Zedge (ZDGE) 10-Q 14 Dec 17 2017 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Oct. 31, 2017	Dec. 12, 2017
Entity Registrant Name	Zedge, Inc.
Entity Central Index Key	1,667,313
Amendment Flag	false
Trading Symbol	ZDGE
Current Fiscal Year End Date	--07-31
Document Type	10-Q
Document Period End Date	Oct. 31, 2017
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q1
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		9,441,572

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Oct. 31, 2017	Jul. 31, 2017
Current assets:
Cash and cash equivalents	$ 4,163	$ 4,580
Trade accounts receivable, net of allowance for doubtful accounts of $0 at October 31, 2017 and July 31, 2017	1,898	1,712
Prepaid expenses	300	315
Other current assets	272	427
Total current assets	6,633	7,034
Property and equipment, net	3,005	2,678
Goodwill	2,437	2,518
Other assets	296	301
Total assets	12,371	12,531
Current liabilities:
Trade accounts payable	155	33
Accrued expenses	2,173	1,840
Due to IDT Corporation	63	36
Total current liabilities	2,391	1,909
Total liabilities	2,391	1,909
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock, $.01 par value; authorized shares-2,400; no shares issued
Common stock value
Additional paid-in capital	21,760	21,446
Accumulated other comprehensive loss	(721)	(584)
Accumulated deficit	(11,156)	(10,336)
Total stockholders' equity	9,980	10,622
Total liabilities and stockholders' equity	12,371	12,531
Class A common stock
Stockholders' equity:
Common stock value	5	5
Class B common stock
Stockholders' equity:
Common stock value	$ 92	$ 91

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Oct. 31, 2017	Jul. 31, 2017
Allowance for doubtful accounts	$ 0	$ 0
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	2,400	2,400
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	9,442	9,123
Common stock, shares outstanding	9,442	9,123

Consolidated Statements of Comp

Consolidated Statements of Comprehensive (Loss) Income (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Oct. 31, 2017	Oct. 31, 2016
Consolidated Statements of Comprehensive Income [Abstract]
Revenues	$ 2,659	$ 2,383
Costs and expenses:
Direct cost of revenues (exclusive of amortization of capitalized software and technology development costs included below)	372	367
Selling, general and administrative	2,972	1,756
Depreciation and amortization	157	138
Write-off of capitalized software and technology development costs		9
(Loss) income from operations	(842)	113
Interest and other income (loss)	9	1
Net (loss) gain resulting from foreign exchange transactions	(1)	50
(Loss) income before income taxes	(834)	164
Benefit from (provision for) for income taxes	14	(1)
Net (loss) income	(820)	163
Other comprehensive (loss) income:
Changes in foreign currency translation adjustment	(137)	73
Total other comprehensive (loss) income	(137)	73
Total comprehensive (loss) income	$ (957)	$ 236
(Loss) earnings per share attributable to Zedge, Inc. common stockholders:
Basic	$ (0.08)	$ 0.02
Diluted	$ (0.08)	$ 0.02
Weighted-average number of shares used in calculation of (loss) earnings per share:
Basic	9,658	9,261
Diluted	9,658	10,458

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2017	Oct. 31, 2016
Operating activities
Net (loss) income	$ (820)	$ 163
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	157	138
Deferred income taxes	1	5
Stock-based compensation	73	27
Stock issued to FreeForm noteholders	242
Change in assets and liabilities:
Trade accounts receivable	(186)	(11)
Prepaid expenses and other current assets	170	(264)
Other assets	4	(2)
Trade accounts payable and accrued expenses	438	392
Due to IDT Corporation	27	(226)
Deferred revenue		(7)
Net cash provided by operating activities	106	215
Investing activities
Capitalized software and technology development costs and purchase of equipment	(488)	(349)
Net cash used in investing activities	(488)	(349)
Financing activities
Proceeds from exercise of stock options		124
Net cash provided by financing activities		124
Effect of exchange rate changes on cash and cash equivalents	(35)	15
Net (decrease) increase in cash and cash equivalents	(417)	5
Cash and cash equivalents at beginning of period	4,580	5,978
Cash and cash equivalents at end of period	$ 4,163	$ 5,983

Basis of Presentation

Basis of Presentation	3 Months Ended
	Oct. 31, 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 months ended October 31, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2018. The balance sheet at July 31, 2017 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, 2017, 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 2018 refers to the fiscal year ending July 31, 2018).

