Zedge (ZDGE) 10-Q 14 Jun 16 2016 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Apr. 30, 2016	Jun. 06, 2016
Entity Registrant Name	Zedge, Inc.
Entity Central Index Key	1,667,313
Amendment Flag	false
Current Fiscal Year End Date	--07-31
Document Type	10-Q
Document Period End Date	Apr. 30, 2016
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q3
Entity Filer Category	Smaller Reporting Company
Class A common stock
Entity Common Stock, Shares Outstanding		524,775
Class B common stock
Entity Common Stock, Shares Outstanding		8,786,671

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Apr. 30, 2016	Jul. 31, 2015
Current assets:
Cash and cash equivalents	$ 3,976	$ 2,170
Trade accounts receivable, net of allowance for doubtful accounts of $0 at April 30, 2016 and July 31, 2015	1,780	1,622
Prepaid expenses	87	103
Other current assets	190	180
Total current assets	6,033	4,075
Property and equipment, net	1,931	1,724
Goodwill	2,478	2,438
Other assets	128	115
Total assets	10,570	8,352
Current liabilities:
Trade accounts payable	59	116
Accrued expenses	1,618	1,319
Deferred revenue	3	4
Due to IDT Corporation	458	369
Total current liabilities	$ 2,138	$ 1,808
Stockholders' equity:
Preferred stock, $.01 par value; authorized shares - 2,400; no shares issued
Additional paid-in capital	$ 17,844	$ 17,726
Accumulated other comprehensive loss	(548)	(655)
Accumulated deficit	(8,946)	(10,708)
Total stockholders' equity	8,432	6,444
Total liabilities and stockholders' equity	10,570	8,352
Class A common stock
Stockholders' equity:
Common stock, value	5	5
Class B common stock
Stockholders' equity:
Common stock, value	$ 77	76
Series B Preferred Stock
Mezzanine equity:
Series B convertible preferred stock		$ 100

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Apr. 30, 2016	Jul. 31, 2015
Allowance for doubtful accounts	$ 0	$ 0
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	2,400	2,400
Preferred stock, shares issued
Class A common stock
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	2,600	2,600
Common stock, shares issued	525	525
Common stock, shares outstanding	525	525
Class B common stock
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	40,000	40,000
Common stock, shares issued	7,704	7,637
Common stock, shares outstanding	7,704	7,637

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2016	Apr. 30, 2015	Apr. 30, 2016	Apr. 30, 2015
Consolidated Statements of Comprehensive Income [Abstract]
Revenues	$ 2,573	$ 2,199	$ 8,661	$ 6,624
Costs and expenses:
Direct cost of revenues (exclusive of amortization of capitalized software and technology development costs included below)	327	289	932	823
Selling, general and administrative	1,850	1,361	5,316	4,298
Depreciation and amortization	153	145	470	501
Income from operations	243	$ 404	1,943	1,002
Interest (expense) income, net	(1)		2	4
Net gains (losses) resulting from foreign exchange transactions	130	$ (44)	(31)	84
Income before income taxes	372	360	1,914	1,090
Provision for income taxes	(46)	(149)	(152)	(231)
Net income	326	211	1,762	859
Other comprehensive income (loss):
Change in foreign currency translation adjustments	266	48	107	(574)
Total other comprehensive income (loss)	266	48	107	(574)
Total comprehensive income	$ 592	$ 259	$ 1,869	$ 285
Earnings per share attributable to Zedge, Inc. common stockholders:
Basic	$ 0.04	$ 0.03	$ 0.22	$ 0.11
Diluted	$ 0.04	$ 0.02	$ 0.20	$ 0.10
Weighted-average number of shares used in calculation of earnings per share:
Basic	8,199	8,161	8,174	8,147
Diluted	9,186	8,934	9,027	8,919

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Apr. 30, 2016	Apr. 30, 2015
Operating activities
Net income	$ 1,762	$ 859
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	470	501
Stock-based compensation	10	68
Change in assets and liabilities:
Trade accounts receivable	(158)	(63)
Prepaid expenses and other current assets	6	18
Other assets	(13)	(17)
Trade accounts payable and accrued expenses	305	699
Due to IDT Corporation	89	(177)
Deferred revenue	(1)	7
Net cash provided by operating activities	2,470	1,895
Investing activities
Purchase of property and equipment	(680)	(679)
Net cash used in investing activities	(680)	(679)
Financing activities
Proceeds from exercise of stock options	9	9
Net cash provided by financing activities	9	9
Effect of exchange rate changes on cash and cash equivalents	7	(115)
Net increase in cash and cash equivalents	1,806	1,110
Cash and cash equivalents at beginning of period	2,170	765
Cash and cash equivalents at end of period	$ 3,976	$ 1,875

