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What changed in Zedge, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Zedge, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+463 added−408 removedSource: 10-K (2023-10-30) vs 10-K (2022-11-14)

Top changes in Zedge, Inc.'s 2023 10-K

463 paragraphs added · 408 removed · 305 edited across 4 sections

Item 1. Business

Business — how the company describes what it does

62 edited+12 added−14 removed28 unchanged
Biggest changeAs of July 31, 2022, we had approximately 40 million MAU spanning across all of our products, of which approximately 27% were in well-developed markets and 73% were in emerging markets. Typically, customers in well-developed markets monetize at a material premium when compared to those in emerging markets.
Biggest changeTypically, customers in well-developed markets monetize at a material premium when compared to those in emerging markets. The Android version of the Zedge Marketplace App is available in 17 languages and Emojipedia is available in 19 languages.
We expect to continue devoting resources to growing our user base profitably by: ○ studying our users’ needs and enhancing our products to meet those needs; ○ developing and offering new features and services that are attractive to both new and existing users; ○ investing in paid user acquisition campaigns that yield profitable customers, based on empirical data and focused, primarily, on well-developed markets; and ○ expanding our reach by collaborating with strategic partners. 3 ● Improve monetization .
We expect to continue devoting resources to growing our user base profitably by: ○ studying our users’ needs and enhancing our products to meet those needs; ○ developing and offering new features and services that are attractive to both new and existing users; 3 ○ investing in paid user acquisition campaigns that yield profitable customers, based on empirical data and focused, primarily, on well-developed markets; and ○ expanding our reach by collaborating with strategic partners. ● Improve monetization .
Our vision is to connect creators who enjoy friendly competitions with a community of prospective consumers in order to drive commerce. We are part of the ‘Creator Economy,’ where over 1 billion people create and share their content across social platforms, mobile, and video games, and content marketplaces.
Our vision is to enable and connect creators who enjoy friendly competitions with a community of prospective consumers in order to drive commerce. We are part of the ‘Creator Economy,’ where over 1 billion people create and share their content across social platforms, mobile, and video games, and content marketplaces.
Our History In 2003, Tom Arnoy, Kenneth Sundnes, and Paul Shaw launched a consumer website at www.zedge.net that people used to upload and download ringtones. 6 In December 2006, IDT Corporation acquired 90% of Zedge. Zedge Holdings, Inc. was incorporated in Delaware in 2008, and our name was changed to Zedge, Inc. in 2016.
Our History In 2003, Tom Arnoy, Kenneth Sundnes, and Paul Shaw launched a consumer website at www.zedge.net that people used to upload and download ringtones. In December 2006, IDT Corporation acquired 90% of Zedge. Zedge Holdings, Inc. was incorporated in Delaware in 2008, and our name was changed to Zedge, Inc. in 2016.
We intimately understand game design, onboarding, game mechanics, LiveOps, feedback loops, in-game resource balancing, scarcity, and how to make a game fun, challenging, and fair. ● Combining Gaming and a Real-world Activity. We have years of experience in combining game dynamics with a real-world activity. In the case of GuruShots the real-world activity is photography.
We intimately understand game design, onboarding, game mechanics, LiveOps, feedback loops, in-game resource balancing, scarcity, and how to make a game fun, challenging, and fair. ● Extensive Experience Combining Gaming and a Real-World Activity. We have years of experience in combining game dynamics with a real-world activity. In the case of GuruShots the real-world activity is photography.
Our infrastructure provides a fully redundant production environment in a cloud-hosted, virtual-server environment. Intellectual Property Our trademarks, copyrights, domain names, proprietary technology, know-how, and other intellectual property are vital to our success.
Our infrastructure provides a fully redundant production environment in a cloud-hosted, virtual-server environment. 7 Intellectual Property Our trademarks, copyrights, domain names, proprietary technology, know-how, and other intellectual property are vital to our success.
We also have a set of product initiatives specific to Emojipedia that will enable new revenue streams from this asset. ● Selectively pursue strategic investments, partnerships, and acquisitions . On a selective basis, we will look to invest in, partner with, or purchase entities that can provide synergistic growth opportunities for our Zedge App and otherwise.
We also have a set of product initiatives specific to Emojipedia that will enable new revenue streams from this asset. ● Selectively pursue strategic investments, partnerships, and acquisitions . On a selective basis, we will look to invest in, partner with, or purchase entities that can provide synergistic growth opportunities for our Zedge Marketplace and otherwise.
We view the Creator Economy as an untapped opportunity for Zedge to expand its business, especially as we execute by connecting our gamers with our marketplace.
We view the Creator Economy as an opportunity for Zedge to expand its business, especially as we execute by connecting our gamers with our marketplace.
We believe that we possess a competitive advantage because of our: ○ large user base; ○ “one-stop shop” approach to mobile personalization, which avails customers of ringtones, wallpapers, notification sounds, and video wallpapers within the same Android app; ○ flexibility that allows the customer to selectively choose what they would like to personalize without handing over the core elements of the native operating system to a third party and overwhelming the user with a myriad of complex options; ○ large content catalog; ○ recognized and well-respected brands; ○ proprietary recommendation engine; and ○ market ranking and longevity. ● Rapid-Paced and Changing World of Mobile App Development .
We believe that we possess a competitive advantage because of our: ○ large user base; ○ “one-stop shop” approach to mobile personalization and creation features, which avails customers with a wide array of ringtones, wallpapers, notification sounds, and video wallpapers within the same Android app; ○ flexibility that allows the customer to selectively choose what they would like to personalize without handing over the core elements of the native operating system to a third party and overwhelming the user with a myriad of complex options; ○ large content catalog; ○ recognized and well-respected brands; ○ proprietary recommendation engine; and ○ market ranking and longevity. ● Rapid-Paced and Changing World of Mobile App Development .
The mobile app eco-system changes quickly and regularly with new apps capturing massive audiences competing for consumer’s time, mindshare, and money. This is an ongoing competitive threat requiring us to do our best to adapt as necessary to remain relevant and meaningful.
The mobile app eco-system changes quickly and regularly with new apps capturing massive audiences competing for consumers’ time, mindshare, and money. This is an ongoing competitive threat requiring us to do our best to adapt as necessary to remain relevant and meaningful.
We lease 1,550 square feet of space in Tel Aviv, Israel that accommodates the GuruShots team. That lease is due to expire in October 2024. Our servers are hosted in leased data centers in different geographic locations in the United States.
We lease 1,600 square feet of space in Tel Aviv, Israel that accommodates the GuruShots team. That lease is due to expire in October 2024. Our servers are hosted in leased data centers in different geographic locations in the United States.
If our assumptions are correct, we will have a flywheel that drives the aforementioned KPIs while also enabling us to expand into new verticals (through internal development or acquisition), gamify them, and add new content to our marketplace. Executing this strategy calls for concentrating our efforts on the following goals: ● Continue growing our user base, profitably .
If our strategy is correct, we will have a flywheel that drives the aforementioned KPIs while also enabling us to expand into new verticals (through internal development or acquisition), gamify them, and add new content to our marketplace. Executing this strategy calls for concentrating our efforts on the following goals: ● Continue growing our user base, profitably .
We believe that adding the ability to sell their content to the Zedge App’s 30+ million MAU is an attractive benefit that enables players not only to have fun, but also to earn money while doing so.
We believe that adding the ability to sell their content to Zedge Marketplace’s 30+ million MAU is an attractive benefit that enables players not only to have fun, but also to earn money while doing so.
Although the foundation of our strategy is currently centered around the Zedge App and GuruShots, over time we expect to expand into other content verticals that have relevance beyond gameplay.
Although the foundation of our strategy is currently centered around the Zedge Marketplace and GuruShots, over time we expect to expand into other content verticals that have relevance beyond gameplay.
Our goal is to build our marketplace into one that artists view as prioritizing their needs and addressing all aspects of their marketing and revenue generation goals including, but not limited to, ease in managing their virtual storefront, promotion, education, reporting, and distribution. ● Increase our marketing efforts for our Zedge App .
Our goal is to build our marketplace into one that artists view as prioritizing their needs and addressing all aspects of their marketing and revenue generation goals including, but not limited to, ease in managing their virtual storefront, promotion, education, reporting, and distribution. ● Increase our marketing efforts .
We believe that our Zedge App is well positioned for continued leadership in the personalization space. ● Deep Knowledge of Gaming . We have leaders with years of experience in building and operating games of skill across digital platforms including iOS, Android, and web.
We believe that the Zedge Marketplace is well positioned for continued leadership in the personalization space. ● Deep Knowledge of Gaming . We have leaders with years of experience in building and operating games of skill across digital platforms including iOS, Android, and web.
The Zedge Ringtones and Wallpapers app (which is named “Zedge Wallpapers” in the App Store), which we refer to as our “Zedge App,” is a marketplace offering a wide array of mobile personalization content including wallpapers, video wallpapers, ringtones, and notification sounds, and is available both in Google Play and the App Store.
The Zedge Ringtones and Wallpapers app (which is named “Zedge Wallpapers” in the App Store), which we refer to as our “Zedge App,” offers a wide array of mobile personalization content including wallpapers, video wallpapers, ringtones, and notification sounds, and is available both in Google Play and the App Store.
In addition, we expect that we will be able to capitalize on cross marketing our suite of products to this customer base. ● Ongoing product and technology investment in and across our product suite .
In addition, we expect that we will be able to capitalize on cross marketing our suite of products to this customer base. ● Continue to invest in product and technology investment in and across our product suite .
Every month, GuruShots stages more than 300 competitions that result in players uploading in excess of 1 million photographs and casting close to 4.5+ billion “perceived votes,” which are calculated by multiplying the number of votes that each player casts by a weighting factor based on various factors related to that user.
Every month, GuruShots stages more than 300 competitions that result in players uploading in excess of 750,000 thousand photographs and casting close to 4 billion “perceived votes,” which are calculated by multiplying the number of votes that each player casts by a weighting factor based on various factors related to that user.
In 2021, our Norwegian operations moved into a smaller Trondheim, Norway facility, with approximately 3,800 square feet of space, accommodates our product, design, and technology teams, and is under lease through March 2024. In May of 2022, we entered into a one-year sublease agreement for approximately 2,300 square feet of space for our team in Vilnius, Lithuania.
In 2021, our Norwegian operations moved into a smaller Trondheim, Norway facility, with approximately 4,900 square feet of space, accommodates our product, design, and technology teams, and is under lease through March 2027. In May of 2022, we entered into a one-year sublease agreement for approximately 2,300 square feet of space for our team in Vilnius, Lithuania.
As a voting member of the Unicode Consortium, the standards body responsible for approving new emojis, Emojipedia works alongside major emoji creators including Apple, Google, Facebook, and Twitter. 2 We believe that Emojipedia provides growth potential to the Zedge App, and it was immediately accretive to earnings.
As a member of the Unicode Consortium, the standards body responsible for approving new emojis, Emojipedia works alongside major emoji creators including Apple, Google, Meta, and X, formerly known as Twitter. 2 We believe that Emojipedia provides growth potential to the Zedge App, and it was immediately accretive to earnings.
In fiscal 2022 we introduced several new customer facing product features including ‘NFTs Made Easy’ and social and community features, all meant to improve customer engagement, MAU, and revenue growth over the long term.
In fiscal 2022 we introduced several new customer facing product features and social and community features, all meant to improve customer engagement, MAU, and revenue growth over the long term.
We plan to better utilize data to scale profitable user acquisition and improve the use of our product through personalized recommendations and content feeds, enhanced search and content discovery, and optimized pricing. ● Building our marketplace into a best-of-breed platform for artists and creators .
We plan to better utilize data to improve the user experience, scale profitable user acquisition and improve the use of our product through personalized recommendations and content feeds, enhanced search and content discovery, and optimized pricing. ● Build our marketplace into a compelling platform for artists and creators .
There are many other marketplaces and platforms that offer mobile personalization content, games, and emoji resources, some of whom are better funded than we are.
There are many other marketplaces and platforms that offer mobile personalization content, generative AI creation tools, games, and emoji resources, some of whom are better funded than we are.
The Zedge App’s monetization stack consists of advertising revenue generated when users view advertisements when using the Zedge App or surfing our website, the in-app sale of Zedge Credits, our virtual currency, that is used to purchase Zedge Premium content, and a paid-subscription offering that provides an ad-free experience to users that purchase a monthly or annual subscription.
The Zedge Marketplace’s monetization stack consists of advertising revenue generated when users view advertisements when using the Zedge App (and the related functionality under the zedge.net website), the in-app (or web-based) sale of Zedge Credits, our virtual currency, that is used to purchase Zedge Premium content, and a paid-subscription offering that provides an ad-free experience to users that purchase a monthly or annual subscription.
Game developers that offer more engaging and interesting games. These competitors, many of whom we may not be aware of, may be more proficient at capitalizing on user acquisition channels in order to gain access to large user bases and their network effects to expand virally and quickly. ● Alternative options and products for mobile personalization and emojis .
These competitors, many of whom we may not be aware of, may be more proficient at capitalizing on user acquisition channels in order to gain access to large user bases and their network effects to expand virally and quickly. ● Alternative options and products for mobile personalization, generative AI image creation, games and emojis .
Our platform allows creators to upload content to our marketplace and avail it to our users either for free or for a price, via ‘Zedge Premium.’ In turn, our users utilize the content to personalize their phones and express their individuality.
Our platform allows creators to upload content to our marketplace and avail it to our users either for free or for a price, via ‘Zedge Premium,’ the section of our marketplace where we offer premium content (i.e., for purchase). In turn, our users utilize the content to personalize their phones and express their individuality.
Revamping the customer onboarding experience in order to maximize first time purchasers by immediately drawing new players into simplified photo competitions that are limited to a small audience taking place in a short time duration. ● Subscriptions . Introducing value-adds that we can bundle into a subscription.
Revamping the customer onboarding experience in order to maximize first time purchasers by immediately drawing new players into simplified photo competitions that are limited to a small audience taking place in a short time duration. ● Economy .
Over the past six years, the monthly average paying player spend has increased in excess of 14% annually to more than $55 per player. As we look to the future, we are advancing several initiatives that we expect will drive user growth, increase engagement, drive in-app purchases, and advance our in-game economy. Some of these include: ● On-Boarding .
Over the past seven years, the monthly average paying player spend has increased in excess of 11.6% annually to more than $51.3 per player. As we look to the future, we are advancing several initiatives that we expect will drive user growth, increase engagement, drive in-app purchases, and advance our in-game economy.
As of July 31, 2022, our Zedge App has been installed nearly 569 million times since inception and, over the past two years, has had between 32.0 and 36.3 million monthly active users (“MAU”).
As of July 31, 2023, our Zedge App has been installed nearly 621 million times since inception and, over the past two fiscal years, has had between 30.8 and 36.3 million monthly active users (“MAU”).
In 2009, we introduced the Android version of our Zedge App. The Zedge App provided ease of use by negating the need for customers to first download a ringtone or wallpaper to their computer and then upload that content to their mobile phone.
The Zedge App provided ease of use by negating the need for customers to first download a ringtone or wallpaper to their computer and then upload that content to their mobile phone. 6 We launched the iOS version of our Zedge App in 2013, followed by the launch of the Windows Mobile Zedge App in 2014.
We also have applied for trademark protection for “Tattoo your phone,” and “NFTs Made Easy” in the United States, a stylized “D” logo in the United States, Canada and India, and have obtained a copyright registration for our flagship app, Zedge. In addition, we have registered, amongst others, the following domain names: www.zedge.net and www.zedge.com.
We also have applied for trademark protection for “AI Art Battles (& Design),” “pAInt,” and “Zedge pAInt” in the United States, a stylized “D” logo in Canada and India, and have obtained a copyright registration for our flagship app, Zedge. In addition, we have registered, amongst others, the following domain names: www.zedge.net and www.zedge.com.
Within this group of individuals, over 200 million identify as creators, people who use their influence, skill, and creativity to amass an audience and monetize it. Furthermore, approximately 12% of full-time creators earn more than $50,000 per year, and 10% of influencers earn more than $100,000 per year.
According to Linktree, over 200 million identify as creators, people who use their influence, skill, and creativity to amass an audience and monetize it. Furthermore, TechCrunch reports that 12% of full-time creators earn more than $50,000 per year, while Influencer Hub reports 10% of influencers earn more than $100,000 per year.
Emojipedia receives approximately 46.4 million monthly page views and has approximately 7.6 million monthly active users of which approximately 45.19% are located in well-developed markets. It is the top resource for all things emoji, offering insights into data and cultural trends.
In July 2023, Emojipedia received approximately 45 million monthly page views and has approximately 9.7 million monthly active users as of July 31, 2023 of which approximately 50.3% are located in well-developed markets. It is the top resource for all things emoji, offering insights into data and cultural trends.
