What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-06-14 compared with 2021-03-16 · 835 added, 736 removed, 332 unchanged (83% of the section changed)

Financial Statements

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value data)

BALANCE SHEETS

thousands, except par value data)

Current assets:

Cash and cash equivalents

Trade accounts receivable, net of allowance for doubtful accounts of $0 at January 31, 2021 and July 31, 2020

Trade accounts receivable, net of allowance for doubtful accounts of $0 at April 30, 2021 and July 31, 2020

Prepaid expenses

19 unchanged sentences

authorized shares—2,600;

525 shares issued and outstanding at January 31, 2021 and July 31, 2020

525 shares issued and outstanding at April 30, 2021 and July 31, 2020

Class B common stock, $.01 par value;

shares—40,000;

12,916 shares issued and 12,858 shares outstanding at January 31, 2021, and 11,788 shares issued and

11,749 shares outstanding at July 31, 2020

authorized shares—40,000;

13,683 shares issued and 13,625 shares outstanding at April 30, 2021, and 11,788 shares issued and 11,749 shares outstanding at July 31, 2020

Additional paid-in capital

1 unchanged sentence

Accumulated deficit

Treasury stock, 58 shares at January 31, 2021 and 40 shares at July 31, 2020, at cost

Treasury stock, 58 shares at April 30, 2021 and 40 shares at July 31, 2020, at cost

Total stockholders’

Total liabilities and stockholders’

See accompanying notes to consolidated financial

CONSOLIDATED STATEMENTS OF COMPREHENSIVE

INCOME (LOSS)

(in thousands, except per share data)

accompanying notes to consolidated financial statements.

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

thousands, except per share data)

Three Months Ended

Six Months Ended

Nine Months Ended

Costs and expenses:

15 unchanged sentences

Weighted-average number of shares used in calculation of income (loss) per share:

See accompanying notes to consolidated financial

accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

(in thousands)

Class A Common Stock

Class B Common Stock

Comprehensive

5 unchanged sentences

Foreign currency translation adjustment

Balance -October 31, 2020

Balance -Oct.

Exercise of stock options

4 unchanged sentences

Balance –

Exercise of stock options

Stock-based compensation

Proceeds from sales of Class B Common Stock

Foreign currency translation adjustment

Balance –

See accompanying notes to consolidated financial

Class A Common Stock

Class B Common Stock

Comprehensive

13 unchanged sentences

Balance –

Net proceeds from sales of Class B Common Stock

Stock-based compensation

Foreign currency translation adjustment

Balance sheet-Apr.

Tied out to balance sheet-April 30, 2020

See accompanying notes to consolidated financial

1 unchanged sentence

(in thousands)

Six Months Ended

Nine Months Ended

Operating activities

11 unchanged sentences

Capitalized software and technology development costs and purchase of equipment

Investment in private company

Net cash used in investing activities

2 unchanged sentences

Payment of issuance costs

Proceeds from PPP loan payable

Repayment of insurance premium loan payable

Proceeds from exercise of stock options

Purchase of treasury stock in connection with restricted stock vesting

Purchase of treasury stock in connection with restricted stock and deferred stock units vesting

Net cash provided by financing activities

15 unchanged sentences

statements of Zedge, Inc.

and its subsidiary, Zedge Europe AS (the “Company”) have been prepared in accordance with

accounting principles generally accepted in the United States of America (“U.S.

GAAP”) for interim financial information

and with the instructions to Form 10-Q and Article 10 of Regulation S-X.

Accordingly, they do not include all of the information

and footnotes required by U.S.

and its subsidiary, Zedge Europe AS (the “Company”) have been prepared in accordance with accounting

principles generally accepted in the United States of America (“U.S.

GAAP”) for interim financial information and with the

instructions to Form 10-Q and Article 10 of Regulation S-X.

Accordingly, they do not include all of the information and footnotes required

GAAP for complete financial statements.

In the opinion of management, all adjustments (consisting

of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three

and six months ended January 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending

July 31, 2021 or any other period.

The balance sheet at July 31, 2020 has been derived from the Company’s audited financial

statements at that date but does not include all of the information and footnotes required by U.S.

GAAP for complete financial

For further information, please refer to the consolidated financial statements and footnotes thereto included in the

Company’s Annual Report on Form 10-K for the year ended July 31, 2020, as filed with the U.S.

Securities and Exchange

Commission (the “SEC”).

The Company’s

fiscal year ends on July 31 of each calendar year.

Each reference below to a fiscal year refers to the fiscal year ending in

the calendar year indicated (e.g., fiscal 2021 refers to the fiscal year ending July 31, 2021).

In the opinion of management, all adjustments (consisting of normal recurring accruals)

considered necessary for a fair presentation have been included.

Operating results for the three and nine months ended April 30, 2021

are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2021 or any other period.

The balance sheet at July 31, 2020 has been derived from the Company’s audited financial statements at that date but does not include

all of the information and footnotes required by U.S.

GAAP for complete financial statements.

For further information, please refer

to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year

ended July 31, 2020, as filed with the U.S.

Securities and Exchange Commission (the “SEC”).

The Company’s fiscal year ends on July 31

of each calendar year.

Each reference below to a fiscal year refers to the fiscal year ending in the calendar year indicated (e.g., fiscal

2021 refers to the fiscal year ending July 31, 2021).

COVID-19 Impacts on Financial and Operational Results

The COVID-19 pandemic has caused widespread

economic disruption impacting the Company in a number of ways, most notably, with a significant decrease in global advertising

spend in the third quarter of fiscal 2020, followed by a rebound in the following three consecutive quarters.

The Company expects

the extent of the impact on its financial and operational results will continue to depend on the duration and severity of the economic

disruption caused by the COVID-19 pandemic, including demand for new phones sales worldwide - a driver of new installs of the Company’s

flagship app.

As of January 31, 2021, the Company had $13.6

million of cash and cash equivalents, including a net of $4.8 million raised from the previously announced “at-the-market”

offering of shares of the Company’s Class B common stock (see Note 15).

The Company has developed certain contingency plans

to preserve liquidity if such actions become necessary due to worsening economic conditions, including those related to the COVID-19

At the current time, the Company does not believe taking such actions would be prudent nor, does it expect to need to

take such actions based on its current forecasts.

The Company believes that its existing cash and cash equivalents, together with

cash generated by operations will be sufficient to meet its working capital and capital expenditure requirements for the foreseeable

future when accounting for the ill effects of the COVID-19 pandemic.

The COVID-19 pandemic has caused widespread economic

disruption impacting the Company in a number of ways, most notably, with a significant decrease in global advertising spend in the third

quarter of fiscal 2020, followed by a rebound in the following four consecutive quarters.

The Company expects the extent of the impact

on its financial and operational results will continue to depend on the duration and severity of the economic disruption caused by the

COVID-19 pandemic, including demand for new phones sales worldwide - a driver of new installs of the Company’s flagship app.

As of April 30, 2021, the Company had $24.9 million

of cash and cash equivalents, including a net of $11.9 million raised from the previously announced “at-the-market”

of shares of the Company’s Class B common stock (see Note 15).

The Company has developed certain contingency plans to preserve liquidity

if such actions become necessary due to worsening economic conditions, including those related to the COVID-19 pandemic.

At the current

time, the Company does not believe taking such actions would be prudent nor, does it expect to need to take such actions based on its

current forecasts.

The Company believes that its existing cash and cash equivalents, together with cash generated by operations will be

sufficient to meet its working capital and capital expenditure requirements for the foreseeable future when accounting for the ill effects

of the COVID-19 pandemic.

The Company considered the impacts of the COVID-19

pandemic on its significant estimates and judgments used in applying its accounting policies in the six months ended January 31,

In light of the pandemic, there is a greater degree of uncertainty in applying these judgments and depending on the duration

and severity of the pandemic, changes to its estimates and judgments could result in a meaningful impact to its financial statements

in future periods.

pandemic on its significant estimates and judgments used in applying its accounting policies in the nine months ended April 30, 2021.

In light of the pandemic, there is a greater degree of uncertainty in applying these judgments and depending on the duration and severity

of the pandemic, changes to its estimates and judgments could result in a meaningful impact to its financial statements in future periods.

Recently Adopted Accounting Pronouncements

In June 2016, Financial Accounting Standards

Board (“FASB”) issued Accounting Standards Update No.

In June 2016, Financial Accounting Standards Board

(“FASB”) issued Accounting Standards Update No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (ASU 2016-13) which changes the impairment model for most financial assets

and certain other instruments.

For receivables, loans and other instruments, entities will be required to use a new forward-looking

“expected loss”

Measurement of

Credit Losses on Financial Instruments (ASU 2016-13) which changes the impairment model for most financial assets and certain other

For receivables, loans and other instruments, entities will be required to use a new forward-looking “expected loss”

model that generally will result in the earlier recognition of allowance for losses.

For available-for-sale

debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except the

losses will be recognized as allowances instead of reductions in the amortized cost of the securities.

In addition, an entity will

have to disclose significantly more information about allowances, credit quality indicators and past due securities.

adopted this new accounting standard on August 1, 2020, and the adoption did not have a material impact on the Company’s

financial statements and related disclosures.

In August 2018, the FASB issued Accounting

Standard Update No.

2018-13, Changes to Disclosure Requirements for Fair Value Measurements (Topic 820) (ASU 2018-13),

which improved the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements.

removes, modifies, and adds certain disclosure requirements.

For available-for-sale debt securities with unrealized

losses, entities will measure credit losses in a manner similar to current practice, except the losses will be recognized as allowances

instead of reductions in the amortized cost of the securities.

In addition, an entity will have to disclose significantly more information

about allowances, credit quality indicators and past due securities.

The Company adopted this new accounting standard on August 1, 2020,

and the adoption did not have a material impact on the Company’s financial statements and related disclosures.

In August 2018, the FASB issued Accounting

Standard Update No.

2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement

That Is a Service Contract (ASU 2018-15) , which aligns the requirements for capitalizing implementation costs incurred

in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop

or obtain internal-use software.

The Company adopted this new accounting standard on August 1, 2020, using the prospective method,

and the adoption did not have a material impact on the Company’s financial statements and related disclosures.

In August 2018, the FASB issued Accounting Standard

2018-13, Changes to Disclosure Requirements for Fair Value Measurements (Topic 820) (ASU 2018-13), which improved

the effectiveness of disclosure requirements for recurring and nonrecurring fair value measurements.

The standard removes, modifies, and

adds certain disclosure requirements.

The Company adopted this new accounting standard on August 1, 2020, and the adoption did not have

a material impact on the Company’s financial statements and related disclosures.

In August 2018, the FASB issued Accounting Standard

2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service

Contract (ASU 2018-15) , which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement

that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

The Company adopted this new accounting standard on August 1, 2020, using the prospective method, and the adoption did not have a material

impact on the Company’s financial statements and related disclosures.

Note 2—Revenue

Disaggregation of Revenue

The following table summarizes revenue by type

of monetization mechanisms of the Zedge app for the periods presented:

The following table summarizes revenue by type of

monetization mechanisms of the Zedge app for the periods presented:

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands)

8 unchanged sentences

to the unsatisfied performance obligations with respect to subscription revenue.

As of January 31, 2021, the Company’s deferred

revenue balance related to paid subscriptions was approximately $1,515,000, representing approximately 711,000 active subscribers

including those under the account hold implemented by Google Play on November 1, 2020.

Account hold is a subscription state

that begins when a user's form of payment fails and the three-day grace period has ended without payment resolution.

hold period lasts for up to 30 days.

As of July 31, 2020, the Company’s deferred revenue balance related to paid subscriptions

was approximately $1,169,000, representing approximately 504,000 active subscribers.

