Zedge (ZDGE) 10-Q 14 Jun 18 2018 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Apr. 30, 2018	Jun. 11, 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	Apr. 30, 2018
Document Fiscal Year Focus	2,018
Document Fiscal Period Focus	Q3
Entity Filer Category	Smaller Reporting Company
Class A common stock
Entity Common Stock, Shares Outstanding		524,775
Class B common stock
Entity Common Stock, Shares Outstanding		9,734,576

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($) $ in Thousands	Apr. 30, 2018	Jul. 31, 2017
Current assets:
Cash and cash equivalents	$ 4,272	$ 4,580
Trade accounts receivable, net of allowance for doubtful accounts of $0 at April 30, 2018 and July 31, 2017	1,680	1,712
Prepaid expenses	236	315
Other current assets	314	427
Total current assets	6,502	7,034
Property and equipment, net	3,272	2,678
Goodwill	2,491	2,518
Other assets	293	301
Total assets	12,558	12,531
Current liabilities:
Trade accounts payable	285	33
Accrued expenses	2,113	1,840
Due to IDT Corporation	3	36
Total current liabilities	2,401	1,909
Total liabilities	2,401	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	22,327	21,446
Accumulated other comprehensive loss	(634)	(584)
Accumulated deficit	(11,638)	(10,336)
Total stockholders' equity	10,157	10,622
Total liabilities and stockholders' equity	12,558	12,531
Class A common stock
Stockholders' equity:
Common stock value	5	5
Class B common stock
Stockholders' equity:
Common stock value	$ 97	$ 91

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Apr. 30, 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	9,736	9,123
Common stock, shares outstanding	9,736	9,123

Consolidated Statements of Comp

Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2018	Apr. 30, 2017	Apr. 30, 2018	Apr. 30, 2017
Income Statement [Abstract]
Revenues	$ 2,551	$ 2,530	$ 8,255	$ 7,485
Costs and expenses:
Direct cost of revenues (exclusive of amortization of capitalized software and technology development costs included below)	378	406	1,106	1,186
Selling, general and administrative	2,195	2,151	7,753	6,222
Depreciation and amortization	317	166	699	487
Write-off of capitalized software and technology development costs				9
Loss from operations	(339)	(193)	(1,303)	(419)
Interest and other income	7	6	21	14
Net gain (loss) resulting from foreign exchange transactions	26	(52)	(19)	(19)
Loss before income taxes	(306)	(239)	(1,301)	(424)
Provision for (benefit from) income taxes	3		1	(21)
Net loss	(309)	(239)	(1,302)	(403)
Other comprehensive loss:
Changes in foreign currency translation adjustment	(152)	(121)	(50)	(62)
Total other comprehensive loss	(152)	(121)	(50)	(62)
Total comprehensive loss	$ (461)	$ (360)	$ (1,352)	$ (465)
Loss per share attributable to Zedge, Inc. common stockholders:
Basic and diluted	$ (0.03)	$ (0.02)	$ (0.13)	$ (0.04)
Weighted-average number of shares used in calculation of loss per share:
Basic and diluted	9,867	9,595	9,757	9,423

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Apr. 30, 2018	Apr. 30, 2017
Operating activities
Net loss	$ (1,302)	$ (403)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	699	487
Deferred income taxes	7	4
Stock-based compensation	429	209
Write-off of capitalized software and technology development costs		9
Stock issued to FreeForm noteholders	242
Change in assets and liabilities:
Trade accounts receivable	33	(122)
Prepaid expenses and other current assets	192	(184)
Other assets	1	2
Trade accounts payable and accrued expenses	516	442
Due to IDT Corporation	(33)	(243)
Deferred revenue		(14)
Net cash provided by operating activities	784	187
Investing activities
Capitalized software and technology development costs and purchase of equipment	(1,295)	(1,240)
Net cash used in investing activities	(1,295)	(1,240)
Financing activities
Proceeds from exercise of stock options	216	167
Net cash provided by financing activities	216	167
Effect of exchange rate changes on cash and cash equivalents	(13)	(10)
Net decrease in cash and cash equivalents	(308)	(896)
Cash and cash equivalents at beginning of period	4,580	5,978
Cash and cash equivalents at end of period	$ 4,272	$ 5,082