GuruShots offers a platform spanning iOS, Android, and the web that provides a fun, educational and structured way for amateur photographers to compete in a wide variety of contests showcasing their photos while gaining recognition with votes, badges, and awards.
In April 2022, we acquired GuruShots Ltd (“GuruShots”) a recognized category leader focused on gamifying the photography vertical. GuruShots offers a platform spanning iOS, Android, and the web that provides a fun, educational and structured way for amateur photographers to compete in a wide variety of contests showcasing their photos while gaining recognition with votes, badges, and awards.
In August 2021, we acquired Emojipedia Pty Ltd (“Emojipedia”), the world’s leading authority dedicated to providing up-to-date and well-researched emoji definitions, information, and news as well as World Emoji Day and the annual World Emoji Awards, and Emojitracker, which provides real time visualization of all emoji symbols used on Twitter.
In August 2021, we acquired Emojipedia Pty Ltd (“Emojipedia”), the world’s leading authority dedicated to providing up-to-date and well-researched emoji definitions, information, and news, as well as World Emoji Day and the annual World Emoji Awards.
In January 2019, we started offering freemium Zedge App Android users the ability to convert into paying subscribers in exchange for removing unsolicited advertisements from our Zedge App. As of July 31, 2022, we had approximately 692,000 active subscribers. In fiscal 2023, we expect to launch subscriptions on iOS.
In January 2019, we started offering freemium Zedge App Android users the ability to convert into paying subscribers in exchange for removing unsolicited advertisements from our Zedge App. As of July 31, 2023, we had approximately 638,000 active subscribers. In April 2023, we introduced a subscription tier in the iOS version of the app.
As of July 31, 2022, we had 692,000 active paying subscribers. In late 2021 we introduced NFT functionality to a limited number of Zedge Premium creators via ‘NFTs Made Easy’.
In April 2023, we introduced a subscription tier in the iOS version of the app. As of July 31, 2023, we had 638,000 active paying subscribers. In late 2021 we introduced NFT functionality to a limited number of Zedge Premium creators via ‘NFTs Made Easy’.
GuruShots has a 4.5 star rating in the App Store albeit from a universe of several thousand reviews. ● Human Capital . We have a team of highly experienced professionals that take pride and ownership in their work product.
GuruShots has a 4.5 star rating in the App Store albeit from a universe of several thousand reviews. ● Human Capital . We have a team of highly experienced professionals that take pride and ownership in their work product. Our diverse employee base is passionate about our product suite and its mission to make our strategy a reality.
Human Capital Our headcount totaled 93 as of July 31, 2022, including 32 added from the GuruShots acquisition. 8 Facilities As a result of the COVID-19 pandemic, we ceased having a physical office in the United States in 2020. Yet, we still address commercial operations including accounting and finance, and business development from the New York area.
Facilities As a result of the COVID-19 pandemic, we ceased having a physical office in the United States in 2020. Yet, we still address commercial operations including accounting and finance, and business development from the New York area.
We have an experienced management team with longstanding tenure with the company and deep knowledge of the mobile app landscape who are highly focused on execution. Our core management team possesses a solid understanding of the mobile app industry, product design and development, operations, and monetization.
Our people possess deep expertise in product design and management, development, marketing, monetization, data and analytics and operations. ● Management team . We have an experienced management team with longstanding tenure with the company and deep knowledge of the mobile app landscape who are highly focused on execution.
We have built a robust platform that allows us to ideate, test, and launch where warranted by the outcome and we have embraced machine learning throughout our technology stack in order to improve content recommendations and relevancy. From an end user’s perspective, our platform minimizes response latency while maximizing content relevancy and discoverability.
We have built a robust platform that allows us to ideate, test, analyze, and launch where warranted by the outcome and we have embraced machine learning, including AI, throughout our technology stack in order to improve content creation, recommendations and relevancy.
We plan to make continued, selected investments in product feature sets and functionality in order to both maintain our existing user base and attract new users.
We plan to make continued, selected investments in product feature sets and functionality in order to both maintain our existing user base and attract new users. In addition, we envision applying our product expertise to verticals that we currently do not have in our portfolio.
We have been granted trademark protection for “Zedge” in the United States, European Union, United Kingdom, India, and Canada, “Tonesync” in the European Union and the United Kingdom, “We Make Phones Personal,” and “Zedge, Everything You” in the United States and a stylized “D” logo in the European Union and the United Kingdom.
We have been granted trademark protection for “Zedge” in the United States, European Union, United Kingdom, India, and Canada, “We Make Phones Personal,” and “Zedge, Everything You,” “Tattoo Your Phone,” “Shortz – Chat Stories By Zedge,” and “NFTs Made Easy” in United States and a stylized “D” logo in the European Union, United Kingdom and United States.
Our Zedge App has a global customer base of approximately 32 million MAU, enabling users to easily personalize their mobile phones with a wide variety of free, high-quality ringtones, wallpapers, notification sounds, video wallpapers, custom app icons (only available for iOS), and NFTs.
The Zedge App has a global customer base of approximately 30.9 million MAU as of July 31, 2023, enabling users to easily personalize their mobile phones with a wide variety of free, high-quality ringtones, wallpapers, notification sounds, video wallpapers, custom app icons (only available for iOS), as well as create bespoke wallpapers with pAInt, our generative AI wallpaper maker.
In addition, our diverse customer base attracts advertisers seeking customers that have adequate disposable income to purchase their products and services. Our Zedge App’s large customer base is also a draw to artists and brands looking to market their content to a critical mass of users. 4 ● Leading global provider of mobile personalization content .
Our Zedge Marketplace’s large customer base is also a draw to artists and brands looking to market their content to a critical mass of users. 4 ● Leading global provider of mobile personalization content .
We optimize our platform by utilizing systems, algorithms, and heuristics that organize our content based on real user data and that renders the content in a relevant fashion. With GuruShots, we have added open source and proprietary technologies around gamification, including ranking algorithms that ensure fair exposure to all content in a competition, and real-time voting/ranking functionality at scale.
With GuruShots, we have added open source and proprietary technologies around gamification, including ranking algorithms that ensure fair exposure to all content in a competition, and real-time voting/ranking functionality at scale, and a personal competition recommendations system based on users’ photos and historical activity.
In 2016, IDT Corporation spun off our stock to its stockholders, and our Class B Common Stock was listed on the NYSE American with the ticker symbol “ZDGE”.
During 2014 and 2015, our Zedge App introduced app icons, social sharing features, marketing automation capabilities, and expanded the number of languages supported. In 2016, IDT Corporation spun off our stock to its stockholders, and our Class B Common Stock was listed on the NYSE American with the ticker symbol “ZDGE”.
Our Strategic Flywheel Our long-term strategy calls for creating a flywheel that leverages the synergies of a “gaming and marketplace” dynamic across our portfolio, engaging communities of consumers with content that can function on a multitude of online and mobile platforms including social networks, messaging, and gaming.
Our Strategic Flywheel Our long-term strategy calls for creating a flywheel that leverages the synergies of content creation, gaming and marketplaces by empowering consumers with easy-to-use content creation utilities whose output can be used to engage across a multitude of online and mobile platforms including social networks, messaging, and gaming as well as for commerce purposes.
Collectively, our management team has a proven ability in building and scaling a business and pursuing opportunities with a manageable risk profile. ● Large and diverse content catalog . Our large and diverse catalog of content includes wallpapers, ringtones, notification sounds, video wallpapers, photographs, and emojis.
Our core management team possesses a solid understanding of the mobile app industry, product design and development, operations, and monetization. Collectively, our management team has a proven ability in building and scaling a business and pursuing opportunities with a manageable risk profile. ● Large and diverse content catalog .
With artists and contributors spanning the globe, we have assembled a vast array of both User Generated (UGC) and licensed content to meet the needs of our users. ● Technology and infrastructure . Our products are built upon scalable technology and infrastructure that reliably serves tens of millions of MAU, globally.
Our large and diverse catalog of content includes wallpapers, ringtones, notification sounds, video wallpapers, photographs, and emojis. With artists and contributors spanning the globe, we have assembled a vast array of both User Generated (“UGC”) and licensed content to meet the needs of our users. ● Scalable and Reliable Technology and infrastructure .
On August 1, 2021, we acquired Emojipedia, the world’s leading authority dedicated to providing up-to-date and well-researched emoji definitions, information, and news as well as World Emoji Day and the annual World Emoji Awards, and Emojitracker, which provides real time visualization of all emoji symbols used on Twitter.
In August 2020, Jonathan Reich was promoted to Chief Executive Officer, and Yi Tsai was promoted to Chief Financial Officer. In August 2021, we acquired Emojipedia, the world’s leading authority dedicated to providing up-to-date and well-researched emoji definitions, information, and news as well as World Emoji Day and the annual World Emoji Awards.
The Android version of our Zedge App is available in 17 languages and Emojipedia is available in 19 languages. We possess a highly diversified portfolio of content and attribute this in part to our global reach which makes us attractive to creators interested in meeting various customer tastes and preferences.
We possess a highly diversified portfolio of content and attribute this in part to our global reach which makes us attractive to creators interested in meeting various customer tastes and preferences. In addition, our diverse customer base attracts advertisers seeking customers that have adequate disposable income to purchase their products and services.
Our diverse employee base is passionate about our product suite and its mission to build a tightly coupled ecosystem of “games and marketplaces.” Our culture is founded on respect and empowerment which are critical in light of us having offices in four different countries with a hybrid in-person work attendance policy.
Our culture is founded on respect and empowerment which are critical in light of us having offices in four different countries with a hybrid in-person work attendance policy. We strive to create an environment where our employees can be autonomous and creative.
GuruShots currently generates revenue from selling digital resources that, if used skillfully, can provide additional visibility to competitors’ photographs, a critical factor in securing votes for competitive ranking. 7 Our Technology Our eco-system is powered by a scalable distributed platform that is comprised of both open source and proprietary technologies centered on content management and discovery, web and app development, data mining and analytics, deep learning, mobile content/device compatibility, advertising, and reporting.
Our Technology Our eco-system is powered by a scalable distributed platform that comprises both open source and proprietary technologies centered on content management and discovery, web and app development, data science and analytics, deep learning, mobile content/device compatibility, advertising/marketing tech, and reporting.
Our Competitive Advantages We believe that the following competitive strengths will drive the growth of our business: ● Large, global customer base . We benefit from having a large customer base.
Our Competitive Advantages We believe that the following competitive strengths will drive the growth of our business: ● Large, global customer base . We benefit from having a large customer base. As of July 31, 2023, the Zedge App had 30.9 million MAU, of which approximately 22% were in well-developed markets and 78% were in emerging markets.
Our Strategy Our vision is to connect creators who enjoy friendly competitions with a community of prospective consumers in order to drive commerce.
Our Strategy Our vision is to provide tools that enable easy and high-quality digital content creation, connect the creators together with friendly competitions and expose the content to communities of prospective consumers in order to drive commerce.
On a monthly basis, GuruShots users currently cast close to 4.5 billion “perceived votes” in more than 300 competitions.
On a monthly basis, GuruShots users currently cast close to 4 billion “perceived votes” in more than 300 competitions. GuruShots currently generates revenue from selling digital resources that, if used skillfully, can provide additional visibility to competitors’ photographs, a critical factor in securing votes for competitive ranking.
Item 1. Business Company Overview Zedge builds digital marketplaces and friendly competitive games around content that people use to express themselves. Our leading products include Zedge Ringtones and Wallpapers, a freemium digital content marketplace offering mobile phone wallpapers, video wallpapers, ringtones, and notification sounds which historically was branded as Zedge Premium, and GuruShots, a skill-based photo challenge game.
Item 1. Business Company Overview Zedge builds digital marketplaces and friendly competitive games around content that people use to express themselves.
In addition, we have applied for trademark protection for “GuruShots” in the United States, and have filed copyright applications for the GuruShots mobile and web-based applications.
In addition, we have obtained trademark registrations for “GuruShots” in the United States, applied for trademark protection for “GuruShots in Canada, India, the European Union and the United Kingdom, and have obtained copyright registrations for the GuruShots mobile and web-based applications. Human Capital Our headcount totaled 94 as of July 31, 2023, including 29 added from the GuruShots acquisition.
Historically, the majority of our revenue has been derived from advertising. We plan to diversify our revenue by developing a subscription offer and introducing advertising into GuruShots. Furthermore, we expect to further our NFT offering, opening up the potential for trading revenue as well as revisiting print on demand, particularly with GuruShots’ player’s content.
We plan to diversify our revenue by advancing our existing subscription offering as well as introducing new subscription offers, introducing advertising into GuruShots and evolving our in-app economy. Furthermore, we expect to test a print on demand offering.
All transactions are made using Zedge Credits. 1 In April 2022, we acquired GuruShots Ltd (“GuruShots”) a recognized category leader focused on gamifying the photography vertical.
In December 2021, we introduced NFT functionality to a limited number of Zedge Premium creators via ‘NFTs Made Easy’. All NFT Made Easy transactions are made using Zedge Credits. In April 2022, we acquired GuruShots, a recognized category leader that fuses photography with mobile gaming.
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In addition, due to developments outside of our control, we migrated to a new ad mediation platform - Applovin MAX -, which monopolized internal resources and delayed the completion of other product initiatives we had planned for in fiscal 2022.
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Our leading products include Zedge Ringtones and Wallpapers, a freemium digital content marketplace offering mobile phone wallpapers, video wallpapers, ringtones, and notification sounds as well as pAInt, a generative AI wallpaper maker, GuruShots, a skill-based photo challenge game, and Emojipedia, the #1 trusted source for ‘all things emoji’.
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Applovin paid us a one-time $2 million integration bonus and their performance has been on-par or better than our prior platform. Following the transition, work resumed on the delayed development and most have been rolled out as of September 30, 2022.
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In fiscal 2023, we introduced pAInt, a generative AI wallpaper maker in the Zedge App. A generative AI wallpaper maker is an implementation of artificial intelligence software that can create images from text descriptions.
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Over time we believe this product enhancement has the potential to drive significant artist growth and revenue production. ‘NFTs Made Easy’ is an eco-friendly platform that enables artists and consumers to sell and purchase NFTs within the Zedge App even though they may lack deep knowledge and proficiency in the crypto space.
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To interface with a generative AI image maker, a user enters a text description of the image they want to create, and the software generates an image based on that description. In addition, we upgraded Zedge+, our paid subscription offering by bundling together an ad-free experience with value adds making the offering more compelling.
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For example, we started testing a feed of short and engaging instructional videos that offer players techniques for improving their photographs. If users engage with this content, we expect to bundle it into a paid subscription. ● Economy .
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All NFT Made Easy transactions are made using Zedge Credits. 1 We often refer to our freemium ringtones and wallpapers, our subscription offering, the functionality for creators to market their products and ancillary offering and features, both in our Zedge App and website as our Zedge Marketplace.
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In addition, we envision applying our product expertise to verticals that we currently do not have in our portfolio, as well as gamifying the Zedge App. ● Better utilize data to improve user acquisition and customer engagement .
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Some of these include: ● New Gameplay Experiences . Introducing a new hybrid-casual gameplay experience that enables users to compete in short-duration photo and image competitions that are limited in size. ● On-Boarding .
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Historically, we haven’t invested materially in marketing initiatives for our Zedge App. Going forward, we envision the need to better promote our Zedge App and to amplify our Zedge App’s value proposition to artists and individual creators.
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For example, we are in the midst of a soft launch of a new mobile game, AI Art Master, which enables players to create generative AI images and compete in themed based competitions with these images, as well as gamifying the Zedge App. ● Better utilize data to improve user acquisition and customer engagement .
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We envisage these creators and influencers and brands self-promoting their availability on our Zedge App in order to extend their reach, generate incremental income and drive more end-user traffic to our platform.
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We plan to build a full-stack marketing team, increase our paid user acquisition investment, build and/or buy data analytic tools that provide valuable insights into our marketing initiatives, focus on the evolving field of search engine optimization, and app store optimization. ● Diversify our revenue stack . Historically, the majority of our revenue has been derived from advertising.
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Furthermore, we also plan to scale up paid user acquisition focusing on users that we believe can yield profitable customers, and also continue to invest in app store optimization, search, marketing automation, social marketing, and community management in order to retain and expand our Zedge App’s customer base. ● Diversify our revenue stack .
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Our products are built upon scalable technology and infrastructure that reliably serves tens of millions of MAU, globally.
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We strive to create an environment where our employees can be autonomous and creative. Our people possess deep expertise in product design and management, development, marketing, monetization, data and analytics and operations. ● Management team .
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Game developers that offer more engaging and interesting games.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn addition, the platforms that we use to distribute our apps may encourage, or require, compliance with certain security standards, such as the voluntary cybersecurity framework released by the National Institute of Standards and Technology which consists of controls designed to identify and manage cyber-security risks, and we could be negatively impacted to the extent we are unable to comply with such standards. 39 RISKS RELATED TO OUR OWNERSHIP AND OUR CLASS B COMMON STOCK We have granted, and may continue to grant, options, restricted shares and other types of awards under our stock option and equity incentive plans and otherwise, which may result in increased equity-based compensation expenses.