Basis of Presentation

Basis of Presentation	9 Months Ended
	Apr. 30, 2016
Basis of Presentation [Abstract]
Basis of Presentation	Note 1—Basis of Presentation The accompanying unaudited consolidated financial statements of Zedge, Inc. and its subsidiaries (the “Company”) have been prepared 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 nine months ended April 30, 2016 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2016. The balance sheet at July 31, 2015 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 Registration Statement on Form 10 as filed with the U.S. Securities and Exchange Commission (“SEC”). The Company’s fiscal year ends on July 31 of each calendar year. Each reference below to a fiscal year refers to the fiscal year ending in the calendar year indicated (e.g., fiscal 2016 refers to the fiscal year ending July 31, 2016). The Company’s Spin-Off The Company was formerly a majority-owned subsidiary of IDT Corporation (“IDT”). On June 1, 2016, IDT’s interest in the Company was spun-off by IDT to IDT’s stockholders and the Company became an independent public company through a pro rata distribution of the Company’s common stock held by IDT to IDT’s stockholders (the “Spin-Off”). As a result of the Spin-Off, each of IDT’s stockholders received: (i) one share of the Company’s Class A common stock for every three shares of IDT’s Class A common stock held of record on May 26, 2016 (the “Record Date”), and (ii) one share of the Company’s Class B common stock for every three shares of IDT’s Class B common stock held of record on the Record Date. On June 1, 2016, 0.5 million shares of the Company’s Class A common stock, and 8.8 million shares of the Company’s Class B common stock were issued and outstanding. The Company entered into various agreements with IDT prior to the Spin-Off including a Separation and Distribution Agreement to effect the separation and provide a framework for the Company’s relationship with IDT after the Spin-Off, and a Transition Services Agreement, which provides for certain services to be performed by IDT to facilitate the Company’s transition into a separate publicly-traded company. These agreements provide for, among other things, (1) the allocation between the Company and IDT of employee benefits, taxes and other liabilities and obligations attributable to periods prior to the Spin-Off, (2) transitional services to be provided by IDT relating to human resources and employee benefits administration, and (3) finance, accounting, tax, internal audit, investor relations and legal services to be provided by IDT to the Company following the Spin-Off. In addition, the Company entered into a Tax Separation Agreement with IDT, which sets forth the responsibilities of the Company and IDT with respect to, among other things, liabilities for federal, state, local and foreign taxes for periods before and including the Spin-Off, the preparation and filing of tax returns for such periods and disputes with taxing authorities regarding taxes for such periods. Significant Customers For the nine months ended April 30, 2016, three customers represented 45%, 20% and 12% of the Company’s revenue. For the nine months ended April 30, 2015, two customers represented 28% and 28% of the Company’s revenue. All were advertising exchanges (

Fair Value Measurements

Fair Value Measurements	9 Months Ended
	Apr. 30, 2016
Fair Value Measurements [Abstract]
Fair Value Measurements	Note 2—Fair Value Measurements The following tables present the balance of assets and liabilities measured at fair value on a recurring basis: Level 1 (1) Level 2 (2) Level 3 (3) Total (in thousands) April 30, 2016 Assets: Foreign exchange forward contracts $ — $ 46 $ — $ 46 Liabilities: Foreign exchange forward contracts $ — $ — $ — $ — July 31, 2015 Assets: Foreign exchange forward contracts $ — $ 38 $ — $ 38 Liabilities: Foreign exchange forward contracts $ — $ 39 $ — $ 39 (1) – quoted prices in active markets for identical assets or liabilities (2) – observable inputs other than quoted prices in active markets for identical assets and liabilities (3) – no observable pricing inputs in the market Fair Value of Other Financial Instruments The Company’s other financial instruments at April 30, 2016 and July 31, 2015 was the due to IDT Corporation balance. The carrying amount of the due to IDT Corporation balance approximated fair value due to its short-term nature. This fair value estimate was classified as Level 2 of the fair value hierarchy.