The amount of revenue recognized in the six

months ended January 31, 2021 that was included in the deferred balance at July 31, 2020 was $816,000.

The Company also records deferred revenues

when users purchase or earn Zedge Credits.

Unused Zedge Credits represent the value of the Company’s unsatisfied performance

obligation to its users.

Revenue is recognized when Zedge App users use Zedge Credits to acquire Zedge Premium content or upon

expiration of the Zedge Credits upon 180 days of account inactivity.

As of January 31, 2021, and July 31, 2020, the Company’s

deferred revenue balance related to Zedge Premium was approximately $197,000 and $169,000, respectively.

Total deferred revenues increased $374,000

from $1,338,000 at July 31, 2020 to $1,712,000 at January 31, 2021, primarily attributed to new paid subscriptions sold in the

six months ended January 31, 2021.

As of April 30, 2021, the Company’s deferred revenue

balance related to paid subscriptions was approximately $1,607,000, representing approximately 753,000 active subscribers including those

under the account hold designation implemented by Google Play on November 1, 2020.

Account hold is a subscription state that begins

when a user's form of payment fails and the three-day grace period has ended without payment resolution.

The account hold period

lasts for up to 30 days.

As of July 31, 2020, the Company’s deferred revenue balance related to paid subscriptions was approximately

$1,169,000, representing approximately 504,000 active subscribers.

The amount of revenue recognized in the nine months ended April 30,

2021 that was included in the deferred balance at July 31, 2020 was $1,078,000.

The Company also records deferred revenues when

users purchase or earn Zedge Credits.

Unused Zedge Credits represent the value of the Company’s unsatisfied performance obligation

to its users.

Revenue is recognized when Zedge App users use Zedge Credits to acquire Zedge Premium content or upon expiration of the

Zedge Credits upon 180 days of account inactivity.

As of April 30, 2021, and July 31, 2020, the Company’s deferred revenue balance

related to Zedge Premium was approximately $217,000 and $169,000, respectively.

Total deferred revenues increased $486,000 from

$1,338,000 at July 31, 2020 to $1,824,000 at April 30, 2021, primarily attributed to new paid subscriptions and renewals sold in the nine

months ended April 30, 2021.

Significant Judgments

The advertising networks and advertising exchanges

to which we sell our inventory track and report the impressions and installs to Zedge and Zedge recognizes revenues based on these

The networks and exchanges base their payments off of those reports and Zedge independently compares the data to each

of the client sites to validate the imported data and identify any differences.

The number of impressions and installs delivered

by the advertising networks and advertising exchanges is determined at the end of each month, which resolves any uncertainty in

the transaction price during the reporting period.

to which we sell our inventory track and report the impressions and installs to Zedge and Zedge recognizes revenues based on these reports.

The networks and exchanges base their payments off of those reports and Zedge independently compares the data to each of the client sites

to validate the imported data and identify any differences.

The number of impressions and installs delivered by the advertising networks

and advertising exchanges is determined at the end of each month, which resolves any uncertainty in the transaction price during the reporting

Practical Expedients

The Company expenses the fees retained by Google Play related to subscription revenue

when incurred as marketing expense because the duration of the contracts for which the Company pays commissions are less than

These costs are included in the selling, general and administrative expenses of the Consolidated Statements of Comprehensive

Income (Loss).

The Company expenses the fees retained by Google

Play related to subscription revenue when incurred as marketing expense because the duration of the contracts for which the Company pays

commissions are less than one year.

These costs are included in the selling, general and administrative expenses of the Consolidated Statements

of Comprehensive Income (Loss).

Note 3—Fair Value Measurements

The following tables present the balance of assets and liabilities measured at

fair value on a recurring basis:

The following tables present the balance of assets

and liabilities measured at fair value on a recurring basis:

(in thousands)

January 31, 2021

April 30, 2021

Foreign exchange forward contracts

3 unchanged sentences

Foreign exchange forward contracts

quoted prices in active markets for identical

assets or liabilities

observable inputs other than quoted prices in

active markets for identical assets and liabilities

quoted prices in active markets for identical assets or liabilities

observable inputs other than quoted prices in active markets for identical assets and liabilities

no observable pricing inputs in the market

Fair Value of Other Financial Instruments

The Company’s other financial instruments at January 31, 2021 and July 31,

2020 included trade accounts receivable, trade accounts payable, and loans payable.

The carrying amounts of the trade accounts

receivable, trade accounts payable, and loan payables approximated fair value due to their short-term nature.

The Company’s other financial instruments

at April 30, 2021 and July 31, 2020 included trade accounts receivable, trade accounts payable, and loans payable.

The carrying amounts

of the trade accounts receivable, trade accounts payable, and loan payables approximated fair value due to their short-term nature.

Note 4—Derivative Instruments

The primary risk managed by the Company using derivative instruments is foreign

exchange risk.

Foreign exchange forward contracts are entered into as hedges against unfavorable fluctuations in the U.S.

(USD) to Norwegian Kroner (NOK) and USD to Euro (EUR) exchange rates.

The Company is party to a Foreign Exchange Agreement with

Western Alliance Bank allowing the Company to enter into foreign exchange contracts under its revolving credit facility with the

The primary risk managed by the Company using

derivative instruments is foreign exchange risk.

Foreign exchange forward contracts are entered into as hedges against unfavorable fluctuations

Dollar (USD) to Norwegian Kroner (NOK) and USD to Euro (EUR) exchange rates.

The Company is party to a Foreign Exchange Agreement

with Western Alliance Bank allowing the Company to enter into foreign exchange contracts under its revolving credit facility with the

bank (see Note 9).

The Company does not apply hedge accounting to these contracts, and therefore the changes in fair value are

recorded in consolidated statements of comprehensive income (loss).

By using derivative instruments to mitigate exposures to changes

in foreign exchange rates, the Company is exposed to credit risk from the failure of the counterparty to perform under the terms

of the contract.

The Company does not apply hedge accounting to these contracts, and therefore the changes in fair value are recorded

in consolidated statements of comprehensive income (loss).

By using derivative instruments to mitigate exposures to changes in foreign

exchange rates, the Company is exposed to credit risk from the failure of the counterparty to perform under the terms of the contract.

The credit or repayment risk is minimized by entering into transactions with high-quality counterparties.

The outstanding contracts at January 31, 2021, are as follows:

The outstanding contracts at April 30, 2021, are as follows:

Settlement Date

2 unchanged sentences

Dollar Amount

The fair value of outstanding derivative instruments recorded in the accompanying

consolidated balance sheets were as follows:

The fair value of outstanding derivative instruments

recorded in the accompanying consolidated balance sheets were as follows:

Assets and Liabilities Derivatives:

4 unchanged sentences

Other current assets

The effects of derivative instruments on the consolidated statements of comprehensive

income (loss) were as follows:

The effects of derivative instruments on the

consolidated statements of comprehensive income (loss) were as follows:

Amount of Gain (Loss) Recognized on Derivatives

Three Months Ended

Six Months Ended

Nine Months Ended

Amount of Gain (Loss) Recognized on Derivatives

6 unchanged sentences

Note 5—Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

Accrued expenses and other current liabilities

consist of the following:

(in thousands)

2 unchanged sentences

Accrued payroll taxes

Accrued payroll and bonuses

Withholding taxes payable (option exercise gains)

Operating lease liability

Due to artists

Accrued payroll and bonuses

Total accrued expenses and other current liabilities

1 unchanged sentence

2016 Stock Option and Incentive Plan

On November 18, 2020, the Company’s Board of Directors amended the

Company’s 2016 Stock Option and Incentive Plan (as amended to date, the “2016 Incentive Plan”) to increase the

number of shares of the Company’s Class B common stock available for the grant of awards thereunder by an additional

On November 18, 2020, the Company’s

Board of Directors amended the Company’s 2016 Stock Option and Incentive Plan (as amended to date, the “2016 Incentive Plan”)

to increase the number of shares of the Company’s Class B common stock available for the grant of awards thereunder by an additional

250,000 shares to an aggregate of 1,521,000 shares.

This amendment was ratified by the Company’s stockholders at the Annual

Meeting of Stockholders held on January 11, 2021.

At January 31, 2021, there were 358,000 shares of Class B Stock available for

awards under the 2016 Incentive Plan.

On November 7, 2019, the Company’s Board of Directors amended the

2016 Incentive Plan to increase the number of shares of the Company’s Class B common stock available for the grant

of awards thereunder by an additional 230,000 shares, to an aggregate of 1,271,000 shares.

This amendment was ratified by the

Company’s stockholders at the Annual Meeting of Stockholders held on January 13, 2020.

Pursuant to the 2016 Incentive Plan, the option exercise price for all

stock option awards that are designated as “Incentive Stock Options”

must not be less than the Fair Market Value of

the shares of Class B Common Stock covered by the option award on the date of grant.

In general, Fair Market Value means the closing

sale price per share of Class B Common Stock on the exchange on which the Class B Common Stock is principally traded for the last

preceding date on which there was a sale of Class B Common Stock on such exchange.

This amendment was ratified by the Company’s stockholders at the Annual Meeting

of Stockholders held on January 11, 2021.

At April 30, 2021, there were 233,000 shares of Class B Stock available for awards under the

2016 Incentive Plan.

On November 7, 2019, the Company’s

Board of Directors amended the 2016 Incentive Plan to increase the number of shares of the Company’s Class B common stock available

for the grant of awards thereunder by an additional 230,000 shares, to an aggregate of 1,271,000 shares.

This amendment was ratified by

the Company’s stockholders at the Annual Meeting of Stockholders held on January 13, 2020.

Pursuant to the 2016 Incentive Plan,

the option exercise price for all stock option awards that are designated as “Incentive Stock Options”

must not be less than

the Fair Market Value of the shares of Class B Common Stock covered by the option award on the date of grant.

In general, Fair Market

Value means the closing sale price per share of Class B Common Stock on the exchange on which the Class B Common Stock is principally

traded for the last preceding date on which there was a sale of Class B Common Stock on such exchange.

Stock Options

During the three months ended October 31, 2020, the Compensation Committee

of the Company’s Board of Directors approved grants of options to purchase an aggregate of 90,849 shares of Class B Stock

In August and October 2020, the Compensation

Committee of the Company’s Board of Directors approved grants of options to purchase an aggregate of 90,849 shares of Class B Stock

to various individuals including company executives, employees and consultants.

Options with respect to 30,000 shares vested upon

grant with the remaining options with respect to 60,849 shares vesting over a three-year period.

Grant date fair value related

to the 30,000 vested options was $32,000 which was expensed immediately.

Unrecognized compensation expense related to the 60,649

options grants was an aggregate of $64,000 based on the estimated fair value of the options on the grant date.

The unrecognized

compensation expense is being recognized on a straight-line basis over the vesting period.

In October 2020, the Compensation Committee extended the expiration date

of options to purchase approximately 182,000 shares of the Company’s Class B Common Stock held by one of the Company’s

executive officers, from October 31, 2021 to May 31, 2026.

Such options are fully vested and were granted under the Company’s

2008 Stock Option and Incentive Plan.

The options have an exercise price of $1.73 per share.

Compensation expense related to this

modification was $78,000 and was fully expensed on the modification date.

December 2020 and January 2021, the Compensation Committee of the Company’s Board of Directors approved grants of

options to purchase an aggregate of 37,000 shares of Class B Stock to four individuals including company executives and

employees, vesting over a three-year period with respect to 15,000 options grants with the remaining 22,000 options grants

vesting over a four-year period.

Unrecognized compensation expense related to the 37,000 options grants was an aggregate of

$141,000 based on the estimated fair value of the options on the grant date.