Biggest changeWe could also be negatively impacted by existing and proposed laws and regulations in the United States, Lithuania, Israel, Norway the European Union, and other jurisdictions, as well as government policies and practices related to cybersecurity, data privacy, data localization and data protection. 38 In addition, the platforms that we use to distribute our apps may encourage, or require, compliance with certain security standards, such as the voluntary cybersecurity framework released by the National Institute of Standards and Technology which consists of controls designed to identify and manage cyber-security risks, and we could be negatively impacted to the extent we are unable to comply with such standards.
We cannot assure you that we will achieve any or all of the above. In the event that we are not successful in some or all of these areas we may not be able to retain our customers and advertisers. We may need to invest in paid user acquisition in order to grow our customer base.
We cannot assure you that we will achieve any or all of the above. In the event that we are not successful in some or all of these areas we may not be able to retain our customers and advertisers. We need to invest in paid user acquisition in order to grow our customer base.
Risk Factor Summary Our business operations are subject to numerous risks and uncertainties, including those outside of our control, that could cause our business, financial condition or operating results to be harmed, including, but not limited to, risks regarding the following: ● We offer a suite of freemium apps and we may not be successful in adding new users or in retaining existing users, or if our users decrease their level of engagement with our products or do not make optional purchases of tokens, resources, or content, or convert into paying subscribers and renew their paid subscriptions our revenue, financial results and business may be significantly harmed. ● We may not be successful in acquiring a sufficient number of users that become purchasers or retain existing users who generate profitable revenue for our apps. ● We may not manage our in-app economy well and as a result, disincentivize users from making in-app purchases.
Risk Factor Summary Our business operations are subject to numerous risks and uncertainties, including those outside of our control, that could cause our business, financial condition or operating results to be harmed, including, but not limited to, risks regarding the following: ● We offer a suite of freemium apps and we may not be successful in adding new users or in retaining existing users, or if our users decrease their level of engagement with our products or do not make optional purchases of tokens, resources, or content, or convert into paying subscribers and renew their paid subscriptions our revenue, financial results and business may be significantly harmed. 8 ● We may not be successful in acquiring a sufficient number of users that become purchasers or retain existing users who generate profitable revenue for our apps. ● We may not manage our in-app economy well and as a result, disincentivize users from making in-app purchases.
Any interruption in the ability of users to access our websites or apps could reduce our future revenues, harm our future profits, subject us to regulatory scrutiny and lead users to seek alternative internet mobile products. 30 There can be no assurance that these providers will continue licensing their technologies or intellectual property to us on reasonable terms, or at all.
Any interruption in the ability of users to access our websites or apps could reduce our future revenues, harm our future profits, subject us to regulatory scrutiny and lead users to seek alternative internet mobile products. There can be no assurance that these providers will continue licensing their technologies or intellectual property to us on reasonable terms, or at all.
Any such equity financing could occur at prices below, or well below, the then-current trading price of our Class B common stock, which would further exacerbate the ownership interests of our stockholders. Our business, financial condition and results of operations, as well as our ability to obtain additional financing, may be adversely affected by downturn in the global economy.
Any such equity financing could occur at prices below, or well below, the then-current trading price of our Class B common stock, which would further exacerbate the ownership interests of our stockholders. 39 Our business, financial condition and results of operations, as well as our ability to obtain additional financing, may be adversely affected by downturn in the global economy.
While we do not anticipate any interruption in their distribution platforms or ability to accept customer payments, any such disruptions, even temporary, may have material impacts on our business and operations. 15 We are subject to the standard policies and terms of service of third-party platforms, which govern the marketing, promotion, distribution, content and operation of our apps on their platforms.
While we do not anticipate any interruption in their distribution platforms or ability to accept customer payments, any such disruptions, even temporary, may have material impacts on our business and operations. We are subject to the standard policies and terms of service of third-party platforms, which govern the marketing, promotion, distribution, content and operation of our apps on their platforms.
We may be affected by economic downturns. A prolonged slowdown in the world economy may lead to a reduced amount of mobile internet advertising, which could materially and adversely affect our business, financial condition and results of operations. 40 Moreover, a slowdown or disruption in the global economy may have a material and adverse impact on financings available to us.
We may be affected by economic downturns. A prolonged slowdown in the world economy may lead to a reduced amount of mobile internet advertising, which could materially and adversely affect our business, financial condition and results of operations. Moreover, a slowdown or disruption in the global economy may have a material and adverse impact on financings available to us.
We believe that continued growth of our business will depend on our ability to successfully develop and enhance our products and services, cost efficiently attract new artists and individual creators, maintain our relationship with various artists and content partners like Google, Twitter and Apple, sustain our high rankings with the leading search engines including Google, capture the changes that are taking place in the industry in a timely fashion grow our user base, retain existing users, continue developing innovative technologies in response to user demand, increase brand awareness through marketing and promotional activities, react to changes in market trends, expand into new market segments, attract new advertisers, retain existing advertisers, get users to engage with our digital properties and convert into paying users or subscribers, and take advantage of the growth in the relevant markets.
We believe that continued growth of our business will depend on our ability to successfully develop and enhance our products and services, cost efficiently attract new artists and individual creators, maintain our relationship with various artists and content partners like Google, Meta and Apple, sustain our high rankings with the leading search engines including Google, capture the changes that are taking place in the industry in a timely fashion grow our user base, retain existing users, continue developing innovative technologies in response to user demand, increase brand awareness through marketing and promotional activities, react to changes in market trends, expand into new market segments, attract new advertisers, retain existing advertisers, get users to engage with our digital properties and convert into paying users or subscribers, and take advantage of the growth in the relevant markets.
In the event of such default, the Bank could elect to terminate their commitments thereunder, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. 21 Changes in accounting principles or their application could result in accounting charges or effects which could adversely affect our operating results and prospects.
In the event of such default, the Bank could elect to terminate their commitments thereunder, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation. Changes in accounting principles or their application could result in accounting charges or effects which could adversely affect our operating results and prospects.
If the market for mobile advertising deteriorates, or develops more slowly than we expect, we may not be able to increase our revenues or our revenues and profitability could decline materially. A material amount of our revenue is generated from a limited number of geographies and third-party advertising demand partners.
If the market for mobile advertising deteriorates, or develops more slowly than we expect, we may not be able to increase our revenues or our revenues and profitability could decline materially. 12 A material amount of our revenue is generated from a limited number of geographies and third-party advertising demand partners.
Revenues of freemium apps and websites typically rely on a small percentage of users that convert into paying users by making in-app purchases of digital goods and/or paid subscriptions; however, the vast majority of users play for free or only occasionally make purchases or opt-in for paid subscription. Accordingly, only a small percentage of our users are paying users.
Revenues of freemium apps and websites typically rely on a small percentage of users that convert into paying users by making in-app purchases of digital goods and/or paid subscriptions; however, the vast majority of users play for free or only occasionally make purchases or opt-in for paid subscriptions. Accordingly, only a small percentage of our users are paying users.
We track certain key performance indicators with internal and third-party tools and do not independently verify that all of this data accurate. Certain of these indicators may have challenges in being tracked accurately which could result in real or perceived inaccuracies that could negatively impact our business.
We track certain key performance indicators with internal and third-party tools and do not independently verify that all of this data is accurate. Certain of these indicators may have challenges in being tracked accurately which could result in real or perceived inaccuracies that could negatively impact our business.
If any of these advertising demand partners were to alter their spend on our digital properties the outcome could result in lowering revenues and profitability. 14 Our apps’ user base is heavily weighted to the Android operating system and our revenues and profitability may suffer if the market demand for Android smartphones decreases.
If any of these advertising demand partners were to alter their spend on our digital properties the outcome could result in lowering revenues and profitability. Our apps’ user base is heavily weighted to the Android operating system and our revenues and profitability may suffer if the market demand for Android smartphones decreases.
If we fail to keep up with rapid and innovative technological changes to remain competitive, our future growth may be materially and adversely affected and our results of operations could be materially and adversely affected. 26 Our international operations expose us to additional risks that could harm our business, operating results and financial condition.
If we fail to keep up with rapid and innovative technological changes to remain competitive, our future growth may be materially and adversely affected and our results of operations could be materially and adversely affected. Our international operations expose us to additional risks that could harm our business, operating results and financial condition.
Although we believe that Zedge Premium will act as an important driver in helping our platform become a leading platform for professional artists, individual creators and brands looking to distribute their work to consumers looking for an easy, entertaining and unique way to express their voice, individuality and essence, it’s premature to conclude this as being the case. 17 Although Zedge Premium’s gross transaction revenue has shown modest growth it is still too early to state with conviction that Zedge Premium will have a materially positive impact on our business.
Although we believe that Zedge Premium will act as an important driver in helping our platform become a leading platform for professional artists, individual creators and brands looking to distribute their work to consumers looking for an easy, entertaining and unique way to express their voice, individuality and essence, it’s premature to conclude this as being the case. 16 Although Zedge Premium’s gross transaction revenue has shown modest growth it is still too early to state with conviction that Zedge Premium will have a materially positive impact on our business.
These potential changes could have a material impact on our effective tax rate, long-term tax planning and financial results. 23 Over the last several years, the Organization for Economic Cooperation and Development has been working on a Base Erosion and Profits Shifting Project that, if implemented, would change various aspects of the existing framework under which our tax obligations are determined in many of the countries in which we do business.
These potential changes could have a material impact on our effective tax rate, long-term tax planning and financial results. 21 Over the last several years, the Organization for Economic Cooperation and Development has been working on a Base Erosion and Profits Shifting Project that, if implemented, would change various aspects of the existing framework under which our tax obligations are determined in many of the countries in which we do business.
Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. 24 RISKS RELATED TO OUR OPERATIONS We may not be able to effectively manage our growth or implement our future business strategies, in which case our business and results of operations may be materially and adversely affected.
Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. 22 RISKS RELATED TO OUR OPERATIONS We may not be able to effectively manage our growth or implement our future business strategies, in which case our business and results of operations may be materially and adversely affected.
For example, in April 2021 Apple released iOS 14 which started requiring users to opt in to share their IDFA with app developers, on an app-by-app basis. As a consequence, the ability of advertisers to accurately target and measure their advertising campaigns at the user level become significantly more difficult typically resulting in higher user acquisition costs.
For example, in April 2021 Apple released iOS 14 which started requiring users to opt in to share their IDFA with app developers, on an app-by-app basis. As a consequence, the ability of advertisers to accurately target and measure their advertising campaigns at the user level becomes significantly more difficult, typically resulting in higher user acquisition costs.
This may include but is not limited to the user’s name, telephone number, email address, web cookies, Facebook and other login credentials, phone model, operating system, location, Android Advertising ID (“AAID”), Apple’s Identifier for Advertising, IDFA, as well as information relating to their interaction with advertisements and content appearing within our products.
This may include but is not limited to the user’s name, telephone number, email address, web cookies, Meta and other login credentials, phone model, operating system, location, Android Advertising ID (“AAID”), Apple’s Identifier for Advertising, IDFA, as well as information relating to their interaction with advertisements and content appearing within our products.
Historically, consumer purchasing and advertising spend have each declined during economic downturns and periods of economic or geopolitical uncertainty or when disposable income or consumer lending is declines.
Historically, consumer purchasing and advertising spend have each declined during economic downturns and periods of economic or geopolitical uncertainty or when disposable income or consumer lending declines.
If new mobile device sales decrease or slowdown, our products and services will likely experience fewer installations which will negatively impact our revenue and operations. We rely on third-party platforms, such as the iOS App Store, Facebook, and Google Play Store, to distribute our apps and collect revenues generated on these platforms.
If new mobile device sales decrease or slowdown, our products and services will likely experience fewer installations which will negatively impact our revenue and operations. We rely on third-party platforms, such as the iOS App Store, Meta, and Google Play Store, to distribute our apps and collect revenues generated on these platforms.
Although we had positive cash flow from operating activities and net earnings in fiscal 2021 and 2022, we had previously incurred, and may once again incur, net losses and experience negative cash flow from operating activities in the future and may not be able to obtain additional capital in a timely manner or on acceptable terms, or at all.
Although we had positive cash flow from operating activities and net earnings in fiscal 2022 and 2023, we had previously incurred, and may once again incur, net losses and experience negative cash flow from operating activities in the future and may not be able to obtain additional capital in a timely manner or on acceptable terms, or at all.
As a consequence, the ability of advertisers to accurately target and measure their advertising campaigns at the user level has become significantly more difficult typically resulting in higher user acquisition costs. 25 Our products may contain errors, flaws or failures that may only become apparent after their release.
As a consequence, the ability of advertisers to accurately target and measure their advertising campaigns at the user level has become significantly more difficult typically resulting in higher user acquisition costs. 23 Our products may contain errors, flaws or failures that may only become apparent after their release.
The size of our user base and our users’ level of engagement and paid conversion are fundamental to our success. Our financial performance has been and will continue to be dependent by our ability to successfully add new users, retain and engage existing users and convert them into paying users and/or subscribers.
The size of our user base and our users’ level of engagement and paid conversion are fundamental to our success. Our financial performance has been and will continue to be dependent on our ability to successfully add new users, retain and engage existing users and convert them into paying users and/or subscribers.
Any change to this mix could result in negatively impacting our business, financial condition, and results of operations. ● Our apps’ user base is heavily weighted to the Android operating system and our revenues and profitability may suffer if the market demand for Android smartphones decreases. 9 ● We rely on third-party platforms, such as the iOS App Store, Facebook, and Google Play Store, to distribute our apps and collect revenues generated on these platforms.
Any change to this mix could result in negatively impacting our business, financial condition, and results of operations. ● Our apps’ user base is heavily weighted to the Android operating system and our revenues and profitability may suffer if the market demand for Android smartphones decreases. ● We rely on third-party platforms, such as the iOS App Store, Meta, and Google Play Store, to distribute our apps and collect revenues generated on these platforms.
Our apps’ user base is heavily weighted to smartphones running the Android operating system, which constituted approximately 96% of our MAU (excluding Emojipedia) as of July 31, 2022, and most of our revenues for fiscal 2022.
Our apps’ user base is heavily weighted to smartphones running the Android operating system, which constituted approximately 96% of our MAU (excluding Emojipedia) as of July 31, 2023, and most of our revenues for fiscal 2023.
If we are unable to recruit and retain well qualified candidates at an attractive rate or manage them well, our business will struggle to meet our development goals and objectives. In fiscal 2021 we adopted a “remote-first” work policy that enables employees to work from home unless they are needed in the office.
If we are unable to recruit and retain well qualified candidates at an attractive rate or manage them well, our business will struggle to meet our development goals and objectives. In fiscal 2021 we adopted a “remote-first” work policy that enabled employees to work from home unless they were needed in the office.
Any number of factors can negatively affect user growth, engagement and conversion, including: ● users opt to utilize other competitive products or services instead of our own; ● user behavior changes with respect to our products and services resulting in a decrease of engagement and/or session time; ● users decrease their engagement, session time, or uninstall our apps because of product decisions that we make with respect to introducing new features, feature enhancements, an/or monetization techniques; ● users lose confidence in how we utilize user data and/or or privacy policy; ● users cease making in-app purchases or in paying for subscriptions; ● users have difficulty accessing our products and services as a result of our actions or those of third parties that we rely on to distribute our products and deliver our services; ● we fail to introduce new features, products or services that users want or enhance the existing products and services with improvements that users are interested in; ● we are unable to acquire users through cost-effective marketing efforts, including both organic and paid channels; ● initiatives designed to attract and maintain users and increase engagement are unsuccessful because of errors that we make or policies instituted by third parties that we use to distribute our products or deliver our services; ● adopting terms, policies or procedures related to areas such as privacy, user data, content ownership, or monetization techniques that are received negatively by our users or creators; ● inability to offer relevant content to our users; ● poor support for our users and creators; ● outages or other technical problems that result in making our products and services inaccessible, unreliable or that result in a poor user experience; ● actions by governments that affect accessibility to our products and services in any market; or ● regulations and/or litigation that result in users not accepting our terms of use because of measures that we have taken in order to ensure compliance. 12 Certain of these factors have, at various times, negatively impacted user and creator growth, MAU and engagement.
