Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | |
Jul. 31, 2016 | Oct. 11, 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-K | |
Document Period End Date | Jul. 31, 2016 | |
Document Fiscal Period Focus | FY | |
Document Fiscal Year Focus | 2,016 | |
Entity Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Public Float | $ 0 | |
Class A common stock | ||
Entity Common Stock, Shares Outstanding | 524,775 | |
Class B common stock | ||
Entity Common Stock, Shares Outstanding | 8,863,178 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jul. 31, 2016 | Jul. 31, 2015 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 5,978 | $ 2,170 |
Trade accounts receivable, net of allowance for doubtful accounts of $0 at July 31, 2016 and 2015 | 1,668 | 1,622 |
Prepaid expenses | 210 | 103 |
Other current assets | 107 | 63 |
TOTAL CURRENT ASSETS | 7,963 | 3,958 |
Property and equipment, net | 1,843 | 1,724 |
Goodwill | 2,361 | 2,438 |
Other assets | 266 | 232 |
TOTAL ASSETS | 12,433 | 8,352 |
CURRENT LIABILITIES: | ||
Trade accounts payable | 36 | 116 |
Accrued expenses | 1,487 | 1,319 |
Deferred revenue | 15 | 4 |
Due to IDT Corporation | 299 | 369 |
TOTAL CURRENT LIABILITIES | 1,837 | 1,808 |
TOTAL LIABILITIES | 1,837 | 1,808 |
MEZZANINE EQUITY: | ||
TOTAL MEZZANINE EQUITY | 100 | |
Commitments and contingencies | ||
STOCKHOLDERS' EQUITY: | ||
Preferred stock, $0.01 par value; authorized shares-2,400; no shares issued | ||
Additional paid-in capital | 21,045 | 17,726 |
Accumulated other comprehensive loss | (817) | (655) |
Accumulated deficit | (9,725) | (10,708) |
TOTAL STOCKHOLDERS' EQUITY | 10,596 | 6,444 |
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY | 12,433 | 8,352 |
Class A common stock | ||
STOCKHOLDERS' EQUITY: | ||
Common stock, value | 5 | 5 |
TOTAL STOCKHOLDERS' EQUITY | 5 | 5 |
Class B common stock | ||
STOCKHOLDERS' EQUITY: | ||
Common stock, value | 88 | 76 |
TOTAL STOCKHOLDERS' EQUITY | 88 | 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 | Jul. 31, 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 | 8,819 | 7,637 |
Common stock, shares outstanding | 8,819 | 7,637 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
Consolidated Statements of Comprehensive Income (Loss) [Abstract] | ||
REVENUES | $ 11,113 | $ 9,052 |
COSTS AND EXPENSES: | ||
Direct cost of revenue (exclusive of amortization of capitalized software and technology development costs included below) | 1,299 | 1,082 |
Selling, general and administrative | 7,755 | 5,723 |
Depreciation and amortization | 605 | 624 |
Write-off of capitalized software and technology development costs | 281 | |
INCOME FROM OPERATIONS | 1,173 | 1,623 |
Interest income | 2 | 5 |
Net (loss) gain resulting from foreign exchange transactions | (49) | 171 |
INCOME BEFORE INCOME TAXES | 1,126 | 1,799 |
Provision for income taxes | 143 | 212 |
NET INCOME | 983 | 1,587 |
Other comprehensive loss: | ||
Changes in foreign currency translation adjustment | (162) | (733) |
TOTAL OTHER COMPREHENSIVE LOSS | (162) | (733) |
TOTAL COMPREHENSIVE INCOME | $ 821 | $ 854 |
Earnings per share attributable to Zedge, Inc. common stockholders: | ||
Basic | $ 0.12 | $ 0.19 |
Diluted | $ 0.11 | $ 0.18 |
Weighted-average number of shares used in calculation of earnings per share: | ||
Basic | 8,346 | 8,150 |
Diluted | 9,279 | 8,923 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands | Total | Class A Common Stock | Class B Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit |
Beginning Balance at Jul. 31, 2014 | $ 5,502 | $ 5 | $ 75 | $ 17,639 | $ 78 | $ (12,295) |
Beginning Balance, shares at Jul. 31, 2014 | 525 | 7,570 | ||||
Reclassification of mezzanine equity | ||||||
Exercise of stock options | 9 | $ 1 | 8 | |||
Exercise of stock options, shares | 67 | |||||
Stock-based compensation | 79 | 79 | ||||
Foreign currency translation adjustment | (733) | (733) | ||||
Net income | 1,587 | 1,587 | ||||
Ending Balance at Jul. 31, 2015 | 6,444 | $ 5 | $ 76 | 17,726 | (655) | (10,708) |
Ending Balance, shares at Jul. 31, 2015 | 525 | 7,637 | ||||
Reclassification of mezzanine equity | 100 | 100 | ||||
Sale of equity prior to the Spin-Off | 3,000 | $ 11 | 2,989 | |||
Sale of equity prior to the Spin-Off, shares | 1,083 | |||||
Exercise of stock options | 65 | $ 1 | 64 | |||
Exercise of stock options, shares | 100 | |||||
Stock-based compensation | 166 | 166 | ||||
Stock-based compensation, shares | (1) | |||||
Foreign currency translation adjustment | (162) | (162) | ||||
Net income | 983 | 983 | ||||
Ending Balance at Jul. 31, 2016 | $ 10,596 | $ 5 | $ 88 | $ 21,045 | $ (817) | $ (9,725) |
Ending Balance, shares at Jul. 31, 2016 | 525 | 8,819 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
OPERATING ACTIVITIES | ||
Net income | $ 983 | $ 1,587 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 605 | 624 |
Deferred income taxes | (26) | (16) |
Write-off of capitalized software and technology development costs | 281 | |
Stock-based compensation | 166 | 79 |
Change in assets and liabilities: | ||
Trade accounts receivable | (46) | (334) |
Prepaid expenses and other current assets | (94) | (97) |
Other assets | (7) | (8) |
Trade accounts payable and accrued expenses | 39 | 459 |
Due to IDT Corporation | (70) | (121) |
Deferred revenue | 11 | (2) |
Net cash provided by operating activities | 1,842 | 2,171 |
INVESTING ACTIVITIES | ||
Capitalized software and technology development costs and purchase of equipment | (1,006) | (886) |
Net cash used in investing activities | (1,006) | (886) |
FINANCING ACTIVITIES | ||
Proceeds from exercise of stock options | 9 | 9 |
Sale of equity prior to the Spin-Off | 3,000 | |
Net cash provided by financing activities | 3,009 | 9 |
Effect of exchange rates on cash and cash equivalents | (37) | 111 |
Net increase in cash and cash equivalents | 3,808 | 1,405 |
Cash and cash equivalents at beginning of year | 2,170 | 765 |
Cash and cash equivalents at end of year | 5,978 | 2,170 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
Cash payments made for taxes | 112 | 208 |
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES | ||
Receivable for exercise of stock options | 56 | |
Reclassification of mezzanine equity | $ 100 |
Description of Business and Sum
Description of Business and Summary of Significant Accounting Policies | 12 Months Ended |
Jul. 31, 2016 | |
Description of Business and Summary of Significant Accounting Policies [Abstract] | |
Description of Business and Summary of Significant Accounting Policies | Note 1—Description of Business and Summary of Significant Accounting Policies Description of Business Zedge, Inc. (the “Company”), a Delaware corporation, was incorporated in 2008. 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 consolidated financial statements include all of the accounts of the Company and Zedge Europe AS, a Norwegian corporation. All significant intercompany accounts and transactions have been eliminated. 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. As part of the Spin-Off, the Company’s capital stock was recapitalized (see Note 7). 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. Basis of Accounting The assets and liabilities in the accompanying financial statements are recorded at historical cost. Direct expenses historically incurred by IDT prior to the Spin-Off on behalf of the Company and Zedge Europe AS are reflected in these financial statements. The most significant expenses as covered under a Master Services Agreement with IDT were as follows: legal and professional fees, and salaries and employee benefits were allocated based on specific identification; certain facility costs, travel, and consulting fees, as well as salaries of personnel in the payroll, human resources, purchasing, accounts payable, treasury, network and telephone services and legal departments were allocated based on estimates of the incremental cost incurred by IDT; medical and dental benefits were allocated based on rates similar to COBRA health benefit provision rates charged to former IDT employees; stock-based compensation and retirement benefits under IDT’s defined contribution plan were allocated based on specific identification; and insurance was allocated based on a combination of headcount and specific policy identification. Management believes that the assumptions and methods of allocation used were reasonable. However, the costs as allocated were not necessarily indicative of the costs that would have been incurred if the Company operated on a stand-alone basis. Therefore, the consolidated financial statements included herein may not necessarily be indicative of the financial position, results of operations, changes in stockholders’ equity and cash flows of the Company to be expected in the future or what they would have been had the Company been a separate stand-alone entity during the periods presented. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Revenue Recognition The Company generates over 90% of its revenues from selling its advertising inventory to advertising networks/exchanges, real time bidding platforms, and game publishers. Advertising networks/exchanges are technology platforms that facilitate the buying and selling of media advertising inventory from multiple ad networks. The Company recognizes advertising revenue as advertisements are delivered to users through impressions or ad views, as long as evidence of the arrangement with the payer exists (generally through an executed contract), the price is fixed and determinable, and the Company has assessed collectability as reasonably assured. The Company generally reports its revenue net of amounts due to agencies and brokers because the Company is not the primary obligor in the relevant arrangements, it does not finalize the pricing, and it does not establish or maintain a direct relationship with the advertiser. Certain advertising arrangements that are directly between the Company and advertisers are recognized gross equal to the price paid to the Company by the customer since the Company is the primary obligor and the Company determines the price. Any third party costs related to such direct relationships are recognized as direct cost of revenues. Concentration of Credit Risk and Significant Customers Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents and trade accounts receivable. The Company holds cash and cash equivalents at several major financial institutions, which may exceed FDIC insured limits. Historically, the Company has not experienced any losses due to such concentration of credit risk. The Company’s temporary cash investments policy is to limit the dollar amount