UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q
FORM 10-Q
 
x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2010JANUARY 31, 2011
 
or
 
¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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 
Delaware26-4831346
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
  
11 Largo Drive South, Stamford, Connecticut06907
(Address of principal executive offices)(Zip Code)
 
(203) 323-5161
(Registrant’s telephone number, including area code)

 
 
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  x     No   ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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  ¨   No  ¨
 
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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer   ¨
Accelerated filer                     ¨
Non-accelerated filer     ¨ (Do not check if a smaller reporting company)
Smaller reporting company   x
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ¨     No   x
 
As of June 14, 2010,March 17, 2011, the registrant had the following shares outstanding:
 
Class A common stock, $0.01 par value:1,106,468 shares outstanding (excluding 178,517 treasury shares)
Class B common stock, $0.01 par value:6,126,2676,126,322 shares outstanding (excluding 794,128797,183 treasury shares)
Class C common stock, $0.01 par value:1,090,775 shares outstanding

 
1
 
 
CTM MEDIA HOLDINGS, INC.
 
TABLE OF CONTENTS
 
   
  
PART I. FINANCIAL INFORMATION
3
   
Item 1.
Financial Statements (Unaudited)
3
   
 
Condensed Consolidated Balance Sheets
  as of January 31, 2011(unaudited) and July 31, 2010		3
   
 
Condensed Consolidated Statements of Operations
(unaudited) for the three and six months ended January 31, 2011 and 2010.		4
   
 
Condensed Consolidated Statements of Cash Flows
(unaudited) for the three and six months ended January 31, 2011 and 2010.		5
   
 
Notes to Condensed Consolidated Financial Statements
(unaudited).		6
   
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
12
   
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
      19
Item 4T.Controls and Procedures      19
PART II. OTHER INFORMATION20
   
Item 4T.1.
Controls and Procedures
20
Legal Proceedings 
PART II. OTHER INFORMATION
21
Item 1.
Legal Proceedings
2120
   
Item 1A.
Risk Factors
21       20
   
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
21 20
   
Item 3.
Defaults Upon Senior Securities
21      20
   
Item 4.
Removed and Reserved
21       20
   
Item 5.
Other Information
21       20
   
Item 6.
Exhibits
22       20
  
SIGNATURES
23       21
 
 
2
 
 
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
CTM MEDIA HOLDINGS, INC.
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands) April 30, 2010  
July 31,
2009
  
January 31,
2011
 
July 31,
2010
 
 (Unaudited)  (Note 1)  (Unaudited) (Note 1) 
Assets           
Current assets:           
Cash and cash equivalents $5,800  $6,480  $6,956 $6,516 
Short term investment  1,029   1,024  1,032  1,030 
Trade accounts receivable, net  2,504   3,908  2,243  3,496 
Inventory – finished goods  1,451   1,405 
Inventory 1,647  1,462 
Prepaid expenses  864   982  1,067  965 
Assets of discontinued operations  2,224   2,350 
Note receivable – current portion  318  321 
Total current assets  13,872   16,149  13,263  13,790 
Property and equipment, net  2,109   2,392  1,955 2,013 
Licenses and other intangibles, net  27   89  2 17 
Note receivable – non current portion 2,250 2,400 
Other assets  181   159   207   181 
Total assets $16,189  $18,789  $17,677 $18,401 
Liabilities and equity (deficit)        
Liabilities and equity     
Current liabilities:             
Trade accounts payable $945   1,024  $858 $ 1,187 
Accrued expenses  2,288   2,050  1,693 1,539 
Deferred revenue  1,769   1,731  1,211 2,035 
Due to IDT Corporation  —   24,921  31 38 
Income tax payable 770 770 
Capital lease obligations—current portion  229   222  231 227 
Other current liabilities  480   563   856  646 
Total current liabilities  5,711   30,511  5,650  6,442 
Capital lease obligations—long-term portion  348   529   322  286 
Total liabilities  6,059   31,040   5,972  6,728 
Commitments and contingencies      —  - - 
Equity (deficit):        
CTM Media Holdings, Inc. stockholders’ equity (deficit):        
Preferred stock, $0.01 par value; authorized shares—10,000; no shares issued  —   — 
Class A common stock, $0.01 par value; authorized shares—35,000; 1,285 shares issued and 1,106 shares outstanding at April 30, 2010  13   — 
Class B common stock, $0.01 par value; authorized shares—65,000; 6,920 shares issued and 6,126 shares outstanding at April 30, 2010  69   — 
Class C common stock, $0.01 par value; authorized shares—15,000; 1,091 shares issued and outstanding at April 30, 2010
  11   — 
Stockholders’ Equity:     
CTM Media Holdings, Inc. stockholders’ equity :     
Preferred stock, $.01 par value; authorized shares—500 and 10,000 shares January 31,2011 and July 31, 2010, respectively; no shares issued - - 
Class A common stock, $.01 par value; authorized shares—6,000 and 35,000 shares at January 31,2011 and July 31, 2010, respectively; 1,285 shares issued and 1,106 shares outstanding at January 31, 2011 and July 31, 2010  13 13 
Class B common stock, $.01 par value; authorized shares—12,000 and 65,000 shares at January 31, 2011 and January 31, 2010, respectively; 6,924 shares issued and 6,126 shares outstanding at January 31, 2011 and July 31, 2010  69 69 
Class C common stock, $.01 par value; authorized shares—2,500 and 15,000 shares at January 31, 2011 and July 31, 2010, respectively; 1,091 shares issued and outstanding at January 31, 2011 and July 31, 2010  11 11 
Additional paid-in capital  58,936   33,141  57,776 58,548 
Treasury Stock, at cost, consisting of 179 shares of shares of Class A and 794 shares of Class B at April 30, 2010  (1,070)  — 
Treasury Stock, at cost, consisting of 179 shares of shares of Class A and 797 shares of Class B at January 31, 2011 and July 31, 2010 (1,070) (1,070)
Accumulated other comprehensive income  113   124  165  117 
Accumulated deficit  (48,744)  (47,483)  (45,670)  (46,235)
Total CTM Media Holdings, Inc. stockholders’ equity (deficit)  9,328   (14,218)
Total CTM Media Holdings, Inc. stockholders’ equity 11,294 11,453 
Noncontrolling interests  802   1,967   411  220 
Total equity (deficit)  10,130   (12,251)
Total liabilities and equity $16,189  $18,789 
Total stockholders’ equity  11,705  11,673 
Total liabilities and stockholders’ equity $17,677 $18,401 
See accompanying notes to condensed consolidated financial statements.
 
 
3
 

CTM MEDIA HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
  
Three Months Ended
April 30,
  
Nine Months Ended
April 30,
 
(in thousands, except per share data) 2010  2009  2010  2009 
             
Revenues $6,832  $6,805   21,431  $22,497 
Costs and expenses:                
Direct cost of revenues (exclusive of depreciation and amortization)  3,605   3,603   10,587   10,553 
Selling, general and administrative (i)  3,651   3,259   10,368   10,921 
Depreciation and amortization  197   213   653   772 
Bad debt  36   253   91   532 
Impairment and severance charges  -   72   -   32,124 
Total costs and expenses  7,489   7,400   21,699   54,902 
Loss from operations  (657)  (595)  (268)  (32,405)
Interest expense, net  (15)  (9)  (73)  (36)
Other (expense) income, net  (156)  4   (160)  7 
Loss from continuing operations before income taxes  (828)  (600)  (501)  (32,434)
Benefit from (provision for) income taxes  49   138   (74)  (19)
Loss from continuing operations  (779)  (462)  (575)  (32,453)
                 
Discontinued operations net of tax: (Note 2)                
Loss from discontinued operations  (316)  (1,333)  (570)  (1,745)
Net Loss  (1,095)  (1,795)  (1,145)  (34,198)
                 
Less - net (loss) income attributable to non-controlling interests  (36)  -   115   (737)
Net loss attributable to CTM Media Holdings, Inc.
  (1,059) $(1,795)  (1,260) $(33,461)
                 
Amounts Attributable to CTM Media Holdings common stockholders:                
Loss from continuing operations  (743)  (462)  (690)  (31,716)
Loss from discontinued operations  (316)  (1,333)  (570)  (1,745)
 
Net loss attributable to CTM Media Holdings, Inc.
  (1,059) $(1,795)  (1,260) $(33,461)

  
Three Months Ended
January 31,
  
Six Months Ended
January 31,
 
(in thousands, except per share data) 2011  2010  2011  2010 
             
Revenues $7,677  $6,365   16,326  $14,598 
Costs and expenses:                
Direct cost of revenues (exclusive of depreciation and amortization)  3,712   3,234   7,473   6,982 
Selling, general and administrative (i)  3,786   3,533   7,600   6,718 
Depreciation and amortization  173   228   344   456 
Bad debt  38   51   84   54 
Total costs and expenses  7,709   7,046   15,501   14,210 
Income (loss) from operations  (32)  (681)  825   388 
Interest income (expense), net  13   (42)  28   (60)
Other income (expense) , net  7   3   -   (4 )
Income (loss) from continuing operations before income taxes  (12)  (720)  853   324 
Benefit from (provision for) income taxes  (16)  116   (84)  (123)
Income (loss) from continuing operations  (28)  (604)  769   201 
Discontinued operations net of tax: (Note 2)                
Loss from discontinued operations  -   (121)  -   (251)
Net Income (loss)  (28)  (725)  769   (50)
Less – net income attributable to non-controlling interests  (116)  (6 )  (203)  (151)
Net income (loss) attributable to CTM Media Holdings, Inc.  (144) $(719)  566  $(201)
Amounts Attributable to CTM Media Holdings, Inc. common stockholders:                
Income (loss) from continuing operations  (144)  (598)  566   50 
Loss from discontinued operations  -   (121)  -   (251)
Net income (loss) attributable to CTM Media Holdings, Inc.  (144) $(719)  566  $(201)
Basic and dilutive loss per share  attributable to CTM Media Holdings, Inc. common stockholders:            
Loss from continuing operations $(0.13) $(0.07) $(0.11) $(4.75)
Loss from discontinued operations $(0.05) $(0.20) $(0.09) $(0.26)
Net Loss $(0.18) $(0.27) $(0.20) $(5.01)
                 
Weighted-average number of shares used in calculation of basic and dilutive loss per share:  5,834   6,684   6,304   6,684 
                 
Dividend declared per common share: $0.25   -  $0.25   - 
Basic and diluted income (loss)  per share  attributable to CTM Media Holdings, Inc. common stockholders:            
Income (loss) from continuing operations $(0.02) $(0.09) $0.07  $0.01 
Loss from discontinued operations $-  $(0.02) $-  $(0.04)
Net income (loss) $(0.02) $(0.11) $0.07  $(0.03)
Weighted-average number of shares used in calculation of basic and diluted loss per share:  8,323   6,380   8,323   6,539 
Dividend declared per common share: $-   -  $0.12   - 
(i)  Stock-based compensation included in selling, general and administrative expenses
114  113   -226   245131 (3)

See accompanying notes to condensed consolidated financial statements.
 
