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What changed in Zedge, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Zedge, Inc.'s 2023 and 2024 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 2024 report.

+453 added−454 removedSource: 10-K (2024-10-29) vs 10-K (2023-10-30)

Top changes in Zedge, Inc.'s 2024 10-K

453 paragraphs added · 454 removed · 312 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWe 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 .
Biggest changeWe expect to continue devoting resources to growing our user base profitably by: ○ analyzing user demographics to identify key segments that yield the highest profitability and quickest return on ad spend (ROAS); 3 ○ testing to determine which user segments are most responsive to new offerings and crafting targeted marketing strategies based on those insights; ○ studying our users’ needs and enhancing our products to align with the preferences of our most profitable segments; ○ 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 ○ exploring crossover marketing opportunities between user segments to maximize reach and engagement; ○ expanding our reach by collaborating with strategic partners. ● Improve monetization .
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.
Our Strategic Flywheel Our long-term strategy calls for creating and supporting 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.
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.
GuruShots has a 4.4-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.
MAU is a key performance indicator (“KPI”) that captures the number of unique users that used our Zedge App during the final 30 days of the relevant period.
MAU is a key performance indicator (“KPI”) for our Zedge App that captures the number of unique users that used our Zedge App during the final 30 days of the relevant period.
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.
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 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.
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 .
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 and licensed content to meet the needs of our users. 5 ● Scalable and Reliable Technology and infrastructure .
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.
We believe that adding the ability to sell their content to Zedge Marketplace’s 25+ million MAU is an attractive benefit that enables players not only to have fun, but also to earn money while doing so.
There are many online platforms that offer content creators an eco-system in which they can make their content available to consumers. Some of these platforms may have better incentives, paid or other, that may potentially make them more attractive than our marketplace. ● Advertisers . We face significant competition in securing spend from advertisers. ● Other Game Developers .
There are many online platforms that offer content creators an ecosystem in which they can make their content available to consumers. Some of these platforms may have better incentives, paid or other, that may potentially make them more attractive than our marketplace. ● Advertisers . We face significant competition in securing spend from advertisers. ● Other Game Developers .
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.
On a monthly basis, GuruShots users currently cast more than 3 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.
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 Technology Our ecosystem 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.
We invest significant resources in product development, design, and usability. We beta test product enhancements extensively and closely monitor customer feedback to ensure that we meet users’ needs. To date, our Zedge App has received more than 11 million reviews in Google Play where it boasts a 4.6 star rating out of a maximum of 5 stars.
We invest significant resources in product development, design, and usability. We beta test product enhancements extensively and closely monitor customer feedback to ensure that we meet users’ needs. To date, our Zedge App has received more than 15 million reviews in Google Play where it boasts a 4.7 star rating out of a maximum of 5 stars.
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.
The Zedge App has a global customer base of approximately 26 million MAU as of July 31, 2024, 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.
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.
Our platform allows creators to upload content to our marketplace and avail it to our users either for free or, via ‘Zedge Premium,’ the section of our marketplace where we offer premium content for purchase. In turn, our users utilize the content to personalize their phones and express their individuality.
Game developers that offer more engaging and interesting games.
Game developers that offer engaging and interesting games.
Our marketing team invests material resources in analyzing all attributes of a campaign ranging from the creative assets, offer acquisition channel, and platform (i.e., iOS, Android, and web), just to name a few, with the goal of determining whether a specific campaign is likely to yield a profitable customer.
Our marketing team invests material resources in analyzing all attributes of a campaign ranging from, among others, the creative assets, offer acquisition channel and platform (i.e., iOS, Android, and web), with the goal of determining whether a specific campaign is likely to yield a profitable customer.
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.
Every month, GuruShots stages more than 300 competitions that result in players uploading in excess of 670,000 photographs and casting close to 3.2 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.
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.
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. We believe that Emojipedia provides growth potential to the Zedge App, and it was immediately accretive to earnings post acquisition in August 2021.
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 Zedge App (which is named “Zedge Wallpapers” in the App Store) 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 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’.
Our leading products include Zedge Ringtones and Wallpapers, which we refer to as our “Zedge App,” 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’.
On April 12, 2022, we acquired GuruShots Ltd. As part of this acquisition, we acquired all intellectual property rights associated with, and encompassed within the GuruShots mobile and web-based applications, including the following domain name: GuruShots.com.
As part of this acquisition, we acquired all intellectual property rights associated with, and encompassed within the GuruShots mobile and web-based applications, including the following domain name: GuruShots.com.
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 have built a robust platform that allows us to ideate, test, analyze, and launch where warranted by the outcome. We enhanced our users’ content creation options with generative AI models, we embraced machine learning, including AI and LLM throughout our technology stack in order to improve content recommendations and relevancy.
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.
In July 2024, Emojipedia received approximately 37.6 million monthly page views and has approximately 9.6 million monthly active users as of July 31, 2024 of which approximately 46.7% are located in well-developed markets. It is the top resource for all things emoji, offering insights into data and cultural trends.
On August 1, 2021, we acquired Emojipedia. As part of this acquisition, we acquired trademark registrations for “Emojipedia” in the United States, the European Union, the United Kingdom, and Australia, and trademark registrations for “World Emoji Day” in the United States and the United Kingdom. We also acquired the following domain name registrations: www.emojipedia.com and www.emojipedia.org.
As part of this acquisition, we acquired trademark registrations for “Emojipedia” in the United States, the European Union, the United Kingdom, and Australia, and trademark registrations for “World Emoji Day” in the United States and the United Kingdom. We also acquired the following domain name registrations: www.emojipedia.com and www.emojipedia.org. On April 12, 2022, we acquired GuruShots Ltd.
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.
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. Our infrastructure provides a fully redundant production environment in a cloud-hosted, virtual-server environment.
In December 2022, we introduced ‘pAInt’ our generative AI wallpaper maker within the Zedge App. pAInt enables users to create high quality images by typing a brief description of what they are interested in and tuning with different style types. In parallel with the introduction of pAInt we also rolled out another in-app currency used for creating wallpapers.
In December 2022, we introduced ‘pAInt’ our generative AI wallpaper maker within the Zedge App. pAInt enables users to create high quality images by typing a brief description of what they are interested in and tuning with different style types.
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.
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 99 as of July 31, 2024.
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.
We also have applied for trademark protection for “pAInt,” and “Zedge pAInt” in the United States, a stylized “D” logo in 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. On August 1, 2021, we acquired Emojipedia.
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 .
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.
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.
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.
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.
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.
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 .
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.
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 .
We believe that our products and customer base are attractive to advertisers, brands, artists, and players and will yield new monetization opportunities. 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 .
Specifically, we plan to enable the ability for GuruShots players to become Zedge Premium artists and sell their photos to our audience of 30+ million MAU as standard digital images or NFTs. In addition, we look to benefit from the experience that the GuruShots team possesses and test gamifying the Zedge App.
Specifically, we plan to enable GuruShots players to become Zedge Premium artists and sell their photos to our audience of 25+ million MAU (as of July 31, 2024) as standard digital images. In addition, we are benefitting from the experience that the GuruShots team possesses in gamifying the Zedge App.
To improve engagement, GuruShots has adopted a set of retention dynamics focused on individual, team and community dynamics that create a sense of belonging, inspiration, recognition, improvement, and competition.
To improve engagement, GuruShots has adopted a set of retention dynamics focused on individual, team and community dynamics that create a sense of belonging, inspiration, recognition, improvement, and competition. GuruShots utilizes a ‘Free-to-Play’ business model and generates revenue through in-app purchases of virtual currency.
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”).
As of July 31, 2024, our Zedge App had been installed nearly 674 million times since inception and, over the past two fiscal years, has had between 26.1 million and 32.2 million monthly active users (“MAU”), ending with 26.1 million MAU as of July 31, 2024.
We market GuruShots to prospective players, primarily via paid user acquisition channels, and utilize a host of creative formats including static and video ads in order to promote the game.
In addition, we migrated to a coin-based economy with multiple currencies in order to enable more players to earn and spend their currency on in-game resources. We market GuruShots to prospective players, primarily via paid user acquisition channels, and utilize a host of creative formats including static and video ads in order to promote the game.
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 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. In April 2022, we acquired GuruShots, a recognized category leader that fuses photography with mobile gaming.
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 .
In addition, our diverse customer base attracts advertisers seeking customers that have adequate disposable income to purchase their products and services. 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. ● Leading global provider of mobile personalization content .
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.
The agreements we enter into with our employees also provide that all software, inventions, developments, works of authorship, and trade secrets created by them during the course of their employment are our property. 7 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, the United States, and Canada.
For example, in April 2022 we acquired GuruShots and in August 2021 we acquired Emojipedia. Each of these acquisitions offers new growth opportunities both on a stand-alone basis as well as on an integrated and synergistic basis that we believe can impact our business in a materially positive fashion.
Each of these acquisitions offers new growth opportunities both on a stand-alone basis as well as on an integrated and synergistic basis that we believe can impact our business in a materially positive fashion. 4 Our Competitive Advantages We believe that the following competitive strengths will drive the growth of our business: ● Large, global customer base .
We seek to protect our intellectual property rights by relying on federal, state, and common law rights in the United States and other countries, as well as contractual restrictions. We enter into confidentiality and nondisclosure agreements with our employees and business partners.
Intellectual Property Our trademarks, copyrights, domain names, proprietary technology, know-how, and other intellectual property are vital to our success. We seek to protect our intellectual property rights by relying on federal, state, and common law rights in the United States and other countries, as well as contractual restrictions.
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.
This is an ongoing competitive threat requiring us to do our best to adapt as necessary to remain relevant and meaningful. 6 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.
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.
