What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-11-09 compared with 2020-10-28 · 638 added, 611 removed, 73 unchanged (94% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

B Common Stock

Class B common stock is quoted on the NYSE American stock exchange under the trading symbol ZDGE.

Trading commenced on the NYSE

American on June 1, 2016.

On October 21, 2020, the last sales price reported on the NYSE American for our Class B common stock

was $1.60 per share.

October 21, 2020, there were 310 holders of record of our Class B common stock and 1 holder of record of our Class A common stock.

As of October 22, 2020, all shares of Class A common stock are beneficially owned by Michael Jonas.

The number of holders of record

of our Class B common stock does not include the number of persons whose shares are in nominee or in “street name”

Market for Registrant’s Common Equity, Related Stockholder

Matters and Issuer Purchases of Equity Securities

Class B Common Stock

Our Class B common stock is quoted on the NYSE American stock exchange

under the trading symbol ZDGE.

Trading commenced on the NYSE American on June 1, 2016.

On November 5, 2021, the last sales price reported

on the NYSE American for our Class B common stock was $11.27 per share.

On November 5, 2021, there were 280 holders of record of our Class

B common stock and 1 holder of record of our Class A common stock.

As of November 5, 2021, all shares of Class A common stock are beneficially

owned by Michael Jonas.

The number of holders of record of our Class B common stock does not include the number of persons whose shares

are in nominee or in “street name”

accounts through brokers.

do not anticipate paying dividends on our common stock until we achieve sustainable profitability (after satisfying all of our

operational needs) and retain certain minimum cash reserves.

Distributions will be subject to the need to retain earnings for

investment in growth opportunities or the acquisition of complementary assets.

The payment of dividends in any specific period

will be at the sole discretion of our Board of Directors.

information required by Item 201(d) of Regulation S-K will be contained in our Proxy Statement for our Annual Stockholders Meeting,

which we will file with the Securities and Exchange Commission within 120 days after July 31, 2020, and which is incorporated

by reference herein.

Sales of Unregistered Securities

February 5, 2020, we closed on our registered direct offering of 1,734,459 shares of our Class B common stock for gross proceeds

We do not anticipate paying dividends on our common stock until we

achieve sustainable profitability (after satisfying all of our operational needs) and retain certain minimum cash reserves.

Distributions

will be subject to the need to retain earnings for investment in growth opportunities or the acquisition of complementary assets.

payment of dividends in any specific period will be at the sole discretion of our Board of Directors.

The information required by Item 201(d) of Regulation S-K will be contained

in our Proxy Statement for our Annual Stockholders Meeting, which we will file with the Securities and Exchange Commission within 120

days after July 31, 2021, and which is incorporated by reference herein.

Recent Sales of Unregistered Securities

We filed with the Securities and Exchange Commission (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 Form S-3 registered the issuance and sale by us of Class B common stock or related securities for gross proceeds

to us 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”

shares of our Class B common stock up to $5 million.

We 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, pursuant to which

we sold 761,906 shares at an average price of $6.5625 per share for total proceeds of $5 million.

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.

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 663,686 shares at an average price of $15.0674 per share for total proceeds

of $10 million.

We 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 of our insiders purchased an additional 76,646

shares at a purchase price of $1.67 per share, the closing price on February 3, 2020.

received proceeds of approximately $12,000 from the exercise of stock options in fiscal 2020 for which we issued 86,197 shares

of our Class B common stock.

received proceeds of approximately $5,300 from the exercise of stock options in fiscal 2019 for which we issued 40,700 shares

of our Class B common stock.

Repurchases of Equity Securities

January 1, 2020, we purchased 4,327 shares of our Class B common stock from a former Freeform employee for $6,772 in connection

with the vesting of restricted stock.

September 18, 2019, we purchased 14,114 shares of our Class B common stock from former Freeform employees for $22,300 in connection

with the vesting of restricted stock.

June 1, 2019, we purchased 7,684 shares of our Class B common stock from former Freeform employees for $16,256 in connection with

the vesting of restricted stock.

September 21, 2018, we purchased 14,137 shares of our Class B common stock from former Freeform employees for $30,543 in connection

with the vesting of restricted stock.

In connection with this offering, we incurred a total issuance costs of $350,000.

We intend to use the net proceeds from

this offering for working capital and other general corporate purposes.

We received proceeds of approximately $873,000 from the exercise of

stock options in fiscal 2021 for which we issued 559,840 shares of our Class B common stock.

On February 5, 2020, we closed on our registered direct offering of

1,734,459 shares of our Class B common stock for gross proceeds of $2.25 million.

We 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

of our insiders purchased an additional 76,646 shares at a purchase price of $1.67 per share, the closing price on February 3, 2020.

We received proceeds of approximately $12,000 from the exercise of

stock options in fiscal 2020 for which we issued 86,197 shares of our Class B common stock.

Issuer Repurchases of Equity Securities

Our Board of Directors authorized a buyback program, effective December

1, 2021, of up to 1.5 million shares of our Class B common stock.

On October 21, 2020, we purchased 12,005 shares of our Class B common

stock from former Freeform employees for $17,528 in connection with the vesting of restricted stock.

On August 1, 2020, we purchased 5,625 shares of our Class B common

stock from our employees for $8,044 in connection with the vesting of deferred stock units.

On January 1, 2020, we purchased 4,327 shares of our Class B common

stock from a former Freeform employee for $6,772 in connection with the vesting of restricted stock.

On September 18, 2019, we purchased 14,114 shares of our Class B common

stock from former Freeform employees for $22,300 in connection with the vesting of restricted stock.

On June 1, 2019, we purchased 7,684 shares of our Class B common stock

from former Freeform employees for $16,256 in connection with the vesting of restricted stock.

On September 21, 2018, we purchased 14,137 shares of our Class B common

stock from former Freeform employees for $30,543 in connection with the vesting of restricted stock.

Selected Financial Data.

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

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

Annual Report 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,”

Smaller reporting companies are not required to provide the information

required by this item.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations.

This Annual Report 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,”

2 unchanged sentences

“intends”

and similar words and phrases.

These forward-looking statements

are subject to risks and uncertainties that could cause actual results to differ materially from 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”

words and phrases.

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 this Annual Report.

The forward-looking statements are made as of the date of this Annual

Report, and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could

The forward-looking statements are made as of the date of this

Annual 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 Securities and Exchange Commission

pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our reports on Forms 10-Q and 8-K.

following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item

8 of this Annual Report.

offer a state-of-the-art digital publishing platform.

We use this platform to power our consumer-facing mobile personalization

app, called Zedge, available in the Google Play store and App Store, which offers an easy, entertaining and immersive way for

end-users to engage with our rich and diverse catalogue of wallpapers, video wallpapers, ringtones, notification sounds on Android

and wallpapers, video wallpapers and ringtones, on iOS.

We secure our content from amateur and professional artists, and also

from emerging and major brands.

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 Securities and Exchange Commission pursuant to the

Securities Act of 1933 and the Securities Exchange Act of 1934, including our reports on Forms 10-Q and 8-K.