 
4
 


CTM MEDIA HOLDINGS, INC.
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
Nine Months ended April 30,
(in thousands)
 2010  2009 
Operating activities      
Net loss $(1,145) $(34,198)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:        
Loss from discontinued operations  570   1,745 
Depreciation and amortization  653   772 
Provision for doubtful accounts receivable  91   532 
Impairment charges  —   31,466 
Stock-based compensation  245   (3)
Change in assets and liabilities:        
Trade accounts receivable  1,184   538 
Inventory, prepaid and other assets  68   (682)
Trade accounts payable, accrued expenses, and other current liabilities  163   (135)
Deferred revenue  41   (576)
Net cash provided by (used in) operating activities  1,870   (541)
Investing activities        
    Capital expenditures  (320)  (454)
    Purchase of IDW noncontrolling interest  (414)  — 
    Purchase of short-term investment  —   (1,018)
Net cash used in investing activities  (734)  (1,472)
Financing activities        
    Dividend paid  (2,082)  — 
    Repurchases of Class A and Class B common stock  (1,070)  — 
    Distributions to holders of noncontrolling interests  (435)  (340)
    Funding provided by IDT Corporation, net  2,372    1,122 
    Repayments of capital lease obligations  (186)  (127)
Net cash (used in) provided by financing activities  (1,401)  655 
Discontinued operations        
     Net cash used in operating activities  (412)  (223)
     Net cash used in investing activities  (3)  — 
Net cash used in discontinued operations  (415)  (223)
         
Net decrease in cash and cash equivalents  (680)  (1,581)
         
Cash and cash equivalents at beginning of period  6,480   5,590 
         
Cash and cash equivalents at end of period $5,800  $4,009 
         
Supplemental schedule of non cash  investing and financing activities        
Purchases of property and equipment through capital lease obligations $-  $95 

Six Months ended January 31,
(in thousands)
 2011  2010 
Operating activities      
Net income (loss) $769  $(50)
Adjustments to reconcile net income (loss) to net cash provided by  operating activities:        
Loss from discontinued operations  -   251 
Depreciation and amortization  344   456 
Provision for doubtful accounts receivable  84   54 
Stock-based compensation  226   131 
Change in assets and liabilities:        
Trade accounts receivable  1,145   1,429 
Inventory, prepaid and other assets  (313)  (60)
Trade accounts payable, accrued expenses, and other current liabilities  100   515 
Deferred revenue  (824)  (396)
Net cash provided by operating activities  1,531   2,330 
Investing activities:        
Capital expenditures  (103)  (150)
    Purchase of IDW non-controlling interests  -   (414)
    Payments received on note for sale of assets  153   - 
Net Cash provided by (used in) investing activities  50   (564)
Financing activities:        
Distributions to holders of non-controlling interests  (12)  (435)
Funding provided by IDT Corporation, net  -   2,254 
Repurchase of Class A and Class B common stock  -   (1,070)
Repayments of capital lease obligations  (130)  (130)
Dividends paid  (999)  - 
Net cash (used in) provided by financing activities  (1,141)  619 
Discontinued operations:        
Net cash used in operating activities  -   (233)
Net cash used in investing activities  -   (3)
Net cash provided by financing activities  -   117 
Net cash used in discontinued operations  -   (119)
Net increase  in cash and cash equivalents  440   2,266 
Cash and cash equivalents at beginning of period  6,516   6,480 
Cash and cash equivalents at end of period $6,956  $8,746 
Supplemental schedule of non cash  investing and financing activities        
Cash paid for interest $15  $13 
Purchases of property and equipment through capital lease obligations $166  $- 
The effect of exchange rate changes on cash and cash equivalents is not material.
 
See accompanying notes to condensed consolidated financial statements.
 
 
5
 

 
CTM MEDIA HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
Note 1—Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of CTM Media Holdings, Inc. and its subsidiaries (the “Company”) have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and ninesix months ended April 30, 2010January 31, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending July 60;July 31, 2010.2011. The balance sheet at July 31, 20092010 has been derived from the Company’s audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended July 31, 2009,2010, as filed with the U.S. Securities and Exchange Commission (the “SEC”).
 
The Company’s fiscal year ends on July 31 of each calendar year.31. Each reference below to a fiscal year refers to the fiscal year ending in the calendar year indicated (e.g., fiscal 20102011 refers to the fiscal year ending July 31, 2010)2011).
 
On August 1, 2009, the Company adopted the accounting standard relating to noncontrolling interests in consolidated financial statements (see Note 11).
 
The Company consists 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; and
 
 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.
 
The Company was formerly a subsidiary of IDT Corporation (“IDT Corporation” or “IDT”) formed on May 8, 2009. On September 14, 2009, the Company was spun-off by IDT to its stockholders and became an independent public company (the “Spin-Off”). IDT transferred its ownership in all of the entities that became the Company’s consolidated subsidiaries prior to the Spin-Off. The entities that became direct or indirect subsidiaries of the Company are: CTM; Beltway Acquisition Corporation; IDT Local Media, Inc. (which conducted certain operations related to CTM with only the Local Pull business still active) and IDT Internet Mobile Group, Inc. (“IIMG”). IIMG owns approximately 77% of the equity interests in IDW (see Note 10 for the purchase of additional interest in IDW). All indebtedne ssindebtedness owed by any of these entities to IDT Corporation or its affiliates was converted into a capital contribution.  All references to the Company, its assets and results of operations for periods prior to the actual formation of the Company, refer to the subsidiaries of IDT that are now or were, owned by the Company, and their consolidated assets and results of operations.

The Company’s authorized capital stock, consistsupon incorporation, consisted 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 the Company’s 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 the Company’s Class A common stock for every three shares of IDT Corporation’s common stock held on the record date; (ii) one share of the Company’s Class B common stock for every three shares of IDT Corporation’s Cla ssClass B common stock held on the record date; (iii) one share of the Company’s 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 the Company’s common stock. On September 14, 2009, as a result of the Spin-Off, the Company 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 issued and outstanding.

On December 20, 2010 the Company’s authorized shares of: (i) Class A common stock was reduced from 35,000,000 shares to 6,000,000 shares; (ii) Class B common stock from 65,000,000 shares to 12,000,000 shares; (iii) Class C common stock from 15,000,000 shares to 2,500,000 shares; and (iv) Preferred Stock from 10,000,000 shares to 500,000 shares, each par value $0.01 per share.  The amendment was authorized by the Company’s Board of Directors on October 19, 2010, and approved on November 12, 2010 by the Written Consent of the holders of shares representing approximately 50.1%, 58%, and 100% of the Company’s outstanding Class A common stock, Class B common stock and Class C common stock, and approximately 84% of the combined voting power of the Company’s outstanding capital stock.

 
6

Note 2—Discontinued Operations
 
Sale of assets of WMET Radio

On May 5, 2010, the Company consummated the sale of substantially all of the assets used in the WMET radio station business (other than working capital) for. WMET 1160 AM is a radio station serving the Washington, D.C. metropolitan area.  The sale price offor the WMET assets was $4 million in a combination of cash and a promissory note of the buyer that is secured by the assets sold.  $1.3 million of the purchase price was paid in cash at the closing and the remainder will be paidis owed pursuant to a two-year promissory note, which is extendable in part to three years at the option of the buyer. The sale met the criteria to be reported as a discontinued operation in the third quarter of fiscal 2010 and accordingly, WMET’s results are classified as part of discontinued operations.operations during the fiscal year 2010.
 
Summary Financial Data of Discontinued Operations

6
Revenues (loss) incomeand loss (in millions) before income taxes and net (loss) income of WMET, which are included in discontinued operations, were as follows:
 
  
Three Months Ended
April 30,
 
  
Nine Months Ended
April 30,
 
 
  
2010
 
  
2009
 
  
2010
 
  
2009
 
 
  (in thousands) 
Revenue
 $56  $286  $407  $894 
Loss before income taxes and net loss .  (316)    (1,333)  (570)    (1,745)
  
 Three Months Ended
January 31, 
  
 Six Months Ended 
January 31,
 
  2011  2010  2011  2010 
Revenue $-  $0.1  $-  $0.4 
Loss before income taxes and net loss $-  $(0.1) $-  $(0.3)

TheThere were no assets andor liabilities of WMET included in discontinued operations consistas of the following:January 31, 2011 and July 31, 2010.