We plan to continue diversifying our revenue streams by advancing our existing subscription offering, optimizing the newly introduced coin-based economy in GuruShots, and introducing advertising into GuruShots. Furthermore, we expect to continue testing our print on demand offering.
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 We do not maintain office space in the United States in light of having a small domestic team. We address certain aspects of our commercial operations, including accounting and finance, and business development from the New York area.
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”.
Zedge Holdings, Inc. was incorporated in Delaware in 2008, and our name was changed to Zedge, Inc. in 2016. 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”.
Continue developing monetization methods that will help us grow, including advancements of the in-app economy, NFTs, subscription models, e-commerce, and new advertising products, implementations, and optimizations. We believe that our products and customer base are attractive to advertisers, brands, artists, and players and will yield new monetization opportunities.
Continue developing monetization methods that will help us grow, including advancements of the in-app economy, subscription models, e-commerce, and new advertising products, implementations, and optimizations. For example, in fiscal 2024 we revamped our subscription offering and have experienced growth as a result of this overhaul.
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.
The Android version of the 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.
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.
We benefit from having a large customer base. As of July 31, 2024, the Zedge App had 26.1 million MAU, of which approximately 21.1% were in well-developed markets and 78.9% were in emerging markets. Typically, customers in well-developed markets monetize at a material premium when compared to those in emerging markets.
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 vision is to enable and connect creators who enjoy friendly competitions with a community of prospective consumers in order to drive commerce.
Our products are built upon scalable technology and infrastructure that reliably serves tens of millions of MAU, globally.
Our products are built upon scalable technology and infrastructure that reliably serves tens of millions of MAU, globally. We use a combination of off-the-shelf and proprietary technologies and infrastructure solutions that scale efficiently to meet the needs of our large customer base.
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.
The mobile app ecosystem changes quickly and regularly with new apps capturing massive audiences competing for consumers’ time, mindshare, and money.
We use a combination of off-the-shelf and proprietary technologies and infrastructure solutions that scale efficiently to meet the needs of our large customer base. 5 Competition We face competition in all aspects of our business and especially from other digital marketplaces and gaming companies. In running our business, we need to account for: ● Consumers.
Competition We face competition in all aspects of our business and especially from other digital marketplaces and gaming companies. In running our business, we compete for: ● Consumers.
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.
We use our full-stack marketing team to scale user acquisition--both paid and organic--invest in building and/or buying data analytic tools that provide valuable insights into our marketing initiatives and focus on the evolving fields of search engine optimization and app store optimization. We have also invested resources to improve product marketing with the goal of driving engagement and retention.
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.
We are part of the ‘Creator Economy,’ which Goldman Sachs estimates is worth $250 billion globally. 1 According to Linktree, over 200 million individuals identify as creators, people who use their influence, skill, and creativity to amass an audience and monetize it. 2 Furthermore, Influencer Marketing Hub reports that out of 2,000 surveyed creators, 44.9% identify as full-time creators, 3 and Exploding Topics reports that 10% of influencers earn more than $100,000 per year. 4 We view the Creator Economy as an opportunity for Zedge to expand our business, especially as we execute by connecting our gamers with our marketplace.
In the past year, we have made many changes to Emojipedia including migrating to a new ad mediation platform, redesigning the Emojipedia website, and introducing localized versions of Emojipedia in Spanish, French, German, Italian, and Portuguese. We will continue to enhance this offering and are exploring new features including a native mobile offering as well as additional monetization opportunities.
In the past year, we have made many changes to Emojipedia including overhauling its backend, redesigning the Emojipedia website, and introducing new entertainment-focused features to the site. We will continue to enhance this offering and are exploring additional new features which use artificial intelligence, some of which will be released before the end of the calendar year.
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.
Based on analyzing user data and performing extensive user testing, we will determine whether to refine the user experience and scale or cease development of this title. 2 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.
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.
We maintain leased facilities in Trondheim, Norway and Vilnius, Lithuania that accommodate our product, design, monetization, marketing and technology teams, and in Tel Aviv, Israel that accommodates members of both the GuruShots and Zedge teams. Our servers are hosted in leased data centers in different geographic locations in the United States.
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 .
One example is our hybrid casual title, ‘AI Art Master,’ which has been in soft-launch in the Philippines, Poland, and India, that enables players to create generative AI images and compete in themed-based competitions with these images.
Removed
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.
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In April 2023, we introduced a subscription tier in the iOS version of the app. As of July 31, 2024, we had approximately 669,0000 active subscribers. 1 https://www.latimes.com/business/story/2024-01-08/creator-influencer-economy-2024-predictions-social-media-stars 2 https://linktr.ee/creator-report 3 https://influencermarketinghub.com/creator-earnings-benchmark-report 4 https://explodingtopics.com/blog/creator-economy-stats# 1 In April 2022, we acquired GuruShots Ltd (“GuruShots”) a recognized category leader focused on gamifying the photography vertical.
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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.
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Players can use this currency to unlock competitions or gain an edge by purchasing resources and participating in additional gameplay. Over the past seven years, the monthly average paying player spend has increased in excess of 9.9% annually to more than $50.9 per player.
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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’.
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In fiscal 2024, we revamped GuruShots’ customer onboarding experience by guiding new players through simplified photo competitions of limited size and duration. The upgrade was designed to enhance the gaming experience for new players by increasing their potential for winning and providing immediate gratification. The new onboarding has shown improvements in engagement, retention, and revenue from new users.
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Today, GuruShots utilizes a ‘Free-to-Play’ business model that leads to strong monetization with the purchase of resources that are used to give paying players an edge while still maintaining a fair and competitive experience for all participants.
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Since the start of fiscal 2025, Cost per Install (CPI) have trended down considerably leading us to believe that our efforts are yielding fruit. It’s too early to say with conviction whether this trend is sustainable as we scale user acquisition and whether these users will provide sufficient long-term ROI; however, we believe that these early results are encouraging.
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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.
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Executing this strategy calls for concentrating our efforts on the following goals: ● Invest in growing our user base and improving profitably .
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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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For example, we launched pAInt, our generative AI wallpaper maker in late 2022 in order to avail our consumers with the ability of becoming creators. ● Better utilize data to improve user acquisition and customer engagement .
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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 .
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We have benefitted from the investment we have made in our data and business analytics teams enabling us to make data driven decisions in shortened timeframes and also expand the number of A/B tests that we use to compare various product changes. ● Build our marketplace into a compelling platform for artists and creators .
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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.
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Finally, we have utilized AI to quickly and efficiently create many different creatives in order to attract new customers. ● Diversify our revenue stack . Historically, the majority of our revenue has been derived from advertising.
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Typically, 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.
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For example, in April 2022 we acquired GuruShots and in August 2021 we acquired Emojipedia.
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In 2009, we introduced the Android version of our Zedge App.
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We focus on delivering the highest quality content to users while minimizing our infrastructure costs on used bandwidth.
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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.
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We enter into confidentiality and nondisclosure agreements with our employees and business partners.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAny 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.
Biggest changeAny number of factors can negatively affect user retention, growth, engagement and conversion, including if: ● 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 they feel their experience is diminished due to product decisions that we make with respect to introducing new features, feature enhancements, an/or monetization techniques; ● users become concerned about our user data practices or other matters related to privacy, security and the sharing of user data; 10 ● users are no longer willing to pay for subscriptions or in-app purchases or we are unable to increase the price of our subscriptions or in-app purchases; ● users have difficulty installing, updating or otherwise 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 find engaging 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; ● we are unable attract sufficient new paying users to offset and exceed those lost through natural churn thus making it more difficult to maintain and grow revenues; ● 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; ● third-party initiatives that may enable greater use of our products, including low-cost or discounted data plans, are discontinued; ● we adopt 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; ● we fail to combat inappropriate or abusive activity on our platforms; ● we are unable to offer relevant content to our users; ● we fail to provide adequate support for our users and creators; ● there are outages or other technical problems that result in making our products and services inaccessible, unreliable or that result in a poor user experience; ● there are actions by governments that affect accessibility to our products and services in any market; or ● there are 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.
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.
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. 8 ● We may not manage our in-app economy well and as a result, disincentivize users from making in-app purchases.
The application of existing domestic and international laws and regulations to us relating to issues such as user privacy and data protection, security, defamation, pricing, advertising, taxation, gambling, sweepstakes, promotions, consumer protection, artificial intelligence and machine learning, accessibility, content regulation, quality of services, law enforcement demands, telecommunications, mobile, and intellectual property ownership and infringement in many instances is unclear or unsettled.
The application of existing domestic and international laws and regulations to us relating to issues such as user privacy and data protection, artificial intelligence, security, defamation, pricing, advertising, taxation, gambling, sweepstakes, promotions, consumer protection, artificial intelligence and machine learning, accessibility, content regulation, quality of services, law enforcement demands, telecommunications, mobile, and intellectual property ownership and infringement in many instances is unclear or unsettled.
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.
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.
We have encountered and will encounter risks and difficulties frequently experienced by early-stage companies in rapidly evolving industries, like mobile apps, digital marketplaces and gaming, including the need to: ● accurately forecast our revenue and plan our operating expenses; ● hire, integrate, and retain key personnel; ● successfully integrate and realize the benefits of the acquisitions that we have made; ● develop a scalable technology infrastructure that can efficiently and reliably address increased usage, as well as new features and services; ● comply with existing and new laws and regulations applicable to our business; ● anticipate and effectively respond to the global economy and the markets in which we operate; ● establish and expand our various digital brands; ● maintain our reputation and build trust with users, artists, advertisers and employees; ● offer competitive economics to advertisers and users alike; ● maintain and expand revenue producing initiatives including ad sales, in-app purchases and subscriptions; ● deliver superior experiences and results for users, artists and advertisers alike; ● identify, attract, retain and motivate new user and artists; and ● manage our expanding operations.