The following discussion should be read in conjunction with the Consolidated

Financial Statements and Notes thereto included in Item 8 of this Annual Report.

We operate a state-of-the-art digital publishing platform that powers

Zedge Ringtones and Wallpapers, available in the Google Play store and App Store, which offers an easy, entertaining and immersive way

for end-users to engage with its rich and diverse catalogue of wallpapers, video wallpapers, ringtones, notification sounds on Android

and wallpapers, video wallpapers, ringtones and custom icon packs on iOS.

We secure our content from amateur and professional artists,

and also from emerging and major brands.

Artists have the ability to easily launch a virtual storefront in our Zedge app where they can

market and sell their content to our user base.

In fiscal 2020, we introduced a new entertainment app called “Shortz –

Chat Stories by Zedge”, which is focused on serialized, short-form, fiction stories, as a beta that runs on our publishing

Zedge app has been installed approximately 450 million times, and at July 31, 2020, boasted approximately 32 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.

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’

That same platform powers an entertainment app called “Shortz –

by Zedge”, which is focused on serialized, short-form, fiction stories, as a beta that runs on Zedge’s publishing platform.

Over the past year, we have been expanding our content catalogue, started testing audio versions of a selected number of stories, materially

improved our ability to measure all types of engagement within the app, and invested a modest budget in paid user acquisition.

in August of 2021, we acquired Emojipedia, the leading source of all things emoji.

Our Zedge app has been installed approximately 511 million times, and

at July 31, 2021, boasted approximately 34.4 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 final 30 days 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

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.

At launch, Zedge

Premium was a “walled garden”

a separate section of the app which users needed to proactively choose to enter.

we embedded Zedge Premium content throughout the app making it far more prominent.

We also introduced a new content type on iOS:

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 July 31, 2020, we had more than 504,000 active paid

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 continuing decline in its MAU 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 July 31, 2020, users in emerging

markets represented 70% of our MAU compared to 65% 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 fourth quarter of fiscal 2020, users in

emerging markets grew by 1.4% while users in well-developed economies declined 18.6% when compared to the same period in fiscal

As of July 31, 2020, approximately 50% of our Zedge app’s user base was located in North America and Europe (including

Eastern Europe) with a split of 26% and 24%, respectively, compared with 54% as of July 31, 2019 with 27% in each of North America

and Europe (including Eastern Europe).

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 negatively impacted our Zedge app’s new user growth.

We believe that new smartphone sales have suffered

as a result of retail business closures, negatively impacting new user growth, especially in well-developed markets.

the retail business rebounds from the COVID-19 pandemic, we expect that our Zedge app’s new user growth will also recover

and we will benefit accordingly.

the quarter and fiscal year ended July 31, 2020, we generated approximately 73% and 78%, 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 July 31, 2020, we had more than 504,000 active paid subscribers, 89% of which had subscribed on an annual basis.

During fiscal

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 freemium Zedge app Android users

the ability to convert into paying subscribers for, amongst other things, the ability to remove unsolicited advertisements from our Zedge

As of July 31, 2021, we had approximately 752,000 active subscribers.

In fiscal 2022, we expect to launch subscriptions on iOS.

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 and more recently as audio productions

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

New stories are added to the app each week, and as the content catalog expands, we are regularly improving content discovery in order

to guide users to the stories that will most interest them and improve engagement.

On August 1, 2021, we acquired Emojipedia, the world’s leading

authority dedicated to providing up to date and well-researched emoji definitions, information, and news as well as World Emoji Day and

the annual World Emoji Awards, and Emojitracker, which provides real time visualization of all emoji symbols used on Twitter.

receives approximately 50 million monthly page views and has approximately 9 million monthly active users of which approximately 50% are

located in well-developed markets.

It is the top resource for all things emoji, offering insights into data and cultural trends.

voting member of the Unicode Consortium, the standards body responsible for approving new emojis, Emojipedia works alongside major emoji

creators including Apple, Google, Facebook and Twitter.

Over the past several years, our Zedge app has experienced a continuing

decline in its MAU 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 July 31, 2021, users in emerging markets represented 75% of our MAU compared to 70% a year prior.

This shift has

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

fourth quarter of fiscal 2021, users in emerging markets grew by 16.1% while users in well-developed economies declined by 11.5% when

compared to the same period in fiscal 2020.

As of July 31, 2021, approximately 42% of our Zedge app’s user base was located in North

America (20%) and Europe (including Eastern Europe, 22%), compared with 50% (North America, 24% and Europe 26%) as of July 31, 2020.

remaining 58% of the user base was primarily located in emerging markets with 25% located in India.

MAU growth is tightly coupled with new user growth.

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.

In fiscal 2022, we expect to increase our paid user

acquisition spend while monitoring results to ensure that the investment is yielding a positive return on investment.

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.

As of September 1, 2021, Gartner reported that

worldwide smartphone sales grew by 10.8% year over year in the second quarter of calendar year 2021 despite supply constraints relating

to COVID-19 component shortages and production disruptions;

however, it is still unclear what the impact on user growth will be as vaccines

become more available globally and as precautions like social distancing start to wane.

The pandemic and measures implement to promote

social distancing had a modest positive impact on user engagement.

During the quarter and fiscal year ended July 31, 2021, we generated

approximately 81% and 80%, 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.

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 or taking a survey.

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

If a user purchases Zedge Credits, Google Play or App Store keeps up to 30% of the purchase price with the remainder 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 to our Android

users 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.

July 31, 2021, we had approximately 752,000 active subscribers, 90% of which had subscribed on an annual basis.

Since inception in January

2019, subscriptions have generated approximately $6.7 million in gross revenue.

to May 31, 2019, we generated service revenue from managing and optimizing the advertising inventory of a third-party mobile application

publisher, as well as overseeing the billing, collections and reporting related to advertising for this publisher.

The agreement

with this mobile application publisher was terminated effective May 31, 2019, and we are no longer providing these services.

business consists of one reportable segment.

ACCOUNTING POLICIES

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

States of America, or U.S.

The preparation of financial statements requires management to make estimates and assumptions

that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and

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.

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

Reportable Segments

Our business consists of one reportable segment.

CRITICAL ACCOUNTING POLICIES

Our financial statements and accompanying notes are prepared in accordance

with accounting principles generally accepted in the United States of America, or U.S.

The preparation of financial statements requires

management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue 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

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.

See Note 1 to the Consolidated Financial

Statements in Item 8 of this Annual Report on Form 10-K for a complete discussion of our significant accounting policies.

software and technology development costs

and technology development activities generally fall into three stages:

Stage activities include developing a project or business plan that outlines the

goals for the content distribution platform or new product or service;

determining the

functionality;

See Note 1 to the Consolidated

Financial Statements in Item 8 of this Annual Report on Form 10-K for a complete discussion of our significant accounting policies.

Capitalized software and technology development costs

Software and technology development activities generally fall into

three stages:

Planning Stage activities include developing a project or business plan that outlines the goals for the content distribution

platform or new product or service;

determining the functionality;

identifying hardware and software applications that will achieve functionality,

security, and traffic flows;

and selecting the internal resources that will be assigned

to the project as well as the external vendors where applicable.

and Infrastructure Development Stage activities focus on acquiring or developing

hardware and software to operate a content distribution platform or new product and service;

Post-Implementation/Operating

Stage activities address training, administration, maintenance, and all other activities

to operate an existing content distribution platform or new product or service.

the Planning Stage, we charge all costs to expense as incurred.

the Application and Infrastructure Development Stage, we begin to capitalize costs when the project has been properly authorized

and we determine that completion is probable.

If a project is subsequently cancelled prior to placement in service, costs that

have been capitalized to date will be reviewed for potential impairment.

Capitalization ceases no later than the point at which

a computer software project is substantially complete and ready for its intended use.

Amortization, which is generally over three

years, begins for each project when the code is ready for use, whether or not it is actually placed in service at that time (an

exception being if the project’s functionality completely depends on the completion of another project;

and selecting the internal resources that will be assigned to the project as well as the external vendors

where applicable.

Application and Infrastructure Development Stage activities focus on acquiring or developing hardware and software to operate

a content distribution platform or new product and service;

Post-Implementation/Operating Stage activities address training, administration, maintenance, and all other activities to operate

an existing content distribution platform or new product or service.

During the Planning Stage, we charge all costs to expense as incurred.

During the Application and Infrastructure Development Stage, we begin

to capitalize costs when the project has been properly authorized and we determine that completion is probable.

If a project is subsequently

cancelled prior to placement in service, costs that have been capitalized to date will be reviewed for potential impairment.

Capitalization

ceases no later than the point at which a computer software project is substantially complete and ready for its intended use.

Amortization,

which is generally over three years, begins for each project when the code is ready for use, whether or not it is actually placed in service

at that time (an exception being if the project’s functionality completely depends on the completion of another project;

then, amortization

begins when that other project is ready for use).

the Post-Implementation/Operation Stage, we expense training costs and maintenance costs as incurred.

However, upgrades and enhancements,

defined as modifications to existing internal-use software that result in additional functionality (modifications to enable the

software to perform tasks that it was previously incapable of performing, normally requiring new software specifications and perhaps

a change to all or part of the existing software specifications) are treated as though they were new projects, and are assessed

utilizing the same stages and criteria on a project by project basis.

As such, internal costs incurred for upgrades and enhancements

are expensed or capitalized based on the requirements noted above, while costs incurred for maintenance are expensed as incurred.

These projects are tracked individually, such that the beginning and ending of the capitalization can be appropriately established,

as well as the amounts capitalized therein.

of these costs is included in depreciation and amortization in the Statement of Comprehensive Loss.

August 1, 2018, we adopted Financial Accounting Standards Board Accounting Standards Codification Topic 606, applying the modified

retrospective method to those contracts not yet substantially completed as of August 1, 2018.

The impact of adopting the

new revenue standard was not material to our consolidated financial statements and there was no adjustment to beginning retained

earnings on August 1, 2018.

generate revenue from four sources:

During the Post-Implementation/Operation Stage, we expense training

costs and maintenance costs as incurred.

However, upgrades and enhancements, defined as modifications to existing internal-use software

that result in additional functionality (modifications to enable the software to perform tasks that it was previously incapable of performing,

normally requiring new software specifications and perhaps a change to all or part of the existing software specifications) are treated

as though they were new projects, and are assessed utilizing the same stages and criteria on a project-by-project basis.

As such, internal

costs incurred for upgrades and enhancements are expensed or capitalized based on the requirements noted above, while costs incurred for

maintenance are expensed as incurred.

These projects are tracked individually, such that the beginning and ending of the capitalization

can be appropriately established, as well as the amounts capitalized therein.

Amortization of these costs is included in depreciation and amortization

in the Statement of Comprehensive Income (Loss).

Revenue Recognition.

We generate revenue from three sources:

(1) Advertising;

(2) Paid Subscriptions

(3) Zedge Premium and Other and (4) Service.

substantial majority of our revenue is generated from selling our advertising inventory (“Advertising Revenue”) to

advertising networks and advertising exchanges, and through direct arrangements with advertisers.

Our monthly and annual subscriptions

allow users to prepay a fixed fee to remove unsolicited advertisements from our Android Zedge app although we are working on adding

additional capabilities to subscriptions including offering subscriptions to iOS Zedge App users.

and (3) Zedge Premium and Other.

The substantial majority of our revenue is generated from selling our advertising inventory (“Advertising

Revenue”) to advertising networks and advertising exchanges, and through direct arrangements with advertisers.

Our monthly and annual

subscriptions allow users to prepay a fixed fee to remove unsolicited advertisements from our Android Zedge app although we are working

on adding additional capabilities to subscriptions including offering subscriptions to iOS Zedge App users.

In Zedge Premium, we retain

30% as fee when users purchase licensed content using Zedge Credits or unlock licensed content by watching a video or taking a

survey on Zedge Premium.

In fiscal 2019, we also generated revenue from managing and optimizing the advertising inventory of a

third-party mobile application publisher, as well as overseeing the billing, collections and reporting related to advertising

for this publisher (“Service Revenue”).

The contract with this publisher was terminated effective May 31, 2019.

We generates the bulk of our revenue from selling our Zedge app’s advertising inventory to advertising

networks and advertising exchanges and direct sales to advertisers.

We also generate revenue from app publishers that pay us for

installations of their apps.

● Advertising

An advertising network is a third-party relationship where buyers of advertising

inventory go to purchase either specific targeted inventory or a large scale of inventory

at a set price.

Advertising Networks serve as an indirect source of advertising fill

to a variety of branded ad campaigns and performance-based ad campaigns.

● Advertising

An advertising exchange is similar to an advertising network, except that

the exchange typically bids in real-time for inventory.

Advertisers may utilize an exchange

when looking for scale or specific audiences, and accept that the price will vary based

30% as fee when users purchase licensed content using Zedge Credits or unlock licensed content by watching a video or taking a survey

on Zedge Premium.

Advertising Revenue :

We generates the bulk of our revenue

from selling our Zedge app’s advertising inventory to advertising networks and advertising exchanges and direct sales to advertisers.

Advertising Networks.

An advertising network is a third-party relationship where buyers of advertising inventory go to purchase either

specific targeted inventory or a large scale of inventory at a set price.

Advertising Networks serve as an indirect source of advertising

fill to a variety of branded ad campaigns and performance-based ad campaigns.

Advertising Exchanges.

An advertising exchange is similar to an advertising network, except that the exchange typically bids in real-time

for inventory.

Advertisers may utilize an exchange when looking for scale or specific audiences, and accept that the price will vary based

on when and how much volume of inventory they wish to buy.

Sales to Advertisers.

We sell advertising directly to advertisers through a contractual

relationship.

These relationships typically offer higher than average pricing than realized

from sales via advertising networks or advertising exchanges.

We earn revenue when a Zedge user installs an app offered by a publisher in

the Game Channel that pays the Company a pre-negotiated fee for the installation (referred

to as Cost Per Install or CPI).

In October 2018, the Company replaced the Game Channel

with a game wall which offers Zedge users with a mix of interactive playable ads and

HTML5 games which, if installed by the user, generate revenue for Zedge.

discontinued game wall in the second quarter of fiscal 2020.

recognize advertising revenue as advertisements are delivered to users through impressions, ad views or app installs (depending

on the terms agreed upon with the advertiser).

For in-app display ads, in-app offers, engagement advertisements and other advertisements,

our performance obligation is satisfied over the life of the relevant contract (i.e., over time), with revenue being recognized

as advertising units are delivered.

The advertiser may compensate us on a cost-per-impression, cost-per-click, cost-per-action

or cost-per-install basis.

Subscription Revenue :

Beginning in January 2019, we started offering monthly and annual paid subscription services sold

through Google Play.

When a customer subscribes, they execute a clickthrough agreement with Zedge outlining the terms and conditions

of the subscription.

Google Play processes subscription prepayment on Zedge’s behalf, and retains up to 30% as its fee.

Paid subscription revenue is a series type performance obligation and is recognized net of sales tax amounts collected from subscribers.

Direct Sales to Advertisers.

In prior periods, we sold, and we currently retain the ability to sell, advertising directly to advertisers

through contractual relationships.

These relationships historically offered higher than average pricing than realized from sales via advertising

networks or advertising exchanges.

We had no direct sales of advertising during fiscal 2021 and have no current expectation that this

will represent a material portion of our sales in the near term.

We recognize advertising revenue as advertisements are delivered to

users through impressions or ad views (depending on the terms agreed upon with the advertiser).

For in-app display ads, in-app offers,

engagement advertisements and other advertisements, our performance obligation is satisfied over the life of the relevant contract (i.e.,

over time), with revenue being recognized as advertising units are delivered.

The advertiser may compensate us on a cost-per-impression,

cost-per-click, or cost-per-action basis.

Paid Subscription Revenue :

Beginning in January 2019,

we started offering monthly and annual paid subscription services sold through Google Play.

When a customer subscribes, they execute a

clickthrough agreement with Zedge outlining the terms and conditions of the subscription.

Google Play processes subscription prepayment

on Zedge’s behalf, and retains up to 30% as its fee.

Paid subscription revenue is a series type performance obligation and is recognized

net of sales tax amounts collected from subscribers.

Both monthly and yearly subscriptions are nonrefundable after a period of 7 days.

Paid subscriptions are automatically renewed

at expiration unless cancelled by subscribers.

The enforceable rights in monthly and yearly subscription contracts are the service

Because of the cancellation clauses for these subscriptions, the duration of these contracts is daily, and revenue for

these contracts is recognized on a daily ratable basis.

The payment terms for subscriptions sold through Google Play is net 30

days after month-end.

Zedge Premium is our marketplace where artists and brands can market, distribute and sell their digital content

to Zedge’s users.

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 rewarded videos or completing

electronic surveys.

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

If a user purchases Zedge Credits (ranging

from 500 credits for $0.99 to 14,000 credits for $19.99), Google Play or iTunes retains 30% of the purchase price as its fee.

When a user purchases Zedge Premium content, the artist or brand receives 70% of the actual revenue (“Royalty Payment”)

and the Company receives the remaining 30%, which is recognized as revenue.

Through May 2019, we managed and optimized the advertising inventory of a third-party mobile application publisher,

as well as overseeing the billing, collections and reporting related to advertising for this publisher.

In exchange for these

management and optimization services, Zedge shared a portion the advertising revenues from this publisher whose revenue is also

derived from sales of advertising.

The contract with this publisher was terminated effective May 31, 2019.

Versus Net Revenue Recognition

report revenue on a gross or net basis based on management’s assessment of whether we act as a principal or agent in the

To the extent we act as the principal, revenue is reported on a gross basis unless we are unable to determine the

amount on a gross basis, in which case we report revenue on a net basis.

The determination of whether we act as a principal or

an agent in a transaction is based on an evaluation of whether we control the good or service prior to transfer to the customer.

generally report our advertising revenue net of amounts due to agencies and brokers because we are not the primary obligor in

the relevant arrangements, we do not finalize the pricing, and we do not establish or maintain a direct relationship with the

Certain advertising arrangements that are directly between us and advertisers are recognized on a gross basis equal

to the price paid to us by the customer since we are the primary obligor and we determines the price.

Any third-party costs related

to such direct relationships are recognized as direct cost of revenues.

report subscription revenue gross of the fee retained by Google Play, as the subscriber is our customer in the contract and we

control the service prior to the transfer to the subscriber.

is deemed to have an indefinite life and is not amortized.

Goodwill is reviewed annually (or more frequently under certain conditions)

for impairment using a fair value approach.

We perform our annual or interim goodwill impairment test by comparing the fair value

of the relevant reporting unit with its carrying amount.

We would recognize an impairment charge for the amount by which the carrying

amount exceeds the reporting unit’s fair value;

however, the loss recognized would not exceed the total amount of goodwill

allocated to that reporting unit.

Additionally, we consider income tax effects from any tax-deductible goodwill on the carrying

amount of our reporting unit when measuring the goodwill impairment loss, if applicable.

We estimate the fair value of our reporting

unit using the market approach (guideline company method).

have the option to perform a qualitative assessment to determine whether it is necessary to perform the quantitative goodwill

impairment test.

However, we may elect to perform the quantitative goodwill impairment test even if no indications of a potential

impairment exist.

our annual impairment tests in fiscal years 2020 and 2019, our estimated fair value exceeded our carrying value, therefore, no

impairment charge was required.

Calculating the fair value of the reporting unit requires significant estimates and assumptions

by management.

Should our estimates or assumptions regarding the fair value of our reporting unit prove to be incorrect, we may

be required to record impairment of goodwill in future periods and such impairment could be material.

ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED

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

in Item 8 of this Annual Report on Form 10-K.

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 initially

experienced a significant decrease in advertising spend when the pandemic became global in March 2020, starting in the late spring

advertising rates started to stabilize and subscriptions rebounded.

light of the current operating and economic environment, the Company has shifted resources and priorities to increase focus on

generating incremental revenue at the expense of delivering new product.

We imposed a temporary hiring freeze and lowered our

discretionary spend to preserve cash for mission critical projects.

We have responded quickly and decisively to the challenges

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

In light of the improvement in our revenue in fourth

quarter of fiscal 2020 we have begun selectively investing in our products by hiring several software developers and consultants

in Lithuania.

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

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

Our past results may not be indicative

of our future performance, and historical trends in revenue, income (loss) from operations, net income (loss), and net income

(loss) per share may differ materially.

For example, to the extent the pandemic continues to disrupt economic activity globally,

it could adversely affect our business, operations and financial results through prolonged decreases in advertising spend, credit

deterioration of our customers, depressed economic activity, or declines in capital markets, including volatility of our stock

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.

As such, given the unprecedented uncertainty around the duration and severity of the impact on market conditions

and the business environment, we cannot reasonably estimate the full impacts of the COVID-19 pandemic on our operating results

in the future.

Performance Indicators

results of operations discussion include 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 in the last thirty days of the relevant period, which is important to understanding the size of the user base for

our Zedge app which is a significant 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 the changes and trends in ARPMAU are indications of how effective our monetization investments are.

of July 31, 2020 MAU, was down 5.6% year over year we believe primarily due to slowing new phone sales which resulted in lower

app installs and engagement which are typical user behavior patterns when they purchase a new handset.

Over the past several years,

we have experienced a continuing shift in the regional customer make-up with MAU in emerging markets representing an increasing

portion of our user base.

As of July 31, 2020, users in emerging markets represented 70% of our MAU compared to 65% a year prior.

This shift has negatively impacted revenue because advertising rates in emerging markets are materially lower than in well-developed

was up 50.3% for the three months ended July 31, 2020 when compared to the same period a year ago, pointing to progress we have

made in generating more value from our users, particularly from subscriptions.

Paid subscriptions are automatically renewed at expiration unless cancelled by subscribers.

The enforceable rights in monthly and yearly

subscription contracts are the service period.

Because of the cancellation clauses for these subscriptions, the duration of these contracts

is daily, and revenue for these contracts is recognized on a daily ratable basis.

The payment terms for subscriptions sold through Google

Play is net 30 days after month-end.

Zedge Premium :

Zedge Premium is our marketplace where

artists and brands can market, distribute and sell their digital content to Zedge’s users.

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 rewarded videos or completing electronic surveys.

Alternatively, users can buy Zedge Credits

with an in-app purchase.

If a user purchases Zedge Credits (ranging from 500 credits for $0.99 to 14,000 credits for $19.99), Google Play

or iTunes retains up to 30% of the purchase price as its fee.

When a user purchases Zedge Premium content, the artist or brand receives

70% of the actual revenue (“Royalty Payment”) and the Company receives the remaining 30%, which is recognized as revenue.

Gross Versus Net Revenue Recognition

We report revenue on a gross or net basis based on management’s

assessment of whether we act as a principal or agent in the transaction.

To the extent we act as the principal, revenue is reported on

a gross basis unless we are unable to determine the amount on a gross basis, in which case we report revenue on a net basis.

The determination

of whether we act as a principal or an agent in a transaction is based on an evaluation of whether we control the good or service prior

to transfer to the customer.

We generally report our advertising revenue net of amounts due to agencies

and brokers because we are not the primary obligor in the relevant arrangements, we do not finalize the pricing, and we do not establish

or maintain a direct relationship with the advertiser.

Any advertising arrangements that are directly between us and advertisers would

be recognized on a gross basis equal to the price paid to us by the customer since we are the primary obligor and we determine the price.

Any third-party costs related to such direct relationships are recognized as direct cost of revenues.

We report subscription revenue gross of the fee retained by Google

Play, as the subscriber is our customer in the contract and we control the service prior to the transfer to the subscriber.

Goodwill is deemed to have an indefinite life and is not amortized.

Goodwill is reviewed annually (or more frequently under certain conditions) for impairment using a fair value approach.

We perform our

annual or interim goodwill impairment test by comparing the fair value of the relevant reporting unit with its carrying amount.

recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value;

loss recognized would not exceed the total amount of goodwill allocated to that reporting unit.

Additionally, we consider income tax effects

from any tax-deductible goodwill on the carrying amount of our reporting unit when measuring the goodwill impairment loss, if applicable.

We estimate the fair value of our reporting unit using the market approach.

We have the option to perform a qualitative assessment to determine

whether it is necessary to perform the quantitative goodwill impairment test.

However, we may elect to perform the quantitative goodwill

impairment test even if no indications of a potential impairment exist.

For our annual impairment tests in fiscal years 2021 and 2020, our

estimated fair value exceeded our carrying value, therefore, no impairment charge was required.

Calculating the fair value of the reporting

unit requires significant estimates and assumptions by management.

Should our estimates or assumptions regarding the fair value of our

reporting unit prove to be incorrect, we may be required to record impairment of goodwill in future periods and such impairment could

RECENT ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED

Recently issued accounting standards not yet adopted by us are more

fully described in Note 1 to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

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 July 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 grew our headcount by 36% from 39 at July 31, 2020 to 53 at July 31, 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

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.

Key Performance Indicators

Our results of operations discussion include disclosure of two

key performance indicators - Monthly Active Users (MAU) and Average Revenue Per Monthly Active User (ARPMAU).

performance indicator that captures the number of unique users that used our Zedge app in the last thirty days of the relevant

period, which is important to understanding the size of the user base for our Zedge app which is a significant 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 the changes and trends in ARPMAU are

indications of how effective our monetization investments are.

As of July 31, 2021 MAU, was up 7.8% year over year primarily attributed

to higher user engagement.

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

in emerging markets (particularly India) representing an increasing portion of our user base.

As of July 31, 2021, users in emerging markets

represented 75% of our MAU compared to 70% a year prior.

This shift has negatively impacted revenue because advertising rates in emerging

markets are materially lower than in well-developed markets.

ARPMAU was up 76.3% for the three months ended July 31, 2021 when compared

to the same period a year ago, pointing to progress we have made in generating more value from our users, particularly from subscriptions.

Three months ended

3 unchanged sentences

Emerging Markets MAU/Total MAU

OF OPERATIONS

following table set forth our consolidated statements of operations data for the fiscal year ended July 31, 2020 compared to the

fiscal year ended July 31, 2019:

RESULTS OF OPERATIONS

The following table set forth our consolidated statements of operations

data for the fiscal year ended July 31, 2021 compared to the fiscal year ended July 31, 2020:

(in thousands)

year ended July 31,

Fiscal year ended July 31,

Direct cost of revenues

Selling, general and administrative

and amortization

Loss from operations

Interest and other income (expense),

Net loss resulting from foreign exchange

Provision for

following table sets forth the composition of our revenues for the fiscal years ended July 31, 2020 and 2019:

Depreciation and amortization

Income (loss) from operations

Interest and other income, net

Net loss resulting from foreign exchange transactions

Provision for (benefit from) income taxes

Net income (loss)

nm-not meaningful

The following table sets forth the composition of our revenues for

the fiscal years ended July 31, 2021 and 2020:

Fiscal Year Ended

3 unchanged sentences

Paid subscription revenue

Zedge Premium and Shortz revenues

Service revenue

Other revenues

Total Revenues

Advertising revenue declined 6.7% in fiscal 2020 compared to fiscal 2019 primarily due to the shift in

the makeup of our user base from well-developed markets that command relatively higher advertising rates to emerging markets where

the rates are lower.

The 5.6% decline in the overall MAU also contributed the decline in advertising revenue despite improvement

in user engagement in fiscal 2020.

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.

In general, pricing of our

monthly subscriptions is $0.99 per month and $3.99 for yearly subscription.

We generated $2,406,000 and $516,000 in gross prepaid

subscription sales consisting of both monthly and annual subscriptions for the fiscal years ended July 31, 2020 and 2019 respectively.

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 fiscal years ended July 31, 2020 and 2019.

Advertising revenue .

Advertising revenue increased

112% from $7.4 million in fiscal 2020 to $15.7 million in fiscal 2021 primarily due to improvements in our ad stack and higher advertising

Paid subscription revenue .

We rolled out a subscription-based

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

our Zedge app.

In general, pricing of our monthly subscriptions in the US is $0.99 per month and $4.99 for yearly subscription with different

pricing for users in other countries.

Google Play processes subscription prepayment on Zedge’s behalf, and retains up to 30% as

We generated $3.8 million and $2.4 million in gross prepaid subscription sales consisting of both monthly and annual subscriptions

for the fiscal years ended July 31, 2021 and 2020 respectively.

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 fiscal

years ended July 31, 2021 and 2020.

As of/Years Ended

FY’20 vs.

FY’21 vs FY’20

(in thousands, except revenue per subscriber and percentages)

Paid net subscriber additions

Paid subscriber at end of period

Average paid subcribers

Average monthly revenue per paid subscriber

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 fiscal 2020, gross transaction value (the total sales volume

transacting through the platform), or “GTV,”

and net revenue generated from Zedge Premium were $728,000 and $459,000,

respectively.

In fiscal 2019, GTV and net revenue generated from Zedge Premium were $485,000 and $130,000 respectively.

includes breakage related to expired Zedge Credits.

continue to focus on topline growth strategy by testing new monetization drivers including a variety of ad units, merchandising,

coin sales as well as certain growth initiatives such as new content vertical in our app and/or new app.

cost of revenues .

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

Fiscal year ended July 31,

Active subscriptions net additions

Active subscriptions at end of period

Average active subscriptions

Average monthly revenue per active subscription

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.

2021, gross transaction value (the total sales volume transacting through the platform), or “GTV,”

and net revenue generated

from Zedge Premium were $945,000 and $509,000, respectively.

In fiscal 2020, GTV and net revenue generated from Zedge Premium were $728,000

and $459,000 respectively.

Net revenue includes breakage related to expired Zedge Credits.

We continue to focus on topline growth strategy by testing new monetization

drivers including a variety of ad units, in-app purchases of Zedge Credits, our virtual currency.

as well as certain growth initiatives

such as new content vertical in our app and/or new app.

Additionally, we may pursue synergistic acquisitions from time to time to complement

organic growth, although we can provide no assurance that any such acquisitions will be consummated.

Direct cost of revenues .

Direct cost of revenues consists

primarily of content hosting and content delivery costs.

Fiscal year ended

(in thousands)

2 unchanged sentences

As a percentage of revenues

cost of revenues decreased by 13.3% in fiscal 2020 to $1.2 million from $1.4 million in fiscal 2019, primarily attributable to

the savings from the migration of our backend infrastructure to cloud-based providers.

a percentage of revenue, direct cost of revenues in fiscal 2020 were 12.6% as compared to 15.6.% in fiscal 2019 due to the combination

of higher revenue and lower direct costs in fiscal 2020 compared to fiscal 2019.

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.

Fiscal year ended July 31,

Direct cost of revenues decreased by 0.1% in fiscal 2021 to $1.194

million from $1.195 million in fiscal 2020, primarily attributable to the residual savings from the migration of our backend infrastructure

to cloud-based providers.

As a percentage of revenue, direct cost of revenues in fiscal 2021

were 6.1% as compared to 12.6.% in fiscal 2020 due primarily to the 107% increase of our revenue in fiscal 2021.

Selling, general and administrative expense .

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

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

Fiscal year ended

(in thousands)

2 unchanged sentences

As a percentage of revenues

expenses decreased $1.8 million or 20.1 % in fiscal 2020 to $7.1 million from $8.9 million in fiscal 2019.

These decreases were

primarily attributable to a $2.1 million reduction in net compensation costs resulting from the workforce reduction plan we implemented

in May 2019 and lower discretionary expenses including lower travel expenses caused by the travel ban related to COVID-19, offset

by $471,000 higher sales and marketing costs related to the Google fee on subscriptions sales severance payments, a one-time payment

related to copyright matters and content acquisition costs associated with the ’Shortz’

app which was launched in

December 2019.

As the majority of our employees are based in Norway a stronger U.S.

Dollar against NOK in fiscal 2020 when compared

to fiscal 2019 also contributed to the overall decline of SG&A.

headcount totaled 39 as of July 31, 2020 compared to 53 as of July 31, 2019, primarily resulting from the workforce reduction

and organic staff attrition in Norway and the U.S., offset by 7 new hires in Lithuania during fiscal 2020 bringing total headcount

in Lithuania to 16 at July 31, 2020.

expenses also included non-cash stock-based compensation expense of $402,000 and $499,000 in fiscal 2020 and 2019, respectively.

We also opted to use Class B common stock to pay a portion of our Board of Directors’

compensation and to fund 401(k) matching

contributions that aggregated to $90,000 and $120,000 in fiscal 2020 and 2019, respectively.

See Note 12 to the Consolidated Financial

Statements in this Annual Report for a complete discussion of our stock-based compensation.

and amortization .

Depreciation and amortization expense consists 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 mobile app service.

Fiscal year ended July 31,

SG&A expenses increased $2.2 million or 31.0 % in fiscal 2020 to

$9.3 million from $7.1 million in fiscal 2020.

This increase was primarily attributable to compensation costs resulting from additional

headcount, higher professional and consulting fees and higher marketing fees we pay to Google for subscription sales, offset by reductions

in discretionary expenses such as rent and travel expenses.

Our headcount totaled 53 as of July 31, 2021 compared to 39 as of July

31, 2020, with the majority of our employees currently based in Lithuania.

SG&A expenses also included non-cash stock-based compensation expense

of $523,000 and $402,000 in fiscal 2021 and 2020, respectively.

We also opted to use Class B common stock to pay a portion of our Board

of Directors’

compensation and to fund 401(k) matching contributions that aggregated to $129,000 and $90,000 in fiscal 2021 and

2020, respectively.

See Note 12 to the Consolidated Financial Statements in this Annual Report for a complete discussion of our stock-based

compensation.

Depreciation and amortization .

Depreciation and

amortization expense consists 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 mobile app service.

Fiscal year ended

(in thousands)

2 unchanged sentences

As a percentage of revenues

increase in depreciation and amortization in fiscal 2020 compared to fiscal 2019 was primarily attributable to the completion

of four projects with an aggregate value of $459,000 in fiscal 2020.

We started amortizing these capitalized software and technology

development costs once these projects were completed.

and other income (expense), net.

The increase in interest and other income (expenses), net in fiscal 2020 when compared

to fiscal 2019 was primarily due to the impairment charges of $250,000 in investment in privately-held company recorded in July

See Note 17 to the Consolidated Financial Statements in this Annual Report for a complete discussion of our investment in

privately-held company.

Fiscal year ended July

Depreciation and amortization expense decreased $0.3 million or 19.6

% in fiscal 2020 to $1.3 million from $1.6 million 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.

The increase in interest

and other income, net in fiscal 2021 when compared to fiscal 2020 was primarily due to the PPP loan forgiveness of $218,000 in fiscal

See Note 17 to the Consolidated Financial Statements in this Annual Report for further details.

Fiscal year ended

(in thousands)

FY’21 vs.

Interest and other income (expense), net

Interest and other income, net

As a percentage of revenues

loss resulting from foreign exchange transactions .

Net loss resulting from foreign exchange transactions is comprised

of losses and gains generated from movements in Norwegian Krone, or NOK, relative to the U.S.

Dollar including gains or losses

from our NOK hedging activities.

Fiscal year ended July 31,

Net loss resulting from foreign exchange transactions .

Net loss resulting from foreign exchange transactions is comprised of gains and losses generated from movements in NOK and EUR relative

Dollar, including gains or losses from our currency hedging activities.

Fiscal year ended

(in thousands)

2 unchanged sentences

As a percentage of revenues

fiscal 2020 and 2019, we incurred losses of $218,000 and $278,000, respectively, from NOK hedging activities due to U.S.

Dollar’s

continued climb against NOK during fiscal 2020.

for income taxes .

The tax expense consists of minimum state taxes based on allocated net worth and certain income

taxes payable in foreign jurisdictions where our subsidiaries reside.

Fiscal year ended July 31,

In fiscal 2021 and 2020, we incurred losses of $18,000 and $218,000,

respectively, from NOK and EUR hedging activities.

Provision for (benefit from) income taxes .

fiscal 2021, we had pretax income of about $8 million which enabled us to utilize all the federal NOL carry forward and portions of the

NOL carry forward from states and other foreign jurisdiction.

Combined with the release of the valuation allowance of $477,000, this resulted

in an income tax benefit of $202,000 for the fiscal year ended July 31, 2021, an effective income tax of (2.5%).

Fiscal year ended

(in thousands)

FY’21 vs.

Provision for income taxes

Provision for (benefit from) income taxes

As a percentage of revenues

part of the Tax Cuts and Jobs Act of 2017, Global Intangible Low-Taxed Income inclusion (GILTI) and Foreign Derived Intangible

Income (FDII) deduction became effective on January 1, 2018.

There was no impact to income tax expense resulting from the

GILTI and FDII in light of the Company’s available NOL carry forward and its full valuation allowance.

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

July 31, 2020, we had cash and cash equivalents of $5.1 million and working capital (current assets less current liabilities)

of $3.9 million.

We currently 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 ending July 31, 2021.

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

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

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 July 31, 2021, we had cash and cash equivalents of $24.9 million

and working capital (current assets less current liabilities) of $23.4 million.

We currently 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 ending July

During fiscal 2021, we raised $15 million through sales of equity in At the Market offerings.

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 twelve months ended July 31, 2020 and 2019:

Fiscal year ended July 31,

The following tables present selected financial information for the

twelve months ended July 31, 2021 and 2020:

Fiscal year ended

(in thousands)

4 unchanged sentences

Effect of exchange rate changes on cash and cash equivalents

Increase (decrease) 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 is also impacted by the factors impacting revenue discussed above.

The change in cash provided

by operating activities in fiscal 2020 compared to fiscal 2019 was primarily due to higher revenues coupled with lower costs and

expenses, an increase in deferred revenues from paid subscriptions and Zedge Premium, as well as increases in certain non-cash

costs and expenses items such as stock-based compensation, impairment of investment in privately-held company and depreciation

and amortization which did not consume cash.

used in investing activities in fiscal 2020 and fiscal 2019 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.

August 23, 2018, the Company made a $250,000 investment in TreSensa, Inc.

(“TreSensa”) representing a less than 1%

equity ownership interest on a fully-diluted basis, and concurrently entered into a playable ad distribution agreement with TreSensa

under which the Company shall be paid a higher percentage of revenue derived from all playable ads provided by TreSensa, from

its available catalogue for distribution through the Zedge App, when compared to industry norms.

In July 2019, we recorded an

impairment charge of $250,000 and thus reduced the fair value to $0.

June 30, 2020, TreSensa agreed to transfer substantially all of its assets to its lender in full satisfaction of its obligations

under certain loan agreement dated March 27, 2020.

Note 17 to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

February 5, 2020, we closed a registered direct offering of 1,734,459 shares of its Class B common stock for net proceeds of $2.1

million from both new and existing investors.

See Note 19 to the Consolidated Financial Statements in Item 8 of this Annual Report

Increase in cash and cash equivalents

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 increased $8.0 million to $10.1 million in

fiscal 2021 from $2.1 million in fiscal 2020, primarily attributable to the higher revenues generated from our service offerings, primarily

advertising and paid subscription revenue.

Investing Activities

On August 1, 2021, we acquired Emojipedia for up to $7.0 million including

initial cash payment of $4.8 million, with the balance to be determined based on an incentive structure linked to EBITDA generated from

emojipedia.org during the four month period following the closing of the acquisition and paid out on the six-month and twelve month anniversaries

of the closing.

Given the closing occurred on Sunday, we deposited $4.8 million into an escrow account on July 30, 2021 which was classified

as other assets on our balance sheet as of July 31, 2021.

See Note 19 to the Consolidated Financial Statements in Item 8 of this Annual

Report on Form 10-K.

Cash used in other investing activities in fiscal 2021 and fiscal 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

Between December 14, 2020 and January 26, 2021, we sold 761,906 shares

of our Class B common stock at an average price of $6.5625 per share for total proceeds of $5 million in a registered “At the Market”

offering through National Securities Corp.

Wainwright & Co, LLC as sales agents.

In connection with this offering, total

issuance costs were $215,000.

We intend to use the net proceeds from this offering for general corporate purposes including organic and

other growth initiatives.

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.

Through June 11, 2021 we sold 663,686 shares at an average price of $15.0674 per share for total

proceeds of $10 million in this offering.

Total issuance costs were $350,000.

We intend to use the net proceeds from this offering for

general corporate purposes including organic and other growth initiatives.

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.

This loan was repaid in full as of

July 31, 2021.

On April 22, 2020, we received $218,000 in proceeds from a PPP loan

from Western Alliance Bank, which was administered by the Small Business Administration and established under the CARES Act.

25, 2020, we submitted the PPP Loan Forgiveness Application Form 3508EZ and on May 21, 2021, we were 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.

Please see Note 17 to the Consolidated Financial Statements in Item 8 of this Annual Report on

On February 5, 2020, we closed a registered direct offering of 1,734,459

shares of its Class B common stock for net proceeds of $2.1 million from both new and existing investors.

See Note 19 to the Consolidated

Financial Statements in Item 8 of this Annual Report on Form 10-K.

In July 2019, we obtained a loan of $140,000 to finance about 85% of

various insurance policies, at an annual percentage interest rate of 4.79% to be repaid over nine equal monthly installments of $15,976.20

starting from September 1, 2019.

We repaid this loan in full as of July 31, 2020.

We received proceeds of $873,261 from the exercise of stock options

in fiscal 2021 in connection with which we issued 559,840 shares of our Class B common stock.

We received proceeds of $11,571 from the

exercise of stock options in fiscal 2020 in connection with which we issued 86,197 shares of our Class B common stock.

We maintain a credit facility of up to $2.0 million provided by Western

Alliance Bank which is more fully described in Note 15 to the Consolidated Financial Statements included in Item 8 of this annual report

on Form 10-K.