Derivative Instruments

Derivative Instruments	9 Months Ended
	Apr. 30, 2016
Derivative Instruments [Abstract]
Derivative Instruments	Note 3—Derivative Instruments The primary risk managed by the Company using derivative instruments is foreign exchange risk. Foreign exchange forward contracts are entered into as hedges against unfavorable fluctuations in the U.S. Dollar – Norwegian Krone (“NOK”) exchange rate. The Company’s subsidiary, Zedge Europe AS, is based in Norway and much of its operations are located in Norway. The Company does not apply hedge accounting to these contracts, therefore the changes in fair value are recorded in earnings. By using derivative instruments to mitigate exposures to changes in foreign exchange rates, the Company is exposed to credit risk from the failure of the counterparty to perform under the terms of the contract. The Company minimizes the credit or repayment risk by entering into transactions with high-quality counterparties. The Company’s outstanding contracts at April 30, 2016 were as follows: Settlement Date U.S. Dollar Amount NOK Amount May 2016 1,000,000 8,238,600 July 2016 1,000,000 8,200,000 October 2016 500,000 4,087,318 The fair value of outstanding derivative instruments recorded as assets in the accompanying consolidated balance sheets were as follows: Asset Derivatives Balance Sheet Location April 30, July 31, (in thousands) Derivatives not designated or not qualifying as hedging instruments: Foreign exchange forward contracts Other current assets $ 46 $ 38 The fair value of outstanding derivative instruments recorded as liabilities in the accompanying consolidated balance sheets were as follows: Liability Derivatives Balance Sheet Location April 30, July 31, (in thousands) Derivatives not designated or not qualifying as hedging instruments: Foreign exchange forward contracts Accrued expenses $ — $ 39 The effects of derivative instruments on the consolidated statements of operations were as follows: Amount of Gain (Loss) Recognized on Derivatives Three Months Ended April 30, Nine Months Ended April 30, Derivatives not designated Location of Gain (Loss) Recognized on Derivatives 2016 2015 2016 2015 (in thousands) Foreign exchange forward contracts Net gains ( losses) resulting from foreign exchange transactions $ 156 $ — $ (68 ) $ —

Accrued Expenses

Accrued Expenses	9 Months Ended
	Apr. 30, 2016
Accrued Expenses [Abstract]
Accrued Expenses	Note 4—Accrued Expenses Accrued expenses consist of the following: April 30, 2016 July 31, (in thousands) Accrued vacation $ 540 $ 356 Accrued payroll taxes 403 172 Accrued payroll and bonuses 84 90 Accrued direct cost of revenues 112 128 Accrued advertising 230 344 Accrued foreign taxes 44 80 Other 205 149 Total accrued expenses $ 1,618 $ 1,319

Equity

Equity	9 Months Ended
	Apr. 30, 2016
Equity [Abstract]
Equity	Note 5—Equity Changes in the components of stockholders’ equity were as follows: Nine Months Ended (in thousands) Balance, July 31, 2015 $ 6,444 Reclassification of mezzanine equity 100 Exercise of stock options 9 Stock-based compensation 10 Comprehensive income: Net income 1,762 Foreign currency translation adjustments 107 Total comprehensive income 1,869 Balance, April 30, 2016 $ 8,432 Reclassification of Mezzanine Equity In 2012, shares of the Company’s Series B convertible preferred stock were issued by the Company’s Board of Directors in excess of the number of shares duly authorized by the Company’s Certificate of Incorporation. These shares of Series B convertible preferred stock were classified as mezzanine equity at the original purchase price in the consolidated balance sheet because they did not meet the definition of permanent equity as a result of the legal imperfections. In February 2016, the Company prepared and filed a certificate of validation with the State of Delaware for an amendment to the Restated Certificate of Incorporation requesting an increase in the number of authorized shares of Series B convertible preferred stock. On February 24, 2016, the State of Delaware certified this validation, which was retroactive to the date of the defective act. Recapitalization Prior to the Spin-Off As part of the Spin-Off, the Company’s capital stock was recapitalized so that, instead of having a single class of common stock and two series of preferred stock authorized and outstanding, all such shares were converted into shares of the Company’s Class A common stock and Class B common stock, all options to purchase the Company’s common stock became options to purchase a proportional number of shares of the Company’s Class B common stock, and the Company has preferred stock authorized, but no shares of preferred stock are outstanding. The Company’s financial statements were retroactively adjusted to reflect the recapitalization. Equity Purchase Prior to the Spin-Off In connection with the Spin-Off, in May 2016, certain of the Company’s equity holders purchased Class B common stock representing approximately 10.0% of the Company’s capital stock for $3 million. 2016 Stock Option and Incentive Plan The Company adopted its 2016 Stock Option and Incentive Plan (“2016 Incentive Plan”), which became effective upon the consummation of the Spin-Off. The 2016 Incentive Plan is intended to provide incentives to executive officers, employees, directors and consultants of the Company. Incentives available under the 2016 Incentive Plan include restricted stock, stock options and stock appreciation rights. The 2016 Incentive Plan is administered by the Compensation Committee of the Company’s Board of Directors. There are 70,500 shares of the Company’s Class B common stock available for awards under the 2016 Incentive Plan. Stock Options, Restricted Stock and Deferred Stock Units At April 30, 2016, there were options to purchase 1.5 million shares of the Company’s Class B common stock outstanding with a weighted-average exercise price of $0.88. In connection with the Spin-Off, in June 2016, the Compensation Committee of the Company’s Board of Directors approved an extension of the expiration dates of all outstanding stock options held by current employees and consultants of the Company. The expiration date of every stock option was extended to June 1, 2026. This extension applied to options to purchase an aggregate of 1.2 million shares of the Company’s Class B common stock. Stock-based compensation expense, if any, for the modification of the options based on the estimated fair value on June 2, 2016 will be recorded in June 2016. As part of the Spin-Off, holders of restricted Class B common stock and Deferred Stock Units (“DSUs”) of IDT received, in respect of those restricted shares and DSUs, one restricted share of the Company’s Class B common stock for every three restricted shares of IDT and one DSU of the Company for every three DSUs of IDT that they owned as of the record date for the Spin-Off. As such, 112,658 shares of restricted stock and 7,761 DSUs were issued pursuant to the terms of the 2016 Incentive Plan. Such restricted shares of the Company’s Class B common stock are restricted under the same terms as the IDT restricted stock in respect of which they were issued. The restricted shares of the Company’s Class B common stock received in the Spin-Off are subject to forfeiture on the same terms, and their restrictions will lapse at the same time, as the corresponding IDT shares.

