What changed in this filing

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Item 9A. Controls and Procedures

2023-10-30 compared with 2022-11-14 · 1539 added, 1374 removed, 365 unchanged (89% of the section changed)

Controls and Procedures.

of Disclosure Controls and Procedures

Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined

in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Annual

Report on Form 10-K.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure

controls and procedures were effective as of July 31, 2022.

of Management on Internal Control over Financial Reporting

the management of Zedge, Inc.

and subsidiaries (the “Company”), are responsible for establishing and maintaining adequate

internal control over financial reporting of the Company.

Company’s internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities

Exchange Act of 1934 as a process designed by, or under the supervision of, the Company’s principal executive and principal financial

officers and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding

the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance

with generally accepted accounting principles in the United States and includes those policies and procedures that:

to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of

reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally

accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations

of management and directors of the Company;

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s

assets that could have a material effect on the financial statements.

has assessed the effectiveness of the Company’s internal control over financial reporting as of July 31, 2022.

In making this assessment,

the Company’s management used the criteria established in Internal Control — Integrated Framework (2013) issued by

the Committee of Sponsoring Organizations of the Treadway Commission.

the supervision and with the participation of our management, including our principal executive officer and principal financial officer,

we conducted an evaluation of our internal control over financial reporting, as prescribed above, as of July 31, 2022.

Based on our evaluation,

our principal executive officer and principal financial officer concluded that the Company’s internal control over financial reporting

was effective as of July 31, 2022.

in Internal Control over Financial Reporting

were no changes in our internal control over financial reporting during the fourth quarter of fiscal 2022 that have materially affected,

or are reasonably likely to materially affect, our internal control over financial reporting.

Reported Material Weakness

previously identified a material weakness in internal control over financial reporting related to accounting for taxes, which is disclosed

“Controls and Procedures” of our Form 10-K for the fiscal year ended July 31, 2021.

Specifically, we determined

that our management review controls related to valuation allowance against deferred tax assets were ineffective.

order to remediate the material weakness, we designed and implemented the following internal controls:

have historically engaged tax consultants to prepare and review the Company’s income

tax provision.

The tax consultants appointed a second tax partner as an independent reviewer

to perform a final review of the tax provision work prepared by its engagement team.

chief financial officer performed a final review of the tax provision, which is performed

at a more granular level than in the past, and performed at a sufficient level of precision.

This review involves a detailed review of the tax provision schedules prepared by the tax

This includes, among other procedures, assessing the completeness

and accuracy of amounts included in the tax provision schedules, reconciling amounts in the

tax provision schedules to the Company’s records, reviewing the mathematical accuracy

of the schedules, understanding key fluctuations in the tax accounts, and reviewing that

amounts recorded in the financial statements for income taxes reconciles to the tax provision

believe our material weakness related to accounting for taxes has been remediated and that our internal control processes over financial

reporting were effective as of July 31, 2022.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial

Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the

Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Annual Report on Form 10-K.

Based on this evaluation,

our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of

July 31, 2023.

Report of Management on Internal Control over Financial Reporting

We, the management of Zedge, Inc.

and subsidiaries

(the “Company”), are responsible for establishing and maintaining adequate internal control over financial reporting of the

The Company’s internal control over financial

reporting is defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or

under the supervision of, the Company’s principal executive and principal financial officers and effected by the Company’s

board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and

the preparation of the Company’s financial statements for external purposes in accordance with generally accepted accounting principles

in the United States and includes those policies and procedures that:

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the Company;

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company;

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Management has assessed the effectiveness of the

Company’s internal control over financial reporting as of July 31, 2023.

In making this assessment, the Company’s management

used the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations

of the Treadway Commission.

Under the supervision and with the participation

of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our internal

control over financial reporting, as prescribed above, as of July 31, 2023.

Based on our evaluation, our principal executive officer and

principal financial officer concluded that the Company’s internal control over financial reporting was effective as of July 31,

Changes in Internal Control over Financial Reporting

There were no changes in our internal control

over financial reporting during the fourth quarter of fiscal 2023 that have materially affected, or are reasonably likely to materially

affect, our internal control over financial reporting.

Other Information.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Directors and Executive Officers of the Registrant, and Corporate Governance

following is a list of our directors and executive officers along with the specific information required by Rule 14a-3 of the Securities

Exchange Act of 1934:

Reich – Chief Executive Officer and President

Tsai – Chief Financial Officer and Treasurer

Jonas – Executive Chairman

Jonas, Chairman of the Board

Jonas, Vice Chairman of the Board

remaining information required by this Item will be contained in our Proxy Statement for our Annual Stockholders Meeting, which will

be filed with the Securities and Exchange Commission within 120 days after July 31, 2022, and which is incorporated by reference herein.

have included as exhibits to this Annual Report on Form 10-K certificates of our Chief Executive Officer and Chief Financial Officer

certifying the quality of our public disclosure.

make available free of charge through the investor relations page of our web site ( investor.zedge.net ) our Annual Reports on Form

10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports, and all beneficial ownership reports

on Forms 3, 4 and 5 filed by directors, officers and beneficial owners of more than 10% of our equity, as soon as reasonably practicable

after such reports are electronically filed with the Securities and Exchange Commission.

We have adopted codes of business conduct and

ethics for all of our employees, including our principal executive officer, principal financial officer and principal accounting officer.

Copies of the codes of business conduct and ethics are available on our web site.

web site and the information contained therein or incorporated therein are not intended to be incorporated into this Annual Report on

Form 10-K or our other filings with the Securities and Exchange Commission.

Disclosure Regarding Foreign Jurisdictions that Prevent

Not applicable.

Directors and Executive Officers of the Registrant, and

Corporate Governance

The following is a list of our directors and executive

officers along with the specific information required by Rule 14a-3 of the Securities Exchange Act of 1934:

Executive Officers

Jonathan Reich – Chief Executive Officer and President

Yi Tsai – Chief Financial Officer and Treasurer

Michael Jonas – Executive Chairman

Michael Jonas, Chairman of the Board

Howard Jonas, Vice Chairman of the Board

Mark Ghermezian

Elliot Gibber

Gregory Suess

The remaining information required by this Item

will be contained in our Proxy Statement for our Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission

within 120 days after July 31, 2023, and which is incorporated by reference herein.

Corporate Governance

We have included as exhibits to this Annual Report

on Form 10-K certificates of our Chief Executive Officer and Chief Financial Officer certifying the quality of our public disclosure.

We make available free of charge through the investor

relations page of our web site ( investor.zedge.net ) our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports

on Form 8-K and all amendments to those reports, and all beneficial ownership reports on Forms 3, 4 and 5 filed by directors, officers

and beneficial owners of more than 10% of our equity, as soon as reasonably practicable after such reports are electronically filed with

the Securities and Exchange Commission.

We have adopted codes of business conduct and ethics for all of our employees, including our principal

executive officer, principal financial officer and principal accounting officer.

Copies of the codes of business conduct and ethics are

available on our web site.

Our web site and the information contained therein

or incorporated therein are not intended to be incorporated into this Annual Report on Form 10-K or our other filings with the Securities

and Exchange Commission.

Executive Compensation

information required by this Item will be contained in our Proxy Statement for our Annual Stockholders Meeting, which will be filed with

the Securities and Exchange Commission within 120 days after July 31, 2022, and which is incorporated by reference herein.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

information required by this Item will be contained in our Proxy Statement for our Annual Stockholders Meeting, which will be filed with

the Securities and Exchange Commission within 120 days after July 31, 2022, and which is incorporated by reference herein.

Certain Relationships and Related Transactions, and Director Independence

information required by this Item will be contained in our Proxy Statement for our Annual Stockholders Meeting, which will be filed with

the Securities and Exchange Commission within 120 days after July 31, 2022, and which is incorporated by reference herein.

The information required by this Item will be

contained in our Proxy Statement for our Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission

within 120 days after July 31, 2023, and which is incorporated by reference herein.

Security Ownership of Certain Beneficial

Owners and Management and Related Stockholder Matters

The information required by this Item will be

contained in our Proxy Statement for our Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission

within 120 days after July 31, 2023, and which is incorporated by reference herein.

Certain Relationships and Related

Transactions, and Director Independence

The information required by this Item will be

contained in our Proxy Statement for our Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission

within 120 days after July 31, 2023, and which is incorporated by reference herein.

Principal Accounting Fees and Services

information required by this Item will be contained in our Proxy Statement for our Annual Stockholders Meeting, which will be filed with

the Securities and Exchange Commission within 120 days after July 31, 2022, and which is incorporated by reference herein.

The information required by this Item will be

contained in our Proxy Statement for our Annual Stockholders Meeting, which will be filed with the Securities and Exchange Commission

within 120 days after July 31, 2023, and which is incorporated by reference herein.

Exhibits, Financial Statement Schedules.

following documents are filed as part of this Report:

of Independent Registered Public Accounting Firm on Consolidated Financial Statements

Financial Statements covered by Report of Independent Registered Public Accounting Firm

Statement Schedule.

schedules have been omitted since they are either included in the Notes to Consolidated Financial Statements or not required or not applicable.

The following documents are filed as part of this Report:

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements

Consolidated Financial Statements covered

by Report of Independent Registered Public Accounting Firm

Financial Statement Schedule.

All schedules have been omitted since

they are either included in the Notes to Consolidated Financial Statements or not required or not applicable.

Exhibit Numbers 10.1, 10.6, 10.7, 10.8 and 10.9 are management contracts or compensatory plans or arrangements.

exhibits listed in paragraph (b) of this item are filed, furnished, or incorporated by reference as part of this Form 10-K.

of the agreements filed as exhibits to this Form 10-K contain representations and warranties by the parties to the agreements that

have been made solely for the benefit of the parties to the agreement.

The exhibits listed in paragraph (b) of

this item are filed, furnished, or incorporated by reference as part of this Form 10-K.

Certain of the agreements filed

as exhibits to this Form 10-K contain representations and warranties by the parties to the agreements that have been made solely for the

benefit of the parties to the agreement.

These representations and warranties:

have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which

disclosures are not necessarily reflected in the agreements;

apply standards of materiality that differ from those of a reasonable investor;

made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances.

these representations and warranties may not describe the actual state of affairs as of the date that these representations and warranties

were made or at any other time.

may have been qualified by disclosures that were made to the other parties in connection with the negotiation of the agreements, which disclosures are not necessarily reflected in the agreements;

may apply standards of materiality that differ from those of a reasonable investor;

were made only as of specified dates contained in the agreements and are subject to subsequent developments and changed circumstances.

Accordingly, these representations

and warranties may not describe the actual state of affairs as of the date that these representations and warranties were made or at any

Investors should not rely on them as statements of fact.

Exhibit Number

Description of

Third Amended and Restated Certificate of Incorporation of Zedge, Inc.

19 unchanged sentences

Subsidiaries of the Registrant

Consent of UHY, LLP, Independent Registered Public Accounting Firm

Consent of Friedman, LLP, Independent Registered Public Accounting Firm

Consent of Mayer Hoffman McCann CPAs, The New York Practice of Mayer Hoffman McCann P.C., Independent Registered Public Accounting Firm

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

2 unchanged sentences

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Instance Document.

Taxonomy Extension Schema Document.

Taxonomy Extension Calculation Linkbase Document.

Taxonomy Extension Definition Linkbase Document.

Taxonomy Extension Label Linkbase Document.

Taxonomy Extension Presentation Linkbase Document.

(1) Incorporated

by reference to Form 10-12G/A, filed June 1, 2016.

(2) Incorporated

by reference to Form 10-K, filed October 28, 2019

(3) Incorporated

by reference to Form 10-K/A, filed December 9, 2020.

(4) Incorporated

by reference to the Schedule 14A, filed November 21, 2019.

(5) Incorporated

by reference to Form 10-12G/A, filed April 25, 2016.

(6) Incorporated

by reference to Form 10-12G/A, filed May 20, 2016.

(7) Incorporated

by reference to Form 8-K, filed December 9, 2020.

(8) Incorporated

by reference to Form 8-K, filed November 1, 2022.

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* filed herewith.

Incorporated by reference to Form 10-12G/A, filed June 1, 2016.

Incorporated by reference to Form 10-K, filed October 28, 2019

Incorporated by reference to Form 10-K/A, filed December 9, 2020.

Incorporated by reference to the Schedule 14A, filed November 21, 2019.

Incorporated by reference to Form 10-12G/A, filed April 25, 2016.

Incorporated by reference to Form 10-12G/A, filed May 20, 2016.

Incorporated by reference to Form 8-K, filed December 9, 2020.

Incorporated by reference to Form 8-K, filed November 1, 2022.

Form 10-K Summary.

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report

on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

Pursuant to the requirements of Section 13

or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf

by the undersigned, thereunto duly authorized.

/s/ Jonathan Reich

Jonathan Reich

Chief Executive Officer

November 14, 2022

to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed by the following persons

on behalf of the Registrant and in the capacities and on the dates indicated.

October 30, 2023

Pursuant to the requirements of the Securities Exchange Act of 1934,

this Annual Report on Form 10-K has been signed by the following persons on behalf of the Registrant and in the capacities and on the

dates indicated.

/s/ Jonathan Reich

Chief Executive Officer

October 30, 2023

Jonathan Reich

Executive Officer

November 14, 2022

Executive Officer)

Financial Officer

November 14, 2022

Financial Officer and

Principal Accounting

(Principal Executive Officer)

Chief Financial Officer

October 30, 2023

(Principal Financial Officer and

Principal Accounting Officer)

/s/ Michael Jonas

October 30, 2023

Michael Jonas

November 14, 2022

/s/ Howard S.

October 30, 2023

/s/ Mark Ghermezian

October 30, 2023

Mark Ghermezian

November 14, 2022

/s/ Elliot Gibber

October 30, 2023

Elliot Gibber

November 14, 2022

/s/ Paul Packer

October 30, 2023

/s/ Gregory Suess

October 30, 2023

Gregory Suess

November 14, 2022

to Consolidated Financial Statements

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm- UHY LLP (PCAOB ID 1195) F-2

Report of Independent Registered Public Accounting Firm- Friedman LLP (PCAOB ID 711 ) F-4

Report of Independent Registered Public Accounting Firm- Mayer Hoffman McCann CPAs, The New York Practice of Mayer Hoffman McCann P.C (PCAOB ID 199 ).

Consolidated Balance Sheets as of July 31, 2023 and 2022 F-5

Consolidated Statements of Income and Comprehensive Income for the Years Ended July 31, 2022 and 2021 F-6

Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income for the Years Ended July 31, 2023 and 2022 F-6

Consolidated Statements of Stockholders’ Equity for the Years Ended July 31, 2023 and 2022 F-7

1 unchanged sentence

Notes to Consolidated Financial Statements F-9

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Board of Directors and

Stockholders of Zedge, Inc.

on the Financial Statements

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheet of Zedge, Inc.

(the “Company”) as of July 31, 2022, the related consolidated statement of income and comprehensive

income, stockholders’ equity, and cash flow for the year ended July 31, 2022, and the related notes (collectively referred to as

the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial

position of the Company as of July 31, 2022, and the results of its operations and its cash flow the year ended July 31, 2022, in conformity

with accounting principles generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit,

we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

(the Company) as of July 31, 2023, and the related consolidated statements of loss and comprehensive loss,

stockholders’ equity, and cash flows for the fiscal year ended July 31, 2023, and the related notes (collectively referred to as

the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects,

the financial position of the Company as of July 31, 2023, and the results of its operations and its cash flows for the fiscal year ended

July 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial

statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)

(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we

engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding

of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

Accordingly, we express no such opinion.

audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or

fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audit included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides

a reasonable basis for our opinion.

Audit Matters

critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated

or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

Critical Audit Matters

The critical audit matters communicated below

are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated

to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter

in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit

matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

value measurement of contingent consideration and intangible assets acquired related to business acquisitions

of the Matter

described in Note 6 to the financial statements, On April 12, 2022, the Company acquired 100% of the outstanding equity securities of

GuruShots, Ltd.

(“GuruShots”), an Israeli company that operates a platform used for its competitive photography game available

across iOS, Android and the web, which included $6 million in contingent consideration, and resulted in approximately $15 million of

intangible assets being recorded.

The Company accounts for business combinations using the acquisition method, which requires recognition

of assets acquired and liabilities assumed at their respective fair values at the date of acquisition.

The contingent consideration was

estimated using a Monte Carlo simulation and the intangible assets acquired were estimated using an income approach.

The fair values

of intangible assets acquired are typically estimated using an income approach, which is based on the present value of future discounted

cash flows or cost based methods based on estimated costs to construct an asset.