7
 
  April 30,2010  July 31, 2009 
  (in thousands) 
Assets      
Property, plant and equipment, net
  1,718   1,851 
Licenses and other intangibles, net
  499   499 
Other assets
  7   7 
         
Assets of discontinued operations
 $2,224  $2,357 
         

Note 3—Stock Repurchase and Cash DividendDividends

On November 17, 2009, the Company commenced a tender offer to purchase up to thirty percent of its outstanding common stock. The Company offered to purchase up to 0.4 million shares of its Class A common stock or any lesser number of Class A shares that stockholders properly tendered in the tender offer, and up to 2.4 million shares of its Class B common stock, or any lesser number of Class B shares that stockholders properly tendered in the tender offer, at a price per share of $1.10, for a maximum aggregate purchase price of $3.1 million.$1.10. The offer expired on December 22, 2009. As a result,2009 and pursuant to the offer, the Company repurchased 0.2 million shares of Class A common stock and 0.8 million shares of Class B common stock for an aggregate purchase price of $1.1 million, representing approximately 14% of its total outstanding capital stock at the t ime.time.
  
On Feb 23, 2010, theThe Company announced that its Board of Directors approved the payment ofpaid a cash dividend in the amount of $0.25 per share (approximately $2.1 million in the aggregate) which was paid, $0.06 per share (approximately $0.5 million in the aggregate), and $0.12 per share (approximately $1.0 million in the aggregate), on March 15, 2010, June 15, 2010 and November 9, 2010, respectively, to stockholders of record as of March 8, 2010, May 3, 2010 and November 1, 2010, respectively, of the Company’s Class A, Class B and Class C common stock.
 
On March 16,October 19, 2010, the Company’s Board of Directors approved the payment of regular quarterly dividends in the amount of $0.06 per share, subject to confirmation by the Company’s management that there is sufficient surplus as of the proposed future payment dates and other circumstances existing at the relevant times. This amount was paid during the second quarter of fiscal 2011.

On February 22, 2011, the Board of Directors, in light of the Company’s significant cash position, the positive impact of the declaration and payment of the $0.25 per share dividend and the lack of near-term needs or opportunities for deployment of its cash, determined to declaredeclared the payment of a cash dividend for the Company’s fourth quarter in the amount of $0.06 per share (approximately $0.5 million in the aggregate). The dividend, which, subject to confirmation by the Company’s management that there is sufficient surplus as of the proposed payment date, will be paid on or about June 15, 2010March 17, 2011 to stockholders of record as of May 3, 2010March  8, 2011 of the Company’s Class A common stock, Class B common stock and Class C common stock.

In addition, the Board of Directors approved the buyback of up to 1 million shares of either the Company’s Class A common stock or Class B common stock.  Any purchases will be made in compliance with applicable regulations.

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The declaration of any future dividend will be at the discretion of the Company’s Board of Directors and will depend on the Company’s financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination by the Company’s Board of Directors that dividends are in the best interest of the Company’s stockholders.

Note 4—Earnings Per Share
Basic earnings per share is computed by dividing net income (loss) attributable to all classes of common stockholders by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted earnings per share is computed in the same manner as basic earnings per share, except that the number of shares is increased to include non-vested restricted stock using the treasury stock method, unless the effect of such increase is anti-dilutive.
For the three and nine months ended April 30, 2009 and 2010, the diluted earnings per share equal basic earnings per share because the Company had losses from continuing operations and the impact of including non-vested restricted stock would have been anti-dilutive. Approximately 2.5 million and 0.8 million shares of non-vested restricted stock of at April 30, 2010 and 2009, respectively, have been excluded from the dilutive earnings per share computations because their inclusion would have been anti-dilutive. The earnings per share for the periods prior to the Spin-Off were calculated as if the number of shares outstanding at the Spin-Off were outstanding during those periods.
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Note 5—Equity (deficit)
 
Changes in the components of equity  (deficit) were as follows:
 

  
Nine Months Ended
April 30, 2010
 
 
  
Attributable to the company
  Noncontrolling Interests  
Total
 
 
  (in thousands) 
Balance, July 31, 2009
 $(14,218) $1,967  $(12,251)
             
Cash contribution and capitalization of balance due to IDT Corporation
  27,293   —   27,293 
Stock based compensation
  245   —   245 
Repurchases of common stock and Class B common stock   (1,070)  —   (1,070)
Partial acquisition of noncontrolling interest in IDW
  431   (845)  (414)
Cash dividend paid
  (2,082)  —   (2,082)
Cash distributions
  —   (435)  (435)
Comprehensive loss:            
        Other Comprehensive loss – foreign currency translation adjustments
  (11)  —   (11)
        Net (loss) income
  (1,260)  115   (1,145)
        Comprehensive (loss) income ((  (1,271)  115   (1,156)
             
Balance, April 30, 2010
 $9,328  $802  $10,130 
  
Six Months Ended
January 31, 2011
 
  Attributable to the Company  Noncontrolling Interests  Total 
  (in thousands) 
Balance, July 31, 2010 $11,453  $220  $11,673 
             
Stock based compensation  226   -   226 
Cash distributions  -   (12)  (12)
Cash dividends  (999)  -   (999)
Comprehensive income:            
             Net income  566   203   769 
             Other comprehensive  income  48   -   48 
             Comprehensive income  614   203   817 
Balance, January 31, 2011 $11,294  $411  $11,705 

On August 1, 2009, the Company adopted the accounting standard relating to noncontrolling interests in consolidated financial statements (see Note 11).
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 owned 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 owned 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 corresponding IDT Corporation restricted shares in respect of which they were issued. Upon completion of the Spin-Off on September 14, 2009, there were 0.3 million shares of Class A unvested restricted stock and 0.5 million shares of Class B unvested restric tedrestricted stock.

On October 14, 2009, the Company’s Board of Directors granted its Chairman and founder, Howard S. Jonas, 1.8 million restricted shares of the Company’s 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. 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. In the three and nine months ended April 30, 2010, the Company’s Stock-b ased compensation included in selling, general and administrative expenses was $0.1 million and $0.2 million, respectively. On September 3, 2009, the Company’s Compensation Committee ratified the Company’s 2009 Stock Option and Incentive Plan (the “Company’s Stock Option and Incentive Plan”), which was previously adopted by the Company’s Board of Directors and approved by IDT Corporation as itsthe Company’s 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 Company’s Stock Option and Incentive Plan is 383,020, subject to adjustment. Incentives available under the Company’s Stock Option and Incentive Plan may include stock options, stock appreciation rights, limited stock appreciation rights, restricted stock, and deferred stock units.
 
Under the Company’s 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 Company’s Stock Option and Incentive Plan to date.
 
 
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On October 14, 2009, the Company’s Board of Directors granted its Chairman and founder, Howard S. Jonas, 1.8 million restricted shares of the Company’s Class B common stock with a value of $1.25 million on the date of grant in lieu of a cash base salary for five years period from October 14, 2009 through October 14, 2014. 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 the Company terminates Mr. Jonas’ employment other than under circumstances where 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 the Company for cause, a pro rata portion of the shares would vest and the remainder would be forfeited. This arrangement did 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 has been and is expected to continue to be recognized over the vesting period from October 14, 2009 through October 14, 2014. The unrecognized compensation cost as of January 31, 2011 was $0.67 million.
The Company repurchased $1.1 million of its Class A and Class B common stock in the second quarter ended January 31, 2010 in connection with the tender offer that expired on December 22, 2009.
Note 6—Comprehensive LossIncome (Loss)
 
Comprehensive income (loss) consists of net income (loss) and other gains and losses affecting equity that, under generally accepted accounting principles are excluded from net income. Changes in the components of other comprehensive income (loss) are described below.
 
  
Three Months Ended
April 30,
  
Nine Months Ended
April 30,
 
  2010  2009  2010  2009 
  (in thousands)  (in thousands) 
Net loss
 $(1,095) $(1,795) $(1,145) $(34,198)
Foreign currency translation adjustments
  (10)  (20)  (11)  (99)
Comprehensive loss
  (1,105)  (1,815)  (1,156)  (34,297)
Less: comprehensive (loss) income attributable to noncontrolling interests
  (36)  -   115   (737)
Comprehensive loss attributable to CTM Media Holdings, Inc.
 $(1,069)  (1,815) $(1,271) $(33,560)
   
Three Months Ended
January 31,
  
Six Months Ended
January 31,
 
  2011  2010  2011  2010 
  (in thousands)  (in thousands) 
Net income (loss) $(28) $(725) $769  $(50)
Foreign currency translation adjustments  16   (5)  48   - 
Comprehensive income (loss)  (12)  (730)  817   (50)
Comprehensive income (loss) attributable to non-controlling interests  (116)  (6)  (203)  (151)
Comprehensive income (loss) attributable to CTM Media Holdings, Inc. $(128)  (724) $614  $(201)
 
Note 7—Business Segment Information
 
The Company has the following reportable business segments: CTM and IDW. CTM consists of our 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 original intellectual property.  The Company owns 76.665% of IDW.
  
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.management.
 
The accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the performance of its business segments based primarily on operating income (loss). There are no other significant asymmetrical allocations to segments.
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Operating results for the business segments of the Company are as follows:
 
(in thousands) CTM  IDW  Total 
Three months ended April 30, 2010         
Revenues $4,051  $2,781  $6,832 
Operating loss  (343)  (314)  (657)
Depreciation and amortization  186   11   197 
Total assets at April 30, 2010 (i)  7,269   6,584   16,189 
Three months ended April 30, 2009            
Revenues $3,877  $2,928  $6,805 
Operating income(loss)  (906)  311   (595)
Depreciation and amortization  181   32   213 
Impairment and severance charges  72   -   72 
Total assets at April 30, 2009 (i)  7,187   5,705   15,778 
Nine months ended April 30, 2010            
Revenues $12,890  $8,541  $21,431 
Operating income (loss)  44   (312)  (268)
Depreciation and amortization  586   67   653 
Nine months ended April 30, 2009            
Revenues $14,244  $8,253  $22,497 
Operating loss  (31,098)  (1,307)  (32,405)
Depreciation and amortization  589   183   772 
Impairment and severance charges  30,300   1,824   32,124 
(i)  The Total column includes assets of WMET
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(in thousands) CTM  IDW  Total 
Three months ended January 31, 2011         
Revenues $4,011  $3,666  $7,677 
Income (loss) from operations  (527)  495   (32)
Depreciation and amortization  164   9   173 
Total assets at January 31, 2011  10,362   7,315   17,677 
Three months January 31, 2010            
Revenues $3,924  $2,441  $6,365 
Income (loss) from operations  (375)  (306 )  (681)
Depreciation and amortization  203   25   228 
Total assets at January 31, 2010  9,918   6,547   16,465 
Six months ended January 31, 2011            
Revenues $9,040  $7,286  $16,326 
Income (loss) from operations  (32)  857   825 
Depreciation and amortization  323   21   344 
Six months ended January 31, 2010            
Revenues $8,839  $5,759  $14,598 
Income (loss) from operations  387   1   388 
Depreciation and amortization  399   57   456 
 
Note 8—Related Party Transaction Provision for Income Taxes
 
Prior to the Spin-Off, IDT Corporation, the Company’s former parent company, charged the Company for certain transactions and allocated routine expenses based on company specific items to the entities that became the Company’s consolidated subsidiaries. The Company and IDT Corporation entered into a Master Services Agreement, dated September 14, 2009, pursuant to which IDT Corporation will continue to provide to the Company, among other things, certain administrative and other services. In addition, pursuant to the Master Services Agreement, IDT Corporation will provide certain additional services to the Company, on an interim basis. 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, Audi t Committee and Compensation Committee, as well as assistance with corporate governance. The cost of these additional services are not includedIncome tax expense decreased in the Company’s historical results of operations for the period prior to the Spin-Off, as they were not applicable for periods that the Company was not a separate public company. In the three and ninesix months ended April 30, 2010, the Company’s selling, general and administrative expenses were $0.2 million and $1.1 million, respectively, for all services and allocated expenses charged by IDT CorporationJanuary 31, 2011 compared to the Company. Insimilar period in fiscal 2010 due to decreases in state and local and foreign income tax expense which was partially offset by an increase in US Alternative Minimum Tax expense. State and local income tax expense decreased in the three and ninesix months ended April 30, 2009, the Company’s selling, general and administrative expenses were $0.8 million and $3.6 million, respectively, for all services and allocated expenses charged by IDT CorporationJanuary 31, 2011 compared to the Company.similar periods in fiscal 2010 due to the utilization of Net Operating Losses (NOLs) that were not available in the prior periods. Our foreign income tax expense results from income generated by our foreign subsidiaries that cannot be offset against losses of our other subsidiaries.
 
In September 2009, IDT Corporation funded the Company with an additional $2.0 million in cash in advance of the Spin-Off.  Also on September 14, 2009, the aggregate of approximately $27.3 million of the amount due to IDT Corporation was converted into a capital contribution. At April 30, 2010, other current liabilities included $0.1 million due to IDT Corporation.
IDT Corporation and the Company 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 must indemnify 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 must indemnify 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 has the right to control the conduct of any audit, examination or other proceeding brought by a taxing authority. The Company has 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 9 – Impairment and Severance ChargesTender Offer

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 and IDW 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 the nine months ended April 30,On November 17, 2009, the Company recorded goodwill impairmentcommenced a tender offer to purchase up to thirty percent of $29.7its outstanding common stock. The Company concluded the tender offer and repurchased 0.2 million in C TMshares of Class A common stock and $1.80.8 million in IDW, which reducedshares of Class B common stock for an aggregate purchase price of $1.1 million, representing approximately 14% of its total outstanding capital stock at the carrying amount of the goodwill in each of these reporting units to zero.time.
In the three and nine months ended April 30, 2009, the Company recorded restructuring charges of $0.1 million and $0.7 million, respectively, consisting primarily of severance related to a company-wide cost savings program and reduction in force.

Note 10 – Acquisitions
Purchase of NoncontrollingNon-Controlling Interests in IDW

On November 5, 2009, the Company purchased an additional 23.335% interest in IDW for a purchase price of $0.4 million in cash. As a result of the transaction, the Company owns a 76.665% interest in IDW. The acquisition was accounted for in the second quarter of fiscal 2010 as an equity transaction, in accordance with the accounting standards on noncontrollingnon-controlling interests.  The Company acquired the additional interests as it determined that the purchase price was reasonable as well as to reduce the number of noncontrolling interest holders in this business.
 
Note 11— Recently Adopted Accounting Standards and Recently Issued Accounting Standards Not Yet Adopted
 
In September 2009, the Company adopted changes issued by theThe Financial Accounting Standards Board (“FASB”) periodically issues new accounting standards in a continuing effort to improve standards of financial accounting and reporting. We have reviewed the recently issued pronouncements and concluded that no new standards were issued this quarter that applied to the authoritative hierarchy of U.S. GAAP. These changes establish the FASB Accounting Standards Codification™ (the “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 did not change or alter existing U.S. GAAP. The adoption of these changes had no impact on the Company’s financial position, results of operations or cash flows.Company.
 
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On August 1, 2009,In January 2010, the Company adopted the accounting standard relating to noncontrolling interests in consolidated financial statements. This standard clarifies that a noncontrolling interest in a subsidiary,FASB issued Accounting Standards Update (ASU) No. 2010-06, “Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”), which was previously referred to as a minority interest, is an ownership interestincluded in the consolidated entity that should be reported as equityASC Topic 820 (Fair Value Measurements and Disclosures). ASU 2010-06 requires new disclosures on the amount and reason for transfers in the consolidated financial statements. Also, this standard requires consolidated net income (loss) to include the amounts attributable to both the parent and the noncontrolling interest,out of Level 1 and it2 fair value measurements.  ASU 2010-06 also requires disclosure of activities, including purchases, sales, issuances, and settlements within the amounts of net income (loss) attributable to the parent and to the noncontrolling interest. Finally, this standard 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 theLevel 3 fair value measurements and clarifies existing disclosure requirements on levels of any noncontrolling equity investment rather than the carrying amount of the retained investment. As required by this standard, the Company retrospectively changed the classificationdisaggregation and presentation of noncontrolling interests in its financial statementsdisclosures about inputs and valuation techniques.  Except for all prior periods.otherwise provided, ASU 2010-06 is effective for interim and annual reporting periods beginning after December 15, 2009. The adoption of this standard did not have a material effect on the Company’s financial statements.

In February 2010, the FASB issued ASU No. 2010-09, “Amendments to Certain Recognition and Disclosure Requirements” (“ASU 2010-09”), which is included in ASC Topic 855 (Subsequent Events).  ASU 2010-09 clarifies that an SEC filer is required to evaluate subsequent events through the date that the financial statements are issued.  ASU 2010-09 was effective upon the issuance of the final update and did not have any impact on the Company’s financial position, results of operations or cash flows. In January 2010, the FASB amended the accounting standard relating to noncontrolling interests in consolidated financial statements (1) to address implementation issues related to the changes in ownership provisions of the standard and (2) to expand the disclosures about the deconsolidation of a subsidiary or de-recognition of a group of assets within the scope of the standard. These amendments were effective for the Company when they were issued by the FASB. The adoption of the amendments to this standard did not hav e a material impact on the Company’s financial position, results of operations or cash flows.statements.
Note 12 — Subsequent Events
 
In June 2009,The Company completed a review and analysis of all events that occurred after the FASB issued changesbalance sheet date to the accounting for transfers of financial assets. These changes include (a) eliminating the concept of a qualifying special-purpose entity (“QSPE”), (b) clarifyingdetermine if any such events must be reported and amending the de-recognition criteria for a transferhas determined that there are no subsequent events 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. These changes also require 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 these changes on August 1, 2010. The Company is currently evaluating the impact of these changes on its consolidated financial statements.disclosed.
In June 2009, the FASB issued changes to the consolidation guidance applicable to a variable interest entity (“VIE”) including amending 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. The changes also require continuous reassessments of whether an enterprise is the primary beneficiary of a VIE and enhance d disclosures about an enterprise’s involvement with a VIE. The Company is required to adopt these changes on August 1, 2010. The Company is currently evaluating the impact of these changes on its consolidated financial statements.
In January 2010, the FASB amended the accounting standard relating to fair value measurements primarily to improve the disclosures about fair value measurements in financial statements. The main provisions of the amendment require new disclosures about (a) transfers in and out of the three levels of the fair value hierarchy and (b) activity within Level 3 of the hierarchy. In addition, the amendment clarifies existing disclosures about (1) the level of disaggregation of fair value measurements, (2) valuation techniques and inputs used to measure fair value, and (3) postretirement benefit plan assets. The Company was required to adopt these changes to its disclosures about fair value measurements on February 1, 2010, except for certain of the disclosures about the activity within Level 3, which are required to be adopted on August 1, 2011. The Company does not expect the adoption of these changes to its disclosures about fair value measurements to have an impact on its financial position, results of operations or cash flows.

 
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Item 2.      Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
The following information should be read in conjunction with the accompanying condensed consolidated financial statements and the associated notes thereto of this Quarterly Report, on Form 10-Q,and the audited consolidated financial statements and the notes thereto and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended July 31, 2009,2010, as filed with the U.S. Securities and Exchange Commission (the “SEC”).
 
In accordance with Item 10(f)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 January 29, 2010, the September 14, 2009 Spin-Off datelast business day of our second fiscal quarter in fiscal 2010, 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 Quarterly Report on Form 10-Q.
 
As used below, unless the context otherwise requires, the terms “the Company,” “we,” “us,” and “our” refer to CTM Media Holdings, Inc., a Delaware corporation, and our subsidiaries.
 
Forward-Looking Statements
 
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, 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 c ouldcould result in those differences include, but are not limited to, those discussed under Item 1A to Part I “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended July 31, 2009.2010. The forward-looking statements are made as of the date of this 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 Annual Report on Form 10-K for the fiscal year ended July 31, 2009.2010.
 