Basis of Presentation

Basis of Presentation	9 Months Ended
	Apr. 30, 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 and nine months ended April 30, 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 (the “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	9 Months Ended
	Apr. 30, 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) April 30, 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 April 30, 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	9 Months Ended
	Apr. 30, 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 - 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. There were no outstanding derivative instruments on April 30, 2018. On May 2, 2018, the Company entered into a series of forward contracts pursuant to the Foreign Exchange Agreement with Western Alliance Bank as follows: Settlement Date U.S. Dollar Amount NOK Amount Jun-18 500,000 4,004,545 Jul-18 500,000 3,999,545 Aug-18 500,000 3,994,495 Sep-18 500,000 3,989,945 Oct-18 500,000 3,986,095 Nov-18 500,000 3,983,595 Total 3,000,000 23,958,220 The fair value of outstanding derivative instruments recorded as assets in the accompanying consolidated balance sheets were as follows: Asset Derivatives Balance Sheet Location April 30, July 31, (in thousands) Derivatives not designated or not qualifying as hedging instruments: Foreign exchange forward contracts Other current assets $ - $ 137 The effects of derivative instruments on the consolidated statements of comprehensive loss were as follows: Amount of Loss Recognized on Derivatives Three Months Ended Nine Months Ended April 30, April 30, Derivatives not designated or not qualifying as hedging instruments Location of Loss Recognized on Derivatives 2018 2017 2018 2017 (in thousands) Foreign exchange forward contracts Net loss resulting from foreign exchange transactions $ - $ (92 ) $ (1 ) $ (68 )

Accrued Expenses

Accrued Expenses	9 Months Ended
	Apr. 30, 2018
Accrued Expenses [Abstract]
Accrued Expenses	Note 4—Accrued Expenses Accrued expenses consist of the following: April 30, July 31, (in thousands) Accrued vacation $ 960 $ 685 Accrued payroll taxes 363 277 Accrued payroll and bonuses 366 250 Accrued severance 123 - Accrued direct cost of revenues - 6 Accrued advertising 43 184 Accrued income taxes 36 36 Accrued professional fees 142 130 Other 80 272 Total accrued expenses $ 2,113 $ 1,840

Equity

Equity	9 Months Ended
	Apr. 30, 2018
Equity [Abstract]
Equity	Note 5—Equity Changes in the components of equity were as follows: Nine Months Ended April 30, (in thousands) Balance, July 31, 2017 $ 10,622 Exercise of stock options 216 Stock issued to FreeForm noteholders 242 Stock-based compensation (1) 429 Comprehensive loss: Net loss (1,302 ) Foreign currency translation adjustments (50 ) Total comprehensive loss (1,352 ) Balance, April 30, 2018 $ 10,157 (1) This amount includes stock issued to pay for the Board of Directors’ compensation of $104,000 and the Company’s matching contribution to employees’ 401(k) plan contributions with a value of $33,000. Stock Options In the nine months ended April 30, 2018, the Company received proceeds of $216,000 from the exercise of stock options for which the Company issued 137,111 shares of its Class B common stock. In September 2016, the Compensation Committee of our Board of Directors (the “Compensation Committee”) 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. The unrecognized compensation expense is being recognized on a straight-line basis over the vesting period. In November 2017, the Company cancelled 53,026 shares of this option 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 approved an option 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 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. 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. At April 30, 2018, there were 386,000 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. 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. The Company expects to receive a $25,000 refund from Freeform Development Inc. Accordingly, the Company recorded a receivable of $25,000 and reduced the Freeform acquihire costs from $465,000 to $440,000 during the three months ended April 30, 2018. In addition to the above payments, 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 Committee and the 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	9 Months Ended
	Apr. 30, 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 Nine Months Ended 2018 2017 2018 2017 (in thousands) Basic weighted-average number of shares 9,867 9,595 9,757 9,423 Effect of dilutive securities: Stock options — — — — Non-vested restricted Class B common stock — — — — Diluted weighted-average number of shares 9,867 9,595 9,757 9,423 The following shares were excluded from the dilutive earnings per share computations because their inclusion would have been anti-dilutive: Three Months Ended Nine Months Ended 2018 2017 2018 2017 (in thousands) Stock options 1,366 1,431 1,366 1,431 Non-vested restricted Class B common stock 346 53 346 53 Shares excluded from the calculation of diluted earnings per share 1,712 1,484 1,712 1,484 For the three and nine months ended April 30, 2018 and 2017, the diluted earnings per share equals basic earnings per share because the Company incurred net loss during those periods 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	9 Months Ended
	Apr. 30, 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 a Transition Services Agreement entered into effective with the Spin-Off. 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. Amounts charged by IDT to the Company are included in “Selling, general and administrative expense” in the consolidated statements of comprehensive loss. Three Months Ended Nine Months Ended 2018 2017 2018 2017 (in thousands) (in thousands) Payments by IDT on behalf of the Company $ 14 $ 160 $ 274 $ 798 Cash repayments, net of advances $ (26 ) $ (181 ) $ (313 ) $ (1,041 )

