What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-11-14 compared with 2021-11-09 · 27 added, 706 removed, 5 unchanged (99% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder

Matters and Issuer Purchases of Equity Securities

Class B Common Stock

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

B Common Stock

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

3 unchanged sentences

on the NYSE American for our Class B common stock was $1.94 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.

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.

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.

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,”

“expects,”

“plans,”

“intends”

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

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.

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.

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.

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.

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.

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.

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.

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).

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

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.

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.

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 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

(in millions, except ARPMAU)

Developed Markets MAU

Emerging Markets MAU

Emerging Markets MAU/Total MAU

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)

Fiscal year ended July 31,

Direct cost of revenues

Selling, general and administrative

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

% of total Revenue

(in thousands)

Advertising revenue

Paid subscription revenue

Other revenues

Total Revenues

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’21 vs FY’20

(in thousands, except revenue per subscriber and percentages)

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)

FY’21 vs.

Direct cost of revenues

As a percentage of revenues

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)

FY’21 vs.

Selling, general and administrative

As a percentage of revenues

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)

FY’21 vs.

Depreciation and amortization

As a percentage of revenues

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, net

As a percentage of revenues

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)

FY’21 vs.

Net loss resulting from foreign exchange transactions

As a percentage of revenues

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 (benefit from) income taxes

As a percentage of revenues

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.

The following tables present selected financial information for the

twelve months ended July 31, 2021 and 2020:

Fiscal year ended

(in thousands)

Cash flows provided by (used in):

Operating activities

Investing activities

Financing activities

Effect of exchange rate changes on cash and cash equivalents

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.

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

Smaller reporting companies are not required to provide the information

required by this item.

Financial Statements and Supplementary Data.

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.

October 25, 2022, there were 270 holders of record of our Class B common stock and 1 holder of record of our Class A common stock.

of October 25, 2022, 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

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, 2022, and which is incorporated by reference

Sales of Unregistered Securities

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.

Graph of Stock

are a smaller reporting company as defined by Rule 12b-2 of the Securities and Exchange Act of 1934 and are not required to provide the

information under this item.

Repurchases of Equity Securities

fiscal 2022 and 2021, we purchased 16,115 shares and 17,630 shares, respectively, of Class B common stock from employees for $232,000

and $26,000 respectively, to satisfy tax withholding obligations in connection with the vesting of restricted stock and DSUs.

Board of Directors authorized a buyback program, effective December 1, 2021, of up to 1.5 million shares of our Class B common

The Company did not purchase any shares under this buyback program in fiscal 2022.

Through November 10, 2022,

the Company had purchased 160,002 shares of Class B common stock at an average price of $2.26 per share under this program.

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