Management applied significant judgment in estimating

the fair value of the contingent consideration and intangible assets acquired, which involved the use of significant estimates and assumptions

with respect to the rate of future revenue growth, profitability of the acquired business and the discount rate, among other factors.

principal considerations for our determination that performing procedures relating to the fair value measurement of the contingent consideration

and intangible assets acquired related to the acquisition is a critical audit matter are (i) the significant judgment by management,

including the use of specialists, when estimating the fair values of intangible assets acquired;

(ii) a high degree of auditor judgment

and subjectivity in performing procedures relating to the fair value measurement of intangible assets acquired;

(iii) the significant

audit effort in evaluating the reasonableness of the significant assumptions relating to the rate of future revenue growth and profitability

of the acquired business and the discount rate;

and (iv) the audit effort involved the use of professionals with specialized skill and

We Addressed the Matter in Our Audit

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial

These procedures included identifying and evaluating the design of controls relating to the acquisition accounting, including

controls over management’s valuation of the intangible assets acquired and contingent consideration, and controls over the development

of the valuation models, as well as the significant assumptions related to the rate of future revenue growth and profitability of

the acquired business and the discount rate, and the costs to create an asset.

These procedures also included, among others, (i) reading

the purchase agreement;

and (ii) testing management’s process for estimating the fair values of the intangible assets acquired

and contingent consideration.

Testing management’s process included evaluating the appropriateness of the valuation method, testing

the completeness and accuracy of data provided by management, and evaluating the reasonableness of significant assumptions related to

the rate of future revenue growth, profitability of the acquired business and the discount rate, and the estimated costs to construct

Evaluating the reasonableness of the rate of future revenue growth and the profitability of the acquired business involved

considering the historical performance of the acquired businesses and market comparable information, as well as economic and industry

The reasonableness of the discount rate was evaluated by considering the cost of capital of comparable businesses and other

industry factors.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of

the discounted cash flow models and the reasonableness of the discount rate.

/s/ Friedman LLP

have served as the Company’s auditor since 2022.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and

of Zedge, Inc.

on the Financial Statements

have audited the accompanying consolidated balance sheet of Zedge, Inc.

(the “Company”) as of July 31, 2021, the related

consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for the year then ended,

and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated

financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2021, and the results

of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United

States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing

an opinion on the effectiveness of the entity’s internal control over financial reporting.

Definite-Lived Intangible Assets Impairment

Assessment – GuruShots Asset Group

As described in Notes 1 and 7 to the consolidated

financial statements, the Company’s consolidated net definite-lived intangible assets balance consisted of primarily of $5.8 million

of Emojipedia.org assets and $12.9 million of the GuruShots asset group as of July 31, 2023.

The GuruShots asset group consisted of acquired

developed technology, customer relationships, and trade names.

Management tests the definite-lived intangible assets if events or circumstances

indicate that the asset group may not be recoverable.

Definite-lived intangible assets are tested for recoverability by comparing the

net carrying value of the asset group to the undiscounted cash flows expected to be generated from the use of the asset group.

net carrying value of the definite-lived intangible assets is not recoverable, an impairment loss is recognized if the carrying amount

of the asset group exceeds its fair value.

Given the triggering events identified with the GuruShots asset group, management compared

the net carrying value of the GuruShots asset group to the projected undiscounted cash flows of the asset group.

Using this method, management’s

cash flow projections included significant judgments and assumptions relating to sales, cost of platform fees, selling, general and administrative

expenses (“SG&A expenses”), long-term growth rates, and other market factors.

The principal considerations for our determination

that performing procedures relating to the definite-lived intangible assets impairment assessment is a critical audit matter are (i) the

significant judgment by management when developing the fair value measurements of the definite-lived intangible assets;

and (ii) a high

degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions

related to sales, cost of platform fees, SG&A expenses, long-term growth rates, and other market factors.

Addressing the matter involved performing procedures

and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures

included testing the effectiveness of controls relating to management’s definite-lived intangible assets impairment assessment,

including controls over the valuation of the Company’s definite-lived intangible assets.

These procedures also included, among others

(i) testing management’s process for developing the fair value estimates;

(ii) evaluating the appropriateness of the projected undiscounted

cash flows approach;

(iii) testing the completeness and accuracy of underlying data used in the fair value estimates;

and (iv) evaluating

the significant assumptions used by management related to sales, cost of platform fees, SG&A expenses, long-term growth rates, and

other market factors.

Evaluating management’s assumptions related to sales, cost of platform fees, SG&A expenses, long-term

growth rates, and other market factors involved evaluating whether the assumptions used by management were reasonable considering (i)

the current and past performance of the individual definite-lived intangible assets;

(ii) the consistency of the data and assumptions

utilized with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas

of the audit.

We have served as the Company’s auditor since 2023.

New York, New York

October 30, 2023

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Board of Directors and Stockholders of

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheet of Zedge, Inc.

(the “Company”) as of July 31, 2022, the related consolidated statements of income and comprehensive

income, stockholders’ equity, and cash flows for the twelve-month period ended July 31, 2022, and the related notes (collectively

referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects,

the financial position of the Company as of July 31, 2022, and the results of its operations and its cash flows for the twelve-month period

ended July 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are

required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal

control over financial reporting.

Accordingly, we express no such opinion.

audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due

to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Mayer Hoffman McCann CPAs

New York Practice of Mayer Hoffman McCann P.C.)

served as the Company’s auditor from 2018 to 2021.

York, New York

/s/ Friedman LLP

We served as the Company’s auditor from January 2022 through

February 2023.

November 14, 2022

CONSOLIDATED BALANCE SHEETS

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Trade accounts receivable

Prepaid expenses

Prepaid expenses and other receivables

Total current assets

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Total current liabilities

Term loan, net of deferred financing costs

Contingent consideration-long term portion

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Accumulated other comprehensive loss

Retained Earnings (Accumulated deficit)

(Accumulated deficit) retained earnings

Treasury stock, 833 shares at July 31, 2023 and 74 shares at July 31, 2022, at cost

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Total liabilities and stockholders’ equity

accompanying notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

The accompanying notes are an integral part of these consolidated financial

CONSOLIDATED STATEMENTS OF (LOSS) INCOME AND COMPREHENSIVE (LOSS) INCOME

(in thousands, except per share data)

Year ended July 31,

Revenues, net

Costs and expenses:

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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

Income before income taxes

Provision for (benefit from) income taxes

Other comprehensive (loss) income:

Net income (loss) resulting from foreign exchange transactions

(Loss) income before income taxes

(Benefit from) provision for income taxes

Net (loss) income

Other comprehensive loss:

Foreign currency translation adjustment

Total other comprehensive (loss) income

Total comprehensive income

Income per share attributable to Zedge, Inc.

Total other comprehensive loss

Total comprehensive (loss) income

(Loss) income per share attributable to Zedge, Inc.

common stockholders:

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

accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands)

Class A Common Stock

Class B Common Stock

Comprehensive

Retained Earnings (Accumulated

Treasury Stock

Stockholders’

Balance – July 31, 2021

Net proceeds from sales of Class B Common Stock

Exercise of stock options

Stock-based compensation

Stock issued for matching contributions to the 401(k) Plan

Purchase of treasury stock

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Exercise of stock options

Restricted stock issuance in connection with GuruShots acquisition

Stock-based compensation

Stock issued for matching contributions to the 401(k) Plan

Purchase of treasury stock

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Balance – July 31, 2023

accompanying notes are an integral part of these consolidated financial statements.

The accompanying notes are an integral part of these consolidated financial

CONSOLIDATED STATEMENTS OF CASH FLOWS

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Operating activities

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Amortization of intangible assets

Amortization of capitalized software and technology development costs

Amortization of deferred financing costs

Change in fair value of contingent consideration

Loss on goodwill impairment

Stock-based compensation

Deferred income taxes

PPP Loan forgiveness

Change in assets and liabilities:

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Payments for asset acquisitions

Capitalized software and technology development costs and purchase of equipment

Investment in private company

Capitalized software and technology development costs

Purchase of property and equipment

Net cash used in investing activities

Financing activities

Proceeds from sales of Class B Common Stock

Payment of issuance costs

Repayment of insurance premium loan payable

Proceeds from term loan payable

Payment of deferred financing costs

Proceeds from exercise of stock options

Purchase of treasury stock in connection with restricted stock vesting

Net cash (used in) provided by financing activities

Purchase of treasury stock in connection with share buyback program and stock awards vesting

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

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Right-of-use assets acquired under operating leases

Acquisition of Emojipedia through release of escrow funds of $ 4,776 , due to seller of $ 1,923 and legal fee of $ 12

Acquisition of Emojipedia through release of escrow funds of $ 4,776 , plus additional amounts due to seller of $ 1,923 and legal fees of $ 12

Accounts receivable from certain Emojipedia websites collected by Seller

Note payable issued for insurance premium financing

accompanying notes are an integral part of these consolidated financial statements.

TO CONSOLIDATED FINANCIAL STATEMENTS

1—Description of Business and Summary of Significant Accounting Policies

(“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, 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.

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 that captures the number of unique users that used our Zedge App during the final 30 days of the relevant

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.

April 2022, we acquired GuruShots Ltd (“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.

Company’s fiscal year ends on July 31 of each calendar year.

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

ending in the calendar year indicated (e.g., fiscal 2022 refers to the fiscal year ended July 31, 2022).

Company was formerly a majority-owned subsidiary of IDT Corporation (“IDT”).

On June 1, 2016, IDT’s interest in the

Company was spun-off by IDT to IDT’s stockholders and the Company became an independent public company through a pro rata distribution

of the Company’s common stock held by IDT to IDT’s stockholders (the “Spin-Off”).

of Consolidation

consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

All significant intercompany

accounts and transactions have been eliminated in consolidation.

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements

and accompanying notes.

Actual results may differ from those estimates, such as useful lives of tangible and intangible assets, fair value of contingent consideration, and allowance

for credit losses.

The Company generates revenue from the following sources:

(1) Advertising;

(2) Paid Subscriptions;

(3) Zedge Premium and Others, and (4) following the GuruShots acquisition, from selling in game resources (“Resources”

or “Virtual Goods”) to enhance user’s in-game rate of progress and game experience.

The substantial majority of the

Company’s revenue is generated from selling its advertising inventory (“Advertising Revenue”) to advertising networks,

advertising exchanges, and direct arrangements with advertisers.

The Company’s monthly and yearly subscriptions allow users to prepay

a fixed fee to remove unsolicited advertisements from its Android Zedge App although the Company is working on adding additional capabilities

to subscriptions including offering subscriptions to iOS Zedge App users.

In Zedge Premium, the Company receives 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.

and other similar taxes are excluded from revenues.

The Company generates the bulk of its revenue from selling its 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.

The accompanying notes are an integral part of these consolidated financial

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Description of Business and Summary of Significant

Accounting Policies

Description of Business

(“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.

Except where the context clearly indicates otherwise, the terms the “Company,”

“Zedge” “we,” “us” or “our” refer to Zedge, Inc.

and its consolidated subsidiaries.

Our fiscal year ends on July 31 of each calendar

Each reference below to a fiscal year refers to the fiscal year ending in the calendar year indicated (e.g., fiscal 2023 refers

to the fiscal year ended July 31, 2023).

The Company was formerly a majority-owned subsidiary

of IDT Corporation (“IDT”).

On June 1, 2016, IDT spun off its interest in the Company to IDT’s stockholders and the

Company became an independent public company through a pro rata distribution of the Company’s common stock held by IDT to IDT’s

stockholders (the “Spin-Off”).

Principles of Consolidation

The consolidated financial statements include

the accounts of the Company and its wholly-owned subsidiaries.

All significant intercompany accounts and transactions have been eliminated

in consolidation.

Reportable Segments

Effective August 1, 2022, we revised the presentation of segment information

to reflect our acquisition of GuruShots (see Note 6, Business Combination and Asset Acquisition, for additional information).

such, we now report operating results through two reportable segments:

Zedge Marketplace and GuruShots, as further discussed in Note 15,

Segment and Geographic Information .

Use of Estimates

The preparation of our consolidated financial

statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets,

liabilities, revenue and expenses, as well as related disclosure of contingent assets and liabilities.

Actual results could differ materially

from our estimates due to risks and uncertainties, including uncertainty in the economic environment due to various global events.

the extent that there are material differences between these estimates and actual results, our financial condition or operating results

will be affected.

We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances,

and we evaluate these estimates on an ongoing basis.

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, the Company 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.

The Company 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.

The Company recognizes 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, the Company’s 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 the Company on a cost-per-impression, cost-per-click, cost-per-action basis.

Subscription Revenue:

Beginning in January 2019, the Company 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 subscriber.

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

(2) Paid Subscription;

(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 its 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 its Android Zedge App in January 2019 and iOS Zedge App users that began in April 2023.

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.

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

Direct 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 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 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 App Store process subscription prepayment on Zedge’s behalf, and retain a fee of up to

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

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30 days after month-end.

Zedge Premium is the Company’s 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, the Company’s 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.

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 the Company receives 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 GuruShots’

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.

GuruShots categorizes its virtual goods as consumable.

game sells only consumable virtual goods.

Consumable virtual goods represent items that can be consumed by a specific player action and

do not provide the player any continuing benefit following consumption.

GuruShots has determined through a review of game play behavior

that players generally do not purchase additional virtual goods until their existing virtual goods balances have been substantially consumed.

This review includes an analysis of game players’ historical play behavior, purchase behavior, and the amounts of virtual goods

The payment terms for subscriptions sold through 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 App Store retains a fee of 30% of the purchase price.

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

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

power-ups, in-game resources) to

GuruShots distributes its game to the end customer 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 that

can be consumed by a specific player action and do not provide the player any continuing benefit following consumption.

GuruShots has

determined through a review of game play behavior that players generally do not purchase additional virtual goods until their existing

virtual goods balances have been substantially consumed.

This review includes an analysis of game players’ historical play behavior,

purchase behavior, and the amounts of virtual goods outstanding.

Revenue is recognized once the virtual goods are sold.

GuruShots monitors its analysis of customer play behavior on a quarterly

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.

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 resource 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

The Company reports revenue on a gross or net basis based on management’s

assessment of whether the Company acts as a principal or agent in the transaction.

To the extent the Company acts as the principal, revenue

is reported on a gross basis.

To the extent the Company acts as the agent, revenue is reported on a net basis.

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

the Company act as a principal or an agent in a transaction is based on an evaluation of whether the Company controls the good or service

prior to transfer to the customer.

Company generally reports its advertising revenue net of amounts due to agencies and brokers because the Company is not the primary obligor

in the relevant arrangements, the Company does not finalize the pricing, and the Company does not establish or maintain a direct relationship

with the advertiser.

Certain advertising arrangements that are directly between the Company and advertisers are recognized on a gross

basis equal to the price paid to the Company by the customer since the Company is the primary obligor and the Company determines the

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.

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.

Company reports subscription revenue gross of the fee retained by Google Play, as the subscriber is the Company’s customer in the

contract and the Company controls 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.

While 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.

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

Concentration

of Credit Risk and Significant Customers

instruments that potentially subject the Company to concentration of credit risk consist principally of cash, cash equivalents and trade

accounts receivable.

The Company holds cash and cash equivalents at several major financial institutions, which may exceed FDIC insured

Historically, the Company has not experienced any losses due to such concentration of credit risk.

The Company’s temporary

cash investments policy is to limit the dollar amount of investments with any one financial institution and monitor the credit ratings

of those institutions.

While the Company may be exposed to credit losses due to the nonperformance of the holders of its deposits, the

Company does not expect the settlement of these transactions to have a material effect on its results of operations, cash flows or financial

Company routinely assesses the financial strength of its customers.

As a result, the Company believes that its accounts receivable credit

risk exposure is limited and has not experienced significant write-downs in its accounts receivable balances.

In 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.

Cost of Revenues

cost of revenues for the Company consists of fees paid to third parties that provide the Company with internet hosting, content serving

and filtering, data analytic tools and marketing automation services.

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 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 App Store 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.

Concentration of Credit Risk and Significant

Financial instruments that potentially subject

the Company to concentration of credit risk consist principally of cash, cash equivalents and trade accounts receivable.

The Company holds

cash and cash equivalents at several major financial institutions, which may exceed FDIC insured limits.

Historically, the Company has

not experienced any losses due to such concentration of credit risk.

The Company’s temporary cash investments policy is to limit

the dollar amount of investments with any one financial institution and monitor the credit ratings of those institutions.

While the Company

may be exposed to credit losses due to the nonperformance of the holders of its deposits, the Company does not expect the settlement of

these transactions to have a material effect on its results of operations, cash flows or financial condition.

We routinely assess the financial strength of

our customers.

As a result, we believe that our accounts receivable credit risk exposure is limited and have not experienced significant

write-downs in our accounts receivable balances.

In the fiscal year ended July 31, 2023, two customers represented 26 % and 16 % of our

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.

Direct Cost of Revenues

Direct cost of revenues for the Company consists

of fees paid to third parties that provide the Company with internet hosting, content serving and filtering, data analytic tools and marketing

automation services.

Such costs are charged to expense as incurred.

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or loss on disposition is included in the results of operations in the year of disposal.

Software and Technology Development Costs

Company accounts for capitalized software and technology development costs in accordance with Financial Accounting Standards Board

(“FASB”) issued Accounting Standards Codification (“ASC”) ASC 350-40.