Any number of factors can negatively affect user growth, engagement and conversion, including: ● users opt to utilize other competitive products or services instead of our own; ● user behavior changes with respect to our products and services resulting in a decrease of engagement and/or session time; ● users decrease their engagement, session time, or uninstall our apps because of product decisions that we make with respect to introducing new features, feature enhancements, an/or monetization techniques; ● users lose confidence in how we utilize user data and/or or privacy policy; ● users cease making in-app purchases or in paying for subscriptions; ● users have difficulty accessing our products and services as a result of our actions or those of third parties that we rely on to distribute our products and deliver our services; ● we fail to introduce new features, products or services that users want or enhance the existing products and services with improvements that users are interested in; ● we are unable to acquire users through cost-effective marketing efforts, including both organic and paid channels; 10 ● initiatives designed to attract and maintain users and increase engagement are unsuccessful because of errors that we make or policies instituted by third parties that we use to distribute our products or deliver our services; ● adopting terms, policies or procedures related to areas such as privacy, user data, content ownership, or monetization techniques that are received negatively by our users or creators; ● inability to offer relevant content to our users; ● poor support for our users and creators; ● outages or other technical problems that result in making our products and services inaccessible, unreliable or that result in a poor user experience; ● actions by governments that affect accessibility to our products and services in any market; or ● regulations and/or litigation that result in users not accepting our terms of use because of measures that we have taken in order to ensure compliance.
Many factors, some of which are beyond our control, are important to maintaining and enhancing our various brands and may negatively impact our brand and reputation if not properly managed, such as our ability to: ● maintain an easy and reliable user experience as user preferences evolve and as our brands expand into new service categories and new service lines; ● remain relevant to users who can turn to other providers for digital content and marketplaces and mobile games; ● increase brand awareness among existing and potential users, advertisers and content providers through various marketing and promotional activities; ● adopt new technologies or adapt our products and services to meet user needs or emerging industry standards; and ● distinguish us from the competition and maintain this distinction.
Many factors, some of which are beyond our control, are important to maintaining and enhancing our various brands and may negatively impact our brand and reputation if not properly managed, such as our ability to: ● maintain an easy and reliable user experience as user preferences evolve and as our brands expand into new service categories and new service lines; ● remain relevant to users who can turn to other providers for digital content and marketplaces and mobile games; ● increase brand awareness among existing and potential users, advertisers and content providers through various marketing and promotional activities; ● adopt new technologies or adapt our products and services to meet user needs or emerging industry standards; and ● distinguish us from the competition and maintain this distinction. 17 In the future, we may conduct various marketing and brand promotion activities to expand our brand.
As threats related to cyber-attacks continuously evolve and grow, we may also find it necessary to investment additional resources in protecting our data and infrastructure, which may impact our results of operations.
As threats related to cyber-attacks continuously evolve and grow, we may also find it necessary to invest additional resources in protecting our data and infrastructure, which may impact our results of operations.
New laws and regulations, changes in existing laws and regulations or the interpretation of them, our introduction of new products, or an extension of our business into new areas, could increase our future compliance costs, make our products and services less attractive to our users, or cause us to change or limit our business practices.
New laws and regulations, changes in existing laws and regulations or the interpretation of them, our introduction of new products, or an extension of our business into new areas could increase our future compliance costs, make our products and services less attractive to our users, introduce litigation exposure, or cause us to change or limit our business practices.
Although the Zedge App had initial success in converting freemium users into paid subscribers, starting with zero in January 2019 and ending fiscal 2021 with approximately 752,000, we ended fiscal 2022 with 692,000 subscribers, an 8% decline and there is no guarantee that we will be successful in improving subscriber base growth or in maintaining our current subscriber base.
Although the Zedge App had initial success in converting freemium users into paid subscribers, starting with zero in January 2019 and ending fiscal 2022 with approximately 692,000, we ended fiscal 2023 with 638,000 subscribers, an 8% decline and there is no guarantee that we will be successful in improving subscriber base growth or in maintaining our current subscriber base.
In January 2022, AppLovin a mobile technology company that enables developers of all sizes to market, monetize, analyze and publish their apps through its mobile advertising, marketing, and analytics platforms consummated the acquisition of mobile monetization company MoPub from Twitter. MoPub had been our ad mediation platform for the past ten years.
In January 2022, AppLovin a mobile technology company that enables developers of all sizes to market, monetize, analyze and publish their apps through its mobile advertising, marketing, and analytics platforms consummated the acquisition of mobile monetization company MoPub from X, formerly known as Twitter. MoPub had been our ad mediation platform for the past ten years.
We may not be successful in diversifying our revenue mix in order to reduce our significant dependence on third-party advertisers. In fiscal 2022, approximately 80% of our revenues excluding GuruShots were generated from advertising sales. We cannot assure you that we will be successful in diversifying our revenue mix by identifying new revenue drivers that complement our advertising-heavy business.
We may not be successful in diversifying our revenue mix in order to reduce our significant dependence on third-party advertisers. In fiscal 2023, approximately 76% of our revenues excluding GuruShots were generated from advertising sales. We cannot assure you that we will be successful in diversifying our revenue mix by identifying new revenue drivers that complement our advertising-heavy business.
As of July 31, 2022, we have registered, amongst others, the following domain names: www.zedge.net, www.zedge.com, www.emojipedia.com, www.emojipedia.org, and gurushots.com.
As of July 31, 2023, we have registered, amongst others, the following domain names: www.zedge.net, www.zedge.com, www.emojipedia.com, www.emojipedia.org, and gurushots.com.
In addition, we are subject to obligations and restrictive covenants under our loan from Bridge Bank that may curtail our ability to operate or which we may not be able to maintain compliance with.
In addition, we are subject to obligations and restrictive covenants under our loan from Western Alliance Bank that may curtail our ability to operate or which we may not be able to maintain compliance with.
In addition, the Digital Millennium Copyright Act, or DMCA, has provisions that limit, but do not necessarily eliminate, our liability for hosting user-generated materials that infringe copyrights, so long as we comply with the statutory requirements in the DMCA.
In addition, the Digital Millennium Copyright Act (the “DMCA”), has provisions that limit, but do not necessarily eliminate, our liability for caching, hosting, listing or linking user-generated materials that infringe copyrights, so long as we comply with the statutory requirements in the DMCA.
We maintain a loan facility with Western Alliance Bank with a new term loan facility in the maximum principal amount of $7,000,000 for a four-year term and a $4,000,000 revolving credit facility for a two-year term. 20 Our indebtedness could have important consequences for us, including, but not limited to, the following: ● limit our ability to borrow money for our working capital, capital expenditures, debt service requirements, acquisitions, research and development, strategic initiatives or other purposes; ● make it more difficult for us to satisfy our obligations, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants, financial covenants and borrowing conditions, could result in an event of default under the agreements governing our indebtedness; ● require us to dedicate a substantial portion of our cash flow from operations to the payment of interest and the repayment of our indebtedness, thereby reducing funds available to us for other purposes; ● limit our flexibility in planning for, or reacting to, changes in our operations or business and the industry in which we operate; ● place us at a competitive disadvantage compared to our competitors that are less leveraged and that, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploring; ● increase our vulnerability to general adverse economic industry and competitive conditions; ● restrict us from making strategic acquisitions, engaging in development activities, introducing new technologies, or exploiting business opportunities; ● potentially limit the amount of net interest expense that we and our subsidiaries can use in the future as a deduction against taxable income under applicable tax laws; ● limit, along with the financial and other restrictive covenants in the agreements governing our indebtedness, among other things, our ability to borrow additional funds, make investments or dispose of assets; ● limit our ability to repurchase shares and pay cash dividends; and ● expose us to the risk of increased interest rates.
Our indebtedness could have important consequences for us, including, but not limited to, the following: ● limit our ability to borrow money for our working capital, capital expenditures, debt service requirements, acquisitions, research and development, strategic initiatives or other purposes; ● make it more difficult for us to satisfy our obligations, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants, financial covenants and borrowing conditions, could result in an event of default under the agreements governing our indebtedness; ● require us to dedicate a substantial portion of our cash flow from operations to the payment of interest and the repayment of our indebtedness, thereby reducing funds available to us for other purposes; ● limit our flexibility in planning for, or reacting to, changes in our operations or business and the industry in which we operate; ● place us at a competitive disadvantage compared to our competitors that are less leveraged and that, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploring; ● increase our vulnerability to general adverse economic industry and competitive conditions; ● restrict us from making strategic acquisitions, engaging in development activities, introducing new technologies, or exploiting business opportunities; ● potentially limit the amount of net interest expense that we and our subsidiaries can use in the future as a deduction against taxable income under applicable tax laws; ● limit, along with the financial and other restrictive covenants in the agreements governing our indebtedness, among other things, our ability to borrow additional funds, make investments or dispose of assets; ● limit our ability to repurchase shares and pay cash dividends; and ● expose us to the risk of increased interest rates.
In the European Union, marketing is defined broadly to include any promotional material and the rules specifically on e-marketing are currently set out in the ePrivacy Directive which is expected to be replaced by a new ePrivacy Regulation in 2023.
In the EU, marketing is defined broadly to include any promotional material and the rules specifically on e-marketing are currently set out in the ePrivacy Directive which is expected to be replaced by a new ePrivacy Regulation.
Initially the COVID-19 pandemic negatively impacted new user growth. New smartphone sales suffered as a result of retail business closures, negatively impacting new user growth, especially in well-developed markets. Any e-retail business rebound will be subject to many factors including the state of the global and local economies.
New smartphone sales suffered as a result of retail business closures, negatively impacting new user growth, especially in well-developed markets. Any e-retail business rebound will be subject to many factors including the state of the global and local economies.
Although, GuruShots’ and Emojipedia’s user bases are more heavily weighted to well-developed economies, we are still exposed to the impact of a shift in our Zedge App’s user base toward emerging markets. Three advertising demand partners, mainly, Google, Facebook and Applovin were responsible for 63% of overall revenue in fiscal 2022.
Although GuruShots’ and Emojipedia’s user bases are more heavily weighted to well-developed economies, we are still exposed to the impact of a shift in our Zedge App’s user base toward emerging markets. Three advertising demand partners, mainly, Google, Vungle and AppLovin were responsible for 51% of overall revenue in fiscal 2023.
In fiscal 2022, our Zedge App’s users in emerging markets declined by 4.6% while its users in well-developed regions declined 14.1% when compared to fiscal 2021. India comprised 28.4% of our MAU as of July 31, 2022. This shift has negatively impacted revenues because well-developed markets command materially higher advertising rates when compared to those in emerging markets.
In fiscal 2023, our Zedge App’s users in emerging markets declined by 2.4% while its users in well-developed regions declined 6.8% when compared to fiscal 2022. India comprised 28% of our MAU as of July 31, 2023. This shift has negatively impacted revenues because well-developed markets command materially higher advertising rates when compared to those in emerging markets.
For example, in May 2019, the United States banned U.S. companies from doing business with Huawei, a major smartphone manufacturer, in 2020 the United States threatened to ban TikTok from operating in the U.S. market, and in 2022 the United States imposed broad-ranging economic sanctions against Russia and Belarus because of Russia’s illegal invasion of the Ukraine; ● stringent local labor laws and regulations; ● the uncertainty of enforcement of remedies in foreign jurisdictions; ● strict and unclear laws around data privacy; ● longer payment cycles; ● credit risk and higher levels of payment fraud; ● profit repatriation restrictions and foreign currency exchange restrictions; ● political or social unrest, economic instability, repression, or human rights issues; ● geopolitical events, including natural disasters, acts of war and terrorism; ● import or export regulations; ● compliance with U.S. laws such as the Foreign Corrupt Practices Act, and local laws prohibiting bribery and corrupt payments to government officials; ● antitrust and competition regulations; ● potentially adverse tax developments; ● seasonal volatility in business activity and local economic conditions; 27 ● economic uncertainties relating to European sovereign and other debt; ● laws, regulations, licensing requirements, and business practices that favor local competitors or prohibit foreign ownership or investments; ● laws, regulations or rulings that block or limit access to our products; ● different, uncertain or more stringent user protection, content, data protection, privacy, intellectual property and other laws; and ● risks related to other government regulation, required compliance with local laws or lack of legal precedent.
For example, in 2022 the United States imposed broad-ranging economic sanctions against Russia and Belarus because of Russia’s illegal invasion of the Ukraine; ● stringent local labor laws and regulations; ● the uncertainty of enforcement of remedies in foreign jurisdictions; ● strict and unclear laws around data privacy; ● longer payment cycles; ● credit risk and higher levels of payment fraud; ● profit repatriation restrictions and foreign currency exchange restrictions; ● political or social unrest, economic instability, repression, or human rights issues; ● geopolitical events, including natural disasters, acts of war and terrorism; ● import or export regulations; ● compliance with U.S. laws such as the Foreign Corrupt Practices Act, and local laws prohibiting bribery and corrupt payments to government officials; ● antitrust and competition regulations; 25 ● potentially adverse tax developments; ● seasonal volatility in business activity and local economic conditions; ● economic uncertainties relating to European sovereign and other debt; ● laws, regulations, licensing requirements, and business practices that favor local competitors or prohibit foreign ownership or investments; ● laws, regulations or rulings that block or limit access to our products; ● different, uncertain or more stringent user protection, content, data protection, privacy, intellectual property and other laws; and ● risks related to other government regulation, required compliance with local laws or lack of legal precedent.
In order to do so, we still need, among other things, to: ● demonstrate that a critical mass of artists, individual creators and brands will offer their content to our Zedge App’s users; ● continue to add new premium content verticals, with ample content in each vertical, to secure end-user demand and consumption; ● create a reliable and attractive web-based offering and successfully market it to both creators and consumers; ● continue to ensure that we build best-of-breed tools for Zedge Premium content creators that, amongst other things, meet their needs and properly address marketing, distribution, monetization, reporting, support, and ease of use; ● continue to develop a wide array of monetization mechanisms Zedge Premium creators in order to optimize revenue generation; ● continue evolving ‘NFTs Made Easy’, our NFT platform, in order to meet the needs of both creators and consumers; ● successfully market Zedge Premium to the creative community and secure their adoption as a must-have in their omnichannel distribution mix; ● effectively market and convert GuruShots’ players into Zedge Premium artists; ● establish that Zedge Premium can be valuable to a sufficient number of creators in achieving their marketing and monetization objectives; and ● continue to offer an excellent and differentiated consumer experience in Zedge Premium, including all end-user facing attributes ranging from the user interface to customer support.
In order to do so, we still need, among other things, to: ● create a reliable and attractive web-based offering and successfully market it to both creators and consumers; ● continue to ensure that we build best-of-breed tools for Zedge Premium content creators that, amongst other things, meet their needs and properly address marketing, distribution, monetization, reporting, support, and ease of use; ● continue to develop a wide array of monetization mechanisms Zedge Premium creators in order to optimize revenue generation; ● continue evolving ‘NFTs Made Easy’, our NFT platform, in order to meet the needs of both creators and consumers; ● successfully market Zedge Premium to the creative community and secure their adoption as a must-have in their omnichannel distribution mix; ● effectively market and convert GuruShots’ players into Zedge Premium artists; ● establish that Zedge Premium can be valuable to a sufficient number of creators in achieving their marketing and monetization objectives; and ● continue to offer an excellent and differentiated consumer experience in Zedge Premium, including all end-user facing attributes ranging from the user interface to customer support.
Our effective tax rate for fiscal 2022 was 16.3% compared and 24.5% for fiscal 2021. In general, changes in applicable U.S. federal and state and foreign tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect, could affect our tax expense.
Our effective tax rate for fiscal 2023 was 7.0% compared and 16.3% for fiscal 2022. In general, changes in applicable U.S. federal and state and foreign tax laws and regulations, or their interpretation and application, including the possibility of retroactive effect, could affect our tax expense.
If these platforms adopt policies including those relating to advertising, privacy, or monetization that are counter to our strategy it could result in materially and adversely affecting our business. ● Zedge Premium, the section of our marketplace where we offer premium content (i.e. for purchase), may not yield the strategic goals and objectives that we envision, and our revenues, profitability and prospects may be materially and adversely negatively affected. ● If we fail to maintain and enhance our various brands, or if we incur excessive expenses in this effort, our business, results of operations and prospects may be materially and adversely affected. ● We may not be able to effectively manage our growth or implement our future business strategies, in which case our business and results of operations may be materially and adversely affected. ● If we fail to keep up with rapid technological changes in the internet and smartphone industries and adapt our products and services accordingly, our results of operations and future growth may be adversely affected. ● We have offices and other significant operations located in Lithuania, Israel, and Norway, and, therefore, our results may be adversely affected by political, economic and military instability in these countries. ● Zedge may be unable to successfully integrate GuruShots into Zedge ● Data privacy and security laws and regulations in the jurisdictions in which we do business subject us to possible sanctions, civil lawsuits (including class action or similar representative lawsuits) and other penalties in the event of non-compliance, additionally the need to observe these regulations increases the cost of doing business and these laws and regulations are continually evolving.
