Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jan. 31, 2018 | Mar. 12, 2018 | |
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 | Jan. 31, 2018 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 | |
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 | 9,664,442 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Jan. 31, 2018 | Jul. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 4,160 | $ 4,580 |
Trade accounts receivable, net of allowance for doubtful accounts of $0 at January 31, 2018 and July 31, 2017 | 1,819 | 1,712 |
Prepaid expenses | 284 | 315 |
Other current assets | 320 | 427 |
Total current assets | 6,583 | 7,034 |
Property and equipment, net | 3,098 | 2,678 |
Goodwill | 2,586 | 2,518 |
Other assets | 299 | 301 |
Total assets | 12,566 | 12,531 |
Current liabilities: | ||
Trade accounts payable | 277 | 33 |
Accrued expenses | 1,944 | 1,840 |
Due to IDT Corporation | 9 | 36 |
Total current liabilities | 2,230 | 1,909 |
Total liabilities | 2,230 | 1,909 |
Commitments and contingencies (Note 10) | ||
Stockholders' equity: | ||
Preferred stock, $.01 par value; authorized shares-2,400; no shares issued | ||
Additional paid-in capital | 22,048 | 21,446 |
Accumulated other comprehensive loss | (482) | (584) |
Accumulated deficit | (11,330) | (10,336) |
Total stockholders' equity | 10,336 | 10,622 |
Total liabilities and stockholders' equity | 12,566 | 12,531 |
Class A common stock | ||
Stockholders' equity: | ||
Common stock value | 5 | 5 |
Class B common stock | ||
Stockholders' equity: | ||
Common stock value | $ 95 | $ 91 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands | Jan. 31, 2018 | 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 |
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 | 9,532 | 9,123 |
Common stock, shares outstanding | 9,532 | 9,123 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2018 | Jan. 31, 2017 | Jan. 31, 2018 | Jan. 31, 2017 | |
Income Statement [Abstract] | ||||
Revenues | $ 3,045 | $ 2,572 | $ 5,704 | $ 4,955 |
Costs and expenses: | ||||
Direct cost of revenues (exclusive of amortization of capitalized software and technology development costs included below) | 356 | 412 | 728 | 780 |
Selling, general and administrative | 2,586 | 2,314 | 5,558 | 4,070 |
Depreciation and amortization | 225 | 184 | 382 | 322 |
Write-off of capitalized software and technology development costs | 9 | |||
Loss from operations | (122) | (338) | (964) | (226) |
Interest and other income | 4 | 7 | 14 | 8 |
Net (loss) gain resulting from foreign exchange transactions | (43) | (17) | (45) | 33 |
Loss before income taxes | (161) | (348) | (995) | (185) |
Provision for (benefit from) income taxes | 12 | (22) | (2) | (21) |
Net loss | (173) | (326) | (993) | (164) |
Other comprehensive income (loss): | ||||
Changes in foreign currency translation adjustment | 239 | (14) | 102 | 59 |
Total other comprehensive income (loss) | 239 | (14) | 102 | 59 |
Total comprehensive income (loss) | $ 66 | $ (340) | $ (891) | $ (105) |
Loss per share attributable to Zedge, Inc. common stockholders: | ||||
Basic and diluted | $ (0.02) | $ (0.03) | $ (0.10) | $ (0.02) |
Weighted-average number of shares used in calculation of loss per share: | ||||
Basic and diluted | 9,749 | 9,413 | 9,703 | 9,337 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jan. 31, 2018 | Jan. 31, 2017 | |
Operating activities | ||
Net loss | $ (993) | $ (164) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 382 | 322 |
Deferred income taxes | 6 | 5 |
Stock-based compensation | 272 | 143 |
Write-off of capitalized software and technology development costs | 9 | |
Stock issued to FreeForm noteholders | 242 | |
Change in assets and liabilities: | ||
Trade accounts receivable | (107) | 51 |
Prepaid expenses and other current assets | 138 | (258) |
Other assets | (4) | (2) |
Trade accounts payable and accrued expenses | 344 | 335 |
Due to IDT Corporation | (27) | (222) |
Deferred revenue | (14) | |
Net cash provided by operating activities | 253 | 205 |
Investing activities | ||
Capitalized software and technology development costs and purchase of equipment | (798) | (757) |
Net cash used in investing activities | (798) | (757) |
Financing activities | ||
Proceeds from exercise of stock options | 91 | 166 |
