What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2024-10-29 compared with 2023-10-30 · 806 added, 834 removed, 1070 unchanged (61% of the section changed)

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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.

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

of July 31, 2024.

Report of Management on Internal Control over Financial Reporting

We, the management of Zedge, Inc.

and subsidiaries

and its 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.

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 the Company;

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.

Management has assessed the effectiveness of

the Company’s internal control over financial reporting as of July 31, 2024.

In making this assessment, the Company’s management

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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,

principal financial officer concluded that the Company’s internal control over financial reporting was effective, at the reasonable

assurance level , as of July 31, 2024.

Changes in Internal Control over Financial Reporting

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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:

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

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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

relations page of our website ( 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

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Copies of the codes of business conduct and ethics are

available on our web site.

Our web site and the information contained therein

available on our website.

Our website 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

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Exhibits, Financial Statement Schedules.

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.

The following

documents are filed as part of this Report:

of Independent Registered Public Accounting Firm on Consolidated Financial Statements

Consolidated Financial Statements

covered by Report of Independent Registered Public Accounting Firm

Statement Schedule.

All schedules have been omitted since

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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.

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:

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.

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;

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

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

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.

Investors should not rely on them as statements of fact.

Exhibit Number

Description of

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

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Form of Restricted Stock Agreement

At Market Issuance Sales Agreement among Zedge, Inc.

and National Securities Corporation and H.C.

Wainwright & Co., LLC, dated December 9, 2020.

Amended and Restated Loan Security Agreement between Zedge, Inc.

Amended and Restated Loan and Security Agreement Modification Agreement between Zedge, Inc.

and Western Alliance Bank, dated October 28, 2024

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Consent of UHY, LLP, Independent Registered Public Accounting Firm

Consent of Friedman, LLP, Independent Registered Public Accounting Firm

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

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

Compensation Clawback Policy

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 Calculation Linkbase

Inline XBRL Taxonomy Extension Definition Linkbase

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)

Inline XBRL Taxonomy Extension Presentation Linkbase

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 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 28, 2022.

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.

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by the undersigned, thereunto duly authorized.

/s/ Jonathan Reich

Jonathan Reich

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October 29, 2024

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

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.

Chief Executive Officer

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Principal Accounting Officer)

/s/ Michael Jonas

October 29, 2024

Michael Jonas

/s/ Howard S.

October 29, 2024

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Mark Ghermezian

/s/ Elliot Gibber

October 29, 2024

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October 29, 2024

/s/ Gregory Suess

October 29, 2024

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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

Consolidated Balance Sheets as of July 31, 2024 and 2023 F-4

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

Consolidated Statements of Cash Flows for the Years Ended July 31, 2023 and 2022 F-8

Consolidated Statements of Operations and Comprehensive Loss for the Fiscal Years Ended July 31, 2024 and 2023 F-5

Consolidated Statements of Stockholders’ Equity for the Fiscal Years Ended July 31, 2024 and 2023 F-6

Consolidated Statements of Cash Flows for the Fiscal Years Ended July 31, 2024 and 2023 F-7

Notes to Consolidated Financial Statements F-8

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Stockholders of Zedge, Inc.

Opinion on the Financial Statements

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated

balance sheet of Zedge, Inc.

(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.

balance sheets of Zedge, Inc.

(the Company) as of July 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive

loss, stockholders’ equity, and cash flows for each of the fiscal years in the two-year period ended July 31, 2024, 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, 2024 and 2023, and the results of its operations

and its cash flows for each of the fiscal years in the two-year period ended July 31, 2024, in conformity with accounting principles generally

accepted in the United States of America.

Basis for Opinion

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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

statements based on our audits.

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 audits in accordance with the

standards of the PCAOB.

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

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

As part of our audits, 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

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Accordingly, we express no such opinion.

Our audit included performing procedures to assess

Our audits included performing procedures to assess

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

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consolidated financial statements.

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

Our audits 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

We believe that our audits provide

a reasonable basis for our opinion.

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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.

– GuruShots Asset Group

As described in Notes 1 and 7 to the consolidated financial statements,

the Company identified indicators of impairment with the GuruShots asset group and performed an undiscounted cash flow analysis to determine

if the cash flows expected to be generated over the estimated remaining useful life of its primary assets were sufficient to recover the

carrying value of the asset group.

Based on this analysis, the undiscounted cash flows were not sufficient to recover the carrying value

of the asset group.

As a result, the Company compared the carrying value of the asset group to its fair value, determined that the fair

value of the asset group was approximately zero, and recorded an impairment charge of $11.9 million related to the GuruShots asset group.

