What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-10-30 compared with 2022-11-14 · 785 added, 661 removed, 72 unchanged (95% of the section changed)

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,” “anticipates,” “expects,”

“plans,” “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” 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.

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.

(“Zedge”) builds digital marketplaces and friendly

competitive games around content that people use to express themselves.

Our leading products include Zedge Ringtones and Wallpapers, a

freemium digital content marketplace offering mobile phone wallpapers, video wallpapers, ringtones, and notification sounds which historically

was branded as Zedge Premium, and GuruShots Ltd (“GuruShots”), a skill-based photo challenge game.

Our vision is to connect

creators who enjoy friendly competitions with a community of prospective consumers in order to drive commerce.

are part of the ‘Creator Economy,’ where over 1 billion people create and share their content across social platforms, mobile,

and video games, and content marketplaces.

Within this group of individuals, over 200 million identify as creators, people who use their

influence, skill, and creativity to amass an audience and monetize it.

Furthermore, approximately 12% of full-time creators earn more

than $50,000 per year, and 10% of influencers earn more than $100,000 per year.

We view the Creator Economy as an untapped opportunity

for Zedge to expand its business, especially as we execute by connecting our gamers with our marketplace.

Zedge Ringtones and Wallpapers app (which is named “Zedge Wallpapers” in the App Store), which we refer to as our “Zedge

App,” is a marketplace offering a wide array of mobile personalization content including wallpapers, video wallpapers, ringtones,

and notification sounds, and is available both in Google Play and the App Store.

As of July 31, 2022, our Zedge App has been installed

nearly 569 million times since inception and, over the past two years, has had between 32.0 and 36.3 million monthly active users (“MAU”).

MAU is a key performance indicator (“KPI”) that captures the number of unique users that used our Zedge App during the final

30 days of the relevant period.

Our platform allows creators to upload content to our marketplace and avail it to our users either for

free or for a price, via ‘Zedge Premium.’ In turn, our users utilize the content to personalize their phones and express

their individuality.

fiscal 2022 we introduced several new customer facing product features including ‘NFTs Made Easy’ and social and community

features, all meant to improve customer engagement, MAU, and revenue growth over the long term.

In addition, due to developments outside

of our control, we migrated to a new ad mediation platform - Applovin MAX -, which monopolized internal resources and delayed the completion

of other product initiatives we had planned for in fiscal 2022.

Applovin paid us a one-time $2 million integration bonus and their performance

has been on-par or better than our prior platform.

Following the transition, work resumed on the delayed development and most have been

rolled out as of September 30, 2022.

Zedge App’s monetization stack consists of advertising revenue generated when users view advertisements when using the Zedge App

or surfing our website, the in-app sale of Zedge Credits, our virtual currency, that is used to purchase Zedge Premium content, and a

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”

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” 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.

(“Zedge”) builds digital marketplaces and

friendly competitive games around content that people use to express themselves.

Our leading products include Zedge Ringtones and Wallpapers,

a freemium digital content marketplace offering mobile phone wallpapers, video wallpapers, ringtones, and notification sounds as well

as pAInt, a generative AI wallpaper maker, GuruShots, a skill-based photo challenge game, and Emojipedia, the #1 trusted source for ‘all

things emoji’.

Our vision is to enable and connect creators who enjoy friendly competitions with a community of prospective consumers

in order to drive commerce.

We are part of the ‘Creator Economy,’ where over 1 billion

people create and share their content across social platforms, mobile, and video games, and content marketplaces.

According to Linktree,

over 200 million identify as creators, people who use their influence, skill, and creativity to amass an audience and monetize it.

TechCrunch reports that 12% of full-time creators earn more than $50,000 per year, while Influencer Hub reports 10% of influencers earn

more than $100,000 per year.

We view the Creator Economy as an opportunity for Zedge to expand its business, especially as we execute

by connecting our gamers with our marketplace.

The Zedge Ringtones and Wallpapers app (which

is named “Zedge Wallpapers” in the App Store), which we refer to as our “Zedge App,” offers a wide array of mobile

personalization content including wallpapers, video wallpapers, ringtones, and notification sounds, and is available both in Google Play

and the App Store.

As of July 31, 2023, our Zedge App has been installed nearly 621 million times since inception and, over the past two

fiscal years, has had between 30.8 and 36.3 million monthly active users (“MAU”), ending with 30.9 million MAU as of July

MAU is a key performance indicator (“KPI”) that captures the number of unique users that used our Zedge App during

the final 30 days of the relevant period.

Our platform allows creators to upload content to our marketplace and avail it to our users

either for free or for a price, via ‘Zedge Premium,’ the section of our marketplace where we offer premium content (i.e.,

for purchase).

In turn, our users utilize the content to personalize their phones and express their individuality.

In fiscal 2023, we introduced pAInt, a generative

AI wallpaper maker in the Zedge App.

A generative AI wallpaper maker is an implementation of artificial intelligence software that can

create images from text descriptions.

To interface with a generative AI image maker, a user enters a text description of the image they

want to create, and the software generates an image based on that description.

In addition, we upgraded Zedge+, our paid subscription

offering, by bundling together an ad-free experience with value adds making the offering more compelling.

In fiscal 2022, we introduced several new customer facing product

features and social and community features, all meant to improve customer engagement, MAU, and revenue growth over the long term.

The Zedge Marketplace monetization stack consists

of advertising revenue generated when users view advertisements when using the Zedge App (and the related functionality under the Zedge.net

website), the in-app (or web-based) sale of Zedge Credits, our virtual currency, that is used to purchase Zedge Premium content, and a

paid-subscription offering that provides an ad-free experience to users that purchase a monthly or annual subscription.

As of July 31,

2022, we had 692,000 active paying subscribers.

late 2021, we introduced NFT functionality to a limited number of Zedge Premium creators via ‘NFTs Made Easy’.

we believe this product enhancement has the potential to drive significant artist growth and revenue production.

‘NFTs Made Easy’

is an eco-friendly platform that enables artists and consumers to sell and purchase NFTs within the Zedge App even though they may lack

deep knowledge and proficiency in the crypto space.

All transactions are made using Zedge Credits.

April 2022, we acquired GuruShots a recognized category leader focused on gamifying the photography vertical.

GuruShots offers a platform spanning iOS, Android, and the web that provides a fun, educational and structured way for amateur photographers

to compete in a wide variety of contests showcasing their photos while gaining recognition with votes, badges, and awards.

that the total addressable market of amateur photographers using their smartphones to take and publicly share artistic photos is 30-40

million people per month and that the market is still in its infancy.

Every month, GuruShots stages more than 300 competitions that result

in players uploading in excess of 1 million photographs and casting close to 4.5+ billion “perceived votes,” which are calculated

by multiplying the number of votes that each player casts by a weighting factor based on various factors related to that user.

engagement, GuruShots has adopted a set of retention dynamics focused on individual, team and community dynamics that create a sense

of belonging, inspiration, recognition, improvement, and competition.

GuruShots utilizes a ‘Free-to-Play’ business model that leads to strong monetization with the purchase of resources that

are used to give paying players an edge while still maintaining a fair and competitive experience for all participants.

Over the past

six years, the monthly average paying player spend has increased in excess of 14% annually to more than $55 per player.

we look to the future, we are advancing several initiatives that we expect will drive user growth, increase engagement, drive in-app

purchases, and advance our in-game economy.

In April 2023,

we introduced a subscription tier in the iOS version of the app.

As of July 31, 2023, we had approximately 638,000 active paying subscribers.

In late 2021, we introduced ‘NFTs Made Easy’ to a limited

number of Zedge Premium creators.

All NFT Made Easy transactions are made using Zedge Credits.

We often refer to our freemium ringtones and wallpapers, our subscription

offering, the functionality for creators to market their products and ancillary offering and features both in our Zedge App and website,

as our Zedge Marketplace.

In April 2022, we acquired GuruShots, a recognized category leader

focused on gamifying the photography vertical.

GuruShots offers a platform spanning iOS, Android, and the web that provides a fun, educational

and structured way for amateur photographers to compete in a wide variety of contests showcasing their photos while gaining recognition

with votes, badges, and awards.

We estimate that the total addressable market of amateur photographers using their smartphones to take

and publicly share artistic photos is 30-40 million people per month and that the market is still in its infancy.

Every month, GuruShots

stages more than 300 competitions that result in players uploading in excess of 750,000 photographs and casting close to 4 billion “perceived

votes”, which are calculated by multiplying the number of votes that each player casts by a weighting factor based on various factors

related to that user.

To improve engagement, GuruShots has adopted a set of retention dynamics focused on individual, team and community

dynamics that create a sense of belonging, inspiration, recognition, improvement, and competition.

Today, GuruShots utilizes a ‘Free-to-Play’ business model

that leads to strong monetization with the purchase of resources that are used to give paying players an edge while still maintaining

a fair and competitive experience for all participants.

Over the past seven years, the monthly average paying player spend has increased

in excess of 11.6% annually to more than $51.3 per player.

As we look to the future, we are advancing several initiatives that

we expect will drive user growth, increase engagement, drive in-app purchases, and advance our in-game economy.

Some of these include:

New Gameplay Experiences .

Introducing a new hybrid-casual gameplay experience that enables users to compete in short-duration photo and image competitions that are limited in size.

On-Boarding .

Revamping the customer onboarding experience in order to maximize first time purchasers by

immediately drawing new players into simplified photo competitions that are limited to a

small audience taking place in a short time duration.

● Subscriptions .

Introducing value-adds that we can bundle into a subscription.

For example, we started testing

a feed of short and engaging instructional videos that offer players techniques for improving

their photographs.

If users engage with this content, we expect to bundle it into a paid

subscription.

Evolving the game economy by maturing the game’s progression mechanics and features,

earn and spend dynamics, and introducing soft and premium currencies tied to resources and

Furthermore, we hope to introduce an advertising layer in the monetization stack

in the future.

Revamping the customer onboarding experience in order to maximize first time purchasers by immediately drawing new players into simplified photo competitions that are limited to a small audience taking place in a short time duration.

Evolving the game economy by maturing the game’s progression mechanics and features, earn and spend dynamics, and introducing soft and premium currencies tied to resources and benefits.

Furthermore, we have started preliminary testing of advertising on web and expect to extend that to the mobile apps during the summer.

We market GuruShots to prospective players, primarily via paid user

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yield a profitable customer.

When we unearth a successful combination of these variables we scale up until we experience diminishing returns.

Ultimately, we believe that the efforts we are making to advance the product coupled with the investment in user acquisition can significantly

increase GuruShots’ player base.

our commitment to growing both the Zedge App and GuruShots on a standalone basis, we believe that there are many potential synergies

that we can capitalize on that exist between the two businesses.

Specifically, we plan to enable the ability for GuruShots players to

become Zedge Premium artists and sell their photos to our audience of 30+ million MAU as standard digital images or NFTs.

we look to benefit from the experience that the GuruShots team possesses and test gamifying the Zedge App.

We believe that successful

gamification can contribute to increasing engagement, retention, and lifetime value, all critical KPIs for our business.

we believe that there are complementary content verticals that lend themselves to gamification.

August 2021, we acquired Emojipedia Pty Ltd (“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.

Emojipedia receives approximately 46.4 million monthly page

views and has approximately 7.6 million monthly active users of which approximately 45.19% are located in well-developed markets.

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

As a voting member of the Unicode Consortium,

the standards body responsible for approving new emojis, Emojipedia works alongside major emoji creators including Apple, Google, Facebook,

believe that Emojipedia provides growth potential to the Zedge App, and it was immediately accretive to earnings.

In the past year, we

have made many changes to Emojipedia including migrating to a new ad mediation platform, redesigning the Emojipedia website, and introducing

localized versions of Emojipedia in Spanish, French, German, Italian, and Portuguese.

We will continue to enhance this offering and are

exploring new features including a native mobile offering as well as additional monetization opportunities.

business consists of one reportable segment.

ACCOUNTING POLICIES

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

the United States of America, or U.S.

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 revenue recognition, business combination, intangible and goodwill, capitalized software and technology development costs

and stock-based compensation.

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.

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.

generate revenue from the following sources:

(1) Advertising;

(2) Paid Subscriptions and (3) Zedge Premium and Others, and (4)

following the GuruShots acquisition, from selling in game resources (“Resources”) to enhance user’s in-game rate

of progress and game experience.

The substantial majority of our revenue is generated from selling its advertising inventory

(“Advertising Revenue”) to advertising networks, advertising exchanges, and direct arrangements with advertisers.

monthly and yearly subscriptions allow users to prepay a fixed fee to remove unsolicited advertisements from its 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 receive 30% as a fee when users purchase licensed content using Zedge Credits or unlock licensed content

by watching a video or taking a survey on Zedge Premium.

We generate 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

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.

When we unearth a successful combination of these variables we scale up until we experience diminishing

Ultimately, we believe that the efforts we are making to advance the product coupled with the investment in user acquisition

can significantly increase GuruShots’ player base.

Beyond our commitment to growing both the Zedge App and GuruShots

on a standalone basis, we believe that there are many potential synergies that we can capitalize on that exist between the two businesses.

Specifically, we plan to enable the ability for GuruShots players to become Zedge Premium artists and sell their photos to our audience

of 30+ million MAU as standard digital images or NFTs.

In addition, we look to benefit from the experience that the GuruShots team possesses

and test gamifying the Zedge App.

We believe that successful gamification can contribute to increasing engagement, retention, and lifetime

value, all critical KPIs for our business.

Longer term, we believe that there are complementary content verticals that lend themselves

to gamification.

To this end we have been developing a new hybrid casual title, ‘AI Art Master,’ which enables players to

create generative AI images and compete in themed based competitions with these images.

AI Art Master is currently in soft-launch in

the Philippines, Poland, and India with the goal of commercial launch in late 2023 or early 2024.

In August 2021, we acquired the assets of Emojipedia Pty Ltd (“Emojipedia”),

including Emojipedia.org 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.

In July 2023, Emojipedia received approximately 45

million monthly page views and has approximately 9.7 million monthly active users as of July 31, 2023 of which approximately 50.3% are

located in well-developed markets.

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

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

including Apple, Google, Meta, and X, formally known as Twitter.

We believe that Emojipedia provides growth potential to the Zedge

App, and it was immediately accretive to earnings.

In the past year, we have made many changes to Emojipedia including migrating to a

new ad mediation platform, overhauling its backend, and redesigning the Emojipedia website.

We will continue to enhance this offering

and are exploring new features including a native mobile offering as well as additional monetization opportunities.

Reportable Segments

Our business consists of two reportable segments.

CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements and accompanying

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

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 revenue recognition, business combination,

intangible and goodwill, capitalized software and technology development costs and stock-based compensation.

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, Description of Business and Summary of Significant

Accounting Policies, 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.

Revenue Recognition

We generate revenue from the following sources:

(1) 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 on when

and how much volume of inventory they wish to buy.

Sales to Advertisers.

In prior periods, we sold, and 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 2022

and 2021 and have no current expectation that this will represent a material portion of its

sales in the near term.

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, which is Zedge’s performance obligation.

The advertiser may compensate the Company on a cost-per-impression, cost-per-click, cost-per-action basis.

(2) Paid Subscription;

Beginning in January 2019, we started offering monthly and yearly paid subscription services sold through Google Play.

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

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

Paid subscription

revenue is recognized net of sales tax amounts collected from subscribers.

Google Play collects and pays applicable sales tax on behalf

of Zedge when there is an obligation to pay.

(3) Other revenues including primarily Zedge Premium, the section of our marketplace where we

offer premium content (i.e., for purchase), and (4) Digital Goods and Services (from the GuruShots acquisition).

The substantial majority

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

exchanges, and direct arrangements with advertisers.

Our monthly and yearly subscriptions allow users to prepay a fixed fee to remove

unsolicited advertisements from the Android Zedge App in January 2019 and the iOS Zedge App users that began in April 2023.

Premium, we receive 30% as a fee when users purchase licensed content using Zedge Credits or unlock licensed content by watching a video

or taking a survey on Zedge Premium.

Sales and other similar taxes are excluded from revenues.

Advertising Revenue :

the bulk of our revenue from selling the Zedge Marketplace’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, sold, and 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 2023 and 2022 and have no current expectation that this will represent a material portion of its 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 obligations are satisfied

over the life of the relevant contract (i.e., over time), with revenue being recognized as advertising units are delivered, which is

Zedge’s performance obligation.

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

Paid Subscription Revenue:

in January 2019 and April 2023, we started offering monthly and yearly paid subscription services sold through Google Play and the App

Store, respectively.

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

between Zedge and the subscriber.

Google Play and the App Store process subscription prepayment on Zedge’s behalf, and retain up

to 30% as a fee.

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

subscriptions are automatically renewed at expiration unless cancelled by subscribers (e.g., that the customer can cancel at any time,

will not receive any refund however will remain entitled to receive the ad free service until the end of their subscription period).

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

The content owner sets the price and the end user can purchase the content by paying for it with Zedge Credits, our closed virtual

Paid subscriptions are automatically

renewed at expiration unless cancelled by subscribers.

While the customer can cancel at any time, he or she will not receive any refund

but will remain entitled to receive the ad free service until the end of the subscription period.

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.

terms for subscriptions sold through the App Store is net 45 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 end 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 700,000 credits for $999.99), Google Play or iTunes retains 30% of the purchase price as its fee.

When a user purchases Zedge Premium

content using Zedge Credits, the artist or brand receives 70% of the actual revenue after the Google Play or iTunes fee (“Royalty

Payment”) and we receive the remaining 30%, which is recognized as revenue.

goods used for online game :

GuruShots generates substantially all of its revenues from selling virtual goods (or Resources) to

GuruShots distributes its game to the end customer through mobile platforms such as Apple and Google.

Through these platforms,

users can download the free-to-play game and can purchase virtual goods which are redeemed in the game to enhance their game-playing

can pay for their virtual item purchases through various widely accepted payment methods offered in the game.

Payments from players for

virtual goods are required at the time of purchase, are non-cancellable and relate to non-cancellable contracts that specify the Company’s

obligations and cannot be redeemed for cash nor exchanged for anything other than virtual goods within the GuruShots’ game.

purchase price is a fixed amount which reflects the consideration that GuruShots expects to be entitled to receive in exchange for use

of virtual goods by its customers.

The platform providers collect proceeds from the game players and remit the proceeds to GuruShots

after deducting their respective platform fees.

Sales and other taxes collected from customers on behalf of governmental authorities

are accounted for on a net basis and are not included in revenues or operating expenses.

GuruShots’ performance obligation is to display the virtual goods in game play based upon the nature of

the virtual item.

categorizes its virtual goods as consumable.

GuruShots sells only consumable virtual goods.

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 700,000

credits for $999.99), Google Play or App Store retains 30% of the purchase price as its fee.

When a user purchases Zedge Premium content

using Zedge credits, the artist or brand receives 70% of the actual revenue after the Google Play or iTunes fee (“Royalty Payment”)

and we receive the remaining 30%, which is recognized as revenue.

Digital Goods

and Services :

GuruShots generates substantially all of its revenues by selling virtual goods (ex.

power-ups, in-game resources)

to its users.

GuruShots distributes its game to end customers through mobile platforms such as Apple’s App Store and Google Play

as well as via the web.

Through these platforms, users can download the free-to-play game and can purchase virtual goods which are redeemed

in the game to enhance their game-playing experience.

Players can pay for

their virtual item purchases through various widely accepted payment methods offered in the game.

Payments from players for virtual goods

are required at the time of purchase, are non-cancellable and relate to non-cancellable contracts that specify GuruShots’ obligations

and cannot be redeemed for cash nor exchanged for anything other than virtual goods within the GuruShots’ game.

The purchase price

is a fixed amount which reflects the consideration that GuruShots expects to be entitled to receive in exchange for use of virtual goods

by its customers.

The platform providers collect proceeds from the game players and remit the proceeds to GuruShots after deducting their

respective platform fees.

Sales and other taxes collected from customers on behalf of governmental authorities are accounted for on a

net basis and are not included in revenues or operating expenses.

GuruShots’ performance obligation is to display the virtual goods

in game play based upon the nature of the virtual item.

GuruShots categorizes

its virtual goods as consumable.

GuruShots’ game sells only consumable virtual goods.

Consumable virtual goods represent items

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purchase behavior, and the amounts of virtual goods outstanding.

Based upon this analysis, GuruShots has estimated the rate at which

virtual item is consumed during game play.

Accordingly, revenue is recognized once the virtual goods are sold.

GuruShots monitors its

analysis of customer play behavior on a quarterly basis.

discussed above, GuruShots concluded that revenue related to the promise of enhancing users’ gaming experience through Resource purchases

should be recognized ratably over the period of benefit period (i.e.

the period over which the enhanced gaming experience is provided).

However, for practical reasons, GuruShots does not defer the portion of revenue attributable to future uses of Resources as of any given

balance sheet date.

This is due to the duration of the enhanced gaming experience that is provided being, in substantially all of the

cases, and applying the portfolio approach (as GuruShots reasonably expects that the effects on the financial statements of applying

ASC 606 guidance to the portfolio would not differ materially from applying ASC 606 guidance to the individual contracts), a very short

time frame ranging from a few hours to less than two weeks.

Therefore, the result of recognizing the related revenues at the point in

time which user first consumes the respective resource would yield a result that is not substantially different then ratable recognition

over the period of benefit.

Revenue is recognized once the virtual goods are sold.

GuruShots monitors

its analysis of customer play behavior on a quarterly basis.

As discussed above, GuruShots

concluded that revenue related to the promise of enhancing users’ gaming experience through in-game resources purchases should be

recognized ratably over the period of benefit period (i.e., the period over which the enhanced gaming experience is provided).

for practical reasons, GuruShots does not defer the portion of revenue attributable to future uses of Resources as of any given balance

This is due to the duration of the enhanced gaming experience that is provided being, in substantially all of the cases, and

applying the portfolio approach (as GuruShots reasonably expects that the effects on the financial statements of applying ASC 606 guidance

to the portfolio would not differ materially from applying ASC 606 guidance to the individual contracts), a very short time frame ranging

from a few hours to less than two weeks.

Therefore, the result of recognizing the related revenues at the point in time which user first

consumes the respective Resource would yield a result that is not substantially different then ratable recognition over the period of

Accordingly, revenue is recognized once the virtual goods are sold.

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.

To the extent that we act as an agent, 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 advertiser.

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 determine the price.

Any third-party costs related to such direct relationships

are recognized as direct cost of revenues.

is primarily responsible for providing the virtual goods, has control over the content and functionality of games and has the discretion

to establish the virtual goods’ prices.

Therefore, GuruShots is the principal and, accordingly revenues are recorded on a gross

Payment processing fees paid to platform providers are recorded within selling, general and administrative expenses.

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 subscribers.

With respect to Zedge Premium, Zedge, as

provider of the platform, is effectively operating as a broker or intermediary connecting online content providers with the end user.

the Company uses gross revenue ( net of the 30% fee retained by Google Play or iTunes when a

user purchases Zedge Credits ) as a performance metric, we record net revenue from Zedge Premium which consists of a 30% platform

fee, in-app purchases profit and breakage.

Content providers are paid their portion of revenue

which is a 70% share of the gross revenue calculated.

Combinations and Contingent Liabilities

Company accounts for business combination using the acquisition method of accounting.

The Company allocates the purchase price of the

acquisition to the tangible and intangible assets acquired and liabilities assumed and contingent considerations based on their estimated

fair values at the acquisition dates.

The excess of the purchase price over those fair values is recorded as goodwill.

During the measurement

period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities

assumed with a corresponding offset to goodwill.

Upon the conclusion of the measurement period or final determination of the values of

assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements

of income and comprehensive income.

Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred.

The fair value of contingent consideration includes estimates and judgments made by management regarding the probability that future

contingent payments will be made.

contingent consideration, we update these estimates and the related fair value of contingent consideration using a Monte Carlo simulation

at each reporting period based on the estimated probability of achieving the earn-out targets and applying a discount rate that measures

the risk associated with the expected contingent payments.

Changes in the fair value can result from changes pertaining to the achievement

of the defined milestones and changes in assumed discount rates.

Changes in the fair value of contingent consideration are recorded in

our consolidated statements of income and comprehensive incomes.

As of July 31, 2022, the contingent consideration for GuruShots associated

with revenue milestones ending March 31, 2024 amounted to $1.9 million, of which $0.2 million is included in current liabilities and

$1.7 million is included in long term liabilities.

assets are carried at cost, less accumulated amortization, unless a determination has been made that their value has been impaired.

assets are amortized on a straight-line basis over their estimated useful lives of between five to fifteen years.

The Company reviews

identifiable amortizable intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that

the carrying value of the assets may not be recoverable.

Determination of recoverability is based on the lowest level of identifiable

estimated undiscounted cash flows resulting from use of the asset and its eventual disposition.

Measurement of any impairment loss is

based on the excess of the carrying value of the asset over its fair value.

There were no impairment charges recorded in the fiscal year

ended July 31, 2022 and 2021 presented in the accompanying audited consolidated financial statements.

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.

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

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 2022 and 2021, 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.