OVERVIEW

We are a former subsidiary of IDT Corporation (“IDT”).Corporation. 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 needCorporation continues to incur additional costs for the infrastructure to perform the necessary accounting, internal control and reporting functions. We expect the annual incremental costs for theseprovide certain functions to be between $600,000 and $700,000. A significant portion of these functions will be provided by IDT pursuant to thea Master Services Agreement, dated September 14, 2009, between us and IDT. In2009. During the three and ninesix months ended April 30,January 31, 2011 and 2010, our selling, general and administrative expenses were $0.2included $0.1 million and $1.1 million, respectively, for all services and allocated expenses charged by IDT to us. In the three and nine months ended April 30, 2009, our selling, general and administrative expenses were $0.8 million and $3.6$0.5 million, respectively, for all services and allocated expenses charged by IDT Corporation to us. At April 30,January 31, 2011 and July 31, 2010 other current liabilities included $0.1 million duethe amount owed to IDT Corporation.Corporation was $0.1 million.
 
On November 17, 2009, wethe Company commenced a tender offer to purchase up to thirty percent of ourits outstanding common stock. We offered to purchase up to 0.4 million shares of our Class A common stock, or any lesser number of Class A shares that stockholders properly tendered inThe Company concluded the tender offer and up to 2.4 million shares of our Class B common stock, or any lesser number of Class B shares that stockholders properly tendered in the tender offer, at a price per share of $1.10, for a maximum aggregate purchase price of $3.1 million. The offer expired on December 22, 2009. In the tender offer, we repurchased 0.2 million shares of Class A common stock and 0.8 million shares of Class B common stock for an aggregate purchase price of $1.1 million, representing approximately 14% of our thenits total outstanding capital stock at the time.

On May 5, 2010, the Company consummated the sale of substantially all of the assets used in the WMET radio station business (other than working capital). WMET 1160 AM is a radio station serving the Washington, D.C. metropolitan area.  The sale price for the WMET assets was $4 million in a combination of cash and a promissory note of the buyer that time.is secured by the assets sold.  $1.3 million of the purchase price was paid in cash at the closing and the remainder is owed pursuant to a two-year promissory note, which is extendable in part to three years at the option of the buyer. The sale met the criteria to be reported as a discontinued operation in the third quarter of fiscal 2010 and accordingly, WMET’s results are classified as part of discontinued operations during the fiscal year 2010.
 
Our principal businesses consist of:
 
 CTM Media Group (“CTM”), our brochure distribution company and other advertising-based new product initiatives focused on small to medium sized businesses; and
 
 Our majority interest in Idea and Design Works, LLC (“IDW”), which is a comic book and graphic novel publisher that creates and licenses intellectual property.
All references to the Company, its assets and results of operations for periods prior to the actual formation of the Company, refer to the subsidiaries of IDT that are now, or were, owned by the Company, and their consolidated assets and results of operations.

 
12
 
 
CTM

CTM develops and distributes print and mobile-based advertising and information in targeted tourist markets. Throughout its operating region, CTM operates fivefour integrated and complimentary business lines: Brochure Distribution, Publishing, RightCardTM, and Digital Distribution. CTM had operated its Design & Print Publishing, RightCardTM, and Digital Distribution.business, which it exited at the beginning of the fourth quarter of fiscal 2010. CTM offers its customers a comprehensive media marketing approach through these business lines. In fiscal 2009,2011, CTM servicedhas been servicing over 3,0002,600 clients and maintainedhas been maintaining more than 11,000 display stations in over 3028 states, territories 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 e ntertainmententertainment venues. CTM’s revenues represented 60.1%55.4% and 59.2% of our consolidated revenues from continuing operations in the ninesix months ended April 30,January 31, 2011 and 2010, and 63.3% in the similar period in fiscal 2009.respectively.
 
IDW

IDW is a comic book and graphic novel publisher that creates and licenses intellectual property. IDW’s revenues represented 39.9%44.6% and 38.5% of our consolidated revenues from continuing operations in the ninethree months ended April 30,January 31, 2011 and 2010, and 36.7% in the similar period in fiscal 2009.respectively.
 
On November 5, 2009 we purchased an additional 23.335% interest in IDW for a purchase price of $0.4 million in cash.million. As a result of the transaction, we own a 76.665% interest in IDW. We acquired the additional interests as we determined that the purchase price was reasonable as well as to reduce the number of noncontrolling interest holders in this business.
On May 5, 2010, the Company consummated the sale of substantially all of the assets used in the WMET radio station business (other than working capital) for a sale price of $4 million in a combination of cash and a promissory note from the buyer  that is secured by the assets being sold. $1.3 million of the purchase price was paid in cash at the closing and the remainder will be paid pursuant to a two-year promissory note, which is extendable in part to three years at the option of the buyer. The sale met the criteria to be reported as a discontinued operation in the third quarter of fiscal 2010 and accordingly, WMET’s results are classified as part of discontinued operations.

REPORTABLE SEGMENTS
 
We have the following two reportable business segments: CTM and IDW are our reportable business segments.IDW.
 
PRESENTATION OF FINANCIAL INFORMATION
 
Basis of presentation
The condensed consolidated financial statements for the periods prior to the September 2009 Spin-Off reflect our financial position, results of operations, 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 condensed consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Our significant accounting policies are described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for fiscal 2009.2010. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues 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 policie spolicies include those related to the allowance for doubtful accounts 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. For additional discussion of our critical accounting policies, see our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal 2009.2010.

13
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. Also, we did not include a separate discussion of WMET’s results of operation since the operations were not significant.
13
Three and NineSix Months Ended April 30, 2010January 31, 2011 Compared to Three and NineSix Months Ended April 30, 2009January 31, 2010
 
Consolidated
 
(in millions) 
Three Months ended
April 30,
  Change  
Nine Months ended
April 30,
  Change 
  2010  2009     $ %  2010   2009     $ %
Revenues                            
CTM $4.1  $3.9  $0.2   4.5% $12.9  $14.2  $(1.3)  (9.5) %
IDW  2.7   2.9   (0.2)  (5.0)  8.5   8.3   0.2   3.5 
Total revenues $6.8  $6.8  $(0.0)  0.4% $21.4  $22.5  $(1.1)  (4.7) %

(in millions) 
Three Months ended
January 31,
  Change  
Six Months ended
January 31,
  Change 
  2011  2010  $   %   2011   2010  $   % 
Revenues                            
CTM $4.0  $3.9  $0.1   2.6  $9.0  $8.8  $0.2   2.3 
IDW  3.6   2.4   1.2  50   7.3   5.7   1.6   28.1 
Total revenues $7.6  $6.3  $1.3   20.6  $16.3  $14.5  $1.8   12.4 
 
Revenues.The increase in consolidated revenues in the three and six months ended April 30, 2010January 31, 2011 compared to the similar periodperiods in fiscal 20092010 was flat asprimarily due to the increase in CTMIDW’s  revenues was offset byand a decreaseslight increase in IDWCTM’s revenues. The increase in CTMIDW’s revenues was primarily due to an increase in distributionpublishing revenues, digital publishing revenues, and barter revenueroyalty income which were partially offset by a decreasedecline in printinglicensing revenues. The decrease in consolidatedCTM’s revenues  induring the nine monthsthree and six month periods ended April 30, 2010January 31, 2011 slightly increased when compared to the similar periodperiods in fiscal 2009 was primarily2010 due to the decreaseincreases in  CTMRight CardTM revenues, map publishing revenues,  and digital revenues which were partially offset by an increasedeclines in IDW revenues. The decreaseprinting revenues, which business we exited in CTM revenues was primarily due to a global economic slowdown in our distribution and printing businesses. Somethe fourth quarter of CTM’s distribution customers rely on state and local funding or grants which ha ve been decreased or eliminated, resulting in reduced advertising and customer spending and, in some cases, certain of our customers going out of business. The increase in IDW revenues was primarily due to an increase in licensing and royalty, digital publishing and creative service revenue, partially offset by lower publishing revenue..fiscal 2010. 
 
(in millions) 
Three Months ended
April 30,
  Change  
Nine Months ended
April 30,
  Change    Three Months ended January 31, Change   Six Months ended January 31, Change 
 2010  2009     $ %  2010   2009     $ % 2011 2010 $ % 2011 2010 $ % 
Costs and expenses                                             
Direct cost of revenues $3.6  $3.6  $(0.0)  0.1% $10.6  $10.6  $0.0   0.3% $3.7 $3.2 $0.5 15.6 $7.4 $6.9 $0.5 7.2 
Selling, general and administrative  3.7   3.3   0.4   12.0   10.3   10.9   (0.6)  (5.1) 3.7 3.5 0.2 5.7 7.6 6.7 0.9 13.4 
Depreciation and amortization  0.2   0.2   (0.0) nm   0.7   0.8   (0.1)  (15.4) 0.2 0.2 0 - 0.4 0.5 (0.1) (20)
Bad debt expense  -   0.2   (0.2) nm   0.1   0.5   (0.4)  (83.0) 0.1 0.1 0 - 0.1 0.1 - 0 
Impairment and severance charges  -   0.1   (0.1) nm   -   32.1   (32.1) nm 
                         