These costs consist of internal

development costs on various projects that the Company invested in specific to the various platforms on which the Company operates

its service that are capitalized during the application development stage.

Capitalized software and technology development costs are

included in property and equipment, net and are amortized over the estimated useful life of the software, after completion of each

specific project, generally three years.

All ordinary maintenance costs are expensed as incurred.

Company accounts for business combinations 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 Company tests the recoverability of its intangible assets (see Note 7) with finite useful lives whenever

events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

The Company tests 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, the Company will record an impairment loss, if any, based on the difference between the estimated

fair value and the carrying value of the asset.

The Company generally measures fair value by considering sale prices for similar assets

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

Cash flow projections and fair value

estimates require significant estimates and assumptions by management.

Should the estimates and assumptions prove to be incorrect, the

Company may be required to record impairments in future periods and such impairments could be material.

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

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

represents the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets

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.

The Company determined that it is a single

reporting unit for its annual impairment test.

Company performs its annual, or interim, goodwill impairment test by comparing the fair value of its reporting unit with its carrying

The Company would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s

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

Additionally,

the Company considers income tax effects from any tax-deductible goodwill on the carrying amount of its reporting unit when measuring

the goodwill impairment loss, if applicable.

Company’s estimated fair value exceeded its carrying value in Step 1 of the Company’s annual impairment tests as of May 1st

for the fiscal years ended July 31, 2022 and 2021.

The Company concluded that no goodwill impairment existed in the fiscal years ended

July 31, 2022 and 2021.

The Company uses the market approach for its Step 1 analysis.

time to time, when opportunities present themselves, the Company considers strategic investments in privately-held companies.

The Company’s

investment at July 31, 2021, is a simple agreement for future equity (SAFE) in which the Company receives the right to receive equity

at some later date.

Investments in SAFE’s are carried at cost due to insufficient observable market inputs to determine fair value.

The Company adjusts the carrying value of its investments to fair value upon observable transactions for identical or similar investments

of the same issuer or upon impairment (referred to as the measurement alternative).

All gains and losses on investments, realized and

unrealized, are recognized in interest and other income, net in the consolidated statements of income and comprehensive income.

Company periodically evaluates the carrying value of the investments, when events and circumstances indicate that the carrying amount

of the investment may not be recovered.

The Company estimates the fair value of the investment to assess whether impairment losses shall

be recorded using Level 3 inputs.

This investment includes the Company’s holding that is not exchange traded and therefore not

supported with observable market prices;

hence, the Company may determine the fair value by reviewing equity valuation reports, current

financial results, long-term plans of the private company, the amount of cash that the privately-held company has on-hand, the ability

to obtain additional financing and overall market conditions in which the private company operates or based on the price observed from

the most recent completed financing.

and Cash Equivalents

Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

There were no cash equivalents as of July 31, 2022 and 2021.

accompanying financial statements include provisions for federal, state and foreign income taxes.

The Company recognizes deferred tax

assets and liabilities for the future tax consequences attributable to temporary differences between the consolidated financial statements

carrying amounts of existing assets and liabilities and their respective tax bases.

A valuation allowance is provided when it is more

likely than not that some portion or all of a deferred tax asset will not be realized.

The ultimate realization of deferred tax assets

depends on the generation of future taxable income during the period in which related temporary differences become deductible.

considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in its assessment

of a valuation allowance.

Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income

in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities

of a change in tax rates is recognized in income in the period that includes the enactment date of such change.

Company uses a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return.

determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related

appeals or litigation processes, based on the technical merits of the position.

In evaluating whether a tax position has met the more-likely-than-not

recognition threshold, the Company presumes that the position will be examined by the appropriate taxing authority that has full knowledge

of all relevant information.

Tax positions that meet the more-likely-than-not recognition threshold are measured to determine the amount

of tax benefit to recognize in the consolidated financial statements.

The tax position is measured at the largest amount of benefit that

is greater than 50 percent likely of being realized upon ultimate settlement.

Differences between tax positions taken in a tax return

and amounts recognized in the consolidated financial statements will generally result in one or more of the following:

an increase in

a liability for income taxes payable, a reduction of an income tax refund receivable, a reduction in a deferred tax asset, or an increase

in a deferred tax liability.

Company classifies interest and penalties on income taxes as a component of income tax expense included in the provision for (benefit

from) income taxes line item in the accompanying consolidated statements of income and comprehensive income.

Capitalized Software and Technology Development Costs

Software and technology development activities

generally fall into three stages:

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

product or service;

determining the functionality;

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.

2 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;

3 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.

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

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 basis.

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.

Business Combinations and Contingent Consideration

We account for business combination using the

acquisition method of accounting.

We allocate the purchase price, including contingent considerations, to the tangible and intangible

assets acquired, and liabilities assumed based on their estimated fair values at the date of acquisition.

The fair values are primarily

based on third-party valuations using our management assumptions that require significant judgments and estimates.

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.

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 (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, for additional disclosure regarding fair value of financial instruments.

Intangible Assets-Net

We test the recoverability of its intangible assets

(see Note 7, Intangible Assets, Net and Goodwill , for additional information) with finite useful lives whenever events or

changes in circumstances indicate that the carrying value of the asset may not be recoverable.

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.

Cash flow 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,

Net and Goodwill , for additional information.

From time to time, when opportunities present

themselves, the Company considers strategic investments in privately-held companies.

The Company’s investment at July 31, 2023,

is a simple agreement for future equity (SAFE) in which the Company receives the right to receive equity at some later date.

in SAFE’s are carried at cost due to insufficient observable market inputs to determine fair value.

The Company adjusts the carrying

value of its investments to fair value upon observable transactions for identical or similar investments of the same issuer or upon impairment

(referred to as the measurement alternative).

All gains and losses on investments, realized and unrealized, are recognized in interest

and other income, net in the consolidated statements of (loss) income and comprehensive (loss) income.

The Company periodically evaluates the carrying

value of the investments, when events and circumstances indicate that the carrying amount of the investment may not be recovered.

Company estimates the fair value of the investment to assess whether impairment losses shall be recorded using Level 3 inputs.

This investment

includes the Company’s holding that is not exchange traded and therefore not supported with observable market prices;

Company may determine the fair value by reviewing equity valuation reports, current financial results, long-term plans of the private

company, the amount of cash that the privately-held company has on-hand, the ability to obtain additional financing and overall market

conditions in which the private company operates or based on the price observed from the most recent completed financing.

Cash and Cash Equivalents

The Company considers all highly liquid investments

with an original maturity of three months or less when purchased to be cash equivalents.

There were $ 12.2 million and $ 0 in cash equivalents

as of July 31, 2023 and 2022, respectively.

The accompanying consolidated financial statements

include provisions for federal, state and foreign income taxes.

The Company recognizes deferred tax assets and liabilities for the future

tax consequences attributable to temporary differences between the consolidated financial statements carrying amounts of existing assets

and liabilities and their respective tax basis.

A valuation allowance is provided when it is more likely than not that some portion or

all of a deferred tax asset will not be realized.

The ultimate realization of deferred tax assets depends on the generation of future

taxable income during the period in which related temporary differences become deductible.

The Company considers the scheduled reversal

of deferred tax assets and liabilities, projected future taxable income and tax planning strategies in its assessment of a valuation allowance.

Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which

those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in

tax rates is recognized in income in the period that includes the enactment date of such change.

The Company uses a two-step approach for recognizing

and measuring tax benefits taken or expected to be taken in a tax return.

The Company determines whether it is more-likely-than-not that

a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical

merits of the position.

In evaluating whether a tax position has met the more-likely-than-not recognition threshold, the Company presumes

that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information.

Tax positions

that meet the more-likely-than-not recognition threshold are measured to determine the amount of tax benefit to recognize in the consolidated

financial statements.

The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized

upon ultimate settlement.

Differences between tax positions taken in a tax return and amounts recognized in the consolidated financial

statements will generally result in one or more of the following:

an increase in a liability for income taxes payable, a reduction of

an income tax refund receivable, a reduction in a deferred tax asset, or an increase in a deferred tax liability.

The Company classifies interest and penalties

on income taxes as a component of income tax expense included in the provision for (benefit from) income taxes line item in the accompanying

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

Contingencies

Company accrues for loss contingencies when both (a) information available prior to issuance of the consolidated financial statements

indicates that it is probable that a liability had been incurred at the date of the consolidated financial statements and (b) the

amount of loss can reasonably be estimated.

When the Company accrues for loss contingencies and the reasonable estimate of the loss is

within a range, the Company records its best estimate within the range.

When no amount within the range is a better estimate than any

other amount, the Company accrues the minimum amount in the range.

The Company discloses an estimated possible loss or a range of loss

when it is at least reasonably possible that a loss may have been incurred.

Per Share (“EPS”)

earnings per share is computed by dividing net income attributable to all classes of common stockholders of the Company by the weighted

average number of shares of all classes of common stock outstanding during the applicable period.

Diluted earnings per share is computed

in the same manner as basic earnings per share, except that the number of shares is increased to include restricted stock still subject

to risk of forfeiture and to assume exercise of potentially dilutive stock options using the treasury stock method, unless the effect

of such increase is anti-dilutive.

disclosed in Note 9, the rights of holders of Class A common stock and Class B common stock are identical except for certain voting and

conversion rights and restrictions on transferability.

The Company accrues for loss contingencies when

both (a) information available prior to issuance of the consolidated financial statements indicates that it is probable that a liability

had been incurred at the date of the consolidated financial statements and (b) the amount of loss can reasonably be estimated.

the Company accrues for loss contingencies and the reasonable estimate of the loss is within a range, the Company records its best estimate

within the range.

When no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount in

The Company discloses an estimated possible loss or a range of loss when it is at least reasonably possible that a loss may

have been incurred.

Earnings Per Share (“EPS”)

Basic earnings per share is computed by dividing

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

common stock outstanding during the applicable period.

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

share, except that the number of shares is increased to include restricted stock still subject to risk of forfeiture and to assume exercise

of potentially dilutive stock options using the treasury stock method, unless the effect of such increase is anti-dilutive.

As disclosed in Note 9 Equity , the rights of holders of Class

A common stock and Class B common stock are identical except for certain voting and conversion rights and restrictions on transferability.

As such, the Company is not required to break out EPS by class.

weighted-average number of shares used in the calculation of basic and diluted earnings per share attributable to the Company’s

common stockholders consists of the following:

Fiscal Year Ended

The weighted-average number of shares used in

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

(in thousands):

Fiscal Year Ended

Basic weighted-average number of shares

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Diluted weighted-average number of shares

following shares were excluded from the diluted earnings per share computation because their inclusion would have been anti-dilutive:

The following shares were excluded from the diluted earnings per share

computation because their inclusion would have been anti-dilutive:

Fiscal Year Ended

(in thousands)

Stock options

Non-vested restricted Class B common stock

Deferred stock units

Shares excluded from the calculation of diluted earnings per share

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 in the consolidated

statements of income and comprehensive income.

Value Measurements

value of financial and non-financial assets and liabilities is defined as an exit price, which is the price that would be received to

sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The three-tier

hierarchy for inputs used to measure fair value, which prioritizes the inputs to valuation techniques used to measure fair value, is

prices (unadjusted) in active markets for identical assets or liabilities.

prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly

or indirectly through market corroboration, for substantially the full term of the financial instrument.

inputs based on the Company’s assumptions used to measure assets and liabilities at fair value.

financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant

to the fair value measurement.

The assessment of the significance of a particular input to the fair value measurement requires judgment,

and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

The Company’s

financial liabilities (which include contingent considerations as discussed in Note 3 – Fair Value Measurements ) have been

initially valued at the transaction price and subsequently valued, at the end of each reporting period, utilizing a third-party valuation

Instruments – Foreign Exchange Forward Contracts

The Company’s earnings and cash flows are subject to fluctuations

due to changes in foreign currency exchange rates, primarily the U.S.

Dollar (“USD”)– NOK and EUR exchange rates.

Company’s risk management policy allows for the use of derivative financial instruments to prudently manage foreign currency exchange

rate exposure.

Foreign currency derivative activities are subject to the management, direction and control of the executive management.

Foreign exchange forward contracts are recognized on the consolidated balance sheets at their fair value in “Prepaid expenses”

or “Accrued expenses and other current liabilities”, and changes in fair value are recognized in “Net loss resulting

from foreign exchange transactions” in the consolidated statements of income and comprehensive income.

Dollar is the Company’s functional currency.

The functional currencies for the Company’s subsidiaries that operate outside

of the United States are USD for GuruShots, NOK for Zedge Europe AS and EUR for Zedge Lithuania UAB which is a wholly-owned subsidiary

of Zedge Europe AS, which are the currencies of the primary economic environments in which they primarily expend cash.

The Company translates

assets and liabilities denominated in foreign currencies to U.S.

Dollars at the exchange rate in effect as of the consolidated financial

statement date, and translates accounts from the consolidated statements of income and comprehensive income using the weighted average

exchange rate for the period.

Gains or losses resulting from foreign currency translations are recorded in “Accumulated other comprehensive

loss” in the accompanying consolidated balance sheets.

Foreign currency transaction gains and losses including gains and losses

from currency exchange rate changes related to intercompany receivables and payables are reported in “Net loss resulting from foreign

exchange transactions” in the accompanying consolidated statements of income and comprehensive income.

for Credit Losses

allowance for credit losses reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance.

The allowance is determined based on known troubled accounts, historical experience and other currently available evidence.

are written-off upon final determination that the trade accounts will not be collected.

There were no allowance for credit losses

as of July 31, 2022 and 2021.

Comprehensive

Income (Loss)

Comprehensive

income (loss) consists of two components, net income (loss) and other comprehensive income (loss).

Other comprehensive income (loss)

refers to gains and losses that are recorded as an element of stockholders’ equity and are excluded from net income (loss).

Company’s other comprehensive income (loss) and accumulated other comprehensive income (loss) are comprised principally of foreign

currency translation adjustments.

and Finance Leases

Company has operating leases primarily for office space.

The determination of whether an arrangement is a lease or contains a lease is

made at inception by evaluating whether the arrangement conveys the right to use (“ROU”) an identified asset and whether

the Company obtains substantially all of the economic benefits from and has the ability to direct the use of the asset.

Operating leases

are included in other assets, accrued expenses and other current liabilities, and other liabilities, on the Company’s consolidated

balance sheets.

The Company does not have any finance leases.

with a term greater than one year are recognized on the consolidated balance sheets in the line items cited above.

The Company has elected

not to recognize leases with terms of one year or less on the consolidated balance sheets.

Lease obligations and their corresponding

ROU assets are recorded based on the present value of lease payments over the expected lease term.

As the interest rate implicit in lease

contracts is typically not readily determinable, the Company utilizes the appropriate incremental borrowing rate, which is the rate incurred

to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Company has elected to combine lease components (including land, building or other similar items) and non-lease components (including

common area maintenance, maintenance, consumables, or other similar items) as a single component and therefore the non-lease components

are included the calculation of the present value of lease payments.

The lease expense is recognized over the expected term on a straight-line

For the fiscal year ended July 31, 2023, the diluted earnings per share

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

options and vesting of restricted stock and deferred stock units (“DSUs”) would have been anti-dilutive.

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.

Fair Value Measurements

Fair value of financial and non-financial assets

and liabilities is defined as an exit price, which is the price that would be received to sell an asset or paid to transfer a liability

in an orderly transaction between market participants at the measurement date.

The three-tier hierarchy for inputs used to measure fair

value, which prioritizes the inputs to valuation techniques used to measure fair value, is as follows:

quoted prices (unadjusted) in active markets for identical assets or liabilities.

quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value.

A financial asset or liability’s classification

within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The assessment of

the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the assets and

liabilities being measured and their placement within the fair value hierarchy.

The Company’s financial liabilities (which include

contingent considerations as discussed in Note 3 – Fair Value Measurements ) have been initially valued at the transaction

price and subsequently valued, at the end of each reporting period, utilizing a third-party valuation specialist.

Derivative Instruments – Foreign Exchange Forward Contracts

The Company’s earnings and cash flows are

subject to fluctuations due to changes in foreign currency exchange rates, primarily the U.S.

Dollar (“USD”)– NOK and

EUR exchange rates.

The Company’s risk management policy allows for the use of derivative financial instruments to prudently manage

foreign currency exchange rate exposure.

Foreign currency derivative activities are subject to the management, direction and control of

the executive management.

Foreign exchange forward contracts are recognized on the consolidated balance sheets at their fair value in

“Prepaid expenses” or “Accrued expenses and other current liabilities”, and changes in fair value are recognized

in “Net income (loss) resulting from foreign exchange transactions” in the consolidated statements of (loss) income and comprehensive

(loss) income.

Functional Currency

Dollar is the Company’s functional

The functional currencies for the Company’s subsidiaries that operate outside of the United States are USD for GuruShots,

NOK for Zedge Europe AS and EUR for Zedge Lithuania UAB which is a wholly-owned subsidiary of Zedge Europe AS, which are the currencies

of the primary economic environments in which they primarily expend cash.

The Company translates assets and liabilities denominated in

foreign currencies to U.S.

Dollars at the exchange rate in effect as of the consolidated financial statement date, and translates accounts

from the consolidated statements of (loss) income and comprehensive (loss) income using the weighted average exchange rate for the period.

Gains or losses resulting from foreign currency translations are recorded in “Accumulated other comprehensive loss” in the

accompanying consolidated balance sheets.

Foreign currency transaction gains and losses including gains and losses from currency exchange

rate changes related to intercompany receivables and payables are reported in “Net income (loss) resulting from foreign exchange

transactions” in the accompanying consolidated statements of (loss) income and comprehensive (loss) income.

Allowance for Credit Losses

The allowance for credit losses reflects the Company’s

best estimate of probable losses inherent in the accounts receivable balance.

The allowance is determined based on known troubled accounts,

historical experience and other currently available evidence.

Bad debts are written-off upon final determination that the trade accounts

will not be collected.

There were no allowance for credit losses as of July 31, 2023 and 2022.

Comprehensive Income (Loss)

Comprehensive income (loss) consists of two components,

net income (loss) and other comprehensive income (loss).

Other comprehensive income (loss) refers to gains and losses that are recorded

as an element of stockholders’ equity and are excluded from net income (loss).

The Company’s other comprehensive income (loss)

and accumulated other comprehensive income (loss) are comprised principally of foreign currency translation adjustments.

Operating and Finance Leases

The Company has operating leases primarily for

office space.

The determination of whether an arrangement is a lease or contains a lease is made at inception by evaluating whether the

arrangement conveys the right to use (“ROU”) an identified asset and whether the Company obtains substantially all of the

economic benefits from and has the ability to direct the use of the asset.

Operating leases are included in other assets, accrued expenses

and other current liabilities, and other liabilities, on the Company’s consolidated balance sheets.

The Company does not have any

finance leases.

Leases with a term greater than one year are recognized

on the consolidated balance sheets in the line items cited above.

The Company has elected not to recognize leases with terms of one year

or less on the consolidated balance sheets.

Lease obligations and their corresponding ROU assets are recorded based on the present value

of lease payments over the expected lease term.

As the interest rate implicit in lease contracts is typically not readily determinable,

the Company utilizes the materially approximate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis

over a similar term an amount equal to the lease payments in a similar economic environment.

The lease term may include options to extend

or terminate the lease when it is reasonably certain that the Company will exercise that option.

The Company has elected the practical expedient

to combine lease components (including land, building or other similar items) and non-lease components (including common area maintenance,

maintenance, consumables, or other similar items) as a single component and therefore the non-lease components are included the calculation

of the present value of lease payments.

The lease expense is recognized over the expected term on a straight-line basis.

Correction of Immaterial Misstatement

During the third quarter of fiscal 2022, the Company determined that

there were immaterial errors in its historical financial statements.

The errors resulted in overstatement of the issued and outstanding

shares of the Company Class B Common Stock by 626,242 shares in connection with the GuruShots Acquisition (Note 5).

The Company evaluated

the effect of these errors on prior periods under the guidance of the Securities Exchange Commission Staff Accounting Bulletin (“SAB”)

99 - Materiality, and determined the amounts were not material to any previously issued financial statements.

The Company corrected

these misstatements with an out-of- period adjustment during the third quarter of fiscal 2022.

Adopted Accounting Pronouncements

December 2019, the FASB issued Accounting Standard Update (“ASU”) No.

2019-12, Income Taxes (Topic 740):

the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes.

The Company adopted this new accounting

standard on August 1, 2021, and the adoption did not have a material impact on the Company’s consolidated financial statements

and related disclosures.

Issued Accounting Pronouncements Not Yet Adopted

June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which requires the measurement and

recognition of expected credit losses for financial assets held at amortized cost.

ASU 2016-13 replaces the existing incurred loss impairment

model with an expected loss model which requires consideration of forward-looking information to calculate credit loss estimates.

changes will result in an earlier recognition of credit losses.

The Company’s financial assets held at amortized cost include accounts

The amendments in ASU 2020-05 deferred the effective date for Topic 326 to fiscal years beginning after December 15, 2022.

The Company will adopt the new standard effective August 1, 2023 and does not expect the adoption of this guidance to have a material

impact on its consolidated financial statements.

January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other:

Simplifying the Test for Goodwill Impairment (ASC

The standard eliminates the requirement to measure the implied fair value of goodwill by assigning the fair value of a

reporting unit to all assets and liabilities within that unit (the Step 2 test) from the goodwill impairment test.

Instead, if the carrying

amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess, limited by the

amount of goodwill in that reporting unit.

The guidance is effective for the Company beginning after December 15, 2022;

and aligns with

the effective date of ASU 2016-13.

The Company will adopt the new standard effective August 1, 2023 and does not expect the adoption

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

October 2021, the FASB issued ASU No.

2021-08, Accounting for Contract Assets and Contract Liabilities From Contracts With Customers .

ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities from acquired

contracts using the revenue recognition guidance in Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts

with Customers, rather than the prior requirement to record them at fair value.

The guidance is effective for fiscal years, and interim

periods within those fiscal years, beginning after December 15, 2022.

Early adoption is permitted.

The Company will adopt the new standard

effective August 1, 2023 and does not expect the adoption of this guidance to have a material impact on its consolidated financial statements.

March 2022 the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage

This ASU eliminates the accounting guidance for Troubled Debt Restructurings (TDRs) by creditors in Subtopic 310-40,

Receivables—Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings

and restructurings by creditors when a borrower is experiencing financial difficulty.

Additionally, this ASU requires a company to disclose

current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic

326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost.

This ASU is effective for the Company beginning

July 1, 2023, and shall be applied prospectively, except for the transition method related to the recognition and measurement of TDRs,

which may be applied following a modified retrospective method.

Early adoption is permitted.

The Company is currently assessing the impact

of this ASU on the consolidated financial statements and related disclosures.

Disaggregation

following table summarizes revenue by type of monetization mechanisms of the Zedge App and GuruShots for the periods presented:

Fiscal year ended

During the third quarter of fiscal 2022, the Company

determined that there were immaterial errors in its historical financial statements.

The errors resulted in overstatement of the issued

and outstanding shares of the Company Class B Common Stock by 626,242 shares in connection with the GuruShots Acquisition (see Note 6,

Business Combination and Asset Acquisition ).

The Company evaluated the effect of these errors on prior periods under the guidance

of the Securities Exchange Commission Staff Accounting Bulletin (“SAB”) No.

99 - Materiality, and determined the amounts were

not material to any previously issued financial statements.

The Company corrected these misstatements with an out-of- period adjustment

during the third quarter of fiscal 2022.

Recent Accounting Pronouncements

We considered all recent accounting pronouncements

and concluded they are not expected to have a material impact on our consolidated financial statements.

Note 2—Revenue

Disaggregation of Revenue

The following table summarizes revenue by type

of monetization for the Zedge Marketplace and GuruShots for the periods presented:

Fiscal Years Ended

(in thousands)

Zedge Marketplace

Advertising revenue

Virtual items used for online game

Paid subscription revenue

Zedge Premium revenue

Emojipedia revenue

AppLovin integration bonus amortization

Other revenues

Total revenues

Total Zedge App revenue

Digital goods and services*

Total revenue

* Since April 12, 2022 Closing Date.

Contract Balances

Deferred revenues

The Company records deferred revenues related

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As of July 31, 2023, the Company’s deferred revenue

balance related to subscriptions was approximately $1.5 million, representing approximately 692 thousand active subscribers.

31, 2021, the Company’s deferred revenue balance related to subscriptions was approximately $1.6 million, representing approximately

752 thousand active subscribers.

balance related to subscriptions was approximately $1.5 million, representing approximately 638,000 active subscribers, including 11,000

active subscribers on the iOS platform.

As of July 31, 2022, the Company’s deferred revenue balance related to subscriptions was

approximately $1.5 million, representing approximately 692,000 active subscribers on the Android platform.

The Company also records deferred revenues when

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is being amortized over an estimated service period of 24 months.

As of July 31, 2022, the Company’s deferred revenue balance related

to integration bonus was $ 1.7 million.

deferred revenues increased $ 1.6 million from $ 1.8 million at July 31, 2021 to $ 3.4 million at July 31, 2022, primarily due to integration

bonus discussed above.

advertising networks and advertising exchanges to which the Company sells its inventory track and report the impressions to Zedge and

Zedge recognizes revenues based on these reports.

The networks and exchanges base their payments off of those reports and Zedge independently

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

The number of impressions delivered

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

price during the reporting period.

Company expenses the fees retained by Google Play related to the subscriptions revenue when incurred because the duration of the contracts

for which the Company pay commissions are less than one year.

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

of the consolidated statements of income and comprehensive income.

3—Fair Value Measurements

following table presents the balance of assets and liabilities measured at fair value on a recurring basis:

(in thousands)

As of July 31, 2023 and 2022, the Company’s deferred revenue balance

related to this integration bonus was $ 667 thousand and $ 1.7 million, respectively.

The amount of deferred revenue recognized in fiscal

2023 that was included in the deferred revenue balance at July 31, 2022 was $ 2.7 million.

Significant Judgments

The advertising networks and advertising exchanges

to which the Company sells its inventory track and report the impressions to Zedge and Zedge recognizes revenues based on these reports.

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

to validate the imported data and identify any differences.

The number of impressions delivered by the advertising networks and advertising

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

Practical Expedients

The Company expenses the fees retained by Google

Play and App Store related to the subscriptions revenue when incurred because the duration of the contracts for which the Company pay

commissions are less than one year.

These costs are included in the selling, general and administrative expenses of the consolidated statements

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

Note 3—Fair Value Measurements

The following table presents the balance of assets

and liabilities measured at fair value on a recurring basis:

July 31, 2023

Contingent consideration-short term

Contingent consideration-long term

Foreign exchange forward contracts

July 31, 2022

Contingent consideration-short term

Contingent consideration-long term

Foreign exchange forward contracts

Consideration

consideration related to the business combinations discussed below in Note 6 are classified within Level 3 of the fair value hierarchy

as the determination of fair value uses considerable judgement and represents the Company’s best estimate of an amount that could

be realized in a market exchange for the asset or liability.

following table provides a rollforward of the contingent consideration related to business acquisition discussed in

Note 6, Business Combinations and Assets Acquisition.

Fiscal years ended July 31, (in thousands)

Balance at beginning of year

Contingent Consideration

Contingent consideration related to the business

combinations discussed below in Note 6, Business Combination and Asset Acquisition are classified within Level 3 of the fair value

hierarchy as the determination of fair value uses considerable judgment and represents the Company’s best estimate of an amount

that could be realized in a market exchange for the asset or liability.

The following table provides a rollforward of

the contingent consideration related to business acquisition discussed in Note 6, Business Combinations and Assets Acquisition.

Balance at July 31, 2021

Change in fair value

Balance at end of year

overall fair value of the contingent consideration decreased by $ 3.9 million during the years ended July 31, 2022, due primarily to the

decrease in the likelihood that certain contingent milestones would be achieved.

Value of Other Financial Instruments

value of the outstanding foreign exchange forward contracts are marked to market price at the end of each measurement period.

Company’s other financial instruments at July 31, 2022 and 2021 included trade accounts receivable and trade accounts payable.

The carrying amounts of the trade accounts receivable and trade accounts payable approximated fair value due to their short-term nature.

4—Derivative Instruments

primary risk managed by the Company using derivative instruments is foreign exchange risk.

Foreign exchange forward contracts are

entered into as hedges against unfavorable fluctuations in the U.S.

Balance at July 31, 2022

Change in fair value

Balance at July 31, 2023

The overall fair value of the contingent consideration

decreased by $ 1.9 million during the fiscal year ended July 31, 2023, primarily due to the decrease in the likelihood that certain contingent

milestones would be achieved.

Fair Value of Other Financial Instruments

Fair value of the outstanding foreign exchange

forward contracts are marked to market price at the end of each measurement period.

The Company’s other financial instruments

at July 31, 2023 and 2022 included trade accounts receivable and trade accounts payable.

The carrying amounts of the trade accounts receivable

and trade accounts payable approximated fair value due to their short-term nature.

Note 4—Derivative Instruments

The primary risk managed by the Company using

derivative instruments is foreign exchange risk.

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

Dollar to NOK and EUR exchange rates.

The Company is party to a

Foreign Exchange Agreement with Western Alliance Bank allowing the Company to enter into foreign exchange contracts under its

revolving credit facility with the bank (see Note 16).

The Company does not apply hedge accounting to these contracts because these are not qualified as hedging accounting pursuant to ASC 815;

the changes in fair value are recorded in earnings.

By using derivative instruments to mitigate exposures to changes in foreign

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

The Company is party to a Foreign Exchange Agreement with Western Alliance Bank allowing

the Company to enter into foreign exchange contracts under its revolving credit facility with the bank (see Note 16 Revolving Credit

The Company does not apply hedge accounting to these contracts because these are not qualified as hedging accounting pursuant

therefore the changes in fair value are recorded in earnings.

By using derivative instruments to mitigate exposures to changes

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

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

outstanding contracts at July 31, 2022 were as follows:

The outstanding contracts at July 31, 2023 were as follows:

Settlement Date

fair value of outstanding derivative instruments recorded in the accompanying consolidated balance sheets were as follows:

The fair value of outstanding derivative instruments

recorded in the accompanying consolidated balance sheets were as follows:

(in thousands)

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Foreign exchange forward contracts

Other current assets

Foreign exchange forward contracts

Accrued expenses and other current liabilities

The effects of derivative instruments on the consolidated statements

of income and comprehensive income were as follows:

The effects of derivative instruments on the consolidated

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

Fiscal Year Ended July 31,

Amount of Loss Recognized on Derivatives

Year ended July 31,

(in thousands)

Derivatives not designated or not qualifying as hedging instruments

Location of Loss Recognized on Derivatives

Location of income (loss) recognized on derivatives

(in thousands)

Foreign exchange forward contracts

Net loss resulting from foreign exchange transactions

5—Property and Equipment, Net

and equipment, net consisted of the following:

July 31, (in thousands)

Net income (loss) resulting from foreign exchange transactions

Note 5—Property and Equipment, Net

Property and equipment, net consisted of the following:

(in thousands)

Capitalized software and technology development costs

Less accumulated depreciation and amortization

and amortization expense pertaining to property and equipment was approximately $ 1.0 million and $ 1.3 million for the fiscal years ended

July 31, 2022 and 2021, respectively.

6—Business Combination and Asset Acquisition

April 12, 2022, the Company consummated the acquisition of 100 % of the outstanding equity securities of GuruShots, Ltd.

(“GuruShots”),

an Israeli company that operates a platform used for its competitive photography game available across iOS, Android and the web.

acquisition was effected pursuant to a Share Purchase Agreement (the “SPA”) between the Company, GuruShots and the holders

of the GuruShots equity interests.

This acquisition was accounted for as a business combination under the acquisition method of accounting

and the results of operations of GuruShots have been included in the Company’s results of operations as of the acquisition date.

purchase price for the equity securities of GuruShots consists of approximately $ 18 million in cash paid at closing and contingent payments

(the “Earnout”) of up to a maximum of $ 8.4 million due on each of the first and second anniversaries from the closing, payable

either in cash or Class B common stock of the Company or a combination thereof, at the Company’s discretion, and subject to GuruShots

achieving certain financial targets set forth in the SPA.

The fair value of the earnout amount has been estimated at $ 5.9 million based

on a Monte Carlo simulation model in an option pricing framework at the acquisition date, whereby a range of possible scenarios were

This Earnout as part of the preliminary purchase price allocation.

The liability for contingent consideration is included

in current and long-term liabilities on the consolidated balance sheets and will be remeasured at each reporting period until the contingency

See Note 3, Fair Value Measurements , for additional discussion of contingent consideration as of July 31, 2022.

connection therewith, the Company has 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”).

addition, the Company has 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 (based on the volume weighted average closing prices of the Class B common stock

on the NYSE American Exchange for the thirty trading days ended April 12, 2022) for GuruShots’ founders and 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.

parties to the SPA have made customary representations, warranties and covenants therein.

The assertions embodied in those representations

and warranties were made for purposes of the SPA and are subject to qualifications and limitations agreed by the respective parties in

connection with negotiating the terms of the SPA.

cash purchase price and the earnout have been preliminarily allocated to GuruShots’ tangible assets, identifiable intangible assets,

and assumed liabilities based on their estimated fair values.

The preliminary fair value estimates of the net assets acquired are based

upon preliminary calculations and valuations, and those estimates and assumptions are subject to change as the Company obtains additional

information for those estimates during the measurement period (up to one year from the acquisition date).

Depreciation and amortization expense pertaining

to property and equipment was approximately $ 953 thousand and $ 958 thousand for the fiscal years ended July 31, 2023 and 2022, respectively.

Note 6—Business Combination and Asset Acquisition

GuruShots Acquisition - On April 12, 2022, the Company consummated

the acquisition of 100 % of the outstanding equity securities of GuruShots, Ltd., an Israeli company that operates a platform used for

its competitive photography game available across iOS, Android and the web.

The acquisition was effected pursuant to a Share Purchase

Agreement (the “SPA”) between the Company, GuruShots and the holders of the GuruShots equity interests.

This acquisition was

accounted for as a business combination under the acquisition method of accounting and the results of operations of GuruShots have been

included in the Company’s results of operations as of the acquisition date.

The purchase price for the equity securities of GuruShots consists

of approximately $ 18 million in cash paid at closing and contingent payments (the “Earnout”) of up to a maximum of $ 8.4 million

due on each of the first and second anniversaries from the closing, payable either in cash or Class B common stock of the Company, or

a combination thereof, at the Company’s discretion, and subject to GuruShots achieving specified financial targets set forth in

The fair value of the earnout amount at the acquisition date was estimated at $ 5.9 million based on a Monte Carlo simulation

model in an option pricing framework, whereby a range of possible scenarios were simulated.

This fair value was reduced from $ 5.9 million

to $ 1.9 million as of July 31, 2022 and further reduced to $ 0 as of July 31, 2023.

See Note 3, Fair Value Measurements .

Under the SPA, the Company agreed to make certain minimum investments

in user acquisition for GuruShots during the period covered by the Earnout, subject to, among other conditions, the acquired users generating

minimum levels of Return On Ad Spend (“ROAS”) as set forth in the SPA.

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.

One of the prior owners of GuruShots has objected to that determination.

The Company has responded to the objection in great detail and believes the assertion to be without merit.

In addition to the cash payment at closing and the contingent Earnout,

the Company has committed to a retention pool of $4 million in cash and 626,242 shares of the Company Class B common stock (the number

of shares was determined based on a value of $4 million or $6.39 per share which was the volume weighted average closing prices of the

Class B common stock on the NYSE American Exchange for the sixty trading days ended April 12, 2022) for GuruShots’ founders and

employees that will be payable or vest, as applicable, over three years from April 1, 2022, based on the beneficiaries thereof remaining

employed by the Company or a subsidiary.

On April 17, 2023, 205,618 shares were vested with a fair value of $ 1.93 per share.

2023, an aggregate of $ 1.3 million in retention bonuses was paid in cash.

The parties to the SPA made various representations, warranties and

covenants subject to the qualifications and limitations agreed by the respective parties in the SPA.

On September 26, 2023, the Company

noticed a claim for indemnification regarding material inaccuracies in certain of those representations and warranties.

The Company does

not currently know how this matter will be resolved and cannot make any assertions as to any eventual outcome.

The cash purchase price and the earnout have been allocated to GuruShots’

tangible assets, identifiable intangible assets, and assumed liabilities based on their estimated fair values.

The preliminary fair value

estimates of the net assets acquired are based upon preliminary calculations and valuations, and those estimates and assumptions are subject

to change as the Company obtains additional information for those estimates during the measurement period.

The excess of the total consideration

over the tangible assets, identifiable intangible assets, and assumed liabilities was recorded as goodwill.

Company will record measurement period adjustments based on its ongoing valuation and purchase price allocation procedures.

is still finalizing the valuation and purchase price allocation as it relates to the net working capital amount in the table below.

allocation of the preliminary purchase price is as follows (in thousands):

over the tangible assets, identifiable intangible assets, and assumed liabilities was recorded as goodwill which was $ 8.9 million at closing.

The Company recorded a measurement period adjustment of $ 180,000 in

the three month period ended July 31, 2022 which reduced the goodwill balance from $ 8.9 million to $ 8.7 million.

The Company wrote off

the remaining goodwill balance and recorded a loss on goodwill impairment of $ 8.7 million in the fiscal year ended July 31, 2023 as discussed

below in Note 7, Intangible Assets, Net and Goodwill .

The allocation of the preliminary purchase price is as follows (in

(Dollar Amounts in Thousands)

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Total purchase price

cash consideration paid includes $ 2.7 million deposited with the escrow agent that is available to satisfy for post-closing indemnification

claims made within 18 months of the acquisition date.

maximum earnout of $ 16.8 million will be determined based upon the satisfaction of certain defined operational milestones and will be

remeasured at fair value at each reporting period through earnings.

As the fair value is based on unobservable inputs, the liabilities

are included in Level 3 of the fair value measurement hierarchy.

The unobservable inputs used in the determination of the fair value

of the earnout which is assumed to be paid in cash include managements assumptions about the likelihood of payment based on the satisfaction

The cash consideration paid includes $ 2.7 million

deposited with the escrow agent that is available to satisfy for post-closing indemnification claims made within 18 months of the acquisition

There were no claims outstanding as of July 31, 2023.

The earnout amount to be paid (up to the maximum of $ 8.4 million in

each of the two annual post-acquisition all earnout periods) is determined based upon the satisfaction of certain defined operational

milestones and will be remeasured at fair value at each reporting period through earnings.

The conditions were not satisfied for the first

annual earnout period and no payment was made.

As the fair value is based on unobservable inputs, the liabilities are included in Level

3 of the fair value measurement hierarchy.

The unobservable inputs used in the determination of the fair value of the earnout which is

assumed to be paid in cash include management’s reasonable assumptions about the likelihood of payment based on the satisfaction

of certain defined operational milestones and discount rates based on cost of debt.

The Company committed to issuing 626,242 shares of the Company’s

Class B common on the closing date to the founders and employees as a retention bonus pool, managed by a trustee based in Israel.

shares will vest, in equal tranches, over three years assuming that the recipients remain employed by the Company or a subsidiary through

the vesting dates.

The $4 million fair value of these unvested restricted stock is not included as purchase consideration above, as it

has a post-combination service requirement and will be accounted for separately from the business combination as stock compensation expense.

Additionally, the founders and employees are also entitled to receive $4 million retention cash bonus over three years, which was not

included in the purchase price above.

As of July 31, 2022, the Company has accrued $ 437 thousand in retention bonus which is included

in the accrued expense and other current liabilities.

intangible assets consist of trade names, technology and customer relationships.

The fair value of intangible assets and the determination

of their respective useful lives were made in accordance with ASC 805 and are outlined in the table below:

Please see Note 3, Fair value measurement .

The Company has issued 575,099 (net of forfeiture of 51,143 shares

for employees who left the Company) shares of the Company’s Class B common in respect of the retention pool to the GuruShots founders

and employees, which are held by a trustee based in Israel.

These shares will vest over three years from April 1, 2023 assuming that the

recipients remain employed by the Company or a subsidiary through the vesting dates, 205,618 shares vested on April 1, 2023.

date fair value of these unvested restricted stock of $4 million is not included as purchase consideration above, as it has a post-combination

service requirement and will be accounted for separately from the business combination as stock compensation expense.

Additionally, the

founders and employees are also entitled to receive an aggregate of up to $4 million retention cash bonus over three years subject to

the same continued service requirement, which was not included in the purchase price above.

Identified intangible assets consist of trade names, technology and

customer relationships.

The fair value of intangible assets and the determination of their respective useful lives were made in accordance

with ASC 805 and are outlined in the table below:

(Dollar Amounts in Thousands)

7 unchanged sentences

These valuation methods require management to project revenues, operating expenses, working capital investment, capital

spending and cash flows for the GuruShots over a multiyear period, as well as determine the weighted average cost of capital to be used

as a discount rate.

Company amortizes its intangible assets assuming no residual value over periods in which the economic benefit of these assets is consumed.

Company recorded the excess of the purchase price over the identified tangible and intangible assets as goodwill.

The Company believes

that the investment value of the future enhancement of the Company’s products and offerings created as a result of this acquisition

has principally contributed to a purchase price that resulted in the recognition of $ 8.9 million of goodwill, which has been reduced

by $ 180,000 subsequently related to accounts payable balance as of the closing date.

The goodwill is deductible for tax purposes.

Acquisition-related

transaction costs (e.g., legal, due diligence, valuation, and other professional fees) are not included as a component of

consideration transferred but are required to be expensed as incurred.

During fiscal 2022, we incurred and accrued $ 860,000 of

acquisition-related costs, which are included in Selling, General and Administrative expenses on the Company’s consolidated

statements of income and comprehensive income.

Pro Forma Consolidated Financial Information

The Company completed the acquisition for GuruShots on April 12, 2022,

and accordingly, GuruShots’ operations for the period from April 13, 2022 to July 31, 2022 are included in the Company’s Consolidated

statements of income and comprehensive income.

GuruShots contributed revenues of approximately $1.7 million and estimated net loss of

$1.7 million for the period from the completion of acquisition through July 31, 2022.

unaudited pro forma financial information for the fiscal years ended July 31, 2022 and 2021 presented below has been calculated after

adjusting the results of Zedge and GuruShots to reflect the business combination accounting effects resulting from this acquisition,

including acquisition costs and the amortization expense from acquired intangible assets as though the acquisition occurred on August

The historical consolidated financial statements have been adjusted in the pro forma financial statements to give effect

to pro forma events that are directly attributable to the business combination.

The pro forma financial information is for informational

purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on

August 1, 2020.

spending and cash flows for GuruShots over a multiyear period, as well as determine the weighted average cost of capital to be used as

a discount rate.

The Company amortizes its intangible assets assuming no residual value

over periods in which the economic benefit of these assets is consumed.

The Company recorded the excess of the purchase price over the identified

tangible and intangible assets as goodwill.

The Company believes that the investment value of the future enhancement of the Company’s

products and offerings created as a result of this acquisition has principally contributed to a purchase price that resulted in the recognition

of $ 8.9 million of goodwill, which was subsequent reduced by $ 180,000 as of July 31, 2022 and then to $ 0 as of July 31, 2023 as discussed

below in Note 7, Intangible Assets, Net and Goodwill .

Of the 8.7 million of goodwill impairment loss recorded in the third quarter

of fiscal 2023, $ 2.8 million is deductible for tax purposes.

Acquisition-related transaction costs (e.g., legal, due diligence,

valuation, and other professional fees) are not included as a component of consideration transferred but are required to be expensed as

During fiscal 2022, we incurred approximately $ 860,000 of acquisition-related costs, which are included in Selling, General

and Administrative expenses on the Company’s consolidated statements of (loss) income and comprehensive (loss) income.

Unaudited Pro Forma Consolidated Financial Information

The unaudited pro forma financial information for all periods presented

below has been calculated after adjusting the results of a combined Zedge and GuruShots to reflect the business combination accounting

effects resulting from this acquisition, including acquisition costs and the amortization expense from acquired intangible assets as though

the acquisition occurred on August 1, 2020.

The information below reflects adjustments to Zedge’s historical consolidated financial

statements to give effect to pro forma events that are directly attributable to the business combination.

The pro forma financial information

is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition

had taken place on August 1, 2020.

Year ended July 31,

unaudited pro forma financial information includes the following adjustments, net of any tax impacts:

amortization expense recognized based on fair value of intangible assets recorded upon acquisition of GuruShots;

compensation expense related to the vesting of retention awards to GuruShots employees consisting of restricted stock awards and

cash payments;

reversal of historical fair value adjustments and interest expense recorded on GuruShots’ convertible notes that were settled

on the acquisition date.

tax expense (benefit) was adjusted for the impact of the above adjustments for each period.

to an Asset Purchase Agreement, on August 1, 2021 (“Closing”), the Company consummated the acquisition of substantially all

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

The total purchase price of the assets

has been determined to be $6.7 million of which $4.8 million was paid on August 2, 2021 and $917,000 was paid on February 1, 2022, with

the remaining $962,000 to be paid out on the twelve-month anniversary of the Closing.

The $ 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.

assets purchased include emojipeida.org, a set of smaller websites, a bank of emoji related URLs related to the seller’s

business, including World Emoji Day, the annual World Emoji Awards, and Emojitracker.

The asset purchase does not qualify as a business

combination under FASB ASC 805, Business Combinations , and has therefore been accounted for as an asset acquisition.

total purchase price for this acquisition was allocated to intangible assets are amortized on a straight-line basis over their estimated

useful lives of fifteen years.

7—Intangible Assets, Net and Goodwill

following table presents the detail of intangible assets, net as of July 31, 2022 and 2021 (in thousands):

Balance at July 31, 2021

The unaudited pro forma financial information includes the following

adjustments, net of any tax impacts:

(i) incremental amortization expense

recognized based on fair value of intangible assets recorded upon acquisition of GuruShots;

(ii) incremental compensation expense

related to the vesting of retention awards to GuruShots employees consisting of restricted stock awards and cash payments;

the reversal of historical fair value adjustments and interest expense recorded on GuruShots’ convertible notes that were settled on the acquisition date.

Income tax expense (benefit) was adjusted for the impact of the above adjustments for each period.

Emojipedia Acquisition

Pursuant to an Asset Purchase Agreement, on August 1, 2021 (“Closing”),

the Company consummated the acquisition of substantially all of the assets of Emojipedia Pty Ltd, a proprietary company organized under

the laws of Australia.

The total purchase price of the assets was $6.7 million, of which $4.8 million was paid on August 2, 2021, $917,000

was paid on February 1, 2022, and the remaining $962,000 paid on August 1, 2022.

The $ 4.8 million was funded into an escrow account and

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

The assets purchased include emojipeida.org, a set of smaller websites,

a bank of emoji related URLs related to the seller’s business, including World Emoji Day, the annual World Emoji Awards.

purchase does not qualify as a business combination under FASB ASC 805, Business Combinations , and has therefore been accounted

for as an asset acquisition.

The total purchase price for this acquisition was allocated to intangible assets are amortized on a straight-line

basis over their estimated useful lives of fifteen years .

Note 7—Intangible Assets, Net and Goodwill

The following table presents the detail of intangible assets, net as

of July 31, 2023 and 2022 (in thousands):

July 31, 2023

July 31, 2022

Gross Carrying Value

Accumulated Amortization

Net Carrying Value

Gross Carrying Value

Accumulated Amortization

Net Carrying Value

Emojipedia.org and other internet domains acquired

1 unchanged sentence

Customer relationships

Balance at July 31, 2022

expense of intangible assets for the fiscal years ended July 31, 2022 and 2021 were approximately $ 1.0 million and $ 0 , respectively.

future amortization expense as of July 31, 2022 is as follows (in thousands):

Company’s goodwill related to acquisitions is carried on the balance sheet of Zedge Europe AS and GuruShots Ltd.

table below reconciles the change in the carrying amount of goodwill for the period from July 31, 2020 to July 31, 2022:

Total intangible assets

Amortization expense of intangible assets for

the fiscal years ended July 31, 2023 and 2022 were approximately $ 2.3 million and $ 1.0 million, respectively.

Estimated future amortization expense as of July 31, 2023 is as follows

(in thousands):

Carrying Amount

Balance at July 31, 2020

Foreign currency translation adjustments

Balance at July 31, 2021

Goodwill represents the difference between the purchase price and the

fair value of assets and liabilities acquired in a business combination (see Note 6, Business Combination and Asset Acquisition ).

The Company reviews goodwill annually, or more frequently whenever circumstances and situations change such that there is an indication

that the carrying amounts may not be recovered, for impairment by initially considering qualitative factors to determine whether it is

more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, as a basis for determining

whether it is necessary to perform a quantitative analysis.

If it is determined that it is more likely than not that the fair value of

reporting unit is less than its carrying amount, a quantitative analysis is performed to identify goodwill impairment.

If it is determined

that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount, it is unnecessary to perform

a quantitative analysis.

The Company may elect to bypass the qualitative assessment and proceed directly to performing a quantitative

The Company has two reporting units and assesses impairment based upon

qualitative factors and if necessary, quantitative factors.

A reporting unit’s fair value is determined using the income approach and

discounted cash flow models by utilizing Level 3 inputs and assumptions such as future cash flows, discount rates, long-term growth rates,

market value and income tax considerations.

Specifically, the value of each reporting unit is determined on a stand-alone basis from the

perspective of a market participant and represents the price estimated to be received in a sale of the reporting unit in an orderly transaction

between market participants at the measurement date.

The Company then reconciles the values of all reporting units to the market capitalization

of the Company.

Interim Impairment Assessment

The Company performs its annual goodwill impairment tests on the first

day of fiscal 4 th quarter in accordance with ASC 350-20-35-28.

In light of a significant and sustained decline in the Company’s

Class B common stock price, circumstances became evident that a possible goodwill impairment existed since the last annual impairment

test on May 1, 2022.

The Company performed an interim impairment test during the third quarter of fiscal 2023 and concluded that the carrying

value of the GuruShots reporting unit exceeded its fair value.

Accordingly, the Company recorded a non-cash goodwill impairment charge

of $ 8.7 million in that quarter.

The Company’s goodwill related to acquisitions is carried on

the balance sheet of Zedge Europe AS and GuruShots Ltd.

The table below reconciles the change in the carrying amount of goodwill for the

period from July 31, 2021 to July 31, 2023:

(in thousands)

Carrying Amounts

Balance as of July 31, 2021

Goodwill acquired during the period

Measurement period adjustment

Foreign currency translation adjustments

Balance at July 31, 2022

8—Accrued Expenses and Other Current Liabilities

expenses and other current liabilities consist of the following:

Impact of currency translation

Balance as of July 31, 2022

Goodwill impairment charge

Impact of currency translation

Balance as of July 31, 2023

The total accumulated impairment loss of the Company’s goodwill

as of July 31, 2023 was $ 8.7 million.