Net cash provided by financing activities | 91 | 166 |
Effect of exchange rate changes on cash and cash equivalents | 34 | 12 |
Net decrease in cash and cash equivalents | (420) | (374) |
Cash and cash equivalents at beginning of period | 4,580 | 5,978 |
Cash and cash equivalents at end of period | $ 4,160 | $ 5,604 |
Basis of Presentation
Basis of Presentation | 6 Months Ended |
Jan. 31, 2018 | |
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 and six months ended January 31, 2018 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 | 6 Months Ended |
Jan. 31, 2018 | |
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) January 31, 2018 Assets: Foreign exchange forward contracts $ - $ - $ - $ - Liabilities: Foreign exchange forward contracts $ - $ - $ - $ - July 31, 2017 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 January 31, 2018 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. |
Derivative Instruments
Derivative Instruments | 6 Months Ended |
Jan. 31, 2018 | |
Derivative Instruments [Abstract] | |
Derivative Instruments | Note 3—Derivative Instruments The primary risk managed by the Company using derivative instruments is foreign exchange risk. Foreign exchange forward contracts are entered into as hedges against unfavorable fluctuations in the U.S. Dollar – Norwegian Krone (NOK) exchange rate. 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 January 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 income (loss) were as follows: Amount of (Loss) or Gain Recognized on Derivatives Three Months Ended January 31, Six Months Ended January 31, Derivatives not designated or not qualifying as hedging instruments Location of (Loss) or Gain Recognized on Derivatives 2018 2017 2018 2017 (in thousands) Foreign exchange forward contracts Net (loss) gain resulting from foreign exchange transactions $ - $ (43 ) $ (2 ) $ 24 |
Accrued Expenses
Accrued Expenses | 6 Months Ended |
Jan. 31, 2018 | |
Accrued Expenses [Abstract] | |
Accrued Expenses | Note 4—Accrued Expenses Accrued expenses consist of the following: January 31, July 31, (in thousands) Accrued vacation $ 890 $ 685 Accrued payroll taxes 232 277 Accrued payroll and bonuses 260 250 Accrued severance 174 - Accrued direct cost of revenues - 6 Accrued advertising 118 184 Accrued income taxes 36 36 Accrued professional fees 145 130 Other 89 272 Total accrued expenses $ 1,944 $ 1,840 |
Equity
Equity | 6 Months Ended |
Jan. 31, 2018 | |
Equity [Abstract] | |
Equity | Note 5—Equity Changes in the components of equity were as follow: Six Months Ended January 31, 2018 (in thousands) Balance, July 31, 2017 $ 10,622 Exercise of stock options 91 Stock issued to FreeForm noteholders 242 Stock-based compensation 272 Comprehensive loss: Net loss (993 ) Foreign currency translation adjustments 102 Total comprehensive loss (891 ) Balance, January 31, 2018 $ 10,336 Stock Options In the six months ended January 31, 2018, the Company received proceeds of $91,000 from the exercise of stock options for which the Company issued 52,855 shares of its Class B common stock. 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 January 31, 2018, there were 457,000 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. Pursuant to the 2016 Incentive Plan, the option exercise price for all stock option awards must not be less than the Fair Market Value of the shares of Class B Common Stock covered by the option award on the date of grant. In general, Fair Market Value means the closing sale price per share of Class B Common Stock on the exchange on which the Class B Common Stock is principally traded for the last preceding date on which there was a sale of Class B Common Stock on such exchange. 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 was ratified by the Company’s stockholders during Annual Meeting held 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 did 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 granted a total of 192,953 restricted 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 which is being amortized on a straight-line basis over the vesting period. Restricted Stock Award On February 7, 2018, the Compensation and Corporate Governance Committees of our Board of Directors approved a grant of 108,553 restricted shares of the Company’s Class B Common Stock to our Executive Chairman Michael Jonas. Mr. Jonas has agreed to accept all of his compensation for his service as Executive Chairman during fiscal 2018 in the form of equity in the Company and to make receipt of such equity compensation contingent on the Company achieving certain milestones relative to its fiscal 2018 budget. The grant was made at that time because the milestones previously set were achieved. These shares shall vest in equal amounts on February 7, 2019, 2020 and 2021.These shares had an aggregate grant date fair value of $330,000 which is being amortized on a straight-line basis over the vesting period. |