Earnings Per Share

Earnings Per Share	9 Months Ended
	Apr. 30, 2016
Earnings Per Share [Abstract]
Earnings Per Share	Note 6—Earnings Per Share Basic earnings per share is computed by dividing net income attributable to all classes of common stockholders of the Company 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 restricted stock still subject to risk of forfeiture and to assume exercise of potentially dilutive stock options using the treasury stock method, unless the effect of such increase is anti-dilutive. The weighted-average number of shares used in the calculation of basic and diluted earnings per share attributable to the Company’s common stockholders consists of the following: Three Months Ended Nine Months Ended 2016 2015 2016 2015 (in thousands) Basic weighted-average number of shares 8,199 8,161 8,174 8,147 Effect of dilutive securities: Stock options 987 773 853 772 Diluted weighted-average number of shares 9,186 8,934 9,027 8,919 The following outstanding stock options were excluded from the calculation of diluted earnings per share because the exercise price of the stock option was greater than the average market price of the Company’s stock during the period: Three Months Ended Nine Months Ended 2016 2015 2016 2015 (in thousands) Shares excluded from the calculation of diluted earnings per share — 707 472 707

Related Party Transactions

Related Party Transactions	9 Months Ended
	Apr. 30, 2016
Related Party Transactions [Abstract]
Related Party Transactions	Note 7—Related Party Transactions At April 30, 2016, the due to IDT Corporation balance relates to charges for certain transactions and allocations of routine expenses based on company specific items covered under a Master Services Agreement. Prior to the Spin-Off, IDT charged the Company for certain transactions and allocated routine expenses based on company specific items covered under a Master Services Agreement. This agreement provided for, among other things: (1) the allocation between the Company and IDT of employee benefits, taxes and other liabilities and obligations; (2) services to be provided by IDT relating to human resources and employee benefits administration; (3) the allocation of responsibilities relating to employee compensation and benefit plans and programs and other related matters; and (4) finance, accounting, tax, facilities and legal services to be provided by IDT to the Company. In the three and nine months ended April 30, 2016 and 2015, charges for payroll, benefits, insurance, facilities and other expenses were included in “Selling, general and administrative expense” in the consolidated statements of comprehensive income and “Purchase of property and equipment” in the consolidated statements of cash flows (relating to capitalized software and technology development costs). Three Months Ended Nine Months Ended 2016 2015 2016 2015 (in thousands) Payments by IDT on behalf of the Company $ 454 $ 411 $ 1,319 $ 819 Cash repayments, net of advances $ (360 ) $ (393 ) $ (1,230 ) $ (996 ) On May 31, 2016, the Company repaid the amount due to IDT of $0.6 million ($0.5 million as of April 30, 2016).