Options with respect to 30,000 shares vested upon grant

with the remaining options with respect to 60,849 shares vesting over a three-year period.

Grant date fair value related to the 30,000

vested options was $32,000 which was expensed immediately.

Unrecognized compensation expense related to the 60,649 options grants was

an aggregate of $64,000 based on the estimated fair value of the options on the grant date.

The unrecognized compensation expense is being

recognized on a straight-line basis over the vesting period.

On November 7, 2019 and January 13, 2020, the Compensation Committee approved

equity grants of options to purchase an aggregate of 180,996 shares of Class B Stock to four employees and one consultant.

Also in October 2020, the Compensation

Committee extended the expiration date of options to purchase approximately 182,000 shares of the Company’s Class B Common Stock

held by one of the Company’s executive officers, from October 31, 2021 to May 31, 2026.

Such options are fully vested and were granted

under the Company’s 2008 Stock Option and Incentive Plan.

The options have an exercise price of $1.73 per share.

Compensation expense

related to this modification was $78,000 and was fully expensed on the modification date.

In December 2020 and January 2021, the

Compensation Committee of the Company’s Board of Directors approved grants of options to purchase an aggregate of 37,000 shares

of Class B Stock to four individuals including company executives and employees, vesting over a three-year period with respect to 15,000

options grants with the remaining 22,000 options grants vesting over a four-year period.

Unrecognized compensation expense related to

the 37,000 options grants was an aggregate of $141,000 based on the estimated fair value of the options on the grant date.

The unrecognized

compensation expense is being recognized on a straight-line basis over the vesting period.

In March 2021, the Compensation Committee

of the Company’s Board of Directors approved grants of options to purchase an aggregate of 42,000 shares of Class B Stock to eight

of its non-executive employees based in Lithuania and one consultant, vesting over a four-year period.

Unrecognized compensation expense

related to the 42,000 options grants was an aggregate of $316,000 based on the estimated fair value of the options on the grant date.

The unrecognized compensation expense is being recognized on a straight-line basis over the vesting period.

In November 2019 and January 2020, the

Compensation Committee approved equity grants of options to purchase an aggregate of 180,996 shares of Class B Stock to four employees

and one consultant.

The options vest over a three-year period.

Unrecognized compensation expense related to these grants was an aggregate of $242,000

based on the estimated fair value of the options on the grant dates.

Unrecognized compensation expense related to these grants was an aggregate

of $242,000 based on the estimated fair value of the options on the grant dates.

The unrecognized compensation expense is being recognized

on a straight-line basis over the vesting period.

In the six months ended January 31, 2021 and 2020, the Company issued

312,287 shares and 29,917 shares respectively of Class B Stock and received $396,000 and $4,000 respectively, in connection with

options exercised during the period.

At January 31, 2021, unrecognized compensation expense related to unvested stock

options was an aggregate of $364,000.

In the nine months ended April 30, 2021

and 2020, the Company issued 497,252 shares and 29,917 shares respectively of Class B Stock and received $819,000 and $4,000 respectively,

in connection with options exercised during the period.

At April 30, 2021, unrecognized compensation expense

related to unvested stock options was an aggregate of $622,000.

Deferred Stock Units

In August 2019, the Compensation Committee approved the grant of 90,000

Deferred Stock Units (DSUs) to 11 of its non-executive employees based in Norway and Lithuania.

Each DSU represents a right to

receive one share of Class B Common Stock upon vesting.

In August 2019, the Compensation Committee

approved the grant of 90,000 Deferred Stock Units (DSUs) to 11 of its non-executive employees based in Norway and Lithuania.

represents a right to receive one share of Class B Common Stock upon vesting.

The DSUs vest over a four-year period from August 1, 2019.

date, unrecognized compensation expense related to this grant was an aggregate of $139,000 based on the estimated fair value of

the DSUs on the grant date.

The unrecognized compensation expense is being recognized on a straight-line basis over the vesting

At January 31, 2021, unrecognized compensation expense related to unvested DSUs was an aggregate of $49,000.

In the six months ended January 31, 2021, the Company purchased 5,625

shares of Class B Stock from various employees for $8,000 to satisfy tax withholding obligations in connection with the vesting

On the grant date, unrecognized compensation expense related to this grant was an aggregate of $139,000 based on the estimated fair value

of the DSUs on the grant date.

The unrecognized compensation expense is being recognized on a straight-line basis over the vesting period.

At April 30, 2021, unrecognized compensation expense related to unvested DSUs was an aggregate of $44,000.

In the nine months ended April 30, 2021,

the Company purchased 5,625 shares of Class B Stock from various employees for $8,000 to satisfy tax withholding obligations in connection

with the vesting of DSUs.

Restricted Stock Awards

In November 2020, the Compensation Committee and the Corporate Governance Committee

of our Board of Directors approved a grant of 92,593 restricted shares of the Company’s Class B Common Stock to our Executive

Chairman Michael Jonas.

Jonas agreed to accept all of his compensation for his service as Executive Chairman during fiscal

2021 in the form of equity in the Company and to make receipt of such equity compensation contingent on the Company achieving

certain milestones relative to its fiscal 2021 budget.

The grant was made at that time because the milestones previously set were

These shares shall vest in equal amounts on February 7, 2022, 2023 and 2024.These shares had an aggregate grant date

fair value of $350,000 which is being amortized on a straight-line basis over the vesting period.

In October 2020, the Compensation Committee approved a grant of 10,619 restricted

shares of Class B Common Stock to each of Mr.

In November 2020, the Compensation Committee and

the Corporate Governance Committee of our Board of Directors approved a grant of 92,593 restricted shares of the Company’s Class

B Common Stock to our Executive Chairman Michael Jonas.

Jonas agreed to accept all of his compensation for his service as Executive

Chairman during fiscal 2021 in the form of equity in the Company and to make receipt of such equity compensation contingent on the Company

achieving certain milestones relative to its fiscal 2021 budget.

The grant was made at that time because the milestones previously set

were achieved.

These shares shall vest in equal amounts on February 7, 2022, 2023 and 2024.These shares had an aggregate grant date fair

value of $350,000 which is being amortized on a straight-line basis over the vesting period.

In October 2020, the Compensation Committee approved

a grant of 10,619 restricted shares of Class B Common Stock to each of Mr.

Elliot Gibber and Mr.

Howard Jonas which vest immediately.

These shares had an aggregate

grant date fair value of $30,000 and have been fully amortized accordingly.

On November 7, 2019, the Compensation Committee approved a grant

of 30,534 restricted shares of Class B Common Stock to Mr.

Elliot Gibber, our Interim Chief Executive Officer in respect of his

service in that capacity through the end of Fiscal 2020 (or such shorter period as he shall serve in that capacity).

These shares had an aggregate grant date fair value of $30,000 and have been fully amortized accordingly.

On November 7, 2019, the Compensation Committee

approved a grant of 30,534 restricted shares of Class B Common Stock to Mr.

Elliot Gibber, our Interim Chief Executive Officer in respect

of his service in that capacity through the end of Fiscal 2020 (or such shorter period as he shall serve in that capacity).

vested on February 7, 2020 and May 7, 2020.

These shares had an aggregate grant date fair value of $60,000 which was amortized

on a straight-line basis over the vesting period.

At January 31, 2020, unrecognized compensation expense related to unvested restricted

stock was an aggregate of $30,000.

At January 31, 2021, unrecognized compensation expense related to unvested restricted

stock awards was an aggregate of $376,000.

In the six months ended January 31, 2021 and 2020, the Company purchased 12,005 shares

and 18,441 shares respectively of Class B Stock from certain employees for $18,000 and $29,000 respectively, to satisfy tax withholding

obligations in connection with the vesting of restricted stock.

These shares had an aggregate grant date fair value of $60,000 which was amortized on a straight-line

basis over the vesting period.

At April 30, 2021, unrecognized compensation expense

related to unvested restricted stock awards was an aggregate of $332,000.

In the nine months ended April 30, 2021 and 2020,

the Company purchased 12,005 shares and 18,441 shares respectively of Class B Stock from certain employees for $18,000 and $29,000 respectively,

to satisfy tax withholding obligations in connection with the vesting of restricted stock.

Note 7—Earnings Per Share

Basic earnings per share is computed by dividing net income attributable to all

classes of common stockholders of the Company by the weighted average number of shares of all classes of common stock outstanding

during the applicable period.

Diluted earnings per share is computed in the same manner as basic earnings per share, except that

the number of shares is increased to include restricted stock still subject to risk of forfeiture, issuances to be made on the

vesting of unvested DSUs and the exercise of potentially dilutive stock options using the treasury stock method, unless the effect

of such increase is anti-dilutive.

The weighted-average number of shares used in the calculation of basic and diluted

earnings per share attributable to the Company’s common stockholders consists of the following:

Basic earnings per share is computed by dividing

net income attributable to all classes of common stockholders of the Company by the weighted average number of shares of all classes of

common stock outstanding during the applicable period.

Diluted earnings per share is computed in the same manner as basic earnings per

share, except that the number of shares is increased to include restricted stock still subject to risk of forfeiture, issuances to be

made on the vesting of unvested DSUs and the exercise of potentially dilutive stock options using the treasury stock method, unless the

effect of such increase is anti-dilutive.

The weighted-average number of shares used in

the calculation of basic and diluted earnings per share attributable to the Company’s common stockholders consists of the following:

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands)

5 unchanged sentences

Diluted weighted-average number of shares

The following shares were excluded from the dilutive earnings per share computations

because their inclusion would have been anti-dilutive

The following shares were excluded from the dilutive

earnings per share computations because their inclusion would have been anti-dilutive

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands)

3 unchanged sentences

Shares excluded from the calculation of diluted earnings per share

For the six months ended January 31, 2020, the diluted earnings per share equals

basic earnings per share because the Company incurred a net loss during that period and the impact of the assumed exercise of

stock options and vesting of restricted stock and DSUs would have been anti-dilutive.

For the nine months ended April 30, 2020, the

diluted earnings per share equals basic earnings per share because the Company incurred a net loss during that period and the impact of

the assumed exercise of stock options and vesting of restricted stock and DSUs would have been anti-dilutive.

Note 8—Contingencies

Legal Proceedings

In March 2014, Saregama India, Limited filed a lawsuit against the Company before

the Barasat District Court, seeking approximately $1.6 million as damages and an injunction for copyright infringement.

India alleged that the Company made available Saregama India’s sound recordings through the Company’s platform with

full knowledge that the sound recordings had been uploaded and were being communicated to the public without obtaining any license

from Saregama India.

In March 2014, Saregama India, Limited filed a

lawsuit against the Company before the Barasat District Court, seeking approximately $1.6 million as damages and an injunction for copyright

infringement.

Saregama India alleged that the Company made available Saregama India’s sound recordings through the Company’s

platform with full knowledge that the sound recordings had been uploaded and were being communicated to the public without obtaining any

license from Saregama India.

On August 20, 2019, the Court lifted the injunction and, subsequently, Saregama India executed a consent

pursuant to which the case against the Company was dismissed.

The Company may from time to time be subject to other legal proceedings that arise

in the ordinary course of business.

Although there can be no assurance in this regard, the Company does not expect any of those

legal proceedings to have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

The Company may from time to time be subject to

other legal proceedings that arise in the ordinary course of business.

Although there can be no assurance in this regard, the Company

does not expect any of those legal proceedings to have a material adverse effect on the Company’s results of operations, cash flows

or financial condition.

Note 9—Revolving Credit Facility

As of September 27, 2016, the Company entered

into a loan and security agreement with Western Alliance Bank for a revolving credit facility of up to $2.5 million for an initial

two-year term which was extended twice for another two two-year term expiring September 26, 2022.