The principal considerations for our determination that performing

procedures relating to the definite-lived intangible assets impairment is a critical audit matter are (i) the significant judgment by

management when developing the fair value measurements of the intangible assets;

and (ii) a high degree of auditor judgment, subjectivity,

and effort in performing procedures and evaluating management’s significant assumptions relating to the fair value measurements.

Significant assumptions included projected sales, cost of platform fees, selling and administrative expenses, long-term growth rates,

and the weighted average cost of capital.

Addressing the matter involved performing procedures

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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.

included, among others (i) testing management’s process for developing the fair value measurements;

(ii) evaluating the appropriateness

of the methodology used;

(iii) testing the completeness and accuracy of underlying data;

and (iv) evaluating the significant assumptions

used by management.

Evaluating management’s significant assumptions involved assessing whether the assumptions used by management

were reasonable considering (i) the current and past performance of the individual 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

New York, New York

October 29, 2024

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.

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.

/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 payable

Deferred acquisition payment payable

Contingent consideration-current portion

Accrued expenses and other current liabilities

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Term loan, net of deferred financing costs

Contingent consideration-long term portion

Deferred revenues--non-current

Other liabilities

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Accumulated other comprehensive loss

(Accumulated deficit) retained earnings

Accumulated deficit

Treasury stock, 1,051 shares at July 31, 2024 and 833 shares at July 31, 2023, at cost

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Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these consolidated financial

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

See Accompanying Notes to Consolidated Financial

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except per share data)

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Depreciation and amortization

Goodwill impairment

Impairment of intangible assets

Impairment of goodwill

Change in fair value of contingent consideration

(Loss) income from operations

Loss from operations

Interest and other income, net

Net income (loss) resulting from foreign exchange transactions

(Loss) income before income taxes

(Benefit from) provision for income taxes

Net (loss) income

Net (loss) income resulting from foreign exchange transactions

Loss before income taxes

Income tax benefit

Other comprehensive loss:

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Total other comprehensive loss

Total comprehensive (loss) income

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

Total comprehensive loss

Loss per share attributable to Zedge, Inc.

common stockholders:

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

The accompanying notes are an integral part of these consolidated financial

See Accompanying Notes to Consolidated Financial

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

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Class B Common Stock

Comprehensive

Additional Paid-in

Accumulated Other Comprehensive

Treasury Stock

Stockholders’

Total Stockholders’

Balance – July 31, 2022

Exercise of stock options

Restricted stock issuance in connection with GuruShots acquisition

Stock-based compensation

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Exercise of stock options

Restricted stock issuance in connection with GuruShots acquisition

Stock-based compensation

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Balance – July 31, 2024

The accompanying notes are an integral part of these consolidated financial

See Accompanying Notes to Consolidated Financial

CONSOLIDATED STATEMENTS OF CASH FLOWS

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Operating activities

Net (loss) income

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

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

Amortization of intangible assets

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Amortization of deferred financing costs

Change in fair value of contingent consideration

Loss on goodwill impairment

Stock-based compensation

Impairment charge of intangible assets

Impairment of investment in privately-held company

Deferred income taxes

Impairment charge of goodwill

Change in fair value of contingent consideration

Change in assets and liabilities:

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Investing activities

Payments for business combination, net of cash acquired

Payments for asset acquisitions

Final payment for asset acquisitions

Capitalized software and technology development costs

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Financing activities

Proceeds from term loan payable

Payment of deferred financing costs

Proceeds from exercise of stock options

Prepayment of term loan

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

Net cash provided by (used in) financing activities

Proceeds from exercise of stock options

Proceeds from term loan

Payment of deferred financing costs

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

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Cash payments made for interest expenses

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Contingent consideration fair value on acquisition date

Right-of-use assets acquired under operating leases

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

The accompanying notes are an integral part of these consolidated financial

See Accompanying Notes to Consolidated Financial

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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and its consolidated subsidiaries.

The Company is headquartered in New York, New

York, and has international office locations in Norway, Lithuania and Israel.

Our fiscal year ends on July 31 of each calendar

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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 .

Effective Q1 of our fiscal 2023, we revised the

presentation of segment information to reflect our acquisition of GuruShots (see Note 6, Business Combination and Asset Acquisition,

for additional information).

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

Zedge Marketplace and GuruShots,

as further discussed in Note 15, Segment and Geographic Information .

Use of Estimates

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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.