Total costs and expenses $7.5  $7.4  $0.1   1.2% $21.7  $54.9  $(33.2)  (60.5) % $7.7 $7 $0.7  10 $15.5 $14.2 $1.3  9.2 

nm—not meaningful

Direct Cost of Revenues.The increase in direct cost of revenues in the three and six months ended April 30, 2010January 31, 2011 compared to the similar periodperiods in fiscal 20092010 was flat with a slight decrease in CTM revenues offset by a slightresult of an increase in IDW revenues.  The decrease in CTM direct cost of revenues wasat our   IDW segment which were partially offset by a result of a decrease in printing revenue.marginal decline at our CTM segment. The increase in IDW direct cost of revenues was a result of a shift in product mix. The direct cost of revenuesat IDW in the ninethree and six months ended April 30, 2010January 31, 2011 compared to the similar periodperiods in fiscal 20092010 was relatively flat with a slight decrease in CTM revenues offset by a slightdirectly attributable to the corresponding increase in IDW revenues.revenues at IDW. The decrease in CTM’s direct cost of revenues in the three and six months ended January 31, 2011 compared to the similar periods in fiscal 2010 was primarily due to decreased in distribution andprincipally as a result of our exiting the printing revenues offset by increased gasoli ne and payroll expenses. The increase in IDW’s direct cost of revenues reflects the increase in revenues and the shift in product mix.business. Overall gross margin percentage slightly increased to 47.2%51.3% and 54.6% in the three and six months ended April 30, 2010January 31, 2011 respectively, from 47.1%49.2% and 52.4% in the similar period in fiscal 2009. Overall gross margin percentage decreased to 50.6% in the ninethree and six months ended April 30,January 31, 2010 from 53.1%respectively. This increase was a result of an increase in the similar period in fiscal 2009, primarily due to a decrease in CTM’soverall gross margin, since a significant portion ofmargins at our CTM cost of sales is fixed, the gross margin percentage decreases when revenues decrease. Additionally, the gross margin percentage decreased due to IDW’s mix of products.and IDW segments
 
Selling, General and Administrative.The increase in selling, general and administrative expenses in the three and six months ended April 30, 2010January 31, 2011 compared to the similar periodperiods in fiscal 20092010 was a result ofprimarily due to an increase in the selling, general and administrative expenses of CTM which were partially offset by a decline in selling, general and administrative expenses of IDW. CTM’s selling, general and administrative expenses increase was primarily a result of costs associated with operating as a publicly traded company and non cash compensation costs offset by a decrease in costs from exited lines of business. The decrease in selling, general and administrative expensesincreased in the ninethree and six months ended April 30, 2010January 31, 2011 compared to the similar periodperiods in fiscal 2009 was2010 due to a decrease in the selling, general and administrative expenses of CTM offset by an increase in IDWpayroll costs, offsite costs related to meetings of CTM’s sales personnel, advertising costs, and professional costs. CTM’s selling, general and administrative expenses decrease was primarily due to the exit from certain unprofitable lines of businesses, reduction in compensation, commissions and insurance expenses partially offset by costs associated with operating as a publicly traded company and non cash compensation cost. IDW’s selling, general and administrative expenses increase was primarilydeclined marginally due to an increasea decline in the number of employees, consultantsadministrative and IDW’s share of costs associated with operating as a publicly traded company.occupancy costs. Total selling, general and administrative expenses associated with operating as a publicly traded company was $0.1were $0.2 million and $0.5$0.4 million for the three and ninesix months ended April 30, 2010. Stock based compensation costs was $0.1 million and $0.2 million for the three and nine months ended April 30, 2010.January 31, 2011.

 
14
 

 
As a percentage of total revenues, selling, general and administrative expenses increaseddecreased to 53.4%48.7% in the three months ended April 30,January 31, 2011 from 55.6% in the similar periods in fiscal 2010 and marginally increased to 46.6% in the six months ended January 31, 2011 from 47.9%46.2% in the similar period in fiscal 2009, as selling, general and administrative expenses increased while revenues remained comparatively flat. As a percentage of total revenues, the selling, general and administrative expenses remained relatively flat at 48.4% for the nine months ended April 30, 2010 compared to 48.5% in the similar period in fiscal 2009.2010.
 
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.year period from October 14, 2009 through October 14, 2014. 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’ ca shcash compensation from the date of the Spin-Off through the pay period ending onincluding 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.  The related stock-based compensation related to this grant was $0.1 million and $0.2 million for the three and ninesix months ended April 30, 2010,January 31, 2011, respectively.
 
Bad Debt Expense.The decrease and increase in bad debt expense in the three and ninesix months ended April 30, 2010January 31, 2011 was due primarily to a corresponding decrease and increase in bad debt expense of CTM.
Impairment and Severance Charges. 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 and IDW 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 the three and nine months ended Apr il 30, 2009, we recorded goodwill impairment of $29.7 million in CTM and $1.8 million in IDW, which reduced the carrying amount of the goodwill in each of these reporting units to zero. In the three and nine months ended April 30, 2009 we recorded restructuring charges of $0.1 million and $0.7 million, respectively, consisting primarily of severance related to a company-wide cost savings program and reduction in force.
(in millions) 
Three Months ended
January 31,
  Change  
Six Months ended
January 31,
  Change 
  2011  2010  $  %   2011  2010  $  % 
(Loss) income from operations $-  $(0.7) $0.7   100.0  $0.9  $0.3  $0.6      200 
Benefit from (provision for) income taxes  0.0   0.1   (0.1)  (100.0)   (0.1)  (0.0)  (0.1)  100 
Loss related to discontinued operations  -   (0.1)  0.1   100.0   -   (0.3)  0.3   - 
Net (loss) income  -   (0.7)  0.7   100.0   0.8   (0.0)  0.8   100 
     Less: Net loss (income) attributable to non - controlling interest  (0.1)   -   (0.1)   100.0   (0.2)  (0.2)   -   - 
Net (loss) income attributable to CTM Media Holdings, Inc. $(0.1) $(0.7) $0.6   86.0  $0.6  $(0.2) $0.8   400 

(in millions) 
Three Months ended
April 30,
  Change  
Nine Months ended
April 30,
  Change 
  2010  2009   $  %   2010   2009   $  % 
 Loss from operations $(0.7) $(0.6) $(0.1)  10.3% $(0.3) $(32.4) $32.1  nm 
Interest income, net  -   -   -  nm   (0.1)  -   (0.1) nm 
Other income, net  (0.1)  -   (0.1) Nm   (0.1)  -   (0.1) nm 
Benefit from income taxes  -   0.1   (0.1) nm   (0.1)  -   (0.1) nm 
Net loss  (0.8)  (0.5)  (0.3) nm   (0.6)  (32.4)  31.8  nm 
Loss from discontinued operations  (0.3)  (1.3)  1.0  nm   (0.6)  (1.8)  1.2  nm 
Net loss  (1.1)  (1.8)  0.7  nm   (1.2)  (34.2)  33.0  nm 
     Less: Net income (loss) attributable to noncontrolling interest  -   -   -  nm   0.1   (0.7)  0.8  nm 
Net loss attributable to CTM Media Holdings, Inc. $(1.1) $(1.8) $0.7   41.0% $(1.3) $(33.5) $32.2  nm 

nm—not meaningful

Income Taxes. Benefit from (provision for) income taxes in the three and ninesix months ended April 30,January 31, 2010 compared to the similar periodperiods in fiscal 2009 remained substantially unchanged.
 
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 must indemnify us from all liability for taxes of ours and our subsidiaries for periods ending on or before September 14, 2009, and we must indemnify IDT from all liability for taxes of ours and our subsidiaries accruing after September 14, 2009. Also, for periods ending on or before September 14, 2009, IDT hasshall 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 benefitaccount of IDT.
 
 
15
 
 
Income (loss) attributable to noncontrolling interests .non controlling interests.Our noncontrolling interests relate to minority holders of IDW. On November 5, 2009, we purchased an additional 23.335% noncontrolling interest in IDW for a purchase price of $0.4 million in cash. As a result of the transaction, we own a 76.665% interest in IDW.
CTM
 
(in millions) 
Three months ended
April 30,
  Change  
Nine Months ended
April 30,
  Change 
  2010  2009  $  %   2010   2009  $  % 
Revenues $4.1  $3.9  $0.2  4.5% $12.9  $14.2  $(1.3) (9.5) %
Direct cost of revenues  1.7   1.9   (0.2) (10.3)  5.1   5.5   (0.4) (7.6)
Selling, general and administrative  2.5   2.4   0.1  3.9   7.1   8.4   (1.3) (15.9)
Depreciation and amortization  0.2   0.2   0.0  nm   0.6   0.6   0.0  nm 
Bad debt expense  0.0   0.2   (0.2) nm   0.1   0.5   (0.4) nm 
Impairment and severance charges  0.0   0.1   (0.1) nm   0.0   30.3   (30.3) nm 
(Loss) income from operations $(0.3) $(0.9) $0.6  nm  $0.0  $(31.1) $31.1  nm 
nm—not meaningful
(in millions) 
Three months ended
January 31,
  Change  
Six Months ended
January 31,
  Change 
  2011  2010  $   %   2011   2010  $   % 
Revenues $4.0  $3.9  $0.1   2.6  $9.0  $8.8  $0.2   2.3 
Direct cost of revenues  1.5   1.7   (0.2)  11.8   3.1   3.4   (0.3)  (8.8)
Selling, general and administrative  2.8   2.4   0.4   16.7   5.5   4.6   0.9   19.6 
Depreciation and amortization  0.1   0.2   (0.1)  (50.0)  0.3   0.4   (0.1)��  (25.0) 
Bad debt expense      -       -  -   0.1   0.0   0.1  100.0 
(Loss) income from operations $(0.4) $(0.4) $-  -  $0.0  $0.4  $(0.4) (100.0)

Revenues.The marginal increase in CTM’s revenues in the three and six months ended April 30, 2010January 31, 2011 compared to the similar periodperiods in fiscal 20092010 was primarily due to an increase in distribution and barter revenue offset by a decrease in the printing business. The most significant increase in the distributions revenue have beenincreases in our New York marketright card revenues, map publishing revenues, and digital revenues which were Broadway show advertising has rebounded, followed by our Canada business which has been positively affected by a revised barter agreement. The increase in distribution revenue is partially offset by decreasesdeclines in Florida, Philadelphia and New England. The decrease inprinting revenues resulting from our printing business is a result of a departure from this business toward the end of the third quarter. The only revenues from thisexiting that line of business going forward will be on a commission basis for referring our customer base. The decrease in CTM’s revenues in the nine months ended April 30, 2010 comparedfourth quarter of fiscal 2010. We are continuing to see positive signs of a gradual recovery in our business such that we expect revenues to be more or at least equal to the similar periodcorresponding periods in fiscal 2009 was primarily due to a the global economic slowdown in our distribution and  printing business. The most significant declines were in our New York market, due to the weakness in Broadway show advertising, followed by Connecticut, Pennsylvania, Florida and Chicago. Some of CTM’s distribution customers rely on state and local funding or grants which have been decreased or eliminated resulting in reduced advertising and customer spending.2010.