At the Company’s request

in September 2020, advances under this facility have been reduced to the lesser of $2.0 million or 80% of the Company’s eligible

accounts receivable, subject to certain concentration limits.

The revolving credit facility is secured by a lien on substantially

all of the Company’s assets.

Effective with the September 2020 extension, the outstanding principal amount bears interest

per annum at the greater of 3.5% or the prime rate plus 1.25%.

into a loan and security agreement with Western Alliance Bank for a revolving credit facility of up to $2.5 million for an initial two-year

term which was extended twice for another two two-year term expiring September 26, 2022.

At the Company’s request in September 2020,

advances under this facility have been reduced to the lesser of $2.0 million or 80% of the Company’s eligible accounts receivable,

subject to certain concentration limits.

The revolving credit facility is secured by a lien on substantially all of the Company’s

Effective with the September 2020 extension, the outstanding principal amount bears interest per annum at the greater of 3.5%

or the prime rate plus 1.25%.

Previously the interest rate was capped at 5.0%.

Interest is payable

monthly and all outstanding principal and any accrued and unpaid interest is due on the maturity date of September 26, 2022.

Company is required to pay an annual facility fee of $10,000 to Western Alliance Bank.

The Company is also required to comply with

various affirmative and negative covenants and to maintain certain financial ratios during the term of the revolving credit facility.

The covenants include a prohibition on the Company paying any dividend on its capital stock.

The Company may terminate this agreement

at any time without penalty or premium provided that it pays down any outstanding principal, accrued interest and bank expenses.

At January 31, 2021 and July 31, 2020, there were no amounts outstanding under the revolving credit facility and the Company was

in compliance with all of the covenants.

As of November 16, 2016, the Company entered into a Foreign Exchange Agreement with

Western Alliance Bank to allow the Company to enter into foreign exchange contracts not to exceed $5.0 million in the aggregate

at any point in time under its revolving credit facility.

This limit was raised to approximately $6.5 million pursuant to the

Loan and Security Modification Agreement dated May 30, 2018.

The available borrowing under the revolving credit facility is reduced

by an applicable foreign exchange reserve percentage as determined by Western Alliance Bank, in its reasonable discretion from

time to time, which was initially set at 10% of the nominal amount of the foreign exchange contracts in effect at the relevant

In December 2016, the applicable foreign exchange reserve percentage was changed so that the reduction of available borrowing

for major currency forward contracts of less than six months tenor is set at 10% of the nominal amount of the foreign exchange

contracts, and for contracts over six months tenor, 12.5% of the nominal amount of the foreign exchange contracts.

31, 2021, there were $1.58 million of outstanding foreign exchange contracts with less than six months tenor under the credit

facility, which reduced the available borrowing under the revolving credit facility by $157,500.

Interest is payable monthly and all outstanding principal

and any accrued and unpaid interest is due on the maturity date of September 26, 2022.

The Company is required to pay an annual facility

fee of $10,000 to Western Alliance Bank.

The Company is also required to comply with various affirmative and negative covenants and to

maintain certain financial ratios during the term of the revolving credit facility.

The covenants include a prohibition on the Company

paying any dividend on its capital stock.

The Company may terminate this agreement at any time without penalty or premium provided that

it pays down any outstanding principal, accrued interest and bank expenses.

At April 30, 2021 and July 31, 2020, there were no amounts

outstanding under the revolving credit facility and the Company was in compliance with all of the covenants.

As of November 16, 2016, the Company entered into

a Foreign Exchange Agreement with Western Alliance Bank to allow the Company to enter into foreign exchange contracts not to exceed $5.0

million in the aggregate at any point in time under its revolving credit facility.

This limit was raised to approximately $6.5 million

pursuant to the Loan and Security Modification Agreement dated May 30, 2018.

The available borrowing under the revolving credit facility

is reduced by an applicable foreign exchange reserve percentage as determined by Western Alliance Bank, in its reasonable discretion from

time to time, which was initially set at 10% of the nominal amount of the foreign exchange contracts in effect at the relevant time.

December 2016, the applicable foreign exchange reserve percentage was changed so that the reduction of available borrowing for major currency

forward contracts of less than six months tenor is set at 10% of the nominal amount of the foreign exchange contracts, and for contracts

over six months tenor, 12.5% of the nominal amount of the foreign exchange contracts.

At April 30, 2021, there were $3.1 million of outstanding

foreign exchange contracts with the majority being less than six months tenor under the credit facility, which reduced the available borrowing

under the revolving credit facility by $321,250.

Note 10—Business Segment and Geographic Information

The Company is a leading app developer focusing on mobile phone personalization

and entertainment.

The Company is a leading app developer focusing

on mobile phone personalization and entertainment.

“Zedge Wallpapers and Ringtones,”

the Company’s flagship app, is a hub for self-expression

used by millions for mobile phone personalization, social content and fandom art.

The app enables consumers to showcase who they

are, what they like, and amplify their persona.

Zedge Premium, the Company’s in-app marketplace, enables content creators,

ranging the gamut from world class celebrities to emerging artists, to display their talent and sell their content to the Company’s

the Company’s flagship app, is

a hub for self-expression used by millions for mobile phone personalization, social content and fandom art.

The app enables consumers

to showcase who they are, what they like, and amplify their persona.

Zedge Premium, the Company’s in-app marketplace, enables content

creators, ranging the gamut from world class celebrities to emerging artists, to display their talent and sell their content to the Company’s

flagship app users.

1 unchanged sentence

Chat Stories by Zedge”

offers serialized, short-form fiction stories delivered

as text-messaging conversations and soon to be available as mini-podcasts.

The Company conducts business as a single operating

Net long-lived assets and total assets held outside of the United States, which

are located primarily in Norway, were as follows:

offers serialized, short-form fiction stories delivered as text-messaging

conversations and soon to be available as mini-podcasts.

The Company conducts business as a single operating segment.

Net long-lived assets and total assets held outside

of the United States, which are located primarily in Norway, were as follows:

United States

1 unchanged sentence

Long-lived assets, net:

January 31, 2021

April 30, 2021

July 31, 2020

Total assets:

January 31, 2021

April 30, 2021

July 31, 2020

1 unchanged sentence

Operating Leases

The Company has operating leases primarily for office space.

Operating lease right-of-use assets recorded and included in other assets were $220,000 and $317,000 at January 31, 2021 and July

31, 2020, respectively.

There were no material changes in the Company's

operating and finance leases in the six months ended January 31, 2021, as compared to the disclosure in the Company's Annual Report

on Form 10-K for the fiscal year ended July 31, 2020.

The Company has operating

leases primarily for office space.

Effective April 1, 2021, the Company moved its main office in Trondheim, Norway with 11,600 square

feet of office space to a 4,900 square feet facility.

There were nine months left on the lease agreement for the old office space and

the Company recognized $14,000 gain as a result of the lease termination.

As of March 31, 2021 the Company recorded $281,000 in the right-of-use

assets and the same amount for the lease liabilities for the new lease which has a three years term.

The following table presents

the lease-related assets and liabilities for the new lease recorded on the Consolidated Balance Sheet (in thousands) as of April 30, 2021:

Operating leases:

Other current liabilities

Other liabilities

Total operating lease liabilities

The following table summarizes

the weighted average remaining lease term and weighted average discount rate as of April 30, 2021:

Weighted average remaining lease term:

Operating leases

Weighted average discount rate:

Operating leases

Future minimum lease

payments under non-cancellable leases at April 30, 2021 are as follows (in thousands):

Years ending July 31,

Remainder of 2021

Total future minimum lease payments

Less imputed interest

There were no other material

changes in the Company's operating and finance leases in the nine months ended April 30, 2021, as compared to the disclosure in the Company's

Annual Report on Form 10-K for the fiscal year ended July 31, 2020.

Note 12—Provision for Income taxes

At July 31, 2020, the Company had available U.S.

federal and state net operating

loss (“NOL”) carryforwards from domestic operations of approximately $5.6 million and $5.9 million, respectively,

to offset future taxable income, the Company also had available NOL carryforwards of approximately $433,000 to offset future foreign

taxable income.

The Company expects to utilize these NOL carryforwards to offset the taxable income for the six months ended January

31, 2021 and for the fiscal year ending July 31, 2021, and reduced its effective tax rate to 7.9% for those periods.

The tax expense

consists of federal and state taxes based on taxable income and allocated net worth and certain income taxes payable in foreign

jurisdictions where our subsidiaries reside.

On March 27, 2020, the CARES Act was signed into law.

The Act contains

several new or changed income tax provisions, including but not limited to the following:

increased limitation threshold for determining

deductible interest expense, class life changes to qualified improvements (in general, from 39 years to 15 years), and the ability

to carry back net operating losses incurred from tax years 2018 through 2020 up to the five preceding tax years.

federal and state net operating loss (“NOL”) carryforwards from domestic operations of approximately $5.6 million and $5.9

million, respectively, to offset future taxable income, the Company also had available NOL carryforwards of approximately $433,000 to

offset future foreign taxable income.

The Company expects to utilize these NOL carryforwards to offset the taxable income for the nine

months ended April 30, 2021 and for the fiscal year ending July 31, 2021, and reduce its effective tax rate to 6.6% for those periods.

The tax expense consists of federal and state taxes based on taxable income and allocated net worth and certain income taxes payable in

foreign jurisdictions where our subsidiaries reside.

On March 27, 2020, the CARES Act was signed into

The Act contains several new or changed income tax provisions, including but not limited to the following:

increased limitation

threshold for determining deductible interest expense, class life changes to qualified improvements (in general, from 39 years to 15 years),

and the ability to carry back net operating losses incurred from tax years 2018 through 2020 up to the five preceding tax years.

of these provisions are either not applicable or have no material effect on the Company.

1 unchanged sentence

Recently Issued Accounting Standards Not Yet Adopted

In December 2019, the FASB issued Accounting Standard Update No.

2019-12, Income

Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting

for income taxes.

This guidance will be effective for the Company in the first quarter of fiscal 2022 on a prospective basis,

and early adoption is permitted.

In December 2019, the FASB issued Accounting Standard

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies

the accounting for income taxes.

This guidance will be effective for the Company in the first quarter of fiscal 2022 on a prospective

basis, and early adoption is permitted.

The Company will adopt the new standard effective August 1, 2021 and does not expect the adoption

of this guidance to have a material impact on its consolidated financial statements.

With the exception of the accounting standards discussed above, there have been

no other recent accounting pronouncements or changes in accounting pronouncements during the six months ended January 31, 2021

that are of significance or potential significance to the Company.

With the exception of the accounting standards

discussed above, there have been no other recent accounting pronouncements or changes in accounting pronouncements during the nine months

ended April 30, 2021 that are of significance or potential significance to the Company.

Note 14—Loans Payable

On August 1, 2020, the Company obtained

a loan of $181,000 to pay for certain insurance coverage, repayable in nine equal installments of $20,490 starting from September

1, 2020 which represented a 3.89% annual percentage interest rate.

On July 16, 2019, the Company obtained a loan of

$140,000 to pay for certain insurance coverage, repayable in nine equal installments of $15,976 starting from September 1, 2019

which represented a 4.79% annual percentage interest rate.

The Company obtained a loan under the Paycheck

Protection Program (PPP) of the CARES Act in the amount of $218,000 from Western Alliance Bank, a loan servicer and the Company’s

lender (see Note 9), on April 22, 2020.

The Company used these proceeds in full for payroll purposes for U.S.

employees during

the covered period provided under the PPP and therefore expects that all or most of this loan will be forgiven.

