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Intangible Assets, Net and Goodwill

12 Months Ended

Jul. 31, 2023

Intangible Assets, Net and Goodwill [Abstract]

Note 7—Intangible Assets, Net and Goodwill

The following table presents the detail of intangible assets, net as of July 31, 2023 and 2022 (in thousands):

	July 31, 2023						July 31, 2022
	Gross Carrying Value		Accumulated Amortization		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value

Emojipedia.org and other internet domains acquired		6,711		894		5,817		6,711		446		6,265
Acquired developed technology		3,950		1,028		2,922		3,950		238		3,712
Customer relationships		7,800		1,013		6,787		7,800		233		7,567
Trade names		3,570		387		3,183		3,570		89		3,481
Total intangible assets	$	22,031	$	3,322	$	18,709	$	22,031	$	1,006	$	21,025

Amortization expense of intangible assets for the fiscal years ended July 31, 2023 and 2022 were approximately $2.3 million and $1.0 million, respectively.

Estimated future amortization expense as of July 31, 2023 is as follows (in thousands):

Fiscal 2024		2,315
Fiscal 2025		2,315
Fiscal 2026		2,315
Fiscal 2027		2,315
Fiscal 2028		2,315
Thereafter		7,134
Total	$	18,709

Goodwill

Goodwill represents the difference between the purchase price and the fair value of assets and liabilities acquired in a business combination (see Note 6, Business Combination and Asset Acquisition). The Company reviews goodwill annually, or more frequently whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered, for impairment by initially considering qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, as a basis for determining whether it is necessary to perform a quantitative analysis. If it is determined that it is more likely than not that the fair value of reporting unit is less than its carrying amount, a quantitative analysis is performed to identify goodwill impairment. If it is determined that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, it is unnecessary to perform a quantitative analysis. The Company may elect to bypass the qualitative assessment and proceed directly to performing a quantitative analysis.

The Company has two reporting units and assesses impairment based upon qualitative factors and if necessary, quantitative factors. A reporting unit’s fair value is determined using the income approach and discounted cash flow models by utilizing Level 3 inputs and assumptions such as future cash flows, discount rates, long-term growth rates, market value and income tax considerations. Specifically, the value of each reporting unit is determined on a stand-alone basis from the perspective of a market participant and represents the price estimated to be received in a sale of the reporting unit in an orderly transaction between market participants at the measurement date. The Company then reconciles the values of all reporting units to the market capitalization of the Company.

Interim Impairment Assessment

The Company performs its annual goodwill impairment tests on the first day of fiscal 4^th quarter in accordance with ASC 350-20-35-28. In light of a significant and sustained decline in the Company’s Class B common stock price, circumstances became evident that a possible goodwill impairment existed since the last annual impairment test on May 1, 2022. The Company performed an interim impairment test during the third quarter of fiscal 2023 and concluded that the carrying value of the GuruShots reporting unit exceeded its fair value. Accordingly, the Company recorded a non-cash goodwill impairment charge of $8.7 million in that quarter.

The Company’s goodwill related to acquisitions is carried on the balance sheet of Zedge Europe AS and GuruShots Ltd. The table below reconciles the change in the carrying amount of goodwill for the period from July 31, 2021 to July 31, 2023:

(in thousands)	Carrying Amounts

Balance as of July 31, 2021	$	2,262
Goodwill acquired during the period		8,907
Measurement period adjustment		(180	)
Impact of currency translation		(201	)
Balance as of July 31, 2022		10,788
Goodwill impairment charge		(8,727	)
Impact of currency translation		(100	)
Balance as of July 31, 2023	$	1,961

The total accumulated impairment loss of the Company’s goodwill as of July 31, 2023 was $8.7 million. There were no accumulated impairment losses prior to the fiscal year ended July 31, 2022.