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

monthly, yearly and life-time subscriptions allow users to prepay a fixed fee to remove unsolicited advertisements

from our Zedge App.

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.

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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.

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.

in January 2019 and April 2023, we started offering paid subscription services sold through Google Play and App Store, respectively.

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 30 %.

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

Paid subscriptions are automatically renewed

at expiration unless cancelled by subscribers.

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

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

The duration of these contracts is daily, and

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

The payment terms for subscriptions sold through Google Play is net

30 days after month-end.

The payment terms for subscriptions sold through App Store is net 45 days after month-end.

Subscriptions are nonrefundable

after a period of seven days.

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

While the customer

can cancel at any time, he or she will not receive any refund but will remain entitled to receive the ad free service until the end of

the subscription period.

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

The payment terms for subscriptions sold through Google Play is net 30 days after month-end.

The payment terms for subscriptions

sold through App Store is net 45 days after month-end.

We recognize subscription revenue ratably over the subscription periods which

range from weekly, monthly, yearly and lifetime with an estimated lifespan of 30 months.

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.

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.

Alternatively, the

content owner may opt to place some items behind video ad gates, in which case the end user can acquire the content by watching a brief

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.

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

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

a fee of 30% of the purchase price.

When a user purchases Zedge Premium content using Zedge credits or watching a rewarded video, 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

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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.

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 we may be

exposed to credit losses due to the nonperformance of the holders of its deposits, we do 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

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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, 2024, two customers represented 31 % and 9 % 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.

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

At July 31, 2024, three customers represented

37 %, 15 % and 10 % of our accounts receivable balance and at July 31, 2023, two customers represented 36 % and 18 % of our accounts receivable

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

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Property and equipment is recorded at cost less

accumulated depreciation and amortization, and depreciated on a straight-line basis over its estimated useful lives, which range as follows:

accumulated depreciation and amortization, and depreciated or amortized on a straight-line basis over its estimated useful lives, which

range as follows:

capitalized software and technology development costs— 3 years;

and other— 5 years.

Other is comprised of furniture and fixtures,

office equipment, video conference equipment, computer hardware and computer software.

Normal repairs and maintenance are expensed as

Replacement property and equipment is capitalized and the property and equipment accounts are relieved of the items being replaced

or disposed of if no longer of value.

The related cost and accumulated depreciation of the disposed assets are eliminated and any gain

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

Capitalized Software and Technology Development Costs

Other is comprised of

furniture and fixtures, office equipment, video conference equipment, computer hardware and computer software.

Normal repairs and maintenance

are expensed as incurred.

Replacement property and equipment is capitalized and the property and equipment accounts are relieved of the

items being replaced or disposed of if no longer of value.

The related cost and accumulated depreciation of the disposed assets are eliminated

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

Capitalized Software and Technology Development Costs-Internal-Use

Software related to Zedge Marketplace

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;

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

determining the functionality;

identifying hardware and software applications that will achieve functionality, security,

and traffic flows;

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.

Application and Infrastructure Development Stage activities focus on acquiring or developing hardware and software to operate a content distribution platform or new product and service;

Post-Implementation/Operating Stage activities address training, administration, maintenance, and all other activities to operate an existing content distribution platform or new product or service.

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

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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.

and amortization in the consolidated statements of operations and comprehensive loss.

Capitalized Software and Technology Development Costs-Software to

Be Sold, Leased, or Marketed related to GuruShots

We expense research and development costs incurred

in the process of software development until technological feasibility has been established for the product.

Once technological feasibility

has been established, software costs are capitalized until the product is available for general release to customers.

Costs incurred from

the time that the product is available for general release to customers are expensed as incurred.

Costs related to upgrades and enhancements

are capitalized only if they result in added functionality or marketability of the original product.

The amortization of these capitalized costs begins

when a product is available for general release to customers and is computed on a product-by-product basis at a rate not less than straight-line

basis over the product’s estimated economic life.

At each balance sheet date, we compare the unamortized capitalized costs to the

net realizable value of that product and write off the amount by which the unamortized capitalized costs of that product exceed its net

realizable value.

Amortization of these costs is included in depreciation

and amortization in the consolidated statements of operations and comprehensive loss.

Intangible Assets, Net

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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.

We performed an interim impairment test during

the second quarter of fiscal 2024 and concluded that the carrying value of the intangible assets of GuruShots reporting unit exceeded

its fair value.

Accordingly, we recorded a non-cash impairment charge of $ 11.9 million during the second quarter of fiscal 2024.

7, Intangible, Net and Goodwill , for additional information.

Goodwill represents the excess of purchase price

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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’s sole investment at July 31, 2023,

is a simple agreement for future equity (SAFE) in which the Company holds the right to receive equity at some later date and upon certain

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

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 operations and comprehensive loss.

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.

value of its 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.

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

During fiscal 2024, we reduced the carrying value

of this SAFE investment to $ 0 and recorded $ 50,000 loss in the accompanying consolidated financial statements.

Cash and Cash Equivalents

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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.

There were $ 9.8 million and $ 12.2 million in

cash equivalents as of July 31, 2024 and 2023, 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.

We recognize 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.

We consider 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.

We use a two-step approach for recognizing and

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

We determine 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, we presume 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

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.

We classify 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 operations and comprehensive loss.

Contingencies

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.

We accrue 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 we accrue for loss

contingencies and the reasonable estimate of the loss is within a range, we record its best estimate within the range.

When no amount

within the range is a better estimate than any other amount, we accrue the minimum amount in the range.

We 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”)

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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 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.

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Diluted weighted-average number of shares

The 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 (in thousands):

Fiscal Year Ended

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Shares excluded from the calculation of diluted earnings per share

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.

For the fiscal years ended July 31, 2024 and 2023,

the diluted loss per share equals basic loss per share because the Company incurred a net loss during these periods 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.

We account for our share-based compensation arrangements in accordance

with ASC 718, Compensation-Stock Compensation, 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 operations and comprehensive loss.

for forfeitures for all awards as they occur.

Fair Value Measurements

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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.

USD-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 (loss) income resulting from foreign exchange transactions” in the consolidated statements of operations and comprehensive

Functional Currency

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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.

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

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) income resulting from foreign exchange transactions”

in the accompanying consolidated statements of operations and comprehensive loss.

Allowance for Credit Losses

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will not be collected.

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

There were no allowances for credit losses as of July 31, 2024 and 2023.

Comprehensive Income (Loss)

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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 (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.

In November 2023, the Financial Accounting Standards

Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 Segment Reporting (Topic 280):

to Reportable Segment Disclosures .

The guidance in ASU 2023-07 seeks to improve reportable segment disclosure requirements, primarily

through enhanced disclosures about significant segment expenses.

The amendments in this ASU require a public entity to disclose the following:

significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within

each reported measure of segment profit or loss;

an amount for other segment items by reportable segment and a description of its composition;

and the title and position of the CODM and how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance

and deciding how to allocate resources.

This ASU requires public entities to provide all annual disclosures about a reportable segment’s

profit or loss and assets currently required by Topic 280 in interim periods.

ASU 2023-07 clarifies that if the CODM uses more than one

measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may

report one or more of those additional measures of segment profit.

ASU 2023-07 is effective for fiscal years beginning after December

15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

ASU 2023-07 is a requirement

for additional disclosure and is not expected to materially impact the consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09

Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

The guidance in this ASU enhances the transparency and decision

functionality of income tax disclosures to provide investors information to better assess how an entity’s operations and related

tax risks, tax planning and operational opportunities affect its tax rate and prospects for future cash flow.

The amendments in this ASU

require public entities to disclose the following specific categories in the rate reconciliation by both percentages and reporting currency

the effect of state and local income tax, net of federal (national) income tax, foreign tax effects, effects of changes in tax

laws or rates enacted in the current period, effects of cross-border tax laws, tax credits, changes in valuation allowances, nontaxable

or nondeductible items and changes in unrecognized tax benefits.

The amendments in ASU 2023-09 also require public entities to provide

additional information for reconciling items that meet the qualitative threshold (if the effect of those reconciling items is equal to

or greater than 5 percent of the amount computed by multiplying pre-tax income (loss) by the applicable statutory income tax rate).

ASU requires reporting entities to annually disclose the year-to-date amount of income taxes paid (net of refunds received) disaggregated

by federal, state and foreign localities.

The amendments in this ASU should be applied on a prospective basis and retrospective application

is permitted.

For public business entities, ASU 2023-09 is effective for annual periods beginning after December 15, 2024.

Early adoption

is permitted for annual financial statements not yet issued.

ASU 2023-09 is a requirement for additional disclosure and is not expected

to materially impact the consolidated financial statements.

In March 2024, the FASB issued ASU 2024-01, Compensation-Stock

Compensation (Topic 718):

Scope Application of Profits Interest and Similar Awards, which provides illustrative guidance to help

entities determine whether profits interest and similar awards should be accounted for as share-based payment arrangements within the

scope of FASB Accounting Standards Codification (FASB ASC) 718, Compensation-Stock Compensation.