Revolving Credit Facility

Revolving Credit Facility	9 Months Ended
	Apr. 30, 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 April 30, 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 April 30, 2018, there were no outstanding foreign exchange contracts under the Foreign Exchange Agreement. On May 2, 2018, the Company entered into a series of forward contracts, see Note 3 above.

Business Segment and Geographic

Business Segment and Geographic Information	9 Months Ended
	Apr. 30, 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: April 30, 2018 $ 3,163 $ 239 $ 3,402 July 31, 2017 $ 2,537 $ 271 $ 2,808 Total assets: April 30, 2018 $ 8,049 $ 4,509 $ 12,558 July 31, 2017 $ 8,910 $ 3,621 $ 12,531

Commitments & Contingencies and

Commitments & Contingencies and Tax Matters	9 Months Ended
	Apr. 30, 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 (the “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 filed an application under Order 7 Rule 10 of the Indian Code of Civil Procedure stating that the suit was wrongly instituted in the present Court and therefore the complaint should be returned to the Plaintiff. After hearing submissions of the counsels of Saregama and the Company, the Court found merit in the application filed by the Company and on February 16, 2017 ordered the complaint along with court fee be returned to Saregama, with a direction to submit the same before the proper jurisdiction. The Company has not received any notice that a new suit has been filed in any other jurisdiction by Saregama and believes that the possibility of material liability related to this 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 April 30, 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 $212,000 which was included in “Other current assets” in the consolidated balance sheet. SkatteFUNN credits of $0 and $39,000 were recorded as a reduction of selling, general and administrative expense for the three months and nine months ended April 30, 2018 respectively, and $33,000 and $ 289,000 were recorded as a reduction of selling, general and administrative expense for the three months and nine months ended April 30, 2017, of which $204,000 was related to prior periods. The Company has not worked on SkatteFUNN related projects since January 2018.

Provision for (benefit from) In

Provision for (benefit from) Income Taxes	9 Months Ended
	Apr. 30, 2018
Provision for (benefit from) Income Taxes [Abstract]
Provision for (benefit from) Income taxes	Note 11—Provision for (benefit from) Income taxes The increase in the provision for income taxes in the three months ended April 30, 2018 compared to the same periods in fiscal 2017, and the changes from a benefit from to a provision for income taxes in the nine months ended April 30, 2018 compared to the same periods in fiscal 2017 was primarily due to the jurisdiction in which loss was incurred in the three and nine months ended April 30, 2018 compared to the same periods in fiscal 2017 and our ability to utilize net operating losses the Company holds 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 $425,000 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 SEC 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 the Company refine its estimates or complete our accounting of such tax effects.