Any portion of

the loan that is not forgiven will be due two years after inception of the loan.

The loan has a 1% fixed interest rate and does

not require collateral or personal guarantees.

The Company submitted the PPP Loan Forgiveness Application

Form 3508EZ on November 25, 2020.

On August 1, 2020,

the Company obtained a loan of $181,000 to pay for certain insurance coverage, repayable in nine equal installments of $20,490 starting

from September 1, 2020 which represented a 3.89% annual percentage interest rate.

On July 16, 2019,

the Company obtained a loan of $140,000 to pay for certain insurance coverage, repayable in nine equal installments of $15,976 starting

from September 1, 2019 which represented a 4.79% annual percentage interest rate.

obtained a loan under the Paycheck Protection Program (PPP) of the CARES Act in the amount of $218,000 from Western Alliance Bank, a loan

servicer and the Company’s lender (see Note 9), on April 22, 2020.

The Company used these proceeds in full for payroll purposes

employees during the covered period provided under the PPP and therefore expects that all or most of this loan will be forgiven.

Any portion of the loan that is not forgiven will be due two years after inception of the loan.

The loan has a 1% fixed interest rate

and does not require collateral or personal guarantees.

The Company submitted

the PPP Loan Forgiveness Application Form 3508EZ on November 25, 2020.

On May 21, 2021, the Company was notified that such application

for the loan forgiveness has been approved and the loan, including accrued interest, has been deemed satisfied in full by the Small Business

Administration to Western Alliance Bank.

The Company will record a gain of forgiveness of debt in the 4 th quarter of fiscal

Note 15—Sales of Class B Common Stock

The Company filed with the SEC a Registration

Statement on Form S-3 (the “Form S-3”) on November 30, 2020 which became effective on December 4, 2020 to facilitate

capital raising.

The Registration Statement registered the issuance and sale by the Company of Class B common stock or related

securities for gross proceeds to the Company of up to $20 million.

On November 30, 2020, the Company engaged National Securities

Wainwright & Co, LLC (the “Sales Agents”) to act as the Company’s exclusive co-Sales Agents

in connection with the Company’s “at-the-market”

offering of shares of the Company’s Class B common stock

up to $5 million.

The Company filed a Prospectus Supplement (supplementing the Prospectus included in the Form S-3) on December

9, 2020 and contemporaneously entered into an At The Market Offering Agreement with the Sales Agents (the “ATM Sales Agreement”),

pursuant to which the Company sold 761,906 shares at an average price of $6.5625 per share for total proceeds of $5 million as

of January 28, 2021.

In connection with this offering, the Company incurred a total issuance costs of $215,000.

The Company intends

to use the net proceeds from this offering for working capital and other general corporate purposes.

On February 5, 2020, the Company closed on its

registered direct offering of 1,734,459 shares of its Class B common stock for gross proceeds of $2.25 million.

The Company sold

1,657,813 shares at a purchase price of $1.28 per share which represented a 20% discount from the 10 Day Volume Weighted Average

Price (VWAP) through January 31, 2020, and certain Company insiders purchased an additional 76,646 shares at a purchase price

of $1.67 per share, the closing price on February 3, 2020.

Statement on Form S-3 (the “Form S-3”) on November 30, 2020 which became effective on December 4, 2020 to facilitate capital

The Registration Statement registered the issuance and sale by the Company of Class B common stock or related securities for

gross proceeds to the Company of up to $20 million.

On November 30, 2020, the Company engaged National Securities Corp.

& Co, LLC (the “Sales Agents”) to act as the Company’s exclusive co-Sales Agents in connection with the Company’s

“at-the-market”

offering of shares of the Company’s Class B common stock up to $5 million.

The Company filed a Prospectus

Supplement (supplementing the Prospectus included in the Form S-3) on December 9, 2020 and contemporaneously entered into an At The Market

Offering Agreement with the Sales Agents (the “ATM Sales Agreement”), pursuant to which the Company sold 761,906 shares at

an average price of $6.5625 per share for total proceeds of $5 million as of January 28, 2021.

In connection with this offering, the Company

incurred a total issuance costs of $215,000.

The Company intends to use the net proceeds from this offering for working capital and other

general corporate purposes.

On March 16, 2021, the Company filed a

prospectus supplement with the SEC which contemplates the sale, for a gross aggregate sale price of up to $10,000,000, of shares of

the Company’s Class B common stock, from time to time in “at the market offerings”

pursuant to an At Market

Issuance Sales Agreement with National Securities Corporation and Maxim Group LLC (the “New Sales Agents”), dated as of

March 16, 2021 (the “New ATM Sales Agreement”), pursuant to which the Company sold 489,303 shares at an average price of

$15.0334 per share for total proceeds of $7.4 million as of April 30, 2021.

In connection with this offering, the Company incurred a

total issuance costs of $254,000.

The Company intends to use the net proceeds from this offering for working capital and other

general corporate purposes.

5, 2020, the Company closed on its registered direct offering of 1,734,459 shares of its Class B common stock for gross proceeds of $2.25

The Company sold 1,657,813 shares at a purchase price of $1.28 per share which represented a 20% discount from the 10 Day Volume

Weighted Average Price (VWAP) through January 31, 2020, and certain Company insiders purchased an additional 76,646 shares at a purchase

price of $1.67 per share, the closing price on February 3, 2020.

In connection with this offering, the Company incurred a total issuance

costs of $141,000.

The Company intends to use the net proceeds from this offering for working capital and other general corporate

Management’s

Discussion and Analysis of Financial Condition and Results of Operations

following information should be read in conjunction with the accompanying 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, 2020 (the “Form 10-K”), as filed with the U.S.

The Company intends to use the net proceeds from this offering for working capital and other general corporate purposes.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction

with the accompanying 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, 2020 (the “Form 10-K”), as filed with the U.S.

Securities and Exchange Commission (the “SEC”).

used below, unless the context otherwise requires, the terms “the Company,”

As used below, unless the context otherwise requires,

the terms “the Company,”

“Zedge,”

2 unchanged sentences

and “our”

refer to Zedge, Inc., a Delaware corporation and its subsidiary Zedge Europe AS, collectively.

Forward-Looking

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,”

refer to Zedge, Inc.,

a Delaware corporation and its subsidiary Zedge Europe AS, 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,”

3 unchanged sentences

and similar words and phrases.

forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the

results projected in any forward-looking statement.

In addition to the factors specifically noted in the forward-looking statements,

other important factors, risks and uncertainties that could result in those differences include, but are not limited to, those

discussed under Item 1A to Part I “Risk Factors”

These forward-looking statements are subject to risks and uncertainties that could

cause actual results to differ materially from the results projected in any forward-looking statement.

In addition to the factors specifically

noted in the forward-looking statements, other important factors, risks and uncertainties that could result in those differences include,

but are not limited to, those discussed under Item 1A to Part I “Risk Factors”

in the 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

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 Form 10-K.

is a leading app developer focusing on mobile phone personalization and entertainment.

Zedge is a leading app developer focusing on mobile

phone personalization and entertainment.

“Zedge Wallpapers and Ringtones”

our flagship app is all about personal identity.

We’re the hub for self-expression used by millions for mobile phone personalization,

social content and fandom art.

Our app enables consumers to showcase who they are, what they like, and amplify their persona.

Zedge Premium, our marketplace, enables content creators, ranging the gamut from world class celebrities to emerging artists,

to display their talent and sell their content to our users.

“Shortz –

We’re the hub for self-expression used by millions for mobile phone personalization, social content and fandom art.

Our app enables

consumers to showcase who they are, what they like, and amplify their persona.

Zedge Premium, our marketplace, enables content creators,

ranging the gamut from world class celebrities to emerging artists, to display their talent and sell their content to our users.

“Shortz

Chat Stories by Zedge,”

which has been

launched in beta, offers serialized, short-form fiction stories delivered as text-messaging conversations and more recently as

mini-podcasts.

Zedge app has been installed approximately 482 million times, and at January 31, 2021, boasted approximately 35.4 million monthly

active users, or MAU.

MAU is a key performance indicator that captures the number of unique users that used our Zedge app during

the previous 30-day of the relevant period.

Our Zedge app has consistently ranked as one of the most popular free apps in the

Google Play store in the United States.

Historically, we have not made a material investment in paid user acquisition for our

Zedge app’s success stems from its ability to meet consumer demand for a rich and diverse catalogue of both long-tail and

popular content in a fun, intuitive and user-friendly fashion that aligns with their interest in expressing their essence in a

bespoke manner, to offer reliable search and discovery capabilities and to make relevant content recommendations to our users.

To this end, we invest heavily in both product design and development and the underlying technology required to satisfy both our

Zedge app’s users’

which has been launched in beta, offers serialized, short-form fiction stories delivered as text-messaging

conversations and more recently as mini-podcasts.

Our Zedge app has been installed approximately 497

million times, and at April 30, 2021, boasted approximately 34.5 million monthly active users, or MAU.

MAU is a key performance indicator

that captures the number of unique users that used our Zedge app during the previous 30-day of the relevant period.

Our Zedge app has

consistently ranked as one of the most popular free apps in the Google Play store in the United States.

Historically, we have not made

a material investment in paid user acquisition for our Zedge app.

Our Zedge app’s success stems from its ability

to meet consumer demand for a rich and diverse catalogue of both long-tail and popular content in a fun, intuitive and user-friendly fashion

that aligns with their interest in expressing their essence in a bespoke manner, to offer reliable search and discovery capabilities and

to make relevant content recommendations to our users.

To this end, we invest heavily in both product design and development and the underlying

technology required to satisfy both our Zedge app’s users’

and content contributors’

expectations.

Our Zedge app utilizes both user-generated and licensed,

third-party content to achieve these goals.

March 2018, we launched Zedge Premium, a marketplace within our Zedge app where professional creators and brands market, distribute

and sell their digital content to our consumers.

Since launching Zedge Premium, we have made and continue making material investments

in optimizing our Zedge app’s homepage design in order to maximize exposure to premium content with the goal of driving

Over time, we expect that Zedge Premium will contribute to a virtuous cycle whereby it drives new consumers into our Zedge

app resulting in more artist payouts, which in turn makes the platform more attractive for artists and brands looking to expand

their reach and increase their income.

January 2019, we started offering freemium Zedge app users the ability to convert into paying subscribers for amongst other things

the ability to remove unsolicited advertisements from our Zedge app.

As of January 31, 2021, we had approximately 711,000 active

In fiscal 2021, we hope to further optimize the offer based on user type, geography and price point as well as introduce

new subscription enhancements like content bundles and rewards.

December 2019, we completed the beta launch of ’Shortz’

our new entertainment app offering serialized, short-form

fiction delivered in a text-message format across both Android and iOS, focusing on users in the United States, the United Kingdom

and Canada and it is now available globally.

the past several years, our Zedge app has experienced a decline in its MAU, with modest increases in certain periods, as well

as a shift in the regional customer make-up with MAU in emerging markets representing an increasing portion of our user base.

As of January 31, 2021, users in emerging markets represented 73% of our MAU compared to 67% a year prior.

This shift has negatively

impacted revenue because advertising rates in emerging markets are materially lower than in well-developed markets.

In the second

quarter of fiscal 2021, users in emerging markets grew by 12.6% while users in well-developed economies declined 15.9% when compared

to the same period in fiscal 2020.

As of January 31, 2021, approximately 45% of our Zedge app’s user base was located in

North America and Europe (including Eastern Europe) with a split of 22% and 23%, respectively, compared with 53% as of January

Our Zedge app utilizes

both user-generated and licensed, third-party content to achieve these goals.

