Zedge, Inc.: Form 10-Q for the period ended Oct 31, 2024

The following information should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the associated notes thereto of this Quarterly Report, and the audited consolidated financial statements and the notes thereto and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended July 31, 2024 (the “2024 Form 10-K”), as filed with the U.S. Securities and Exchange Commission (the “SEC”).

As used below, unless the context otherwise requires, the terms “the Company,” “Zedge,” “we,” “us,” and “our” refer to Zedge, Inc., a Delaware corporation and its subsidiaries, GuruShots Ltd., Zedge Europe AS and Zedge Lithuania UAB, collectively.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words “believes,” “anticipates,” “expects,” “plans,” “intends,” and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from future results. Factors that may cause such differences include, but are not limited to: (1) economic, geopolitical and market conditions can adversely affect our business, results of operations and financial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price; (2) our ability to successfully make acquisitions and/or successfully integrate acquisitions that we have made into Zedge without incurring unanticipated costs or without being subject to other integration issues that may disrupt our existing operations; (3) delay or failure to realize the expected synergies and benefits of the GuruShots acquisition; (4) the impact of the Covid-19 pandemic on our employees, customers, partners, and the global financial markets; (5) Russia’s invasion of Ukraine, and the international community’s response; and (6) recent attack by Hamas and other terrorist organizations from the Gaza Strip and Lebanon and Israel’s war against them. For further information regarding risks and uncertainties associated with our business, please refer to Item 1A to Part I “Risk Factors” in the 2024 Form 10-K. The forward-looking statements are made as of the date of this report and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our reports filed with the SEC pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including the 2024 Form 10-K.

Trends and Uncertainties

Current Economic Conditions

The majority of our users and employees are located outside of the United States exposing us to a range of economic factors and regulations including foreign exchange fluctuations. There is uncertainty surrounding macroeconomic factors in the U.S. and globally. We believe these macroeconomic conditions coupled with the global political climate and unrest, including the ongoing wars between Ukraine and Russia and Israel and Hamas, may negatively impact our performance.

The Israel-Hamas and Israel-Hezbollah Conflicts

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. 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. Prior to this, changes in Israel’s judicial system had already raised concerns about the business environment, compounded by recent events, potentially impacting foreign investment, currency fluctuations, credit ratings, interest rates, and security markets. Furthermore, regional political unrest and threats from extremist groups, notably Iran, pose additional risks. Management and our Board of Directors are closely monitoring the situation in Israel to address potential business disruptions and implications.

Overview

Zedge builds digital marketplaces and friendly competitive games around content that people use to express themselves. Our leading products include Zedge Ringtones and Wallpapers, 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’. 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,’ 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.

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. As of October 31, 2024, our Zedge App had been installed nearly 686 million times since inception and, over the past two fiscal years, has had between 25.0 million and 32.2 million monthly active users (“MAU”), ending with 25.0 million MAU as of October 31, 2024. 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. 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 fiscal 2023, we introduced pAInt, a generative AI wallpaper maker in the Zedge App. A generative AI wallpaper maker is an implementation of artificial intelligence software that can create images from text descriptions. To interface with a generative AI image maker, a user enters a text description of the image they want to create, and the software generates an image based on that description. In addition, we upgraded Zedge+, our paid subscription offering by bundling together an ad-free experience with value adds making the offering more compelling.

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.

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, annual or lifetime subscription. In April 2023, we introduced a subscription tier in the iOS version of the app. As of October 31, 2024, we had approximately 698,000 active subscribers.

In April 2022, we acquired GuruShots Ltd, 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. We estimate that the total addressable market of amateur photographers using their smartphones to take and publicly share artistic photos is 30-40 million people per month and that the market is still in its infancy. Every month, GuruShots stages more than 300 competitions that result in players uploading in excess of 600,000 photographs and casting close to 2.4 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. 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. 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 8.4% annually to more than $49.0 per player.