Earnings Per Share
Earnings Per Share | 6 Months Ended |
Jan. 31, 2018 | |
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 Six Months Ended January 31, January 31, 2018 2017 2018 2017 (in thousands) Basic weighted-average number of shares 9,749 9,413 9,703 9,337 Effect of dilutive securities: Stock options — — — — Non-vested restricted Class B common stock — — — — Diluted weighted-average number of shares 9,749 9,413 9,703 9,337 The following shares were excluded from the dilutive earnings per share computations because their inclusion would have been anti-dilutive: Three Months Ended Six Months Ended January 31, January 31, 2018 2017 2018 2017 (in thousands) Stock options 1,499 1,434 1,499 1,434 Non-vested restricted Class B common stock 241 53 241 53 Shares excluded from the calculation of diluted earnings per share 1,740 1,487 1,740 1,487 For the three and six months ended January 31, 2018 and 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. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jan. 31, 2018 | |
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 or vendors retained by Zedge. IDT’s charges are included in “Selling, general and administrative expense” in the consolidated statements of comprehensive income (loss). Three Months Ended Six Months Ended January 31, January 31, 2018 2017 2018 2017 (in thousands) (in thousands) Payments by IDT on behalf of the Company $ 33 $ 161 $ 261 $ 638 Cash repayments, net of advances $ (86 ) $ (157 ) $ (287 ) $ (860 ) |
Revolving Credit Facility
Revolving Credit Facility | 6 Months Ended |
Jan. 31, 2018 | |
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 January 31, 2018, 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 January 31, 2018, there were no outstanding foreign exchange contracts Foreign Exchange Agreement. |
Business Segment and Geographic
Business Segment and Geographic Information | 6 Months Ended |
Jan. 31, 2018 | |
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 high quality ringtones, wallpapers, home screen app icons and notification sounds. The bulk of the content is generally available free of charge. 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: January 31, 2018 $ 2,972 $ 260 $ 3,232 July 31, 2017 $ 2,537 $ 271 $ 2,808 Total assets: January 31, 2018 $ 8,111 $ 4,455 $ 12,566 July 31, 2017 $ 8,910 $ 3,621 $ 12,531 |
Commitments & Contingencies and
Commitments & Contingencies and Tax Matters | 6 Months Ended |
Jan. 31, 2018 | |
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. This case is still ongoing and 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 January 31, 2018, the balance of the Company’s net receivable from SkatteFUNN, a Norwegian government program designed to stimulate research and development in Norwegian trade and industry, was $220,000 which was included in “Other current assets” in the consolidated balance sheet. SkatteFUNN credits of $4,500 and $39,200 were recorded as a reduction of selling, general and administrative expense for the three months and six months ended January 31, 2018 respectively, and $33,200 and $ 255,900 were recorded as a reduction of selling, general and administrative expense for the three months and six months ended January 31, 2017, of which $204,000 was related to prior periods. |
Provision for (benefit from) In
Provision for (benefit from) Income Taxes | 6 Months Ended |
Jan. 31, 2018 | |
Provision for (benefit from) Income Taxes [Abstract] | |