Recently Issued Accounting Stan

Recently Issued Accounting Standards Not Yet Adopted	9 Months Ended
	Apr. 30, 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 February 2018, the Financial Accounting Standards Board (“FASB”) issued a new Accounting Standards Update (“ASU”) to give entities the option to reclassify tax effects stranded in accumulated other comprehensive income as a result of tax reform to retained earnings (accumulated deficits). The new guidance also requires entities to make additional disclosures, regardless of whether reclassification of tax effects is elected. This guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is evaluating the impact that this ASU will have on its consolidated financial statements. In August 2017, the FASB issued an 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)	9 Months Ended
	Apr. 30, 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) April 30, 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)	9 Months Ended
	Apr. 30, 2018
Derivative Instruments [Abstract]
Schedule of derivative instruments outstanding contracts	Settlement Date U.S. Dollar Amount NOK Amount Jun-18 500,000 4,004,545 Jul-18 500,000 3,999,545 Aug-18 500,000 3,994,495 Sep-18 500,000 3,989,945 Oct-18 500,000 3,986,095 Nov-18 500,000 3,983,595 Total 3,000,000 23,958,220
Schedule of derivative assets fair value	Asset Derivatives Balance Sheet Location April 30, July 31, (in thousands) Derivatives not designated or not qualifying as hedging instruments: Foreign exchange forward contracts Other current assets $ - $ 137
Schedule of derivative instruments on consolidated statements of comprehensive income (loss)	Amount of Loss Recognized on Derivatives Three Months Ended Nine Months Ended April 30, April 30, Derivatives not designated or not qualifying as hedging instruments Location of Loss Recognized on Derivatives 2018 2017 2018 2017 (in thousands) Foreign exchange forward contracts Net loss resulting from foreign exchange transactions $ - $ (92 ) $ (1 ) $ (68 )

Accrued Expenses (Tables)

Accrued Expenses (Tables)	9 Months Ended
	Apr. 30, 2018
Accrued Expenses [Abstract]
Summary of accrued expenses	April 30, July 31, (in thousands) Accrued vacation $ 960 $ 685 Accrued payroll taxes 363 277 Accrued payroll and bonuses 366 250 Accrued severance 123 - Accrued direct cost of revenues - 6 Accrued advertising 43 184 Accrued income taxes 36 36 Accrued professional fees 142 130 Other 80 272 Total accrued expenses $ 2,113 $ 1,840

Equity (Tables)

Equity (Tables)	9 Months Ended
	Apr. 30, 2018
Equity [Abstract]
Summary of changes in the components of equity	Nine Months Ended April 30, (in thousands) Balance, July 31, 2017 $ 10,622 Exercise of stock options 216 Stock issued to FreeForm noteholders 242 Stock-based compensation (1) 429 Comprehensive loss: Net loss (1,302 ) Foreign currency translation adjustments (50 ) Total comprehensive loss (1,352 ) Balance, April 30, 2018 $ 10,157 (1) This amount includes stock issued to pay for the Board of Directors’ compensation of $104,000 and the Company’s matching contribution to employees’ 401(k) plan contributions with a value of $33,000.

Earnings Per Share (Tables)

Earnings Per Share (Tables)	9 Months Ended
	Apr. 30, 2018
Earnings Per Share [Abstract]
Summary of weighted-average number of shares calculation of basic diluted earnings per share	Three Months Ended Nine Months Ended 2018 2017 2018 2017 (in thousands) Basic weighted-average number of shares 9,867 9,595 9,757 9,423 Effect of dilutive securities: Stock options — — — — Non-vested restricted Class B common stock — — — — Diluted weighted-average number of shares 9,867 9,595 9,757 9,423
Shares excluded from the dilutive earnings per share computations	Three Months Ended Nine Months Ended 2018 2017 2018 2017 (in thousands) Stock options 1,366 1,431 1,366 1,431 Non-vested restricted Class B common stock 346 53 346 53 Shares excluded from the calculation of diluted earnings per share 1,712 1,484 1,712 1,484

Related Party Transactions (Tab

Related Party Transactions (Tables)	9 Months Ended
	Apr. 30, 2018
Related Party Transactions [Abstract]
Schedule of related party transactions included in selling, general and administrative expense	Three Months Ended Nine Months Ended 2018 2017 2018 2017 (in thousands) (in thousands) Payments by IDT on behalf of the Company $ 14 $ 160 $ 274 $ 798 Cash repayments, net of advances $ (26 ) $ (181 ) $ (313 ) $ (1,041 )

Business Segment and Geograph24

Business Segment and Geographic Information (Tables)	9 Months Ended
	Apr. 30, 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: April 30, 2018 $ 3,163 $ 239 $ 3,402 July 31, 2017 $ 2,537 $ 271 $ 2,808 Total assets: April 30, 2018 $ 8,049 $ 4,509 $ 12,558 July 31, 2017 $ 8,910 $ 3,621 $ 12,531

Fair Value Measurements (Detail

Fair Value Measurements (Details) - USD ($) $ in Thousands		Apr. 30, 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)	9 Months Ended
	Apr. 30, 2018USD ($)	Apr. 30, 2018NOK (kr)
Derivative Instruments, Gain (Loss) [Line Items]
Amount	$ 3,000,000	kr 23,958,220
Jun-18 [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Settlement Date	Jun. 30, 2018	Jun. 30, 2018
Amount	$ 500,000	kr 4,004,545
Jul-18 [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Settlement Date	Jul. 31, 2018	Jul. 31, 2018
Amount	$ 500,000	kr 3,999,545
Aug-18 [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Settlement Date	Aug. 31, 2018	Aug. 31, 2018
Amount	$ 500,000	kr 3,994,495
Sep-18 [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Settlement Date	Sep. 30, 2018	Sep. 30, 2018
Amount	$ 500,000	kr 3,989,945
Oct-18 [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Settlement Date	Oct. 31, 2018	Oct. 31, 2018
Amount	$ 500,000	kr 3,986,095
Nov-18 [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Settlement Date	Nov. 30, 2018	Nov. 30, 2018
Amount	$ 500,000	kr 3,983,595

Derivative Instruments (Detai27

Derivative Instruments (Details 1) - USD ($) $ in Thousands	Apr. 30, 2018	Jul. 31, 2017
Derivatives not designated or not qualifying as hedging instruments:
Foreign exchange forward contracts		$ 137

Derivative Instruments (Detai28

Derivative Instruments (Details 2) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2018	Apr. 30, 2017	Apr. 30, 2018	Apr. 30, 2017
Derivatives not designated or not qualifying as hedging instruments
Foreign exchange forward contracts		$ (92)	$ (1)	$ (68)

Accrued Expenses (Details)

Accrued Expenses (Details) - USD ($) $ in Thousands	Apr. 30, 2018	Jul. 31, 2017
Accrued Expenses [Abstract]
Accrued vacation	$ 960	$ 685
Accrued payroll taxes	363	277
Accrued payroll and bonuses	366	250
Accrued severance	123
Accrued direct cost of revenues		6
Accrued advertising	43	184
Accrued income taxes	36	36
Accrued professional fees	142	130
Other	80	272
Total accrued expenses	$ 2,113	$ 1,840

Equity (Details)

Equity (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Apr. 30, 2018	Apr. 30, 2017	Apr. 30, 2018	Apr. 30, 2017
Equity [Abstract]
Balance, July 31, 2017				$ 10,622
Exercise of stock options				216
Stock issued to FreeForm noteholders				242
Stock-based compensation	[1]			429
Comprehensive loss:
Net loss		$ (309)	$ (239)	(1,302)	$ (403)
Foreign currency translation adjustments		(152)	$ (121)	(50)	$ (62)
Total comprehensive loss				(1,352)
Balance, April 30, 2018		$ 10,157		$ 10,157
[1]	This amount includes stock issued to pay for the Board of Directors' compensation of $104,000 and the Company's matching contribution to employees' 401(k) plan contributions with a value of $33,000.