We have encountered and will encounter risks and difficulties frequently experienced by early-stage companies in rapidly evolving industries, like mobile apps, digital marketplaces and gaming, including the need to: ● accurately forecast our revenue and plan our operating expenses; 19 ● hire, integrate, and retain key personnel; ● successfully integrate and realize the benefits of the acquisitions that we have made; ● develop a scalable technology infrastructure that can efficiently and reliably address increased usage, as well as new features and services; ● comply with existing and new laws and regulations applicable to our business; ● anticipate and effectively respond to the global economy and the markets in which we operate; ● establish and expand our various digital brands; ● maintain our reputation and build trust with users, artists, advertisers and employees; ● offer competitive economics to advertisers and users alike; ● maintain and expand revenue producing initiatives including ad sales, in-app purchases and subscriptions; ● deliver superior experiences and results for users, artists and advertisers alike; ● identify, attract, retain and motivate new users and artists; and ● manage our expanding operations.
Substituting free traffic with paid alternatives could also lead to increased costs. These risks highlight the critical importance of continuous adaptation to the evolving search engine landscape and the potential consequences if we do not adequately navigate these challenges. User acquisition of our apps depends on a host of items including and especially on paid and organic app marketing initiatives.
Substituting free traffic with paid alternatives could also lead to increased costs. These risks highlight the critical importance of continuous adaptation to the evolving search engine landscape and the potential consequences if we do not adequately navigate these challenges. User acquisition for our apps depends on a host of items including and especially on paid and organic app marketing initiatives.
Compliance failure either by us or our partners, or vendors could harm our business. ● New laws that may impact our business, such as those affecting artificial intelligence and efforts by lawmakers in various jurisdictions to regulate providers of certain online services which may apply to our business and therefore introduce additional compliance obligations and potential sanctions and penalties for failings in these areas.
Compliance failure either by us or our partners, or vendors could harm our business. ● New laws may impact our business, such as those affecting artificial intelligence and efforts by lawmakers in various jurisdictions to regulate providers of certain online services which may apply to our business and therefore introduce additional compliance obligations and potential sanctions and penalties for failings in these areas.
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.
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, and Canada, “Emojipedia” in the United States, the European Union, the United Kingdom and Australia, “World Emoji Day” in the United States and United Kingdom, and “GuruShots” in the United States.
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 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, coins, resources, or content, or convert into paying subscribers and renew their paid subscriptions our revenue, financial results and business may be significantly harmed.
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.
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. 14 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.
If consumers and/or creators do not perceive our products as useful, effective, entertaining, reliable, and/or trustworthy, we may not be able to attract or keep users or otherwise maintain or increase the frequency and duration of their engagement or the percentage of users that are converted into paying subscribers.
If consumers and/or creators do not perceive our products as useful, effective, entertaining, reliable, and/or trustworthy, we may not be able to attract or keep users or otherwise maintain or increase the frequency and duration of their engagement or the percentage of users that are converted into or remain paying subscribers.
Our systems may be vulnerable to damage or interruption from telecommunication failures, power loss, computer attacks or viruses, earthquakes, floods, fires, terrorist attacks and similar events. Parts of our system are not fully redundant or backed up, and our disaster recovery planning may not be sufficient for all eventualities.
Our systems may be vulnerable to damage or interruption from telecommunication failures, power loss, computer or hacking attacks or viruses, earthquakes, floods, fires, terrorist attacks and similar events. Parts of our system are not fully redundant or backed up, and our disaster recovery planning may not be sufficient for all eventualities.
We have significant operations in Europe and Israel that are denominated in foreign currencies, primarily the Norwegian Krone, Euro and Israel Shekel, subjecting us to foreign currency risk. The strengthening or weakening of the U.S. Dollar versus these currencies impacts the expenses generated in these foreign currencies when converted into the U.S. Dollar.
We have significant operations in Europe and Israel that are denominated in foreign currencies, primarily the Norwegian Krone, Euro and Israeli Shekel, subjecting us to foreign currency risk. The strengthening or weakening of the U.S. Dollar versus these currencies impacts the expenses generated in these foreign currencies when converted into the U.S. Dollar.
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.
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. 22 We need to invest in paid user acquisition in order to grow our customer base.
Our business depends on a high degree of app installs from the app stores and website traffic, which is dependent on many factors, including the availability of appealing website content and search engine optimization (“SEO”), affiliate marketing and display advertising, as well as social media and email.
Our business depends on a high degree of app installs from the app stores and website traffic, which is dependent on many factors, including the availability of appealing website content and search engine optimization, affiliate marketing and display advertising, as well as social media and email.
Directive Article 17 removes the shield of the current ‘hosting exemption,’ enshrined in the Electronic Commerce Directive (2000/31/EC) (the “E-Commerce Directive”), and replaces it with a principle of full liability where “online content sharing service providers” (“OCSSPs”) are concerned.
The DSM Directive Article 17 removes the shield of the current ‘hosting exemption,’ enshrined in the Electronic Commerce Directive (2000/31/EC) (the “E-Commerce Directive”), and replaces it with a principle of full liability where “online content sharing service providers” (“OCSSPs”) are concerned.
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.
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.
Although we have invested and continue to invest in systems and resources, which are intended to ensure that we are compliant with the requirements of the GDPR, CCPA, DMCA, the Directive and other U.S. and international laws relating to, among other things, materials that infringe on copyrights and contain other objectionable content, our systems may not be sufficient or we may unintentionally err and fail to comply with these laws and regulations which could expose us to claims, judgments, monetary liabilities and other remedies, and to limitations on our business practices which could materially adversely affect our business and financial results. 33 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.
Although we have invested and continue to invest in systems and resources, which are intended to ensure that we are compliant with the requirements of the GDPR, CCPA, DMCA, the DSM Directive and other U.S. and international laws relating to, among other things, materials that infringe on copyrights and contain other objectionable content, our systems may not be sufficient or we may unintentionally err and fail to comply with these laws and regulations which could expose us to claims, judgments, monetary liabilities and other remedies, and to limitations on our business practices which could materially adversely affect our business and financial results. 34 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.
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.
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 at a cost effective rate, 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.
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.
Our products face competition in all aspects of their 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.
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 new 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.
Consumer purchases of discretionary retail items and specialty retail products, as well as participation in gallery events, may be adversely affected by national and regional economic, market and other conditions such as employment levels, salary and wage levels, the availability of consumer credit, inflation, high interest rates, high tax rates, high fuel prices, the threat of a pandemic or other health crisis (such as COVID-19) and consumer confidence with respect to current and future economic, market and other conditions.
Consumer purchases of discretionary retail items and specialty retail products, as well as participation in gallery events, may be adversely affected by national and regional economic, market and other conditions such as employment levels, salary and wage levels, the availability of consumer credit, inflation, high interest rates, high tax rates, high fuel prices, the threat of a pandemic or other health crisis and consumer confidence with respect to current and future economic, market and other conditions.
In addition to possible stockholders’ approval, we may also have to obtain approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable laws and regulations, which could result in increased delay and costs. 31 LEGAL AND REGULATORY RISKS Legal or regulatory proceedings or allegations of impropriety could have a material adverse impact on our reputation, results of operations, financial condition and liquidity.
In addition to possible stockholders’ approval, we may also have to obtain approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable laws and regulations, which could result in increased delay and costs. 32 LEGAL AND REGULATORY RISKS Legal or regulatory proceedings or allegations of impropriety could have a material adverse impact on our reputation, results of operations, financial condition and liquidity.
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.
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. 40 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.
We face similar risks and costs as our products and services are offered in international markets and may be subject to additional regulations. 32 In many, but not all, territories outside of the U.S. there are laws similar to the DMCA that exempt us from copyright infringement liability that may arise due to hosting user-uploaded materials.
We face similar risks and costs as our products and services are offered in international markets and may be subject to additional regulations. 33 In many, but not all, territories outside of the U.S. there are laws similar to the DMCA that exempt us from copyright infringement liability that may arise due to hosting user-uploaded materials.
GuruShots’ financial performance during the period from the April 2022 acquisition through July 31, 2023, was materially impacted by a combination of industry specific, macroeconomic, and geopolitical challenges that contributed to negatively impacting ROAS. 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.
GuruShots’ financial performance during the period from the April 2022 acquisition through July 31, 2024, was materially impacted by a combination of industry specific, macroeconomic, and geopolitical challenges that contributed to negatively impacting ROAS. 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.
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.
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 2024, we experienced an 8% decline in paid subscriptions.
Such laws, regulations, regulatory codes and guidelines may be inconsistent across jurisdictions or conflict with other rules and change regularly. On July 10, 2023, the European Commission adopted its adequacy decision relating to the new EU-U.S. Data Privacy Framework (“DPF”).
Such laws, regulations, regulatory codes and guidelines may be inconsistent across jurisdictions or conflict with other rules and change regularly. For example, on July 10, 2023, the European Commission adopted its adequacy decision relating to the new EU-U.S. Data Privacy Framework (“DPF”).
On October 7, 2023, Hamas militants and members of other terrorist organizations infiltrated Israel’s southern border from the Gaza Strip and conducted a series of terror attacks on civilian and military targets. Thereafter, these terrorists launched extensive rocket attacks on Israeli population and industrial centers located along the Israeli border with the Gaza Strip.
On October 7, 2023, Hamas militants and members of other terrorist organizations infiltrated Israel’s southern border from the Gaza Strip and conducted a series of terror attacks on civilian and military targets. Thereafter, Hamas launched extensive rocket attacks on Israeli population and industrial centers located along the Israeli border with the Gaza Strip.
The OSB regulates “user-to-user” services, e.g., services that allow content to be generated by a user and then shared and encountered by other users. The DSA and OSB impose additional obligations on covered service providers and may increase liability for such service providers in relation to content hosted and shared on their services.
The OSA regulates “user-to-user” services, e.g., services that allow content to be generated by a user and then shared and encountered by other users. The DSA and OSA impose additional obligations on covered service providers and may increase liability for such service providers in relation to content hosted and shared on their services.
As such, we will likely incur legal costs in identifying the extent to which obligations under the DSA and OSB may impact our business and there may be ongoing compliance costs associated with these new laws (and any comparable changes in the law in other jurisdictions).
As such, we will likely incur legal costs in identifying the extent to which obligations under the DSA and OSA may impact our business and there may be ongoing compliance costs associated with these new laws (and any comparable changes in the law in other jurisdictions).
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.
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. ● The GuruShots acquisition may fail to yield growth opportunities and achieve beneficial synergies. ● 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.
RISKS RELATED TO CONTENT AND INTELLECTUAL PROPERTY If we are unable to license, acquire or otherwise obtain access to compelling content and services at reasonable cost or if we do not develop or commission compelling content of our own, the number of users of the Zedge Marketplace may not grow as anticipated, or may decline, or users’ level of engagement with the Zedge Marketplace may decline, all or any of which could materially harm our business and operating results.
RISKS RELATED TO CONTENT AND INTELLECTUAL PROPERTY If we face intellectual property infringement claims, or are unable to license, acquire or otherwise obtain access to compelling content and services at reasonable cost, or if we do not develop or commission compelling content of our own, the number of users of the Zedge Marketplace may not grow as anticipated, or may decline, or users’ level of engagement with the Zedge Marketplace may decline, all or any of which could materially harm our business and operating results.
Such litigation, if instituted against us, could cause us to incur substantial costs and divert management’s attention and resources. 40 We are controlled by our majority stockholder, which limits the ability of other stockholders to affect our management.
Such litigation, if instituted against us, could cause us to incur substantial costs and divert management’s attention and resources. 41 We are controlled by our majority stockholder, which limits the ability of other stockholders to affect our management.
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.
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, 2024, and most of our revenues for fiscal 2024.
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.
Conversely, over the past seven years, GuruShots has successfully increased the compounded annual growth rate of monthly spending per paying player by around 9.9%. 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.
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.
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.
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.
Although we had positive cash flow from operating activities fiscal 2023 and 2024, 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.
Our ability to successfully retain or expand our user base will depend on our ability to achieve the following, among others: ● anticipate and effectively respond to the growing number of internet users in general and our users in particular; ● attract, retain and motivate talent, including but not limited to application developers, visual designers, product and program managers and engineers who have experience developing consumer facing digital products or other mobile internet products and services; ● effectively market our existing and new products and services in response to evolving user needs; ● develop in a timely fashion and launch new products and features, and develop and launch other internet products cost-effectively; ● funnel our existing users and prospects into new products that we develop, independent of our current product suite, and convert them into recurring users of these new products; ● successfully recruit new users, artists, individual creators and brands that offer their content to our users; ● further improve our platform to provide a compelling and optimal user experience through integration of products and services provided by existing and new third-party developers or business partners; and ● continue to provide quality content to attract and retain our users and advertisers.
Our ability to successfully retain or expand our user base will depend on our ability to achieve the following, among others: ● anticipate and effectively respond to the growing number of internet users in general and our users in particular; ● attract, retain and motivate talent, including but not limited to application developers, visual designers, product and program managers and engineers who have experience developing consumer facing digital products or other mobile internet products and services; ● effectively market our existing and new products and services in response to evolving user needs; ● develop in a timely fashion and launch new products and features, and develop and launch other internet products cost-effectively; ● funnel our existing users and prospects into new products that we develop, independent of our current product suite, and convert them into recurring users of these new products; ● successfully recruit new users, artists, individual creators and brands that offer their content to our users; ● further improve our platform to provide a compelling and optimal user experience through integration of products and services provided by existing and new third-party developers or business partners; and ● continue to provide quality content to attract and retain our users and advertisers. 17 We cannot assure you that our existing products and services, will remain sufficiently popular with our users.
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.
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. 37 From time to time, we are subject to claims from owners of technology patents, copyrights, trademarks, trade secrets and content, who assert claims against us.
Impacting the growth figures is the inclusion of GuruShots for all of fiscal 2023 as compared to only the final three and a half months of fiscal 2022.
Impacting the growth figures in fiscal 2023 as compared to fiscal 2024 is the inclusion of GuruShots for all of fiscal 2023 as compared to only the final three and a half months of 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.
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 69% of overall advertising revenue in fiscal 2024.
These risks inherent in our international operations and expansion increase our costs of doing business internationally and could result in material harm to our business, operating results, and financial condition. Conditions in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them, may adversely affect our operations.
These risks inherent in our international operations and expansion increase our costs of doing business internationally and could result in material harm to our business, operating results, and financial condition. Conditions in Israel, including the October 7, 2023 attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them, may adversely affect our operations.
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.
We may not be successful in diversifying our revenue mix in order to reduce our significant dependence on third-party advertisers. In fiscal 2024, approximately 79% 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 have also 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 “GuruShots” in Canada, India, the European Union, and the United Kingdom, and have obtained copyright registrations for the GuruShots mobile and web-based applications, and have obtained a copyright registration for our flagship app, Zedge.
We have also applied for trademark protection for “pAInt,” and “Zedge pAInt” in the United States, a stylized “D” logo in India, and “GuruShots” in Canada, India, the European Union, and the United Kingdom, and have obtained copyright registrations for the GuruShots mobile and web-based applications, and have obtained a copyright registration for our flagship app, Zedge.
Any failure to do so could adversely affect our business, financial condition, and results of operations. ● If we fail to attract advertisers or if advertisers reduce their spend with us, our revenues, profitability and prospects may be materially and adversely affected. ● The digital advertising market may deteriorate or develop more slowly than expected, which could materially harm our business and results of operations. ● A material amount of our revenue is generated from a limited number of geographies and third-party advertising demand partners.
Any failure to do so could adversely affect our business, financial condition, and results of operations. ● If we are unable to compete for advertisers or if advertisers reduce their spend with us, our revenues, profitability and prospects may be materially and adversely affected. ● The digital advertising market may deteriorate or develop more slowly than expected, which could materially harm our business and results of operations. ● A material amount of our revenue is generated from a limited number of geographies and third-party advertising demand partners.
From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources and may not be successful. In addition, it is often difficult to create and enforce intellectual property rights in certain international markets.
From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources and may not be successful. We may face challenges in enforcing intellectual property rights in international markets. It is often difficult to create and enforce intellectual property rights in certain international markets.
The intensity and duration of Israel’s current war against Hamas is difficult to predict, and as are such war’s economic implications on the Company’s business and operations.
The intensity and duration of Israel’s current war against Hamas is difficult to predict as are such war’s economic implications on the global economy. 26 The intensity and duration of Israel’s current war against Hamas is difficult to predict, and as are such war’s economic implications on the Company’s business and operations.
If a claim of infringement is brought against us, we may be required to pay substantial penalties or other damages and fines, remove relevant content, enter into license agreements that may not be available on commercially reasonable terms or at all or be barred from any of the third-party distribution platforms.
If a claim of infringement is brought against us that we are not able to successfully and cost-effectively defend, we may be required to pay substantial penalties or other damages and fines, remove relevant content, enter into license agreements that may not be available on commercially reasonable terms or at all or be barred from any of the third-party distribution platforms.
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.
Our effective tax rate for fiscal 2024 was 19.3% compared with 7.0% for fiscal 2023. 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.
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.
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; ● potentially adverse tax developments; 25 ● 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; ● risks related to other government regulation, required compliance with local laws or lack of legal precedent; and ● risks specific to operating in war-torn regions where employees may be mobilized for army service and where damage and/or loss of life may occur when under attack.
The expenses associated with equity-based compensation have affected our net income and may reduce our net income in the future, and any additional equity issued under equity-based compensation schemes will dilute the ownership interests of our stockholders.
The expenses associated with equity-based compensation, including the potential repricing of options, have affected our net income and may reduce our net income in the future, and any additional equity issued under equity-based compensation schemes will dilute the ownership interests of our stockholders.
Any breaches of these new laws (to the extent they apply) may also lead to penalties and reputational damage. Furthermore, legislators’ and regulators’ future approach to artificial intelligence (“AI”) may impact our business.
Any breaches of these new laws (to the extent they apply) may also lead to penalties and reputational damage. Furthermore, legislators’ and regulators’ future approach to AI may impact our business.
If we fail to manage our economy well, we risk confusing or upsetting users to the point that they reduce their purchases which could negatively hurt the business. 11 If we fail to attract advertisers or if advertisers reduce their spend with us, our revenues, profitability and prospects may be materially and adversely affected.
If we fail to manage our economy well, we risk confusing or upsetting users to the point that they reduce their purchases which could negatively hurt the business. If we are unable to compete for advertisers or if advertisers reduce their spend with us, our revenues, profitability and prospects may be materially and adversely affected.
For example, in 2023, and 2022 our marketing expenses were approximately $3.2 million and $0.9 million, respectively, and we expect our marketing expenses to continue to account for a significant portion of our operating expenses.
For example, in 2024 and 2023 our marketing expenses were approximately $6.9 million and $3.2 million, respectively, and we expect our marketing expenses to continue to account for a significant portion of our operating expenses.
There remains considerable uncertainty and volatility in the national and global economy. Further or future slowdowns or disruptions in the economy, market and other conditions could adversely affect us and our business strategy. We may not be able to sustain or increase our current net sales if there is a decline in consumer spending.
Further or future slowdowns or disruptions in the economy, market and other conditions could adversely affect us and our business strategy. We may not be able to sustain or increase our current net sales if there is a decline in consumer spending.
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.
If the market for mobile advertising deteriorates, 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.
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.
Any change to this mix could result in negatively impacting our business, financial condition, and results of operations. In fiscal 2024, revenue from well developed economies accounted for approximately 80% of our total revenues and 69% of our total advertising revenues were generated by three advertising demand partners.
Our digital products and services may suffer negative consequences, including a material reduction of revenue, with mass adoption of website ad blocking technologies or other technologies that limit the ability to personalize advertisements, including, without limitation, if the price for this advertising inventory declines.
We may suffer negative consequences, including a material reduction of revenue, with mass adoption of website ad blocking technologies or other technologies that limit the ability to personalize advertisements, including, without limitation, if the price for this advertising inventory declines.
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.
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.
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.
In fiscal 2024 and fiscal 2023, we recorded a loss of $190,000 and a gain of $36,000, respectively, from foreign currency movements relative to the U.S. Dollar. Included in these amounts were losses from hedging activities of $245,000 and gains of $14,000 in fiscal 2024 and fiscal 2023, respectively.
These laws may restrict our ability to use personal information in connection with our business operations, and along with other state laws, such as the California Online Privacy Protection Act, create compliance obligations. The CCPA also provides a private right of action for certain data breaches. Additionally, alongside California, several other states have also enacted comprehensive consumer data privacy laws.
These laws may restrict our ability to use personal information in connection with our business operations, and along with other state laws, such as the California Online Privacy Protection Act, create compliance obligations. The CCPA also provides a private right of action for certain data breaches.
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.
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.
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.
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. 12 The digital advertising market may deteriorate, which could materially harm our business and results of operations.
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.
In order to do so, we still need, among other things, to: ● successfully market the recently-launched web-based offering to both creators and consumers; ● expand the digital content types we offer to include more types of creators ● 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 exclusive, limited edition digital content functionality that meets 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.
RISKS RELATED INFORMATION TECHNOLOGY AND DATA SECURITY 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.
Such losses could adversely affect our business prospects, results of operations, cash flows and financial condition. 38 RISKS RELATED INFORMATION TECHNOLOGY AND DATA SECURITY 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.
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.
In Q4 of fiscal 2024, our Zedge App’s users in emerging markets declined by 15% while its users in well-developed regions declined 19% when compared to fiscal 2023. India comprised 30% of our MAU as of July 31, 2024. 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, 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.
In fiscal 2024, 79% of our Zedge App’s users were located in emerging markets with 21% of users in well-developed regions compared to 78% and 22% respectively in fiscal 2023. India comprised 30% of our MAU as of July 31, 2024.
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.
Although the Zedge App had initial success in converting freemium users into paid subscribers, starting with zero in January 2019 and ending fiscal 2023 with approximately 647,000, we ended fiscal 2024 with 669,000 subscribers, a 3.4% increase and there is no guarantee that we will be successful in improving subscriber base growth or in maintaining our current subscriber base.
Several states have enacted laws requiring businesses subject to the laws to implement cyber and data security programs. For example, New York enacted the Stop Hacks and Improve Electronic Data Security Act (SHIELD Act), effective March 2020, which requires companies with data relating to New Yorkers to adopt comprehensive cybersecurity programs.
For example, New York enacted the Stop Hacks and Improve Electronic Data Security Act (SHIELD Act), effective March 2020, which requires companies with data relating to New Yorkers to adopt comprehensive cybersecurity programs.
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.
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. 9 ● 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. ● Any significant system or network disruption or cyberattack 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.
From time to time, we receive user feedback in connection with errors, flaws or failures and such errors, flaws or failures may also come to our attention during our internal testing process.
Our products may contain errors, flaws or failures that may only become apparent after their release. From time to time, we receive user feedback in connection with errors, flaws or failures and such errors, flaws or failures may also come to our attention during our internal testing process.
We are particularly susceptible to market conditions and risks associated with the mobile app ecosystem, which also include the popularity, price, and timing of our apps, changes in user demographics, the availability and popularity of other forms of entertainment. Furthermore, critical reviews and general tastes and preferences may change quickly and without prior warning.
We are particularly susceptible to market conditions and risks associated with the mobile app ecosystem, which also include the popularity, price, and timing of our apps, changes in user demographics, the availability and popularity of other forms of entertainment.
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.
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.
As such, we may not be able to fund our operating expenses and expenditures out of cash flows, which would require us to utilize debt or equity financing which we may not be able to secure or which we may only secure on terms that are not favorable, which may result in significant dilution or voluntary or involuntary dissolution or liquidation proceeding of us and a total loss of your investment. 19 Debt obligations could adversely affect our ability to raise additional capital or to fund our operations and also exposes us to interest rate risk which could negatively impact our ability to make debt service payments.
As such, we may not be able to fund our operating expenses and expenditures out of cash flows, which would require us to utilize debt or equity financing which we may not be able to secure or which we may only secure on terms that are not favorable, which may result in significant dilution or voluntary or involuntary dissolution or liquidation proceeding of us and a total loss of your investment.
A key component of our growth strategy involves the adoption and utilization of artificial intelligence (AI), which introduces certain risks. We currently incorporate AI into specific existing and planned products, as well as our internal operations.
Furthermore, critical reviews and general tastes and preferences may change quickly and without prior warning. 30 A key component of our growth strategy involves the adoption and utilization of artificial intelligence (AI), which introduces certain risks. We currently incorporate AI into specific existing and planned products, as well as our internal operations.
For example, the publication of the White House Blueprint for an AI Bill of Rights signals that operators of AI systems in the U.S. may face significant compliance obligations of a go-forward basis.
For example, the publication of the White House Blueprint for an AI Bill of Rights signals that operators of AI systems in the U.S. may face significant compliance obligations on a go-forward basis. State laws relating to AI are also proliferating, including significant state AI laws in California and Colorado.
While AI offers substantial opportunities, it also carries inherent risks. Our competitors may possess greater financial and technological resources, providing them with a competitive edge in attracting, motivating, and retaining top AI professionals. This could pose challenges in building and maintaining our AI capabilities. Furthermore, the use of AI brings to the forefront emerging ethical concerns.
While AI offers substantial opportunities, it also carries inherent risks to our business, reputation and financial results. AI technologies are complex and evolving rapidly. Our competitors may possess greater financial and technological resources, providing them with a competitive edge in attracting, motivating, and retaining top AI professionals. This could pose challenges in building and maintaining our AI capabilities.
We spend a significant amount on marketing activities to acquire new customers and retain and engage existing customers and have plans to maintain and increase that focus.
Maintaining and promoting awareness of our services is important to our ability to attract and retain customers. We spend a significant amount on marketing activities to acquire new customers and retain and engage existing customers and have plans to maintain and increase that focus.
We have also acquired other companies and made asset purchases and integrating those into Zedge has placed and continues to place significant strain on management and resources.
We cannot assure you that these periods will recur or be sustainable. We have also acquired other companies and made asset purchases and integrating those into Zedge has placed and continues to place significant strain on management and resources.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our principal executive office was located in a leased premises comprising approximately 500 square feet of space in New York City, which lease was terminated on July 15, 2020. Since July 2020, we have maintained a virtual presence as our headquarters as our corporate staff has been working remotely.
Biggest changeItem 2. Properties Since July 2020, we have not maintained a physical headquarters, but maintain a virtual presence as our headquarters as our corporate staff has been working remotely. We lease a 4,900 square-foot office in Trondheim, Norway, as well as a satellite development center in Vilnius, Lithuania, that accommodate our product, design, monetization, marketing and technology teams.
Our servers are hosted in leased data centers in different geographic locations in the United States. These data centers are owned and maintained by third-party data center providers. The Company believes it has sufficient space to accommodate its employees and operations.
These data centers are owned and maintained by third-party data center providers. The Company believes it has sufficient space to accommodate its employees and operations.
Removed
Effective April 1, 2021, the Company relocated its main office in Trondheim, Norway with 11,600 square feet of office space to a 4,900 square-foot facility. GuruShots leases 1,600 square feet of office space in Tel Aviv, Israel. We also lease a satellite development center in Vilnius, Lithuania.
Added
The Trondheim lease is due to expire in March 2027. We lease approximately 2,200 square feet of office space in Tel Aviv, Israel that accommodates members of both the GuruShots and Zedge teams. The Tel Aviv lease is due to expire in October 2026. Our servers are hosted in leased data centers in different geographic locations in the United States.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe 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.
Biggest changeThe 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. 45 The following table summarizes the share repurchase activity for the fourth quarter fiscal of 2024: Total Number of Shares Purchased as Approximate Dollar Value of Shares that May Total Number of Average Price Part of Publicly Yet Be Purchased Period Shares Purchased Paid Per Share(1) Announced Programs Under the Program (in thousands) (in thousands) (in thousands) May 1, 2024 to May 31, 2024 16 $ 2.65 16 $ 1,227 June 1, 2024 to June 30, 2024 77 $ 2.88 77 $ 1,007 July 1, 2024 - July 31, 2024 59 $ 3.72 59 $ 788 Total 152 152 (1) The average price paid per share includes any broker commissions.
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.
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, 2024 and which is incorporated by reference herein. Recent Sales of Unregistered Securities None.
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.
As of October 28, 2024, 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.
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.
Repurchases under the 2021 Share Repurchase Plan were, and under the 2024 Share Repurchase Plan are to 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.
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.
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 (“2021 Share Repurchase Plan”) which was completed on August 28, 2024.
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.
On October 28, 2024, the last sales price reported on the NYSE American for our Class B common stock was $3.05 per share. On October 28, 2024, there were 263 holders of record of our Class B common stock and 1 holder of record of our Class A common stock.
Added
On September 9, 2024, our Board approved a new $5 million share buyback program (the “2024 Share Repurchase Plan”).

Item 7. Management's Discussion & Analysis

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

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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.
Biggest changeResults of Operations The following table sets forth certain of our consolidated results of operations data for the fiscal year ended July 31, 2024 compared to the fiscal year ended July 31, 2023: Fiscal Year Ended July 31, Change 2024 2023 $ % (in thousands, except percentages) Revenues $ 30,091 $ 27,241 $ 2,850 10.5 % Direct cost of revenues 1,859 2,242 (383 ) -17.1 % Selling, general and administrative 25,625 21,857 3,768 17.2 % Depreciation and amortization 2,454 3,269 (815 ) -24.9 % Impairment of intangible assets 11,958 - 11,958 nm Impairment of goodwill - 8,727 (8,727 ) nm Change in fair value of contingent consideration - (1,943 ) 1,943 nm Loss from operations (11,805 ) (6,911 ) (4,894 ) 70.8 % Interest and other income, net 626 311 315 101.3 % Net (loss) income resulting from foreign exchange transactions (190 ) 36 (226 ) nm Income tax benefit (2,198 ) (462 ) (1,736 ) 375.8 % Net loss $ (9,171 ) $ (6,102 ) $ (3,069 ) 50.3 % nm-not meaningful 56 Comparison of Our Results of Operations for the fiscal years ended July 31, 2024 and 2023 Revenues The following table sets forth the composition of our revenues for the periods indicated: Fiscal Year Ended July 31, 2024 2023 % Changes (in thousands, except percentages) Zedge Marketplace Advertising revenue $ 21,042 $ 18,273 15.2 % Paid subscription revenue 4,349 3,488 24.7 % Other revenues 1,225 833 47.1 % Total Zedge Marketplace revenue 26,616 22,594 17.8 % GuruShots Digital goods and services 3,475 4,647 -25.2 % Total revenue $ 30,091 $ 27,241 10.5 % The following table summarizes our subscription revenue for the periods indicated: Fiscal Year Ended July 31, 2024 2023 % Change (in thousands, except revenue per subscriber and percentages) Subscription Revenue $ 4,349 $ 3,488 24.7 % Active subscriptions net increase (decrease) 22 (45 ) nm Active subscriptions at end of period 669 647 3.4 % Average active subscriptions during the period 654 657 -0.5 % Average monthly revenue per active subscription $ 0.55 $ 0.44 25.0 % nm-not meaningful The following table presents a reconciliation of subscription billings to the most directly comparable GAAP financial measures for the fiscal years ended July 31, 2024 and 2023.
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.
We report subscription revenue gross of the fee retained by Google Play and App Store, as the subscriber is our customer in the contract and we control the service prior to the transfer to the subscriber.
Impact of Israel-Hamas War Given our operations in Israel, the impact of economic, political, geopolitical, and military conditions in the region directly affects us, including conflicts involving missile strikes, infiltrations, and terrorism. Notably, on October 7, 2023, Hamas launched attacks in southern Israel, resulting in casualties and military engagement.
The Israel-Hamas War Given our operations in Israel, the impact of economic, political, geopolitical, and military conditions in the region directly affects us, including conflicts involving missile strikes, infiltrations, and terrorism. Notably, on October 7, 2023, Hamas launched attacks in southern Israel, resulting in casualties and military engagement.
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.
Change in fair value of contingent consideration. 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.
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.
Net (loss) income resulting from foreign exchange transactions . Net (loss) income 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.
Capitalized software and technology development costs Software and technology development activities generally fall into three stages: 1 Planning Stage activities include developing a project or business plan that outlines the goals for the content distribution platform or new product or service; determining the functionality; identifying hardware and software applications that will achieve functionality, security, and traffic flows; and selecting the internal resources that will be assigned to the project as well as the external vendors where applicable. 2 Application and Infrastructure Development Stage activities focus on acquiring or developing hardware and software to operate a content distribution platform or new product and service; and 3 Post-Implementation/Operating Stage activities address training, administration, maintenance, and all other activities to operate an existing content distribution platform or new product or service.
Capitalized software and technology development costs Capitalized Software and Technology Development Costs-Internal-Use Software Software and technology development activities generally fall into three stages: 1 Planning Stage activities include developing a project or business plan that outlines the goals for the content distribution platform or new product or service; determining the functionality; identifying hardware and software applications that will achieve functionality, security, and traffic flows; and selecting the internal resources that will be assigned to the project as well as the external vendors where applicable. 2 Application and Infrastructure Development Stage activities focus on acquiring or developing hardware and software to operate a content distribution platform or new product and service; and 3 Post-Implementation/Operating Stage activities address training, administration, maintenance, and all other activities to operate an existing content distribution platform or new product or service.
Under ASC 350, Intangibles-Goodwill and Other , goodwill is not amortized, but instead is tested for impairment annually, or if certain circumstances indicate a possible impairment may exist. We test goodwill for impairment on the first day of the fourth fiscal quarter or upon the occurrence of events or changes in circumstances that indicate that the asset might be impaired.
Under ASC 350, Intangibles-Goodwill and Other , goodwill is not amortized, but instead is tested for impairment annually, or if certain circumstances indicate a possible impairment may exist. 51 We test goodwill for impairment on the first day of the fourth fiscal quarter or upon the occurrence of events or changes in circumstances that indicate that the asset might be impaired.
Should the estimates and assumptions prove to be incorrect, we may be required to record impairments in future periods and such impairments could be material. 48 Intangible assets are carried at cost, less accumulated amortization, unless a determination has been made that their value has been impaired.
Should the estimates and assumptions prove to be incorrect, we may be required to record impairments in future periods and such impairments could be material. Intangible assets are carried at cost, less accumulated amortization, unless a determination has been made that their value has been impaired.
In effect, we reduced the amount payable from $5.9 million to $0, due to the decrease in the likelihood that certain contingent milestones would be achieved. Interest and other income, net.
In effect, we reduced the amount payable from $5.9 million to $0, due to the decrease in the likelihood that certain contingent payment milestones would be achieved. Interest and other income, net.
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.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES 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.
MAU is a key performance indicator (“KPI”) that captures the number of unique users that used our Zedge App during the final 30 days of the relevant period.
MAU is a key performance indicator (“KPI”) for our Zedge app that captures the number of unique users that used our Zedge App during the final 30 days of the relevant period.
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.
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, 2024 and 2023.
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).
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 resource purchases should be recognized ratably over the period of benefit period (i.e., the period over which the enhanced gaming experience is provided).
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.
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 the end customer through mobile platforms such as Apple’s App Store and Google Play, as well as via the web.
Stock-Based Compensation We account for our share-based compensation arrangements in accordance with ASC 718, “Compensation-Stock Compensation” (“ASC 718”) which requires the measurement and recognition of compensation expense for all share-based payment awards to employees and directors based on estimated fair values on the grant date.
Stock-Based Compensation We account for our share-based compensation arrangements in accordance with ASC 718, “Compensation-Stock Compensation”, which requires the measurement and recognition of compensation expense for all share-based payment awards to employees and directors based on estimated fair values on the grant date.
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.
While we use gross revenue (net of the 30% fee retained by Google Play or App Store 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.
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.
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 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.
When a user purchases Zedge Premium content using Zedge credits, the artist or brand receives 70% of the actual revenue after the Google Play or iTunes fee (“Royalty Payment”) and we receive the remaining 30%, which is recognized as revenue.
When a user purchases Zedge Premium content using Zedge credits or watching a rewarded video, the artist or brand receives 70% of the actual revenue after the Google Play or iTunes fee (“Royalty Payment”) and we receive the remaining 30%, which is recognized as revenue.
MAU is a key performance indicator that captures the number of unique users that used our Zedge App in the last thirty days of the relevant period, which is important to understanding the size of the user base for our Zedge App which is a significant driver of revenue.
Zedge App’s MAU and ARPMAU MAU is a key performance indicator that captures the number of unique users that used our Zedge App in the last thirty days of the relevant period, which is important to understanding the size of the user base for our Zedge App which is a significant driver of revenue.
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.
Our platform allows creators to upload content to our marketplace and avail it to our users either for free or, via ‘Zedge Premium,’ the section of our marketplace where we offer premium content for purchase. In turn, our users utilize the content to personalize their phones and express their individuality.
In addition, Hezbollah, another terrorist organization based in Lebanon has been indiscriminately shelling Israel. The extent and duration of this conflict remain uncertain, potentially involving other groups. Israel’s response led to the mobilization of reservists, affecting our workforce.
In addition, Hezbollah, another terrorist organization based in Lebanon has been indiscriminately shelling Israel since October 8, 2023. The extent and duration of this conflict remain uncertain, potentially involving other groups. Israel’s response led to the mobilization of reservists, affecting our workforce.
Our marketing team invests material resources in analyzing all attributes of a campaign ranging from the creative assets, offer acquisition channel, and platform (i.e., iOS, Android, and web), just to name a few, with the goal of determining whether a specific campaign is likely to yield a profitable customer.
Our marketing team invests material resources in analyzing all attributes of a campaign ranging from, among others, the creative assets, offer acquisition channel and platform (i.e., iOS, Android, and web), with the goal of determining whether a specific campaign is likely to yield a profitable customer.
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.
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, 2024, users in emerging markets represented 78.9% of our MAU compared to 78.0% a year prior.
Google Play and the App Store process subscription prepayment on Zedge’s behalf, and retain up to 30% as a fee. Both monthly and yearly subscriptions are nonrefundable after a period of seven days. Paid subscriptions are automatically renewed at expiration unless cancelled by subscribers.
Google Play and App Store process subscription prepayment on Zedge’s behalf, and retain a fee of up to 30%. Subscriptions are nonrefundable after a period of seven days. Paid subscriptions are automatically renewed at expiration unless cancelled by subscribers.
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.
Every month, GuruShots stages more than 300 competitions that result in players uploading in excess of 670,000 photographs and casting close to 3.2 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.
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.
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. We believe that Emojipedia provides growth potential to the Zedge App, and it was immediately accretive to earnings post acquisition in August 2021.
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’.
Our leading products include Zedge Ringtones and Wallpapers, which we refer to as our “Zedge App,” 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’.
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.
In August 2021, we acquired Emojipedia Pty Ltd, 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.
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.
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, 2024 MAU declined 15.5% year over year primarily due to attrition in both developed markets and emerging markets.
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.
In July 2024, Emojipedia received approximately 37.6 million monthly page views and has approximately 9.6 million monthly active users as of July 31, 2024 of which approximately 46.7% are located in well-developed markets. It is the top resource for all things emoji, offering insights into data and cultural trends.
In fiscal 2023, we received proceeds of $1,785 from the exercise of stock options for which the Company issued 1,500 shares of its Class B common stock. In fiscal 2022, the Company received proceeds of $8,631 from the exercise of stock options for which the Company issued 5,166 shares of its Class B common stock.
In fiscal 2023, we received proceeds of $1,785 from the exercise of stock options for which the Company issued 1,500 shares of its Class B common stock.
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.
In fiscal 2024 and fiscal 2023, we purchased 6,328 shares and 6,310 shares respectively of Class B Stock from certain employees for $13,000 and $17,000 respectively, to satisfy tax withholding obligations in connection with the vesting of restricted stock and DSUs.
At our request, the maximum principal amount of the term loan was reduced to $2 million as of May 11, 2023. Pursuant to the Amended Loan Agreement, $2,000,000 was advanced in a single-cash advance on the closing date on October 28, 2022. As of July 31, 2023, there were no availability under the term loan facility.
Pursuant to the Amended Loan Agreement, $2,000,000 was advanced in a single-cash advance on the closing date on October 28, 2022. At our request, the maximum principal amount of the term loan was reduced to $2 million as of May 11, 2023.
Therefore, the result of recognizing the related revenues at the point in time which user first consumes the respective Resource would yield a result that is not substantially different then ratable recognition over the period of benefit. Accordingly, revenue is recognized once the virtual goods are sold.
Therefore, the result of recognizing the related revenues at the point in time which user first consumes the respective resource would yield a result that is not substantially different then ratable recognition over the period of benefit.
If the projected undiscounted future cash flows are less than the carrying value of the asset, we will record an impairment loss, if any, based on the difference between the estimated fair value and the carrying value of the asset.
We test for recoverability based on the projected undiscounted cash flows to be derived from such asset. If the projected undiscounted future cash flows are less than the carrying value of the asset, we will record an impairment loss, if any, based on the difference between the estimated fair value and the carrying value of the asset.
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.
Fiscal Year Ended July 31, 2024 2023 % Change (in thousands, except percentages) Net (loss) income resulting from foreign exchange transactions $ (190 ) $ 36 nm As a percentage of revenues -0.6 % 0.1 % nm-not meaningful In fiscal 2024 and 2023, we incurred loss of $245,000 and gain of $14,000, respectively, from NOK and EUR hedging activities.
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.
Accordingly, revenue is recognized once the virtual goods are sold. 50 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.
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.
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.
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.
Financing Activities 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.
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.
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.
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.
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).
Three Months Ended July 31, (in thousands, except ARPMAP) 2023 2022 % Change Monthly Active Payers 6,444 8,204 -21.5 % Average Revenue per Monthly Active Payer $ 50.3 $ 56.1 -10.3 % The following charts present the MAP and ARPMAP – GuruShots for the consecutive eight quarters ended July 31, 2023: Our KPIs related to GuruShots are not based on any standardized industry methodology and are not necessarily calculated in the same manner that other companies or third parties may use to calculate these or similarly titled measures.
The following table shows our MAP and ARPMAP for the three months ended July 31, 2024 as compared to the same period a year ago: Three Months Ended July 31, 2024 2023 % Change Monthly Active Payers 4,521 6,444 -29.8 % Average Revenue per Monthly Active Payer $ 52.5 $ 50.3 4.4 % 55 The following charts present the MAP and ARPMAP – GuruShots for the consecutive eight quarters ended July 31, 2024: Our KPIs related to GuruShots are not based on any standardized industry methodology and are not necessarily calculated in the same manner that other companies or third parties may use to calculate these or similarly titled measures.
While the customer can cancel at any time, he or she will not receive any refund but will remain entitled to receive the ad free service until the end of the subscription period. 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.
While the customer can cancel at any time, he or she will not receive any refund but will remain entitled to receive the ad free service until the end of the subscription period. The duration of these contracts is daily, and revenue for these contracts is recognized on a daily ratable basis.
Depreciation and amortization . Depreciation and amortization expense consists mainly of amortization of intangible assets related to the GuruShots and Emojipedia acquisitions, capitalized software and technology development costs of our internal developers on various projects that we invested in specific to the various platforms on which we operate our mobile app service.
Depreciation and amortization expense consists mainly of amortization of intangible assets related to the GuruShots (prior to the full impairment charge of $11.9 million recorded in Q2 of our fiscal 2024) and Emojipedia acquisitions, capitalized software and technology development costs of our internal developers on various projects that we invested in specific to the various platforms on which we operate our service.
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.
The advertiser may compensate us on a cost-per-impression, cost-per-click, cost-per-action basis. 49 Paid Subscription Revenue: Beginning in January 2019 and April 2023, we started offering paid subscription services sold through Google Play and App Store, respectively. When a customer subscribes, they execute a clickthrough agreement with Zedge outlining the terms and conditions between Zedge and the subscriber.
Specifically, we plan to enable the ability for GuruShots players to become Zedge Premium artists and sell their photos to our audience of 30+ million MAU as standard digital images or NFTs. In addition, we look to benefit from the experience that the GuruShots team possesses and test gamifying the Zedge App.
Specifically, we plan to enable GuruShots players to become Zedge Premium artists and sell their photos to our audience of 25+ million MAU (as of July 31, 2024) as standard digital images. In addition, we are benefitting from the experience that the GuruShots team possesses in gamifying the Zedge App.
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.
As of July 31, 2024, our Zedge App had been installed nearly 674 million times since inception and, over the past two fiscal years, has had between 26.1 million and 32.2 million monthly active users (“MAU”), ending with 26.1 million MAU as of July 31, 2024.
LIQUIDITY AND CAPITAL RESOURCES General At July 31, 2023, we had cash and cash equivalents of $18.1 million and working capital (current assets less current liabilities) of $16.0 million.
LIQUIDITY AND CAPITAL RESOURCES General At July 31, 2024, we had cash and cash equivalents of approximately $20.0 million and working capital (current assets less current liabilities) of $17.7 million.
The following tables present the MAU – Zedge App and ARPMAU – Zedge App for the three months ended July 31, 2023 as compared to the same period a year ago: Three Months Ended July 31, (in millions, except ARPMAU - Zedge App) 2023 2022 % Change MAU- Zedge App 30.9 32.0 -3.4 % Developed Markets MAU - Zedge App 6.8 7.3 -6.8 % Emerging Markets MAU - Zedge App 24.1 24.7 -2.4 % Emerging Markets MAU - Zedge App/Total MAU - Zedge App 78 % 77 % 1.0 % ARPMAU - Zedge App $ 0.0552 $ 0.0584 -5.5 % 51 The following charts present the MAU – Zedge App and ARPMAU – Zedge App for the consecutive eight fiscal quarters ended July 31, 2023: GuruShots-MAPs and ARPMAP Monthly Active Payers (“MAPs”).
ARPMAU increased 43.3% for the three months ended July 31, 2023 when compared to the same period a year ago, primarily due to higher advertising rate and higher subscription revenue. 54 The following tables present the MAU – Zedge App and ARPMAU – Zedge App for the three months ended July 31, 2024 as compared to the same period a year ago: Three Months Ended July 31, (in millions, except percentages and ARPMAU - Zedge App) 2024 2023 % Change MAU- Zedge App 26.1 30.9 -15.5 % Developed Markets MAU - Zedge App 5.5 6.8 -19.1 % Emerging Markets MAU - Zedge App 20.6 24.1 -14.5 % Emerging Markets MAU - Zedge App/Total MAU - Zedge App 78.9 % 78.0 % 1.2 % ARPMAU - Zedge App $ 0.0791 $ 0.0552 43.3 % The following charts present the MAU – Zedge App and ARPMAU – Zedge App for the consecutive eight fiscal quarters ended July 31, 2024: GuruShots-MAPs and ARPMAP Monthly Active Payers (“MAPs”).
ARPMAP for a particular time period longer than one month is the average ARPMAP for each month during that period. ARPMAP shows how efficiently we are monetizing each MAP. The following table shows our MAP and ARPMAP for the three months ended July 31, 2023 and 2022.
ARPMAP for a particular time period longer than one month is the average ARPMAP for each month during that period. ARPMAP shows how efficiently we are monetizing each MAP.
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. In April 2022, we acquired GuruShots, a recognized category leader focused on gamifying the photography vertical.
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.
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 four key performance indicators - Monthly Active Users (MAU) and Average Revenue Per Monthly Active User (ARPMAU) for our Zedge App and Monthly Active Payers (MAP) and Average Revenue Per Monthly Active Payer (ARMAP) for GuruShots.
To improve engagement, GuruShots has adopted a set of retention dynamics focused on individual, team and community dynamics that create a sense of belonging, inspiration, recognition, improvement, and competition.
To improve engagement, GuruShots has adopted a set of retention dynamics focused on individual, team and community dynamics that create a sense of belonging, inspiration, recognition, improvement, and competition. GuruShots utilizes a ‘Free-to-Play’ business model and generates revenue through in-app purchases of virtual currency.