of investments with any one financial institution and monitor the credit ratings of those institutions. While the Company may be exposed to credit losses due to the nonperformance of the holders of its deposits, the Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows or financial condition. The Company routinely assesses the financial strength of its customers. As a result, the Company believes that its accounts receivable credit risk exposure is limited and has not experienced significant write-downs in its accounts receivable balances. In the year ended July 31, 2016, three customers represented 45%, 20% and 13% of the Company's revenue, and at July 31, 2016, one customer represented 62% of the Company’s accounts receivable balance. In the year ended July 31, 2015, two customers represented 37%, and 25% of the Company's revenue, and at July 31, 2015, three customers represented 55%, 13% and 12% of the Company’s accounts receivable balance. All of these significant customers were advertising exchanges operated by leading companies, and the receivables represent many smaller amounts due from advertisers. Direct Cost of Revenues Direct cost of revenues for the Company consists primarily of costs associated with the running of the Company’s content distribution platform including hosting, marketing automation and content filtering. Such costs are charged to expense as incurred. Long-Lived Assets Property and equipment is recorded at cost and depreciated on a straight-line basis over its estimated useful lives, which range as follows: capitalized software and technology development costs—3 years; and other—3, 5, 7, 10 or 20 years. Other is comprised of furniture and fixtures, office equipment, video conference equipment, computer hardware and computer software. The Company tests the recoverability of its long-lived assets with finite useful lives whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. The Company tests for recoverability based on the projected undiscounted cash flows to be derived from such asset. If the projected undiscounted future cash flows are less than the carrying value of the asset, the Company will record an impairment loss, if any, based on the difference between the estimated fair value and the carrying value of the asset. The Company generally measures fair value by considering sale prices for similar assets or by discounting estimated future cash flows from such asset using an appropriate discount rate. Cash flow projections and fair value estimates require significant estimates and assumptions by management. Should the estimates and assumptions prove to be incorrect, the Company may be required to record impairments in future periods and such impairments could be material. Capitalized Software and Technology Development Costs The Company accounts for capitalized software and technology development costs in accordance with Accounting Standard Codification (“ASC”) 350-40. These costs consist of internal development costs on various projects that the Company invested in specific to the various platforms on which the Company operates its service that are capitalized during the application development stage. Capitalized software and technology development costs are included in property and equipment, net and are amortized over the estimated useful life of the software, generally three years. All ordinary maintenance costs are expensed as incurred. Goodwill Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of the business acquired. Under ASC 350, Intangibles-Goodwill and Other, goodwill is not amortized, but instead is tested for impairment annually, or if certain circumstances indicate a possible impairment may exist. The Company evaluates the recoverability of goodwill using a two-step impairment test approach at the reporting unit level. The Company has determined that it has one reporting unit. In the first step, the fair value for the reporting unit is compared to its book value including goodwill. If the fair value of the reporting unit is less than its book value, a second step is performed which compares the implied fair value of the reporting unit’s goodwill to the book value of the goodwill. If the fair value of the goodwill is less than the book value, the difference is recognized as impairment. The Company’s estimated fair value exceeded its carrying value in Step 1 of the Company’s annual impairment tests as of May 1st for the years ended July 31, 2016 and 2015, therefore it was not necessary to perform Step 2. The Company concluded that no goodwill impairment existed in the years ended July 31, 2016 and 2015. The Company uses a combination of the income approach (discounted cash flows) and market approach (guideline company method) for its Step 1 analysis. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Income Taxes The accompanying financial statements include provisions for federal, state and foreign income taxes. Prior to the Spin-Off, the Company was included in consolidated federal income tax returns with IDT and IDT’s other subsidiaries. Income taxes in the accompanying consolidated financial statements were calculated on a separate tax return basis. The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the period in which related temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in its assessment of a valuation allowance. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of such change. In November 2015, the Financial Accounting Standards Board (“FASB”) issued an 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 ASU requires that deferred tax assets and liabilities be classified as noncurrent in a classified balance sheet instead of separated into current and noncurrent amounts. The Company adopted this ASU on May 1, 2016. As a result, the Company reclassified deferred income tax assets of $0.1 million at July 31, 2015 from current to noncurrent. The Company uses a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return. The Company determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, the Company presumes that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. Tax positions that meet the more-likely-than-not recognition threshold are measured to determine the amount of tax benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in one or more of the following: an increase in a liability for income taxes payable, a reduction of an income tax refund receivable, a reduction in a deferred tax asset, or an increase in a deferred tax liability. The Company classifies interest and penalties on income taxes as a component of income tax expense. Contingencies The Company accrues for loss contingencies when both (a) information available prior to issuance of the financial statements indicates that it is probable that a liability had been incurred at the date of the financial statements and (b) the amount of loss can reasonably be estimated. When the Company accrues for loss contingencies and the reasonable estimate of the loss is within a range, the Company records its best estimate within the range. When no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount in the range. The Company discloses an estimated possible loss or a range of loss when it is at least reasonably possible that a loss may have been incurred. 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: Year ended July 31, (in thousands) 2016 2015 Basic weighted-average number of shares 8,346 8,150 Effect of dilutive securities: Stock options 913 773 Non-vested restricted Class B common stock 20 — Diluted weighted-average number of shares 9,279 8,923 The following outstanding stock options were excluded from the calculations of diluted earnings per share because the exercise price of the stock options was greater than the average market price of the Company’s stock during the period: Year ended July 31, (in thousands) 2016 2015 Shares excluded from the calculation of diluted earnings per share 355 707 Stock-Based Compensation The Company recognizes compensation expense for all of its grants of stock-based awards based on the estimated fair value on the grant date. Compensation cost for awards is recognized using the straight-line method over the vesting period. Stock-based compensation is included in selling, general and administrative expense. Fair Value Measurements Fair value of financial and non-financial assets and liabilities is defined as an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used to measure fair value, which prioritizes the inputs to valuation techniques used to measure fair value, is as follows: Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 – unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. Derivative Instruments – Foreign Exchange Forward Contracts The Company’s earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, primarily the U.S. Dollar Functional Currency The U.S. Dollar is the Company’s functional currency. The functional currency for Zedge Europe AS, which operates outside of the United States, is the NOK, the currency of the primary economic environment in which it primarily expends cash. The Company translates assets and liabilities denominated in foreign currencies to U.S. Dollars at the exchange rate in effect as of the financial statement date, and translates accounts from the statements of comprehensive income using the weighted average exchange rate for the period. Gains or losses resulting from foreign currency translations are recorded in “Accumulated other comprehensive loss” in the accompanying consolidated balance sheets. Foreign currency transaction gains and losses including gains and losses from currency exchange rate changes related to intercompany receivables and payables are reported in “Net (loss) gain resulting from foreign exchange transactions” in the accompanying Allowance for Doubtful Accounts The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance. The allowance is determined based on known troubled accounts, historical experience and other currently available evidence. Doubtful accounts are written-off upon final determination that the trade accounts will not be collected. Recently Issued Accounting Standards Not Yet Adopted In June 2016, the FASB issued an ASU that changes the impairment model for most financial assets and certain other instruments. For receivables, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except the losses will be recognized as allowances instead of reductions in the amortized cost of the securities. In addition, an entity will have to disclose significantly more information about allowances, credit quality indicators and past due securities. The new provisions will be applied as a cumulative-effect adjustment to retained earnings. The Company will adopt the new standard on August 1, 2020. The Company is evaluating the impact that the new standard will have on its consolidated financial statements. In March 2016, the FASB issued an 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 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. The Company will adopt this standard on August 1, 2018. Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. The Company is evaluating the impact that the standard will have on its consolidated financial statements. |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Jul. 31, 2016 | |
Fair Value Measurements [Abstract] | |
Fair Value Measurements | Note 2—Fair Value Measurements The following table presents the balance of assets and liabilities measured at fair value on a recurring basis: July 31, 2016 (in thousands) Level 1 Level 2 Level 3 Total Assets: Foreign exchange forward contracts $ — $ 21 $ — $ 21 Liabilities: Foreign exchange forward contracts $ — $ 15 $ — $ 15 July 31, 2015 (in thousands) Level 1 Level 2 Level 3 Total Assets: Foreign exchange forward contracts $ — $ 38 $ — $ 38 Liabilities: Foreign exchange forward contracts $ — $ 39 $ — $ 39 Fair Value of Other Financial Instruments The Company’s other financial instruments at July 31, 2016 and 2015 included trade accounts receivable, trade accounts payable and due to IDT Corporation. The carrying amounts of the trade accounts receivable, trade accounts payable and due to IDT Corporation balances approximated fair value due to their short-term nature. These fair value estimates were classified as Level 2 of the fair value hierarchy. |
Derivative Instruments
Derivative Instruments | 12 Months Ended |
Jul. 31, 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 - NOK exchange rate. Subsequent to the Spin-Off, IDT provides hedging services to Zedge pursuant to the Transition Services Agreement until Zedge establishes a credit facility and is able to enter into foreign exchange contracts (see Note 11). 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 credit or repayment risk is minimized by entering into transactions with high-quality counterparties. The outstanding contracts at July 31, 2016 were as follows: Settlement Date U.S. Dollar Amount NOK Amount October 2016 500,000 4,087,318 December 2016 500,000 4,300,871 January 2017 500,000 4,299,044 The fair value of outstanding derivative instruments recorded as assets in the accompanying consolidated balance sheets were as follows: July 31, 2016 2015 Assets Derivatives: Balance Sheet Location Derivatives not designated or not qualifying as hedging instruments Foreign exchange forward contracts Other current assets $ 21 $ 38 The fair value of outstanding derivative instruments recorded as liabilities in the accompanying consolidated balance sheets were as follows: July 31, 2016 2015 Liabilities Derivatives: Balance Sheet Location Derivatives not designated or not qualifying as hedging instruments Foreign exchange forward contracts Accrued expenses $ 15 $ 39 The effects of derivative instruments on the consolidated statements of comprehensive income were as follows: Amount of Loss Recognized on Derivatives Year ended July 31, (in thousands) 2016 2015 Derivatives not designated or not qualifying as hedging instruments Statement of Comprehensive Income Location Foreign exchange forward contracts Net (loss) gain resulting from foreign exchange transactions $ (142 ) $ (58 ) |
Property and Equipment
Property and Equipment | 12 Months Ended |
Jul. 31, 2016 | |
Property and Equipment [Abstract] | |
Property and Equipment | Note 4—Property and Equipment Property and equipment consisted of the following: July 31, 2016 2015 Capitalized software and technology development costs $ 5,001 $ 4,346 Other 230 174 5,231 4,520 Less accumulated depreciation and amortization (3,388 ) (2,796 ) Total $ 1,843 $ 1,724 Depreciation and amortization expense pertaining to property and equipment was $605,000 and $624,000 for the years ended July 31, 2016 and 2015, respectively. In the year ended July 31, 2016, the Company decided to abandon two software and technology projects that were in development. Since these abandoned projects do not have any future benefit, the Company expensed $281,000 in the year ended July 31, 2016, representing the capitalized costs of these projects to date. |
Goodwill
Goodwill | 12 Months Ended |
Jul. 31, 2016 | |
Goodwill [Abstract] | |
Goodwill | Note 5—Goodwill The Company’s goodwill related to an acquisition made in a prior period and is carried on the balance sheet of Zedge Europe AS. The table below reconciles the change in the carrying amount of goodwill for the period from July 31, 2014 to July 31, 2016: (in thousands) Balance at July 31, 2014 $ 3,182 Foreign currency translation adjustments (744 ) Balance at July 31, 2015 2,438 Foreign currency translation adjustments (77 ) Balance at July 31, 2016 $ 2,361 |
Accrued Expenses
Accrued Expenses | 12 Months Ended |
Jul. 31, 2016 | |
Accrued Expenses [Abstract] | |
Accrued Expenses | Note 6—Accrued Expenses Accrued expenses consist of the following: July 31, 2016 2015 Accrued vacation $ 494 $ 356 Accrued payroll taxes 210 172 Accrued payroll and bonuses 72 90 Accrued direct cost of revenues 111 128 Accrued advertising 242 344 Accrued income taxes 119 80 Other 239 149 Total $ 1,487 $ 1,319 |
Equity
Equity | 12 Months Ended |
Jul. 31, 2016 | |
Equity [Abstract] | |
Equity | Note 7—Equity 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. Class A Common Stock and Class B Common Stock The rights of holders of Class A common stock and Class B common stock are identical except for certain voting and conversion rights and restrictions on transferability. The holders of Class A common stock and Class B common stock receive identical dividends per share when and if declared by the Company’s Board of Directors. In addition, the holders of Class A common stock and Class B common stock have identical and equal priority rights per share in liquidation. The Class A common stock and Class B common stock do not have any other contractual participation rights. The holders of Class A common stock are entitled to three votes per share and the holders of Class B common stock are entitled to one-tenth of a vote per share. Each share of Class A common stock may be converted into one share of Class B common stock, at any time, at the option of the holder. Shares of Class A common stock are subject to certain limitations on transferability that do not apply to shares of Class B common stock. 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 effective retroactive to the date of the defective act. Changes to mezzanine amounts in the years ended July 31, 2015 and 2016 were as follows: Series B Convertible Preferred Stock (dollars in thousands) Shares Amount Balance at July 31, 2014 947 $ 100 2015 activity — — Balance at July 31, 2015 947 100 Reclassification of mezzanine equity (947 ) (100 ) Balance at July 31, 2016 — $ — F-13 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. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Jul. 31, 2016 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | Note 8—Commitments and Contingencies Legal Proceedings On August 9, 2012, Blue Spike LLC filed a patent infringement lawsuit against one of the Company’s suppliers and 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. 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. 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 May 31, 2016, the District Court entered summary judgment of non-infringement as to the supplier’s technology, and, on July 12, 2016, the Court entered an order, amongst other things, dismissing, with prejudice, the patent infringement claims against all the defendants including the Company. In March 2014, Saregama India, Limited filed a lawsuit against the Company before the Barasat District Court, seeking approximately $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 material 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. Lease Commitments The Company’s future contractual obligations and other commercial commitments at July 31, 2016 were as follows: Year ended July 31, 2017 2018 2019 Thereafter Total Real estate leases $ 231 $ 248 $ 106 $ — $ 585 Software as a Service (“SaaS”) license 193 73 — — 266 Total contractual obligations $ 424 $ 321 $ 106 $ — $ 851 Rental expense under operating leases was $244,000 and $211,000 in the years ended July 31, 2016 and 2015, respectively. |
Income Taxes
Income Taxes | 12 Months Ended |
Jul. 31, 2016 | |
Income Taxes [Abstract] | |
Income Taxes | Note 9—Income Taxes Until the Spin-Off, the Company was a member of IDT’s consolidated group of entities for which income tax returns were filed for the consolidated group, and income taxes for the Company were calculated on a separate tax return basis. The current U.S. Federal and State income tax expense was recorded as an increase in the amount due to IDT Corporation in the accompanying consolidated balance sheets. The components of income before income taxes are as follows: Year ended July 31, 2016 2015 Domestic $ 604 $ 1,121 Foreign 522 678 Income before income taxes $ 1,126 $ 1,799 Provision for income taxes consisted of the following: Year ended July 31, 2016 2015 Current: Foreign $ 169 $ 200 Federal — 28 State — — Total current expense 169 228 Deferred: Foreign (26 ) (16 ) Federal — — State — — Total deferred expense (26 ) (16 ) Provision for income taxes $ 143 $ 212 The differences between income taxes expected at the U.S. federal statutory income tax rate and income taxes reported were as follows: Year ended July 31, 2016 2015 U.S. federal income tax at statutory rate $ 383 $ 629 State income tax 69 63 Valuation allowance (276 ) (422 ) Foreign tax rate differential (34 ) (52 ) Permanent differences 4 3 Other (3 ) (9 ) Provision for income taxes $ 143 $ 212 The Company has not recorded U.S. income tax expense for foreign earnings, as such earnings are permanently reinvested outside the United States. The cumulative undistributed foreign earnings are included in accumulated deficit in the Company’s consolidated balance sheets and consisted of approximately $2.1 million at July 31, 2016. Upon distribution of these foreign earnings to the Company’s domestic entities, the Company may be subject to U.S. income taxes and withholding of foreign taxes; however, it is not practicable to determine the amount, if any, which would be paid. Significant components of the Company’s deferred tax assets and deferred tax liabilities are as follows: July 31, 2016 2015 Deferred tax assets: Net operating loss carryforwards $ 305 $ 1,413 AMT carryforwards — 29 Reserves and accruals 352 289 Stock-based compensation 823 691 Gross deferred tax assets 1,480 2,422 Less valuation allowance (1,337 ) (2,305 ) Total deferred tax assets 143 117 Total deferred tax liabilities — — Deferred tax assets, net $ 143 $ 117 Deferred tax assets, net are included in “Other assets” in the consolidated balance sheets. At July 31, 2016 and 2015, the Company had available Federal and State net operating loss (“NOL”) carryforwards from domestic operations of approximately $0.6 million and $3.5 million, respectively, to offset future taxable income. The Federal and State NOL carryforwards will begin to expire in 2036. The Company had no available NOLs from foreign operations. The AMT carryforwards do not expire. Due to its history of losses, the Company believes that it is not more-likely-than-not that all of the deferred tax assets can be realized. Therefore, the Company has a full valuation allowance on all U.S. deferred tax assets. The change in the valuation allowance is as follows: Year ended July 31, Balance at Additions Deductions Balance at 2016 Reserves deducted from deferred income taxes, net: Valuation allowance $ 2,305 $ — $ (968 ) $ 1,337 2015 Reserves deducted from deferred income taxes, net: Valuation allowance $ 2,733 $ — $ (428 ) $ 2,305 At July 31, 2016 and 2015, the Company did not have any unrecognized tax benefits and did not anticipate any significant changes to the unrecognized tax benefits within twelve months of this reporting date. In the years ended July 31, 2016 and 2015, the Company did not record any interest or penalties on income taxes. At July 31, 2016 and 2015, there was no accrued interest included in income taxes payable. The Company currently remains subject to examinations of its tax returns as follows: U.S. federal tax returns for fiscal 2013 to fiscal 2015 as part of the IDT consolidated tax return and for pre and post spin periods for fiscal 2016, state and local tax returns generally for fiscal 2013 to fiscal 2016 and foreign tax returns generally for fiscal 2013 to fiscal 2016. In September 2016, the Company was notified that the Zedge Europe AS tax returns for 2013 and 2014 were going to be audited by the tax authorities in Norway. The audit is expected to begin in November 2016. Amounts asserted by taxing authorities or the amount ultimately assessed against the Company could be greater than the accrued amount. Accordingly, provisions may be recorded in the future as estimates are revised or underlying matters are settled or resolved. Imposition of assessments as a result of tax audits could have an adverse effect on the Company’s results of operations, cash flows and financial condition. In connection with the Spin-Off, the Company and IDT entered into various agreements prior to the Spin-Off including a Tax Separation Agreement, 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. Pursuant to the Tax Separation Agreement, among other things, IDT indemnifies the Company from all liability for taxes of the Company and any of its subsidiaries or relating to its business with respect to taxable periods ending on or before the Spin-Off, and the Company indemnifies IDT from all liability for taxes of the Company and any of its subsidiaries or relating to its business accruing after the Spin-Off. Notwithstanding the foregoing, the Company is responsible for, and IDT has no obligation to indemnify the Company for, any tax liability of the Company resulting from an audit, examination or other proceeding related to any tax returns that relate solely to the Company and its subsidiaries regardless of whether such tax return relates to a period prior to or following the Spin-Off. |
Stock-Based Compensation
Stock-Based Compensation | 12 Months Ended |
Jul. 31, 2016 | |
Stock-Based Compensation [Abstract] | |
Stock-Based Compensation | Note 10—Stock-Based Compensation 2016 Stock Option and Incentive Plan The Company adopted the Zedge, Inc. 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. At July 31, 2016, there were 55,000 shares of the Company’s Class B common stock available for awards under the 2016 Incentive Plan. On September 29, 2016, the Company’s Board of Directors amended the 2016 Incentive Plan to increase the number of shares of the Company’s Class B common stock available for the grant of awards thereunder to 691,000 shares. The amendment is subject to ratification by the Company’s stockholders. In the years ended July 31, 2016 and 2015, there was no income tax benefit resulting from tax deductions in excess of the compensation cost recognized for the Company’s stock-based compensation. Stock Options The Company’s option awards generally have a maximum term of 10 years from grant date, are exercisable upon vesting unless otherwise designated for early exercise by the Board of Directors at the time of grant, and are pursuant to individual written agreements. Prior to the Spin-Off, historical grants generally vested ratably over a three to four-year period. Subsequent to the Spin-Off, grants generally vest over a three-year period. Certain option agreements provide for accelerated vesting of options upon the effective date of an initial public offering or a change in control of the Company. 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 that do not reside in the United States. The expiration date of the stock options was extended to May 31, 2026. This extension applied to options to purchase an aggregate of 0.9 million shares of the Company’s Class B common stock. The Company recorded stock-based compensation expense of $123,000 for the modification of the options based on their estimated fair value on June 2, 2016. The fair value of stock options was estimated on the date of grant using the Black-Scholes (“BSM”) pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service period. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The estimate of fair value using the BSM pricing model is affected by assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the current fair value of the Company’s stock, the expected stock price volatility over the expected term of the awards, and actual and projected employee stock option exercise behaviors. Prior to the Spin-Off, the fair value of the Company’s common stock was established by valuations of the Company’s stock, based on estimates developed by the Company, conducted for each respective date. The expected volatility is based on historical volatility of peer companies. The Company’s historical stock option exercise experience does not provide a reasonable basis upon which to estimate an expected term because of a lack of sufficient data, therefore, expected term is estimated using the simplified method, which computes expected term as the average of the sum of the vesting term plus the contract term. Historical data is used to estimate forfeitures. The risk-free interest rate is based on U.S. Treasury rates in effect during the corresponding period of grant. The Company used the following weighted average assumptions in its BSM pricing model: Year ended July 31, 2016 Expected term 6.0 years Volatility 113 % Risk free interest rate 1.3 % Dividends — Grant date fair value $ 3.71 A summary of the Company’s stock option activity is as follows: Number of Options (in thousands) Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding at July 31, 2015 1,582 $ 0.85 Granted 16 4.42 Exercised (100 ) 0.66 Cancelled/forfeited-unvested (63 ) 0.41 Cancelled/expired-vested — — Outstanding at July 31, 2016 1,435 $ 0.92 8.00 $ 4,647 Exercisable at July 31, 2016 1,394 $ 0.87 7.83 $ 4,588 The total intrinsic value of options exercised during the years ended July 31, 2016 and 2015 was $0.1 million and none, respectively. At July 31, 2016, there was $57,000 of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 1.6 years. Restricted Stock As part of the Spin-Off, holders of IDT restricted Class B common stock and Deferred Stock Units (“DSUs”) 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, 111,842 shares of restricted stock and 7,767 DSUs were issued (adjusted for forfeitures) 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. The fair value of restricted shares of the Company’s Class B common stock is determined based on the closing price of the Company’s Class B common stock on the grant date. Share awards generally vest on a graded basis over three years of service. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Jul. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 11—Related Party Transactions 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. Following the Spin-Off, IDT charges the Company for services it provides pursuant to the Transition Services Agreement. The services provided pursuant to the Transition Services Agreement include human resources, payroll, investor relations, legal, accounting, tax, financial systems, management consulting and foreign exchange risk management. The Transition Services Agreement has a twelve month term with automatic renewals for additional six month terms unless terminated by either party upon 90 days’ notice prior to the end of the then-current term. IDT’s charges are included in “Selling, general and administrative expense” in the consolidated statements of comprehensive income. The change in the Company’s liability to IDT was as follows: Years ended July 31, 2016 2015 Balance at beginning of year $ 369 $ 489 Payments by IDT on behalf of the Company 2,122 1,982 Cash repayments, net of advances (2,192 ) (2,102 ) Balance at end of year $ 299 $ 369 Federal tax payments made by IDT on behalf of the Company totaled nil and $25,000 in the years ended July 31, 2016 and 2015, respectively. In the years ended July 31, 2016 and 2015, the Company paid $141,000 and $76,000, respectively, to Appboy, Inc. for use of its customer relationship management and lifecycle marketing platform. The Chief Executive Officer and Co-Founder of Appboy, Inc. is a member of the Company’s Board of Directors. |
Business Segment and Geographic
Business Segment and Geographic Information | 12 Months Ended |
Jul. 31, 2016 | |
Business Segment and Geographic Information [Abstract] | |
Business Segment and Geographic Information | Note 12—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: (in thousands) United States Foreign Total Long-lived assets, net: July 31, 2016 $ 1,719 $ 247 $ 1,966 July 31, 2015 1,727 112 1,839 Total assets: July 31, 2016 $ 8,576 $ 3,857 $ 12,433 July 31, 2015 5,305 3,047 8,352 |
Revolving Credit Facility (Subs
Revolving Credit Facility (Subsequent Event) | 12 Months Ended |
Jul. 31, 2016 | |
Revolving Credit Facility (Subsequent Event) [Abstract] | |
Revolving Credit Facility (Subsequent Event) | Note 13—Revolving Credit Facility (Subsequent Event) As of September 27, 2016, the Company entered into a loan and security agreement with Western Alliance Bank for a revolving credit facility of up to $2.5 million. Advances under this facility may not exceed the lesser of $2.5 million or 80% of the Company’s eligible accounts receivable subject to certain concentration limits. The revolving credit facility is secured by a lien on substantially all of the Company’s assets. The principal outstanding bears interest per annum at the greater of 3.5% or the prime rate plus 1.25%. Interest is payable monthly and all outstanding principal and any accrued and unpaid interest is due on the maturity date of September 27, 2018. The Company is required to pay an annual facility fee of $12,500 to Western Alliance Bank. The Company is also required to comply with various affirmative and negative covenants as well as maintain certain financial ratios during the term of the revolving credit facility, including the Company may not pay any dividend on its capital stock. The Company may terminate this agreement at any time without penalty or premium provided that it pays down any outstanding principal, accrued interest and bank expenses. |
Defined Contribution Plan (Subs
Defined Contribution Plan (Subsequent Event) | 12 Months Ended |
Jul. 31, 2016 | |
Defined Contribution Plan (Subsequent Event) [Abstract] | |
Defined Contribution Plan (Subsequent Event) | Note 14—Defined Contribution Plan (Subsequent Event) In September 2016, the Company adopted a 401(k) Plan, effective August 1, 2016, available to all employees meeting certain eligibility criteria. The Plan permits participants to elect pre-tax or after tax salary deferrals that will be contributed to the Plan, not to exceed the limits established by the Internal Revenue Code. The Plan provides for enhanced safe harbor employer matching contributions. All contributions made by participants and safe harbor matching contributions by the Company will be fully vested. The Company’s Class A common stock and Class B common stock are not investment options for elective deferrals by the Plan’s participants. However, matching contributions may be made in shares of the Company. |
Description of Business and S21
Description of Business and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jul. 31, 2016 | |
Description of Business and Summary of Significant Accounting Policies [Abstract] | |
Description of Business | Description of Business Zedge, Inc. (the “Company”), a Delaware corporation, was incorporated in 2008. 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 consolidated financial statements include all of the accounts of the Company and Zedge Europe AS, a Norwegian corporation. All significant intercompany accounts and transactions have been eliminated. |
The Company's Spin-Off | 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. As part of the Spin-Off, the Company’s capital stock was recapitalized (see Note 7). 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. |
Basis of Accounting | Basis of Accounting The assets and liabilities in the accompanying financial statements are recorded at historical cost. Direct expenses historically incurred by IDT prior to the Spin-Off on behalf of the Company and Zedge Europe AS are reflected in these financial statements. The most significant expenses as covered under a Master Services Agreement with IDT were as follows: legal and professional fees, and salaries and employee benefits were allocated based on specific identification; certain facility costs, travel, and consulting fees, as well as salaries of personnel in the payroll, human resources, purchasing, accounts payable, treasury, network and telephone services and legal departments were allocated based on estimates of the incremental cost incurred by IDT; medical and dental benefits were allocated based on rates similar to COBRA health benefit provision rates charged to former IDT employees; stock-based compensation and retirement benefits under IDT’s defined contribution plan were allocated based on specific identification; and insurance was allocated based on a combination of headcount and specific policy identification. Management believes that the assumptions and methods of allocation used were reasonable. However, the costs as allocated were not necessarily indicative of the costs that would have been incurred if the Company operated on a stand-alone basis. Therefore, the consolidated financial statements included herein may not necessarily be indicative of the financial position, results of operations, changes in stockholders’ equity and cash flows of the Company to be expected in the future or what they would have been had the Company been a separate stand-alone entity during the periods presented. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. |
Revenue Recognition | Revenue Recognition The Company generates over 90% of its revenues from selling its advertising inventory to advertising networks/exchanges, real time bidding platforms, and game publishers. Advertising networks/exchanges are technology platforms that facilitate the buying and selling of media advertising inventory from multiple ad networks. The Company recognizes advertising revenue as advertisements are delivered to users through impressions or ad views, as long as evidence of the arrangement with the payer exists (generally through an executed contract), the price is fixed and determinable, and the Company has assessed collectability as reasonably assured. The Company generally reports its revenue net of amounts due to agencies and brokers because the Company is not the primary obligor in the relevant arrangements, it does not finalize the pricing, and it does not establish or maintain a direct relationship with the advertiser. Certain advertising arrangements that are directly between the Company and advertisers are recognized gross equal to the price paid to the Company by the customer since the Company is the primary obligor and the Company determines the price. Any third party costs related to such direct relationships are recognized as direct cost of revenues. |
Concentration of Credit Risk and Significant Customers | Concentration of Credit Risk and Significant Customers Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents and trade accounts receivable. The Company holds cash and cash equivalents at several major financial institutions, which may exceed FDIC insured limits. Historically, the Company has not experienced any losses due to such concentration of credit risk. The Company’s temporary cash investments policy is to limit the dollar amount of investments with any one financial institution and monitor the credit ratings of those institutions. While the Company may be exposed to credit losses due to the nonperformance of the holders of its deposits, the Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows or financial condition. The Company routinely assesses the financial strength of its customers. As a result, the Company believes that its accounts receivable credit risk exposure is limited and has not experienced significant write-downs in its accounts receivable balances. In the year ended July 31, 2016, three customers represented 45%, 20% and 13% of the Company's revenue, and at July 31, 2016, one customer represented 62% of the Company’s accounts receivable balance. In the year ended July 31, 2015, two customers represented 37%, and 25% of the Company's revenue, and at July 31, 2015, three customers represented 55%, 13% and 12% of the Company’s accounts receivable balance. All of these significant customers were advertising exchanges operated by leading companies, and the receivables represent many smaller amounts due from advertisers. |
Direct Cost of Revenues | Direct Cost of Revenues Direct cost of revenues for the Company consists primarily of costs associated with the running of the Company’s content distribution platform including hosting, marketing automation and content filtering. Such costs are charged to expense as incurred. |
Long-Lived Assets | Long-Lived Assets Property and equipment is recorded at cost and depreciated on a straight-line basis over its estimated useful lives, which range as follows: capitalized software and technology development costs—3 years; and other—3, 5, 7, 10 or 20 years. Other is comprised of furniture and fixtures, office equipment, video conference equipment, computer hardware and computer software. The Company tests the recoverability of its long-lived assets with finite useful lives whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. The Company tests for recoverability based on the projected undiscounted cash flows to be derived from such asset. If the projected undiscounted future cash flows are less than the carrying value of the asset, the Company will record an impairment loss, if any, based on the difference between the estimated fair value and the carrying value of the asset. The Company generally measures fair value by considering sale prices for similar assets or by discounting estimated future cash flows from such asset using an appropriate discount rate. Cash flow projections and fair value estimates require significant estimates and assumptions by management. Should the estimates and assumptions prove to be incorrect, the Company may be required to record impairments in future periods and such impairments could be material. |
Capitalized Software and Technology Development Costs | Capitalized Software and Technology Development Costs The Company accounts for capitalized software and technology development costs in accordance with Accounting Standard Codification (“ASC”) 350-40. These costs consist of internal development costs on various projects that the Company invested in specific to the various platforms on which the Company operates its service that are capitalized during the application development stage. Capitalized software and technology development costs are included in property and equipment, net and are amortized over the estimated useful life of the software, generally three years. All ordinary maintenance costs are expensed as incurred. |
Goodwill | Goodwill Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of the business acquired. Under ASC 350, Intangibles-Goodwill and Other, goodwill is not amortized, but instead is tested for impairment annually, or if certain circumstances indicate a possible impairment may exist. The Company evaluates the recoverability of goodwill using a two-step impairment test approach at the reporting unit level. The Company has determined that it has one reporting unit. In the first step, the fair value for the reporting unit is compared to its book value including goodwill. If the fair value of the reporting unit is less than its book value, a second step is performed which compares the implied fair value of the reporting unit’s goodwill to the book value of the goodwill. If the fair value of the goodwill is less than the book value, the difference is recognized as impairment. The Company’s estimated fair value exceeded its carrying value in Step 1 of the Company’s annual impairment tests as of May 1st for the years ended July 31, 2016 and 2015, therefore it was not necessary to perform Step 2. The Company concluded that no goodwill impairment existed in the years ended July 31, 2016 and 2015. The Company uses a combination of the income approach (discounted cash flows) and market approach (guideline company method) for its Step 1 analysis. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. |
Income Taxes | Income Taxes The accompanying financial statements include provisions for federal, state and foreign income taxes. Prior to the Spin-Off, the Company was included in consolidated federal income tax returns with IDT and IDT’s other subsidiaries. Income taxes in the accompanying consolidated financial statements were calculated on a separate tax return basis. The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the period in which related temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in its assessment of a valuation allowance. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of such change. In November 2015, the Financial Accounting Standards Board (“FASB”) issued an 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 ASU requires that deferred tax assets and liabilities be classified as noncurrent in a classified balance sheet instead of separated into current and noncurrent amounts. The Company adopted this ASU on May 1, 2016. As a result, the Company reclassified deferred income tax assets of $0.1 million at July 31, 2015 from current to noncurrent. The Company uses a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return. The Company determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, the Company presumes that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. Tax positions that meet the more-likely-than-not recognition threshold are measured to determine the amount of tax benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in one or more of the following: an increase in a liability for income taxes payable, a reduction of an income tax refund receivable, a reduction in a deferred tax asset, or an increase in a deferred tax liability. The Company classifies interest and penalties on income taxes as a component of income tax expense. |
Contingencies | Contingencies The Company accrues for loss contingencies when both (a) information available prior to issuance of the financial statements indicates that it is probable that a liability had been incurred at the date of the financial statements and (b) the amount of loss can reasonably be estimated. When the Company accrues for loss contingencies and the reasonable estimate of the loss is within a range, the Company records its best estimate within the range. When no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount in the range. The Company discloses an estimated possible loss or a range of loss when it is at least reasonably possible that a loss may have been incurred. |
Earnings Per Share | 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: Year ended July 31, 2016 2015 Basic weighted-average number of shares 8,346 8,150 Effect of dilutive securities: Stock options 913 773 Non-vested restricted Class B common stock 20 — Diluted weighted-average number of shares 9,279 8,923 The following outstanding stock options were excluded from the calculations of diluted earnings per share because the exercise price of the stock options was greater than the average market price of the Company’s stock during the period: Year ended July 31, 2016 2015 Shares excluded from the calculation of diluted earnings per share 355 707 |
Stock-Based Compensation | Stock-Based Compensation The Company recognizes compensation expense for all of its grants of stock-based awards based on the estimated fair value on the grant date. Compensation cost for awards is recognized using the straight-line method over the vesting period. Stock-based compensation is included in selling, general and administrative expense. |
Fair Value Measurements | Fair Value Measurements Fair value of financial and non-financial assets and liabilities is defined as an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used to measure fair value, which prioritizes the inputs to valuation techniques used to measure fair value, is as follows: Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 – unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy. |
Derivative Instruments - Foreign Exchange Forward Contracts | Derivative Instruments – Foreign Exchange Forward Contracts The Company’s earnings and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, primarily the U.S. Dollar |
Functional Currency | Functional Currency The U.S. Dollar is the Company’s functional currency. The functional currency for Zedge Europe AS, which operates outside of the United States, is the NOK, the currency of the primary economic environment in which it primarily expends cash. The Company translates assets and liabilities denominated in foreign currencies to U.S. Dollars at the exchange rate in effect as of the financial statement date, and translates accounts from the statements of comprehensive income using the weighted average exchange rate for the period. Gains or losses resulting from foreign currency translations are recorded in “Accumulated other comprehensive loss” in the accompanying consolidated balance sheets. Foreign currency transaction gains and losses including gains and losses from currency exchange rate changes related to intercompany receivables and payables are reported in “Net (loss) gain resulting from foreign exchange transactions” in the accompanying |
Allowance for Doubtful Accounts | Allowance for Doubtful Accounts The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance. The allowance is determined based on known troubled accounts, historical experience and other currently available evidence. Doubtful accounts are written-off upon final determination that the trade accounts will not be collected. |
Recently Issued Accounting Standards Not Yet Adopted | Recently Issued Accounting Standards Not Yet Adopted In June 2016, the FASB issued an ASU that changes the impairment model for most financial assets and certain other instruments. For receivables, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except the losses will be recognized as allowances instead of reductions in the amortized cost of the securities. In addition, an entity will have to disclose significantly more information about allowances, credit quality indicators and past due securities. The new provisions will be applied as a cumulative-effect adjustment to retained earnings. The Company will adopt the new standard on August 1, 2020. The Company is evaluating the impact that the new standard will have on its consolidated financial statements. In March 2016, the FASB issued an 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 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. The Company will adopt this standard on August 1, 2018. Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. The Company is evaluating the impact that the standard will have on its consolidated financial statements. |
Description of Business and S22
Description of Business and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Jul. 31, 2016 | |
Description of Business and Summary of Significant Accounting Policies [Abstract] | |
Schedule of weighted-average number of shares used in the calculation of basic and diluted earnings per share | Year ended July 31, 2016 2015 Basic weighted-average number of shares 8,346 8,150 Effect of dilutive securities: Stock options 913 773 Non-vested restricted Class B common stock 20 — Diluted weighted-average number of shares 9,279 8,923 |
Schedule of outstanding stock options were excluded from the calculations of diluted earnings per share | Year ended July 31, 2016 2015 Shares excluded from the calculation of diluted earnings per share 355 707 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 12 Months Ended |
Jul. 31, 2016 | |
Fair Value Measurements [Abstract] | |
Summary of balance of assets and liabilities measured at fair value on a recurring basis | July 31, 2016 (in thousands) Level 1 Level 2 Level 3 Total Assets: Foreign exchange forward contracts $ — $ 21 $ — $ 21 Liabilities: Foreign exchange forward contracts $ — $ 15 $ — $ 15 July 31, 2015 (in thousands) Level 1 Level 2 Level 3 Total Assets: Foreign exchange forward contracts $ — $ 38 $ — $ 38 Liabilities: Foreign exchange forward contracts $ — $ 39 $ — $ 39 |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 12 Months Ended |
Jul. 31, 2016 | |
Derivative Instruments [Abstract] | |
Schedule of derivative instruments outstanding contracts | Settlement Date U.S. Dollar Amount NOK Amount October 2016 500,000 4,087,318 December 2016 500,000 4,300,871 January 2017 500,000 4,299,044 |
Schedule of derivative assets fair value | July 31, 2016 2015 Assets Derivatives: Balance Sheet Location Derivatives not designated or not qualifying as hedging instruments Foreign exchange forward contracts Other current assets $ 21 $ 38 |
Schedule of derivative liability fair value | July 31, 2016 2015 Liabilities Derivatives: Balance Sheet Location Derivatives not designated or not qualifying as hedging instruments Foreign exchange forward contracts Accrued expenses $ 15 $ 39 |
Schedule of derivative instruments on consolidated statements of comprehensive income | Year ended July 31, (in thousands) 2016 2015 Derivatives not designated or not qualifying as hedging instruments Statement of Comprehensive Income Location Foreign exchange forward contracts Net (loss) gain resulting from foreign exchange transactions $ (142 ) $ (58 ) |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Jul. 31, 2016 | |
Property and Equipment [Abstract] | |
Schedule of property and equipment | July 31, 2016 2015 Capitalized software and technology development costs $ 5,001 $ 4,346 Other 230 174 5,231 4,520 Less accumulated depreciation and amortization (3,388 ) (2,796 ) Total $ 1,843 $ 1,724 |
Goodwill (Tables)
Goodwill (Tables) | 12 Months Ended |
Jul. 31, 2016 | |
Goodwill [Abstract] | |
Schedule of change in carrying amount of goodwill | (in thousands) Balance at July 31, 2014 $ 3,182 Foreign currency translation adjustments (744 ) Balance at July 31, 2015 2,438 Foreign currency translation adjustments (77 ) Balance at July 31, 2016 $ 2,361 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 12 Months Ended |
Jul. 31, 2016 | |
Accrued Expenses [Abstract] | |
Summary of accrued expenses | July 31, 2016 2015 Accrued vacation $ 494 $ 356 Accrued payroll taxes 210 172 Accrued payroll and bonuses 72 90 Accrued direct cost of revenues 111 128 Accrued advertising 242 344 Accrued income taxes 119 80 Other 239 149 Total $ 1,487 $ 1,319 |
Equity (Tables)
Equity (Tables) | 12 Months Ended |
Jul. 31, 2016 | |
Equity [Abstract] | |
Summary of changes in the components of equity | Series B Convertible Preferred Stock (dollars in thousands) Shares Amount Balance at July 31, 2014 947 $ 100 2015 activity — — Balance at July 31, 2015 947 100 Reclassification of mezzanine equity (947 ) (100 ) Balance at July 31, 2016 — $ — |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Jul. 31, 2016 | |
Commitments and Contingencies [Abstract] | |
Summary of future contractual obligations and other commercial commitments | Year ended July 31, 2017 2018 2019 Thereafter Total Real estate leases $ 231 $ 248 $ 106 $ — $ 585 Software as a Service (“SaaS”) license 193 73 — — 266 Total contractual obligations $ 424 $ 321 $ 106 $ — $ 851 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Jul. 31, 2016 | |
Income Taxes [Abstract] | |
Components of income before income taxes | Year ended July 31, 2016 2015 Domestic $ 604 $ 1,121 Foreign 522 678 Income before income taxes $ 1,126 $ 1,799 |
Schedule of provision for income taxes | Year ended July 31, 2016 2015 Current: Foreign $ 169 $ 200 Federal — 28 State — — Total current expense 169 228 Deferred: Foreign (26 ) (16 ) Federal — — State — — Total deferred expense (26 ) (16 ) Provision for income taxes $ 143 $ 212 |
Differences between income taxes expected at the U.S. federal statutory income tax rate and income taxes report | Year ended July 31, 2016 2015 U.S. federal income tax at statutory rate $ 383 $ 629 State income tax 69 63 Valuation allowance (276 ) (422 ) Foreign tax rate differential (34 ) (52 ) Permanent differences 4 3 Other (3 ) (9 ) Provision for income taxes $ 143 $ 212 |
Components of company's deferred tax assets and deferred tax liabilities | July 31, 2016 2015 Deferred tax assets: Net operating loss carryforwards $ 305 $ 1,413 AMT carryforwards — 29 Reserves and accruals 352 289 Stock-based compensation 823 691 Gross deferred tax assets 1,480 2,422 Less valuation allowance (1,337 ) (2,305 ) Total deferred tax assets 143 117 Total deferred tax liabilities — — Deferred tax assets, net $ 143 $ 117 |
Schedule of change in the valuation allowance | Year ended July 31, Balance at Additions Deductions Balance at 2016 Reserves deducted from deferred income taxes, net: Valuation allowance $ 2,305 $ — $ (968 ) $ 1,337 2015 Reserves deducted from deferred income taxes, net: Valuation allowance $ 2,733 $ — $ (428 ) $ 2,305 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Jul. 31, 2016 | |
Stock-Based Compensation [Abstract] | |
Summary of weighted average assumptions in BSM pricing model | Year ended July 31, 2016 Expected term 6.0 years Volatility 113 % Risk free interest rate 1.3 % Dividends — Grant date fair value $ 3.71 |
Summary of stock option activity | Number of Options (in thousands) Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding at July 31, 2015 1,582 $ 0.85 Granted 16 4.42 Exercised (100 ) 0.66 Cancelled/forfeited-unvested (63 ) 0.41 Cancelled/expired-vested — — Outstanding at July 31, 2016 1,435 $ 0.92 8.00 $ 4,647 Exercisable at July 31, 2016 1,394 $ 0.87 7.83 $ 4,588 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 12 Months Ended |
Jul. 31, 2016 | |
Related Party Transactions [Abstract] | |
Change in company's liability to IDT | Years ended July 31, 2016 2015 Balance at beginning of year $ 369 $ 489 Payments by IDT on behalf of the Company 2,122 1,982 Cash repayments, net of advances (2,192 ) (2,102 ) Balance at end of year $ 299 $ 369 |
Business Segment and Geograph33
Business Segment and Geographic Information (Tables) | 12 Months Ended |
Jul. 31, 2016 | |
Business Segment and Geographic Information [Abstract] | |
Schedule of net long-lived assets and total assets by geographic areas | (in thousands) United States Foreign Total Long-lived assets, net: July 31, 2016 $ 1,719 $ 247 $ 1,966 July 31, 2015 1,727 112 1,839 Total assets: July 31, 2016 $ 8,576 $ 3,857 $ 12,433 July 31, 2015 5,305 3,047 8,352 |
Description of Business and S34
Description of Business and Summary of Significant Accounting Policies (Details) - shares shares in Thousands | 12 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
Description of Business and Summary of Significant Accounting Policies [Abstract] | ||
Basic weighted-average number of shares | 8,346 | 8,150 |
Effect of dilutive securities: | ||
Stock options | 913 | 773 |
Non-vested restricted Class B common stock | 20 | |
Diluted weighted-average number of shares | 9,279 | 8,923 |
Description of Business and S35
Description of Business and Summary of Significant Accounting Policies (Details 1) - shares shares in Thousands | 12 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
Description of Business and Summary of Significant Accounting Policies [Abstract] | ||
Shares excluded from the calculation of diluted earnings per share | 355 | 707 |
Description of Business and S36
Description of Business and Summary of Significant Accounting Policies (Details Textual) shares in Thousands, $ in Millions | 12 Months Ended | ||
Jul. 31, 2016CustomerSegmentsshares | Jul. 31, 2015USD ($)Customershares | Jun. 01, 2016shares | |
Basis of Presentation (Textual) | |||
Number of Segments | Segments | 1 | ||
Description pertaining to income tax | The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in one or more of the following: an increase in a liability for income taxes payable, a reduction of an income tax refund receivable, a reduction in a deferred tax asset, or an increase in a deferred tax liability. | ||
Reclassified deferred income tax assets noncurrent | $ | $ 0.1 | ||
Capitalized software and technology development costs [Member] | |||
Basis of Presentation (Textual) | |||
Estimated useful lives of Long-Lived assets | 3 years | ||
Other property and equipment [Member] | |||
Basis of Presentation (Textual) | |||
Estimated useful lives of Long-Lived assets | 3, 5, 7, 10 or 20 years | ||
Revenue [Member] | |||
Basis of Presentation (Textual) | |||
Concentration risk, percentage | 90.00% | ||
Revenue [Member] | Customer one [Member] | |||
Basis of Presentation (Textual) | |||
Concentration risk, percentage | 45.00% | 37.00% | |
Number of customers | 3 | 2 | |
Revenue [Member] | Customer two [Member] | |||
Basis of Presentation (Textual) | |||
Concentration risk, percentage | 20.00% | 25.00% | |
Number of customers | 3 | 2 | |
Revenue [Member] | Customer three [Member] | |||
Basis of Presentation (Textual) | |||
Concentration risk, percentage | 13.00% | ||
Number of customers | 3 | ||
Accounts receivable [Member] | Customer one [Member] | |||
Basis of Presentation (Textual) | |||
Concentration risk, percentage | 62.00% | 55.00% | |
Number of customers | 1 | 3 | |
Accounts receivable [Member] | Customer two [Member] | |||
Basis of Presentation (Textual) | |||
Concentration risk, percentage | 13.00% | ||
Number of customers | 3 | ||
Accounts receivable [Member] | Customer three [Member] | |||
Basis of Presentation (Textual) | |||
Concentration risk, percentage | 12.00% | ||
Number of customers | 3 | ||
Class A common stock [Member] | |||
Basis of Presentation (Textual) | |||
Common stock, shares issued | shares | 525 | 525 | 500 |
Common stock, shares outstanding | shares | 525 | 525 | 500 |
Class B common stock [Member] | |||
Basis of Presentation (Textual) | |||
Common stock, shares issued | shares | 8,819 | 7,637 | 8,800 |
Common stock, shares outstanding | shares | 8,819 | 7,637 | 8,800 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Jul. 31, 2016 | Jul. 31, 2015 |
Assets: | ||
Foreign exchange forward contracts | $ 21 | $ 38 |
Liabilities: | ||
Foreign exchange forward contracts | 15 | 39 |
Fair value on recurring basis [Member] | Level 1 [Member] | ||
Assets: | ||
Foreign exchange forward contracts | ||
Liabilities: | ||
Foreign exchange forward contracts | ||
Fair value on recurring basis [Member] | Level 2 [Member] | ||
Assets: | ||
Foreign exchange forward contracts | 21 | 38 |
Liabilities: | ||
Foreign exchange forward contracts | 15 | 39 |
Fair value on recurring basis [Member] | Level 3 [Member] | ||
Assets: | ||
Foreign exchange forward contracts | ||
Liabilities: | ||
Foreign exchange forward contracts |
Derivative Instruments (Details
Derivative Instruments (Details) | 12 Months Ended | |
Jul. 31, 2016USD ($) | Jul. 31, 2016NOK | |
October 2016 [Member] | ||
Derivative [Line Items] | ||
Settlement date | Oct. 31, 2016 | Oct. 31, 2016 |
Amount | $ 500,000 | NOK 4,087,318 |
December 2016 [Member] | ||
Derivative [Line Items] | ||
Settlement date | Dec. 31, 2016 | Dec. 31, 2016 |
Amount | $ 500,000 | NOK 4,300,871 |
January 2017 [Member] | ||
Derivative [Line Items] | ||
Settlement date | Jan. 31, 2017 | Jan. 31, 2017 |
Amount | $ 500,000 | NOK 4,299,044 |
Derivative Instruments (Detai39
Derivative Instruments (Details 1) - USD ($) $ in Thousands | Jul. 31, 2016 | Jul. 31, 2015 |
Derivatives not designated or not qualifying as hedging instruments | ||
Foreign exchange forward contracts | $ 21 | $ 38 |
Derivative Instruments (Detai40
Derivative Instruments (Details 2) - USD ($) $ in Thousands | Jul. 31, 2016 | Jul. 31, 2015 |
Derivatives not designated or not qualifying as hedging instruments | ||
Foreign exchange forward contracts | $ 15 | $ 39 |
Derivative Instruments (Detai41
Derivative Instruments (Details 3) - USD ($) $ in Thousands | 12 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
Derivatives not designated or not qualifying as hedging instruments | ||
Foreign exchange forward contracts | $ (142) | $ (58) |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | Jul. 31, 2016 | Jul. 31, 2015 |
Property and Equipment [Abstract] | ||
Capitalized software and technology development costs | $ 5,001 | $ 4,346 |
Other | 230 | 174 |
Property, plant and equipment, gross | 5,231 | 4,520 |
Less accumulated depreciation and amortization | (3,388) | (2,796) |
Total | $ 1,843 | $ 1,724 |
Property and Equipment (Detai43
Property and Equipment (Details Textual) - USD ($) $ in Thousands | 12 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
Property and Equipment (Textual) | ||
Depreciation and amortization expense | $ 605 | $ 624 |
Write-off of capitalized software and technology development costs | $ 281 |
Goodwill (Details)
Goodwill (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
Goodwill [Abstract] | ||
Beginning Balance | $ 2,438 | $ 3,182 |
Foreign currency translation adjustments | (77) | (744) |
Ending Balance | $ 2,361 | $ 2,438 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Jul. 31, 2016 | Jul. 31, 2015 |
Accrued Expenses [Abstract] | ||
Accrued vacation | $ 494 | $ 356 |
Accrued payroll taxes | 210 | 172 |
Accrued payroll and bonuses | 72 | 90 |
Accrued direct cost of revenues | 111 | 128 |
Accrued advertising | 242 | 344 |
Accrued income taxes | 119 | 80 |
Other | 239 | 149 |
Total | $ 1,487 | $ 1,319 |
Equity (Details)
Equity (Details) - Series B Convertible Preferred Stock [Member] - USD ($) $ in Thousands | 12 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
MEZZANINE EQUITY: | ||
Beginning Balance | $ 100 | $ 100 |
Beginning Balance, shares | 947 | 947 |
Reclassification of mezzanine equity | $ (100) | |
Reclassification of mezzanine equity, Shares | (947) | |
2015 activity | ||
Ending Balance | $ 100 | |
Ending Balance, shares | 947 |
Equity (Details Textual)
Equity (Details Textual) - USD ($) $ in Millions | 1 Months Ended | 12 Months Ended |
May 31, 2016 | Jul. 31, 2016 | |
Equity (Textual) | ||
Common stock, voting rights | The holders of Class A common stock are entitled to three votes per share and the holders of Class B common stock are entitled to one-tenth of a vote per share. Each share of Class A common stock may be converted into one share of Class B common stock, at any time, at the option of the holder. | |
Class B common stock [Member] | ||
Equity (Textual) | ||
Capital stock | $ 3 | |
Percentage of capital stock | 10.00% |
Commitments and Contingencies48
Commitments and Contingencies (Details) $ in Thousands | Jul. 31, 2016USD ($) |
Year ended July 31, | |
2,017 | $ 424 |
2,018 | 321 |
2,019 | 106 |
Thereafter | |
Total | 851 |
Real estate leases [Member] | |
Year ended July 31, | |
2,017 | 231 |
2,018 | 248 |
2,019 | 106 |
Thereafter | |
Total | 585 |
Software as a Service ("SaaS") license [Member] | |
Year ended July 31, | |
2,017 | 193 |
2,018 | 73 |
2,019 | |
Thereafter | |
Total | $ 266 |
Commitments and Contingencies49
Commitments and Contingencies (Details Textual) - USD ($) | Mar. 31, 2014 | Aug. 09, 2012 | Jul. 31, 2016 | Jul. 31, 2015 |
Commitments and Contingencies (Textual) | ||||
Rental expense under operating leases | $ 244,000 | $ 211,000 | ||
Lawsuit description | Saregama India, Limited filed a lawsuit against the Company before the Barasat District Court, seeking approximately $1,595,700 as damages and an injunction for copyright infringement. | Blue Spike LLC filed a patent infringement lawsuit against one of the Company's suppliers and 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 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
Income Taxes [Abstract] | ||
Domestic | $ 604 | $ 1,121 |
Foreign | 522 | 678 |
Income before income taxes | $ 1,126 | $ 1,799 |
Income Taxes (Details 1)
Income Taxes (Details 1) - USD ($) $ in Thousands | 12 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
Current: | ||
Foreign | $ 169 | $ 200 |
Federal | 28 | |
State | ||
Total current expense | 169 | 228 |
Deferred: | ||
Foreign | (26) | (16) |
Federal | ||
State | ||
Total deferred expense | (26) | (16) |
Provision for income taxes | $ 143 | $ 212 |
Income Taxes (Details 2)
Income Taxes (Details 2) - USD ($) $ in Thousands | 12 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
Effective income tax rate reconciliation | ||
U.S. federal income tax at statutory rate | $ 383 | $ 629 |
State income tax | 69 | 63 |
Valuation allowance | (276) | (422) |
Foreign tax rate differential | (34) | (52) |
Permanent differences | 4 | 3 |
Other | (3) | (9) |
Provision for income taxes | $ 143 | $ 212 |
Income Taxes (Details 3)
Income Taxes (Details 3) - USD ($) $ in Thousands | Jul. 31, 2016 | Jul. 31, 2015 |
Deferred tax assets: | ||
Net operating loss carryforwards | $ 305 | $ 1,413 |
AMT carryforwards | 29 | |
Reserves and accruals | 352 | 289 |
Stock-based compensation | 823 | 691 |
Gross deferred tax assets | 1,480 | 2,422 |
Less valuation allowance | (1,337) | (2,305) |
Total deferred tax assets | 143 | 117 |
Total deferred tax liabilities | ||
Deferred tax assets, net | $ 143 | $ 117 |
Income Taxes (Details 4)
Income Taxes (Details 4) - USD ($) $ in Thousands | 12 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
Change in the valuation allowance for deferred tax assets | ||
Balance at beginning of year | $ 2,305 | $ 2,733 |
Additions charged to costs and expenses | ||
Deductions | (968) | (428) |
Balance at end of year | $ 1,337 | $ 2,305 |
Income Taxes (Details Textual)
Income Taxes (Details Textual) - USD ($) $ in Millions | 12 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
Income Taxes (Textual) | ||
Undistributed foreign earnings included in accumulated deficit | $ 2.1 | |
Accrued interest on income taxes | ||
Federal and State net operating loss ("NOL") carryforwards | $ 0.6 | $ 3.5 |
Federal and state net operating loss carryforwards expire date | Jul. 31, 2036 |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) | 12 Months Ended |
Jul. 31, 2016$ / shares | |
Stock-Based Compensation [Abstract] | |
Expected term | 6 years |
Volatility | 113.00% |
Risk free interest rate | 1.30% |
Dividends | |
Grant date fair value | $ 3.71 |
Stock-Based Compensation (Det57
Stock-Based Compensation (Details 1) - Employee Stock Option [Member] $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended |
Jul. 31, 2016USD ($)$ / sharesshares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Outstanding, Number of Options Beginning | shares | 1,582 |
Granted, Number of Options | shares | 16 |
Exercised, Number of Options | shares | (100) |
Cancelled/forfeited-unvested, Number of Options | shares | (63) |
Cancelled/expired-vested, Number of Options | shares | |
Outstanding, Number of Options Ending | shares | 1,435 |
Exercisable, Number of Options | shares | 1,394 |
Outstanding, Weighted-Average Exercise Price Beginning | $ / shares | $ 0.85 |
Granted, Weighted-Average Exercise Price | $ / shares | 4.42 |
Exercised, Weighted-Average Exercise Price | $ / shares | 0.66 |
Cancelled/forfeited-unvested, Weighted-Average Exercise Price | $ / shares | 0.41 |
Cancelled/expired-vested, Weighted-Average Exercise Price | $ / shares | |
Outstanding, Weighted-Average Exercise Price Ending | $ / shares | 0.92 |
Exercisable, Weighted-Average Exercise Price | $ / shares | $ 0.87 |
Outstanding, Weighted-Average Remaining Contractual Term (in years) | 8 years |
Exercisable, Weighted-Average Remaining Contractual Term (in years) | 7 years 9 months 29 days |
Outstanding, Aggregate Intrinsic Value | $ | $ 4,647 |
Exercisable, Aggregate Intrinsic Value | $ | $ 4,588 |
Stock-Based Compensation (Det58
Stock-Based Compensation (Details Textual) - USD ($) | 1 Months Ended | 12 Months Ended | |
Sep. 29, 2016 | Jul. 31, 2016 | Jul. 31, 2015 | |
Restricted Stock [Member] | Class B common stock [Member] | |||
Stock-Based Compensation (Textual) | |||
Restricted stock shares issued | 111,842 | ||
Deferred stock units | 7,767 | ||
Stock Options [Member] | |||
Stock-Based Compensation (Textual) | |||
Expiration date | May 31, 2026 | ||
Stock option expiration extension, number of shares | 900,000 | ||
Stock-based compensation expense | $ 123,000 | ||
Intrinsic value of options | 100,000 | ||
Unrecognized compensation cost, non-vested stock options | $ 57,000 | ||
Stock options exercisable upon vesting term | 10 years | ||
Stock options weighted average period | 1 year 7 months 6 days | ||
Stock option vesting period, description | Prior to the Spin-Off, historical grants generally vested ratably over a three to four-year period. Subsequent to the Spin-Off, grants generally vest over a three-year period. | ||
2016 Stock Option and Incentive Plan [Member] | Class B common stock [Member] | |||
Stock-Based Compensation (Textual) | |||
Share available for awards | 55,000 | ||
2016 Stock Option and Incentive Plan [Member] | Class B common stock [Member] | Subsequent Event [Member] | |||
Stock-Based Compensation (Textual) | |||
Stock available for grant of awards | 691,000 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
Related Party Transactions [Abstract] | ||
Balance at beginning of year | $ 369 | $ 489 |
Payments by IDT on behalf of the Company | 2,122 | 1,982 |
Cash repayments, net of advances | (2,192) | (2,102) |
Balance at end of year | $ 299 | $ 369 |
Related Party Transactions (D60
Related Party Transactions (Details Textual) - USD ($) | 12 Months Ended | |
Jul. 31, 2016 | Jul. 31, 2015 | |
IDT Corporation [Member] | ||
Related Party Transactions (Textual) | ||
Federal tax payments made by IDT | $ 25,000 | |
Appboy Inc [Member] | ||
Related Party Transactions (Textual) | ||
Related party payments | $ 141,000 | $ 76,000 |
Business Segment and Geograph61
Business Segment and Geographic Information (Details) - USD ($) $ in Thousands | Jul. 31, 2016 | Jul. 31, 2015 |
Business Segment Information [Line Items] | ||
Long-lived assets, net | $ 1,966 | $ 1,839 |
Total assets | 12,433 | 8,352 |
United States [Member] | ||
Business Segment Information [Line Items] | ||
Long-lived assets, net | 1,719 | 1,727 |
Total assets | 8,576 | 5,305 |
Foreign [Member] | ||
Business Segment Information [Line Items] | ||
Long-lived assets, net | 247 | 112 |
Total assets | $ 3,857 | $ 3,047 |
Revolving Credit Facility (Su62
Revolving Credit Facility (Subsequent Event) (Details) - Subsequent Event [Member] | 1 Months Ended |
Sep. 27, 2016USD ($) | |
Revolving Credit Facility (Subsequent Event) (Textual) | |
Loan and security agreement with Western Alliance Bank for revolving credit facility | $ 2,500,000 |
Line of credit facility, borrowing capacity, description | Advances under this facility may not exceed the lesser of $2.5 million or 80% of the Company's eligible accounts receivable subject to certain concentration limits. |
Interest rate description | The principal outstanding bears interest per annum at the greater of 3.5% or the prime rate plus 1.25%. |
Line of credit maturity date | Sep. 27, 2018 |
Line of credit facility annual fee | $ 12,500 |