If these platforms adopt policies including those relating to advertising, privacy, or monetization that are counter to our strategy it could result in materially and adversely affecting our business. ● Zedge Premium, the section of our marketplace where we offer premium content (i.e., for purchase), may not yield the strategic goals and objectives that we envision, and our revenues, profitability and prospects may be materially and adversely negatively affected. ● If we fail to maintain and enhance our various brands, or if we incur excessive expenses in this effort, our business, results of operations and prospects may be materially and adversely affected. ● We may not be able to effectively manage our growth or implement our future business strategies, in which case our business and results of operations may be materially and adversely affected. ● If we fail to keep up with rapid technological changes in the internet and smartphone industries and adapt our products and services accordingly, our results of operations and future growth may be adversely affected. ● We have offices and other significant operations located in Lithuania, Israel, and Norway, and, therefore, our results may be adversely affected by political, economic and military instability in these countries. ● A key component of our growth strategy involves the adoption and utilization of artificial intelligence (AI), which introduces certain risks. ● Failure to detect or prevent fraudulent activities on our platform could cause users to lose confidence in our products and harm our business. ● Zedge may be unable to successfully integrate GuruShots into Zedge ● Data privacy and security laws and regulations in the jurisdictions in which we do business subject us to possible sanctions, civil lawsuits (including class action or similar representative lawsuits) and other penalties in the event of non-compliance, additionally the need to observe these regulations increases the cost of doing business and these laws and regulations are continually evolving.
Errors, flaws or failures in our services and products may adversely affect user experience and cause our users to stop using our services and products, which could materially and adversely affect our business and results of operations. Our products face competition in all aspects of its business.
Errors, flaws or failures in our services and products may adversely affect user experience and cause our users to stop using our services and products, which could materially and adversely affect our business and results of operations.
However, Article 17 effectively creates a new liability exemption regime for OCSSPs (albeit a more onerous one than is currently provided by the E-Commerce Directive) under which OCSSPs will not be liable for the copyright-protected works that they communicate to the public provided that they cooperate with rightsholders by: ● making best efforts to obtain the necessary authorization (i.e., a license); ● expeditiously taking down or disabling access to content upon receiving a sufficiently substantiated notice to do so by rightsholders (i.e., similar to the existing ‘notice and take-down’ requirements); ● making best efforts to prevent future uploads of content in respect of which they have received a notice from rightsholders pursuant to the previous requirement (i.e., a ‘notice and stay down’ requirement); and ● making best efforts, in accordance with high industry standards of professional diligence, to ensure the unavailability of specific works in respect of which rightsholders have provided the ‘relevant and necessary information’. 34 The article also extends any licenses granted to OCSSPs to their users, as long as those users are not acting “on a commercial basis”.
However, Article 17 effectively creates a new liability exemption regime for OCSSPs (albeit a more onerous one than is currently provided by the E-Commerce Directive) under which OCSSPs will not be liable for the copyright-protected works that they communicate to the public provided that they cooperate with rightsholders by: ● making best efforts to obtain the necessary authorization (i.e., a license); ● expeditiously taking down or disabling access to content upon receiving a sufficiently substantiated notice to do so by rightsholders (i.e., similar to the existing ‘notice and take-down’ requirements); ● making best efforts to prevent future uploads of content in respect of which they have received a notice from rightsholders pursuant to the previous requirement (i.e., a ‘notice and stay down’ requirement); and ● making best efforts, in accordance with high industry standards of professional diligence, to ensure the unavailability of specific works in respect of which rightsholders have provided the ‘relevant and necessary information.’ The article also extends any licenses granted to OCSSPs to their users, as long as those users are not acting “on a commercial basis.” Additionally, our increased use of artificial intelligence (“AI”), including generative AI, in our product offerings presents additional risks.
In addition, a small portion of paying users generate a disproportionate percentage of revenue. Because of this, it is imperative for us to both retain these valuable customers and to maintain or increase their spend over time. In fiscal 2022, we experienced a 3.7% decline in in-app purchases and paid subscriptions.
In addition, a small portion of paying users generate a disproportionate percentage of revenue. Because of this, it is imperative for us to both retain these valuable customers and to maintain or increase their spend over time. In fiscal 2023, we experienced an 8% decline in paid subscriptions.
We generate the substantial majority of our revenue from selling advertising inventory. We anticipate that our growth and profitability will continue to depend on our ability to sell advertising inventory across some if not all of our digital brands. Mobile connected devices, especially smartphones, are a relatively new advertising medium.
We anticipate that our growth and profitability will continue to depend on our ability to sell advertising inventory across some if not all of our digital brands. Mobile connected devices, especially smartphones, are a relatively new advertising medium.
In fiscal 2022, 77% our Zedge App’s users were located in emerging markets with 23% of users in well-developed regions compared to 75% and 24% respectively in fiscal 2021. India comprised 28% of our MAU as of July 31, 2022.
In fiscal 2023, 78% of our Zedge App’s users were located in emerging markets with 22% of users in well-developed regions compared to 77% and 23% respectively in fiscal 2022. India comprised 28% of our MAU as of July 31, 2023.
Conversely, over the past six years, GuruShots has successfully increased the compounded annual growth rate of monthly spending per paying player by around 14%. There can be no assurance that we will be able to continue to retain paying users or that paying users will maintain or increase their spending.
Conversely, over the past seven years, GuruShots has successfully increased the compounded annual growth rate of monthly spending per paying player by around 11.6%. There can be no assurance that we will be able to continue to retain paying users, grow or maintain subscription levels or that paying users will maintain or increase their spending.
While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose the source code or that would otherwise breach the terms of an open-source agreement, such use could nevertheless occur and we may be required to release our proprietary source code, pay damages for breach of contract, re-engineer our applications, discontinue use in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our development efforts, any of which could materially and adversely affect our business, financial condition or operating results.
While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose the source code or that would otherwise breach the terms of an open-source agreement, such use could nevertheless occur and we may be required to release our proprietary source code, pay damages for breach of contract, re-engineer our applications, discontinue use in the event re-engineering cannot be accomplished on a timely basis or take other remedial action that may divert resources away from our development efforts, any of which could materially and adversely affect our business, financial condition or operating results. 29 Our business, results of operation and financial condition could be adversely affected by the Covid 19 pandemic, other global epidemics and the restrictions put in place in connection therewith and/or the loosening of such restrictions could adversely impact our business.
Thus, our operating results in one or more future quarters or years may fluctuate substantially or fall below the expectations of securities analysts and investors. In such event, the trading price of our Class B common stock may fluctuate significantly or decrease significantly.
Thus, our operating results in one or more future quarters or years may fluctuate substantially or fall below the expectations of securities analysts and investors. In such an event, the trading price of our Class B common stock may fluctuate significantly or decrease significantly. Item 1B. Unresolved Staff Comments. None.
Any change to this mix could result in negatively impacting our business, financial condition, and results of operations. In fiscal 2022, revenue from well developed economies accounted for approximately 73% of our total revenues and 83% of our total revenues were generated by four advertising demand partners.
Any change to this mix could result in negatively impacting our business, financial condition, and results of operations. In fiscal 2023, revenue from well developed economies accounted for approximately 78% of our total revenues and 51% of our total revenues were generated by three advertising demand partners.
As of July 31, 2022 we paid Google and Apple, approximately 16% of the revenue we generated across their respective platforms. Our cashflow may be negatively impacted if either platform changes that timing of their payments to us.
As of July 31, 2023 we paid Google and Apple up to 30% of the revenue we generated across their respective platforms. Our cashflow may be negatively impacted if either platform changes the timing of their payments to us.
We may be subject to intellectual property infringement claims or other allegations, which could require us to pay substantial statutory penalties or other damages and fines, remove relevant content, enter into license agreements which may not be available on commercially reasonable terms or could result in our being barred from third-party distribution platforms, which could harm our business and competitive position.
We may be subject to intellectual property infringement claims or other allegations, which could require us to pay substantial statutory penalties or other damages and fines, remove relevant content, enter into license agreements which may not be available on commercially reasonable terms or could result in our being barred from third-party distribution platforms, which could harm our business and competitive position. 36 There may be owners of technology patents, copyrights, trademarks, trade secrets and content, who assert claims against us.
In fiscal 2022 and fiscal 2021, we recorded a loss of $281,000 and $2,000, respectively, from foreign currency movements relative to the U.S. Dollar. Included in these amounts were losses from hedging activities of $368,000 and $18,000 in fiscal 2022 and fiscal 2021, respectively.
In fiscal 2023 and fiscal 2022, we recorded a gain of $36,000 and a loss of $281,000, respectively, from foreign currency movements relative to the U.S. Dollar. Included in these amounts were gains from hedging activities of $14,000 and losses of $368,000 in fiscal 2023 and fiscal 2022, respectively.
Compliance failure either by us or our partners, or vendors could harm our business. ● Our business depends on our ability to collect and effectively use data to serve relevant advertising, deliver suitable content, and identify appropriate customer prospects, and any limitation on the collection and use of this data could significantly diminish the value of our services, cause us to lose clients, make us less attractive to prospective customers and revenues. ● Security breaches or computer virus attacks could have a material adverse effect on our business prospects and results of operations. ● We are controlled by our majority stockholder, which limits the ability of other stockholders to affect our management. 10 RISKS RELATED TO OUR BUSINESS AND INDUSTRY Certain of our offerings, including GuruShots’ participation in gallery exhibitions, are sensitive to consumer spending and economic conditions.
Monitoring (and, if applicable, complying with) these developments is likely to increase the cost of doing business and any failure to comply with new laws may harm our business and reputation. ● Our business depends on our ability to collect and effectively use data to serve relevant advertising, deliver suitable content, and identify appropriate customer prospects, and any limitation on the collection and use of this data could significantly diminish the value of our services, cause us to lose clients, make us less attractive to prospective customers and revenues. ● Security breaches or computer virus attacks could have a material adverse effect on our business prospects and results of operations. ● We are controlled by our majority stockholder, which limits the ability of other stockholders to affect our management. 9 RISKS RELATED TO OUR BUSINESS AND INDUSTRY Certain of our offerings, including GuruShots’ participation in gallery exhibitions, are sensitive to consumer spending and economic conditions.
Mr. Jonas is able to control matters requiring approval by our stockholders, including the election of all of the directors and the approval of significant corporate matters, including any merger, consolidation or sale of all or substantially all of our assets.
Mr. Jonas is able to control matters requiring approval by our stockholders, including the election of all of the directors and the approval of significant corporate matters, including any merger, consolidation or sale of all or substantially all of our assets. As a result, the ability of any of our other stockholders to influence our management is limited.
If our apps fail to compete effectively or if their reputation is damaged, our business, financial condition and results of operations may be materially and adversely affected.
Our products face competition in all aspects of its business. If our apps fail to compete effectively or if their reputation is damaged, our business, financial condition and results of operations may be materially and adversely affected.
In addition, our credit agreement contains financial and restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest, including our ability to, among other things: ● incur additional debt under certain circumstances; ● create or incur certain liens or permit them to exist; ● enter into certain sale and lease-back transactions; ● make certain investments and acquisitions; ● consolidate, merge or otherwise transfer, sell or dispose of our assets; ● pay dividends, repurchase stock and make other certain restricted payments; or ● enter into certain types of transactions with affiliates.
In addition, our credit agreement contains financial and restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest, including our ability to, among other things: ● incur additional debt under certain circumstances; ● create or incur certain liens or permit them to exist; ● enter into certain sale and lease-back transactions; ● make certain investments and acquisitions; ● consolidate, merge or otherwise transfer, sell or dispose of our assets; ● pay dividends, repurchase stock and make other certain restricted payments; or ● enter into certain types of transactions with affiliates. 20 Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of substantially all of our indebtedness.
In some countries, particularly in Europe and the APAC region, these laws are being readjusted and new - at times burdensome - constraints are being imposed onto service providers.
In some countries, particularly in Europe and the Asia-Pacific region, these laws are being readjusted and new, and potentially burdensome, constraints are being imposed onto service providers.
If we are unable to maintain or increase our user base and user engagement, our revenue and financial results may be materially adversely affected. We may not experience growth or engagement in certain geographic locations due to local factors.
Certain of these factors have, at various times, negatively impacted user and creator growth, MAU and engagement. If we are unable to maintain or increase our user base and user engagement, our revenue and financial results may be materially adversely affected. We may not experience growth or engagement in certain geographic locations due to local factors.
Zedge Premium, the section of our marketplace where we offer premium content (i.e. for purchase), may not yield the strategic goals and objectives that we envision, and our revenues, profitability and prospects may be materially and adversely negatively affected.
Zedge Premium, the section of our marketplace where we offer premium content (i.e., for purchase), may not yield the strategic goals and objectives that we envision.
If the size of the digital advertising market does not increase from current levels, or if our digital brands are unable to capture and retain a sufficient share of that market, our ability to maintain or increase our current level of advertising revenues and our revenues, profitability and prospects could be materially and adversely affected. 13 The digital advertising market may deteriorate or develop more slowly than expected, which could materially harm our business and results of operations.
If the size of the digital advertising market does not increase from current levels, or if our digital brands are unable to capture and retain a sufficient share of that market, our ability to maintain or increase our current level of advertising revenues and our revenues, profitability and prospects could be materially and adversely affected.
Furthermore, health crises may disrupt or negatively impact behaviors of large numbers of users or potential users due to either mandated stay at home orders or the lifting of such orders or non-mandated changes in consumer behavior.
Widespread pandemics, epidemics or other health crises could result in significant market volatility, regionally or globally. Furthermore, health crises may disrupt or negatively impact behaviors of large numbers of users or potential users due to either mandated stay at home orders or the lifting of such orders or non-mandated changes in consumer behavior.
Companies and governmental agencies may restrict access to our website or mobile apps, or the internet generally, which could lead to the loss or slower growth of our user base, in which case our business and results of operations may be materially and adversely affected.
This resulted in temporarily disrupting the work product associated with these contractors at the outset of the war. 27 Companies and governmental agencies may restrict access to our website or mobile apps, or the internet generally, which could lead to the loss or slower growth of our user base, in which case our business and results of operations may be materially and adversely affected.
In addition, we have been granted trademark protection for “Zedge” in the United States, European Union, United Kingdom, India, and Canada, “Tonesync” in the European Union and the United Kingdom, “We Make Phones Personal,” and “Zedge, Everything You” in the United States, a stylized “D” logo in the European Union and the United Kingdom, “Emojipedia” in the United States, the European Union, the United Kingdom, China and Australia, and “World Emoji Day” in the United States and United Kingdom.
In addition, we have been granted trademark protection for “Zedge” in the United States, European Union, United Kingdom, India, and Canada, “We Make Phones Personal,” “Zedge, Everything You,” “Tattoo Your Phone,” “Shortz – Chat Stories by Zedge,” and “NFTs Made Easy” in the United States, a stylized “D” logo in the European Union, the United Kingdom, and United States, “Emojipedia” in the United States, the European Union, the United Kingdom, China and Australia, “World Emoji Day” in the United States and United Kingdom, and “GuruShots” in the United States.
Our net income in fiscal 2022 was $9.7 million and $8.2 million in fiscal 2021 compared to net loss of $0.6 million in fiscal 2020.
Our net loss in fiscal 2023 was $6.1 million, our net income in fiscal 2022 was $ 9.7 million, and $8.2 million in fiscal 2021.
There may be owners of technology patents, copyrights, trademarks, trade secrets and content, who assert claims against us. There may also be laws and regulations that are adopted that change the rules related to the safe harbor for user generated content and ultimately requiring us to pay licensing fees.
There may also be laws and regulations that are adopted that change the rules related to the safe harbor for user generated content and ultimately requiring us to pay licensing fees.
All of these factors introduced challenges in operating our business including the productivity of our employees and third-party vendors that we depend on while adjusting to shelter-in-place and health regulations.
All of these factors introduced challenges in operating our business including the productivity of our employees and third-party vendors that we depend on while adjusting to shelter-in-place and health regulations. We also had to comply with an assortment of regulations specific to returning to our offices, creating additional uncertainty and confusion.
Michael Jonas is our majority stockholder, Executive Chairman, Chairman of the Board and a director, and, as of November 10, 2022, had voting power over 1,864,673 shares of our Class B common stock (which includes 524,775 shares of our Class A common stock, which are convertible into shares of our Class B common stock on a 1-for-1 basis, and 1,339,898 shares of our Class B common stock), representing approximately 56.7% of the combined voting power of our outstanding capital stock.
Michael Jonas is our majority stockholder, Executive Chairman, Chairman of the Board and a director, and, as of October 30, 2023, had voting power over 1,918,159 shares of our Class B common stock (which includes 524,775 shares of our Class A common stock, which are convertible into shares of our Class B common stock on a 1-for-1 basis, and 1,393,384 shares of our Class B common stock), representing approximately 57.9% of the combined voting power of our outstanding capital stock.
In practice, there is little change to the core data protection principles, rights and obligations under UK data protection law. On June 28, 2021, the EU approved the United Kingdom’s adequacy decision, meaning data can continue to flow between the United Kingdom and EEA as it did prior to Brexit, in most circumstances.