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.
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 filing of this annual report on Form 10-K. 61 The following table presents selected cash flow information for the periods indicated: Fiscal Year Ended July 31, (in thousands) 2024 2023 $ Changes Cash flows provided by (used in): Operating activities $ 5,850 $ 3,162 $ 2,688 Investing activities (1,194 ) (2,422 ) 1,228 Financing activities (2,643 ) 387 (3,030 ) Effect of exchange rate changes on cash and cash equivalents (140 ) (87 ) (53 ) Increase in cash and cash equivalents $ 1,873 $ 1,040 $ 833 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.
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.
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.
We market GuruShots to prospective players, primarily via paid user acquisition channels, and utilize a host of creative formats including static and video ads in order to promote the game.
In addition, we migrated to a coin-based economy with multiple currencies in order to enable more players to earn and spend their currency on in-game resources. We market GuruShots to prospective players, primarily via paid user acquisition channels, and utilize a host of creative formats including static and video ads in order to promote the game.
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.
CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS In connection with the acquisition of GuruShots, the Company (i) committed to a retention pool of $4 million in cash (in addition to the $4 million portion of the retention pool to be paid in the Company’s Class B common stock) to be paid to the founders and employees of GuruShots 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 invest a minimum in user acquisition in the first 24 months following the closing subject to the acquired users generating minimum ROAS thresholds and payment of an earnout if certain growth targets were met.
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.
We made the final payment of about $1.0 million on August 1, 2022. Cash used in investing activities in the fiscal years ended July 31, 2024 and 2023 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.
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.
An advertising exchange is similar to an advertising network, except that the exchange typically bids in real-time for inventory. 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.
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.
If a user purchases Zedge Credits, Google Play or App Store retains a fee of 30% of the purchase price.
In the fiscal year ended July 31, 2023, two customers represented 26% and 16% of our revenue. In the fiscal year ended July 31, 2022, two customers represented 28% and 15% of our revenue.
In the fiscal year ended July 31, 2023, two customers represented 26% and 16% of our revenue. At July 31, 2024, three customers represented 37%, 15% and 10% of our accounts receivable balance and at July 31, 2023, two customers represented 36% and 18% of our accounts receivable balance.
MoPub (owned by X, formerly known as Twitter, and sold to AppLovin in January 2022), Google and Meta, and we terminate our services with smaller customers immediately upon balances becoming past due. Since these smaller customers rely on us to derive their own revenue, they generally pay their outstanding balances on a timely basis.
Google and Meta, and we terminate our services with smaller customers immediately upon balances becoming past due. Since these smaller customers rely on us to derive their own revenue, they generally pay their outstanding balances on a timely basis. In the fiscal year ended July 31, 2024, two customers represented 31% and 9% of our revenue.
To this end we have been developing a new hybrid casual title, ‘AI Art Master,’ which enables players to create generative AI images and compete in themed based competitions with these images. AI Art Master is currently in soft-launch in the Philippines, Poland, and India with the goal of commercial launch in late 2023 or early 2024.
One example is our hybrid casual title, ‘AI Art Master,’ which has been in soft-launch in the Philippines, Poland, and India, that enables players to create generative AI images and compete in themed-based competitions with these images.
Stock-based compensation is included in selling, general and administrative expense in the consolidated statements of (loss) income and comprehensive (loss) income. See Note 1, Description of Business and Summary of Significant Accounting Policies, to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, for discussion of new accounting pronouncements.
Reportable Segments Our business consists of two reportable segments. Recent Accounting Pronouncements See Note 1, Description of Business and Summary of Significant Accounting Policies, to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, for discussion of new accounting pronouncements. 63
There were no impairment charges recorded in the fiscal years ended July 31, 2023 and 2022 presented in the accompanying consolidated financial statements. Goodwill Goodwill represents the excess of purchase price and related costs over the fair value of assets acquired and liabilities assumed of the business acquired.
We recorded $11.9 million impairment charges in Q2 of our fiscal year ended July 31, 2024. Goodwill Goodwill represents the excess of purchase price and related costs over the fair value of assets acquired and liabilities assumed of the business acquired.
The content owner sets the price and the end user can purchase the content by paying for it with Zedge Credits, our closed virtual currency. A user can earn Zedge Credits when taking specific actions such as watching rewarded videos or completing electronic surveys. Alternatively, users can buy Zedge Credits with an in-app purchase.
Alternatively, the content owner may opt to place some items behind video ad gates, in which case the end user can acquire the content by watching a brief video ad. A user can earn Zedge Credits when taking specific actions such as watching rewarded videos or completing electronic surveys. Alternatively, users can buy Zedge Credits with an in-app purchase.
During fiscal 2023, we had pretax loss of about $6.6 million in respect of which we accrued $0.5 million in income tax benefit, an effective tax rate of 7.0% which is lower than the statutory rate primarily due to the $8.7 million goodwill impairment charge and $1.9 million change in fair value of contingent consideration.
During fiscal 2024 we had a pretax loss of about $11.4 million in respect of which we accrued $2.2 million in income tax benefit, an effective tax rate of 19.3% which is lower than the statutory rate primarily due to the addition of $185,000 in valuation allowances related to certain stock-based compensation and the inclusion for U.S. tax purposes, of foreign earnings partially offset by state taxes and foreign tax differential. 60 During fiscal 2023, we had a pretax loss of about $6.6 million in respect of which we accrued $0.5 million in income tax benefit, an effective tax rate of 7.0% which is lower than the statutory rate primarily due to the $8.7 million goodwill impairment charge which had an associated $2.8 million in tax basis and the $1.9 million change in fair value of contingent consideration which had no tax basis.
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.
All of these significant customers are advertising exchanges operated by leading companies, and the receivables represent many smaller amounts due from advertisers.
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.
Changes in Trade Accounts Receivable Gross trade accounts receivables were $3.4 million and $2.9 million at July 31, 2024 and 2023 respectively. Our cash collections in fiscal 2024 and fiscal 2023 were $29.2 million and $24.8 million, respectively. Investing Activities On August 1, 2021, we acquired substantially all of the assets of Emojipedia Pty Ltd for approximately $6.7 million.
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.
Our weekly, monthly, yearly and life-time subscriptions allow users to prepay a fixed fee to remove unsolicited advertisements from our Zedge App. 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.
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.
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 Networks serve as an indirect source of advertising fill to a variety of branded ad campaigns and performance-based ad campaigns. ● Advertising Exchanges.
Intangible Assets-Net We test the recoverability of its intangible assets with finite useful lives whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. We test for recoverability based on the projected undiscounted cash flows to be derived from such asset.
Content providers are paid their portion of revenue which is a 70% share of the gross revenue calculated. Intangible Assets-Net We test the recoverability of its intangible assets with finite useful lives whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.
As a percentage of revenue, direct cost of revenues in fiscal 2023 were 8.2% as compared to 6.2% in fiscal 2022. The higher percentage in fiscal 2023 can be attributed to GuruShots’ lower revenue base and relatively high direct cost of revenues. 54 Selling, general and administrative expense .
As a result, direct cost of revenues as percentage of revenue in fiscal 2024 declined to 6.2% from 8.2% in fiscal 2023. Selling, general and administrative expense .
We performed an interim impairment assessment during the Q3 of fiscal 2023 and determined that the fair value of the GuruShots reporting unit exceeded its carrying value and recorded a $8.7 million goodwill impairment charge in the three months ended April 30, 2023.
We performed an interim impairment assessment of goodwill during Q3 of fiscal 2023 and determined that the fair value of the GuruShots reporting unit exceeded its carrying value and recorded a $8.7 million goodwill impairment charge in Q3 of fiscal 2023, as more fully described in Note 7, Intangible Assets, Net and Goodwill , to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information.
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.
Fiscal Year Ended July 31, 2024 2023 % Change (in thousands, except percentages) Depreciation and amortization $ 2,454 $ 3,269 -24.9 % As a percentage of revenues 8.2 % 12.0 % Depreciation and amortization expense in fiscal 2024 decreased by $0.8 million, or 24.9%, compared to fiscal 2023, primarily due to the $11.9 million impairment charge of intangible assets recorded in Q2 of fiscal 2024 discussed below.
In the past year, we have made many changes to Emojipedia including migrating to a new ad mediation platform, overhauling its backend, and redesigning the Emojipedia website. We will continue to enhance this offering and are exploring new features including a native mobile offering as well as additional monetization opportunities. Reportable Segments Our business consists of two reportable segments.
In the past year, we have made many changes to Emojipedia including overhauling its backend, redesigning the Emojipedia website, and introducing new entertainment-focused features to the site. We will continue to enhance this offering and are exploring additional new features which use artificial intelligence, some of which will be released before the end of the calendar year.
Our vision is to enable and connect creators who enjoy friendly competitions with a community of prospective consumers in order to drive commerce. 43 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.
Critical accounting policies are those that require application of management’s most subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Our critical accounting policies include those related to revenue recognition, business combination, intangible and goodwill, capitalized software and technology development costs and stock-based compensation.
Critical accounting policies are those that require application of management’s most subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances.
Please see Note 7, Intangible Assets, Net and Goodwill , to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information. Contingent Consideration Fair Value Change.
We performed an impairment assessment of intangible assets of our GuruShots reporting segment in Q2 of fiscal 2024 and determined that its fair value was approximately $0 and recorded a full impairment charge of $11.9 million, as more fully described in Note 7, Intangible Assets, Net and Goodwill , to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information. 59 Impairment of goodwill.
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.
Zedge Premium : Zedge Premium is our marketplace where artists and brands can market, distribute and sell their digital content to Zedge’s users. The content owner sets the price and the end user can purchase the content by paying for it with Zedge Credits, our closed virtual currency.

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