April 22, 2020, we received $218,000 in proceeds from a PPP loan from Western Alliance Bank, which was administered by the Small

Business Administration and established under the CARES Act, as more fully described in Note 18 to the Consolidated Financial

Statements in Item 8 of this Annual Report on Form 10-K.

July 2019, we obtained a loan of $140,000 to finance about 85% of various insurance policies, at an annual percentage interest

rate of 4.79% to be repaid over nine equal monthly installments of $15,976.20 starting from September 1, 2019.

We repaid this

loan in full as of July 31, 2020.

Effective August 1, 2020, we obtained a loan of $181,462 to pay for our insurance policies,

repayable in nine equal installments of $20,491 starting from September 1, 2020 which represented a 3.89% annual percentage interest

received proceeds of $11,571 from the exercise of stock options in fiscal 2020 in connection with which we issued 86,197 shares

of our Class B common stock.

We received proceeds of $5,291 from the exercise of stock options in fiscal 2019 in connection with

which we issued 40,700 shares of our Class B common stock.

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 years term which was extended for another two years term expiring September

Advances under this facility may not exceed the lesser of $2.5 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.

The outstanding principal amount bears interest per annum at the greater of 5.0% or the prime rate

Interest is payable monthly and all outstanding principal and any accrued and unpaid interest is due on the maturity

date of September 26, 2020.

The Company is required to pay an annual facility fee of $12,500 to Western Alliance Bank.

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 July 31, 2020, there were no amounts outstanding under the revolving credit facility and

the Company was in compliance with all of the covenants.

On September 25, 2020, this agreement was extended for another two-year

term at substantially comparable terms except for the minimum interest rate which was reduced from 5.0% to 3.5%, and the facility

was reduced from $2.5 million to $2.0 million at the Company’s request.

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

This limit was raised to approximately $6.5 million pursuant to the Loan and Security Modification Agreement dated May

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.

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.

At July 31, 2020, there were $2.6 million of outstanding foreign

exchange contracts under the credit facility, which reduced the available borrowing under the revolving credit facility by $269,000,

see Note 4 to the Consolidated Financial Statements included in Item 8 of this annual report on Form 10-K.

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 were $1.4 million and $1.1 million at July 31, 2020 and 2019 respectively.

Our cash collections in fiscal

2020 and fiscal 2019 were $9.2 million and $9.4 million, respectively.

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 and Facebook, 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 fiscal year ended July 31, 2020, two customers represented 29% and 26% of the Company’s revenue, and in the fiscal year

ended July 31,2019, three customers represented 28%, 28% and 10% of the Company’s revenue.

At July 31, 2020, two customers

represented 35% and 32% of the Company’s accounts receivable balance and at July 31, 2019, three customers represented 32%,

17% and 17% of the Company’s accounts receivable balance.

All of these significant customers were advertising exchanges

operated by leading companies, and the receivables represent many smaller amounts due from advertisers.

OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

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

SHEET ARRANGEMENTS

July 31, 2020, 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, other than the following.

connection with our Spin-Off, we and IDT entered into various agreements prior to the Spin-Off including a Separation and Distribution

Agreement to effect the separation and provide a framework for our relationship with IDT after the Spin-Off, and a Tax Separation

Agreement, which sets forth the responsibilities of us and IDT with respect to, among other things, liabilities for federal, state,

local and foreign taxes for periods before and including the Spin-Off, the preparation and filing of tax returns for such periods

and disputes with taxing authorities regarding taxes for such periods.

Pursuant to Separation and Distribution Agreement, among

other things, we indemnify IDT and IDT indemnifies us for losses related to the failure of the other to pay, perform or otherwise

discharge, any of the liabilities and obligations set forth in the agreement.

Pursuant to the Tax Separation Agreement, among

other things, IDT indemnifies us from all liability for taxes of ours and any of our subsidiaries or relating to our business

with respect to taxable periods ending on or before the Spin-Off, and we indemnify IDT from all liability for taxes of ours and

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 receivables were $2.5 million and $1.4 million

at July 31, 2021 and 2020 respectively.

Our cash collections in fiscal 2021 and fiscal 2020 were $18.4 million and $9.2 million, respectively.

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.

by Twitter), Google and Facebook, and we terminate our services with smaller customers immediately upon balances becoming past due.

these smaller customers rely on us to derive their own revenue, they generally pay their outstanding balances on a timely basis.

In the fiscal year ended July 31, 2021, three customers represented

30%, 22% and 12% of the Company’s revenue, and in the fiscal year ended July 31, 2020, two customers represented 29% and 26% of

the Company’s revenue.

At July 31, 2021, two customers represented 37% and 28% of the Company’s accounts receivable balance

and at July 31, 2020, two customers represented 35% and 32% of the Company’s accounts receivable balance.

All of these significant

customers were advertising exchanges operated by leading companies, and the receivables represent many smaller amounts due from 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 July 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, other than the following.

In connection with our Spin-Off, we and IDT entered into various agreements

prior to the Spin-Off including a Separation and Distribution Agreement to effect the separation and provide a framework for our relationship

with IDT after the Spin-Off, and a Tax Separation Agreement, which sets forth the responsibilities of us and IDT with respect to, among

other things, liabilities for federal, state, local and foreign taxes for periods before and including the Spin-Off, the preparation and

filing of tax returns for such periods and disputes with taxing authorities regarding taxes for such periods.

Pursuant to Separation and

Distribution Agreement, among other things, we indemnify IDT and IDT indemnifies us for losses related to the failure of the other to

pay, perform or otherwise discharge, any of the liabilities and obligations set forth in the agreement.

Pursuant to the Tax Separation

Agreement, among other things, IDT indemnifies us from all liability for taxes of ours and any of our subsidiaries or relating to our

business with respect to taxable periods ending on or before the Spin-Off, and we indemnify IDT from all liability for taxes of ours and

any of our subsidiaries or relating to our business accruing after the Spin-Off.

Notwithstanding the foregoing, we are responsible

for, and IDT has no obligation to indemnify us for, any tax liability of ours resulting from an audit, examination or other proceeding

related to any tax returns that relate solely to us and our subsidiaries regardless of whether such tax return relates to a period

prior to or following the Spin-Off.

Quantitative and Qualitative Disclosures about Market Risks.

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

Notwithstanding the foregoing, we are responsible for,

and IDT has no obligation to indemnify us for, any tax liability of ours resulting from an audit, examination or other proceeding related

to any tax returns that relate solely to us and our subsidiaries regardless of whether such tax return relates to a period prior to or

following the Spin-Off.

Quantitative and Qualitative Disclosures about Market

Smaller reporting companies are not required to provide the information

required by this item.

Financial Statements and Supplementary Data.

Consolidated Financial Statements of the Company and the report of the independent registered public accounting firm thereon starting

on page F-1 are included herein.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

The Consolidated Financial Statements of the Company and the report

of the independent registered public accounting firm thereon starting on page F-1 are included herein.

Changes in and Disagreements with Accountants on Accounting

and Financial Disclosure.

Not applicable.

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-K

Item 5. Market for Registrant’s Common Equity