In March 2018, we launched Zedge Premium, a marketplace

within our Zedge app where professional creators and brands market, distribute and sell their digital content to our consumers.

launching Zedge Premium, we have made and continue making material investments in optimizing our Zedge app’s homepage design in

order to maximize exposure to premium content with the goal of driving sales.

Over time, we expect that Zedge Premium will contribute

to a virtuous cycle whereby it drives new consumers into our Zedge app resulting in more artist payouts, which in turn makes the platform

more attractive for artists and brands looking to expand their reach and increase their income.

In January 2019, we started offering paid subscriptions

which, amongst other things, removed unsolicited advertisements from our Zedge app.

As of April 30, 2021, we had approximately 753,000

active subscribers.

Beginning in fiscal 2021, we hope to further optimize the offer based on user type, geography and price point as well

as introduce new subscription enhancements like content bundles and rewards.

In December 2019, we completed the beta launch of

‘Shortz’

our new entertainment app offering serialized, short-form fiction delivered in a text-message format across both

Android and iOS, focusing on users in the United States, the United Kingdom and Canada and it is now available globally.

Over the past several years, our Zedge app has experienced

a decline in its MAU, with modest increases in certain periods, as well as a shift in the regional customer make-up with MAU in emerging

markets representing an increasing portion of our user base.

As of April 30, 2021, users in emerging markets represented 74% of our MAU

compared to 69% a year prior.

This shift impacts our business because emerging markets do not monetize as well as well-developed markets

due to lower eCPMs and lower monthly and annual subscription rates in these regions coupled with lower priced subscriptions SKUs (Stock

Keeping Unit).

In the third quarter of fiscal 2021, users in emerging markets grew by 29.3% while users in well-developed economies declined

1.2% when compared to the same period in fiscal 2020.

As of April 30, 2021, approximately 43% of our Zedge app’s user base was located

in North America and Europe (including Eastern Europe) with a split of 21% and 22%, respectively, compared with 51% as of April 30, 2020

with a split of 25% and 26%, respectively.

growth is tightly coupled with securing new users.

Historically, our relatively high ranking in the Google Play store has been

one of the primary drivers for securing new users.

Although still an important factor, we now also dedicate resources to growth

initiatives, both organic and paid.

With time, we believe that we can change our growth dynamic in well-developed markets.

from targeted growth initiatives, we need to continually improve the core user experience, test different mechanisms and content

verticals that may spur growth and capitalize on the role that Zedge Premium artists can have on driving new users into the Zedge

COVID-19 pandemic has impacted our Zedge app’s new user growth.

According to Gartner, a leading research and advisory company,

new smartphone sales declined 10.5% in calendar year 2020 as a result of the pandemic, negatively impacting new user growth, especially

in well-developed markets.

Gartner forecasts and smartphone sales are expected to rebound in 2021.

Mature Asia Pacific, Western

Europe, and Latin America are expected to exhibit the strongest growth between 2020 and 2021 which we expect will bode well for

our business.

the quarters ended January 31, 2021 and 2020, we generated approximately 83% and 85%, respectively, of our revenues from selling

our Zedge app’s advertising inventory to advertising networks, advertising exchanges, and direct arrangements with advertisers.

Advertising networks and advertising exchanges are third-party technology platforms that facilitate the buying and selling of

media advertising inventory from multiple ad networks.

The price of advertising inventory is fixed on an advertising network whereas

the price for inventory is determined through real-time bidding on an advertising exchange.

Advertisers are attracted to our Zedge

app because of its sizable user base.

our Zedge Premium marketplace, the content owner sets the price and the 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 a rewarded video.

Alternatively, users can buy Zedge Credits via an in-app purchase.

If a user purchases Zedge Credits, Google Play or App Store

keeps 30% of the purchase price with the remaining 70% being paid to us.

When a user purchases Zedge Premium content, the artist

or brand receives 70% of the actual value of the Zedge Credits used to buy the content item as a royalty and we retain the remaining

30% as our fee, which we recognize as revenue.

As Zedge Premium matures and expands, we expect to also diversify our revenue source

January 2019, we started offering a subscription-based product to Android users of our Zedge app in which the payment of a monthly

or annual fee would remove unsolicited ads when using our Zedge app.

During the first 12 months after a customer’s sign

up for the subscription-based product, Google retains up to 30% as a fee, which decreases to 15% from month 13 and beyond.

of January 31, 2021, we had approximately 711,000 active subscribers, 90% of which had subscribed on an annual basis.

Since inception

in January 2019, subscriptions have generated approximately $4.7 million in gross revenue.

Accounting Policies

consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted

in the United States of America, or U.S.

Our significant accounting policies are described in Note 1 to the consolidated

financial statements included in the 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.

accounting policies include those related to capitalized software and technology development costs, revenue recognition and goodwill.

Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under

the circumstances.

MAU growth is tightly coupled with securing new

Historically, our relatively high ranking in the Google Play store has been one of the primary drivers new user acquisition.

still an important factor, we now also dedicate resources to growth initiatives, both organic and paid.

With time, we believe that we

can change our growth dynamic in well-developed markets.

Aside from targeted growth initiatives, we need to continually improve the core

user experience, test different mechanisms and content verticals that may spur growth and capitalize on the role that Zedge Premium artists

can have on driving new users into the Zedge platform.

The COVID-19 pandemic has impacted our Zedge app’s

new user growth.

According to Gartner, a leading research and advisory company, new smartphone sales declined 10.5% in calendar year 2020

as a result of the pandemic, negatively impacting new user growth, especially in well-developed markets.

Gartner forecasts smartphone

sales are expected to rebound in 2021 and there have been reports of a partial recovery, with sales still below 2019 levels.

During the quarters ended April 30, 2021 and 2020,

we generated approximately 80% and 72%, respectively, of our revenues from selling our Zedge app’s advertising inventory to advertising

networks, advertising exchanges, and direct arrangements with advertisers.

Advertising networks and advertising exchanges are third-party

technology platforms that facilitate the buying and selling of media advertising inventory from multiple ad networks.

The price of advertising

inventory is fixed on an advertising network whereas the price for inventory is determined through real-time bidding on an advertising

Advertisers are attracted to our Zedge app because of its sizable user base.

In our Zedge Premium marketplace, the content owner

sets the price and the 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 a rewarded video.

Alternatively, users can buy Zedge Credits via an in-app

If a user purchases Zedge Credits, Google Play or App Store keeps 30% of the purchase price with the remaining 70% being paid

When a user purchases Zedge Premium content, the artist or brand receives 70% of the actual value of the Zedge Credits used to

buy the content item as a royalty and we retain the remaining 30% as our fee, which we recognize as revenue.

As Zedge Premium matures

and expands, we expect to also diversify our revenue source mix.

In January 2019, we started offering paid subscriptions

which amongst other things removed unsolicited advertisements from our Zedge app.

During the first 12 months after a customer’s

sign up for the subscription-based product, Google retains up to 30% as a fee, which decreases to 15% from month 13 and beyond.

April 30, 2021, we had approximately 753,000 active subscribers, 90% of which had subscribed on an annual basis.

Since inception in January

2019, subscriptions have generated approximately $5.7 million in gross revenue.

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.

Our significant

accounting policies are described in Note 1 to the consolidated financial statements included in the 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 capitalized software and technology development costs,

revenue recognition and goodwill.

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 Form 10-K.

Issued Accounting Standards Not Yet Adopted

issued accounting standards not yet adopted by us are more fully described in Note 13 to the Consolidated Financial Statements

included in Item 1 to Part I of this Quarterly Report on Form 10-Q.

COVID-19 pandemic has resulted in public health responses including travel bans, restrictions, social distancing requirements,

and shelter-in place orders, which have negatively impacted our business, operations and financial performance.

While we saw a

significant decrease in advertising spend when the pandemic became global in March, our daily advertising revenue has experienced

a strong recovery since July 2020.

responded quickly and decisively to the challenges presented by the pandemic in order to ensure the long-term continuity of our

Initially, we shifted resources and priorities and focused on streamlining our back-end infrastructure and specifically

redesigning our content management system in order to better control costs while simultaneously establishing a scalable foundation

for new growth initiatives, even at the expense of new product initiatives.

At the outset of the pandemic, we instituted a hiring

freeze which has subsequently been relaxed and we are starting to invest in new products, features, and enhancements.

to grow headcount by between 15% to 20% in calendar 2021, mostly in engineering, product and design to execute on our product

development roadmap.

the unprecedented uncertainty and rapidly shifting market conditions of the business environment, we cannot reasonably estimate

the full impact of the COVID-19 pandemic on our future financial and operational results.

At this point it is unclear whether

variables including the economy, unemployment, retail sales, and advertising budgets, or capital markets, including volatility

of our stock price will impact our business.

We continue to monitor the rapidly evolving situation and guidance from international

and domestic authorities, including federal, state and local public health authorities, and there may be developments outside

our control requiring us to adjust our operating plan.

risks related to the COVID-19 pandemic on our business are further described in Part I, Item 1A - Risk Factors of the Company’s

Annual Report on Form 10-K for the year ended July 31, 2020, as filed with the SEC.

Performance Indicators

presentation of our results of operations 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 captures the number of unique users

that used our Zedge app during the previous 30-day period, which is important to understanding the size of the user base for the

Company’s Zedge app which is a driver of revenue.

Changes and trends in MAU are useful for measuring the general health

of our business, gauging both present and potential customers’

experience, assessing the efficacy of product improvements and

marketing campaigns and overall user engagement.

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.

increased 3.2% in the second quarter of fiscal 2021 when compared to the same period a year ago and increased 9.3% on a sequential

Over the past several years, we have experienced a continuing shift in our regional customer make-up with MAU in emerging

markets representing an increasing portion of our user base.

As of January 31, 2021, users in emerging markets represented 73%

of our MAU compared to 67% a year prior.

This shift has negatively impacted revenue because advertising rates in emerging markets

are materially lower than in well-developed markets.

However, ARPMAU for the three months ended January 31, 2021 was up 87.8%

additional discussion of our critical accounting policies, see our Management’s Discussion and Analysis of Financial Condition

and Results of Operations in the Form 10-K.

Recently Issued Accounting Standards Not Yet Adopted

Recently issued

accounting standards not yet adopted by us are more fully described in Note 13 to the Consolidated Financial Statements included in Item 1

to Part I of this Quarterly Report on Form 10-Q.

The COVID-19 pandemic has resulted in public health

responses including travel bans, restrictions, social distancing requirements, and shelter-in place orders, which have negatively impacted

our business, operations and financial performance.

While we saw a significant decrease in advertising spend when the pandemic became

global in March 2020, our daily advertising revenue has experienced a strong recovery since July 2020 through April 2021.

We responded quickly and decisively to the challenges

presented by the pandemic in order to ensure the long-term continuity of our service.

Initially, we shifted resources and priorities and

focused on streamlining our back-end infrastructure and specifically redesigning our content management system in order to better control

costs while simultaneously establishing a scalable foundation for new growth initiatives, even at the expense of new product initiatives.

At the outset of the pandemic, we instituted a hiring freeze which has subsequently been relaxed and we are starting to invest in new

products, features, and enhancements.

We expect to grow headcount by between 15% to 20% in calendar 2021, mostly in engineering, product

and design to execute on our product development roadmap.

Given the unprecedented uncertainty and rapidly

shifting market conditions of the business environment, we cannot reasonably estimate the full impact of the COVID-19 pandemic on our

future financial and operational results.

At this point it is unclear whether variables including the economy, unemployment, retail sales,

and advertising budgets, or capital markets, including volatility of our stock price will impact our business.