In practice, there is little change to the core data protection principles, rights and obligations under UK data protection law. On June 28, 2021, the European Commission determined that the UK offers an adequate level of data protection, meaning data can continue to flow between the UK and EEA as it did prior to Brexit, in most circumstances.
Such changes could: ● make our products and services inaccessible or limit their accessibility; ● curtail our ability to distribute and update our applications as we see fit across their platforms; ● impose changes in the way in which we monetize our users; ● limit the scope of feature enhancements or new features; ● decrease or eliminate our ability to market to prospective and existing users; or ● cease our ability to collect certain data about users and their respective usage.
Such changes could: ● make our products and services inaccessible or limit their accessibility; ● curtail our ability to distribute and update our applications as we see fit across their platforms; ● impose changes in the way in which we monetize our users; ● limit the scope of feature enhancements or new features; ● decrease or eliminate our ability to market to prospective and existing users; or ● cease our ability to collect certain data about users and their respective usage. 14 Google and Apple are able to terminate our distribution agreements with them, without cause, with 30 days prior written notice (to the extent allowed by applicable local law).
We believe that maintaining and enhancing our various digital brands and associated reputation is important to the success of our business. Historically, we have not made material investments in this effort. We believe that a well-recognized and respected brand is important to increasing the number of users and enhancing our attractiveness to users, artists, advertisers and business partners.
Historically, we have not made material investments in this effort. We believe that a well-recognized and respected brand is important to increasing the number of users and enhancing our attractiveness to users, artists, advertisers and business partners. Brand recognition and enhancement may directly affect our ability to maintain our market position.
If we are not able to effectively compete in any aspect of our business or if our reputation is harmed by rumors or allegations regarding our business or business practices, our overall user base may decline, making it less attractive to advertisers.
If we are unsuccessful in meeting our goal, our business may suffer resulting in diluting our value proposition, losing MAU and having lower revenues and profits. 24 If we are not able to effectively compete in any aspect of our business or if our reputation is harmed by rumors or allegations regarding our business or business practices, our overall user base may decline, making it less attractive to advertisers.
Although we constantly monitor and research our users’ expectations, we may be unable to meet them on an ongoing basis or anticipate future user needs.
We may not be able to continually meet our users’ expectations and retain or expand our user base, and our revenues, profitability and prospects may be materially and adversely affected. Although we constantly monitor and research our users’ expectations, we may be unable to meet them on an ongoing basis or anticipate future user needs.
Our ability to compete and grow depends in large part on the efforts and talents of our employees. Such employees, particularly product managers, designers and engineers, are in high demand, and we devote significant resources to identifying, hiring, training, successfully integrating and retaining these employees.
Such employees, particularly product managers, designers and engineers, are in high demand, and we devote significant resources to identifying, hiring, training, and successfully integrating and retaining these employees.
The GuruShots acquisition may fail to yield growth opportunities and achieve beneficial synergies. Zedge acquired GuruShots with the expectation that the transaction will yield growth on a standalone basis as well as strategic synergies on a combined basis.
Zedge may not execute the integration successfully resulting in higher costs, product delays, employee resignations, and overall underperformance. The GuruShots acquisition may fail to yield growth opportunities and achieve beneficial synergies. Zedge acquired GuruShots with the expectation that the transaction will yield growth on a standalone basis as well as strategic synergies on a combined basis.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+3 added−2 removed3 unchanged
Biggest changeRecent Sales of Unregistered Securities We received proceeds of approximately $873,000 from the exercise of stock options in fiscal 2021 for which we issued 559,840 shares of our Class B common stock. 43 Performance Graph of Stock We are a smaller reporting company as defined by Rule 12b-2 of the Securities and Exchange Act of 1934 and are not required to provide the information under this item.
Biggest changePerformance Graph of Stock We are a smaller reporting company as defined by Rule 12b-2 of the Securities and Exchange Act of 1934 and are not required to provide the information under this item.
As of October 25, 2022, all shares of Class A common stock are beneficially owned by Michael Jonas. The number of holders of record of our Class B common stock does not include the number of persons whose shares are in nominee or in “street name” accounts through brokers.
As of October 26, 2023, all shares of Class A common stock are beneficially owned by Michael Jonas. The number of holders of record of our Class B common stock does not include the number of persons whose shares are in nominee or in “street name” accounts through brokers.
The information required by Item 201(d) of Regulation S-K will be contained in our Proxy Statement for our Annual Stockholders Meeting, which we will file with the Securities and Exchange Commission within 120 days after July 31, 2022, and which is incorporated by reference herein.
The information required by Item 201(d) of Regulation S-K will be contained in our Proxy Statement for our Annual Stockholders Meeting, which we will file with the Securities and Exchange Commission within 120 days after July 31, 2023, and which is incorporated by reference herein. Recent Sales of Unregistered Securities None.
On November 10, 2022, the last sales price reported on the NYSE American for our Class B common stock was $1.94 per share. On October 25, 2022, there were 270 holders of record of our Class B common stock and 1 holder of record of our Class A common stock.
On October 26, 2023, the last sales price reported on the NYSE American for our Class B common stock was $1.95 per share. On October 26, 2023, there were 271 holders of record of our Class B common stock and 1 holder of record of our Class A common stock.
Our Board of Directors authorized a buyback program, effective December 1, 2021, of up to 1.5 million shares of our Class B common stock. The Company did not purchase any shares under this buyback program in fiscal 2022.
Issuer Repurchases of Equity Securities In October 2021, our board of directors authorized a repurchase program of up to 1.5 million shares of our Class B common stock at a maximum aggregate purchase price of $3.0 million.
Removed
Issuer Repurchases of Equity Securities In fiscal 2022 and 2021, we purchased 16,115 shares and 17,630 shares, respectively, of Class B common stock from employees for $232,000 and $26,000 respectively, to satisfy tax withholding obligations in connection with the vesting of restricted stock and DSUs.
Added
Repurchases may be made from time to time through open market purchases or through privately negotiated transactions, subject to market conditions, applicable legal requirements and other relevant factors. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18.
Removed
Through November 10, 2022, the Company had purchased 160,002 shares of Class B common stock at an average price of $2.26 per share under this program.
Added
We may also, from time to time, enter into Rule 10b-5 trading plans to facilitate repurchases of its shares.
Added
The repurchase program does not obligate us to acquire any particular amount of our Class A common stock, has no expiration date and may be modified, suspended, or terminated at any time at our discretion. 42 The following table summarizes the share repurchase activity for the fourth quarter fiscal of 2023: Period Total Number of Shares Purchased Average Price Paid Per Share (1) Total Number of Shares Purchased as Part of Publicly Announced Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands) (in thousands) (in thousands) May 1 - 31, 2023 67 $ 1.98 67 $ 1,431 June 1 - 30, 2023 5 $ 2.02 5 $ 1,421 July 1 - 31, 2023 - $ - - $ 1,421 Total 72 72 (1) The average price paid per share includes any broker commissions.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

95 edited+65 added−44 removed44 unchanged
Biggest changeThree Months Ended July 31, (in millions, except ARPMAU - Zedge App) 2022 2021 % Change MAU- Zedge App 32.0 34.4 -7.0 % Developed Markets MAU - Zedge App 7.3 8.5 -14.1 % Emerging Markets MAU - Zedge App 24.7 25.9 -4.6 % Emerging Markets MAU - Zedge App/Total MAU - Zedge App 77 % 75 % 2.9 % ARPMAU - Zedge App $ 0.0558 $ 0.0501 11.4 % 52 RESULTS OF OPERATIONS The following table sets forth our consolidated statements of operations data for the fiscal year ended July 31, 2022 compared to the fiscal year ended July 31, 2021: Year Ended July 31, Change 2022 2021 $ % (in thousands) Revenues $ 26,545 $ 19,569 $ 6,976 35.6 % Direct cost of revenues 1,641 1,194 447 37.4 % Selling, general and administrative 15,061 9,311 5,750 61.8 % Depreciation and amortization 1,966 1,261 705 55.9 % Change in fair value of contingent consideration (3,961 ) - (3,961 ) nm Income from operations 11,838 7,803 4,035 51.7 % Interest and other income, net 49 245 (196 ) -80.0 % Net loss resulting from foreign exchange transactions (281 ) (2 ) (279 ) nm Provision for (benefit from) income taxes 1,892 (202 ) 2,094 nm Net Income $ 9,714 $ 8,248 $ 1,466 17.8 % nm-not meaningful The following table sets forth the composition of our revenues for the fiscal years ended July 31, 2022 and 2021: Fiscal Year Ended July 31, % Changes % of total Revenue 2022 2021 YoY FY’22 FY’21 (in thousand) Advertising revenue $ 18,883 $ 15,741 20 % 71.1 % 80.4 % Virtual items used for online game 1,673 - NM 6.3 % 0.0 % Paid subscription revenue 3,741 3,311 13 % 14.1 % 16.9 % Other revenues 2,248 517 335 % 8.5 % 2.6 % Total revenues $ 26,545 $ 19,569 36 % 100.0 % 100.0 % Advertising revenue .
Biggest changeWe regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy. 52 RESULTS OF OPERATIONS The following table sets forth certain of our consolidated results of operations data for the fiscal year ended July 31, 2023 compared to the fiscal year ended July 31, 2022: Fiscal Year Ended July 31, Change 2023 2022 $ % (in thousands) Revenues $ 27,241 $ 26,545 $ 696 2.6 % Direct cost of revenues 2,242 1,641 601 36.6 % Selling, general and administrative 21,857 15,061 6,796 45.1 % Depreciation and amortization 3,269 1,966 1,303 66.3 % Goodwill impairment 8,727 - 8,727 nm Change in fair value of contingent consideration (1,943 ) (3,961 ) 2,018 -50.9 % (Loss) income from operations (6,911 ) 11,838 (18,749 ) nm Interest and other income, net 311 49 262 534.7 % Net income (loss) resulting from foreign exchange transactions 36 (281 ) 317 nm (Benefit from) provision for income taxes (462 ) 1,892 (2,354 ) nm Net (loss) income $ (6,102 ) $ 9,714 $ (15,816 ) nm nm-not meaningful The following table sets forth the composition of our revenues for the fiscal years ended July 31, 2023 and 2022: Fiscal Years Ended July 31, 2023 2022 % Changes (in thousands) Zedge App Advertising revenue $ 18,273 $ 20,296 -10.0 % Paid subscription revenue 3,488 3,741 -6.8 % Other revenues 833 835 -0.2 % Total Zedge App revenue 22,594 24,872 -9.2 % GuruShots Digital goods and services* 4,647 1,673 nm Total revenue $ 27,241 $ 26,545 2.6 % * Year over year percentage change is not meaningful due to the stub period from April 13, 2022 to July 31, 2022.
Gross Versus Net Revenue Recognition We report revenue on a gross or net basis based on management’s assessment of whether we act as a principal or agent in the transaction. To the extent we act as the principal, revenue is reported on a gross basis.
Gross Versus Net Revenue Recognition We report revenue on a gross or net basis based on management’s assessment of whether we act as a principal or agent in the transaction. To the extent we act as the principal, revenue is reported on a gross basis. To the extent we act as the agent, revenue is reported on a net basis.
Advertisers may utilize an exchange when looking for scale or specific audiences, and accept that the price will vary based on when and how much volume of inventory they wish to buy. ● Direct Sales to Advertisers. In prior periods, we sold, and currently retain the ability to sell, advertising directly to advertisers through contractual relationships.
Advertisers may utilize an exchange when looking for scale or specific audiences, and accept that the price will vary based on when and how much volume of inventory they wish to buy. ● Direct Sales to Advertisers. In prior periods, sold, and currently retain the ability to sell, advertising directly to advertisers through contractual relationships.
Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of income and comprehensive income. Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred.
Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of (loss) income and comprehensive (loss) income. Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred.
Payments from players for virtual goods are required at the time of purchase, are non-cancellable and relate to non-cancellable contracts that specify the Company’s obligations and cannot be redeemed for cash nor exchanged for anything other than virtual goods within the GuruShots’ game.
Payments from players for virtual goods are required at the time of purchase, are non-cancellable and relate to non-cancellable contracts that specify GuruShots’ obligations and cannot be redeemed for cash nor exchanged for anything other than virtual goods within the GuruShots’ game.
Net loss resulting from foreign exchange transactions is comprised of gains and losses generated from movements in Norwegian Krone (“NOK”) and Euros (“EUR”) relative to the U.S. Dollar, including gains or losses from our currency hedging activities.
Net income (loss) resulting from foreign exchange transactions is comprised of gains and losses generated from movements in Norwegian Krone (“NOK”) and Euros (“EUR”) relative to the U.S. Dollar, including gains or losses from our currency hedging activities.
GAAP. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities.
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities.
These relationships historically offered higher than average pricing than realized from sales via advertising networks or advertising exchanges. We had no direct sales of advertising during fiscal 2022 and 2021 and have no current expectation that this will represent a material portion of its sales in the near term.
These relationships historically offered higher than average pricing than realized from sales via advertising networks or advertising exchanges. We had no direct sales of advertising during fiscal 2023 and 2022 and have no current expectation that this will represent a material portion of its sales in the near term.
Advertising Revenue : We generate the bulk of our revenue from selling our Zedge App’s advertising inventory to advertising networks and advertising exchanges and direct sales to advertisers. ● Advertising Networks. An advertising network is a third-party relationship where buyers of advertising inventory go to purchase either specific targeted inventory or a large scale of inventory at a set price.
Advertising Revenue : We generate the bulk of our revenue from selling the Zedge Marketplace’s advertising inventory to advertising networks and advertising exchanges and direct sales to advertisers. ● Advertising Networks. An advertising network is a third-party relationship where buyers of advertising inventory go to purchase either specific targeted inventory or a large scale of inventory at a set price.
The final purchase price of the assets has been determined to be $6.7 million of which $4.8 million was paid on August 2, 2021 with the remaining $1.9 million to be paid out on the six-month and twelve-month anniversary of the Closing.
The final purchase price of the assets was determined to be $6.7 million of which $4.8 million was paid on August 2, 2021 with the remaining $1.9 million to be paid out on the six-month and twelve-month anniversary of the Closing.
Changes in the fair value can result from changes pertaining to the achievement of the defined milestones and changes in assumed discount rates. Changes in the fair value of contingent consideration are recorded in our consolidated statements of income and comprehensive incomes.
Changes in the fair value can result from changes pertaining to the achievement of the defined milestones and changes in assumed discount rates. Changes in the fair value of contingent consideration are recorded in our consolidated statements of (loss) income and comprehensive (loss) income.
Amortization, which is generally over three years, begins for each project when the code is ready for use, whether or not it is actually placed in service at that time (an exception being if the project’s functionality completely depends on the completion of another project, in which case, amortization begins when that other project is ready for use). 50 During the Post-Implementation/Operation Stage, we expense training costs and maintenance costs as incurred.
Amortization, which is generally over three years, begins for each project when the code is ready for use, whether or not it is actually placed in service at that time (an exception being if the project’s functionality completely depends on the completion of another project, in which case, amortization begins when that other project is ready for use). 49 During the Post-Implementation/Operating Stage, we expense training costs and maintenance costs as incurred.
During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with a corresponding offset to goodwill.
During the measurement period, which may be up to one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed with a corresponding offset to goodwill.
Intangible assets are amortized on a straight-line basis over their estimated useful lives of between five to fifteen years. The Company reviews identifiable amortizable intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.
Intangible assets are amortized on a straight-line basis over their estimated useful lives of between five to fifteen years. We review identifiable amortizable intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.
In connection therewith, we agreed to make certain minimum investments in user acquisition for GuruShots in the period covered by the Earnout, subject to GuruShots maintaining agreed upon levels of return on ad spend (ROAS).
In connection therewith, we agreed to make certain minimum investments in user acquisition for GuruShots in the period covered by the Earnout, subject to GuruShots maintaining agreed upon levels of return on ad spend (ROAS) and other conditions.
If a user purchases Zedge Credits (ranging from 500 credits for $0.99 to 700,000 credits for $999.99), Google Play or iTunes retains 30% of the purchase price as its fee.
If a user purchases Zedge Credits (ranging from 500 credits for $0.99 to 700,000 credits for $999.99), Google Play or App Store retains 30% of the purchase price as its fee.
Additionally, we have experienced a continuing shift in the regional customer make-up with MAU in emerging markets (particularly India) representing an increasing portion of our user base. As of July 31, 2022, users in emerging markets represented 77% of our MAU compared to 75% a year prior.
Additionally, we have experienced a continuing shift in the regional customer make-up with MAU in emerging markets (particularly India) representing an increasing portion of our user base. As of July 31, 2023, users in emerging markets represented 78% of our MAU compared to 77% a year prior.
GuruShots monitors its analysis of customer play behavior on a quarterly basis. 48 As discussed above, GuruShots concluded that revenue related to the promise of enhancing users’ gaming experience through Resource purchases should be recognized ratably over the period of benefit period (i.e. the period over which the enhanced gaming experience is provided).
GuruShots monitors its analysis of customer play behavior on a quarterly basis. As discussed above, GuruShots concluded that revenue related to the promise of enhancing users’ gaming experience through in-game resources purchases should be recognized ratably over the period of benefit period (i.e., the period over which the enhanced gaming experience is provided).
While the Company uses gross revenue ( net of the 30% fee retained by Google Play or iTunes when a user purchases Zedge Credits ) as a performance metric, we record net revenue from Zedge Premium which consists of a 30% platform fee, in-app purchases profit and breakage.
While we use gross revenue (net of the 30% fee retained by Google Play or AppStore when a user purchases Zedge Credits) as a performance metric, we record net revenue from Zedge Premium which consists of a 30% platform fee, in-app purchases profit and breakage.
In fiscal 2022 we introduced several new customer facing product features including ‘NFTs Made Easy’ and social and community features, all meant to improve customer engagement, MAU, and revenue growth over the long term.
In fiscal 2022, we introduced several new customer facing product features and social and community features, all meant to improve customer engagement, MAU, and revenue growth over the long term.
As a voting member of the Unicode Consortium, the standards body responsible for approving new emojis, Emojipedia works alongside major emoji creators including Apple, Google, Facebook, and Twitter. We believe that Emojipedia provides growth potential to the Zedge App, and it was immediately accretive to earnings.
As a member of the Unicode Consortium, the standards body responsible for approving new emojis, Emojipedia works alongside major emoji creators including Apple, Google, Meta, and X, formally known as Twitter. We believe that Emojipedia provides growth potential to the Zedge App, and it was immediately accretive to earnings.
ARPMAU is valuable because it provides insight into how well we monetize our users and the changes and trends in ARPMAU are indications of how effective our monetization investments are. As of July 31, 2022 MAU declined 7.0% year over year primarily to attrition in both developed markets and emerging markets.
ARPMAU is valuable because it provides insight into how well we monetize our users and the changes and trends in ARPMAU are indications of how effective our monetization investments are. As of July 31, 2023 MAU declined 3.4% year over year primarily to attrition in both developed markets and emerging markets.
Provision for (benefit from) income taxes . During fiscal 2022, we had pretax income of about $11.6 million of which we accrued $1.9 million in income tax expenses, an effective tax rate of 16.3% which is lower than the statutory rate primarily due to the $4.0 million change in fair value of contingent consideration.
During fiscal 2022, we had pretax income of about $11.6 million in respect of which we accrued $1.9 million in income tax expenses, an effective tax rate of 16.3% which is lower than the statutory rate primarily due to the $4.0 million change in fair value of contingent consideration.
Every month, GuruShots stages more than 300 competitions that result in players uploading in excess of 1 million photographs and casting close to 4.5+ billion “perceived votes,” which are calculated by multiplying the number of votes that each player casts by a weighting factor based on various factors related to that user.
Every month, GuruShots stages more than 300 competitions that result in players uploading in excess of 750,000 photographs and casting close to 4 billion “perceived votes”, which are calculated by multiplying the number of votes that each player casts by a weighting factor based on various factors related to that user.
OFF-BALANCE SHEET ARRANGEMENTS At July 31, 2022, we did not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources, other than the following: In connection with our Spin-Off on June 1, 2016, we and IDT entered into various agreements prior to the Spin-Off including a Separation and Distribution Agreement to effect the separation and provide a framework for our relationship with IDT after the Spin-Off, and a Tax Separation Agreement, which sets forth the responsibilities of us and IDT with respect to, among other things, liabilities for federal, state, local and foreign taxes for periods before and including the Spin-Off, the preparation and filing of tax returns for such periods and disputes with taxing authorities regarding taxes for such periods.
The conditions for payment of the Earnout for the first year following the acquisition were not met and no Earnout payment was made or accrued. 59 OFF-BALANCE SHEET ARRANGEMENTS At July 31, 2023, we did not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources, other than the following: In connection with our Spin-Off on June 1, 2016, we and IDT entered into various agreements prior to the Spin-Off including a Separation and Distribution Agreement to effect the separation and provide a framework for our relationship with IDT after the Spin-Off, and a Tax Separation Agreement, which sets forth the responsibilities of us and IDT with respect to, among other things, liabilities for federal, state, local and foreign taxes for periods before and including the Spin-Off, the preparation and filing of tax returns for such periods and disputes with taxing authorities regarding taxes for such periods.
Fiscal year ended July 31, (in thousands) 2022 2021 % Change Net loss resulting from foreign exchange transactions $ (281 ) $ (2 ) nm As a percentage of revenues -1.1 % 0.0 % nm-not meaningful In fiscal 2022 and 2021, we incurred losses of $368,000 and $18,000, respectively, from NOK and EUR hedging activities.
Fiscal Year Ended July 31, (in thousands) 2023 2022 % Change Net income (loss) resulting from foreign exchange transactions $ 36 $ (281 ) nm As a percentage of revenues 0.1 % -1.1 % nm-not meaningful In fiscal 2023 and 2022, we incurred income of $14,000 and losses of $368,000, respectively, from NOK and EUR hedging activities.
CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS In connection with the acquisition of GuruShots, the Company has (i) committed to a retention pool of $4 million in cash to be paid to the founders and employees of GuruShots that will be payable over three years from closing of the acquisition based on the beneficiaries thereof remaining employed by the Company or a subsidiary; and (ii) agreed to make certain minimum investments in user acquisition for GuruShots in the period covered by the earnout to be contingently paid to the prior owners of GuruShots subject to GuruShots maintaining agreed upon levels of return on ad spend (ROAS).
CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS In connection with the acquisition of GuruShots, the Company has (i) committed to a retention pool of $4 million in cash to be paid to the founders and employees of GuruShots that will be payable over three years from April 1, 2022 based on the beneficiaries thereof remaining employed by the Company or a subsidiary; and (ii) agreed to make certain minimum investments in user acquisition for GuruShots in the period covered by the earnout to be contingently paid to the prior owners of GuruShots subject to the acquired users generating minimum levels of ROAS.
The Zedge App’s monetization stack consists of advertising revenue generated when users view advertisements when using the Zedge App or surfing our website, the in-app sale of Zedge Credits, our virtual currency, that is used to purchase Zedge Premium content, and a paid-subscription offering that provides an ad-free experience to users that purchase a monthly or annual subscription.
The Zedge Marketplace monetization stack consists of advertising revenue generated when users view advertisements when using the Zedge App (and the related functionality under the Zedge.net website), the in-app (or web-based) sale of Zedge Credits, our virtual currency, that is used to purchase Zedge Premium content, and a paid-subscription offering that provides an ad-free experience to users that purchase a monthly or annual subscription.
At July 31, 2022, three customers represented 41%, 17% and 16% of the Company’s accounts receivable balance and at July 31, 2021, two customers represented 37% and 28% of the Company’s accounts receivable balance. All of these significant customers are advertising exchanges operated by leading companies, and the receivables represent many smaller amounts due from advertisers.
At July 31, 2023, two customers represented 36% and 18% of our accounts receivable balance and at July 31, 2022, three customers represented 41%, 17% and 16% of our accounts receivable balance. All of these significant customers are advertising exchanges operated by leading companies, and the receivables represent many smaller amounts due from advertisers.
On October 28, 2022, we entered into an Amended Loan Agreement with Western Alliance Bank. Pursuant to the Amended Loan Agreement, Western Alliance Bank agreed to provide the Company with a new term loan facility in the maximum principal amount of $7,000,000 for a four-year term and a $4,000,000 revolving credit facility for a two-year term.
Pursuant to the Amended Loan Agreement, Western Alliance Bank agreed to provide the Company with a new term loan facility in the maximum principal amount of $7,000,000 for a four-year term and a $4,000,000 revolving credit facility for a two-year term.
Our platform allows creators to upload content to our marketplace and avail it to our users either for free or for a price, via ‘Zedge Premium.’ In turn, our users utilize the content to personalize their phones and express their individuality.
Our platform allows creators to upload content to our marketplace and avail it to our users either for free or for a price, via ‘Zedge Premium,’ the section of our marketplace where we offer premium content (i.e., for purchase). In turn, our users utilize the content to personalize their phones and express their individuality.
Compensation cost for awards is recognized using the straight-line method over the vesting period or the graded vesting method if awards with market or performance conditions include graded vesting features or if an award includes both a service condition and a market or performance condition. Stock-based compensation is included in selling, general and administrative expense.
Compensation cost for awards is recognized using the straight-line method over the vesting period or the graded vesting method if awards with market or performance conditions include graded vesting features or if an award includes both a service condition and a market or performance condition.
In fiscal 2022 and 2021, we purchased 16,115 shares and 17,630 shares, respectively, of Class B common stock from employees for $232,000 and $26,000 respectively, to satisfy tax withholding obligations in connection with the vesting of restricted stock and DSUs.
In fiscal 2023 and 2022, we purchased 6,310 shares and 16,115 shares respectively of Class B Stock from certain employees for $17,000 and $232,000 respectively, to satisfy tax withholding obligations in connection with the vesting of restricted stock and DSUs.
This increase was primarily attributable to incremental SG&A from consolidating GuruShots’ operating results for the period from April 13, 2022 to July 31, 2022. Compensation costs, stock-based compensation as discussed below, higher professional and consulting fees also contributed in part to the increase in SG&A year over year.
This increase was primarily attributable to the effect of consolidating GuruShots’ operating results for twelve months in fiscal 2023 versus the period from April 13, 2022 to July 31, 2022. Stock-based compensation as discussed below, PUA, higher professional and consulting fees also contributed in part to the increase in SG&A year over year.
Fiscal year ended July 31, (in thousands) 2022 2021 % Change Direct cost of revenues $ 1,641 $ 1,194 37.4 % As a percentage of revenues 6.2 % 6.1 % Direct cost of revenues increased 37.4% in fiscal 2022 to $1.6 million from $1.2 million in fiscal 2021, primarily attributable to the cloud hosting costs related to GuruShots.
Fiscal Year Ended July 31, (in thousands) 2023 2022 % Change Direct cost of revenues $ 2,242 $ 1,641 36.6 % As a percentage of revenues 8.2 % 6.2 % Direct cost of revenues increased 37% in fiscal 2023 to $2.2 million from $1.6 million in fiscal 2022, primarily attributable to the full year effect of the cloud hosting costs related to GuruShots.
The Company allocates the purchase price of the acquisition to the tangible and intangible assets acquired and liabilities assumed and contingent considerations based on their estimated fair values at the acquisition dates. The excess of the purchase price over those fair values is recorded as goodwill.
We allocate the purchase price of an acquisition to the tangible and intangible assets acquired and liabilities assumed and contingent considerations based on their estimated fair values at the relevant acquisition date. The excess of the purchase price over those fair values is recorded as goodwill.
Content providers are paid their portion of revenue which is a 70% share of the gross revenue calculated. Business Combinations and Contingent Liabilities The Company accounts for business combination using the acquisition method of accounting.
Content providers are paid their portion of revenue which is a 70% share of the gross revenue calculated. Business Combinations and Contingent Considerations We account for business combinations using the acquisition method of accounting.
Revamping the customer onboarding experience in order to maximize first time purchasers by immediately drawing new players into simplified photo competitions that are limited to a small audience taking place in a short time duration. ● Subscriptions . Introducing value-adds that we can bundle into a subscription.
Revamping the customer onboarding experience in order to maximize first time purchasers by immediately drawing new players into simplified photo competitions that are limited to a small audience taking place in a short time duration. ● Economy .
In addition, we committed to a retention pool of $4 million in cash and 626,242 shares of the Company Class B common stock with a fair value of $4 million or $6.39 per share for GuruShots’ founders and other employees that will be payable or vest, as applicable, over three years from closing based on the beneficiaries thereof remaining employed by the Company or a subsidiary. 57 On August 1, 2021, we acquired substantially all of the assets of Emojipedia Pty Ltd, a proprietary company organized under the laws of Australia.
In addition, we committed to a retention pool of $4 million in cash and 626,242 shares of the Company Class B common stock with a fair value of $4 million or $6.39 per share for GuruShots’ founders and other employees that will be payable or vest, as applicable, over three years from closing based on the beneficiaries thereof remaining employed by the Company or a subsidiary.
Our headcount totaled 93 as of July 31, 2022, including GuruShots personnel, compared to 53 as of July 31, 2021. The majority of our employees are based in Lithuania and Israel. SG&A expense also included stock-based compensation expense including equity grants to employees and consultants, as well as stock issuances to pay for board compensations and 401(k) matching contributions.
The majority of our employees are based in Lithuania and Israel. SG&A expense also included stock-based compensation expense including equity grants to employees and consultants, as well as stock issuances to pay for board compensations and 401(k) matching contributions.
In April 2022, we acquired GuruShots a recognized category leader focused on gamifying the photography vertical. GuruShots offers a platform spanning iOS, Android, and the web that provides a fun, educational and structured way for amateur photographers to compete in a wide variety of contests showcasing their photos while gaining recognition with votes, badges, and awards.
GuruShots offers a platform spanning iOS, Android, and the web that provides a fun, educational and structured way for amateur photographers to compete in a wide variety of contests showcasing their photos while gaining recognition with votes, badges, and awards.
We perform our annual or interim goodwill impairment test by comparing the fair value of the relevant reporting unit with its carrying amount. We would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit.
We would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit.
Over the past six years, the monthly average paying player spend has increased in excess of 14% annually to more than $55 per player. 45 As we look to the future, we are advancing several initiatives that we expect will drive user growth, increase engagement, drive in-app purchases, and advance our in-game economy. Some of these include: ● On-Boarding .
Over the past seven years, the monthly average paying player spend has increased in excess of 11.6% annually to more than $51.3 per player. 44 As we look to the future, we are advancing several initiatives that we expect will drive user growth, increase engagement, drive in-app purchases, and advance our in-game economy.
Emojipedia receives approximately 46.4 million monthly page views and has approximately 7.6 million monthly active users of which approximately 45.19% are located in well-developed markets. It is the top resource for all things emoji, offering insights into data and cultural trends.
In July 2023, Emojipedia received approximately 45 million monthly page views and has approximately 9.7 million monthly active users as of July 31, 2023 of which approximately 50.3% are located in well-developed markets. It is the top resource for all things emoji, offering insights into data and cultural trends.
For in-app display ads, in-app offers, engagement advertisements and other advertisements, our performance obligation is satisfied over the life of the relevant contract (i.e., over time), with revenue being recognized as advertising units are delivered, which is Zedge’s performance obligation.
For in-app display ads, in-app offers, engagement advertisements and other advertisements, our performance obligations are satisfied over the life of the relevant contract (i.e., over time), with revenue being recognized as advertising units are delivered, which is Zedge’s performance obligation. The advertiser may compensate us on a cost-per-impression, cost-per-click, cost-per-action basis.
In Zedge Premium, we receive 30% as a fee when users purchase licensed content using Zedge Credits or unlock licensed content by watching a video or taking a survey on Zedge Premium.
In Zedge Premium, we receive 30% as a fee when users purchase licensed content using Zedge Credits or unlock licensed content by watching a video or taking a survey on Zedge Premium. Sales and other similar taxes are excluded from revenues.
Certain stock options, deferred stock unit and restricted stock grants are more fully described in Note 13 to the Consolidated Financial Statements in this Annual Report for a complete discussion of our stock-based compensation. The following table summarizes stock-based compensation expense for the fiscal year ended July 31, 2022 and 2021.
Certain stock options, deferred stock unit and restricted stock grants are more fully described in Note 13, Stock-Based Compensation , to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. The following table summarizes stock-based compensation expense for the fiscal year ended July 31, 2023 and 2022.
Fiscal year ended July 31, (in thousands) 2022 2021 % Change Selling, general and administrative $ 15,061 $ 9,311 61.8 % As a percentage of revenues 56.7 % 47.6 % SG&A expense increased 62% in fiscal 2022 to $15.1 million from $9.3 million in fiscal 2021.
Fiscal Year Ended July 31, (in thousands) 2023 2022 % Change Selling, general and administrative $ 21,857 $ 15,061 45.1 % As a percentage of revenues 80.2 % 56.7 % SG&A expense increased 45%, or $6.8 million in fiscal 2023 to $21.9 million from $15.1 million in fiscal 2022.
As of July 31, 2022, our Zedge App has been installed nearly 569 million times since inception and, over the past two years, has had between 32.0 and 36.3 million monthly active users (“MAU”).
As of July 31, 2023, our Zedge App has been installed nearly 621 million times since inception and, over the past two fiscal years, has had between 30.8 and 36.3 million monthly active users (“MAU”), ending with 30.9 million MAU as of July 31, 2023.