There were no accumulated impairment losses prior to the fiscal year ended July 31, 2022.

Note 8—Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

July 31, (in thousands)

Accrued payroll and bonuses

Accrued vacation

Accrued income taxes payable

Accrued payroll taxes

Accrued payroll and bonuses

Due to artists

Accrued expenses

1 unchanged sentence

Derivative liability for foreign exchange contracts

Due to artists

Accrued income taxes payable

Due to related party - IDT

Total accrued expenses and other current liabilities

A Common Stock and Class B Common Stock

rights of holders of Class A common stock and Class B common stock are identical except for certain voting and conversion rights and

restrictions on transferability.

The holders of Class A common stock and Class B common stock have the right to receive identical dividends

per share if and when declared by the Company’s Board of Directors.

In addition, the holders of Class A common stock and Class

B common stock have identical and equal priority rights per share in liquidation.

The Class A common stock and Class B common stock do

not have any other contractual participation rights.

The holders of Class A common stock are entitled to three votes per share and the

holders of Class B common stock are entitled to one-tenth of a vote per share.

Each share of Class A common stock may be converted into

one share of Class B common stock, at any time, at the option of the holder.

Shares of Class A common stock are subject to certain limitations

on transferability that do not apply to shares of Class B common stock.

10—Commitments and Contingencies

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).

Company may from time to time be subject to legal proceedings that arise in the ordinary course of business.

Although there can be no

assurance in this regard, the Company does not expect any of those legal proceedings to have a material adverse effect on the Company’s

results of operations, cash flows or financial condition.

11— Operating Leases

Company has operating leases primarily for office space located in Trondheim, Norway.

Operating lease right-of-use assets recorded and

included in other assets were approximately $ 139,000 and $ 243,000 at July 31, 2022 and 2021, respectively.

connection with the GuruShots acquisition, the Company also acquired approximately $ 86,000 of right-of-use assets related to its office

space in Tel Aviv and assumed approximately $ 86,000 lease liabilities as of April 12, 2022.

As of July 31, 2022, right-of-use assets

and lease liability were approximately $ 65,000 and $ 65,000 , respectively.

following table presents the lease-related assets and liabilities for leases recorded on the consolidated balance sheets (in thousands)

as of July 31, 2022 and 2021:

Note 9—Equity

Class A Common Stock and Class B Common Stock

The rights of holders of Class A common stock

and Class B common stock are identical except for certain voting and conversion rights and restrictions on transferability.

of Class A common stock and Class B common stock have the right to receive identical dividends per share if and when declared by the Company’s

Board of Directors.

In addition, the holders of Class A common stock and Class B common stock have identical and equal priority rights

per share in liquidation.

The Class A common stock and Class B common stock do not have any other contractual participation rights.

holders of Class A common stock are entitled to three votes per share and the holders of Class B common stock are entitled to one-tenth

of a vote per share.

Each share of Class A common stock may be converted into one share of Class B common stock, at any time, at the option

of the holder.

Shares of Class A common stock are subject to certain limitations on transferability that do not apply to shares of Class

B common stock.

Note 10—Commitments and Contingencies

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.

Legal Proceedings

The Company may from time to time be subject to

legal proceedings that arise in the ordinary course of business.

Although there can be no assurance in this regard, the Company does not

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

Note 11— Operating Leases

The Company has operating leases primarily for

office space located in Trondheim, Norway, Tel Aviv, Israel as well as a short-term lease in Vilnius, Lithuania.

Operating lease right-of-use

assets recorded and included in other assets were approximately $ 360,000 and $ 204,000 at July 31, 2023 and 2022, respectively.

In connection with the GuruShots acquisition,

the Company acquired approximately $ 86,000 of right-of-use assets related to its office space in Tel Aviv and assumed approximately $ 86,000

of lease liabilities as of April 12, 2022.

The following table presents the lease-related

assets and liabilities for leases recorded on the consolidated balance sheets (in thousands) as of July 31, 2023 and 2022:

As of July 31,

3 unchanged sentences

Total operating lease liabilities

following table summarizes the weighted average remaining lease term and weighted average discount rate as of July 31, 2022 and 2021:

The following table includes the components of

our occupancy costs in our consolidated statements of (loss) income and comprehensive (loss) income:

Years ended July 31,

(in thousands)

Operating lease cost (1)

Variable lease cost (2)

(1) Operating lease costs include costs associated with fixed

lease payments and index-based variable payments that qualified for lease accounting under ASC 842, Leases and complied with the practical

expedients and exceptions we elected.

(2) Variable lease costs include costs that were not fixed at

the lease commencement date and are not dependent on an index or rate.

These costs were not included in the measurement of lease liabilities

and primarily include variable non-lease costs, such as utilities, real estate taxes, insurance and maintenance, as well as lease costs

for those leases that qualified for the short-term lease exception.

The following table summarizes the weighted average

remaining lease term and weighted average discount rate as of July 31, 2023 and 2022:

As of July 31,

3 unchanged sentences

Operating leases

minimum lease payments under non-cancellable leases at July 31, 2022 are as follows (in thousands):

Future minimum lease payments under non-cancellable

leases at July 31, 2023 are as follows (in thousands):

Years ending July 31,

Operating Leases

Total future minimum lease payments

Less imputed interest

of July 31, 2022, the Company did not have any leases that have not yet commenced that create significant rights and obligations.

12—Income Taxes

components of income before income taxes are as follows:

Fiscal year ended July 31, (in thousands)

Income before income taxes

for (benefit from) income taxes consisted of the following:

Fiscal year ended July 31, (in thousands)

As of July 31, 2023,

the Company did not have any leases that have not yet commenced that create significant rights and obligations.

Note 12—Income Taxes

The components of (loss) income before income taxes are as follows:

Fiscal year ended July 31,

(in thousands)

(Loss) income before income taxes

Provision for (benefit from) income taxes consisted of the following:

Fiscal year ended July 31,

(in thousands)

Total current expense

Total deferred expense

Provision for (benefit from) income taxes

differences between income taxes expected at the U.S.

(Benefit from) provision for income taxes

The differences between income taxes expected

federal statutory income tax rate and income taxes reported were as follows:

Fiscal year ended July 31, (in thousands)

Fiscal year ended July 31,

(in thousands)

U.S federal income tax at statutory rate

2 unchanged sentences

Foreign tax rate differential

Change in fair value of contingent consideration

Provision for (benefit from) income taxes

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

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

but not limited to the following:

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

improvements (in general, from 39 years to 15 years), and the ability to carry back net operating losses incurred from tax years 2018

through 2020 up to the five preceding tax years.

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

Tax Cuts and Jobs Act of 2017 (the “Tax Act”) contains a provision which subjects a U.S parent of a foreign subsidiary to current

tax on its global intangible low-taxed income (“GILTI”).

The GILTI income is eligible for a deduction, which lowers the

effective tax.

The Company will report the tax impact of GILTI as a period cost when incurred.

Accordingly, the Company is not providing

deferred taxes for basis differences expected to reverse as GILTI.

Companies are eligible for a deduction that lowers the effective tax rate on certain foreign income.

This regime is referred to as the

Foreign-Derived Intangible Income deduction (“FDII”).

components of the Company’s deferred tax assets and deferred tax liabilities are as follows:

Change in fair value of contingent consideration and goodwill impairment

Stock-based compensation

(Benefit from) provision for income taxes

The Company is subject to taxation in the United States and certain

foreign jurisdictions.

Earnings from non-U.S.

activities are subject to local country income tax.

The material jurisdictions where the Company is subject to potential

examination by tax authorities include the United States, Norway and Lithuania.

The Tax Cuts and Jobs Act of 2017 (the “Tax

Act”) contains a provision which subjects a U.S parent of a foreign subsidiary to current U.S.

tax on its global intangible low-taxed

income (“GILTI”).

The GILTI income is eligible for a deduction, which lowers the effective tax.

The Company will report the

tax impact of GILTI as a period cost when incurred.

Accordingly, the Company is not providing deferred taxes for basis differences expected

to reverse as GILTI.

U.S companies are eligible for a deduction that

lowers the effective tax rate on certain foreign income.

This regime is referred to as the Foreign-Derived Intangible Income deduction

Significant components of the Company’s

deferred tax assets and deferred tax liabilities are as follows:

(in thousands)

8 unchanged sentences

Total deferred tax assets

July 31, 2022 and 2021, the Company had no available U.S.

federal NOL carryforwards from domestic operations to offset future taxable

At July 31, 2022 and 2021, the Company had available U.S.

state NOL carryforwards from domestic operations of approximately $ 0.9

million and $ 1.7 million, respectively, to offset future taxable income.

The state NOL carryforwards will begin to expire in 2039 At

July 31, 2022 and 2021, the Company had available Norwegian NOL carryforwards of approximately $ 0 and $ 201,000 , respectively, to offset

future taxable income.

In addition, the Company has approximately $ 8 million of Foreign NOLs (Israel) which is available to offset Israel’s

future taxable income without time limit.

Due to its financial performance during fiscal 2022 the Company believes

that it is more-likely-than-not that substantially all of the deferred tax assets except certain foreign net operating loss carryforward

and capital loss carryforward will be realized.

Therefore, the Company has released the valuation allowance on deferred tax assets other

than those stated above in fiscal 2021.

At July 31, 2023 and 2022, the Company had available

state NOL carryforwards from domestic operations of approximately $ 0.1 million and $ 0.9 million, respectively, to offset future taxable

The state NOL carryforwards will begin to expire in 2038.

At July 31, 2023 and 2022, the Company has approximately $ 8.0 millions

of Foreign NOLs (Israel) which is available to offset Israel’s future taxable income without time limit.

The change in the valuation allowance is as follows:

5 unchanged sentences

Valuation allowance

July 31, 2022 and 2021, the Company did not have any unrecognized tax benefits and does not anticipate any significant changes to the

unrecognized tax benefits within twelve months of this reporting date.

In the fiscal years ended July 31, 2022 and 2021, the Company

recorded no interest and penalties on income taxes.

At July 31, 2022 and 2021, there was no accrued interest included in income taxes

Company currently remains subject to examinations of its U.S.

tax returns as follows:

federal tax returns for fiscal

2019 to fiscal 2021, state and local tax returns generally for fiscal 2019 to fiscal 2021 and foreign tax returns generally for

fiscal 2020 to fiscal 2021.

connection with the Spin-Off, the Company 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 the Company’s relationship with IDT after the Spin-Off, and a Tax

Separation Agreement, which sets forth the responsibilities of the Company and IDT with respect to, among other things, liabilities for

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

such periods and disputes with taxing authorities regarding taxes for such periods.

Pursuant to Separation and Distribution Agreement,

among other things, the Company indemnifies IDT and IDT indemnifies the Company 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 the Company from all liability for taxes of the Company and any of its subsidiaries or relating to

its business with respect to taxable periods ending on or before the Spin-Off, and the Company indemnifies IDT from all liability for

taxes of the Company and any of its subsidiaries or relating to its business accruing after the Spin-Off.

Notwithstanding the foregoing,

the Company is responsible for, and IDT has no obligation to indemnify the Company for, any tax liability of the Company resulting from

an audit, examination or other proceeding related to any tax returns that relate solely to it and its subsidiaries regardless of whether

such tax return relates to a period prior to or following the Spin-Off.

At July 31, 2023 and 2022, the Company did not

have any unrecognized tax benefits and does not anticipate any significant changes to the unrecognized tax benefits within twelve months

of this reporting date.

In the fiscal years ended July 31, 2023 and 2022, the Company recorded no interest and penalties on income taxes.

At July 31, 2023 and 2022, there was no accrued interest included in income taxes payable.

The Company currently remains subject to examinations of its U.S.

state, and foreign tax returns generally for the fiscal 2019 to fiscal 2022 years.

The Tax Cuts and Jobs Act of 2017 (TCJA) has modified the IRC 174 expenses

related to research and development (R&D) for the tax years beginning after December 31, 2021.

The Company must now capitalize the

expenditures related to R&D activities and amortize over 5 years for US activities and 15 years for non-US activities using mid-year

For US GAAP purposes, the Company capitalize all R&D expenditures on the consolidated balance sheet and amortize over

3 years for book purposes.

Therefore, we will have book to tax difference in amortization expense and no additional capitalization on

R&D expenditures for tax purposes under IRC 174.

Note 13—Stock-Based Compensation

2016 Stock Incentive Plan

On March 23, 2022, the Company’s Board of Directors amended the

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

of shares of the Company’s Class B common stock available for the grant of awards thereunder by an additional 685,000 shares to

an aggregate of 2,531,000 shares, including 626,000 shares for the GuruShots retention pool.

This amendment was ratified by the Company’s

stockholders at the Annual Meeting of Stockholders held on January 18, 2023.

On November 10, 2021, the Company’s Board of Directors amended

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

thereunder by an additional 325,000 shares to an aggregate of 1,846,000 shares.

This amendment was ratified by the Company’s stockholders

at the Annual Meeting of Stockholders held on January 12, 2022.

At July 31, 2023, there were 467,000 shares of Class B common stock

available for awards under the 2016 Incentive Plan before accounting for the remaining 173,000 contingently issuable shares related to

the DSUs with both service and market conditions discussed below.

Stock-based compensation

Stock Option and Incentive Plan

Company adopted the Zedge, Inc.

2016 Stock Option and Incentive Plan (as amended to date, the “2016 Incentive Plan”).

2016 Incentive Plan is intended to provide incentives to executive officers, employees, directors and consultants of the Company.

available under the 2016 Incentive Plan include restricted stock, deferred stock unit, stock options and stock appreciation rights.

2016 Incentive Plan is administered by the Compensation Committee of the Company’s Board of Directors.

to the 2016 Incentive Plan, the option exercise price for all stock option awards that are designated as “Incentive Stock Options”

must not be less than the Fair Market Value of the shares of Class B Common Stock covered by the option award on the date of grant.

general, Fair Market Value means the closing sale price per share of Class B Common Stock on the exchange on which the Class B Common

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

November 10, 2021, the Company’s Board of Directors amended the 2016 Incentive Plan to increase the number of shares of the Company’s

Class B common stock available for the grant of awards thereunder by an additional 325,000 shares to an aggregate of 1,846,000 shares.

This amendment was ratified by the Company’s stockholders at the Annual Meeting of Stockholders held on January 12, 2022.

March 23, 2022, the Company’s Board of Directors amended the 2016 Incentive Plan to increase the number of shares of the Company’s

Class B common stock available for the grant of awards thereunder by an additional 685,000 shares to an aggregate of 2,531,000 shares,

including 685,000 shares for the GuruShots retention pool.

The Company expects to submit the amendment for ratification by the Company’s

stockholders at the Annual Meeting of Stockholders to be held in January 2023.

July 31, 2022, there were 489,000 shares of Class B common stock available for awards under the 2016 Incentive Plan before accounting

for the approximately 204,000 contingently issuable shares related to the deferred stock units (“DSUs”) with both service

and market conditions.

Company recognizes stock-based compensation for stock-based awards, including stock options, restricted stock and DSUs based on the estimated

fair value of the awards and recognizes over the relevant service period.

The Company estimates the fair value of stock options on the

measurement date using the Black-Scholes option valuation model (“BSM”).

The Company estimates the fair value of restricted

stock and DSUs with service conditions only using the current market price of the stock.

The Company estimates the fair value of DSUs

with both service and market conditions using the Monte Carlo Simulation valuation model.

Black-Scholes and Monte Carlo Simulation valuation models incorporate assumptions as to stock price volatility, the expected life of

options or awards, a risk-free interest rate and dividend yield.

The Company recognizes stock-based compensation 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.

fiscal 2022 and fiscal 2021, the Company recognized stock-based compensation for its employees and non-employees as follows:

The Company recognizes stock-based compensation

for stock-based awards, including stock options, restricted stock and DSUs based on the estimated fair value of the awards and recognizes

over the relevant service period.

The Company estimates the fair value of stock options on the measurement date using the Black-Scholes

option valuation model (“BSM”).

The Company estimates the fair value of restricted stock and DSUs with service conditions

only using the current market price of the stock.

The Company estimates the fair value of DSUs with both service and market conditions

using the Monte Carlo Simulation valuation model.

The Black-Scholes and Monte Carlo Simulation valuation

models incorporate assumptions as to stock price volatility, the expected life of options or awards, a risk-free interest rate and dividend

The Company recognizes stock-based compensation 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.

In fiscal 2023 and fiscal 2022, the Company recognized

stock-based compensation for its employees and non-employees as follows:

Fiscal Year Ended

(in thousands)

Selling, general and administrative

the fiscal years ended July 31, 2022 and 2021 there were $ 85,000 and $ 105,000 , respectively, income tax benefit resulting from tax deductions

in excess of the compensation cost recognized for the Company’s stock-based compensation.

Company’s option awards generally have a maximum term of 10 years from grant date, are exercisable upon vesting unless otherwise

designated for early exercise by the Board of Directors at the time of grant and are pursuant to individual written agreements.

generally vest over a three-year or four -year period.

fiscal years 2022 and 2021, the Compensation Committee approved equity grants of options to purchase 60,000 and 189,000 shares respectively

of the Company’s Class B common stock to various executives, consultants and employees, vesting mostly over a three-year or four-year

Unrecognized compensation expense related to these grants were $ 587,000 and $ 774,000 in fiscal 2022 and 2021 respectively based

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

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 2021, the Company received proceeds of $ 873,261 from the exercise of stock options for which the

Company issued 559,840 shares of its Class B common stock.

Company cancelled or forfeited options grants of 41,000 shares and 13,000 shares in fiscal 2022 and fiscal 2021 respectively primarily

due to employee resignations or layoffs.

fair value of stock options was estimated on the date of the grant using a Black-Scholes valuation model and the assumptions in the following

Expected volatility is based on historical volatility of the Company’s Class B common stock.

The Company uses the simplified

method to estimate the expected term of the stock-based payments granted due to the limited history of the Company.

The risk-free rate

is based on the U.S.

Treasury yield curve in effect at the time of grant.

Company used the following weighted average assumptions in its BSM pricing model:

Stock-based compensation expense

As of July 31, 2023, the Company’s unrecognized stock-based compensation

expense was $321 thousand for unvested stock options, $616 thousand for unvested DSUs and $2.0 million for unvested restricted stock primarily

related to the portion of retention bonus to be paid in the Company’s Class B common stock in connection with the GuruShots acquisition.

In fiscal 2023 and 2022, restricted stock and DSUs awards with respect

to 267,000 shares and 78,000 shares vested.

In connection with this vesting, the Company 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.

In the fiscal years ended July 31, 2023 and 2022

there were $ 0 and $ 107,000 , respectively, income tax benefit resulting from tax deductions in excess of the compensation cost recognized

for the Company’s stock-based compensation.

Stock Options

The Company’s option awards generally have

a maximum term of 10 years from grant date, are exercisable upon vesting unless otherwise designated for early exercise by the Board of

Directors at the time of grant and are pursuant to individual written agreements.

Grants generally vest over a three-year or four -year

In fiscal years 2023 and 2022, the Compensation

Committee approved equity grants of options to purchase 58,000 and 60,000 shares, respectively, of the Company’s Class B common

stock to various executives, consultants and employees, vesting mostly over a three-year or four-year period.

Unrecognized compensation

expense related to these awards granted in fiscal 2023 and 2022 were $ 104,000 and $ 400,000 respectively based on the estimated fair value

of the options on the grant dates.

In fiscal 2023, the Company 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

The Company cancelled or forfeited options grants

of 57,000 shares and 41,000 shares in fiscal 2023 and fiscal 2022 respectively primarily due to employee resignations or layoffs.

Repricing of Outstanding and Unexercised

On October 20, 2022, the Board unanimously approved

the repricing of all outstanding and unexercised stock options granted under the 2016 Plan with exercise prices above the then current

market value held by then current employees, executive officers, and consultants of the Company (the “Eligible Stock Options”).

Effective October 20, 2022, the exercise price of the eligible stock options was reduced to $ 2.27 , the closing price of its common stock

on October 19, 2022.

Except for the modification to the exercise price of the Eligible Stock Options, all other terms and conditions of

each of the Eligible Stock Options remained in full force and effect.

Pursuant to the 2016 Incentive Plan, the Compensation

Committee of the Board of Directors, as the administrator, has discretionary authority, exercisable on such terms and conditions that

it deems appropriate under the circumstances, to reduce the exercise price in effect for outstanding options under the 2016 Incentive

In approving the repricing, the Compensation Committee considered the impact of the current exercise prices of outstanding stock

options on the incentives provided to employees and consultants, the lack of retention value provided by the outstanding stock options

to employees and consultants, and the impact of such options on the capital structure of the Company.

As of October, 2022, there were

532,750 stock options outstanding under the 2016 Incentive Plan, of which 191,663 outstanding stock options had exercise prices in excess

of the market price of the Company’s common stock as of October 20, 2022, which is why the Compensation Committee made the determination

to deem all outstanding and unexercised stock options held by current employees, executive officers, and consultants as Eligible Stock

Jonathan Reich, the Company’s Chief Executive

Officer, and Yi Tsai, the Company’s Chief Financial Officer, hold Eligible Stock Options exercisable for an aggregate of 64,898

and 15,000 shares of the Company’s common stock, respectively.

The option repricing resulted in incremental stock-based

compensation of $ 87,000 , of which $ 52,000 was recorded as expense in the fiscal 2023, and $ 35,000 will be recognized as expense over the

requisite service periods over which the Eligible Stock Options vest.

The fair value of stock options was estimated

on the date of the grant using a Black-Scholes valuation model and the assumptions in the following table.

Expected volatility is based

on historical volatility of the Company’s Class B common stock.

The Company uses the simplified method to estimate the expected

term of the stock-based payments granted due to the limited history of the Company.

The risk-free rate is based on the U.S.

Treasury yield

curve in effect at the time of grant.

The Company used the following weighted average assumptions in its

BSM pricing model:

Fiscal year ended July 31,

1 unchanged sentence

Risk free interest rate

following represents option activity for the fiscal years ended July 31, 2022 and 2021, including options granted prior to our separation

from our former parent in a spin-off on June 1, 2016 and options granted under the 2016 Incentive Plan adopted on June 2, 2016:

The following represents option activity for the

fiscal years ended July 31, 2023 and 2022, including options granted prior to our separation from our former parent in a spin-off on June

1, 2016 and options granted under the 2016 Incentive Plan adopted on June 2, 2016:

Stock Options

(in thousands)

Weighted- Average

Number of Options (in thousands)

Exercise Price

Intrinsic Value

(in thousands)

5 unchanged sentences

Exercisable at July 31, 2023

following table summarizes the weighted average grant date fair value of options granted, intrinsic value of options exercised and fair

value of awards vested in the periods indicated:

The following table summarizes the weighted average

grant date fair value of options granted, intrinsic value of options exercised and fair value of awards vested in the periods indicated:

(in thousands except per share amounts)

2 unchanged sentences

Fair value of awards vested

July 31, 2022, there was approximately $ 587,000 of total unrecognized compensation cost related to non-vested stock options, which is

expected to be recognized over a weighted-average period of 2.9 years.

At July 31, 2021, there was $ 774,000 of total unrecognized compensation cost related to non-vested stock options,

which is expected to be recognized over a weighted-average period of 3.2 years.

In connection with the GuruShots acquisition, the Company committed

to issue 626,242 shares of the Company’s Class B common stock with a grant date fair value of $ 4 million on the closing date to

the founders and employees as a retention bonus pool which is managed by a trustee based in Israel.

These shares will vest, in equal tranches,

over three years assuming that the recipients remain employed by the Company or a subsidiary through the vesting dates.

In fiscal 2022,

the Company has amortized $ 444 thousands in stock-based compensation expenses related to these shares.

fiscal 2021, the Compensation Committee and the Corporate Governance Committee of our Board of Directors approved a grant of 92,593 restricted

shares of the Company’s Class B Common Stock to our Executive Chairman Michael Jonas.

Jonas agreed to accept all of his compensation

for his service as Executive Chairman during fiscal 2021 in the form of equity in the Company and to make receipt of such equity compensation

contingent on the Company achieving certain milestones relative to its fiscal 2021 budget.

The grant was made at that time because the

milestones previously set were achieved.

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

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

fiscal 2021, the Compensation Committee approved a grant of 10,619 restricted shares of Class B Common Stock to each of Mr.

Elliot Gibber

Howard Jonas which were fully vested upon grant.

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

fully amortized accordingly.

fiscal 2021, the Company granted 10,869 restricted shares of its Class B common stock, which vested immediately, to its non-employee

Board of Directors at an average grant date fair value of $ 8.22 per share .

July 31, 2022, there were 688,000 non-vested restricted shares of the Company’s Class B common stock.

At July 31, 2022, there was

$ 3.7 million of total unrecognized compensation cost related to these non-vested restricted shares, which is expected to be recognized

over a weighted-average period of 2.6 years.

At July 31, 2021, there were 127,300 non-vested restricted shares of the Company’s Class B common stock.

At July 31, 2021, there was $ 288,000 of total unrecognized compensation cost related to these non-vested restricted shares, which is expected

to be recognized over a weighted-average period of 2.4 years.

fiscal 2022 and fiscal 2021, there were 65,000 shares and 92,000 shares vested.

In connection with this vesting, the Company purchased

11,665 shares and 12,005 shares respectively of Class B Stock from certain employees for $ 161,000 and $ 18,000 respectively, to satisfy

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

following represents restricted shares activity for the fiscal years ended July 31, 2022 and 2021:

Weighted Average Grant Date Fair Value

Non-vested stock award as of July 31, 2020

At July 31, 2023, there was approximately $ 321,000

of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a period of 2.4 years.

At July 31, 2022, there was approximately $ 587,000

of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average

period of 2.9 years.

Restricted Stock

In fiscal 2023 and in connection with the GuruShots

acquisition, the Company issued 626,242 shares of the Company’s Class B common stock with a grant date fair value of $ 4 million

to the founders and employees as a retention bonus pool which is managed by a trustee based in Israel.

These shares shall vest, in equal

tranches, over three years assuming that the recipients remain employed by the Company or a subsidiary through the vesting dates.

2023 and 2022, the Company has amortized $ 1.3 million and $ 444 thousands in stock-based compensation expenses related to these shares.

In fiscal 2023, 51,000 shares were forfeited due to resignations.

At July 31, 2023, there were 400,000 non-vested

restricted shares of the Company’s Class B common stock.

At July 31, 2023, there was $ 2.0 million of total unrecognized compensation

cost related to these non-vested restricted shares, which is expected to be recognized over a weighted-average period of 1.6 years.

At July 31, 2022, there were 688,000 non-vested

restricted shares of the Company’s Class B common stock.

At July 31, 2022, there was $ 3.7 million of total unrecognized compensation

cost related to these non-vested restricted shares, which is expected to be recognized over a weighted-average period of 2.6 years.

In fiscal 2023 and fiscal 2022, there were 237,000

shares and 65,000 shares vested.

In connection with this vesting, the Company did not purchase any shares in fiscal 2023 and purchased

11,665 shares of Class B Stock from certain employee for $ 161,000 to satisfy tax withholding obligations.

The following represents restricted shares activity

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

Non-vested stock award as of July 31, 2021

1 unchanged sentence

Non-vested stock award as of July 31, 2022

September 7, 2021, the Company granted a total of 291,320 DSUs to 64 of its employees and consultants.

Each DSU represents the right

to receive one share of the Company’s Class B common stock.

of the DSU’s (or 87,396) have service vesting conditions only, with a vesting schedule of 25% on September 7, 2022, 33% on September

7, 2023, and remaining on September 7, 2024.

Vesting of the remaining 70% of the DSUs (or 203,924) is subject to continued service as

well as a market condition.

These DSUs will vest if the grantee remains in service to the Company and only if the aggregate market capitalization

of the Company’s equity securities has reached or exceeded $451 million for five consecutive trading days between the grant date

and the vest date.

Subject to satisfaction of both of those conditions, these DSU’s with both service and market conditions have

a vesting schedule of 25% September 7, 2022, up to 58% (the 25% eligible to vest in 2022 and an additional 33%) on September 7, 2023,

and up to 100% on September 7, 2024.

In the event the market capitalization condition has not been met prior to a vesting date, but is

met by a subsequent vesting date, all DSUs with a market condition eligible for vesting prior to that date shall vest.

In the event that

the market capitalization condition has not been met by September 7, 2024, the DSUs with a market condition shall expire.

fiscal 2022, the Company purchased 4,450 shares of Class B Common Stock from various employees for $ 72,000 to satisfy tax withholding

Non-vested stock award as of July 31, 2023

Deferred Stock Units

On September 7, 2021, the Company granted a total

of 291,320 DSUs to 64 of its employees and consultants.

Each DSU represents the right to receive one share of the Company’s Class

B common stock.

30% of the DSU’s (or 87,396) have service

vesting conditions only, with a vesting schedule of 25% on September 7, 2022, 33% on September 7, 2023, and remaining 42% on September

Vesting of the remaining 70% of the DSUs (or 203,924) is subject to continued service as well as a market condition.

will vest if the grantee remains in service to the Company and only if the aggregate market capitalization of the Company’s equity

securities has reached or exceeded $451 million for five consecutive trading days between the grant date and the vest date.

satisfaction of both of those conditions, these DSU’s with both service and market conditions have a vesting schedule of 25% September

7, 2022, up to 58% (the 25% eligible to vest in 2022 and an additional 33%) on September 7, 2023, and up to 100% on September 7, 2024.

In the event the market capitalization condition has not been met prior to a vesting date, but is met by a subsequent vesting date, all

DSUs with a market condition eligible for vesting prior to that date shall vest.

In the event that the market capitalization condition

has not been met by September 7, 2024, the DSUs with a market condition shall expire.

In fiscal 2023, the Company purchased 6,310 shares

of Class B Common Stock from various employees for $ 17,000 to satisfy tax withholding obligations in connection with the vesting of DSUs.

In fiscal 2022, the Company purchased 4,450 shares of Class B Common Stock from various employees for $ 72,000 to satisfy tax withholding

obligations in connection with the vesting of DSUs.

In fiscal 2021, the Company purchased 5,625 shares of Class B Stock from various

employees for $ 8,000 to satisfy tax withholding obligations in connection with the vesting of DSUs.

following represents restricted shares activity for the fiscal years ended July 31, 2022 and 2021:

Average Grant

Date Fair Value

The following represents restricted shares activity for the fiscal

years ended July 31, 2023 and 2022:

Non-vested DSU award as of July 31, 2021

3 unchanged sentences

are subject to both service and market condition.

DSUs with both service and market conditions were valued using a Monte Carlo Simulation valuation model, with a valuation of $ 7.19 per

Total grant date fair value for these DSUs was approximately $ 1.5 million.

The unrecognized compensation expense is being recognized

on a graded vesting method over the vesting period.

The DSUs with both service and market conditions

were valued using a Monte Carlo Simulation valuation model, with a valuation of $ 7.19 per DSU.

Total grant date fair value for these DSUs

was approximately $ 1.5 million.

The unrecognized compensation expense is being recognized on a graded vesting method over the vesting

The DSUs with a service condition had a grant date fair value of $ 1.3 million.

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

July 31, 2022, there were 282,600 non-vested DSUs and the unrecognized compensation expense related to unvested DSUs was an aggregate

of $ 1.5 million which is expected to be recognized over a weighted-average period of 1.9 years.

14—Related Party Transactions

June 1, 2016, IDT’s interest in the Company was spun-off by IDT to IDT’s stockholders and the Company became an

independent publicly-held company.

IDT and the Company are controlled by members of the same family.

The unrecognized compensation expense is being

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

At July 31, 2023, there were 238,605 non-vested

DSUs and the unrecognized compensation expense related to unvested DSUs was an aggregate of $ 616,000 which is expected to be recognized

over a weighted-average period of 1.1 years.

Note 14—Related Party Transactions

On June 1, 2016, IDT’s interest in the Company

was spun-off by IDT to IDT’s stockholders and the Company became an independent publicly-held company.

Following the Spin-Off, IDT

charges the Company for services it provides, and the Company charges IDT for services it provides, pursuant to a Transition

Services Agreement (“TSA”).

fiscal 2022 and 2021 the Company was charged by IDT a total of $ 118,000 and $ 113,000 , respectively, for legal services.

the Company charged IDT approximately $ 167,000 and $ 144,000 , respectively, for consulting services provided to IDT by a Zedge employee.

As of July 31, 2022, the Company owed IDT $ 1,000 and as of July 31, 2021, IDT owed the Company $ 6,000 .

activities between the Company and IDT were as follows:

charges the Company for services it provides, and the Company charges IDT for services it provides, pursuant to a Transition Services

Agreement (“TSA”).

In fiscal 2023 and 2022 the Company was charged

by IDT a total of $ 125,000 and $ 118,000 , respectively, for legal services.

In addition, the Company charged IDT approximately $ 81,000

and $ 167,000 , respectively, for consulting services provided to IDT by a Zedge employee.

As of July 31, 2023 and 2022, the Company

owed IDT $ 8,000 and $ 1,000 respectively.

The activities between the Company and IDT were as follows (in thousands):

Fiscal years ended July 31,

3 unchanged sentences

Consulting services provided to IDT

Cash payments received from IDT

Cash payments made to IDT

Due to (from) IDT*

* Due to (from) IDT is included in accrued expenses and other

current liabilities or prepaid expenses

Company is party to a consulting agreement with Activist Artist Management, LLC (“Activist”), which assists the company in

strategic business development.

A member of the Company’s Board of Directors owns a significant minority stake in Activist.

the terms of the agreement, which was amended as of August 1, 2020, the Company pays Activist $ 3,750 per month, plus possible commissions.

On June 7, 2022 the Company’s Board approved a $ 65,000 advisory fee to Activist in connection with the GuruShots acquisition.

addition, the Board approved the increase in monthly retainer from $ 3,750 to $ 5,000 per month retroactive from April 1, 2022.

the Company paid approximately $ 114,000 and $ 41,000 respectively, to Activist in the fiscal years ended July 31, 2022 and 2021, respectively.

the fiscal years ended July 31, 2022 and 2021, the Company paid $30,000 and $0 , respectively, to Braze Inc.

(formerly “Appboy,

Inc.”) for use of its customer relationship management and lifecycle marketing platform.

The former Chief Executive Officer and

Co-Founder of Braze, Inc.

is a member of the Company’s Board of Directors.

15—Segment and Geographic Information

segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief

operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.

The Company’s

chief operating decision maker is its Chief Executive Officer as of July 31, 2022.

Based on the criteria established by ASC 280, Segment

Reportin g, the Company has one operating and reportable segment.

long-lived assets and total assets held outside of the United States, which are located primarily in Israel and Norway, were as follows:

United States

* Due to IDT is included in accrued expenses and other current

The Company is party to a consulting agreement

with Activist Artist Management, LLC (“Activist”), which assists the company in strategic business development.

the Company’s Board of Directors and Chairman of the Audit Committee owns a significant minority stake in Activist.

Under the terms

of the agreement, which was amended as of August 1, 2020, the Company pays Activist $ 3,750 per month, plus possible commissions.

7, 2022 the Company’s Board approved a $ 65,000 advisory fee to Activist in connection with the GuruShots acquisition.

the Board approved the increase in monthly retainer from $ 3,750 to $ 5,000 per month retroactive from April 1, 2022.

In aggregate the Company

paid approximately $ 60,000 and $ 114,000 respectively, to Activist in the fiscal years ended July 31, 2023 and 2022, respectively.

Note 15—Segment and Geographic Information

Operating segments are components of an enterprise

about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”),

or decision-making group, in deciding how to allocate resources and in assessing performance.

The Company’s chief operating decision

maker is its Chief Executive Officer as of July 31, 2023.

Based on the criteria established by ASC 280, Segment Reportin g, the

Company has one operating and reportable segment as of July 31, 2022.

Beginning in the first quarter of fiscal 2023, the Company revised

the presentation of segment information to align with changes to how the Company’s CODM manages the business, allocates resources

and assesses operating performance reports operating results based on two reportable segments, which are the Zedge Marketplace and GuruShots.

The CODM evaluates the performance of each operating segment using

revenue and income (loss) from operations.

The following table provides information about the Company’s two reportable segments.

Fiscal Year Ended

(in thousands)

Zedge Marketplace

Segment income (loss) from operations:

Zedge Marketplace

The CODM does not evaluate operating segments using asset information

and, accordingly, the Company does not report asset information by segment.

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, 2022 may

not be comparable to the corresponding periods in fiscal 2023.

Please refer to the unaudited pro forma consolidated financial information

contained in Note 6, Business Combination and Asset Acquisition.

Geographic Information

Net long-lived assets and total assets held outside

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

United States

Long-lived assets, net:

4 unchanged sentences

July 31, 2022

16—Revolving Credit Facility

As of September 27, 2016, the Company entered into a loan and security

agreement with Western Alliance Bank for a revolving credit facility of up to $ 2.5 million for an initial two-year term which was extended

twice for another two two-year term expired September 26, 2022 (“Existing Agreement”), which was extended through October

28, 2022 (see Note 20).

At the Company’s request in September 2020, advances under this facility have been reduced to the lesser

of $2.0 million or 80% of the Company’s eligible accounts receivable, subject to certain concentration limits.

The revolving credit

facility is secured by a lien on substantially all of the Company’s assets.

Effective with the September 2020 extension, the outstanding

principal amount bears interest per annum at the greater of 3.5% or the prime rate plus 1.25%.

Previously the interest rate was capped

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

September 26, 2022.

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

The Company is also required

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

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

The Company may terminate this

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

At July 31, 2022 and 2021, there were no amounts outstanding under the revolving credit facility and the Company was in compliance with

all of the covenants.

of November 16, 2016, the Company entered into a Foreign Exchange Agreement with Western Alliance Bank to allow the Company to enter

into foreign exchange contracts not to exceed $5.0 million in the aggregate at any point in time under its revolving credit facility.

This limit was raised to approximately $6.5 million pursuant to the Loan and Security Modification Agreement dated May 30, 2018.

available borrowing under the revolving credit facility is reduced by an applicable foreign exchange reserve percentage as determined

by Western Alliance Bank, in its reasonable discretion from time to time, which was initially set at 10% of the nominal amount of the

foreign exchange contracts in effect at the relevant time.

At July 31, 2022, there were $ 1.8 million of outstanding foreign exchange

contracts under the credit facility, which reduced the available borrowing under the revolving credit facility by $ 180,000 (see Note

17—Defined Contribution Plan

September 2016, the Company adopted a 401(k) Plan, effective August 1, 2016, available to all employees meeting certain eligibility criteria.

The Plan permits participants to elect pre-tax or after-tax salary deferrals that will be contributed to the Plan, not to exceed the

limits established by the Internal Revenue Code.

The Plan provides for enhanced safe harbor employer matching contributions.

All contributions

made by participants and safe harbor matching contributions by the Company will be fully vested.

The Company’s Class A common stock

and Class B common stock are not investment options for elective deferrals by the Plan’s participants.

However, matching contributions

may be made in shares of the Company.

Company’s cost for matching contributions to the Plan were $ 43,000 and $ 39,000 for the fiscal years ended July 31, 2022 and 2021,

respectively.

In lieu of making cash contributions, the Company opted to contribute 4,812 shares and 6,572 shares of the Company’s

Class B common stock to the Plan for fiscal 2022 and fiscal 2021, respectively.

18—Insurance Loan and PPP Loan Payable

August 1, 2020, the Company obtained a loan of $ 181,462 to pay for its insurance coverages, repayable in nine equal installments of $ 20,491

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

There were no outstanding balance as of July 31, 2022 and July 31, 2021.

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

Bank, a loan servicer and the Company’s lender (see Note 16), on April 22, 2020.

The Company used these proceeds in full for payroll

purposes for its U.S.

based employees during the covered period provided under the PPP.

Any portion of the loan that is not forgiven

would have been due two years after inception of the loan.

November 25, 2020, the Company submitted the PPP Loan Forgiveness Application Form 3508EZ and on May 21, 2021, the Company was notified

that such application for the loan forgiveness has been approved and the loan, including accrued interest, has been deemed satisfied

in full by the Small Business Administration to Western Alliance Bank.

The Company therefore recorded a gain of forgiveness of debt of

$ 218,000 which is included in interest and other income, net on the consolidated statements of income and comprehensive income.

19—Sales of Class B Common Stock

Company filed with the SEC a Registration Statement on Form S-3 (the “Form S-3”) on November 30, 2020 which became effective

on December 4, 2020 to facilitate capital raising.

The Registration Statement registered the issuance and sale by the Company of Class

B common stock or related securities for gross proceeds to the Company of up to $ 20 million.

On November 30, 2020, the Company engaged

National Securities Corp.

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

co-Sales Agents in connection with the Company’s “at-the-market” offering of shares of the Company’s Class B

common stock up to $5 million.

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

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

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

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

March 16, 2021, the Company filed a prospectus supplement with the SEC which contemplates the sale, for a gross aggregate sale price

of up to $ 10,000,000 , of shares of the Company’s Class B common stock, from time to time in “at the market offerings”

pursuant to an At Market Issuance Sales Agreement with National Securities Corporation and Maxim Group LLC (the “New Sales Agents”),

dated as of March 16, 2021 (the “New ATM Sales Agreement”), pursuant to which we sold 663,686 shares at an average price

of $ 15.0674 per share for total proceeds of $ 10 million.

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

20—Subsequent Events

Loan and Revolving Credit Facility with Western Alliance Bank

On October 28, 2022, the Company entered into an Amended and Restated

Loan and Security Agreement (“Amended Loan Agreement”) with Western Alliance Bank.

Note 16—Revolving Credit Facility

As of September 27, 2016, the Company entered

into a loan and security agreement with Western Alliance Bank (“WAB”) for a revolving credit facility of up to $ 2.5 million

for an initial two-year term which was extended twice for another two-year term which expired September 26, 2022 and was amended on October

28, 2022 as discussed below.

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

with the September 2020 extension, the outstanding principal amount bore interest per annum at the greater of 3.5 % or the prime rate plus

Previously the interest rate was capped at 5.0 %.

Interest was payable monthly and all outstanding principal and any accrued and

unpaid interest was due on the maturity date of September 26, 2022.

The Company was required to pay an annual facility fee of $ 10,000

The Company was also required to comply with various affirmative and negative covenants and to maintain certain financial ratios

during the term of the revolving credit facility.

The covenants included a prohibition on the Company paying any dividend on its capital

At October 27, 2022 and July 31, 2022, there were no amounts outstanding under the revolving credit facility and the Company was

in compliance with all of the covenants.

On October 28, 2022, the Company entered into

an Amended and Restated Loan and Security Agreement (“Amended Loan Agreement”) with WAB.

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.

Amounts outstanding under the term loan and credit facility

of the Amended Loan Agreement bear interest at a per annum rate equal to the Prime Rate (as published in The Wall Street Journal) plus

0.5%, with a Prime “floor” rate of 4.00%.

WAB agreed to provide the Company with a new term loan facility in the maximum principal amount of $ 7 million for a four-year term and

a $ 4 million revolving credit facility for a two-year term.

Amounts outstanding under the term loan and credit facility of the Amended

Loan Agreement bear interest at a per annum rate equal to the Prime Rate (as published in The Wall Street Journal) plus 0.5 %, with a Prime

“floor” rate of 4.00 %.

Pursuant to the Amended Loan Agreement, 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), as amended, restated, supplemented and otherwise modified from time to time prior to the date of the Amended Loan

At 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 or about the closing date, with the remaining $ 5,000,000 available for drawdown during twenty-four

discontinued the existing $ 2 million revolving credit facility under the prior version of the Loan and Security Agreement.

of the discontinuance, there was no outstanding balance on the revolving credit facility.

Pursuant to the Amended Loan Agreement, $ 2 million

was advanced in a single-cash advance on October 28, 2022, with the remaining $ 5 million available for drawdown during twenty-four (24)

months after closing.

Each drawdown must be in an amount of not less than One Million Dollars ($ 1,000,000 ).

Interest accrued under the Amended Loan Agreement is due monthly, and

the Company shall make monthly interest-only payments related to the term loan through the eighteen (18) month anniversary of the closing

From the nineteen (19) month anniversary of the Closing Date through the maturity date, the Company shall repay each outstanding

term loan by paying the Applicable Term Advance Amortization Payment equal to 1/12 th of 10 % of the outstanding term loan balance

plus monthly payments of accrued interest, in each case payable on the tenth (10th) day of each month.

Zedge’s final payment for

each Term Advance, due on the Term Loan Maturity Date, shall include all outstanding principal of and accrued and unpaid interest on such

Term Advance.

Each drawdown must be in an amount of not less than One Million Dollars ($ 1 million).

On May 11, 2023, the Company

entered into a Modification Agreement pursuant to which the Company agreed to modify the Amended Loan Agreement to reduce the remaining

$ 5 million availability to $ 0 .

Interest accrued under the Amended Loan Agreement

is due monthly, and the Company shall make monthly interest-only payments related to the term loan through the eighteen (18) month anniversary

of the closing date.

From the nineteen (19) month anniversary of the Closing Date through the maturity date, the Company shall repay each

outstanding term loan by paying the Applicable Term Advance Amortization Payment equal to 1/12 th of 10 % of the outstanding

term loan balance plus monthly payments of accrued interest, in each case payable on the tenth (10 th ) day of each month.

final payment for each Term Advance, due on the Term Loan Maturity Date, shall include all outstanding principal of and accrued and unpaid

interest on such Term Advance.

Once repaid, a Term Advance may not be reborrowed.

Amended Loan Agreement may also require early repayments if certain conditions are met.

The Amended Loan Agreement is secured by substantially

all of the assets of the Company, its subsidiaries, and certain of its affiliates.

Amended Loan Agreement includes the following financial covenants:

Future scheduled principal repayments on the term

loan as of July 31, 2023 are as follows (in thousands):

Years ending July 31,

Repayments Amount

Total future principal repayments

Deferred financing costs

Term loan, net of deferred financing costs

The Amended Loan Agreement may also require early

repayments if certain conditions are met.

Borrowings under the Amended Loan Agreement is secured by substantially all of the assets of

the Company, its subsidiaries, and certain of its affiliates.

The Amended Loan Agreement includes the following

financial covenants:

a) Debt Service Coverage Ratio .

Zedge shall maintain, at all times, a Debt Service Coverage Ratio of no less than 1.25 to 1.00 .

This covenant shall be tested quarterly as of the end of each fiscal quarter.

Debt to EBITDA .

Zedge shall maintain, at all times, a ratio of (a) indebtedness owed

by Zedge to Western Alliance Bank, to (b) Zedge’s EBITDA for the trailing twelve (12)

month period ended on such date of determination, shall not be greater than the amount set

forth under the heading “Maximum Debt to EBITDA Ratio” as of, and for each of

the dates appearing adjacent to such Maximum Debt to EBITDA Ratio”.

Maximum Debt to

Quarter Ending

This covenant shall be tested quarterly

as of the end of each fiscal quarter.

b) Maximum Debt to EBITDA .

Zedge shall maintain, at all times, a ratio of (a) indebtedness owed by Zedge to WAB, to (b) Zedge’s EBITDA for the trailing twelve

(12) month period ended on such date of determination, shall not be greater than the amount set forth under the heading “Maximum

Debt to EBITDA Ratio” as of, and for each of the dates appearing adjacent to such Maximum Debt to EBITDA Ratio”.

Maximum Debt to Quarter Ending

October 31, 2022

7 unchanged sentences

To be agreed upon

Amended Loan Agreement also includes customary negative covenants, subject to exceptions, which limit transfers, capital expenditures,

indebtedness, certain liens, investments, acquisitions, dispositions of assets, restricted payments and the business activities of the

Company, as well as customary representations and warranties, affirmative covenants and events of default, including cross defaults and

a change of control default.

Exchange Forward Contracts

September 21, 2022 the Company entered into the following foreign exchange forward contracts with Western Alliance Bank:

Settlement Date

Dollar Amount

Settlement Date

Dollar Amount

Issuer Repurchases of Equity Securities

Our Board of Directors authorized a buyback program, effective December 1, 2021, of up to 1.5 million shares

of our Class B common stock.

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

Through November 10, 2022,

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

The Amended Loan Agreement also includes customary negative covenants, subject to exceptions,

which limit transfers, capital expenditures, indebtedness, certain liens, investments, acquisitions, dispositions of assets, restricted

payments and the business activities of the Company, as well as customary representations and warranties, affirmative covenants and events

of default, including cross defaults and a change of control default.

As of November 16, 2016, the Company entered into

a Foreign Exchange Agreement with WAB to allow the Company to enter into foreign exchange contracts not to exceed $ 5.0 million in the

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

This limit was raised to approximately $ 7.5 million pursuant to the

Loan and Security Modification Agreement dated May 30, 2018.

The available borrowing under the revolving credit facility is reduced by

an applicable foreign exchange reserve percentage as determined by WAB, in its reasonable discretion from time to time, which was set

at 10 % of the nominal amount of the foreign exchange contracts in effect at the relevant time.

At July 31, 2023, there were $ 4.5 million

of outstanding foreign exchange contracts, which reduced the available borrowing under the revolving credit facility by $ 450,000 .

Note 17—Defined Contribution Plan

In September 2016, the Company adopted a 401(k)

Plan, effective August 1, 2016, available to all employees based in the US meeting certain eligibility criteria.

The Plan permits participants

to elect pre-tax or after-tax salary deferrals that will be contributed to the Plan, not to exceed the limits established by the Internal

Revenue Code.

The Plan provides for enhanced safe harbor employer matching contributions.

All contributions made by participants and safe

harbor matching contributions by the Company will be fully vested.

The Company’s Class A common stock and Class B common stock are

not investment options for elective deferrals by the Plan’s participants.

However, matching contributions may be made in shares

of the Company.

The Company’s cost for matching contributions

to the Plan were $ 45,000 and $ 43,000 for the fiscal years ended July 31, 2023 and 2022, respectively.

In lieu of making cash contributions,

the Company opted to contribute 18,278 shares and 4,812 shares of the Company’s Class B common stock to the Plan for fiscal 2023

and fiscal 2022, respectively.

Note 18—Subsequent Events

The parties to the agreement governing our purchase of GuruShots made

various representations, warranties and covenants subject to the qualifications and limitations agreed by the respective parties in the

On September 26, 2023, the Company noticed a claim for indemnification regarding material inaccuracies in certain of those

representations and warranties.

The Company does not currently know how this matter will be resolved and cannot make any assertions as

to any eventual outcome.

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 9A. Controls and Procedures