Provision for (benefit from) Income Taxes | Note 11—Provision for (benefit from) Income taxes The changes from a benefit from to a provision for income taxes in the three ended January 31, 2018 compared to the same periods in fiscal 2017, and the decrease in benefit from income tax in the six months ended January 31, 2018 compared to the same periods in fiscal 2017 was primarily due to the jurisdiction in which loss was incurred in the three and six months ended January 31, 2018 compared to the same periods in fiscal 2017 and our ability to utilize net operating losses we hold in those jurisdictions. In addition, the decrease in the Norwegian corporate tax rate from 24.0% to 23.0% resulted in an increase in deferred tax expense of approximately $7,000. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act significantly revises U.S. corporate income taxation by, among other things, lowering the U.S. corporate income tax rate from 35.0 % to 21.0% effective January 1, 2018. The decrease in the U.S. federal corporate tax rate from 35.0% to 21.0% will result in a blended statutory tax rate of 26.4% for the fiscal year ending July 31, 2018. The Company does not anticipate any impact to tax expense due to the full valuation allowance of the Company and believes that the most significant impact on its consolidated financial statements will be reduction of approximately $342,000 for the deferred tax assets related to net operating losses and other assets. Such reduction is offset by changes to the Company’s valuation allowance. In December 2017, the Securities and Exchange Commission issued Staff Accounting Bulletin 118, which allows a measurement period, not to exceed one year, to finalize the accounting for the income tax impacts of the Tax Act. Until the accounting for the income tax impacts of the Tax Act is complete, the reported amounts are based on reasonable estimates, are disclosed as provisional and reflect any adjustments in subsequent periods as we refine our estimates or complete our accounting of such tax effects. |
Recently Issued Accounting Stan
Recently Issued Accounting Standards Not Yet Adopted | 6 Months Ended |
Jan. 31, 2018 | |
Recently Issued Accounting Standards Not Yet Adopted [Abstract] | |
Recently Issued Accounting Standards Not Yet Adopted | Note 12—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 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) | 6 Months Ended |
Jan. 31, 2018 | |
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) January 31, 2018 Assets: Foreign exchange forward contracts $ - $ - $ - $ - Liabilities: Foreign exchange forward contracts $ - $ - $ - $ - July 31, 2017 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) | 6 Months Ended |
Jan. 31, 2018 | |
Derivative Instruments [Abstract] | |
Schedule of derivative assets fair value | Asset Derivatives Balance Sheet Location January 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 income (loss) | Amount of (Loss) or Gain Recognized on Derivatives Three Months Ended January 31, Six Months Ended January 31, Derivatives not designated or not qualifying as hedging instruments Location of (Loss) or Gain Recognized on Derivatives 2018 2017 2018 2017 (in thousands) Foreign exchange forward contracts Net (loss) gain resulting from foreign exchange transactions $ - $ (43 ) $ (2 ) $ 24 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 6 Months Ended |
Jan. 31, 2018 | |
Accrued Expenses [Abstract] | |
Summary of accrued expenses | January 31, July 31, (in thousands) Accrued vacation $ 890 $ 685 Accrued payroll taxes 232 277 Accrued payroll and bonuses 260 250 Accrued severance 174 - Accrued direct cost of revenues - 6 Accrued advertising 118 184 Accrued income taxes 36 36 Accrued professional fees 145 130 Other 89 272 Total accrued expenses $ 1,944 $ 1,840 |
Equity (Tables)
Equity (Tables) | 6 Months Ended |
Jan. 31, 2018 | |
Equity [Abstract] | |
Summary of changes in the components of equity | Six Months Ended January 31, 2018 (in thousands) Balance, July 31, 2017 $ 10,622 Exercise of stock options 91 Stock issued to FreeForm noteholders 242 Stock-based compensation 272 Comprehensive loss: Net loss (993 ) Foreign currency translation adjustments 102 Total comprehensive loss (891 ) Balance, January 31, 2018 $ 10,336 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 6 Months Ended |
Jan. 31, 2018 | |
Earnings Per Share [Abstract] | |