In August 2021, we acquired Emojipedia Pty Ltd (“Emojipedia”), the world’s leading authority dedicated to providing up-to-date and well-researched emoji definitions, information, and news as well as World Emoji Day and the annual World Emoji Awards, and Emojitracker, which provides real time visualization of all emoji symbols used on Twitter.
In August 2021, we acquired the assets of Emojipedia Pty Ltd (“Emojipedia”), including Emojipedia.org the world’s leading authority dedicated to providing up-to-date and well-researched emoji definitions, information, and news as well as World Emoji Day and the annual World Emoji Awards.
Cash used in investing activities in the fiscal years ended July 31, 2022 and 2021 also consisted of capitalized software and technology development costs related to various projects that we invested in specific to the various platforms on which we operate our service.
Cash used in investing activities in the fiscal years ended July 31, 2023 and 2022 also consisted of capitalized software and technology development costs related to various projects that we invested in specific to the various platforms on which we operate our service. 58 Financing Activities On October 28, 2022, we entered into an Amended Loan Agreement with Western Alliance Bank.
The payment of dividends in any specific period will be at the sole discretion of our Board of Directors. 58 Concentration of Credit Risk and Significant Customers Historically, we have had very little or no bad debt, which is common with other platforms of our size that derive their revenue from digital advertising, as we aggressively manage our collections and perform due diligence on our customers.
Concentration of Credit Risk and Significant Customers Historically, we have had very little or no bad debt, which is common with other platforms of our size that derive their revenue from digital advertising, as we aggressively manage our collections and perform due diligence on our customers. In addition, the majority of our revenue is derived from large, credit-worthy customers, e.g.
The advertiser may compensate the Company on a cost-per-impression, cost-per-click, cost-per-action basis. 47 Paid Subscription Revenue : Beginning in January 2019, we started offering monthly and yearly paid subscription services sold through Google Play. When a customer subscribes, they execute a clickthrough agreement with Zedge outlining the terms and conditions between Zedge and the subscriber.
Paid Subscription Revenue: Beginning in January 2019 and April 2023, we started offering monthly and yearly paid subscription services sold through Google Play and the App Store, respectively. When a customer subscribes, they execute a clickthrough agreement with Zedge outlining the terms and conditions between Zedge and the subscriber.
Fiscal year ended July 31, (in thousands) 2022 2021 % Change Depreciation and amortization $ 1,966 $ 1,261 55.9 % As a percentage of revenues 7.4 % 6.4 % Depreciation and amortization expense increased $0.7 million or 56 % in fiscal 2022 to $2.0 million from $1.3 million in fiscal 2021, primarily due to the amortization of intangible assets acquired in fiscal 2022. 55 Contingent Consideration Fair Value Change.
Fiscal Year Ended July 31, (in thousands) 2023 2022 % Change Depreciation and amortization $ 3,269 $ 1,966 66.3 % As a percentage of revenues 12.0 % 7.4 % Depreciation and amortization expense increased $1.3 million or 66 % in fiscal 2023 to $3.2 million from $2.0 million in fiscal 2022, primarily due to the amortization of intangible assets acquired in connection with the GuruShots acquisition. 55 Goodwill impairment.
We generally report our advertising revenue net of amounts due to agencies and brokers because we are not the primary obligor in the relevant arrangements, we do not finalize the pricing, and we do not establish or maintain a direct relationship with the advertiser.
The determination of whether we act as a principal or an agent in a transaction is based on an evaluation of whether we control the good or service prior to transfer to the customer. 47 We generally report our advertising revenue net of amounts due to agencies and brokers because we are not the primary obligor in the relevant arrangements, we do not finalize the pricing, and we do not establish or maintain a direct relationship with the advertiser.
The duration of these contracts is daily, and revenue for these contracts is recognized on a daily ratable basis. The payment terms for subscriptions sold through Google Play is net 30 days after month-end. Zedge Premium : Zedge Premium is our marketplace where artists and brands can market, distribute and sell their digital content to Zedge’s users.
The payment terms for subscriptions sold through the App Store is net 45 days after month-end. 46 Zedge Premium : Zedge Premium is our marketplace where artists and brands can market, distribute and sell their digital content to Zedge’s users.
The Company discontinued the existing $2,000,000 revolving credit facility under the existing Loan and Security Agreement, dated as of September 26, 2016 (See Note 16). At each of July 31, 2021, July 31, 2022 and the time of the discontinuance, there was no outstanding balance on the revolving credit facility.
We discontinued the existing $2,000,000 revolving credit facility under the existing Loan and Security Agreement, dated as of September 26, 2016. At both July 31, 2022 and the time of the discontinuance on October 28, 2022, there was no outstanding balance on the revolving credit facility. In connection with the share repurchase program as in Item 5.
We view the Creator Economy as an untapped opportunity for Zedge to expand its business, especially as we execute by connecting our gamers with our marketplace. 44 The Zedge Ringtones and Wallpapers app (which is named “Zedge Wallpapers” in the App Store), which we refer to as our “Zedge App,” is a marketplace offering a wide array of mobile personalization content including wallpapers, video wallpapers, ringtones, and notification sounds, and is available both in Google Play and the App Store.
The Zedge Ringtones and Wallpapers app (which is named “Zedge Wallpapers” in the App Store), which we refer to as our “Zedge App,” offers a wide array of mobile personalization content including wallpapers, video wallpapers, ringtones, and notification sounds, and is available both in Google Play and the App Store.
Our cash collections in fiscal 2022 and fiscal 2021 were $26.0 million and $18.4 million, respectively. Investing Activities On April 12, 2022, we acquired 100% of the outstanding equity securities of GuruShots.
Changes in Trade Accounts Receivable Gross trade accounts receivables were $2.9 million and $2.4 million at July 31, 2023 and 2022 respectively. Our cash collections in fiscal 2023 and fiscal 2022 were $24.8 million and $26.0 million, respectively. Investing Activities On April 12, 2022, we acquired 100% of the outstanding equity securities of GuruShots.
Business combination and assets acquisition are more fully described in Note 6 to the Consolidated Financial Statements in Item 8 of this annual report on Form 10-K for further details.
We paid approximately half of the $1.9 million on February 1, 2022 and the remaining amount was paid on August 1, 2022. Business combination and assets acquisition are more fully described in Note 6, Business Combination and Asset Acquisition , to the Consolidated Financial Statements in Item 8 of this annual report on Form 10-K.
We do not anticipate paying dividends on our common stock until we achieve sustainable profitability and retain certain minimum cash reserves.
We do not anticipate paying dividends on our common stock until we achieve sustainable profitability and retain certain minimum cash reserves. The payment of dividends in any specific period will be at the sole discretion of our Board of Directors.
GuruShots sells only consumable virtual goods. Consumable virtual goods represent items that can be consumed by a specific player action and do not provide the player any continuing benefit following consumption. GuruShots has determined through a review of game play behavior that players generally do not purchase additional virtual goods until their existing virtual goods balances have been substantially consumed.
GuruShots’ game sells only consumable virtual goods. Consumable virtual goods represent items that can be consumed by a specific player action and do not provide the player any continuing benefit following consumption.
Fiscal year ended July 31, (in thousands) 2022 2021 % Change Stock-based compensation expense $ 1,936 $ 652 196.9 % Stock-based compensation expense increased $1.3 million or 197 % in fiscal 2022 to $1.9 million from $0.6 million in fiscal 2021 primarily due to deferred stock units (DSUs) granted to Company employees and restricted stock the Company committed to issue in connection with the GuruShots acquisition.
Fiscal Year Ended July 31, (in thousands) 2023 2022 % Change Stock-based compensation expense $ 2,519 $ 1,936 30.1 % Stock-based compensation expense increased $0.6 million or 30% in fiscal 2023 to $2.5 million from $1.9 million in fiscal 2022 primarily due to the equity-based compensation expenses related to the restricted stock issued in connection with the GuruShots acquisition.
See Note 18 to the Consolidated Financial Statements in this Annual Report for further details. Fiscal year ended July 31, (in thousands) 2022 2021 % Change Interest and other income, net $ 49 $ 245 -80.0 % As a percentage of revenues 0.2 % 1.3 % Net loss resulting from foreign exchange transactions .
Fiscal Year Ended July 31, (in thousands) 2023 2022 % Change Interest and other income, net $ 311 $ 49 534.7 % As a percentage of revenues 1.1 % 0.2 % Net income (loss) resulting from foreign exchange transactions .
The following table summarizes Zedge Premium gross and net revenue for the fiscal year ended July 31, 2022 and 2021.
Other revenue consists primarily of Zedge Premium revenue. Zedge Premium gross revenue increased 2.3% while net revenue was flat year over year. The following table summarizes Zedge Premium gross and net revenue for the fiscal year ended July 31, 2023 and 2022.
The following tables present selected financial information for the twelve months ended July 31, 2022 and 2021: Fiscal year ended July 31, (in thousands) 2022 2021 $ Changes Cash flows provided by (used in): Operating activities $ 11,492 $ 10,130 1,362 Investing activities (18,950 ) (5,479 ) (13,471 ) Financing activities (223 ) 15,101 (15,324 ) Effect of exchange rate changes on cash and cash equivalents (142 ) 45 (187 ) (Decrease) increase in cash and cash equivalents $ (7,823 ) $ 19,797 (27,620 ) Operating Activities Our cash flow from operations varies significantly from quarter to quarter and from year to year, depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable.
We currently expect that our cash and cash equivalents on hand, and our cash flow from operations will be sufficient to meet our anticipated cash requirements for the twelve months following issuance of this annual report on Form 10-K. 57 The following tables present selected financial information for the fiscal years ended July 31, 2023 and 2022: Fiscal Year Ended July 31, (in thousands) 2023 2022 $ Changes Cash flows provided by (used in): Operating activities $ 3,162 $ 11,492 $ (8,330 ) Investing activities (2,422 ) (18,950 ) 16,527 Financing activities 387 (223 ) 611 Effect of exchange rate changes on cash and cash equivalents (87 ) (142 ) 55 Increase (decrease) in cash and cash equivalents $ 1,040 $ (7,823 ) $ 8,863 Operating Activities Our cash flow from operating activities varies significantly from quarter to quarter and from year to year, depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable.
This shift has negatively impacted revenue because advertising rates in emerging markets are materially lower than in well-developed markets. ARPMAU was up 11.4% for the three months ended July 31, 2022 when compared to the same period a year ago, pointing to progress we have made in generating more value from our users, particularly from subscriptions.
This shift has negatively impacted revenue because advertising rates in emerging markets are materially lower than in well-developed markets. ARPMAU declined 5.5% for the three months ended July 31, 2023 when compared to the same period a year ago, primarily due to macroeconomic condition that impacted our advertising revenue and subscription revenue.
As of July 31, 2022, we had 692,000 active paying subscribers. In late 2021, we introduced NFT functionality to a limited number of Zedge Premium creators via ‘NFTs Made Easy’.
In April 2023, we introduced a subscription tier in the iOS version of the app. As of July 31, 2023, we had approximately 638,000 active paying subscribers. In late 2021, we introduced ‘NFTs Made Easy’ to a limited number of Zedge Premium creators. All NFT Made Easy transactions are made using Zedge Credits.
Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. See Note 1 to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for a complete discussion of our significant accounting policies.
Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
Additionally, we consider income tax effects from any tax-deductible goodwill on the carrying amount of our reporting unit when measuring the goodwill impairment loss, if applicable. We estimate the fair value of our reporting unit using the market approach.
Additionally, we consider income tax effects from any tax-deductible goodwill on the carrying amount of its reporting unit when measuring the goodwill impairment loss, if applicable. We performed an interim impairment test during the third quarter of fiscal 2023 and concluded that the carrying value of the GuruShots reporting unit exceeded its fair value.
We report subscription revenue gross of the fee retained by Google Play, as the subscriber is our customer in the contract and we control the service prior to the transfer to the subscribers. With respect to Zedge Premium, Zedge, as provider of the platform, is effectively operating as a broker or intermediary connecting online content providers with the end user.
We report subscription revenue gross of the fee retained by Google Play and the App Store, as the subscriber is our customer in the contract and we control the service prior to the transfer to the subscriber.
Evolving the game economy by maturing the game’s progression mechanics and features, earn and spend dynamics, and introducing soft and premium currencies tied to resources and benefits. Furthermore, we hope to introduce an advertising layer in the monetization stack in the future.
Evolving the game economy by maturing the game’s progression mechanics and features, earn and spend dynamics, and introducing soft and premium currencies tied to resources and benefits. Furthermore, we have started preliminary testing of advertising on web and expect to extend that to the mobile apps during the summer.
During fiscal 2022, we recorded a $4 million net benefit related to the change in fair value of our contingent consideration liabilities incurred, from $5.9 million to $1.9 million, associated with the acquisition of GuruShots in April 2022. The liability for contingent consideration is remeasured at each reporting period until the contingency is resolved.
During fiscal 2023, we recorded a $1.9 million net benefit related to the change in fair value of our contingent consideration payable (related to the GuruShots acquisition) in addition to the $4.0 million net benefit recorded in fiscal 2022.
Virtual goods used for online game : GuruShots generates substantially all of its revenues from selling virtual goods (or Resources) to its users. GuruShots distributes its game to the end customer through mobile platforms such as Apple and Google.
Digital Goods and Services : GuruShots generates substantially all of its revenues by selling virtual goods (ex. power-ups, in-game resources) to its users. GuruShots distributes its game to end customers through mobile platforms such as Apple’s App Store and Google Play as well as via the web.
As a percentage of revenue, direct cost of revenues in fiscal 2022 were 6.2% and flat when compared to 6.1% in fiscal 2021. 54 Selling, general and administrative expense . Selling, general and administrative expense (“SG&A”) consists mainly of payroll, benefits, facilities, marketing, consulting, professional fees, software licensing (“SaaS”) and public company related expenses.
Selling, general and administrative expense (“SG&A”) consists mainly of payroll, benefits, facilities, marketing (primarily PUA), consulting, professional fees, software licensing (“SaaS”) and public company related expenses.
This review includes an analysis of game players’ historical play behavior, purchase behavior, and the amounts of virtual goods outstanding. Based upon this analysis, GuruShots has estimated the rate at which virtual item is consumed during game play. Accordingly, revenue is recognized once the virtual goods are sold.
GuruShots has determined through a review of game play behavior that players generally do not purchase additional virtual goods until their existing virtual goods balances have been substantially consumed. This review includes an analysis of game players’ historical play behavior, purchase behavior, and the amounts of virtual goods outstanding. Revenue is recognized once the virtual goods are sold.
We will continue to enhance this offering and are exploring new features including a native mobile offering as well as additional monetization opportunities. 46 Reportable Segments Our business consists of one reportable segment. CRITICAL ACCOUNTING POLICIES Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, or U.S.
CRITICAL ACCOUNTING POLICIES Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP.
We also updated the collateral materials in these storefronts to the color of the Ukrainian flag resulting in a decline in new installs from these same countries. 51 Key Performance Indicators Our results of operations discussion includes disclosure of two key performance indicators - Monthly Active Users (MAU) and Average Revenue Per Monthly Active User (ARPMAU).
Key Performance Indicators Our results of operations discussion includes disclosure of two key performance indicators - Monthly Active Users (MAU) and Average Revenue Per Monthly Active User (ARPMAU).
As of/Years Ended 7/31/2022 7/31/2021 % Change (in thousands, except revenue per subscriber and percentages) Revenues $ 3,741 $ 3,311 $ 13 % Active subscriptions net (decrease) increase (60 ) 248 nm Active subscriptions at end of period 692 752 -8 % Average Active subscriptions 736 678 9 % Average monthly revenue per Active subscriptions $ 0.42 $ 0.41 $ 2 % 53 nm-not meaningful Virtual goods used for online game .
Fiscal Year Ended July 31, 2023 2022 % Change (in thousands, except revenue per subscriber and percentages) Revenues* $ 3,440 $ 3,741 $ -8.0 % Active subscriptions net decrease* (65 ) (60 ) 7.2 % Active subscriptions at end of period * 627 692 -9.3 % Average active subscriptions during the period* 654 736 -11.1 % Average monthly revenue per active subscription* $ 0.44 $ 0.42 $ 4.8 % * Android Only Digital Goods and Services .
The substantial majority of our revenue is generated from selling its advertising inventory (“Advertising Revenue”) to advertising networks, advertising exchanges, and direct arrangements with advertisers.
The substantial majority of our revenue is generated from selling our advertising inventory (“Advertising Revenue”) to advertising networks, advertising exchanges, and direct arrangements with advertisers. Our monthly and yearly subscriptions allow users to prepay a fixed fee to remove unsolicited advertisements from the Android Zedge App in January 2019 and the iOS Zedge App users that began in April 2023.

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