We continue to monitor

the rapidly evolving situation and guidance from international and domestic authorities, including federal, state and local public health

authorities, and there may be developments outside our control requiring us to adjust our operating plan.

The risks related to the COVID-19 pandemic on

our business are further described in Part I, Item 1A - Risk Factors of the Company’s Annual Report on Form 10-K for the year ended

July 31, 2020, as filed with the SEC.

Key Performance Indicators

The presentation of our results of operations

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 captures the number of unique users that used our Zedge app during the previous 30-day period,

which is important to understanding the size of the user base for the Company’s Zedge app which is a driver of revenue.

and trends in MAU are useful for measuring the general health of our business, gauging both present and potential customers' experience,

assessing the efficacy of product improvements and marketing campaigns and overall user engagement.

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

MAU increased 19.8% in the third quarter of fiscal

2021 when compared to the same period a year ago and decreased 2.6% on a sequential basis.

Over the past several years, we have experienced

a continuing shift in our regional customer make-up with MAU in emerging markets representing an increasing portion of our user base.

As of April 30, 2021, users in emerging markets represented 74% of our MAU compared to 69% a year prior.

This shift impacts our business

because emerging markets do not monetize as well as well-developed markets due to lower eCPMs and lower monthly and annual subscription

rates in these regions coupled with lower priced subscriptions SKUs.

However, ARPMAU for the three months ended April 30, 2021 was up

121% when compared to the same period a year ago, pointing to progress we have made in extracting more value from our users, particularly

from paid subscriptions sales and improvement in ad optimization.

For the same reasons, ARPMAU also increased 35.2% on a sequential

ARPMAU decreased slightly on a sequential basis.

Three Months Ended

8 unchanged sentences

Emerging Markets MAU/Total MAU

of Operations

and Six Months Ended January 31, 2021 Compared to Three and Six Months Ended January 31, 2020

Results of Operations

Three and Nine months Ended April 30, 2021 Compared to Three and

Nine months Ended April 30, 2020

Three months ended

Nine Months Ended

(in thousands)

8 unchanged sentences

Net Income (loss)

following table sets forth the composition of our revenues for the three and six months ended January 31, 2021 and 2020:

not measurable

The following table sets forth the composition

of our revenues for the three and nine months ended April 30, 2021 and 2020:

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands)

4 unchanged sentences

Total Revenues

Advertising revenue increased 95% and 88% in the three and six months ended January 31, 2021, respectively,

compared to the three and six months ended January 31, 2020, primarily due to improvement in our ad optimizations and higher advertising

subscription revenue .

We rolled out a subscription-based product on Android in January 2019, whereby users of

our Zedge app could pay a monthly or annual fee to remove unsolicited ads when using our Zedge app.

We employ a regional pricing

strategy in order to improve conversions.

constitutes our largest subscriber base and we generally charge $0.99 per month

and $4.99 per year.

We generated $954,000 and $1,816,000 in gross prepaid subscription in the three and six months ended January

31, 2021, respectively, compared to $496,000 and $838,000 in the three and six months ended January 31, 2020.

We expect that from

time to time the prices of our subscription in each country/region may change and we may test other plan and price variations.

following table summarizes subscription revenue for the three and six months ended January 31, 2021 and 2020.

Advertising revenue .

Advertising revenue increased

182% and 114% in the three and nine months ended April 30, 2021, respectively, compared to the three and nine months ended April 30, 2020,

primarily due to improvement in our ad optimizations and higher advertising rates.

Paid subscription revenue .

We rolled out a subscription-based

product on Android in January 2019, whereby users of our Zedge app could pay a monthly or annual fee to remove unsolicited ads when using

our Zedge app.

We employ a regional pricing strategy in order to improve conversions.

constitutes our largest subscriber base

and we generally charge $0.99 per month or $4.99 per year.

We generated $990,000 and $2,806,000 in gross prepaid subscription in the three

and nine months ended April 30, 2021, respectively, compared to $684,000 and $1,522,000 in the three and nine months ended April 30, 2020.

We expect that, based on research and testing we undertake, from time to time, the prices of our subscription in each country/region may

change and we may test other plan and price variations.

The following table summarizes subscription revenue for the three and

nine months ended April 30, 2021 and 2020.

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands, except revenue per subscriber and percentages)

3 unchanged sentences

Average monthly revenue per active subscription

We completed the initial rollout of Zedge Premium in March 2018 to a segment of our Android user base and

we expanded it to 100% of our Android user base in January 2019.

In the three and six months ended January 31, 2021, gross transaction

value (the total sales volume transacting through the platform), or “GTV,”

generated from Zedge Premium were $211,000

and $419,000, respectively, compared to $197,000 and $389,000 in the three and six months ended January 31, 2020.

and six months ended January 31, 2021 net revenue generated from Zedge Premium were $103,000 and $228,000, respectively, compared

to $61,000 and $220,000 in the three and six months ended January 31, 2020.

from Zedge Premium, as well as revenues generated by Shortz, are reported under Other Revenues, and those offerings constitute

potential growth drivers in the quarters to come.

cost of revenues .

Zedge Premium .

We completed the

initial rollout of Zedge Premium in March 2018 to a segment of our Android user base and we expanded it to 100% of our Android user base

in January 2019.

In the three and nine months ended April 30, 2021, gross transaction value (the total sales volume transacting through

the platform), or “GTV,”

generated from Zedge Premium were $252,000 and $671,000, respectively, compared to $150,000 and $539,000

in the three and nine months ended April 30, 2020.

In the three and nine months ended April 30, 2021 net revenue generated from Zedge

Premium were $124,000 and $352,000, respectively, compared to $123,000 and $343,000 in the three and nine months ended April 30, 2020.

Revenue from Zedge Premium, as well as revenues

generated by Shortz, are reported under Other Revenues, and those offerings constitute potential growth drivers in the quarters to come.

Direct cost of revenues .

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

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands)

1 unchanged sentence

As a percentage of revenues

cost of revenues increased 1.6% and decreased 3% in the three and six months ended January 31, 2021, respectively, compared to

three and six months ended January 31, 2020.

The 1.6% increase in the three months ended January 31, 2021 can be attributed to

a billing error in fiscal 2020 where certain charges were not billed by one of our vendors.

The 3% decrease was primarily attributable

to the migration of our backend infrastructure to cloud-based providers, offset by the increase in revenues.

a percentage of revenue, direct cost of revenues in three and six months ended January 31, 2021 were 5.9% and 6.8%, respectively,

compared to 11.6% and 13.6% in the three and six months ended January 31, 2020, primarily due to significantly higher revenue

in the current periods and the fixed nature of many of our direct cost of revenues.

general and administrative expense .

Selling, general and administrative expense (“SG&A”) consists

mainly of payroll, benefits, recruiting fees, facilities, marketing, content acquisition costs, consulting, professional fees,

software licensing (“SaaS”) and public company related expenses.

Direct cost of revenues increased 0.3% and decreased

1.9% in the three and nine months ended April 30, 2021, respectively, compared to three and nine months ended April 30, 2020.

As a percentage of revenue, direct cost of revenues

in three and nine months ended April 30, 2021 were 5.5% and 6.3%, respectively, compared to 13.9% and 13.7% in the three and nine months

ended April 30, 2020, primarily due to significantly higher revenue in the current periods and the fixed nature of many of our direct

cost of revenues.

Selling, general and administrative expense .

general and administrative expense (“SG&A”) consists mainly of payroll, benefits, recruiting fees, facilities, marketing,

content acquisition costs, consulting, professional fees, software licensing (“SaaS”) and public company related expenses.

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands)

1 unchanged sentence

As a percentage of revenues

expense increased 14.0% and 8.5% in the three and six months ended January 31, 2021, respectively, compared to three and six months

ended January 31, 2020.

This increase was primarily attributable to higher compensation costs resulting from additional headcount,

higher professional fees and higher marketing costs associated with the approximately 23.9% average fee we pay to Google for subscription

sales, offset by reductions in discretionary expenses.

a percentage of revenue, SG&A expense in the three and six months ended January 31, 2021 were 40.6% and 45.9%, respectively,

compared to 71.6% and 82.1% in the three and six months ended January 31, 2020, primarily due to significantly higher revenue

in the current periods.

headcount totaled 46 as of January 31, 2021 compared to 39 as of January 31, 2020 with the majority of our employees currently

based in Lithuania.

expense also included stock-based compensation expense which were $152,000 and $389,000 for the three and six months ended January

31, 2021, respectively, compared to $198,000 and $296,000 for the three and six months ended January 31, 2020.

Stock-based compensation

includes equity grants to employees and consultants, as well as stock issuances to pay for board compensations and 401(k) matching

contributions.

Certain stock options, deferred stock unit and restricted stock grants are more fully described in Note 6 to the

Consolidated Financial Statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.

and amortization .

Depreciation and amortization consist mainly of amortization of 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.

We start amortizing these capitalized software and technology development costs once these projects were

SG&A expense increased 71.7% and 26.8% in

the three and nine months ended April 30, 2021, respectively, compared to three and nine months ended April 30, 2020.

This increase was

primarily attributable to higher compensation costs resulting from additional headcount and bonus accrual, higher payroll taxes resulting

from option exercise activities as discussed below, higher professional fees and higher marketing costs associated with the approximately

23.4% average fee we pay to Google for subscription sales, offset by reductions in discretionary expenses.

Norwegian NOK declined significantly

to a historical low following the outbreak of Covid-19 in the three months ended April 30, 2020, as a result, SG&A expenses related

to our Norwegian operations for that period were lower when expressed in US dollar term and contributed in part to the overall year over

year increases in our SG&A expenses.

As a percentage of revenue, SG&A expense in

the three and nine months ended April 30, 2021 were 51.3% and 47.9%, respectively, compared to 75.5% and 80.0% in the three and nine months

ended April 30, 2020, primarily due to significantly higher revenue in the current periods.

Our headcount totaled 52 as of April 30, 2021

compared to 39 as of April 30, 2020 with the majority of our employees currently based in Lithuania.

SG&A expense also included stock-based compensation

expense which was $98,000 and $487,000 for the three and nine months ended April 30, 2021, respectively, compared to $102,000 and $397,000

for the three and nine months ended April 30, 2020.

Stock-based compensation includes equity grants to employees and consultants, as well

as stock issuances to pay for board compensations and 401(k) matching contributions.

Certain stock options, deferred stock unit and restricted

stock grants are more fully described in Note 6 to the Consolidated Financial Statements included in Item 1 to Part I of this Quarterly

Report on Form 10-Q.

Holders exercised option to purchase 312,287 and

497,252 shares of Class B common stock, respectively, in the three and nine months ended April 30, 2021 as compared to 0 and 29,917 shares

in the three and nine months ended April 30, 2020.

In connection with these option exercises and the resulting net gains, we incurred

approximately $258,000 and $382,000 in payroll taxes in the three and nine months ended April 30, 2021 as compared to $0 and $6,000 in

the three and nine months ended April 30, 2020.

Depreciation and amortization .

and amortization consist mainly of amortization of 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.

We start amortizing these capitalized

software and technology development costs once these projects were completed.

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands)

1 unchanged sentence

As a percentage of revenues

comparison of depreciation and amortization expenses in any given periods can be attributed to the number of projects being amortized

during those periods, as we removed fully amortized projects and added newly completed projects in the amortization pool.

and other income, net.

Interest and other income, net in the three and six months ended January 31, 2021 remained flat

when compared to the same periods in fiscal 2020.

The comparison of depreciation and amortization

expenses in any given periods can be attributed to the number of projects being amortized during those periods, as we removed fully amortized

projects and added newly completed projects in the amortization pool.

Interest and other income, net.