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#

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. 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. 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. When we unearth a successful combination of these variables we scale up until we experience diminishing returns. Ultimately, we believe that the efforts we are making to advance the product coupled with the investment in user acquisition can significantly increase GuruShots’ player base.

Since the start of fiscal 2025 Cost per Install (CPI) have trended down 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.

Beyond our commitment to growing both the Zedge App and GuruShots on a standalone basis, we believe that there are many potential synergies that we can capitalize on that exist between the two businesses. 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 October 31, 2024) as standard digital images. In addition, we are benefitting from the experience that the GuruShots team possesses in gamifying the Zedge App. We believe that successful gamification can contribute to increasing engagement, retention, and lifetime value, all critical KPIs for our business. Longer term, we believe that there are complementary content verticals that lend themselves to gamification. 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. 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

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. In October 2024, Emojipedia received approximately 38.8 million monthly page views and has approximately 10.3 million monthly active users as of October 31, 2024 of which approximately 48.9% are located in well-developed markets. It is the top resource for all things emoji, offering insights into data and cultural trends. 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. 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.

Critical Accounting Policies

Our unaudited condensed 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. Our significant accounting policies are described in Note 1 to the consolidated financial statements included in the 2024 Form 10-K. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities. 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, intangible assets, goodwill, capitalized software and technology development costs, stock-based compensation and income taxes. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. For additional discussion of our critical accounting policies, see our Management’s Discussion and Analysis of Financial Condition and Results of Operations in the 2024 Form 10-K.

Recently Issued Accounting Pronouncements

Please refer to Note 1 to the unaudited condensed consolidated financial statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.

Key Performance Indicators (KPIs)

Zedge App-MAU and ARPMAU

The presentation of our results of operations related to our Zedge App includes disclosure of two key performance indicators – Monthly Active Users (MAU) and Average Revenue Per Monthly Active User (ARPMAU). MAU is a key performance indicator that we define as the number of unique users that used our Zedge App during the previous 30-day period, which is important to understanding the size of our active user base which is a main driver of our revenue. Changes and trends in MAU are useful for measuring the general health of our business, gauging both present and potential users/customers’ experience, assessing the efficacy of product improvements and marketing campaigns and overall user engagement.

ARPMAU is defined as (i) the total revenue derived from Zedge App in a monthly period, divided by (ii) MAU in that same period. ARPMAU for a particular time period longer than one month is the average ARPMAU for each month during that period. ARPMAU is valuable because it provides insight into how well we monetize our users and, changes and trends in ARPMAU are indications of how effective our monetization investments are.

MAU decreased 12.3% in the three months ended October 31, 2024 when compared to the same period a year ago. As of October 31, 2024, users in emerging markets represented about 78.0% of our MAU, as compared to 78.2% from the same period a year ago.

ARPMAU for the three months ended October 31, 2024 increased 22.1% when compared to the same period a year ago, primarily due to the increase in price per advertising impression from the same period a year ago, which was driven by increased competition for our ad inventory as well as strong year-over-year subscription revenue growth. Subscription revenue and subscription billings for the three months ended October 31, 2024 increased 21.1% and 56.0%, respectively, when compared to the same period a year ago, as discussed below.

The following tables present the MAU – Zedge App and ARPMAU – Zedge App for the three months ended October 31, 2024 as compared to the same period in the prior year:

(in millions, except ARPMAU - Zedge App)

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The following charts present the MAU – Zedge App and ARPMAU – Zedge App for the consecutive eight fiscal quarters ended October 31, 2024:

GuruShots-MAPs and ARPMAP

The presentation of our results of operations related to our GuruShots segment includes disclosure of two key performance indicators as discussed below:

Monthly Active Payers (“MAPs”). We define a MAP as a unique active user on the GuruShots app or GuruShots.com in a month who completed at least one in-app purchase (“IAP”) during that time period. MAPs for a time period longer than one month are the average MAPs for each month during that period. We estimate the number of MAPs by aggregating certain data from third-party attribution platforms. MAP is a key performance indicator because it shows the size of GuruShots’ active paying user base which is a main driver of GuruShots’ revenue. Changes and trends in MAP are useful for measuring the general health of GuruShots’ business, gauging both present and potential users/customers’ experience, assessing the efficacy of product improvements and marketing campaigns and overall user engagement.