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	Apr. 30, 2018
Equity (Textual)
Exercise of stock options							$ 216,000
Inclusive of the additional							350,000
Restricted Stock Award [Member]
Equity (Textual)
Grant of restricted shares	108,553
Aggregate grant date fair value	$ 330,000
Class B common stock [Member]
Equity (Textual)
Options to purchase shares of the Company's Class B common stock							386,000
Exercise of stock options							$ 216,000
Fair market value				$ 242,000
Stock issued shares of common stock							137,111
Board of Directors [Member]
Equity (Textual)
Contribution amount							$ 33,000
Stock issued to pay compensation							$ 104,000
Freeform Development, Inc. [Member]
Equity (Textual)
Operating liabilities				125,000
Consisting of cash						$ 465,000
Refund received from related party, description							The Company expects to receive a $25,000 refund from Freeform Development Inc. Accordingly, the Company recorded a receivable of $25,000 and reduced the Freeform acquihire costs from $465,000 to $440,000 during the three months ended April 30, 2018.
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)
Option grant							53,026
Unrecognized compensation expense							$ 85,000

Earnings Per Share (Details)

Earnings Per Share (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2018	Apr. 30, 2017	Apr. 30, 2018	Apr. 30, 2017
Weighted-average number of shares used in the calculation of basic and diluted earnings per share
Basic weighted-average number of shares	9,867	9,595	9,757	9,423
Effect of dilutive securities:
Stock options
Non-vested restricted Class B common stock
Diluted weighted-average number of shares	9,867	9,595	9,757	9,423

Earnings Per Share (Details 1)

Earnings Per Share (Details 1) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2018	Apr. 30, 2017	Apr. 30, 2018	Apr. 30, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares excluded from the calculation of diluted earnings per share	1,712	1,484	1,712	1,484
Stock options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Shares excluded from the calculation of diluted earnings per share	1,366	1,431	1,366	1,431
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	346	53	346	53

Related Party Transactions (Det

Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2018	Apr. 30, 2017	Apr. 30, 2018	Apr. 30, 2017
Related Party Transactions [Abstract]
Payments by IDT on behalf of the Company	$ 14	$ 160	$ 274	$ 798
Cash repayments, net of advances	$ (26)	$ (181)	$ (313)	$ (1,041)

Revolving Credit Facility (Deta

Revolving Credit Facility (Details) - Revolving credit facility [Member] - USD ($)	1 Months Ended	9 Months Ended
	Sep. 27, 2016	Apr. 30, 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 Geograph36

Business Segment and Geographic Information (Details) - USD ($) $ in Thousands	Apr. 30, 2018	Jul. 31, 2017
Business Segment Information [Line Items]
Long-lived assets, net	$ 3,402	$ 2,808
Total assets	12,558	12,531
United States [Member]
Business Segment Information [Line Items]
Long-lived assets, net	3,163	2,537
Total assets	8,049	8,910
Foreign [Member]
Business Segment Information [Line Items]
Long-lived assets, net	239	271
Total assets	$ 4,509	$ 3,621

Business Segment and Geograph37

Business Segment and Geographic Information (Details Textual)	9 Months Ended
	Apr. 30, 2018Segments
Business Segment and Geographic Information Details (Textual)
Number of operating segment	1

Commitments & Contingencies a38

Commitments & Contingencies and Tax Matters (Details) - USD ($)	Mar. 31, 2014	Apr. 30, 2018	Apr. 30, 2017	Apr. 30, 2018	Apr. 30, 2017
Commitments & Contingencies and Tax Matters (Textual)
Lawsuit approximate amount	$ 1,600,000
Amounts receivable from Norway's SkatteFUNN government		$ 212,000		$ 212,000
Selling, general and administrative		2,195,000	$ 2,151,000	7,753,000	$ 6,222,000
Related to prior periods value					204,000
Norway SkatteFUNN [Member]
Commitments & Contingencies and Tax Matters (Textual)
Selling, general and administrative		$ 0	$ 33,000	$ 39,000	$ 289,000

Provision for (benefit from) 39

Provision for (benefit from) Income Taxes (Details)	9 Months Ended
	Apr. 30, 2018USD ($)
Provision for (benefit from) Income taxes (Textual)
Reduction of deferred tax assets	$ 425,000
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.