Interest and other income, net in the three and nine months ended April 30, 2021 increased $7,000 and $7,000, respectively, when compared

to the same periods in fiscal 2020 due to higher cash balance resulting from cash flows provided by operating activities and financing

activities in the current periods.

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands)

1 unchanged sentence

As a percentage of revenues

gain (loss) resulting from foreign exchange transactions .

Net gain (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.

Net gain (loss) resulting from foreign exchange

transactions .

Net gain (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.

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands)

1 unchanged sentence

As a percentage of revenues

the three and six months ended January 31, 2021, we realized gains of $92,000 and $51,000, respectively, from NOK and EUR hedging

activities, compared to gains of $20,000 and losses of $54,000 in the three and six months ended January 31, 2020.

for income taxes .

The tax expense consists of federal and state taxes based on taxable income and allocated net

worth and certain income taxes payable in foreign jurisdictions where our subsidiaries reside.

In the three and nine months ended April 30, 2021,

we realized gains of $16,000 and $67,000, respectively, from NOK and EUR hedging activities, compared to losses of $273,000 and $327,000

in the three and nine months ended April 30, 2020 for the reason stated above.

Provision for income taxes .

The tax expense consists of federal and state taxes based on taxable income and allocated net worth and certain income taxes payable in

foreign jurisdictions where our subsidiaries reside.

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands)

1 unchanged sentence

As a percentage of revenues

July 31, 2020, we had available U.S.

federal and state net operating loss (“NOL”) carryforwards from domestic operations

of approximately $5.6 million and $5.9 million, respectively, to offset future taxable income, we also had available NOL carryforwards

of approximately $433,000 to offset future foreign taxable income.

We expect to utilize these NOL carryforwards to offset the

taxable income for the six months ended January 31, 2021 and for the fiscal year ending July 31, 2021, and reduced its effective

tax rate to 7.9% for those periods.

March 27, 2020, the CARES Act was signed into law.

The Act contains several new or changed income tax provisions, including

but not limited to the following:

increased limitation threshold for determining deductible interest expense, class life changes

to qualified improvements (in general, from 39 years to 15 years), and the ability to carry back net operating losses incurred

from tax years 2018 through 2020 up to the five preceding tax years.

Most of these provisions are either not applicable

or have no material effect on the Company.

and Capital Resources

January 31, 2021, we had cash and cash equivalents of $13.6 million and working capital (current assets less current liabilities)

of $13.2 million, compared to $5.1 million and $3.9 million, respectively at July 31, 2020.

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 months period

ending January 31, 2022.

We also maintain a revolving line of credit of up to $2.0 million and a foreign exchange contract facility

of up to $6.5 million with Western Alliance Bank, as discussed below in Financing Activities.

following tables present selected financial information for the six months ended January 31, 2021 and 2020:

Six Months Ended

At July 31, 2020,

we had available U.S.

federal and state net operating loss (“NOL”) carryforwards from domestic operations of approximately

$5.6 million and $5.9 million, respectively, to offset future taxable income , we also had available

NOL carryforwards of approximately $433,000 to offset future foreign taxable income.

We expect to utilize these NOL carryforwards to offset

the taxable income for the nine months ended April 30, 2021 and for the fiscal year ending July 31, 2021, and reduce our effective tax

rate to 6.6% for those periods.

On March 27, 2020, the CARES Act was signed into

The Act contains several new or changed income tax provisions, including but not limited to the following:

increased limitation

threshold for determining deductible interest expense, class life changes to qualified improvements (in general, from 39 years to 15 years),

and the ability to carry back net operating losses incurred from tax years 2018 through 2020 up to the five preceding tax years.

of these provisions are either not applicable or have no material effect on the Company.

Liquidity and Capital Resources

At April 30, 2021, we had cash and cash equivalents

of $24.9 million and working capital (current assets less current liabilities) of $22.9 million, compared to $5.1 million and $3.9 million,

respectively, at July 31, 2020.

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 months period ending April 30, 2022.

We also maintain a revolving line of credit

of up to $2.0 million and a foreign exchange contract facility of up to $6.5 million with Western Alliance Bank, as discussed below in

Financing Activities.

The following tables

present selected financial information for the nine months ended April 30, 2021 and 2020:

Nine Months Ended

(in thousands)

5 unchanged sentences

Increase in cash and cash equivalents

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.

provided by operating activities in the six months ended January 31, 2021 was $2.8 million higher when compared to the same period

a year ago, primarily attributable to the higher revenues generated from our service offerings, including primarily advertising

and paid subscription revenue.

used in investing activities in the six months ended January 31, 2021 and 2020 consisted mostly 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.

filed with the SEC a Registration Statement on Form S-3 on November 30, 2020 which became effective on December 4, 2020 to facilitate

capital raising.

The Registration Statement registered the issuance and sale by the Company of Class B common stock or related

securities for gross proceeds to the Company of up to $20 million.

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 in the nine months ended April

30, 2021 was $6.1 million higher when compared to the same period a year ago, primarily attributable to the higher revenues generated

from our service offerings, including primarily advertising and paid subscription revenue.

Investing Activities

Cash used in investing activities in the nine

months ended April 30, 2021 and 2020 consisted mostly 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

We filed with the SEC a Registration Statement

on Form S-3 on November 30, 2020 which became effective on December 4, 2020 to facilitate capital raising.

The Registration Statement

registered the issuance and sale by the Company of Class B common stock or related securities for gross proceeds to the Company of up

to $20 million.

On November 30, 2020, we engaged National Securities Corp.

Wainwright & Co, LLC (the “Sales Agents”) to act as our exclusive co-Sales Agents in connection with

the Company’s “at-the-market”

offering of shares of the Company’s Class B common stock up to $5 million.

We filed a Prospectus Supplement on December 9, 2020 and contemporaneously entered into an At The Market Offering Agreement with

the Sales Agents, pursuant to which we sold 761,906 shares at an average price of $6.5625 per share for total proceeds of $5 million

as of January 28, 2021.

Wainwright & Co, LLC (the “Sales Agents”)

to act as our exclusive co-Sales Agents in connection with the Company’s “at-the-market”

offering of shares of the Company’s

Class B common stock up to $5 million.

We filed a Prospectus Supplement on December 9, 2020 and contemporaneously entered into an At The

Market Offering Agreement with the Sales Agents, pursuant to which we sold 761,906 shares at an average price of $6.5625 per share for

total proceeds of $5 million as of January 28, 2021.

In connection with this offering, we incurred a total issuance costs of $215,000.

We intend to use the

net proceeds from this offering for working capital and other general corporate purposes.

August 2020, we obtained a loan of $181,000 to finance about 82% of our directors and officers’

liability and cyber liability

insurance policies, at an annual percentage interest rate of 3.89% to be repaid over nine equal monthly installments of $20,490

starting from September 1, 2020.

We repaid approximately $100,000 in principal in the six months ended January 31, 2021.

August 2019, we obtained a loan of $140,000 to finance about 85% of our directors and officers’

liability and cyber liability

insurance policies, at an annual percentage interest rate of 4.79% to be repaid over nine equal monthly installments of $15,976

starting from September 1, 2019.

We repaid approximately $78,000 in principal in the six months ended January 31, 2020.

the six months ended January 31, 2021 and 2020, we issued 312,287 shares and 29,917 shares respectively of Class B Stock and received

$396,000 and $4,000 respectively, in connection with options exercised during the period.

the six months ended January 31, 2021 and 2020, we purchased 17,630 shares and 18,441shares, respectively, of Class B Stock from

employees for $26,000 and $29,000 respectively, to satisfy tax withholding obligations in connection with the vesting of restricted

stock and DSUs.

maintain a credit facility of up to $2.0 million provided by Western Alliance Bank which is more fully described in Note 9 to

the Consolidated Financial Statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.

do not anticipate paying dividends on our common stock until we achieve sustainable profitability and retain certain minimum cash

The payment of dividends in any specific period will be at the sole discretion of our Board of Directors.

in Trade Accounts Receivable

trade accounts receivable increased $1.50 million to $2.91 million at January 31, 2021 from $1.41 million at July 31, 2020, primarily

due to higher revenue in the six months ended January 31, 2021.

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 digital

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.

MoPub (owned by Twitter), Google, Facebook and Ogury, 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.

the six months ended January 31, 2021, three customers represented 31%, 22% and 12% of our revenue.

In the six months ended January

31, 2020, two customers represented 33% and 30% of our revenue.

At January 31, 2021, two customers represented 47% and 22% of

our accounts receivable balance, and at July 31, 2020, two customers represented 35% and 32% of our accounts receivable balance.

All of these significant customers were advertising exchanges operated by leading companies, and the receivables represent many

smaller amounts due from their advertisers.

Obligations and Other Commercial Commitments

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

Sheet Arrangements

January 31, 2021, 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.

and Qualitative Disclosures About Market Risks

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

We intend to use the net proceeds from this offering for working capital and other general corporate purposes.

On March 16, 2021, we filed a prospectus supplement

with the SEC which contemplates the sale, for a gross aggregate sale price of up to $10,000,000, of shares of our Class B common stock,

from time to time in “at the market offerings”

pursuant to an At Market Issuance Sales Agreement with National Securities

Corporation and Maxim Group LLC dated as of March 16, 2021, pursuant to which we sold 489,303 shares at an average price of $15.0334 per

share for total proceeds of $7.4 million as of April 30, 2021.

In connection with this offering, we incurred a total issuance costs of

We intend to use the net proceeds from this offering for working capital and other general corporate purposes.

In August 2020, we obtained a loan of $181,000

to finance about 82% of our directors’

and officers’

liability and cyber liability insurance policies, at an annual percentage

interest rate of 3.89% to be repaid over nine equal monthly installments of $20,490 starting from September 1, 2020.

We repaid approximately

$161,000 in principal in the nine months ended April 30, 2021.

In August 2019, we obtained a loan of $140,000

to finance about 85% of our directors’

and officers’

liability and cyber liability insurance policies, at an annual percentage

interest rate of 4.79% to be repaid over nine equal monthly installments of $15,976 starting from September 1, 2019.

We repaid approximately

$125,000 in principal in the nine months ended April 30, 2020.

In the nine months ended April 30, 2021

and 2020, we issued 497,252 shares and 29,917 shares respectively of Class B Stock and received $819,000 and $4,000 respectively, in connection

with options exercised during the period.

In the nine months ended April 30, 2021 and 2020,

we purchased 17,630 shares and 18,441shares, respectively, of Class B Stock from employees for $26,000 and $29,000 respectively, to satisfy

tax withholding obligations in connection with the vesting of restricted stock and DSUs.

We maintain a credit facility of up to $2.0 million

provided by Western Alliance Bank which is more fully described in Note 9 to the Consolidated Financial Statements included in Item 1

to Part I of this Quarterly Report on Form 10-Q.

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.

Changes in Trade Accounts Receivable

Gross trade accounts receivable increased $1.33

million to $2.74 million at April 30, 2021 from $1.41 million at July 31, 2020, primarily due to higher revenue in the nine months ended

April 30, 2021.

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 digital 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.

MoPub (owned by Twitter), Google, Facebook and Ogury, 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 nine months ended April 30, 2021, three

customers represented 31%, 22% and 12% of our revenue.

In the nine months ended April 30, 2020, two customers represented 31% and 28%

of our revenue.

At April 30, 2021, two customers represented 44% and 25% of our accounts receivable balance, and at July 31, 2020, two

customers represented 35% and 32% of our accounts receivable balance.

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 April 30, 2021, 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.

Quantitative and Qualitative Disclosures About Market Risks

Smaller reporting companies are not required

to provide the information required by this item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements