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Item 9A. Controls and Procedures

2022-03-15 compared with 2021-03-01 · 111 added, 56 removed, 136 unchanged (55% of the section changed)

Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the principal executive officer and the principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of the end of the period covered by this report, J2 Global’s management, with the participation of Vivek Shah, our principal executive officer, and R.

Scott Turicchi, our principal financial officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures.

Based upon that evaluation, Mr.

Turicchi concluded that these disclosure controls and procedures were effective as of the end of the period covered in this Annual Report on Form 10-K.

(b) Management’s Annual Report on Internal Control Over Financial Reporting

J2 Global’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for J2 Global.

Our CEO and CFO concluded that, as of December 31, 2021, our disclosure controls and procedures were not effective as of such date due to a material weakness in internal control over financial reporting, described below.

Management’s Report on Internal Control over Financial Reporting

Ziff Davis’ management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act) for Ziff Davis.

In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) using the 2013 framework.

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on its assessment, management has concluded that J2 Global’s internal control over financial reporting was effective as of December 31, 2020.

Management did not assess the effectiveness of internal control over financial reporting of all the 2020 acquisitions (see Note 4 - Business Acquisitions) because of the timing of these acquisitions.

Because of the timing of these acquisitions, under Section 404 of the Sarbanes-Oxley Act, management was not required to and therefore did not assess the effectiveness of internal control over financial reporting of all of the 2021 acquisitions (see Note 4 - Business Acquisitions in the accompanying consolidated financial statements).

These acquisitions combined constituted 5.3% of total assets as of December 31, 2021 and 2.8% of revenues for the year then ended.

During the year ended December 31, 2021, we determined that we did not design and maintain effective controls over the accounting for certain elements related to the Consensus Cloud Solutions, Inc.

(“Consensus”) Spin-off resulting in a material weakness.

The control activities were not designed to allow the Company to timely identify and account for (i) a debt exchange with a third-party lender that resulted in a loss on extinguishment of existing debt, (ii) the unrealized gain on the Company’s remaining 19.9% investment in Consensus, and (iii) the completeness and accuracy of certain amounts classified in discontinued operations in the consolidated financial statements.

Although this control weakness did not result in any material misstatement of our consolidated financial statements for the periods presented, it is reasonably possible that it could have led to a material misstatement of account balances or disclosures.

Accordingly, management has concluded that this control weakness constitute material weakness.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.

As a result of the material weakness in internal control over financial reporting described above, management concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2021.

Following identification of the material weakness and prior to filing this Annual Report on Form 10-K, we completed significant procedures for the year ended December 31, 2021.

Based on these procedures, management believes that our consolidated financial statements included in this Form 10-K have been prepared in accordance with U.S.

Our CEO and CFO have certified that, based on their knowledge, the financial statements, and other financial information included in this Form 10-K, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this Form 10-K.

Our internal controls over financial reporting as of December 31, 2021 have been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in the attestation report which is included herein.

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) which occurred during the fourth quarter of our fiscal year ended December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Remediation Plan for the Material Weakness

To remediate the material weakness, our management is enhancing and revising the design of existing controls and procedures over our accounting for significant unusual transactions.

These controls relate to the research, analysis and documentation supporting our management’s evaluations, judgments, and conclusions that were required in order to account for significant unusual transactions.

We plan to enhance our approach to and the execution of the research, analysis, and documentation related to these matters.

Our existing process of consulting third party experts will also be enhanced and will continue to include outreach to and coordination with experts with the relevant knowledge and experience to assist our management with the evaluation of our accounting for significant unusual transactions.

We believe that these actions will remediate the material weakness.

The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

We expect that the remediation of this material weakness will be completed no later than December 31, 2022.

Changes in Internal Control Over Financial Reporting

Other than in respect of the remediation activities undertaken in connection with the material weakness described above, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) which occurred during the fourth quarter of our fiscal year ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

(d) Report of Independent Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Shareholders and Board of Directors

J2 Global, Inc.

Los Angeles, California

Stockholders and Board of Directors

Ziff Davis, Inc.

New York, New York

Opinion on Internal Control over Financial Reporting

We have audited J2 Global, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and schedule listed in the accompanying index and our report dated March 1, 2021, expressed an unqualified opinion thereon.

We have audited Ziff Davis, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (201 3) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.

We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the accompanying index (collectively referred to as “the financial statements”) and our report dated March 14, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Annual Report on Internal Control over Financial Reporting.

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

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We believe that our audit provides a reasonable basis for our opinion.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.

A material weakness regarding management’s failure to design and maintain controls over the Consensus Cloud Solutions, Inc.

spin-off has been identified and described in management’s assessment.

This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2021 financial statements, and this report does not affect our report dated March 14, 2022 on those financial statements.

As indicated in the accompanying Item 9A, Management’s Annual Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of 2021 acquisitions, which are included in the consolidated balance sheets of the Company as of December 31, 2021, and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for the year then ended.

These acquisitions combined constituted 17.7% of total assets as of December 31, 2020, and 4.2% of revenues for the year then ended.

These acquisitions combined constituted 5.3% of total assets as of December 31, 2021, and 2.8% of revenues from continuing operations for the year then ended.

Management did not assess the effectiveness of internal control over financial reporting of the 2021 acquisitions because of the timing of these acquisitions.

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A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to

permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

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Other Information

On October 7, 2021, the Separation was completed and the Company transferred J2 Cloud Services, LLC to Consensus who in turn transferred non-fax assets and liabilities back to the Company such that Consensus was left with the cloud fax business.

The Separation was achieved through the Company’s distribution of 80.1% of the shares of Consensus common stock to holders of J2 Global, Inc.

common stock as of the close of business on October 1, 2021, the record date for the distribution.

The Company’s stockholders of record received one share of Consensus common stock for every three shares of J2 Global’s common stock.

The Separation was effectuated pursuant to a Separation and Distribution Agreement, dated October 7, 2021 (the “Separation and Distribution Agreement”), as Exhibit 2.1 of this report.

Attached to this report as Exhibit 99.1 are the unaudited pro forma statement of operations of the Company for the nine months ended September 30, 2021 and the fiscal years ended December 31, 2020, December 31, 2019, and December 31, 2018, and the unaudited pro forma consolidated balance sheet as of September 30, 2021.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Directors, Executive Officers and Corporate Governance

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The following financial statements are filed as a part of this Annual Report on Form 10-K:

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (BDO USA, LLP;

Los Angeles, California;

PCAOB ID # 243 )

Consolidated Balance Sheets

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Exhibit Title

Separation and Distribution Agreement, dated as of October 7, 2021, by and between Ziff Davis, Inc.

and Consensus Cloud Solutions, Inc.

Amended and Restated Certificate of Incorporation of J2 Global, Inc., dated as of June 10, 2014 (8)

Amendment to the Amended and Restated Certificate of Incorporation of J2 Global, Inc., dated as of September 5, 2019 (1 7 )

Fourth Amended and Restated By-Laws (12)

Certificate of Amendment to Amended and Restated Certificate of Incorporation of Ziff Davis, Inc.

dated as of October 7, 2021 (26)

Fifth Amended and Restated By-Laws (27)

Specimen of Common Stock Certificate (6)

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2015 Stock Option Plan ( 2 3 )

Form of Performance Stock Unit Agreement Pursuant to J2 Global, Inc.

2015 Stock Option Plan (23)

Amended and Restated J2 Global, Inc.

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Second Amendment to Credit Agreement, dated August 16, 2019 (2 0 )

Credit Agreement, dated as of April 7, 2021, among J2 Global, Inc., the Lenders from time to time party thereto and MUFG Union Bank, N.A., as Administrative Agent and Collateral Agent (24)

First Amendment to Credit Agreement, dated as of June 2, 2021, by and among J2 Global, Inc., the subsidiaries of J2 Global, Inc.

party thereto as guarantors, Citicorp North America Inc.

and MUFG (4) Union Bank, N.A., as lenders, and MUFG Union Bank, N.A., as administrative agent for the lenders.(24)

Second, Third and Fourth Amendments to Credit Agreement by and among J2 Global, Inc., the subsidiaries of J2 Global, Inc.

party thereto as guarantors, Citicorp North America Inc.

and MUFG Union Bank, N.A., as lenders, and MUFG Union Bank, N.A., as administrative agent for the lenders.

Transition Services Agreement, dated as of October 7, 2021, by and between Ziff Davis, Inc.

and Consensus Cloud Solutions, Inc.

Tax Matters Agreement, dated as of October 7, 2021, by and between Ziff Davis, Inc.

and Consensus Cloud Solutions, Inc.

Employee Matters Agreement, dated as of October 7, 2021, by and between Ziff Davis, Inc.

and Consensus Cloud Solutions, Inc.

Intellectual Property License Agreement, dated as of October 7, 2021, by and between Ziff Davis, Inc.

and Consensus Cloud Solutions, Inc.

Stockholder and Registration Rights Agreement, dated as of October 7, 2021, by and between Ziff Davis, Inc.

and Consensus Cloud Solutions, Inc.

Stipulation of Settlement and Amendment No.

1 to the Second Amended and Restated Limited Partnership Agreement

Order Approving Stipulated Settlement

List of subsidiaries of J2 Global, Inc.

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Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C.

Unaudited pro forma consolidated statements of operations for the nine months ended September 30, 2021 and the fiscal years ended December 31, 2020, December 31, 2019, and December 31, 2018 , and the unaudited pro forma consolidated balance sheet as of September 30, 2021

101.INS XBRL Instance Document

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____________________

(1) Incorporated by reference to J2 Global’s Registration Statement on Form S-1 filed with the Commission on April 16, 1999,

(1) Incorporated by reference to Ziff Davis’ Registration Statement on Form S-1 filed with the Commission on April 16, 1999,

Registration No.

