Zedge (ZDGE) risk factors, FY2025 10-K

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

1. 01If we fail to keep up with rapid technological changes in the internet, smartphone industries, and artificial intelligence (“AI”), and adapt our products and services accordingly, our results of operations and future growth may be adversely affected46% rewritten
2. 02A key component of our growth strategy involves the adoption, integration, and effective utilization of AI technologies across our products, services, and internal operations, which introduces significant and evolving risksNew
3. 03We may not experience growth or engagement in certain geographic locations due to local factors
4. 04We may not be successful in acquiring a sufficient number of users that become purchasers or retain existing users who generate profitable revenue for our apps25% rewritten
5. 05We 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
6. 06If 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
7. 07We 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
8. 08A 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 operations44% rewritten
9. 09Three advertising demand partners, mainly, Google, Liftoff, and AppLovin were responsible for 72% of advertising revenue in fiscal 2025. If any of these advertising demand partners were to alter their spend on our digital properties the outcome could result in lowering revenues and profitability99% rewritten
10. 10Our 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
11. 11We may not be successful in diversifying our revenue mix in order to reduce our significant dependence on third-party advertisers47% rewritten
12. 12Our revenues may fluctuate materially due to increases and decreases of new mobile device sales, or other factors, over which we have no control
13. 13If new mobile device sales decrease or slowdown, our products and services will likely experience fewer installations which will negatively impact our revenue and operations47% rewritten
14. 14If 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
15. 15Activities of our advertiser clients and/or users could damage our reputation or give rise to legal claims against us
16. 16We 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
17. 17Zedge 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 envision27% rewritten
18. 18We operate in a highly competitive industry with low barriers to entry, and our failure to compete effectively, particularly with our AI-based offerings, could adversely affect our business and results of operationsNew
19. 19Our licensing catalog may not contain the types of content prospective licensors seek, which could limit demand for our licensing businessNew
20. 20Challenges in delivering “content-on-demand” could undermine our ability to secure or generate the content that prospective licensors requireNew
21. 21Dependence on a limited number of prospective licensing partners could restrict our growth and profitabilityNew
22. 22If 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
23. 23Our 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
24. 24The GuruShots acquisition may fail to yield growth opportunities and achieve beneficial synergies
25. 25Certain of our offerings are sensitive to consumer spending and economic conditions81% rewritten

RISKS RELATED TO FINANCIAL AND ACCOUNTING MATTERS

1. 26Our 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. 27Our recent restructuring efforts may not achieve anticipated financial and operational goals, increasing our investment riskNew
3. 28Changes in accounting principles or their application could result in accounting charges or effects which could adversely affect our operating results and prospects
4. 29If 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. 30Changes 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 operations69% rewritten
6. 31We are exposed to fluctuations in foreign currency exchange rates63% rewritten
7. 32If 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. 33Our continued success depends on our ability to effectively and efficiently grow each of the properties in our brand portfolio
2. 34Our 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 control42% rewritten
3. 35Our international operations expose us to additional risks that could harm our business, operating results and financial condition59% rewritten
4. 36We have offices and other significant operations in Lithuania and Israel, and, therefore, our results may be adversely affected by political, economic and military instability in these countries58% rewritten
5. 37Companies 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
6. 38Our core values of focusing on our users and acting for the long-term may conflict with the short-term interests of our business
7. 39If we are unable to attract and retain highly qualified employees, we may not be able to grow effectively24% rewritten
8. 40We 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
9. 41We 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
10. 42We 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
11. 43Our 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
12. 44Our business is subject to economic, market, and geopolitical conditions as well as to cyber-attacks and natural disasters beyond our control
13. 45Failure to detect or prevent fraudulent activities on our platform could cause users to lose confidence in our products and harm our business
14. 46Future strategic alliances or acquisitions may not be successful and may have a material and adverse effect on our business, reputation and results of operations36% rewritten

LEGAL AND REGULATORY RISKS

1. 47Legal or regulatory proceedings or allegations of impropriety could have a material adverse impact on our reputation, results of operations, financial condition and liquidity23% rewritten
2. 48A 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 affected24% rewritten
3. 49For 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. 50The article also extends any licenses granted to OCSSPs to their users, as long as those users are not acting “on a commercial basis.”84% rewritten

RISKS RELATED TO CONTENT AND INTELLECTUAL PROPERTY

1. 51We may not be able to prevent others from unauthorized use of our intellectual property, which could materially harm our business and competitive position
2. 52We may face challenges in enforcing intellectual property rights in international markets
3. 53Our insurance may not provide adequate levels of coverage against claims
4. 54RISKS RELATED INFORMATION TECHNOLOGY AND DATA SECURITY72% rewritten
5. 55Any 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. 56We 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. 57Investors may suffer dilution
3. 58Our 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. 59The 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. 60We are controlled by our majority stockholder, which limits the ability of other stockholders to affect our management23% rewritten
6. 61If 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. 62Our 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