Business Segment and Geographic

Business Segment and Geographic Information	9 Months Ended
	Apr. 30, 2016
Business Segment Information [Abstract]
Business Segment Information	Note 8—Business Segment and Geographic Information The Company provides a content distribution platform, worldwide, centered on self-expression, attracting both creators looking to promote their content and consumers who utilize such content to express their identity, feelings, tastes and interests. The Company’s platform enables consumers to personalize their mobile devices with free, high quality ringtones, wallpapers, home screen app icons and notification sounds. The Company conducts business as one operating segment. There were no revenues from customers located outside of the United States in all periods presented. Net long-lived assets and total assets held outside of the United States, which are located primarily in Norway, were as follows: United States Foreign Total (in thousands) Long-lived assets, net: April 30, 2016 $ 1,829 $ 230 $ 2,059 July 31, 2015 1,727 112 1,839 Total assets: April 30, 2016 $ 6,609 $ 3,961 $ 10,570 July 31, 2015 5,305 3,047 8,352

Legal Proceedings

Legal Proceedings	9 Months Ended
	Apr. 30, 2016
Legal Proceedings [Abstract]
Legal Proceedings	Note 9—Legal Proceedings On August 9, 2012, Blue Spike LLC filed a patent lawsuit against the Company in the United States District Court for the Eastern District of Texas. Blue Spike alleged that the Company was infringing four patents related to automatic content recognition technologies, provided to the Company by a supplier. On December 3, 2012, the Company filed an answer denying the allegations in the complaint and asserting defenses and counterclaims. On July 15, 2013, the Company filed an amended answer asserting additional defenses and counterclaims. Plaintiff served its infringement contentions on February 26, 2014. The case was bifurcated, with the plaintiff’s case proceeding solely against the supplier, and proceedings in the case against the Company, a customer, being stayed entirely until after the litigation against the supplier concluded. In the case against the supplier, the supplier filed a motion for summary judgment of non-infringement, which was heard on August 25, 2015. On September 8, 2015, the United States District Court for the Northern District of California, in a co-pending case, found asserted claims of the patents in suit to be invalid for lack of patentable subject matter. On September 11, 2015, the magistrate judge who heard the motion issued a report and recommended granting the motion for summary judgment of non-infringement as to the supplier’s technology, which is the same technology underlying the claim against the Company. The Court then continued all activity and case deadlines, to allow the supplier and the plaintiff to negotiate a resolution of the dispute between them. That process is ongoing. The Court recently lifted the stay of the case and scheduled trial on all remaining issues in the case between Blue Spike and the supplier. On May 31, 2016, the District Court entered summary judgment of non-infringement as to the supplier’s technology. The only remaining issues are supplier’s counterclaims against Blue Spike, which is set for trial in July. In March 2014, Saregama India, Limited filed a lawsuit against the Company before the Barasat District Court, seeking approximately US$1,595,700 as damages and an injunction for copyright infringement. The main ground for the lawsuit was that the Company allegedly avails the plaintiff’s sound recordings through the Company’s platform with full knowledge that the sound recordings have been uploaded and are being communicated to the public without obtaining any license from the plaintiff. The Company believes that any possible liability on the matter is remote. The Company may from time to time be subject to other legal proceedings that arise in the ordinary course of business. Although there can be no assurance in this regard, the Company does not expect any of those legal proceedings to have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

Recently Issued Accounting Stan

Recently Issued Accounting Standards Not Yet Adopted	9 Months Ended
	Apr. 30, 2016
Recently Issued Accounting Standards Not Yet Adopted [Abstract]
Recently Issued Accounting Standards Not Yet Adopted	Note 10—Recently Issued Accounting Standards Not Yet Adopted In March 2016, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) to improve the accounting for employee share-based payments. The new standard simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The Company will adopt the new standard on August 1, 2017. The Company is evaluating the impact that the new standard will have on its consolidated financial statements. In February 2016, the FASB issued an ASU related to the accounting for leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company will adopt the new standard on August 1, 2019. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is evaluating the impact that the new standard will have on its consolidated financial statements. In November 2015, the FASB issued an ASU to simplify the presentation of deferred income taxes, as well as align the presentation of deferred income tax assets and liabilities with International Financial Reporting Standards (“IFRS”). The amendments in the ASU require that deferred tax assets and liabilities be classified as noncurrent in a classified balance sheet instead of separated into current and noncurrent amounts. The ASU is effective for the Company’s financial statements beginning August 1, 2017. Earlier application is permitted. The change may be applied either prospectively or retrospectively. The Company is evaluating when to apply the ASU for its consolidated balance sheet. In May 2014, the FASB and the International Accounting Standards Board jointly issued a comprehensive new revenue recognition standard that will supersede most of the current revenue recognition guidance under U.S. GAAP and IFRS. The goals of the revenue recognition project were to clarify and converge the revenue recognition principles under U.S. GAAP and IFRS and to develop guidance that would streamline and enhance revenue recognition requirements. To accomplish this objective, the standard requires five basic steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

Fair Value Measurements (Tables

Fair Value Measurements (Tables)	9 Months Ended
	Apr. 30, 2016
Fair Value Measurements [Abstract]
Summary of balance of assets and liabilities measured at fair value on a recurring basis	Level 1 (1) Level 2 (2) Level 3 (3) Total (in thousands) April 30, 2016 Assets: Foreign exchange forward contracts $ — $ 46 $ — $ 46 Liabilities: Foreign exchange forward contracts $ — $ — $ — $ — July 31, 2015 Assets: Foreign exchange forward contracts $ — $ 38 $ — $ 38 Liabilities: Foreign exchange forward contracts $ — $ 39 $ — $ 39

Derivative Instruments (Tables)

Derivative Instruments (Tables)	9 Months Ended
	Apr. 30, 2016
Derivative Instruments [Abstract]
Schedule of derivative instruments outstanding contracts	Settlement Date U.S. Dollar Amount NOK Amount May 2016 1,000,000 8,238,600 July 2016 1,000,000 8,200,000 October 2016 500,000 4,087,318
Schedule of derivative assets fair value	Asset Derivatives Balance Sheet Location April 30, July 31, (in thousands) Derivatives not designated or not qualifying as hedging instruments: Foreign exchange forward contracts Other current assets $ 46 $ 38
Schedule of derivative liability fair value	Liability Derivatives Balance Sheet Location April 30, July 31, (in thousands) Derivatives not designated or not qualifying as hedging instruments: Foreign exchange forward contracts Accrued expenses $ — $ 39
Schedule of derivative instruments on the consolidated statements of operations	Amount of Gain (Loss) Recognized on Derivatives Three Months Ended April 30, Nine Months Ended April 30, Derivatives not designated Location of Gain (Loss) Recognized on Derivatives 2016 2015 2016 2015 (in thousands) Foreign exchange forward contracts Net gains ( losses) resulting from foreign exchange transactions $ 156 $ — $ (68 ) $ —

Accrued Expenses (Tables)

Accrued Expenses (Tables)	9 Months Ended
	Apr. 30, 2016
Accrued Expenses [Abstract]
Summary of accrued expenses	April 30, 2016 July 31, (in thousands) Accrued vacation $ 540 $ 356 Accrued payroll taxes 403 172 Accrued payroll and bonuses 84 90 Accrued direct cost of revenues 112 128 Accrued advertising 230 344 Accrued foreign taxes 44 80 Other 205 149 Total accrued expenses $ 1,618 $ 1,319

Equity (Tables)

Equity (Tables)	9 Months Ended
	Apr. 30, 2016
Equity [Abstract]
Summary of changes in the components of stockholders' equity	Nine Months Ended (in thousands) Balance, July 31, 2015 $ 6,444 Reclassification of mezzanine equity 100 Exercise of stock options 9 Stock-based compensation 10 Comprehensive income: Net income 1,762 Foreign currency translation adjustments 107 Total comprehensive income 1,869 Balance, April 30, 2016 $ 8,432

Earnings Per Share (Tables)

Earnings Per Share (Tables)	9 Months Ended
	Apr. 30, 2016
Earnings Per Share [Abstract]
Summary of weighted-average number of shares used in the calculation of basic and diluted earnings per share	Three Months Ended Nine Months Ended 2016 2015 2016 2015 (in thousands) Basic weighted-average number of shares 8,199 8,161 8,174 8,147 Effect of dilutive securities: Stock options 987 773 853 772 Diluted weighted-average number of shares 9,186 8,934 9,027 8,919
Shares excluded from the diluted earnings per share computations	Three Months Ended Nine Months Ended 2016 2015 2016 2015 (in thousands) Shares excluded from the calculation of diluted earnings per share — 707 472 707

Related Party Transactions (Tab

Related Party Transactions (Tables)	9 Months Ended
	Apr. 30, 2016
Related Party Transactions [Abstract]
Schedule of related party transactions	Three Months Ended Nine Months Ended 2016 2015 2016 2015 (in thousands) Payments by IDT on behalf of the Company $ 454 $ 411 $ 1,319 $ 819 Cash repayments, net of advances $ (360 ) $ (393 ) $ (1,230 ) $ (996