Average Revenue Per Monthly Active Payer (“ARPMAP”). We define ARPMAP as (i) the total revenue from IAPs derived from GuruShots and GuruShots.com in a monthly period, divided by (ii) MAPs in that same period. 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.

MAP decreased 25.9% in the three months ended October 31, 2024 when compared to the same period a year ago, primarily attributable to Apple’s App Tracking Transparence (“ATT”) framework which impedes our ability to invest in paid user acquisition (“PUA”) campaigns profitably in terms of return on ad spend or (“ROAS”). As such, we continued to scale back our PUA spend for GuruShots while testing new campaigns and creatives in order to unearth attractive ROAS scaling opportunities. ARPMAP decreased 15.4% to $43.3 in the three months ended October 31, 2024 from $51.2 in the three months ended October 31, 2023

The following table shows our MAP and ARPMAP for the three months ended October 31, 2024 and 2023.

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The following charts present the MAP and ARPMAP – GuruShots for the consecutive eight quarters ended October 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. The numbers that we use to calculate MAP and ARPMAP are derived from data that we generate internally. While these numbers are based on what we believe to be reasonable judgments and estimates for the applicable period of measurement, there are inherent challenges in measuring usage and engagement. We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy.

Results of Operations

The following table summarizes our historical condensed consolidated statements of operations data:

(in thousands, except percentages)

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Comparison of Our Results of Operations for the Three months ended October 31, 2024 and 2023

Revenues

The following table sets forth the composition of our revenues for the three months ended October 31, 2024 and 2023 (in thousands):

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The following table summarizes our subscription revenue for the three months ended October 31, 2024 and 2023:

(in thousands, except revenue per subscriber and percentages)

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The following table presents a reconciliation of subscription billings to the most directly comparable GAAP financial measures, for each of the periods indicated. We calculate subscription billings by adding the change in subscription deferred revenue between the start and end of the period to subscription revenue recognized in the same period. Subscription billings is a performance measure that we believe provides useful information to our management and investors as it allows us to better track the growth of the subscription-based portion of our business, which is a critical part of our business plan.

(in thousands, except percentages)

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The following table summarizes Zedge Premium gross and net revenue for the three months ended October 31, 2024 and 2023:

(in thousands, except percentages)

Three months Ended October 31, 2024 Compared to Three months Ended October 31, 2023

For the three months ended October 31, 2024, our advertising revenue decreased 1.3% compared to the same period in the prior year primarily due to a 12.3% decrease in MAU partially offset by an increase in price per advertising impression paid by the advertisers on our platform when compared to the same period a year ago, which was driven by increased competition for our ad inventory.

For the three months ended October 31, 2024, our subscription revenue increased 21.1%, and our subscription billings increased 56.0% compared to the same period in the prior year primarily due to the introduction of our iOS subscription offering in April 2023 and the lifetime subscription product for Android users we rolled out in August 2023.

For the three months ended October 31, 2024, our other revenue increased 122.5% compared to the same period in the prior year primarily due to the increase in Zedge Premium net revenue. For the three months ended October 31, 2024, Zedge Premium net revenue increased 141.7% compared to the same period in the prior year primarily attributable to additional revenue from certain AI generative features we rolled out in our Zedge App in fiscal 2024.

For the three months ended October 31, 2024, digital goods and services revenue declined 31.8% compared to the same period in the prior year primarily due to the 25.9% decrease in GuruShots’ MAP coupled with 15.4% decrease in ARPMAP for the corresponding periods.

Direct cost of revenues. Direct cost of revenues consists primarily of content hosting and content delivery costs.

(in thousands, except percentages)

Direct cost of revenues decreased 5.1% in the three months ended October 31, 2024 compared to the same period in the prior year primarily due to the revamping of our backend infrastructure implemented during fiscal 2023. As a percentage of revenue, direct cost of revenues in the three months ended October 31, 2024 declined to 6.4% from 6.9% for the same period in the prior year.

Selling, general and administrative expense. Selling, general and administrative expense (“SG&A”) consists mainly of payroll and benefits, stock-based compensation expense (as discussed below), PUA expenses, third-party payment processing fee relate to in-app purchases, marketing, consulting, professional fees, software licensing (“SaaS”), recruiting fees, facilities and public company related expenses.

(in thousands, except percentages)

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SG&A expense increased 23.8% in the three months ended October 31, 2024 compared to the same period in the prior year primarily due to higher PUA, higher compensation expenses (resulting primarily from lower capitalized software and technology development costs) and higher platform fee paid to Google and Apple offset by lower discretionary spends and lower stock-based compensation expense. In the three months ended October 31, 2024, we ramped up PUA for our Zedge App significantly but scaled back PUA spend for GuruShots as compared to the same period in the prior year. We expect to continue our investment in PUA for our Zedge App in the near term provided that the ROAS remains compelling. As a percentage of revenue, SG&A expense in the three months ended October 31, 2024 was 94.6% compared to 77.7% in the three months ended October 31, 2023.

Global headcount as of October 31, 2024 totaled 102 (including 28 at GuruShots) compared to 95 (including 29 at GuruShots) as of October 31, 2023 with the majority of our employees currently based in Lithuania and Israel.

The following table summarizes stock-based compensation expense included in the SG&A for the three months ended October 31, 2024 and 2023:

Stock-based compensation expenses decreased 25.2% in the three months ended October 31, 2024 compared to the same period in the prior year. The decrease was primarily attributable to the lower compensation expense related to the DSU grants with both service and market conditions which are recognized based on the graded vesting method. Certain stock options, DSUs and restricted stock grants are more fully described in Note 7 Stock-Based Compensation to the unaudited condensed consolidated financial statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.

Depreciation and amortization. Depreciation and amortization consist mainly of amortization of intangible assets in connection with the GuruShots and Emojipedia acquisitions and 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.

(in thousands, except percentages)

Depreciation and amortization expenses decreased 50.8% in three months ended October 31, 2024 compared to the same period in the prior year primarily due to the $11.9 million impairment charge recorded in Q2 of fiscal 2024

Interest and other income, net.

(in thousands, except percentages)

In the three months ended October 31, 2024, interest and other income, net increased by $101,000 compared to the same period in the prior year, which included a deduction of $46,000 in interest expense related to the $2 million term loan which was repaid in November 2023 and a $50,000 impairment charge related to our investment in a privately held company of which the carrying value was reduced to $0 as of October 30, 2023.

Net loss resulting from foreign exchange transactions. Net loss resulting from foreign exchange transactions is comprised of gains and losses generated from movements in NOK and EUR relative to the U.S. Dollar, including gains or losses from our hedging activities.

(in thousands, except percentages)

In the three months ended October 31, 2024, net loss resulting from foreign exchange transactions decreased by $215,000 or 93.6% compared to the same period in the prior year primarily due to higher Mark to Market (“MTM”) loss recorded in prior period.

We recognized MTM losses of $58,000 and $208,000 from NOK and EUR hedging activities for the three months ended October 31, 2024 and 2023, respectively, as more fully described in Note 4, Derivative Instruments, to the unaudited condensed consolidated financial statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.

Provision for Income taxes

(in thousands, except percentages)

In the three months ended October 31, 2024, we had pretax loss of $290,000 in respect of which we accrued $49,000 in income tax expense, primarily due to discrete tax items of $115,000 associated with the vesting of restricted stock and DSUs in the current period more than offsetting the accrued tax benefit of $66,000 based on an estimated effective tax rate of 22.7%.

In the three months ended October 31, 2023, we had pretax income of $183,000 in respect of which we accrued $198,000 in income tax expense, an effective tax rate of 108% which is higher than the statutory rate primarily due to discrete tax items of $128,000 associated with the vesting of restricted stock and DSUs in the prior period.

Comparison of our Segment Results of Operations

The following table presents the results for our Zedge Marketplace and GuruShots segment income (loss) from operations for the three months ended October 31, 2024 and 2023:

Three months Ended October 31, 2024 Compared to Three months Ended October 31, 2023

For the three months ended October 31, 2024, our income from operations related to the Zedge Marketplace decreased to $0.9 million from $1.7 million for the same period in the prior year, primarily due to higher SG&A expenses incurred in the current period.

For the three months ended October 31, 2024, our loss from operations related to GuruShots was $1.4 million compared to a loss of $1.3 million for the same period in the prior year, primarily due to lower revenue in the current period coupled with higher SG&A (primarily attributable to lower capitalized software and technology development costs) and offset by the decrease in amortization expenses related to intangible assets impairment as discussed above.

Liquidity and Capital Resources

General

At October 31, 2024, we had cash and cash equivalents of $20.2 million and working capital (current assets less current liabilities) of $17.5 million, compared to $20.0 million and $17.7 million, respectively, at July 31, 2024. We 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-month period ending December 16, 2025. We maintain a revolving credit facility of $4 million, including a foreign exchange contract facility of up to $7.5 million with WAB, as discussed below under Financing Activities and in Note 10, Term Loan and Revolving Credit Facility, to the unaudited condensed consolidated financial statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.

The following tables present selected financial information for the three months ended October 31, 2024 and 2023:

(in thousands)

Operating Activities

Our cash flow from operations varies significantly from quarter to quarter and from year to year, depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable. Cash provided by operating activities decreased by $90,000 in the three months ended October 31, 2024 to $1.2 million compared to $1.3 million in the same period in the prior year, primarily attributable to a higher net loss before accounting for the acquisition related charges and changes in assets and liabilities.

Changes in Trade Accounts Receivable

Gross trade accounts receivable decreased $0.2 million to $3.2 million at October 31, 2024 from $3.4 million at July 31, 2024, primarily due to lower revenue in the preceding two months ended October 31, 2024 when compared to the same period ended July 31, 2024.

Investing Activities

Cash used in investing activities in the three months ended October 31, 2024 and 2024 consisted primarily 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.

Financing Activities

In the three months ended October 31, 2024 and 2023, we purchased 6,903 shares and 6,328 shares, respectively, of our Class B common stock from certain employees for $22,000 and $13,000, respectively, to satisfy tax withholding obligations in connection with the vesting of DSUs.

In the three months ended October 31, 2024 and 2023, we repurchased - in connection with the share repurchase program - 219,573 shares and 0 shares, respectively, of our Class B common stock for approximately $782,000 and $0, respectively.

We do not anticipate paying dividends on our common stock until we achieve sustainable profitability and retain certain minimum cash reserves. The payment of dividends in any specific period will be at the sole discretion of our Board of Directors.

Concentration of Credit Risk and Significant Customers

Historically, we have had very little or no bad debt, which is common with other platforms of our size that derive their revenue from mobile advertising, as we aggressively manage our collections and perform due diligence on our customers. In addition, the majority of our revenue is derived from large, credit-worthy customers, e.g. Google, Facebook, Vungle and AppLovin, 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 three months ended October 31, 2024, we had only one large customer, and that customer represented 30% of our revenue for the period. In the three months ended October 31, 2023, there were two customers that represented 30% and 11% of our revenue, respectively. At October 31, 2024, three customers represented 43%, 12% and 11% of our accounts receivable balance, respectively. At July 31, 2024, three customers represented 37%, 15% and 10% of our accounts receivable balance, respectively. All of these significant customers were advertising exchanges operated by leading companies, and the receivables represent many smaller amounts due from their advertisers.

Contractual Obligations and Other Commercial Commitments

Smaller reporting companies are not required to provide the information required by this item.

Off-Balance Sheet Arrangements

At October 31, 2024, we did not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at a reasonable assurance level as of October 31, 2024.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended October 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.