Direct Cost of Revenues.Direct cost of revenues consists primarily of distribution and fulfillment payroll, warehouse and vehicle distribution expenses and print and design expenses. The decrease in direct cost of revenues in the three months and six months ended April 30,January 31, 2011 compared to the similar periods in fiscal 2010 is a resultslightly lower. The decline is primarily on account of a decrease in printing revenues. Despite the slight increase in distribution revenue the cost remains relatively flat as most of its costs are fixed. The decreasedecreases in direct cost of revenues in the nine months ended April 30, 2010 compared to the similar period in fiscal 2009 is primarily due to decreased in distribution and printing revenues associated with our unprofitable printing business which were partially offset by increased gasolineincreases in direct costs of Right CardTM and payroll expenses.publishing revenues.
 
CTM’s gross margin percentage increased in the three and six months ended April 30, 2010January 31, 2011 to 57.7% from 50.7% due62.5% and 65.6%, respectively, compared to lower revenues in the printing business which has relatively lower margins. CTM’s gross margin percentage decreased to 60.5% in the nine months ended April 30, 2010 from 61.3%56.4% and 61.4% in the similar periodperiods in fiscal 2009.2010. Since a significant portion of CTM’s cost of sales is fixed, the gross margin percentage decreases when revenues decrease. Additionally, there was an increase in gasoline and payroll costs during the ninethree and six months ended April 30, 2010 which negatively impacted the gross margin.January 31, 2010.
 
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 was relatively flat forincreased in the three and six months ended April 30, 2010January 31, 2011 as compared to the similar periodperiods in fiscal 2009. The increase of $0.2 million2010 primarily due to marginal increases in offsite staff training costs, facilities rent, and advertising costs. Total selling, general and administrative expenses for these costs associated with operating as a publicly traded company and stock based compensation was offset by a $0.2 million decrease in costs from exited lines of business. Selling, general and administrative expenses decreased in the nine months ended April 30, 2010 as compared to the similar period in fiscal 2009 primarily due to the exit from certain unprofitable lines of businesses, reduction in compensation, commissions and ins urances partially offset by costs associated with operating as a publicly traded company and stock based compensation. Total selling, general and administrative expenses associated with operating as a publicly traded company and stock based compensation was $0.3 and $0.2$0.4 million for the ninethree and six months ended April 30, 2010.January 31, 2011. As a percentage of CTM’s aggregate revenues, selling, general and administrative expenses decreasedincreased to 60.7%70.0% and 54.9%61.1% in the three and ninesix months ended April 30, 2010, respectively,January 31, 2011 from 61.0%60.3% and 59.1%52.3% in the three and nine months ended April 30 2009, respectively.similar periods in fiscal 2010.
 
Impairment and severance charges. In the nine months ended April 30, 2009, we recorded aggregate goodwill impairment of $29.7 million in CTM, which reduced the carrying amount of the goodwill to zero. In the three and nine months ended April 30, 2009, we recorded restructuring charges of $0.1 million and $0.6 million, respectively, consisted primarily of severance related to a company-wide cost savings program and reduction in force.

 
16
 
IDW
 
(in millions) 
Three Months ended
April 30,
  Change  
Nine Months ended
April 30,
  Change 
  2010  2009  $  %   2010   2009  $  % 
Revenues $2.7  $2.9  $(0.2) (5.0)% $8.5  $8.3  $0.2  3.5%
Direct cost of revenues  1.8   1.7   0.1  11.8   5.5   5.0   0.5  9.0 
Selling, general and administrative  1.2   0.9   0.3  33.4   3.2   2.6   0.6  31.3 
Depreciation and amortization  -   -   -  nm   0.1   0.2   (0.1) nm 
Impairment and severance charges  -   -   -  nm   0.0   1.8   (1.8) nm 
(Loss) income from operations $(0.3) $0.3  $(0.6) nm  $(0.3) $(1.3) $(1.0) nm 
nm—not meaningful
(in millions) 
Three Months ended
January 31,
  Change  
Six Months ended
January 31,
  Change 
  2011  2010  $   %   2011   2010  $   % 
Revenues $3.6  $2.4  $1.2   50.0  $7.3  $5.8  $1.5   25.9 
Direct cost of revenues  2.1   1.6   0.5   31.3   4.3   3.6   0.7   19.4 
Selling, general and administrative  1.1   1.1   -   -   2.1   2.1   -   - 
Depreciation and amortization  -   -   -  -   0.1   0.1   -  - 
Income from operations $0.3  $(0.3) $0.7  233.3  $0.8  $-  $0.8  100 

Revenues.IDW’s revenues increased in the three and six months ended April 30, 2010January 31, 2011 as compared to the similar periodperiods in fiscal 2009 was  lower due to publishing revenue from comic book movie releases toward the end of the third quarter of 2009, which resulted in higher revenue in that period. The decrease in publishing revenues was partially offset by an increase in creative services and digital publishing revenue.2010. The increase in IDW’s revenues in the nine months ended April 30, 2010 as compared to the similar periodperiods in fiscal 20092010 was primarily due to the release of blockbuster products Bloom County, The Outfit (YTD), True Blood, and James Patterson’s Witch & Wizard. Digital publishing revenues continued to increase due to the greater application of digital equipment leading to an increase in licensing and royalty, digital publishing and creative services revenue, partially offset by lower publishing revenue. We do not expect IDW’s fiscal 2010 revenues to be as high as those earned in fis cal 2009 since revenues generated by the comic book movie releases in the fourth quarter of 2009 were exceptionally high.revenues.
 
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,devices, primarily iPhones/iPod Touch.Touch/iPad. IDW titles are also available direct-to-desktop via several websites and are available on Sony’s PSP and PSP Go.
 
Direct Cost of Revenues.Direct cost of revenues consists primarily of printing expenses and costs of artists and writers. Direct cost of revenues in the three months ended April 30, 2010January 31, 2011 as compared to the similar period in fiscal 2009 was slightly higher due2010 increased in proportion to a shiftincrease in product mix. The product shift of increased salesrevenues and also to hard cover edition graphic novels bear a slightly higher cost of sales than the traditional soft cover comic books with lower cost of sales. Additionally, fiscal 2010 revenue consisted of an increased number of titles sold, with lower sales per title. This resultedincrease in lower print runs, which carry a higher print cost per unit.royalty expenses. The increase in direct cost of revenues in the ninesix months ended April 30, 2010January 31, 2011 as compared to the similar period in fiscal 2009 reflects2010 was principally attributable to the increase in revenues, the shift in product mix.revenues.
 
IDW’s aggregate gross margin decreasedincreased in the three and ninesix months ended April 30, 2010January 31, 2011 to 32.0%41.7% and 35.6%41.1%, respectively, from 42.2%33.3% and 38.9%37.9% in the similar periods in fiscal 2009.2010. The decreaseincrease in the three and ninesix months ended April 30,January 31, 2010 was primarily due to the mix of products.
 
Selling, General and Administrative.Selling, general and administrative expenses increased in the three and ninesix months ended April 30, 2010January 31, 2011 remained the same as compared to the similar period in fiscal 2009 primarily due to an increase in allocated expenses to IDW by CTM Holdingsperiods in fiscal 2010. This allocation includes executive salaries, stock based compensationMarginal declines in occupancy and administration costs associated with operating aswere offset by a publicly traded company, which were approximately $0.2 millionslight increase in marketing and $0.4 million for the three and nine months ended April 30, 2010, respectively. IDW has increased staff in an effort to increase the number of titles sold and establish a footprint into digital distribution.personnel costs. As a percentage of IDW’s aggregate revenues, selling, general and administrative expenses increaseddecreased in the three and ninesix months ended April 30, 2010January 31, 2011 to 42.9%30.6% and 38.5%28.8%, respectively, from 30.5%47.8% and 30.3%36.4% in the similar periods in fiscal 2009,2010, as revenues increased at a slowerfaster rate thanwhile selling, general and administrative expenses.expenses remained the same.
Impairment and severance charges. In th nine months ended April 30, 2009, we recorded aggregate goodwill impairment of $1.8 million in IDW, which reduced the carrying amount of the 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) Nine months ended April 30,  Six months ended January 31, 
 2010  2009  2011 2010(i) 
Cash flows provided by (used in):           
Operating activities $1.8  $(0.5) $1.5 $2.3 
Investing activities  (0.7)  (1.5) .1  (0.5)
Financing activities  (1.4)  0.6   (1.2)  0.6 
Increase (decrease) in cash and cash equivalents from continuing operations  (0.3)  (1.4)
Discontinued operations  (0.4)  (0.2)
Increase (decrease) in cash and cash equivalents $(0.7) $(1.6)
Increase in cash and cash equivalents $0.4 $2.4 
(i)  Excludes cash flows from discontinued operations
 
 
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Operating Activities
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. Beginning 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 completed. The Local Pull product is still being offeredCash flows provided 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 frombased on these exited businesses was approximately $0.9factors were $1.6 million and $2.3 million for the ninesix months ended  April 30, 2009.January 31, 2011 and 2010, respectively.

Investing Activities
Activities.Our capital expenditures were $0.3$0.1 million inand $0.6 million during the ninesix months ended April 30,January 31, 2011 and 2010, and $0.5 million in the similar periodrespectively. We currently anticipate that total capital expenditures for all of our divisions in fiscal 2009.