Business Segment and Geograph22

Business Segment and Geographic Information (Tables)	9 Months Ended
	Apr. 30, 2016
Business Segment Information [Abstract]
Schedule of net long-lived assets and total assets by geographic areas	United States Foreign Total (in thousands) Long-lived assets, net: April 30, 2016 $ 1,829 $ 230 $ 2,059 July 31, 2015 1,727 112 1,839 Total assets: April 30, 2016 $ 6,609 $ 3,961 $ 10,570 July 31, 2015 5,305 3,047 8,352

Basis of Presentation (Details)

Basis of Presentation (Details) - shares shares in Thousands	9 Months Ended
	Apr. 30, 2016	Apr. 30, 2015	Jun. 01, 2016	Jul. 31, 2015
Revenue [Member]
Basis of Presentation (Textual)
Number of customers	three customers.	two customers.
Revenue [Member] | Customer One [Member]
Basis of Presentation (Textual)
Concentration risk, percentage	45.00%	28.00%
Revenue [Member] | Customer Two [Member]
Basis of Presentation (Textual)
Concentration risk, percentage	20.00%	28.00%
Revenue [Member] | Customer Three [Member]
Basis of Presentation (Textual)
Concentration risk, percentage	12.00%
Common Class A [Member]
Basis of Presentation (Textual)
Common stock, shares issued	525			525
Common stock, shares outstanding	525			525
Common Class A [Member] | Subsequent Event [Member]
Basis of Presentation (Textual)
Common stock, shares issued			500
Common stock, shares outstanding			500
Common Class B [Member]
Basis of Presentation (Textual)
Common stock, shares issued	7,704			7,637
Common stock, shares outstanding	7,704			7,637
Common Class B [Member] | Subsequent Event [Member]
Basis of Presentation (Textual)
Common stock, shares issued			8,800
Common stock, shares outstanding			8,800

Fair Value Measurements (Detail

Fair Value Measurements (Details) - USD ($) $ in Thousands		Apr. 30, 2016	Jul. 31, 2015
Assets:
Foreign exchange forward contracts		$ 46	$ 38
Liabilities:
Foreign exchange forward contracts			$ 39
Fair Value, Measurements, Recurring [Member] | Level 1 [Member]
Assets:
Foreign exchange forward contracts	[1]
Liabilities:
Foreign exchange forward contracts	[1]
Fair Value, Measurements, Recurring [Member] | Level 2 [Member]
Assets:
Foreign exchange forward contracts	[2]	$ 46	$ 38
Liabilities:
Foreign exchange forward contracts	[2]		$ 39
Fair Value, Measurements, Recurring [Member] | Level 3 [Member]
Assets:
Foreign exchange forward contracts	[3]
Liabilities:
Foreign exchange forward contracts	[3]
[1]	quoted prices in active markets for identical assets or liabilities
[2]	observable inputs other than quoted prices in active markets for identical assets and liabilities
[3]	no observable pricing inputs in the market

Derivative Instruments (Details

Derivative Instruments (Details)	9 Months Ended
	Apr. 30, 2016USD ($)	Apr. 30, 2016NOK
May 2016 [Member]
Derivative [Line Items]
Settlement Date	May 31, 2016	May 31, 2016
Amount	$ 1,000,000	NOK 8,238,600
July 2016 [Member]
Derivative [Line Items]
Settlement Date	Jul. 31, 2016	Jul. 31, 2016
Amount	$ 1,000,000	NOK 8,200,000
October 2016 [Member]
Derivative [Line Items]
Settlement Date	Oct. 31, 2016	Oct. 31, 2016
Amount	$ 500,000	NOK 4,087,318

Derivative Instruments (Detai26

Derivative Instruments (Details 1) - USD ($) $ in Thousands	Apr. 30, 2016	Jul. 31, 2015
Derivatives not designated or not qualifying as hedging instruments:
Foreign exchange forward contracts	$ 46	$ 38

Derivative Instruments (Detai27

Derivative Instruments (Details 2) - USD ($) $ in Thousands	Apr. 30, 2016	Jul. 31, 2015
Derivatives not designated or not qualifying as hedging instruments:
Foreign exchange forward contracts		$ 39

Derivative Instruments (Detai28

Derivative Instruments (Details 3) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2016	Apr. 30, 2015	Apr. 30, 2016	Apr. 30, 2015
Derivatives not designated or not qualifying as hedging instruments
Foreign exchange forward contracts	$ 156		$ (68)

Accrued Expenses (Details)