Summary of weighted-average number of shares calculation of basic diluted earnings per share | Three Months Ended Six Months Ended January 31, January 31, 2018 2017 2018 2017 (in thousands) Basic weighted-average number of shares 9,749 9,413 9,703 9,337 Effect of dilutive securities: Stock options — — — — Non-vested restricted Class B common stock — — — — Diluted weighted-average number of shares 9,749 9,413 9,703 9,337 |
Shares excluded from the dilutive earnings per share computations | Three Months Ended Six Months Ended January 31, January 31, 2018 2017 2018 2017 (in thousands) Stock options 1,499 1,434 1,499 1,434 Non-vested restricted Class B common stock 241 53 241 53 Shares excluded from the calculation of diluted earnings per share 1,740 1,487 1,740 1,487 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 6 Months Ended |
Jan. 31, 2018 | |
Related Party Transactions [Abstract] | |
Schedule of related party transactions included in selling, general and administrative expense | Three Months Ended Six Months Ended January 31, January 31, 2018 2017 2018 2017 (in thousands) (in thousands) Payments by IDT on behalf of the Company $ 33 $ 161 $ 261 $ 638 Cash repayments, net of advances $ (86 ) $ (157 ) $ (287 ) $ (860 ) |
Business Segment and Geograph24
Business Segment and Geographic Information (Tables) | 6 Months Ended |
Jan. 31, 2018 | |
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: January 31, 2018 $ 2,972 $ 260 $ 3,232 July 31, 2017 $ 2,537 $ 271 $ 2,808 Total assets: January 31, 2018 $ 8,111 $ 4,455 $ 12,566 July 31, 2017 $ 8,910 $ 3,621 $ 12,531 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Jan. 31, 2018 | 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 | Jan. 31, 2018 | Jul. 31, 2017 |
Derivatives not designated or not qualifying as hedging instruments: | ||
Foreign exchange forward contracts | $ 137 |
Derivative Instruments (Detai27
Derivative Instruments (Details 1) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2018 | Jan. 31, 2017 | Jan. 31, 2018 | Jan. 31, 2017 | |
Derivatives not designated or not qualifying as hedging instruments | ||||
Foreign exchange forward contracts | $ (43) | $ (2) | $ 24 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Jan. 31, 2018 | Jul. 31, 2017 |
Accrued Expenses [Abstract] | ||
Accrued vacation | $ 890 | $ 685 |
Accrued payroll taxes | 232 | 277 |
Accrued payroll and bonuses | 260 | 250 |
Accrued severance | 174 | |
Accrued direct cost of revenues | 6 | |
Accrued advertising | 118 | 184 |
Accrued income taxes | 36 | 36 |
Accrued professional fees | 145 | 130 |
Other | 89 | 272 |
Total accrued expenses | $ 1,944 | $ 1,840 |
Equity (Details)
Equity (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2018 | Jan. 31, 2017 | Jan. 31, 2018 | Jan. 31, 2017 | |
Equity [Abstract] | ||||
Balance, July 31, 2017 | $ 10,622 | $ 10,596 | ||
Exercise of stock options | 91 | |||
Stock issued to FreeForm noteholder | 242 | |||
Stock-based compensation | 272 | |||
Comprehensive loss: | ||||
Net loss | $ (173) | $ (326) | (993) | (164) |
Foreign currency translation adjustments | 239 | $ (14) | 102 | $ 59 |
Total comprehensive loss | (891) | |||
Balance, January 31, 2018 | $ 10,336 | $ 10,336 |
Equity (Details Textual)
Equity (Details Textual) - USD ($) | Feb. 07, 2018 | Nov. 30, 2017 | Oct. 18, 2017 | Sep. 30, 2017 | Sep. 30, 2016 | Oct. 31, 2017 | Jan. 31, 2018 |
Equity (Textual) | |||||||
Exercise of stock options | $ 91,000 | ||||||
Inclusive of the additional | 350,000 | ||||||
Class B common stock [Member] | |||||||
Equity (Textual) | |||||||
Options to purchase shares of the Company's Class B common stock | 457,000 | ||||||
Exercise of stock options | $ 91,000 | ||||||
Fair market value | $ 242,000 | ||||||
Stock issued shares of common stock | 52,855 | ||||||
Subsequent Event [Member] | Restricted Stock Award [Member] | |||||||
Equity (Textual) | |||||||
Grant of restricted shares | 108,553 | ||||||
Aggregate grant date fair value | $ 330,000 | ||||||
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 | ||||||
Vesting period | 3 years | ||||||
Cancelled shares of these options grant | 53,026 | ||||||
Annual limit shares per grantee | 60,000 | ||||||
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 | ||||||
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 | ||||||
2016 Stock Option and Incentive Plan [Member] | Board of Directors [Member] | |||||||
Equity (Textual) | |||||||