On November 5, 2009, we purchased an additional 23.335% interest in IDW for a purchase price of $0.4 million in cash. As a result of the transaction, we own a 76.665% interest in IDW. We acquired the additional interests as we determined that the purchase price was reasonable as well as to reduce the number of noncontrolling interest holders in this business.

On May 5, 2010, the Company consummated the sale of substantially all of the assets used in the WMET radio station business (other than working capital) for a sale price of $4 million in a combination of cash and a promissory note from the buyer that is secured by the assets sold.  $1.3 million of the purchase price was paid in cash at the closing and the remainder2011 will be paid pursuantapproximately $0.3 million. We expect to a two-year promissory note, which is extendable in part to three years at the option of the buyer.fund our capital expenditures with our cash, cash equivalents and short term investments on hand.

Financing Activities
Activities.During allthe six months ended January 31, 2011, we did not receive any financing from IDT Corporation. During the periods presented throughthough the September 14, 2009 Spin-Off, IDT Corporation provided us with the required liquidity to fund our working capital requirements and investments for some of our businesses. During that period, weWe used any excess cash provided by our operations to repay IDT. In the ninethree months ended April 30, 2010 andOctober 31, 2009, IDT Corporation provided cash to us of $2.4 million and $1.1 million, respectively.million. In September 2009, the amount due to IDT Corporation of $27.3$25.3 million was converted into a capital contribution.
 
WeDuring the six months ended January 31, 2011 and 2010, we distributed cash of $0.4 million in the nine months ended April 30, 2010 and $0.3 million in the similar period in fiscal 2009 to the minority shareholders of IDW.IDW in the amount of $0.02 million and $0.4 million, respectively. We also paid dividends of $1.0 million during the six months ended January 31, 2011
 
We repaid capital lease obligations of $0.2 million in the nine months ended April 30, 2010 and $0.1 million in each of the similar period in fiscal 2009.
We repurchased $1.1 million of our Class A and Class B common stock in the ninesix months ended April 30, 2010 in connection with the tender offer that expired on December 22, 2009.
On February 23, 2010, our Board of Directors approved the payment of a cash dividend in the amount of $0.25 per share ($2.1 million in the aggregate) which was paid on March 15, 2010 to stockholders of record as of March 8, 2010 of our Class A, Class BJanuary 31, 2011 and Class C common stock..
On March 16, 2010, our Board of Directors, in light of our significant cash position, the positive impact of the declaration and payment of the $0.25 per share dividend and the lack of near-term needs or opportunities for deployment of our cash, determined to declare the payment of a cash dividend for our fourth quarter in the amount of $0.06 per share (approximately $0.5 million in the aggregate).  The dividend, subject to confirmation by our management that there is sufficient surplus as of the proposed payment date, will be paid on or about June 15, 2010 to stockholders of record as of May 3, 2010 of our Class A common stock, Class B common stock and Class C common stock.2010.

The declaration of any future dividend will be at the discretion of our Board of Directors and will depend on our financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination by our Board of Directors that dividends are in the best interest of our stockholders.

CHANGES IN TRADE ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
 
Gross trade accounts receivable decreasedincreased marginally to $3.4$3.0 million at April 30, 2010January 31, 2011 compared to $4.6$4.2 million at July 31, 2009, primarily due to higher collections in IDW.2010. The allowance for doubtful accounts as a percentage of gross trade accounts receivable marginally increased to 25.3%25.0% at April 30, 2010January 31, 2011 compared to 14.7%from 18.2% at July 31, 2009, primarily due to an increase in WMET’s allowance for bad debt.2010.
 
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.

In addition, we will utilize approximately $2 million annually to pay the regular quarterly dividends in the amount of $0.06 per share, subject to confirmation by our management that there is sufficient surplus as of the proposed future payment dates and other circumstances existing at the relevant times.
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Historically, we satisfied our cash requirements primarily through cash provided by CTM’s operating activities and prior to our separation from IDT, funding from IDT.IDT Corporation. The conversion of our balance due to IDT Corporation into a capital contribution as well as the $2.0 million cash contribution by IDT 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 that our operations in fiscal 20102011 and the balance of cash, cash equivalents and short term investment that we held as of April 30, 2010,January 31, 2011, will be sufficient to meet our currently anticipated working capital and capital expenditure requirements, capital lease obligations, make limited acquisitions and investments, pay the currently announced and any future declared dividends and fund any potential operating cash flow deficits within any of our seg mentssegments 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 revenues 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 7.7%8.2% and 6.7%7.5% of our consolidated revenues for the ninesix months ended April 30,January 31, 2011 and 2010, and 2009, 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.dollars. 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 and IDT entered intodo not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that are reasonably likely to have 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 must indemnify us from all liability for taxes of ours and our subsidiaries for periods ending oncurrent or before September 14, 2009, and we must indemnify IDT from all liability for taxes of ours and our subsidiaries accruing after September 14, 2009. Also, for periods ending on or before September 14, 2009, IDT has the right to control the conduct of any audit, examination or other proceeding brought by a taxing authority. We 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 benefit of IDT.
RECENTLY ADOPTED ACCOUNTING STANDARDS
In June 2009, the Financial Accounting Standards Board (“FASB”) issued changes to the accounting for transfers of financial assets. These changes include (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. These changes also require 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 financialfuture effect of restrictions on the transferor’s assets that continue to be reported in the statement of financial position. We are required to adopt these changes on August 1, 2010. We are currently evaluating the impact of these changes on our consolidated financial statements.
In June 2009, the FASB issued changes to the consolidation guidance applicable to a variable interest entity (“VIE”) including amending the guidance governing the determinationcondition, results of whether an enterprise is the primary beneficiary of a VIE, and is, therefore, required to consolidate the 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 lossesoperations, liquidity, capital expenditures or the right to receive benefits of the VIE that could potentially be significant to the VIE. The changes also require continuous reassessments of whether an enterprise is the primary beneficiary of a VIE and enhanc ed disclosures about an enterprise’s involvement with a VIE. We are required to adopt these changes on August 1, 2010. We are currently evaluating the impact of these changes on our consolidated financial statements.capital resources.
 
 
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RECENTLY ADOPTED ACCOUNTING STANDARDS

The Financial Accounting Standards Board (“FASB”) periodically issues new accounting standards in a continuing effort to improve standards of financial accounting and reporting. We have reviewed the recently issued pronouncements and concluded that no new standards were issued this fiscal quarter that applied to the Company.
In January 2010, the FASB amendedissued Accounting Standards Update (ASU) No. 2010-06, “Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”), which is included in the accounting standard relating to fair value measurements primarily to improve the disclosures about fair value measurements in financial statements. The main provisions of the amendment requireASC Topic 820 (Fair Value Measurements and Disclosures). ASU 2010-06 requires new disclosures about (1)on the amount and reason for transfers in and out of the three levels of theLevel 1 and 2 fair value hierarchymeasurements.  ASU 2010-06 also requires disclosure of activities, including purchases, sales, issuances, and (2) activitysettlements within the Level 3 of the hierarchy. In addition, the amendment clarifies existing disclosures about (1) the level of disaggregation of fair value measurements (2)and clarifies existing disclosure requirements on levels of disaggregation and disclosures about inputs and valuation techniquestechniques.  Except for otherwise provided, ASU 2010-06 is effective for interim and inputs usedannual reporting periods beginning after December 15, 2009. The adoption of this standard did not have a material effect on the Company’s financial statements.

In February 2010, the FASB issued ASU No. 2010-09, “Amendments to measure fair value,Certain Recognition and (3) postretirement benefit plan assets. We wereDisclosure Requirements” (“ASU 2010-09”), which is included in ASC Topic 855 (Subsequent Events).  ASU 2010-09 clarifies that an SEC filer is required to adopt these changes to our disclosures about fair value measurements on February 1, 2010, except for certainevaluate subsequent events through the date that the financial statements are issued.  ASU 2010-09 was effective upon the issuance of the disclosures about the activity within Level 3, which are required to be adopted on August 1, 2011. We dofinal update and did not expect the adoption of these changes to our disclosures about fair value measurements to have ana significant impact on ourthe Company’s financial position, results of operations or cash flows.statements.
Item 3.   Quantitative and Qualitative Disclosures About Market Risks
 
Smaller reporting companies are not required to provide the information required by this item.
Item 4T.4. Controls and Procedures
 
Evaluation of Disclosure Controls and Procedures.This Based on their evaluation as of January 31, 2011, our Chief Executive Officer and our Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) and concluded that our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in this Quarterly Report does not include a report of management’s assessmenton Form 10-Q was (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and regulations and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding internal control over financial reporting due to a transition period established by rules of the SEC for newly public companies.required disclosure.
 
Changes in Internal Control over Financial Reporting.  There were no changes in our internal control over financial reporting during the quartersix months ended April 30, 2010January 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
2019
 

  PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
 
None
 None
Item 1A. Risk Factors.
 
There are no material changes from the risk factors previously disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the year ended July 31, 2009.2010.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
None
Item 3. Defaults Upon Senior Securities.
 
None

Item 4. (Removed and Reserved)
 
Item 5.   Other Information.Information
 
None
 
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Item 6. Exhibits, Financial Statement Schedules.
Exhibit
Number
Description
  
 
31.1*Certification of Chief Executive Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
  
31.2*Certification of Chief Financial Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
  
32.1*Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
  
32.2*Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
*
Filed herewith.
 
 
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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
CTM Media Holdings, Inc.
   
June 14, 2010March 17, 2011By:/s/    Marc E. Knoller        
  
Marc E. Knoller
Chief Executive Officer and President
   
June 14, 2010March 17, 2011By:/s/    Leslie B. Rozner        
  
Leslie B. Rozner
Chief Financial Officer, Treasurer and Secretary
 
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