Fair Value Measurements

Fair Value Measurements	3 Months Ended
	Oct. 31, 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) 31-Oct-17 Assets: Foreign exchange forward contracts $ - $ - $ - $ - Liabilities: Foreign exchange forward contracts $ - $ - $ - $ - 31-Jul-17 Assets: Foreign exchange forward contracts $ - $ 137 $ - $ 137 Liabilities: Foreign exchange forward contracts $ - $ - $ - $ - (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 October 31, 2017 and July 31, 2017 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	3 Months Ended
	Oct. 31, 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 fair value of outstanding derivative instruments recorded as assets in the accompanying consolidated balance sheets were as follows: Asset Derivatives Balance Sheet Location October 31, July 31, (in thousands) Derivatives not designated or not qualifying as hedging instruments: Foreign exchange forward contracts Other current assets $ — $ 137 The effects of derivative instruments on the consolidated statements of comprehensive (loss) income were as follows: Amount of (Loss) Gain Derivatives not designated or not qualifying as hedging Three Months Ended instruments Statement of Comprehensive (Loss) Income Location 2017 2016 (in thousands) Foreign exchange forward contracts Net gain (loss) resulting from foreign exchange transactions $ (1 ) $ 50

Accrued Expenses

Accrued Expenses	3 Months Ended
	Oct. 31, 2017
Accrued Expenses [Abstract]
Accrued Expenses	Note 4—Accrued Expenses Accrued expenses consist of the following: October 31, 2017 July 31, (in thousands) Accrued vacation $ 760 $ 685 Accrued payroll taxes 375 277 Accrued payroll and bonuses 331 250 Accrued severance 163 - Accrued direct cost of revenues - 6 Accrued advertising 172 184 Accrued income taxes - 36 Accrued professional fees 99 130 Other 273 272 Total accrued expenses $ 2,173 $ 1,840

Equity

Equity	3 Months Ended
	Oct. 31, 2017
Equity [Abstract]
Equity	Note 5—Equity Changes in the components of equity were as follows: Three Months Ended (in thousands) Balance, July 31, 2017 $ 10,622 Stock issued to FreeForm noteholders 242 Stock-based compensation 73 Comprehensive income: Net loss (820 ) Foreign currency translation adjustments (137 ) Total comprehensive loss (957 ) Balance, October 31, 2017 $ 9,980 Stock Options In September 2016, the Compensation Committee of our Board of Directors approved an equity grant of options to purchase an aggregate of 231,327 shares of our Class B common stock to our executive officers, a non-executive employee and a consultant. 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. In November, 2017, the Company cancelled 53,026 shares of these options grant because they exceeded the annual limit of 60,000 shares per grantee as set forth in Article 5(c) of the Amended and Restated 2016 Stock Option and Incentive Plan dated October 18, 2017 (the ‘2016 Incentive Plan”). Simultaneously, the Compensation Committee of our Board of Directors approved an options grant of 53,026 with similar terms. Unrecognized compensation expense related to this option grant was an aggregate of $85,000 based on the estimated fair value of the options on the grant date. On October 18, 2017, the Compensation Committee of the Company’s Board of Directors approved the grant of options to purchase an aggregate of 124,435 shares of the Company’s Class B common stock to 55 of its non-executive employees. The options vest over a three-year period from December 8, 2017. Unrecognized compensation expense related to this grant was an aggregate of $159,000 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. At October 31, 2017, there were 483,000 shares of the Company’s Class B common stock available for awards under the 2016 Incentive Plan, inclusive of the additional 350,000 shares discussed below. 2016 Stock Option and Incentive Plan On October 18, 2017, 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 by an additional 350,000 shares. This amendment is subject to ratification by the Company’s stockholders during Annual Meeting which is scheduled to take place on January 17, 2018. Freeform Transaction In September 2017, the Company entered into an Agreement and Release with Freeform Development, Inc. (“Freeform”) and certain of its former employees, pursuant to which the Company obtained releases for certain employees from their Freeform employment agreements in exchange for the repayment of certain of Freeform’s liabilities. The Company paid Freeform $125,000 in cash to pay its operating liabilities (with any excess to be refunded to the Company), and the Company paid the holders of Freeform’s convertible promissory notes cash of $97,567 and issued the noteholders a total of 126,679 shares of Zedge Class B common stock with a fair value of $242,000 on issuance, which are subject to a two-year lock-up agreement. The Company believes this transaction does not qualify as a business combination under Accounting Standard Update 2017-01, which the Company adopted early on August 1, 2017, and as such accounted for the payment of the Freeform liabilities that aggregated $465,000, as selling, general and administrative expense in three months ended October 31, 2017. Additionally, the Company also issued a total of 192,953 shares of the Company’s Class B common stock to former Freeform employees, which shall vest over a four-year period subject to continued employment. These shares had an aggregate grant date fair value of $369,000 and is being amortized on a straight-line basis over the vesting period.

Earnings Per Share

Earnings Per Share	3 Months Ended
	Oct. 31, 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 October 31, 2017 2016 (in thousands) Basic weighted-average number of shares 9,658 9,261 Effect of dilutive securities: Stock options - 1,079 Non-vested restricted Class B common stock - 118 Diluted weighted-average number of shares 9,658 10,458 The following shares were excluded from the dilutive earnings per share computations because their inclusion would have been anti-dilutive: Three Months Ended October 31, 2017 2016 (in thousands) Shares excluded from the calculation of diluted earnings per share 1,797 247 For the three months ended October 31, 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 three months ended October 31, 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	3 Months Ended
	Oct. 31, 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. As of October 31, 2017, most of these services were discontinued and are being performed directly by Zedge. IDT’s charges are included in “Selling, general and administrative expense” in the consolidated statements of comprehensive (loss) income. Three Months Ended 2017 2016 (in thousands) Payments by IDT on behalf of the Company $ 229 $ 477 Cash repayments, net of advances $ (201 ) $ (703 )

Revolving Credit Facility

Revolving Credit Facility	3 Months Ended
	Oct. 31, 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 October 31, 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 October 31, 2017, there were no outstanding foreign exchange contracts Foreign Exchange Agreement.

Business Segment and Geographic

Business Segment and Geographic Information	3 Months Ended
	Oct. 31, 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. 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: 31-Oct-17 $ 2,880 $ 251 $ 3,131 31-Jul-17 $ 2,537 $ 271 $ 2,808 Total assets: 31-Oct-17 $ 7,267 $ 5,104 $ 12,371 31-Jul-17 $ 8,910 $ 3,621 $ 12,531

Commitments &Contingencies and

Commitments &Contingencies and Tax Matters	3 Months Ended
	Oct. 31, 2017
Commitments &Contingencies and Tax Matters [Abstract]
Commitments &Contingencies and Tax Matters	Note 10—Commitments &Contingencies 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, 2017, the balance of the Company’s net receivable from Norway’s SkatteFUNN government program designed to stimulate research and development in Norwegian trade and industry was $202,700, which was included in “Other current assets” in the consolidated balance sheet and $25,800 was recorded as a reduction of selling, general and administrative expense for the three months ended October 31, 2017, and $222,700 was recorded as a reduction of selling, general and administrative expense for the three months ended October 31, 2016, of which $204,000 was related to prior periods.

Recently Issued Accounting Stan

Recently Issued Accounting Standards Not Yet Adopted	3 Months Ended
	Oct. 31, 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 August 2017, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) intended to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. In addition, the ASU includes certain targeted improvements to simplify the application of hedge accounting guidance in U.S. GAAP. The amendments in this ASU are effective for the Company on August 1, 2019. Early application is permitted. Entities will apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirements will be applied prospectively. The Company is evaluating the impact that this ASU will have on its consolidated financial statements. In May 2017, the Financial Accounting Standards Board (“FASB”) issued an 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 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 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. Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. The Company expects to adopt this standard on August 1, 2018 using the modified retrospective approach. The Company has identified its main revenue streams, which are advertising revenue, app installs and advertising ops outsourcing. In addition, the Company substantially completed reviewing contracts and other relevant documents for most of its customers that comprises its main revenue streams. Based on this preliminary analysis to date of the adoption of the standard, the Company has not identified a significant impact on its consolidated financial statements, although this is subject to change as the Company completes the process.

Fair Value Measurements (Tables

Fair Value Measurements (Tables)	3 Months Ended
	Oct. 31, 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) 31-Oct-17 Assets: Foreign exchange forward contracts $ - $ - $ - $ - Liabilities: Foreign exchange forward contracts $ - $ - $ - $ - 31-Jul-17 Assets: Foreign exchange forward contracts $ - $ 137 $ - $ 137 Liabilities: Foreign exchange forward contracts $ - $ - $ - $ - (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)	3 Months Ended
	Oct. 31, 2017
Derivative Instruments [Abstract]
Schedule of derivative assets fair value	Asset Derivatives Balance Sheet Location October 31, July 31, (in thousands) Derivatives not designated or not qualifying as hedging instruments: Foreign exchange forward contracts Other current assets $ — $ 137
Schedule of derivative instruments on consolidated statements of comprehensive (loss) income	Amount of (Loss) Gain Derivatives not designated or not qualifying as hedging Three Months Ended instruments Statement of Comprehensive (Loss) Income Location 2017 2016 (in thousands) Foreign exchange forward contracts Net gain (loss) resulting from foreign exchange transactions $ (1 ) $ 50

Accrued Expenses (Tables)

Accrued Expenses (Tables)	3 Months Ended
	Oct. 31, 2017
Accrued Expenses [Abstract]
Summary of accrued expenses	October 31, 2017 July 31, (in thousands) Accrued vacation $ 760 $ 685 Accrued payroll taxes 375 277 Accrued payroll and bonuses 331 250 Accrued severance 163 - Accrued direct cost of revenues - 6 Accrued advertising 172 184 Accrued income taxes - 36 Accrued professional fees 99 130 Other 273 272 Total accrued expenses $ 2,173 $ 1,840

Equity (Tables)

Equity (Tables)	3 Months Ended
	Oct. 31, 2017
Equity [Abstract]
Summary of changes in the components of equity	Three Months Ended October 31, (in thousands) Balance, July 31, 2017 $ 10,622 Stock issued to FreeForm noteholders 242 Stock-based compensation 73 Comprehensive income: Net loss (820 ) Foreign currency translation adjustments (137 ) Total comprehensive loss (957 ) Balance, October 31, 2017 $ 9,980

Earnings Per Share (Tables)

Earnings Per Share (Tables)	3 Months Ended
	Oct. 31, 2017
Earnings Per Share [Abstract]
Summary of weighted-average number of shares calculation of basic diluted earnings per share	Three Months Ended October 31, 2017 2016 (in thousands) Basic weighted-average number of shares 9,658 9,261 Effect of dilutive securities: Stock options - 1,079 Non-vested restricted Class B common stock - 118 Diluted weighted-average number of shares 9,658 10,458
Shares excluded from the dilutive earnings per share computations	Three Months Ended October 31, 2017 2016 (in thousands) Shares excluded from the calculation of diluted earnings per share 1,797 247

Related Party Transactions (Tab

Related Party Transactions (Tables)	3 Months Ended
	Oct. 31, 2017
Related Party Transactions [Abstract]
Schedule of related party transactions included in selling, general and administrative expense	Three Months Ended 2017 2016 (in thousands) Payments by IDT on behalf of the Company $ 229 $ 477 Cash repayments, net of advances $ (201 ) $ (703 )

Business Segment and Geograph23

Business Segment and Geographic Information (Tables)	3 Months Ended
	Oct. 31, 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: 31-Oct-17 $ 2,880 $ 251 $ 3,131 31-Jul-17 $ 2,537 $ 271 $ 2,808 Total assets: 31-Oct-17 $ 7,267 $ 5,104 $ 12,371 31-Jul-17 $ 8,910 $ 3,621 $ 12,531

Fair Value Measurements (Detail

Fair Value Measurements (Details) - USD ($) $ in Thousands		Oct. 31, 2017	Jul. 31, 2017
Assets:
Foreign exchange forward contracts			$ 137
Liabilities:
Foreign exchange forward contracts
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]		137
Liabilities:
Foreign exchange forward contracts	[2]
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) - USD ($) $ in Thousands	Oct. 31, 2017	Jul. 31, 2017
Derivatives not designated or not qualifying as hedging instruments:
Foreign exchange forward contracts		$ 137

Derivative Instruments (Detai26

Derivative Instruments (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2017	Oct. 31, 2016
Derivatives not designated or not qualifying as hedging instruments
Foreign exchange forward contracts	$ (1)	$ 50

Accrued Expenses (Details)

Accrued Expenses (Details) - USD ($) $ in Thousands	Oct. 31, 2017	Jul. 31, 2017
Accrued Expenses [Abstract]
Accrued vacation	$ 760	$ 685
Accrued payroll taxes	375	277
Accrued payroll and bonuses	331	250
Accrued severance	163
Accrued direct cost of revenues		6
Accrued advertising	172	184
Accrued income taxes		36
Accrued professional fees	99	130
Other	273	272
Total accrued expenses	$ 2,173	$ 1,840

Equity (Details)

Equity (Details) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2017	Oct. 31, 2016
Equity [Abstract]
Balance, July 31, 2017	$ 10,622	$ 10,596
Stock issued to FreeForm noteholder	242
Stock-based compensation	73
Comprehensive income:
Net loss	(820)	163
Foreign currency translation adjustments	(137)	$ 73
Total comprehensive loss	(957)
Balance, October 31, 2017	$ 9,980

Equity (Details Textual)

Equity (Details Textual) - USD ($)	1 Months Ended				3 Months Ended
	Nov. 30, 2017	Oct. 18, 2017	Sep. 30, 2017	Sep. 30, 2016	Oct. 31, 2017
Equity (Textual)
Exercise of stock options					$ 242,000
Class B common stock [Member]
Equity (Textual)
Options to purchase shares of the Company's Class B common stock					483,000
Fair market value			$ 242,000
Freeform Development, Inc. [Member]
Equity (Textual)
Operating liabilities			125,000
Consisting of cash					$ 465,000
Freeform Development, Inc. [Member] | Class B common stock [Member]
Equity (Textual)
Convertible promissory notes cash			$ 97,567
Stock issued shares of common stock			126,679
Stock Option [Member]
Equity (Textual)
Options to purchase shares of the Company's Class B common stock				231,327
Unrecognized compensation expense				$ 85,000
Vesting period				3 years
Fair market value				$ 681,000
Stock Option [Member] | Class B common stock [Member]
Equity (Textual)
Options to purchase shares of the Company's Class B common stock		124,435			192,953
Unrecognized compensation expense		$ 159,000
Vesting period		3 years			4 years
Fair market value					$ 369,000
Stock Option [Member] | Subsequent Event [Member]
Equity (Textual)
Cancelled shares of these options grant	53,026
Annual limit shares per grantee	60,000
2016 Stock Option and Incentive Plan [Member] | Class B common stock [Member]
Equity (Textual)
Options to purchase shares of the Company's Class B common stock		350,000

Earnings Per Share (Details)

Earnings Per Share (Details) - shares shares in Thousands	3 Months Ended
	Oct. 31, 2017	Oct. 31, 2016
Weighted-average number of shares used in the calculation of basic and diluted earnings per share
Basic weighted-average number of shares	9,658	9,261
Effect of dilutive securities:
Stock options		1,079
Non-vested restricted Class B common stock		118
Diluted weighted-average number of shares	9,658	10,458

Earnings Per Share (Details 1)

Earnings Per Share (Details 1) - shares shares in Thousands	3 Months Ended
	Oct. 31, 2017	Oct. 31, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares excluded from the calculation of diluted earnings per share	1,797	247

Related Party Transactions (Det

Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended
	Oct. 31, 2017	Oct. 31, 2016
Related Party Transactions [Abstract]
Payments by IDT on behalf of the Company	$ 229	$ 477
Cash repayments, net of advances	$ (201)	$ (703)

Revolving Credit Facility (Deta

Revolving Credit Facility (Details) - Revolving credit facility [Member] - USD ($)	1 Months Ended		3 Months Ended
	Dec. 31, 2016	Sep. 27, 2016	Oct. 31, 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.

Business Segment and Geograph34

Business Segment and Geographic Information (Details) - USD ($) $ in Thousands	Oct. 31, 2017	Jul. 31, 2017
Business Segment Information [Line Items]
Long-lived assets, net	$ 3,131	$ 2,808
Total assets	12,371	12,531
United States [Member]
Business Segment Information [Line Items]
Long-lived assets, net	2,880	2,537
Total assets	7,267	8,910
Foreign [Member]
Business Segment Information [Line Items]
Long-lived assets, net	251	271
Total assets	$ 5,104	$ 3,621

Commitments &Contingencies an35

Commitments &Contingencies and Tax Matters (Details) - USD ($)	Mar. 31, 2014	Oct. 31, 2017	Oct. 31, 2016
Commitments &Contingencies and Tax Matters (Textual)
Lawsuit description		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.
Lawsuit approximate amount	$ 1,600,000
Amounts receivable from Norway's SkatteFUNN government		$ 202,700
Selling, general and administrative		2,972,000	$ 1,756,000
Related to prior periods value		204,000
Norway SkatteFUNN [Member]
Commitments &Contingencies and Tax Matters (Textual)
Selling, general and administrative		$ 25,800	$ 222,700