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.

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;

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.

To the extent we act as the agent, revenue is reported 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.

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 determine the price.

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

GuruShots is primarily responsible for providing

the virtual goods, has control over the content and functionality of games and has the discretion to establish the virtual goods’

Therefore, GuruShots is the principal and, accordingly revenues are recorded on a gross basis.

Payment processing fees paid to

platform providers are recorded within selling, general and administrative expenses.

We report subscription revenue gross of the fee

retained by Google Play and the App Store, as the subscriber is our customer in the contract and we control the service prior to the

transfer to the subscriber.

With respect to Zedge Premium, Zedge, as provider

of the platform, is effectively operating as a broker or intermediary connecting online content providers with the end user.

use gross revenue (net of the 30% fee retained by Google Play or AppStore when a user purchases Zedge Credits) as a performance

metric, we record net revenue from Zedge Premium which consists of a 30% platform fee, in-app purchases profit and breakage.

providers are paid their portion of revenue which is a 70% share of the gross revenue calculated.

Business Combinations and Contingent Considerations

We account for business combinations using the

acquisition method of accounting.

We allocate the purchase price of an acquisition to the tangible and intangible assets acquired and

liabilities assumed and contingent considerations based on their estimated fair values at the relevant acquisition date.

The excess of

the purchase price over those fair values is recorded as goodwill.

During the measurement period, which may be up to one year from the

acquisition date, we may record adjustments to the assets acquired and liabilities assumed with a corresponding offset to goodwill.

the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes

first, any subsequent adjustments are recorded to the consolidated statements of (loss) income and comprehensive (loss) income.

Acquisition-related

costs are recognized separately from the acquisition and are expensed as incurred.

The fair value of contingent consideration includes

estimates and judgments made by management regarding the probability that future contingent payments will be made.

For contingent consideration, we update these

estimates and the related fair value of contingent consideration using a Monte Carlo simulation at each reporting period based on the

estimated probability of achieving the earn-out targets and applying a discount rate that measures the risk associated with the expected

contingent payments.

Changes in the fair value can result from changes pertaining to the achievement of the defined milestones and changes

in assumed discount rates.

Changes in the fair value of contingent consideration are recorded in our consolidated statements of (loss)

income and comprehensive (loss) income.

To the extent our estimates change in the future regarding the likelihood of achieving these targets,

we would need to record adjustments to our contingent consideration liabilities.

The inputs used to calculate the fair value of the contingent

consideration liabilities are considered to be Level 3 inputs due to the lack of relevant market activity and significant management judgment.

See Note 3, Fair Value Measurement, to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K,

for additional disclosure regarding fair value of financial instruments.

Intangible Assets-Net

We test the recoverability of its intangible

assets with finite useful lives whenever events or changes in circumstances indicate that the carrying value of the asset may not be

We test for recoverability based on the projected undiscounted cash flows to be derived from such asset.

If the projected

undiscounted future cash flows are less than the carrying value of the asset, we will record an impairment loss, if any, based on the

difference between the estimated fair value and the carrying value of the asset.

We generally measure fair value by considering sale

prices for similar assets or by discounting estimated future cash flows from such asset using an appropriate discount rate.

projections and fair value estimates require significant estimates and assumptions by management.

Should the estimates and assumptions

prove to be incorrect, we may be required to record impairments in future periods and such impairments could be material.

Intangible assets are carried at cost, less accumulated

amortization, unless a determination has been made that their value has been impaired.

Intangible assets are amortized on a straight-line

basis over their estimated useful lives of between five to fifteen years.

We review identifiable amortizable intangible assets to be

held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable.

Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of

the asset and its eventual disposition.

Measurement of any impairment loss is based on the excess of the carrying value of the asset

over its fair value.

There were no impairment charges recorded in the fiscal years ended July 31, 2023 and 2022 presented in the accompanying

consolidated financial statements.

Goodwill represents the excess of purchase price

and related costs over the fair value of assets acquired and liabilities assumed of the business acquired.

Under ASC 350, Intangibles-Goodwill

and Other , goodwill is not amortized, but instead is tested for impairment annually, or if certain circumstances indicate a possible

impairment may exist.

We test goodwill for impairment on the first

day of the fourth fiscal quarter or upon the occurrence of events or changes in circumstances that indicate that the asset might be impaired.

Goodwill is assigned to our reporting units, which are our operating segments, or components of an operating segment, that constitute

a business for which discrete financial information is available, and for which segment management regularly reviews the operating results.

During the annual impairment review process we have the option to first perform a qualitative assessment (commonly referred to as “step

zero”) over relative events and circumstances to determine whether it is more likely than not that the fair value of a reporting

unit is less than its carrying value or to perform a quantitative assessment (“step one”) where we estimate the fair value

of each reporting unit using primarily a market capitalization approach.

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 its reporting unit when measuring the goodwill impairment loss, if applicable.

We performed an interim impairment test during

the third quarter of fiscal 2023 and concluded that the carrying value of the GuruShots reporting unit exceeded its fair value.

we recorded a non-cash goodwill impairment charge of $8.7 million during the third quarter of fiscal 2023.

See Note 7, Intangible

Assets-Net and Goodwill , for additional information) to the Consolidated Financial Statements in Item 8 of this Annual Report on

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, in which case, 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 income.

Company recognizes compensation expense for all of its grants of stock-based awards based on the estimated fair value on the grant

Compensation cost for awards is recognized using the straight-line method over the vesting period or the graded vesting method

if awards with market or performance conditions include graded vesting features or if an award includes both a service condition and

a market or performance condition.

Stock-based compensation is included in selling, general and administrative expense.

Accounting Pronouncements

Note 1 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for recently adopted accounting

pronouncements and recently issued accounting pronouncements not yet adopted as of July 31, 2022.

full impact of the COVID-19 pandemic is inherently uncertain at the time of this report.

The COVID-19 pandemic resulted in various travel

restrictions and mandates and greater uncertainty in global financial markets.

Our advertisers and subscribers, and our business and

operations, have been and may continue to be affected by the COVID-19 pandemic, variants and responsive government restrictions.

so long as the COVID-19 pandemic persists, restrictions and policies implemented by governments and companies may continue to have negative

implications on business and consumer spending, the supply chain, production of goods, demand for goods, transportation, the labor market,

the global capital markets and the global economy, and could result in inflation, recession and prolonged economic downturn.

negative impact on our advertisers and subscribers may cause them to cut back on ad buying on our platform or purchasing our subscriptions

and other products offerings.

Any of these conditions or actions may have a negative impact on our future results of operations, liquidity,

and financial condition.

We are unable to predict the full impact that the COVID-19 pandemic will have on our future results of operations,

liquidity and financial condition due to numerous uncertainties, including the duration of the pandemic, the actions that may be taken

by government authorities across the U.S.

or other countries, the impact to our customers, partners, and suppliers, and other factors

described in the section titled “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K.

of Russia’s recent invasion of Ukraine

February of 2022, the Russian Federation invaded Ukraine.

As a result, many governments and businesses imposed trade and economic sanctions

on the Russian Federation and Belarus.

Zedge has a small user base in Russia and Belarus;

however, it also has a development center in

Vilnius, Lithuania, which is approximately 40 kilometers from the Belarussian border.

In the event that the conflict spills over into

other countries, Zedge may need to relocate personnel potentially resulting in a slowdown in work product generated by those personnel.

At present, the Company is working on contingency planning to be in a position to minimize any potential interruptions.

GuruShots has

several contractors originally based in Ukraine who were inaccessible for a period of time.

Most of them are now back at work and some

of them have relocated to neighboring countries.

As a result, there has been minimal disruption in the development work performed for

We disabled both the Zedge App and GuruShots in Russia and Belarus resulting in a loss of that customer base and associated

Finally, at the outset of the war, we changed the color of the Zedge App’s icon to the colors of the Ukrainian flag as a demonstration

of our solidarity with Ukraine.

This change triggered a spate of users, primarily located in countries that have close ties to the Russian

Federation, to either uninstall the Zedge App and/or reduce our star ranking across the various storefronts.

We also updated the collateral

materials in these storefronts to the color of the Ukrainian flag resulting in a decline in new installs from these same countries.

Performance Indicators

results of operations discussion includes disclosure of two key performance indicators - Monthly Active Users (MAU) and Average Revenue

Per Monthly Active User (ARPMAU).

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

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

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, 2022 MAU declined 7.0% year over year primarily to attrition in both developed markets and emerging markets.