(2) Incorporated by reference to J2 Global’s Annual Report on Form 10-K/A filed with the Commission on April 30, 2001.

(3) Incorporated by reference to J2 Global’s Annual Report on Form 10-K filed with the Commission on April 1, 2002.

(4) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on May 3, 2006.

(5) Incorporated by reference to Exhibit A to J2 Global’s Definitive Proxy Statement on Schedule 14A filed with the Commission on September 18, 2007.

(6) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on December 7, 2011.

(7) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on October 7, 2020.

(8) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on June 10, 2014.

(9) Incorporated by reference to J2 Global’s Registration Statement on Form S-3ASR filed with the Commission on June 10, 2014, Registration No.

(10) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on June 17, 2014.

(11) Incorporated by reference to Annex A to j2 Global’s Definitive Proxy Statement on Schedule 14A filed with the Commission on March 26, 2015.

(12) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on May 11, 2020.

(13) Incorporated by reference to J2 Global’s Annual Report on Form 10-K filed with the Commission on March 1, 2017.

(14) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on June 27, 2017.

(15) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on February 8, 2018.

(16) Incorporated by reference to J2 Global’s Current Report on Form 10-K filed with the Commission on March 1, 2018.

(17) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on January 9, 2019.

(18) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on November 1, 2019.

(19) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on November 15, 2019.

(20) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on July 1, 2019.

(21) Incorporated by reference to J2 Global’s Current Report on Form 8-K filed with the Commission on August 16, 2019.

(22) Incorporated by reference to J2 Global’s Annual Report on Form 10-K filed with the Commission on March 2, 2020.

(23) Incorporated by reference to J2 Global’s Current Report on Form 10-Q filed with the Commission on August 10, 2020.

(2) Incorporated by reference to Ziff Davis’ Annual Report on Form 10-K/A filed with the Commission on April 30, 2001.

(3) Incorporated by reference to Ziff Davis’ Annual Report on Form 10-K filed with the Commission on April 1, 2002.

(4) Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on May 3, 2006.

(5) Incorporated by reference to Exhibit A to Ziff Davis’ Definitive Proxy Statement on Schedule 14A filed with the Commission on September 18, 2007.

(6) Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on December 7, 2011.

(7) Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on October 7, 2020.

(8) Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on June 10, 2014.

(9) Incorporated by reference to Ziff Davis’ Registration Statement on Form S-3ASR filed with the Commission on June 10, 2014, Registration No.

(10) Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on June 17, 2014.

(11) Incorporated by reference to Annex A to Ziff Davis’ Definitive Proxy Statement on Schedule 14A filed with the Commission on March 26, 2015.

(12) Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on May 11, 2020.

(13) Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on June 27, 2017.

(14) Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on February 8, 2018.

(15) Incorporated by reference to Ziff Davis’ Current Report on Form 10-K filed with the Commission on March 1, 2018.

(16) Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on January 9, 2019.

(17) Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on November 1, 2019.

(18) Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on November 15, 2019.

(19) Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on July 1, 2019.

(20) Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on August 16, 2019.

(21) Incorporated by reference to Ziff Davis’ Annual Report on Form 10-K filed with the Commission on March 2, 2020.

(22) Incorporated by reference to Ziff Davis’ Current Report on Form 10-Q filed with the Commission on August 10, 2020.

(23) Incorporated by reference to Ziff Davis’ Quarterly Report on Form 10-Q filed with the Commission on May 10, 2021.

(24) Incorporated by reference to Ziff Davis’ Quarterly Report on Form 10-Q filed with the Commission on August 9, 2021.

(25) Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on September 22, 2021.

(26) Incorporated by reference to Ziff Davis’ Current Report on Form 8-K filed with the Commission on October 8, 2021.

(27) Incorporated by reference to Ziff Davis’ Quarterly Report on Form 10-Q filed with the Commission on November 9, 2021.

Form 10-K Summary

Pursuant to the requirements of Section 13 or 15(d) 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, on March 14, 2022.

J2 Global, Inc.

Ziff Davis, Inc.

/s/ VIVEK SHAH

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Vivek Shah (Principal Executive Officer)

SCOTT TURICCHI President and Chief Financial Officer

Scott Turicchi

/s/ BRET RICHTER Chief Financial Officer

(Principal Financial Officer)

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RESSLER Chairman of the Board and a Director

/s/ DOUGLAS Y.

BECH Director

/s/ SARAH FAY Director

/s/ JON MILLER Director

/s/ STEPHEN ROSS Director

/s/ PAMELA SUTTON-WALLACE Director

Pamela Sutton-Wallace

TAYLOR Director

/s/ TRACE HARRIS Director

/s/ WILLIAM B.

KRETZMER Director

/s/ JONATHAN F.

MILLER Director

TAYLOR Director

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures