Zedge (ZDGE) 10-Q 14 Jun 17 2017 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Apr. 30, 2017	Jun. 08, 2017
Entity Registrant Name	Zedge, Inc.
Entity Central Index Key	1,667,313
Amendment Flag	false
Current Fiscal Year End Date	--07-31
Document Type	10-Q
Document Period End Date	Apr. 30, 2017
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q3
Entity Filer Category	Smaller Reporting Company
Class A common stock
Entity Common Stock, Shares Outstanding		524,775
Class B common stock
Entity Common Stock, Shares Outstanding		9,122,863

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Apr. 30, 2017	Jul. 31, 2016
Current assets:
Cash and cash equivalents	$ 5,082	$ 5,978
Trade accounts receivable, net of allowance for doubtful accounts of $0 at April 30, 2017 and July 31, 2016	1,790	1,668
Prepaid expenses	131	210
Other current assets	313	107
Total current assets	7,316	7,963
Property and equipment, net	2,586	1,843
Goodwill	2,325	2,361
Other assets	260	266
Total assets	12,487	12,433
Current liabilities:
Trade accounts payable	45	36
Accrued expenses	1,916	1,487
Deferred revenue	1	15
Due to IDT Corporation	56	299
Total current liabilities	2,018	1,837
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $.01 par value; authorized shares-2,400; no shares issued
Additional paid-in capital	21,380	21,045
Accumulated other comprehensive loss	(879)	(817)
Accumulated deficit	(10,128)	(9,725)
Total stockholders' equity	10,469	10,596
Total liabilities and stockholders' equity	12,487	12,433
Class A common stock
Stockholders' Equity:
Common stock value	5	5
Class B common stock
Stockholders' Equity:
Common stock value	$ 91	$ 88

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Apr. 30, 2017	Jul. 31, 2016
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	9,123	8,819
Common stock, shares outstanding	9,123	8,819

Consolidated Statements of Comp

Consolidated Statements of Comprehensive (Loss) Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2017	Apr. 30, 2016	Apr. 30, 2017	Apr. 30, 2016
Consolidated Statements of Comprehensive Income [Abstract]
Revenues	$ 2,530	$ 2,573	$ 7,485	$ 8,661
Costs and expenses:
Direct cost of revenues (exclusive of amortization of capitalized software and technology development costs included below)	406	327	1,186	932
Selling, general and administrative	2,151	1,850	6,222	5,316
Depreciation and amortization	166	153	487	470
Write-off of capitalized software and technology development costs			9
(Loss) income from operations	(193)	243	(419)	1,943
Interest and other income (loss)	6	(1)	14	2
Net (loss) gain resulting from foreign exchange transactions	(52)	130	(19)	(31)
(Loss) income before income taxes	(239)	372	(424)	1,914
(Provision for) benefit from income taxes		(46)	21	(152)
Net (loss) income	(239)	326	(403)	1,762
Other comprehensive (loss) income:
Changes in foreign currency translation adjustment	(121)	266	(62)	107
Total other comprehensive (loss) income	(121)	266	(62)	107
Total comprehensive (loss) income	$ (360)	$ 592	$ (465)	$ 1,869
(Loss) earnings per share attributable to Zedge, Inc. common stockholders:
Basic	$ (0.02)	$ 0.04	$ (0.04)	$ 0.22
Diluted	$ (0.02)	$ 0.04	$ (0.04)	$ 0.20
Weighted-average number of shares used in calculation of (loss) earnings per share:
Basic	9,595	8,199	9,423	8,174
Diluted	9,595	9,186	9,423	9,027

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Apr. 30, 2017	Apr. 30, 2016
Operating activities
Net (loss) income	$ (403)	$ 1,762
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	487	470
Deferred income taxes	4
Stock-based compensation	209	10
Write-off of capitalized software and technology development costs	9
Change in assets and liabilities:
Trade accounts receivable	(122)	(158)
Prepaid expenses and other current assets	(184)	6
Other assets	2	(13)
Trade accounts payable and accrued expenses	442	305
Due to IDT Corporation	(243)	89
Deferred revenue	(14)	(1)
Net cash provided by operating activities	187	2,470
Investing activities
Capitalized software and technology development costs and purchase of equipment	(1,240)	(680)
Net cash used in investing activities	(1,240)	(680)
Financing activities
Proceeds from exercise of stock options	167	9
Net cash provided by financing activities	167	9
Effect of exchange rate changes on cash and cash equivalents	(10)	7
Net (decrease) increase in cash and cash equivalents	(896)	1,806
Cash and cash equivalents at beginning of period	5,978	2,170
Cash and cash equivalents at end of period	$ 5,082	$ 3,976

Basis of Presentation

Basis of Presentation	9 Months Ended
	Apr. 30, 2017
Basis of Presentation [Abstract]
Basis of Presentation	Note 1—Basis of Presentation The accompanying unaudited consolidated financial statements of Zedge, Inc. and its subsidiaries, Zedge Europe AS and Zedge Canada, Inc. (the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended April 30, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2017. The balance sheet at July 31, 2016 has been derived from the Company’s audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended July 31, 2016, as filed with the U.S. Securities and Exchange Commission (“SEC”). 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”). The Company’s fiscal year ends on July 31 of each calendar year. Each reference below to a fiscal year refers to the fiscal year ending in the calendar year indicated (e.g., fiscal 2017 refers to the fiscal year ending July 31, 2017).

Fair Value Measurements

Fair Value Measurements	9 Months Ended
	Apr. 30, 2017
Fair Value Measurements [Abstract]
Fair Value Measurements	Note 2—Fair Value Measurements The following tables present the balance of assets and liabilities measured at fair value on a recurring basis: Level 1 (1) Level 2 (2) Level 3 (3) Total (in thousands) April 30, 2017 Assets: Foreign exchange forward contracts $ — $ — $ — $ — Liabilities: Foreign exchange forward contracts $ — $ 44 $ — $ 44 July 31, 2016 Assets: Foreign exchange forward contracts $ — $ 21 $ — $ 21 Liabilities: Foreign exchange forward contracts $ — $ 15 $ — $ 15 (1) – quoted prices in active markets for identical assets or liabilities (2) – observable inputs other than quoted prices in active markets for identical assets and liabilities (3) – no observable pricing inputs in the market Fair Value of Other Financial Instruments The Company’s other financial instruments at April 30, 2017 and July 31, 2016 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. This fair value estimate was classified as Level 2 of the fair value hierarchy.

Derivative Instruments

Derivative Instruments	9 Months Ended
	Apr. 30, 2017
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 and until November 2016, IDT provided hedging services to the Company pursuant to the Transition Services Agreement (see Note 7). As of November 16, 2016, the Company entered into a Foreign Exchange Agreement with Western Alliance Bank allowing the Company to enter into foreign exchange contracts under its revolving credit facility with the bank (see Note 8). 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 April 30, 2017 were as follows: Settlement Date U.S. Dollar Amount NOK Amount May 2017 500,000 4,132,484 June 2017* 500,000 4,179,494 July 2017* 500,000 4,179,038 * Entered into pursuant to the Foreign Exchange Agreement with Western Alliance Bank. The fair value of outstanding derivative instruments recorded as assets in the accompanying consolidated balance sheets were as follows: Asset Derivatives Balance Sheet Location April 30, July 31, (in thousands) Derivatives not designated or not qualifying as hedging instruments: Foreign exchange forward contracts Other current assets $ — $ 21 The fair value of outstanding derivative instruments recorded as liabilities in the accompanying consolidated balance sheets were as follows: Liability Derivatives Balance Sheet Location April 30, July 31, (in thousands) Derivatives not designated or not qualifying as hedging instruments: Foreign exchange forward contracts Accrued expenses $ 44 $ 15 The effects of derivative instruments on the consolidated statements of comprehensive (loss) income were as follows: Amount of Gain (Loss) Recognized on Derivatives Three Months Ended Nine Months Ended Derivatives not designated or not qualifying as hedging instruments Location of Gain (Loss) Recognized on Derivatives 2017 2016 2017 2016 (in thousands) Foreign exchange forward contracts Net (loss) gain resulting from foreign exchange transactions $ (92 ) $ 156 $ (68 ) $ (68 )

Accrued Expenses

Accrued Expenses	9 Months Ended
	Apr. 30, 2017
Accrued Expenses [Abstract]
Accrued Expenses	Note 4—Accrued Expenses Accrued expenses consist of the following: April 30, July 31, (in thousands) Accrued vacation $ 653 $ 494 Accrued payroll taxes 459 210 Accrued payroll and bonuses 156 72 Accrued direct cost of revenues 6 111 Accrued advertising 175 242 Accrued income taxes 65 119 Other 402 239 Total accrued expenses $ 1,916 $ 1,487

Equity

Equity	9 Months Ended
	Apr. 30, 2017
Equity [Abstract]
Equity	Note 5—Equity Changes in the components of equity were as follows: Nine Months Ended (in thousands) Balance, July 31, 2016 $ 10,596 Exercise of stock options 110 Stock-based compensation 209 Stock issued for matching contributions to the 401(k) Plan 19 Comprehensive loss: Net loss (403 ) Foreign currency translation adjustments (62 ) Total comprehensive loss (465 ) Balance, April 30, 2017 $ 10,469 Stock Options In the nine months ended April 30, 2017, the Company received proceeds of $109,790 from the exercise, during that period, of stock options for which the Company issued 280,700 shares of its Class B common stock. In addition, in the nine months ended April 30, 2017, the Company received proceeds of $56,840 from the exercise, in fiscal 2016, of stock options which was recorded as a receivable as of July 31, 2016. In September 2016, the Compensation Committee of the Company’s Board of Directors approved the grant of options to purchase 231,327 shares of the Company’s Class B common stock to its executive officers, a consultant and a non-executive employee. The options vest over a three-year period from grant. Unrecognized compensation expense related to this grant was an aggregate of $681,000 based on the estimated fair value of the options on the grant date. The unrecognized compensation expense is being recognized on a straight-line basis over the vesting period.

Earnings Per Share

Earnings Per Share	9 Months Ended
	Apr. 30, 2017
Earnings Per Share [Abstract]
Earnings Per Share	Note 6—Earnings Per Share Basic earnings per share is computed by dividing net income attributable to all classes of common stockholders of the Company by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted earnings per share is computed in the same manner as basic earnings per share, except that the number of shares is increased to include restricted stock still subject to risk of forfeiture and to assume exercise of potentially dilutive stock options using the treasury stock method, unless the effect of such increase is anti-dilutive. The weighted-average number of shares used in the calculation of basic and diluted earnings per share attributable to the Company’s common stockholders consists of the following: Three Months Ended Nine Months Ended 2017 2016 2017 2016 (in thousands) Basic weighted-average number of shares 9,595 8,199 9,423 8,174 Effect of dilutive securities: Stock options — 987 — 853 Non-vested restricted Class B common stock — — — — Diluted weighted-average number of shares 9,595 9,186 9,423 9,027 The following shares were excluded from the dilutive earnings per share computations because their inclusion would have been anti-dilutive: Three Months Ended Nine Months Ended 2017 2016 2017 2016 (in thousands) Stock options 1,431 — 1,431 472 Non-vested restricted Class B common stock 53 — 53 — Shares excluded from the calculation of diluted earnings per share 1,484 — 1,484 472 For the three and nine months ended April 30, 2017, the diluted earnings per share equals basic earnings per share because the Company had a net loss and the impact of the assumed exercise of stock options and vesting of restricted stock would have been anti-dilutive. For the nine months ended April 30, 2016, outstanding stock options were excluded from the calculation of diluted earnings per share because the exercise price of the stock option was greater than the average market price of the Company’s stock during the period.

Related Party Transactions

Related Party Transactions	9 Months Ended
	Apr. 30, 2017
Related Party Transactions [Abstract]
Related Party Transactions	Note 7—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 costs of employee benefits, taxes and other liabilities and obligations; (2) services provided by IDT relating to human resources and employee benefits administration; and (3) finance, accounting, tax, facilities and legal services 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. IDT’s charges are included in “Selling, general and administrative expense” in the consolidated statements of comprehensive (loss) income. Three Months Ended Nine Months Ended 2017 2016 2017 2016 (in thousands) Payments by IDT on behalf of the Company $ 160 $ 454 $ 798 $ 1,319 Cash repayments, net of advances $ (181 ) $ (360 ) $ (1,041 ) $ (1,230 )

Revolving Credit Facility

Revolving Credit Facility	9 Months Ended
	Apr. 30, 2017
Revolving Credit Facility [Abstract]
Revolving Credit Facility	Note 8—Revolving Credit Facility 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 outstanding principal amount 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 and to maintain certain financial ratios during the term of the revolving credit facility. The covenants include a prohibition on the Company paying 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. At April 30, 2017, there were no amounts outstanding under the revolving credit facility and the Company was in compliance with all of the covenants. As of November 16, 2016, the Company entered into a Foreign Exchange Agreement with Western Alliance Bank to allow the Company to enter into foreign exchange contracts not to exceed $5.0 million in the aggregate at any point in time under its revolving credit facility. The available borrowing under the revolving credit facility is reduced by an applicable foreign exchange reserve percentage as determined by Western Alliance Bank, in its reasonable discretion from time to time, which was initially set at 10% of the nominal amount of the foreign exchange contracts in effect at the relevant time. In December 2016, the applicable foreign exchange reserve percentage was changed so that the reduction of available borrowing for major currency forward contracts of less than six months tenor is set at 10% of the nominal amount of the foreign exchange contracts, and for contracts over six months tenor, 12.5% of the nominal amount of the foreign exchange contracts. As of April 30, 2017, there were $1.0 million of outstanding foreign exchange contracts with less than six months tenor under the credit facility, and no contracts of greater than six months tenor, which reduced the available borrowing under the revolving credit facility by $100,000.

Business Segment and Geographic

Business Segment and Geographic Information	9 Months Ended
	Apr. 30, 2017
Business Segment and Geographic Information [Abstract]
Business Segment and Geographic Information	Note 9—Business Segment and Geographic Information The Company provides a content platform, worldwide, centered on self-expression, attracting both creators looking to promote their content and consumers who utilize such content to express their identity, feelings, tastes and interests. The Company’s platform enables consumers to personalize their mobile devices with free, high quality ringtones, wallpapers, home screen app icons and notification sounds. The Company conducts business as one operating segment. There were no revenues from customers located outside of the United States in all periods presented. Net long-lived assets and total assets held outside of the United States, which are located primarily in Norway, were as follows: United States Foreign Total (in thousands) Long-lived assets, net: April 30, 2017 $ 2,462 $ 244 $ 2,706 July 31, 2016 1,719 247 1,966 Total assets: April 30, 2017 $ 8,884 $ 3,603 $ 12,487 July 31, 2016 8,576 3,857 12,433

Legal Proceeding and Tax Matter

Legal Proceeding and Tax Matters	9 Months Ended
	Apr. 30, 2017
Legal Proceeding and Tax Matters [Abstract]
Legal Proceeding and Tax Matters	Note 10—Legal Proceeding and Tax Matters Legal Proceedings In March 2014, Saregama India, Limited filed a lawsuit against the Company before the Barasat District Court, seeking approximately $1.6 million as damages and an injunction for copyright infringement. The main ground for the lawsuit was an allegation that the Company 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 the possibility of it bearing 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. Tax Audits In September 2016, the Company was notified that the Zedge Europe AS tax returns for 2012 through 2016 were going to be audited by the tax authorities in Norway. The initial audit meeting took place in October 2016 and the audit is progressing. No significant issues have been identified at this time. Amounts asserted by taxing authorities or the amount ultimately assessed against the Company could be greater than any 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. Research and Development Credits As of October 31, 2016, the Company recorded a $0.2 million receivable from Norway’s SkatteFUNN government program designed to stimulate research and development in Norwegian trade and industry, which related to previous periods. At April 30, 2017, the balance was $0.3 million, which was included in “Other current assets” in the consolidated balance sheet.

Recently Issued Accounting Stan

Recently Issued Accounting Standards Not Yet Adopted	9 Months Ended
	Apr. 30, 2017
Recently Issued Accounting Standards Not Yet Adopted [Abstract]
Recently Issued Accounting Standards Not Yet Adopted	Note 11—Recently Issued Accounting Standards Not Yet Adopted In May 2017, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Pursuant to this ASU, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified (if the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification); (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The Company will adopt the amendments in this ASU prospectively to an award modified on or after on August 1, 2018. The Company is evaluating the impact that the new standard will have on its consolidated financial statements. In January 2017, the FASB issued an ASU to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current guidance, there are three elements of a business—inputs, processes, and outputs. While an integrated set of assets and activities (collectively referred to as a “set”) that is a business usually has outputs, outputs are not required to be present. In addition, all the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set and continue to produce outputs, for example, by integrating the acquired set with their own inputs and processes. The amendments in this ASU provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments in this ASU (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The amendments provide a framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs. Lastly, the ASU narrows the definition of the term output. The Company will adopt the amendments in this ASU on August 1, 2018. The Company is evaluating the impact that the new standard will have on its consolidated financial statements. In January 2017, the FASB issued an ASU that simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, under the amendments in this ASU, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity should consider income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Early adoption of this standard is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company intends to adopt this standard for its goodwill impairment test to be performed in fiscal 2017. 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 does not expect that the adoption of the new standard will have a significant impact on its consolidated financial statements. In February 2016, the FASB issued an ASU related to the accounting for leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company will adopt the new standard on August 1, 2019. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is evaluating the impact that the new standard will have on its consolidated financial statements. In 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 International Financial Reporting Standards (“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 is required to 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 and has not yet selected an adoption date or a transition method. The Company cannot reasonably estimate the impact that the adoption of the standard will have on its consolidated financial statements.

Fair Value Measurements (Tables

Fair Value Measurements (Tables)	9 Months Ended
	Apr. 30, 2017
Fair Value Measurements [Abstract]
Summary of balance of assets and liabilities measured at fair value on a recurring basis	Level 1 (1) Level 2 (2) Level 3 (3) Total (in thousands) April 30, 2017 Assets: Foreign exchange forward contracts $ — $ — $ — $ — Liabilities: Foreign exchange forward contracts $ — $ 44 $ — $ 44 July 31, 2016 Assets: Foreign exchange forward contracts $ — $ 21 $ — $ 21 Liabilities: Foreign exchange forward contracts $ — $ 15 $ — $ 15 (1) – quoted prices in active markets for identical assets or liabilities (2) – observable inputs other than quoted prices in active markets for identical assets and liabilities (3) – no observable pricing inputs in the market

Derivative Instruments (Tables)

Derivative Instruments (Tables)	9 Months Ended
	Apr. 30, 2017
Derivative Instruments [Abstract]
Schedule of derivative instruments outstanding contracts	Settlement Date U.S. Dollar Amount NOK Amount May 2017 500,000 4,132,484 June 2017* 500,000 4,179,494 July 2017* 500,000 4,179,038 * Entered into pursuant to the Foreign Exchange Agreement with Western Alliance Bank.
Schedule of derivative assets fair value	Asset Derivatives Balance Sheet Location April 30, July 31, (in thousands) Derivatives not designated or not qualifying as hedging instruments: Foreign exchange forward contracts Other current assets $ — $ 21
Schedule of derivative liability fair value	Liability Derivatives Balance Sheet Location April 30, July 31, (in thousands) Derivatives not designated or not qualifying as hedging instruments: Foreign exchange forward contracts Accrued expenses $ 44 $ 15
Schedule of derivative instruments on consolidated statements of comprehensive (loss) income	Amount of Gain (Loss) Recognized on Derivatives Three Months Ended Nine Months Ended Derivatives not designated or not qualifying as hedging instruments Location of Gain (Loss) Recognized on Derivatives 2017 2016 2017 2016 (in thousands) Foreign exchange forward contracts Net (loss) gain resulting from foreign exchange transactions $ (92 ) $ 156 $ (68 ) $ (68 )

Accrued Expenses (Tables)

Accrued Expenses (Tables)	9 Months Ended
	Apr. 30, 2017
Accrued Expenses [Abstract]
Summary of accrued expenses	April 30, July 31, (in thousands) Accrued vacation $ 653 $ 494 Accrued payroll taxes 459 210 Accrued payroll and bonuses 156 72 Accrued direct cost of revenues 6 111 Accrued advertising 175 242 Accrued income taxes 65 119 Other 402 239 Total accrued expenses $ 1,916 $ 1,487

Equity (Tables)

Equity (Tables)	9 Months Ended
	Apr. 30, 2017
Equity [Abstract]
Summary of changes in the components of equity	Nine Months Ended (in thousands) Balance, July 31, 2016 $ 10,596 Exercise of stock options 110 Stock-based compensation 209 Stock issued for matching contributions to the 401(k) Plan 19 Comprehensive loss: Net loss (403 ) Foreign currency translation adjustments (62 ) Total comprehensive loss (465 ) Balance, April 30, 2017 $ 10,469

Earnings Per Share (Tables)

Earnings Per Share (Tables)	9 Months Ended
	Apr. 30, 2017
Earnings Per Share [Abstract]
Summary of weighted-average number of shares used in the calculation of basic and diluted earnings per share	Three Months Ended Nine Months Ended 2017 2016 2017 2016 (in thousands) Basic weighted-average number of shares 9,595 8,199 9,423 8,174 Effect of dilutive securities: Stock options — 987 — 853 Non-vested restricted Class B common stock — — — — Diluted weighted-average number of shares 9,595 9,186 9,423 9,027
Shares excluded from the dilutive earnings per share computations	Three Months Ended Nine Months Ended 2017 2016 2017 2016 (in thousands) Stock options 1,431 — 1,431 472 Non-vested restricted Class B common stock 53 — 53 — Shares excluded from the calculation of diluted earnings per share 1,484 — 1,484 472

Related Party Transactions (Tab

Related Party Transactions (Tables)	9 Months Ended
	Apr. 30, 2017
Related Party Transactions [Abstract]
Schedule of related party transactions	Three Months Ended Nine Months Ended 2017 2016 2017 2016 (in thousands) Payments by IDT on behalf of the Company $ 160 $ 454 $ 798 $ 1,319 Cash repayments, net of advances $ (181 ) $ (360 ) $ (1,041 ) $ (1,230 )

Business Segment and Geograph23

Business Segment and Geographic Information (Tables)	9 Months Ended
	Apr. 30, 2017
Business Segment and Geographic Information [Abstract]
Schedule of net long-lived assets and total assets by geographic areas	United States Foreign Total (in thousands) Long-lived assets, net: April 30, 2017 $ 2,146 $ 250 $ 2,396 July 31, 2016 1,719 247 1,966 Total assets: April 30, 2017 $ 7,780 $ 4,895 $ 12,675 July 31, 2016 8,576 3,857 12,433

Fair Value Measurements (Detail

Fair Value Measurements (Details) - USD ($) $ in Thousands		Apr. 30, 2017	Jul. 31, 2016
Assets:
Foreign exchange forward contracts			$ 21
Liabilities:
Foreign exchange forward contracts		44	15
Fair Value, Measurements, Recurring [Member] | Level 1 [Member]
Assets:
Foreign exchange forward contracts	[1]
Liabilities:
Foreign exchange forward contracts	[1]
Fair Value, Measurements, Recurring [Member] | Level 2 [Member]
Assets:
Foreign exchange forward contracts	[2]		21
Liabilities:
Foreign exchange forward contracts	[2]	44	15
Fair Value, Measurements, Recurring [Member] | Level 3 [Member]
Assets:
Foreign exchange forward contracts	[3]
Liabilities:
Foreign exchange forward contracts	[3]
[1]	quoted prices in active markets for identical assets or liabilities
[2]	observable inputs other than quoted prices in active markets for identical assets and liabilities
[3]	no observable pricing inputs in the market

Derivative Instruments (Details

Derivative Instruments (Details)	9 Months Ended
	Apr. 30, 2017USD ($)	Apr. 30, 2017NOK
May 2017 [Member]
Derivative [Line Items]
Settlement Date	May 31, 2017	May 31, 2017
Amount	$ 500,000	NOK 4,132,484
June 2017 [Member]
Derivative [Line Items]
Settlement Date	Jun. 30, 2017	Jun. 30, 2017
Amount	$ 500,000	NOK 4,179,494	[1]
July 2017 [Member]
Derivative [Line Items]
Settlement Date	Jul. 31, 2017	Jul. 31, 2017
Amount	$ 500,000	NOK 4,179,038	[1]
[1]	Entered into pursuant to the Foreign Exchange Agreement with Western Alliance Bank.

Derivative Instruments (Detai26

Derivative Instruments (Details 1) - USD ($) $ in Thousands	Apr. 30, 2017	Jul. 31, 2016
Derivatives not designated or not qualifying as hedging instruments:
Foreign exchange forward contracts		$ 21

Derivative Instruments (Detai27

Derivative Instruments (Details 2) - USD ($) $ in Thousands	Apr. 30, 2017	Jul. 31, 2016
Derivatives not designated or not qualifying as hedging instruments:
Foreign exchange forward contracts	$ 44	$ 15

Derivative Instruments (Detai28

Derivative Instruments (Details 3) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2017	Apr. 30, 2016	Apr. 30, 2017	Apr. 30, 2016
Derivatives not designated or not qualifying as hedging instruments
Foreign exchange forward contracts	$ (92)	$ 156	$ (68)	$ (68)

Accrued Expenses (Details)

Accrued Expenses (Details) - USD ($) $ in Thousands	Apr. 30, 2017	Jul. 31, 2016
Accrued Expenses [Abstract]
Accrued vacation	$ 653	$ 494
Accrued payroll taxes	459	210
Accrued payroll and bonuses	156	72
Accrued direct cost of revenues	6	111
Accrued advertising	175	242
Accrued income taxes	65	119
Other	402	239
Total accrued expenses	$ 1,916	$ 1,487

Equity (Details)

Equity (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2017	Apr. 30, 2016	Apr. 30, 2017	Apr. 30, 2016
Equity [Abstract]
Balance, July 31, 2016			$ 10,596
Exercise of stock options			110
Stock-based compensation			209
Stock issued for matching contributions to the 401(k) Plan			19
Comprehensive loss:
Net loss	$ (239)	$ 326	(403)	$ 1,762
Foreign currency translation adjustments	(121)	$ 266	(62)	$ 107
Total comprehensive loss			(465)
Balance, April 30, 2017	$ 10,469		$ 10,469

Equity (Details Textual)

Equity (Details Textual) - USD ($)	1 Months Ended	9 Months Ended
	Sep. 30, 2016	Apr. 30, 2017
Equity (Textual)
Exercise of stock options		$ 110,000
Stock Option [Member]
Equity (Textual)
Options to purchase shares of the Company's Class B common stock	231,327
Unrecognized compensation expense	$ 681,000
Vesting period	3 years
Collection of receivable from stockholder for stock option exercise		$ 56,840
Stock Option [Member] | Class B common stock [Member]
Equity (Textual)
Options to purchase shares of the Company's Class B common stock		280,700
Exercise of stock options		$ 109,790

Earnings Per Share (Details)

Earnings Per Share (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2017	Apr. 30, 2016	Apr. 30, 2017	Apr. 30, 2016
Weighted-average number of shares used in the calculation of basic and diluted earnings per share
Basic weighted-average number of shares	9,595	8,199	9,423	8,174
Effect of dilutive securities:
Stock options		987		853
Non-vested restricted Class B common stock
Diluted weighted-average number of shares	9,595	9,186	9,423	9,027

Earnings Per Share (Details 1)

Earnings Per Share (Details 1) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2017	Apr. 30, 2016	Apr. 30, 2017	Apr. 30, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares excluded from the calculation of diluted earnings per share	1,484		1,484	472
Stock options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares excluded from the calculation of diluted earnings per share	1,431		1,431	472
Non-vested restricted Class B common stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares excluded from the calculation of diluted earnings per share	53		53

Related Party Transactions (Det

Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2017	Apr. 30, 2016	Apr. 30, 2017	Apr. 30, 2016
Related Party Transactions [Abstract]
Payments by IDT on behalf of the Company	$ 160	$ 454	$ 798	$ 1,319
Cash repayments, net of advances	$ (181)	$ (360)	$ (1,041)	$ (1,230)

Revolving Credit Facility (Deta

Revolving Credit Facility (Details) - Revolving credit facility [Member] - USD ($)	1 Months Ended		9 Months Ended
	Dec. 31, 2016	Sep. 27, 2016	Apr. 30, 2017	Nov. 16, 2016
Revolving Credit Facility (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 outstanding principal amount 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
Foreign Exchange Agreement [Member]
Revolving Credit Facility (Textual)
Loan and security agreement with Western Alliance Bank for revolving credit facility				$ 5,000,000
Line of credit facility, borrowing capacity, description			The revolving credit facility is reduced by an applicable foreign exchange reserve percentage as determined by Western Alliance Bank, in its reasonable discretion from time to time, which was initially set at 10% of the nominal amount of the foreign exchange contracts in effect at the relevant time.
Foreign exchange, Description	The applicable foreign exchange reserve percentage was changed so that the reduction of available borrowing for major currency forward contracts of less than six months tenor is set at 10% of the nominal amount of the foreign exchange contracts, and for contracts over six months tenor, 12.5% of the nominal amount of the foreign exchange contracts.		There were $1.0 million of outstanding foreign exchange contracts with less than six months tenor under the credit facility, and no contracts of greater than six months tenor, which reduced the available borrowing under the revolving credit facility by $100,000.

Business Segment and Geograph36

Business Segment and Geographic Information (Details) - USD ($) $ in Thousands	Apr. 30, 2017	Jul. 31, 2016
Business Segment Information [Line Items]
Long-lived assets, net	$ 2,706	$ 1,966
Total assets	12,487	12,433
United States [Member]
Business Segment Information [Line Items]
Long-lived assets, net	2,462	1,719
Total assets	8,884	8,576
Foreign [Member]
Business Segment Information [Line Items]
Long-lived assets, net	244	247
Total assets	$ 3,603	$ 3,857

Legal Proceeding and Tax Matt37

Legal Proceeding and Tax Matters (Details) - USD ($) $ in Thousands	Mar. 31, 2014	Apr. 30, 2017	Oct. 31, 2016	Jul. 31, 2016
Legal Proceeding and Tax Matters (Textual)
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.
Lawsuit approximate amount	$ 1,600
Amounts receivable from Norway's SkatteFUNN government			$ 200
Other current assets		313		$ 107
Norway SkatteFUNN [Member]
Legal Proceeding and Tax Matters (Textual)
Other current assets		$ 300