Zedge (ZDGE) risk factors, FY2024 10-K

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

1. 01Certain of our offerings are sensitive to consumer spending and economic conditions
2. 02We may not experience growth or engagement in certain geographic locations due to local factors
3. 03We 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
4. 04We may not manage our in-app economy well and as a result, disincentivize users from making in-app purchases. Any failure to do so could adversely affect our business, financial condition, and results of operations
5. 05If 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
6. 06We generate the substantial majority of our revenue from selling advertising inventory. We anticipate that our growth and profitability will continue to depend on our ability to sell advertising inventory across some if not all of our digital brands
7. 07A 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
8. 08Three advertising demand partners, mainly, Google, Vungle and AppLovin were responsible for 69% of overall advertising revenue in fiscal 2024. If any of these advertising demand partners were to alter their spend on our digital properties the outcome could result in lowering revenues and profitability
9. 09Our apps’ user base is heavily weighted to the Android operating system and our revenues and profitability may suffer if the market demand for Android smartphones decreases
10. 10We may not be successful in diversifying our revenue mix in order to reduce our significant dependence on third-party advertisers
11. 11Our revenues may fluctuate materially due to increases and decreases of new mobile device sales, or other factors, over which we have no control
12. 12If new mobile device sales decrease or slowdown, our products and services will likely experience fewer installations which will negatively impact our revenue and operations
13. 13If technologies designed to block the display of advertisements are adopted en masse, or if web browsers limit or block behavioral targeting technologies our revenues may be adversely affected
14. 14Activities of our advertiser clients and/or users could damage our reputation or give rise to legal claims against us
15. 15We may not be able to continually meet our users’ expectations and retain or expand our user base, and our revenues, profitability and prospects may be materially and adversely affected
16. 16Zedge 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
17. 17If Zedge Premium fails to yield the strategic goals and objectives that we envision, our business, results of operations and financial condition will be materially and adversely affected
18. 18If 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

RISKS RELATED TO FINANCIAL AND ACCOUNTING MATTERS

1. 19Our limited operating history makes it difficult to evaluate our business with past results not necessarily being indicative for future operating results and may increase your investment risk
2. 20If we do not successfully address any or all of these risks, our business, revenues and profitability could be materially adversely affected
3. 21Changes in accounting principles or their application could result in accounting charges or effects which could adversely affect our operating results and prospects
4. 22If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could suffer and lower the expectations of equity analysts and investors, resulting in a decline in the market price of our common stock
5. 23Changes in tax laws, tax rates or tax rulings, or the examination of our tax positions, could materially affect our financial condition, effective tax rate, future profitability and results of operations
6. 24We are exposed to fluctuations in foreign currency exchange rates
7. 25If we fail to implement and maintain an effective system of internal controls over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud

RISKS RELATED TO OUR OPERATIONS

1. 26Our continued success depends on our ability to effectively and efficiently grow each of the properties in our brand portfolio
2. 27Our marketing efforts to acquire new, and retain existing, customers may not be effective or cost-efficient, and may be affected by external factors beyond our control
3. 28Our 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
4. 29If 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
5. 30Our international operations expose us to additional risks that could harm our business, operating results and financial condition
6. 31Conditions 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
7. 32The 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
8. 33Furthermore, Iran has fired hundreds of missiles and drones into Israel and Israel has recently responded to that action with attacks on military sites in Iran
9. 34We 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
10. 35The State of Israel is currently at war with Hamas and Hezbollah, terrorist organizations that control the Gaza Strip and Lebanon, respectively, and has had various armed conflicts with its neighbors as well as terrorist acts committed within Israel by hostile elements
11. 36Companies 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
12. 37Our core values of focusing on our users and acting for the long-term may conflict with the short-term interests of our business
13. 38If we are unable to attract and retain highly qualified employees, we may not be able to grow effectively
14. 39We rely on third parties to provide the technologies, including cloud services, necessary to deliver content, advertising, and services to our users, and any change in the licensing terms, costs, availability, or acceptance of these formats and technologies could materially adversely affect our business
15. 40We track certain key performance indicators with internal and third-party tools and do not independently verify that all of this data is accurate. Certain of these indicators may have challenges in being tracked accurately which could result in real or perceived inaccuracies that could negatively impact our business
16. 41We use open-source software in our platform that may subject our technology to general release or require us to re-engineer our solutions, which may cause materially harm to our business
17. 42Our 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
18. 43Our business is subject to economic, market, and geopolitical conditions as well as to cyber-attacks and natural disasters beyond our control
19. 44A key component of our growth strategy involves the adoption and utilization of artificial intelligence (AI), which introduces certain risks
20. 45Failure to detect or prevent fraudulent activities on our platform could cause users to lose confidence in our products and harm our business
21. 46Zedge is exposed to claims from prior owners of GuruShots objecting to the determination that the conditions for payment of the earnout for the first year following acquisition were not met, and that the user acquisition spend obligations that we have made to the sellers of GuruShots are not required
22. 47The GuruShots acquisition may fail to yield growth opportunities and achieve beneficial synergies
23. 48Future strategic alliances or acquisitions may not be successful and may have a material and adverse effect on our business, reputation and results of operations

LEGAL AND REGULATORY RISKS

1. 49Legal or regulatory proceedings or allegations of impropriety could have a material adverse impact on our reputation, results of operations, financial condition and liquidity
2. 50A variety of new and existing U.S. and foreign government laws and regulations could subject us to claims, judgments, monetary liabilities and other remedies, and to limitations on our business practices, in which case our business and results of operations may be materially and adversely affected
3. 51For example, the European Union’s Directive on Copyright in the Digital Single Market (the “DSM Directive”) is in effect and has been implemented by all EU Member States
4. 52The article also extends any licenses granted to OCSSPs to their users, as long as those users are not acting “on a commercial basis.”
5. 53In addition, Lithuania, Israel, and Norway each have unique data privacy regulations that impact how and what we can do with employee data and require local compliance efforts

RISKS RELATED TO CONTENT AND INTELLECTUAL PROPERTY

1. 54We may not be able to prevent others from unauthorized use of our intellectual property, which could materially harm our business and competitive position
2. 55We may face challenges in enforcing intellectual property rights in international markets
3. 56Our insurance may not provide adequate levels of coverage against claims
4. 57RISKS RELATED INFORMATION TECHNOLOGY AND DATA SECURITY
5. 58Any significant system or network disruption or cyberattack could have a material adverse effect on our business prospects and results of operations

RISKS RELATED TO OUR OWNERSHIP AND OUR CLASS B COMMON STOCK

1. 59We have granted, and may continue to grant, options, restricted shares and other types of awards under our stock option and equity incentive plans and otherwise, which may result in increased equity-based compensation expenses
2. 60Investors may suffer dilution
3. 61Our 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
4. 62The trading price of the shares of our Class B common stock may be volatile, and purchasers of our Class B common stock could incur substantial losses
5. 63We are controlled by our majority stockholder, which limits the ability of other stockholders to affect our management
6. 64If securities or industry analysts do not publish research or publish unfavorable research about our business or our stock, our stock price and trading volume could decline
7. 65Our results of operations may be subject to wide fluctuations due to a number of factors, which may adversely affect the trading price of our Class B common stock