Accrued Expenses (Details) - USD ($) $ in Thousands	Apr. 30, 2016	Jul. 31, 2015
Accrued Expenses [Abstract]
Accrued vacation	$ 540	$ 356
Accrued payroll taxes	403	172
Accrued payroll and bonuses	84	90
Accrued direct cost of revenues	112	128
Accrued advertising	230	344
Accrued foreign taxes	44	80
Other	205	149
Total accrued expenses	$ 1,618	$ 1,319

Equity (Details)

Equity (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2016	Apr. 30, 2015	Apr. 30, 2016	Apr. 30, 2015
Equity [Abstract]
Beginning Balance			$ 6,444
Reclassification of mezzanine equity			100
Exercise of stock options			9	$ 9
Stock-based compensation			10	68
Comprehensive income:
Net income	$ 326	$ 211	1,762	859
Foreign currency translation adjustments	266	$ 48	107	$ (574)
Total comprehensive income			1,869
Ending Balance	$ 8,432		$ 8,432

Equity (Details Textual)

Equity (Details Textual) - USD ($) $ / shares in Units, $ in Millions	1 Months Ended	9 Months Ended
	May 31, 2016	Apr. 30, 2016	Jun. 30, 2016
Equity Purchase Prior to the Spin-Off [Member] | Subsequent Event [Member]
Equity (Textual)
Purchased amount of the common stock	$ 3
Percentage of Company's capital stock	10.00%
2016 Stock Option and Incentive Plan [Member]
Equity (Textual)
Class B common stock available for awards		70,500
Options to purchase shares of the Company's Class B common stock		1,500,000
Class B common stock outstanding weighted-average exercise price		$ 0.88
2016 Stock Option and Incentive Plan [Member] | Subsequent Event [Member]
Equity (Textual)
Options to purchase shares of the Company's Class B common stock			1,200,000
Stock-Based Compensation [Member] | Restricted Stock [Member]
Equity (Textual)
Shares issued		112,658
Stock-Based Compensation [Member] | Deferred Stock Units (DSUs) [Member]
Equity (Textual)
Shares issued		7,761

Earnings Per Share (Details)

Earnings Per Share (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2016	Apr. 30, 2015	Apr. 30, 2016	Apr. 30, 2015
Weighted-average number of shares used in the calculation of basic and diluted earnings per share
Basic weighted-average number of shares	8,199	8,161	8,174	8,147
Effect of dilutive securities:
Stock options	987	773	853	772
Diluted weighted-average number of shares	9,186	8,934	9,027	8,919

Earnings Per Share (Details 1)

Earnings Per Share (Details 1) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2016	Apr. 30, 2015	Apr. 30, 2016	Apr. 30, 2015
Stock options excluded from the diluted earnings per share computations
Shares excluded from the calculation of diluted earnings per share		707	472	707

Related Party Transactions (Det

Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2016	Apr. 30, 2015	Apr. 30, 2016	Apr. 30, 2015
Related Party Transactions [Abstract]
Payments by IDT on behalf of the Company	$ 454	$ 411	$ 1,319	$ 819
Cash repayments, net of advances	$ (360)	$ (393)	$ (1,230)	$ (996)

Related Party Transactions (D35

Related Party Transactions (Details Textual) - USD ($) $ in Thousands	May 31, 2016	Apr. 30, 2016	Jul. 31, 2015
Related Party Transaction [Line Items]
Due to IDT Corporation		$ 458	$ 369
Idt Corporation [Member] | Subsequent Event [Member]
Related Party Transaction [Line Items]
Due to IDT Corporation	$ 600

Business Segment and Geograph36

Business Segment and Geographic Information (Details) - USD ($) $ in Thousands	Apr. 30, 2016	Jul. 31, 2015
Business Segment Information [Line Items]
Long-lived assets, net	$ 2,059	$ 1,839
Total assets	10,570	8,352
United States [Member]
Business Segment Information [Line Items]
Long-lived assets, net	1,829	1,727
Total assets	6,609	5,305
Foreign [Member]
Business Segment Information [Line Items]
Long-lived assets, net	230	112
Total assets	$ 3,961	$ 3,047

Legal Proceedings (Details)

Legal Proceedings (Details) - USD ($)	Mar. 31, 2014	Aug. 09, 2012
Legal Proceedings [Abstract]
Lawsuit description	Saregama India, Limited filed a lawsuit against the Company before the Barasat District Court, seeking approximately US$1,595,700 as damages and an injunction for copyright infringement.	Blue Spike LLC filed a patent lawsuit against the Company in the United States District Court for the Eastern District of Texas. Blue Spike alleged that the Company was infringing four patents related to automatic content recognition technologies, provided to the Company by a supplier.
Lawsuit approximate amount	$ 1,595,700