Additionally,

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, 2022, users in emerging markets represented 77% of our MAU compared to 75% a year

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

was up 11.4% for the three months ended July 31, 2022 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

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.

project is subsequently cancelled prior to placement in service, costs that have been capitalized to date will be reviewed for potential

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, in which case, amortization begins when that other project is ready for use).

During the Post-Implementation/Operating 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

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.

Stock-Based Compensation

We account for our share-based compensation arrangements

in accordance with ASC 718, “Compensation-Stock Compensation” (“ASC 718”) which requires the measurement and recognition

of compensation expense for all share-based payment awards to employees and directors based on estimated fair values on the grant date.

Compensation cost for awards is recognized using the straight-line method over the vesting period or the graded vesting method if awards

with market or performance conditions include graded vesting features or if an award includes both a service condition and a market or

performance condition.

Stock-based compensation is included in selling, general and administrative expense in the consolidated statements

of (loss) income and comprehensive (loss) income.

See Note 1, Description of Business and Summary

of Significant Accounting Policies, to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, for discussion

of new accounting pronouncements.

Geo-Political and Macroeconomic Conditions and the COVID-19 Pandemic

We are subject to risks and uncertainties caused by events with significant

macroeconomic impacts, including but not limited to, Russia’s invasion of Ukraine, rising interest rates, actions taken to counter

inflation, reduced consumer confidence, supply side disruptions, and the COVID-19 pandemic.

The future and full impact that these factors

may have on our business, financial condition, and results of operations is unclear.

The risks related to our business are further described

in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and those discussed under

Item 1A to Part I “Risk Factors” in the Form 10-K.

Impact of Russia’s Invasion of Ukraine

We are closely monitoring the current and potential impact on our

business, our people, and our users/customers as Russia’s war with Ukraine evolves.

We have taken steps to comply with applicable

domestic and international regulatory restrictions on international trade and financial transactions.

Revenues associated with our users/customers

in Russia and Belarus are not material to our consolidated financial results, and we anticipate that blocking Russian and Belarus users/customers’

access to our mobile app and web platforms will not have a material impact on our business.

Management and our Board of Directors are

monitoring the regional and global ramifications of the continuing events.

Impact of Israel-Hamas War

Given our operations in Israel, the impact of economic, political,

geopolitical, and military conditions in the region directly affects us, including conflicts involving missile strikes, infiltrations,

and terrorism.

Notably, on October 7, 2023, Hamas launched attacks in southern Israel, resulting in casualties and military engagement.

In addition, Hezbollah, another terrorist organization based in Lebanon has been indiscriminately shelling Israel.

The extent and duration

of this conflict remain uncertain, potentially involving other groups.

Israel’s response led to the mobilization of reservists, affecting

our workforce.

Prior to this, changes in Israel’s judicial system had already raised concerns about the business environment, compounded

by recent events, potentially impacting foreign investment, currency fluctuations, credit ratings, interest rates, and security markets.

Furthermore, regional political unrest and threats from extremist groups, notably Iran, pose additional risks.

Management and our Board

of Directors are closely monitoring the situation in Israel to address potential business disruptions and implications.

COVID-19 Update

Although the World Health Organization declared in early May of 2023

that COVID-19 no longer constitutes a public health emergency we continue to actively monitor the COVID-19 developments and potential

impact on our employees, business and operations.

The effects of COVID-19 did not have a material impact on our result of operations

or financial condition for the fiscal year ended July 31, 2023.

However, given the evolution of the COVID-19 situation, and the global

responses to curb its spread, we are not able to estimate the effects COVID-19 may have on our future results of operations or financial

Key Performance Indicators

Our results of operations discussion includes

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

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.

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

As of July 31, 2023 MAU declined 3.4% year over

year primarily to attrition in both developed markets and emerging markets.

Additionally, 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.

July 31, 2023, users in emerging markets represented 78% of our MAU compared to 77% a year prior.

This shift has negatively impacted

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

ARPMAU declined 5.5% for the three months ended

July 31, 2023 when compared to the same period a year ago, primarily due to macroeconomic condition that impacted our advertising revenue

and subscription revenue.

The following tables present the MAU – Zedge App and ARPMAU

– Zedge App for the three months ended July 31, 2023 as compared to the same period a year ago:

Three Months Ended July 31,

(in millions, except ARPMAU - Zedge App)

4 unchanged sentences

ARPMAU - Zedge App

OF OPERATIONS

following table sets forth our consolidated statements of operations data for the fiscal year ended July 31, 2022 compared to the fiscal

year ended July 31, 2021:

Year Ended July 31,

The following charts present the MAU –

Zedge App and ARPMAU – Zedge App for the consecutive eight fiscal quarters ended July 31, 2023:

GuruShots-MAPs and ARPMAP

Monthly Active Payers (“MAPs”).

a MAP as a unique active user on the GuruShots app or GuruShots.com in a month that completed at least one in-app purchase (“IAP”)

during that time period.

MAPs for a time period longer than one month are the average MAPs for each month during that period.

the number of MAPs by aggregating certain data from third-party attribution platforms.

Average Revenue Per Monthly Active Payer (“ARPMAP”).

We define ARPMAP as (i) the total revenue from IAPs derived from GuruShots and GuruShots.com in a monthly period, divided by (ii)

MAPs in that same period.

ARPMAP for a particular time period longer than one month is the average ARPMAP for each month during that

ARPMAP shows how efficiently we are monetizing each MAP.

The following table shows our MAP and ARPMAP for the three months

ended July 31, 2023 and 2022.

Three Months Ended

(in thousands, except ARPMAP)

Monthly Active Payers

Average Revenue per Monthly Active Payer

The following charts present the MAP and ARPMAP – GuruShots

for the consecutive eight quarters ended July 31, 2023:

Our KPIs related to GuruShots are not based on any standardized industry

methodology and are not necessarily calculated in the same manner that other companies or third parties may use to calculate these or

similarly titled measures.

The numbers that we use to calculate MAP and ARPMAP are derived from data that we generate internally.

these numbers are based on what we believe to be reasonable judgments and estimates for the applicable period of measurement, there are

inherent challenges in measuring usage and engagement.

We regularly review and may adjust our processes for calculating our internal

metrics to improve their accuracy.

RESULTS OF OPERATIONS

The following table sets forth certain of our

consolidated results of operations data for the fiscal year ended July 31, 2023 compared to the fiscal year ended July 31, 2022:

Fiscal Year Ended

(in thousands)

2 unchanged sentences

Depreciation and amortization

Goodwill impairment

Change in fair value of contingent consideration

Income from operations

(Loss) income from operations

Interest and other income, net

Net loss resulting from foreign exchange transactions

Provision for (benefit from) income taxes

following table sets forth the composition of our revenues for the fiscal years ended July 31, 2022 and 2021:

Fiscal Year Ended

% of total Revenue

(in thousand)

Net income (loss) resulting from foreign exchange transactions

(Benefit from) provision for income taxes

Net (loss) income

nm-not meaningful

The following table sets forth the composition

of our revenues for the fiscal years ended July 31, 2023 and 2022:

Fiscal Years Ended

(in thousands)

Advertising revenue

Virtual items used for online game

Paid subscription revenue

Other revenues

Total revenues

Advertising revenue increased 20% from $15.7 million in fiscal 2021 to $18.9 million in fiscal 2022 primarily

due to improvements in our ad stack and higher advertising rates.

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

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 its fee which decreases to 15% from month 13 and beyond.

generated $3.6 million and $3.8 million in gross prepaid subscription sales consisting of both monthly and annual subscriptions for the

fiscal years ended July 31, 2022 and 2021 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.

Our active subscription numbers decreased by 8% from July 31, 2021 to July 31, 2022 primarily due to the new

subscriptions not offsetting churn.

However, despite this reduction, our average number of active subscribers during the 2022 fiscal year

increased by 9% from the 2021 fiscal year.

following table summarizes subscriptions and subscription revenue for the fiscal years ended July 31, 2022 and 2021.

As of/Years Ended

Total Zedge App revenue

Digital goods and services*

Total revenue

* Year over year percentage change is not meaningful due to the stub

period from April 13, 2022 to July 31, 2022.

Advertising revenue .

revenue decreased 10% from $20.3 million in fiscal 2022 to $18.3 million in fiscal 2023 primarily due to lower media advertising spending

caused by negative macroeconomic conditions, including related to rising interest rate and recession concerns.

Paid subscription revenue .

Gross subscription

revenue on the Android platform decreased 8% to $3.3 million in fiscal 2023 from $3.6 million in fiscal 2022.

Subscription revenue recognized

on the Android platform also decreased 8% to $3.4 million in fiscal 2023 from $3.7 million in fiscal 2022.

Our active subscriptions decreased

by 65,000 or 9% from 692,000 as of July 31, 2022 to 627,000 as of July 31, 2023 primarily due to the new subscriptions not offsetting

churn, and our average active subscribers decreased by 11% during the same period.

Our average monthly revenue per active subscription

increased 4.8% to $0.44 in fiscal 2023 from $0.42 in fiscal 2022 due to revenue mix (more monthly subscriptions in fiscal 2023 compared

to fiscal 2022).

Beginning in August 2023, we rolled out lifetime subscriptions for Android users and the initial results were quite encouraging,

although there can be no assurance that the trend will continue.

The following table summarizes subscriptions and

subscription revenue from the Android platform for the fiscal years ended July 31, 2023 and 2022.

We began our subscription offering on

the iOS platform in late April 2023 and the associated revenue for the three months ended July 31, 2023 was not material.

Fiscal Year Ended July 31,

(in thousands, except revenue per subscriber and percentages)

Active subscriptions net (decrease) increase

Active subscriptions net decrease*

Active subscriptions at end of period *

Average Active subscriptions

Average monthly revenue per Active subscriptions

goods used for online game .

GuruShots sells virtual goods that enable extra abilities for the user throughout the game via in-app

and online purchases.

GuruShots recognizes revenue at the time of purchase because the overwhelming majority of users purchase game resources

when they use them at a rate that exceeds the rate in which they earn them for free through participation.

The $1.7 million revenue was

earned in the period from the April 2022 closing of the purchase of GuruShots through July 31, 2022.

Zedge Premium gross revenue and net revenue grew 60% and 62% year over year primarily due to the landing page redesign

that make premium content more visible to our users.

The following table summarizes Zedge Premium gross and net revenue for the fiscal

year ended July 31, 2022 and 2021.

Fiscal Year Ended July 31,

Average active subscriptions during the period*

Average monthly revenue per active subscription*

* Android Only

Digital Goods and Services .

Digital Goods

and Services revenue were $4.6 million for the twelve months ended July 31, 2023 as compared to $1.7 million for the period from April

13, 2022 to July 31, 2022.

Since the closing of the acquisition, GuruShots has experienced downward trajectory in both MAP and ARPMAP.

As shown in the table above under the discussion of Key Performance Indicators, MAP and ARPMAP declined 22% and 10% respectively for the

three months ended July 31, 2023 when compared to the same period a year ago.

The decline in MAP can be attributed primarily to Apple’s

App Tracking Transparence (“ATT”) framework which impeded our ability to invest in paid user acquisition (“PUA”)

campaigns profitably in terms of return on ad spend or (“ROAS”).

As such, we scaled back our PUA spend for GuruShots in fiscal

2023 while continuously testing with new campaigns and creatives in order to unearth attractive ROAS scaling opportunities.

in ARPMAP was primarily due to the negative macroeconomic conditions caused by the rising interest rate and recession fear throughout

Other Revenue .

Other revenue consists

primarily of Zedge Premium revenue.

Zedge Premium gross revenue increased 2.3% while net revenue was flat year over year.

The following

table summarizes Zedge Premium gross and net revenue for the fiscal year ended July 31, 2023 and 2022.

Fiscal Year Ended

(in thousands)

1 unchanged sentence

Zedge Premium-net revenue

from Zedge Premium, web-based advertising revenues from Emojipedia and other related sites, as well as revenues generated by Shortz,

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

On April 1, 2022, we received a one-time integration bonus of $2 million from AppLovin Corporation for migrating to their

mediation platform.

This amount is being amortized over an initial estimated service period of 24 months which is also included in Other

cost of revenues .

Direct cost of revenues consists primarily of content hosting, content serving and filtering, data analytic

tools and marketing automation services.

Fiscal year ended July 31,

Direct cost of revenues .

cost of revenues consists primarily of content hosting, content serving and filtering, and data analytic tools.

Fiscal Year Ended

(in thousands)

1 unchanged sentence

As a percentage of revenues

cost of revenues increased 37.4% in fiscal 2022 to $1.6 million from $1.2 million in fiscal 2021, primarily attributable to the cloud

hosting costs related to GuruShots.

a percentage of revenue, direct cost of revenues in fiscal 2022 were 6.2% and flat when compared to 6.1% in fiscal 2021.

general and administrative expense .

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

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

Fiscal year ended July 31,

Direct cost of revenues increased 37% in fiscal

2023 to $2.2 million from $1.6 million in fiscal 2022, primarily attributable to the full year effect of the cloud hosting costs related

to GuruShots.

As a percentage of revenue, direct cost of revenues

in fiscal 2023 were 8.2% as compared to 6.2% in fiscal 2022.

The higher percentage in fiscal 2023 can be attributed to GuruShots’

lower revenue base and relatively high direct cost of revenues.

Selling, general and administrative expense .

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

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

Fiscal Year Ended

(in thousands)

1 unchanged sentence

As a percentage of revenues

expense increased 62% in fiscal 2022 to $15.1 million from $9.3 million in fiscal 2021.

This increase was primarily attributable to incremental

SG&A from consolidating GuruShots’ operating results for the period from April 13, 2022 to July 31, 2022.

Compensation costs,

stock-based compensation as discussed below, higher professional and consulting fees also contributed in part to the increase in SG&A

year over year.

headcount totaled 93 as of July 31, 2022, including GuruShots personnel, compared to 53 as of July 31, 2021.

The majority of our employees

are based in Lithuania and Israel.

expense also included stock-based compensation expense including equity grants to employees and consultants, as well as stock issuances

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

Certain stock options, deferred stock unit and restricted stock grants

are more fully described in Note 13 to the Consolidated Financial Statements in this Annual Report for a complete discussion of our stock-based

compensation.

following table summarizes stock-based compensation expense for the fiscal year ended July 31, 2022 and 2021.

Fiscal year ended July 31,

SG&A expense increased 45%, or $6.8 million

in fiscal 2023 to $21.9 million from $15.1 million in fiscal 2022.

This increase was primarily attributable to the effect of consolidating

GuruShots’ operating results for twelve months in fiscal 2023 versus the period from April 13, 2022 to July 31, 2022.

compensation as discussed below, PUA, higher professional and consulting fees also contributed in part to the increase in SG&A year

We started investing in PUA during fiscal 2023 to counter the decline in organic installs of our Zedge App.

We expect to increase

our PUA spend in fiscal 2024 provided the ROAS remains compelling.

As a percentage of our total revenue, SG&A

expense in fiscal 2023 was 80.2% as compared to 56.7% in fiscal 2022.

The higher percentage in fiscal 2023 can be attributed to the full

year effect of consolidating GuruShots’ operations in fiscal 2023 as compared to a short year period in fiscal 2022 (April 13, 2022

to July 31, 2022).

Our headcount totaled 94 as of July 31, 2023,

relatively stable from the staffing level as of July 31, 2022.

The majority of our employees are based in Lithuania and Israel.

SG&A expense also included stock-based compensation

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

contributions.

Certain stock options, deferred stock unit and restricted stock grants are more fully described in Note 13, Stock-Based

Compensation , to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K.

The following table summarizes stock-based compensation

expense for the fiscal year ended July 31, 2023 and 2022.

Fiscal Year Ended

(in thousands)

Stock-based compensation expense

Stock-based compensation expense increased $1.3 million or 197 % in

fiscal 2022 to $1.9 million from $0.6 million in fiscal 2021 primarily due to deferred stock units (DSUs) granted to Company employees

and restricted stock the Company committed to issue in connection with the GuruShots acquisition.

and amortization .

Depreciation and amortization expense consists mainly of amortization of intangible assets related to

the GuruShots and Emojipedia acquisitions, 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,

Stock-based compensation expense increased $0.6

million or 30% in fiscal 2023 to $2.5 million from $1.9 million in fiscal 2022 primarily due to the equity-based compensation expenses

related to the restricted stock issued in connection with the GuruShots acquisition.

Depreciation and amortization .

and amortization expense consists mainly of amortization of intangible assets related to the GuruShots and Emojipedia acquisitions, 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)

1 unchanged sentence

As a percentage of revenues

and amortization expense increased $0.7 million or 56 % in fiscal 2022 to $2.0 million from $1.3 million in fiscal 2021, primarily due

to the amortization of intangible assets acquired in fiscal 2022.

Consideration Fair Value Change.

During fiscal 2022, we recorded a $4 million net benefit related to the change in fair value

of our contingent consideration liabilities incurred, from $5.9 million to $1.9 million, associated with the acquisition of GuruShots

in April 2022.

The liability for contingent consideration is remeasured at each reporting period until the contingency is resolved.

decrease in fair value of the contingent consideration was due primarily to the decrease in the likelihood that certain contingent milestones

would be achieved.

and other income, net.

The decrease in interest and other income, net in fiscal 2022 when compared to fiscal 2021 was primarily

due to the PPP loan forgiveness of $218,000 in fiscal 2021.

See Note 18 to the Consolidated Financial Statements in this Annual Report

for further details.

Fiscal year ended July 31,

Depreciation and amortization expense increased

$1.3 million or 66 % in fiscal 2023 to $3.2 million from $2.0 million in fiscal 2022, primarily due to the amortization of intangible

assets acquired in connection with the GuruShots acquisition.

Goodwill impairment.

We performed an interim impairment

assessment during the Q3 of fiscal 2023 and determined that the fair value of the GuruShots reporting unit exceeded its carrying value

and recorded a $8.7 million goodwill impairment charge in the three months ended April 30, 2023.

Please see Note 7, Intangible Assets,

Net and Goodwill , to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Contingent Consideration Fair Value Change.

During fiscal 2023, we recorded a $1.9 million net benefit related to the change in fair value of our contingent consideration payable

(related to the GuruShots acquisition) in addition to the $4.0 million net benefit recorded in fiscal 2022.

In effect, we reduced the

amount payable from $5.9 million to $0, due to the decrease in the likelihood that certain contingent milestones would be achieved.

Interest and other income, net.

The increase in interest and other income, net in fiscal 2023 when compared to fiscal 2022 was primarily due to higher interest rates

earned on our cash balances in fiscal 2023 compared to fiscal 2022.

Fiscal Year Ended

(in thousands)

1 unchanged sentence

As a percentage of revenues

loss resulting from foreign exchange transactions .

Net loss resulting from foreign exchange transactions is comprised of gains

and losses generated from movements in Norwegian Krone (“NOK”) and Euros (“EUR”) relative to the U.S.

including gains or losses from our currency hedging activities.

Fiscal year ended July 31,

Net income (loss) resulting from foreign exchange transactions .

Net income (loss) resulting from foreign exchange transactions is comprised of gains and losses generated from movements in Norwegian

Krone (“NOK”) and Euros (“EUR”) relative to the U.S.

Dollar, including gains or losses from our currency hedging

Fiscal Year Ended

(in thousands)

Net loss resulting from foreign exchange transactions

Net income (loss) resulting from foreign exchange transactions

As a percentage of revenues

nm-not meaningful

fiscal 2022 and 2021, we incurred losses of $368,000 and $18,000, respectively, from NOK and EUR hedging activities.

for (benefit from) income taxes .

During fiscal 2022, we had pretax income of about $11.6 million of which we accrued $1.9

million in income tax expenses, an effective tax rate of 16.3% which is lower than the statutory rate primarily due to the $4.0 million

In fiscal 2023 and 2022, we incurred income of

$14,000 and losses of $368,000, respectively, from NOK and EUR hedging activities.

(Benefit from) provision for income taxes .

During fiscal 2023, we had pretax loss of about $6.6 million in respect of which we accrued $0.5 million in income tax benefit, an effective

tax rate of 7.0% which is lower than the statutory rate primarily due to the $8.7 million goodwill impairment charge and $1.9 million

change in fair value of contingent consideration.

During fiscal 2021, we had pretax income of about $8 million which enabled us to utilize

all the federal net operating loss (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 July 31,

During fiscal 2022, we had pretax income of about $11.6 million in respect of which

we accrued $1.9 million in income tax expenses, an effective tax rate of 16.3% which is lower than the statutory rate primarily due to

the $4.0 million change in fair value of contingent consideration.

See Note 12, Income Taxes , to the Consolidated Financial Statements

in Part II, Item 8 of this Annual Report on Form 10-K, for information regarding income taxes.

Fiscal Year Ended

(in thousands)

Provision for (benefit from) income taxes

(Benefit from) provision for income taxes

As a percentage of revenues

nm-not meaningful

AND CAPITAL RESOURCES

Comparison of our Segment Results of Operations

The following table presents the results for our Zedge Marketplace

and GuruShots segment income (loss) from operations for the fiscal years ended July 31, 2023 and 2022:

Fiscal Year Ended

(in thousands)

Segment income (loss) from operations:

Zedge Marketplace

nm-not meaningful

Our income from operations related to the Zedge Marketplace decreased

34.0% to $6.3 million in fiscal 2023 from $9.6 million in fiscal 2022, primarily due to 1) lower advertising revenue resulting from MAU

decline in well-developed countries and lower eCPMs, 2) lower subscription revenue as discussed earlier, and 3) higher operating expenses

attributable to higher compensation costs (including stock-based compensation), PUA expenses, and professional fees.

Our loss from operations related to GuruShots was $13.2 million

for the fiscal year ended July 31, 2023, including goodwill impairment charge of $8.7 million and changes in fair value of contingent

consideration of $1.9 million.

Excluding these two items loss from operations related to GuruShots would have been $6.4 million for fiscal

GuruShots continued to underperform due primarily to lower revenue from existing users and adding fewer new users to the platform

which resulted in lower MAP and lower ARPMAP when compared to prior periods.

Our income from operations related to GuruShots

was $2.3 million for the period from April 13, 2022 to July 31, 2022, including changes in fair value of contingent consideration

of $4.0 million.

Excluding this item loss from operations related to GuruShots would have been $1.7 million for that period in fiscal

GuruShots’ operating results are consolidated with our operating

results beginning on April 13, 2022.

Therefore, our consolidated results of operations for the fiscal year ended July 31, 2023 may

not be comparable to the corresponding periods in fiscal 2022.

Please refer to the unaudited pro forma consolidated financial information

contained in Note 6, Business Combination and Assets Acquisition , to the Consolidated Financial Statements in Part II, Item 8 of

this Annual Report on Form 10-K.

LIQUIDITY AND CAPITAL RESOURCES

At July 31, 2023, we had cash and cash equivalents

3 unchanged sentences

months following issuance of this annual report on Form 10-K.

During fiscal 2021, we raised $15 million through sales of Class B common

stock in At the Market offerings.

On October 28, 2022, we entered into an Amended

Loan Agreement with Western Alliance Bank.

Pursuant to the Amended Loan Agreement, Western Alliance Bank agreed to provide the Company

with a new term loan facility in the maximum principal amount of $7,000,000 for a four-year term and a $4,000,000 revolving credit facility

for a two-year term.

The Company discontinued the existing $2,000,000

revolving credit facility under the existing Loan and Security Agreement, dated as of September 26, 2016 (See Note 16).

At each of July

31, 2021, July 31, 2022 and the time of the discontinuance, there was no outstanding balance on the revolving credit facility.

Pursuant to the Amended Loan Agreement, $2,000,000

was advanced in a single-cash advance on the closing date (October 28, 2022), with the remaining $5,000,000 available for drawdown during

twenty-four (24) months after closing.

Each drawdown must be in an amount of not less than $1,000,000.

following tables present selected financial information for the twelve months ended July 31, 2022 and 2021:

Fiscal year ended July 31,

The following tables present selected financial information for the

fiscal years ended July 31, 2023 and 2022:

Fiscal Year Ended

(in thousands)

3 unchanged sentences

Financing activities

Effect of exchange rate changes on cash and cash

(Decrease) increase in cash and

cash equivalents

cash flow from operations varies significantly from quarter to quarter and from year to year, depending on our operating results and

the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable.

Cash provided

by operating activities increased $1.4 million to $11.5 million in fiscal 2022 from $10.1 million in fiscal 2021, primarily attributable

to the higher revenues generated from our service offerings, primarily advertising and paid subscription revenue.

in Trade Accounts Receivable

trade accounts receivables were $2.4 million and $2.5 million at July 31, 2022 and 2021 respectively.

Our cash collections in fiscal

2022 and fiscal 2021 were $26.0 million and $18.4 million, respectively.

April 12, 2022, we acquired 100% of the outstanding equity securities of GuruShots.

The purchase price consists of $18 million in cash

paid at closing and contingent payments (the “Earnout”) of up to a maximum of $16.8 million, payable either in cash or Class

B common stock of the Company or a combination thereof (in the Company’s discretion) payable over two years from closing subject

to GuruShots achieving certain financial targets set forth in the Share Purchase Agreement (“SPA”).

