michael Recycle book published by IDW. In June 2009, the parties agreed to a
settlement consisting of the following material terms: (a) upfront remuneration
from IDW of $25,000; (b) a co-existence agreement and full release; (c) a book
publication contract from IDW for Ms. Criswell’s Recycle Michael: I’ll Do My
Part book; (d) IDW’s right of first refusal regarding the publication of
a second Recycle
Michael title by Ms. Criswell; and (e) a royalty of 1.5% of net sales
arising from IDW’s publication of the book entitled Michael Recycle Meets Litterbug
Doug.




In
addition to the foregoing, the Company is subject to other legal proceedings
that have arisen in the ordinary course of business and have not been finally
adjudicated. Although there can be no assurance in this regard, in the opinion
of the Company’s management, none of the legal proceedings to which the Company
is a party, whether discussed above or otherwise, will have a material adverse
effect on the Company’s results of operations, cash flows or financial
condition.




Lease
Commitments


The
future minimum payments for capital and operating leases as of July 31,
2009 are as follows:




(in
      thousands)
            
            Operating
              Leases
            
            
            Capital
              LeasesYear
      ending July 31:2010
            
            $
            1,107
            
            
            $
            2542011
            
            
            905
            
            
            
            2532012
            
            
            522
            
            
            
            1762013
            
            
            141
            
            
            
            972014
            
            
            25
            
            
            
            35Thereafter
            
            
            —
            
            
            
            —Total
      payments
            
            $
            2,700
            
            
            
            815Less
      amount representing interest
            
            
            
            
            
            
            (64
            )Less
      current portion
            
            
            
            
            
            
            (222
            )Capital
      lease obligations—long-term portion
            
            
            
            
            
            $
            529





Rental
expense under operating leases was $1.7 million in fiscal 2009 and $1.6 million
in fiscal 2008.




Note
11—Related Party Transactions




In fiscal
2009 and 2008, IDT Corporation, the Company’s former parent company, charged
Holdings for certain transactions and allocated routine expenses based on
company specific items. In addition, IDT Corporation controlled the flow of
Holdings’ treasury transactions. Expenses allocated to Holdings amounted to $1.1
million in fiscal 2009 and $1.6 million in fiscal 2008. In September 2009, IDT
Corporation funded Holdings with an additional $2.0 million in cash in advance
of the spin-off. Also in September 2009, the aggregate $27.5 million balance of
the amount in “Due to IDT Corporation” was converted into a capital
contribution.




The
Company’s liability to IDT Corporation fluctuated primarily due
to operating expenses paid by IDT Corporation on behalf of Holdings and the
transfers of funds. The Company’s liability to IDT Corporation was as
follows:




Years
      ended July 31,2009
            
            
            2008(in
      thousands)Opening
      Balance
            
            $
            22,924
            
            
            $
            21,147Expenses
      paid by IDT Corporation on behalf of the Company
            
            
            4,313
            
            
            
            5,503Transfer
      of funds to IDT Corporation, net
            
            
            (2,316
            )
            
            
            (3,726
            )Ending
      Balance
            
            $
            24,921
            
            
            $
            22,924Average
      Balance Owed to IDT Corporation
            
            $
            23,844
            
            
            $
            22,135






F-18





CTM
distributes brochures for ETR Brochures, Inc., a brochure distribution firm
controlled by Howard S. Jonas. ETR Brochures also distributes brochures for CTM.
In fiscal 2009, CTM billed ETR Brochures approximately $24,000 for distribution
services and ETR Brochures billed CTM approximately $105,000 for distribution
services. The balance owed to ETR Brochures, Inc. by CTM was approximately
$2,000 as of July 31, 2009. The balance owed by ETR Brochures, Inc. to CTM was
approximately $10,000 as of July 31, 2009. In fiscal 2008, CTM billed ETR
Brochures approximately $35,000 for distribution services and ETR Brochures
billed CTM approximately $144,000 for distribution services. The net balance
owed to ETR Brochures by CTM was approximately $8,000 as of July 31,
2008.  These transactions were approved in accordance with IDT
Corporation’s Related Person Transaction policy described in its 2008 Proxy
Statement and 2007 Proxy Statement. The Company intends for the relationship
between CTM and ETR to continue after the spin-off.




Note
12—Defined Contribution Plans




IDT
Corporation maintains a 401(k) Plan (the “Plan”) available to all employees
meeting certain eligibility criteria, which also covered the employees of the
Company. The Plan permits participants to contribute up to 20% of their salary,
not to exceed the limits established by the Internal Revenue Code. The Plan
provided for discretionary matching contributions of 50%, up to the first 6% of
compensation, to be invested in IDT Corporation Class B common stock. The
discretionary matching contributions vest over five years. The Plan permits the
discretionary matching contributions to be granted as of December 31 of
each year. All contributions made by participants vest immediately into the
participant’s account. In fiscal 2009 and fiscal 2008, the Company’s
contributions to the Plan were $0.1 million and $0.1 million, respectively. The
common stock and Class B common stock of IDT Corporation are not investment
options for the Plan’s participants.




In
September 2009, Holdings adopted a 401(K) Plan available to all its employees
meeting certain eligibility criteria. The 401(K) Plan permits participants to
contribute a portion of their salary with no minimum deferred required, not to
exceed the limits established by the Internal Revenue Code. The Plan provided
for discretionary matching contributions as determined in Holdings’ sole
discretion, which vests over six years. All contributions made by participants
vest immediately into the participant’s account.




Note
13—Business Segment Information




The
Company has the following two reportable business segments: CTM and IDW. CTM
consists of the Company’s brochure distribution company and other
advertising-based new product initiatives focused on small to medium sized
businesses. IDW is a comic book and graphic novel publisher that creates and
licenses intellectual property. The results of operations of WMET do not
comprise a separate reportable segment and are reported under the heading
“Other.” WMET-AM is a radio station in the Washington, D.C. metropolitan
area.




The
Company’s reportable segments are distinguished by types of service, customers
and methods used to provide their services. The operating results of these
business segments are regularly reviewed by the Company’s chief operating
decision maker.




The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates the
performance of its business segments based primarily on operating income (loss).
There are no significant asymmetrical allocations to segments. Operating results
for the business segments of the Company are as follows:




(in
      thousands)
            
            CTM
            
            
            IDW
            
            
            Other
            
            
            TotalYear
      ended July 31, 2009Revenues
            
            $
            19,888
            
            
            $
            12,627
            
            
            $
            1,168
            
            
            $
            33,683Operating
      loss
            
            
            (30,413
            )
            
            
            (92
            )
            
            
            (1,935
            )
            
            
            (32,440
            )Depreciation
      and amortization
            
            
            816
            
            
            
            215
            
            
            
            407
            
            
            
            1,438Impairment
      and severance charges
            
            
            30,300
            
            
            
            1,825
            
            
            
            1,210
            
            
            
            33,335Total
      assets at July 31, 2009
            
            $
            9,120
            
            
            $
            6,701
            
            
            $
            2,968
            
            
            $
            18,789Year
      ended July 31, 2008Revenues
            
            $
            21,603
            
            
            $
            9,856
            
            
            $
            1,167
            
            
            $
            32,626Operating
      income (loss)
            
            
            (343
            )
            
            
            463
            
            
            
            (4,570
            )
            
            
            (4,450
            )Depreciation
      and amortization
            
            
            740
            
            
            
            661
            
            
            
            677
            
            
            
            2,078Impairment
      and severance charges
            
            
            203
            
            
            
            —
            
            
            
            3,480
            
            
            
            3,683Total
      assets at July 31, 2008
            
            $
            38,600
            
            
            $
            7,124
            
            
            $
            4,286
            
            
            $
            50,010





Revenues
from customers located outside of the United States represented approximately
7.4% and 9.3% of total consolidated revenues in fiscal 2009 and fiscal 2008,
respectively. Revenues by country are determined based on the country where the
customer is invoiced. Net long-lived assets and net total assets held outside of
the United States, primarily in Canada, totaled approximately $0.3 million and
$3.3 million, respectively, as of July 31, 2009 and $0.3 million and
$3.0 million, respectively, as of July 31, 2008.






F-19




Note
14—Selected Quarterly Financial Data (Unaudited)




The table
below presents selected quarterly financial data of the Company for its fiscal
quarters for fiscal 2009 and fiscal 2008:




Quarter
      Ended
              (in
      thousands)
            
            Revenues
            
            
            Direct
      cost
              of
      revenues
            
            
            (Loss)
              income
              from
              operations
            
            
            Net
      (loss)
              income2009:2009:October
      31
            
            $
            9,056
            
            
            $
            3,589
            
            
            $
            23
            
            
            $
            (315
            )January
      31(a)
            
            
            7,244
            
            
            
            3,361
            
            
            
            (32,244
            )
            
            
            (31,351
            )April
      30(b)
            
            
            7,091
            
            
            
            3,603
            
            
            
            (1,928
            )
            
            
            (1,795
            )July
      31
            
            
            10,292
            
            
            
            4,087
            
            
            
            1,709
            
            
            
            (399
            )TOTAL
            
            $
            33,683
            
            
            $
            14,640
            
            
            $
            (32,440
            )
            
            $
            (33,860
            )2008:October
      31
            
            $
            7,782
            
            
            $
            2,919
            
            
            $
            442
            
            
            $
            134January
      31
            
            
            7,031
            
            
            
            2,979
            
            
            
            (1,622
            )
            
            
            (1,382
            )April
      30
            
            
            7,463
            
            
            
            3,094
            
            
            
            (455
            )
            
            
            (427
            )July
      31(c)
            
            
            10,350
            
            
            
            3,574
            
            
            
            (2,815
            )
            
            
            (3,652
            )TOTAL
            
            $
            32,626
            
            
            $
            12,566
            
            
            $
            (4,450
            )
            
            $
            (5,327
            )





(a)
            Included
      in loss from operations are goodwill impairment charges of $29.7 million
      for CTM and $1.8 million for IDW.


(b)
            Included
      in loss from operations are goodwill impairment charges of $1.1 million
      for WMET.


(c)
            Included
      in loss from operations are impairment charges of $3.5 million related to
      certain of WMET’s fixed assets.










F-20