Options grant | 53,026 | ||||||
Unrecognized compensation expense | $ 85,000 |
Earnings Per Share (Details)
Earnings Per Share (Details) - shares shares in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2018 | Jan. 31, 2017 | Jan. 31, 2018 | Jan. 31, 2017 | |
Weighted-average number of shares used in the calculation of basic and diluted earnings per share | ||||
Basic weighted-average number of shares | 9,749 | 9,413 | 9,703 | 9,337 |
Effect of dilutive securities: | ||||
Stock options | ||||
Non-vested restricted Class B common stock | ||||
Diluted weighted-average number of shares | 9,749 | 9,413 | 9,703 | 9,337 |
Earnings Per Share (Details 1)
Earnings Per Share (Details 1) - shares shares in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2018 | Jan. 31, 2017 | Jan. 31, 2018 | Jan. 31, 2017 | |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Shares excluded from the calculation of diluted earnings per share | 1,740 | 1,487 | 1,740 | 1,487 |
Stock options [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Shares excluded from the calculation of diluted earnings per share | 1,499 | 1,434 | 1,499 | 1,434 |
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 | 241 | 53 | 241 | 53 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jan. 31, 2018 | Jan. 31, 2017 | Jan. 31, 2018 | Jan. 31, 2017 | |
Related Party Transactions [Abstract] | ||||
Payments by IDT on behalf of the Company | $ 33 | $ 161 | $ 261 | $ 638 |
Cash repayments, net of advances | $ (86) | $ (157) | $ (287) | $ (860) |
Revolving Credit Facility (Deta
Revolving Credit Facility (Details) - Revolving credit facility [Member] - USD ($) | 1 Months Ended | 6 Months Ended | |
Sep. 27, 2016 | Jan. 31, 2018 | 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 | 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. |
Business Segment and Geograph35
Business Segment and Geographic Information (Details) - USD ($) $ in Thousands | Jan. 31, 2018 | Jul. 31, 2017 |
Business Segment Information [Line Items] | ||
Long-lived assets, net | $ 3,232 | $ 2,808 |
Total assets | 12,566 | 12,531 |
United States [Member] | ||
Business Segment Information [Line Items] | ||
Long-lived assets, net | 2,972 | 2,537 |
Total assets | 8,111 | 8,910 |
Foreign [Member] | ||
Business Segment Information [Line Items] | ||
Long-lived assets, net | 260 | 271 |
Total assets | $ 4,455 | $ 3,621 |
Commitments & Contingencies a36
Commitments & Contingencies and Tax Matters (Details) - USD ($) | Mar. 31, 2014 | Jan. 31, 2018 | Jan. 31, 2017 | Jan. 31, 2018 | Jan. 31, 2017 |
Commitments & Contingencies and Tax Matters (Textual) | |||||
Lawsuit approximate amount | $ 1,600,000 | ||||
Amounts receivable from Norway's SkatteFUNN government | $ 220,000 | $ 220,000 | |||
Selling, general and administrative | 2,586,000 | $ 2,314,000 | 5,558,000 | $ 4,070,000 | |
Related to prior periods value | 204,000 | ||||
Norway SkatteFUNN [Member] | |||||
Commitments & Contingencies and Tax Matters (Textual) | |||||
Amounts receivable from Norway's SkatteFUNN government | 204,000 | 204,000 | |||
Selling, general and administrative | $ 4,500 | $ 33,200 | $ 39,200 | $ 255,900 |
Provision for (benefit from) 37
Provision for (benefit from) Income Taxes (Details) | 6 Months Ended |
Jan. 31, 2018USD ($) | |
Provision for (benefit from) Income taxes (Textual) | |
Reduction of deferred tax assets | $ 342,000 |
Norwegian corporate tax rate [Member] | |
Provision for (benefit from) Income taxes (Textual) | |
Description of increase decrease corporate income tax rate percentage | The decrease in the Norwegian corporate tax rate from 24.0% to 23.0% resulted in an increase in deferred tax expense of approximately $7,000. |
U.S. corporate tax rate [Member] | |
Provision for (benefit from) Income taxes (Textual) | |
Description of increase decrease corporate income tax rate percentage | Lowering the U.S. corporate income tax rate from 35.0 % to 21.0% effective January 1, 2018. |
U.S. federal corporate tax rate [Member] | |
Provision for (benefit from) Income taxes (Textual) | |
Description of increase decrease corporate income tax rate percentage | The decrease in the U.S. federal corporate tax rate from 35.0% to 21.0% will result in a blended statutory tax rate of 26.4% for the fiscal year ending July 31, 2018. |