In connection therewith,

we agreed to make certain minimum investments in user acquisition for GuruShots in the period covered by the Earnout, subject to GuruShots

maintaining agreed upon levels of return on ad spend (ROAS).

In addition, we committed to a retention pool of $4 million in cash and 626,242 shares of the Company Class B common stock with a fair value of $4 million or $6.39 per share for GuruShots’ founders

and other employees that will be payable or vest, as applicable, over three years from closing based on the beneficiaries thereof remaining

employed by the Company or a subsidiary.

August 1, 2021, we acquired substantially all of the assets of Emojipedia Pty Ltd, a proprietary company organized under the laws of

The final purchase price of the assets has been determined to be $6.7 million of which $4.8 million was paid on August 2,

2021 with the remaining $1.9 million to be paid out on the six-month and twelve-month anniversary of the Closing.

We paid approximately

half of the $1.9 million on February 1, 2022 with the remaining amount due on August 1, 2022.

That $4.8 million was funded into an escrow

account on July 30, 2021 and classified as other assets on our balance sheet as of July 31, 2021.

combination and assets acquisition are more fully described in Note 6 to the Consolidated Financial Statements in Item 8 of this annual

report on Form 10-K for further details.

used in investing activities in the fiscal years ended July 31, 2022 and 2021 also consisted 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.

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.

& 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.

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

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.

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.

On November 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 18 to the

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

received proceeds of $8,631 from the exercise of stock options in fiscal 2022 in connection with which we issued 5,166 shares of our

Class B common stock.

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.

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.

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.

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 and sold to AppLovin in January 2022), 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, 2022, two customers represented 28% and 15% of the Company’s revenue.

In the fiscal year ended July

31, 2021, three customers represented 30%, 22% and 12% of the Company’s revenue.

At July 31, 2022, three customers represented

41%, 17% and 16% of the Company’s accounts receivable balance and at July 31, 2021, two customers represented 37% and 28% of the

Company’s accounts receivable balance.

All of these significant customers are advertising exchanges operated by leading companies,

and the receivables represent many smaller amounts due from advertisers.

OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

In connection with the acquisition of GuruShots, the Company has (i) committed to a retention pool of $4 million

in cash to be paid to the founders and employees of GuruShots that will be payable over three years from closing of the acquisition based

on the beneficiaries thereof remaining employed by the Company or a subsidiary;

and (ii) agreed to make certain minimum investments in

user acquisition for GuruShots in the period covered by the earnout to be contingently paid to the prior owners of GuruShots subject to

GuruShots maintaining agreed upon levels of return on ad spend (ROAS).

SHEET ARRANGEMENTS

July 31, 2022, 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 on June 1, 2016, 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 the 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.

Effect of exchange rate changes on cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Operating Activities

Our cash flow from operating activities 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 decreased $8.3

million to $3.2 million in fiscal 2023 from $11.5 million in fiscal 2022, primarily attributable to the operating losses from GuruShots

in fiscal 2023, see Note 15, Segment and Geographic Information , to the consolidated financial statements in Part II, Item 8 of

this Annual Report on Form 10-K.

Changes in Trade Accounts Receivable

Gross trade accounts receivables were $2.9 million

and $2.4 million at July 31, 2023 and 2022 respectively.

Our cash collections in fiscal 2023 and fiscal 2022 were $24.8 million and $26.0

million, respectively.

Investing Activities

On April 12, 2022, we acquired 100% of the outstanding

equity securities of GuruShots.

The purchase price consists of $18 million in cash paid at closing and contingent payments (the “Earnout”)

of up to a maximum of $16.8 million, payable either in cash or Class B common stock of the Company or a combination thereof (in the Company’s

discretion) payable over two years from closing subject to GuruShots achieving certain financial targets set forth in the Share Purchase

Agreement (“SPA”).

In connection therewith, we agreed to make certain minimum investments in user acquisition for GuruShots

in the period covered by the Earnout, subject to GuruShots maintaining agreed upon levels of return on ad spend (ROAS) and other conditions.

In addition, we committed to a retention pool of $4 million in cash and 626,242 shares of the Company Class B common stock with a fair

value of $4 million or $6.39 per share for GuruShots’ founders and other employees that will be payable or vest, as applicable,

over three years from closing based on the beneficiaries thereof remaining employed by the Company or a subsidiary.

On August 1, 2021, we acquired substantially all of the assets of Emojipedia

Pty Ltd, a proprietary company organized under the laws of Australia.

The final purchase price of the assets was determined to be $6.7

million of which $4.8 million was paid on August 2, 2021 with the remaining $1.9 million to be paid out on the six-month and twelve-month

anniversary of the Closing.

We paid approximately half of the $1.9 million on February 1, 2022 and the remaining amount was paid on August

Business combination and assets acquisition are

more fully described in Note 6, Business Combination and Asset Acquisition , to the Consolidated Financial Statements in

Item 8 of this annual report on Form 10-K.

Cash used in investing activities in the fiscal

years ended July 31, 2023 and 2022 also consisted 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

On October 28, 2022, we entered into an Amended

Loan Agreement with Western Alliance Bank.

Pursuant to the Amended Loan Agreement, Western Alliance Bank agreed to provide the Company

with a new term loan facility in the maximum principal amount of $7,000,000 for a four-year term and a $4,000,000 revolving credit facility

for a two-year term.

At our request, the maximum principal amount of the term loan was reduced to $2 million as of May 11, 2023.

to the Amended Loan Agreement, $2,000,000 was advanced in a single-cash advance on the closing date on October 28, 2022.

As of July 31,

2023, there were no availability under the term loan facility.

We discontinued the existing $2,000,000 revolving

credit facility under the existing Loan and Security Agreement, dated as of September 26, 2016.

At both July 31, 2022 and the time of

the discontinuance on October 28, 2022, there was no outstanding balance on the revolving credit facility.

In connection with the share repurchase program as in Item 5.

for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities , we bought back 752,687

shares for approximately $1.6 million in fiscal 2023, including commission and banking fees of approximately $15,000.

In fiscal 2023, we received proceeds of $1,785

from the exercise of stock options for which the Company issued 1,500 shares of its Class B common stock.

In fiscal 2022, the Company

received proceeds of $8,631 from the exercise of stock options for which the Company issued 5,166 shares of its Class B common stock.

In fiscal 2023 and 2022, we purchased 6,310 shares

and 16,115 shares respectively of Class B Stock from certain employees for $17,000 and $232,000 respectively, to satisfy tax withholding

obligations in connection with the vesting of restricted stock and DSUs.

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.

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 X, formerly known as Twitter, and sold to AppLovin in January 2022), Google and Meta, and we terminate

our services with smaller customers immediately upon balances becoming past due.

Since these smaller customers rely on us to derive their

own revenue, they generally pay their outstanding balances on a timely basis.

In the fiscal year ended July 31, 2023, two customers represented 26%

and 16% of our revenue.

In the fiscal year ended July 31, 2022, two customers represented 28% and 15% of our revenue.

At July 31, 2023,

two customers represented 36% and 18% of our accounts receivable balance and at July 31, 2022, three customers represented 41%, 17% and

16% of our accounts receivable balance.

All of these significant customers are advertising exchanges operated by leading companies, and

the receivables represent many smaller amounts due from advertisers.

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

In connection with the acquisition of GuruShots,

the Company has (i) committed to a retention pool of $4 million in cash to be paid to the founders and employees of GuruShots that will

be payable over three years from April 1, 2022 based on the beneficiaries thereof remaining employed by the Company or a subsidiary;

(ii) agreed to make certain minimum investments in user acquisition for GuruShots in the period covered by the earnout to be contingently

paid to the prior owners of GuruShots subject to the acquired users generating minimum levels of ROAS.

The Company was prepared to make

the minimum investment, however, GuruShots was unable to achieve those minimum ROAS target conditions.

GuruShots’ financial performance

during the period from the April 2022 acquisition through July 31, 2023, was materially impacted by a combination of industry specific,

macroeconomic, and geopolitical challenges that contributed to negatively impacting ROAS.

The conditions for payment of the Earnout for

the first year following the acquisition were not met and no Earnout payment was made or accrued.

OFF-BALANCE SHEET ARRANGEMENTS

At July 31, 2023, 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 on June 1, 2016,

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

Pursuant to the 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.

Smaller reporting companies are not required to

provide the information required by this item.

Financial Statements and Supplementary

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.

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 7. Management’s Discussion and Analysis