For public business entities, ASU 2024-01

is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted for annual financial statements not yet

We are currently evaluating the impact of this accounting standard, but do not expect it to have a material impact on our consolidated

financial statements.

In March 2024, the FASB issued ASU 2024-02, Codification

Improvements-Amendments to Remove References to the Concepts Statements, which removes references to various FASB Concepts Statements.

Note that this ASU finalizes amendments proposed in Section A of Proposed ASU No.

2019-800, Codification Improvements, issued in November

For public business entities, ASU 2024-02 is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted

for annual financial statements not yet issued.

We are currently evaluating the impact of this accounting standard, but do not expect

it to have a material impact on our consolidated financial statements.

We reviewed all other accounting pronouncements

issued during fiscal 2024 and concluded that they were not applicable to the Company

Note 2—Revenue

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Fiscal Years Ended

(in thousands)

Zedge Marketplace

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Other revenues

Total Zedge App revenue

Total Zedge Marketplace revenue

Digital goods and services

Total revenue

* Since April 12, 2022 Closing Date.

Contract Balances

Deferred revenues

Contract liabilities consist of deferred revenue,

which are recorded for payments received in advance of the satisfaction of performance obligations .

The Company records deferred revenues related

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As of July 31, 2024, the Company’s deferred revenue

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.

balance related to subscriptions was approximately $ 2.9 million, representing approximately 669,000 active subscribers, including approximately

210,000 lifetime subscriptions that we rolled out in August 2023.

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

to subscriptions was approximately $ 1.5 million, representing approximately 638,000 active subscribers.

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.

The Company also records deferred revenues when

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As of July 31, 2024, 2023 and 2022, the Company’s deferred revenue balance related

to Zedge Premium was approximately $ 255 thousand and $ 259 thousand, respectively.

to Zedge Premium was approximately $ 251,000 , $ 255,000 and $ 259,000 , respectively.

On April 1, 2022, the Company received a one-time

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As of July 31, 2024 and 2023, the Company’s deferred revenue balance

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

related to this integration bonus was $ 0 and $ 667,000 , respectively.

The amount of deferred revenue recognized in fiscal

2024 that was included in the deferred revenue balance at July 31, 2023 was $ 2.1 million.

Unsatisfied Performance Obligations

Substantially all of the Company’s unsatisfied

performance obligations relate to contracts with an original expected length of 30 months or less.

Significant Judgments

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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:

and liabilities measured at fair value on a recurring basis (in thousands):

July 31, 2024

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July 31, 2023

Contingent consideration-short term

Contingent consideration-long term

Foreign exchange forward contracts

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The following table provides a rollforward of

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

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

Balance at July 31, 2021

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Fair value of the outstanding foreign exchange

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

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

The Company’s other financial instruments

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

Dollar to NOK and EUR exchange rates.

in the USD to NOK and USD to EUR exchange rates.

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

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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.

therefore the changes in fair value are recorded in the consolidated statements of operations and comprehensive loss.

derivative instruments to mitigate exposures to changes in foreign exchange rates, the Company is exposed to credit risk from the failure

of the counterparty to perform under the terms of the contract.

The credit or repayment risk is minimized by entering into transactions

with high-quality counterparties.

The outstanding contracts at July 31, 2024 were as follows:

Settlement Date

Dollar Amount

Settlement Date

Dollar Amount

The fair value of outstanding derivative instruments

recorded in the accompanying consolidated balance sheets were as follows:

(in thousands)

recorded in the accompanying consolidated balance sheets were as follows (in thousands):

Assets and Liabilities Derivatives:

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The effects of derivative instruments on the consolidated

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

statements of operations and comprehensive loss were as follows (in thousands):

Fiscal Year Ended July 31,

Amount of Loss Recognized on Derivatives

Amount of Loss (Income) Recognized on Derivatives

Derivatives not designated or not qualifying as hedging instruments

Location of income (loss) recognized on derivatives

(in thousands)

Location of loss (income) recognized on derivatives

Foreign exchange forward contracts

Net income (loss) resulting from foreign exchange transactions

Net loss (income) resulting from foreign exchange transactions

Note 5—Property and Equipment, Net

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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.

to property and equipment was approximately $ 1,074,000 and $ 958,000 for the fiscal years ended July 31, 2024 and 2023, 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.

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 SPA.

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.

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

objected to that determination.

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.

In the first quarter of fiscal 2024, the Company

and the prior owners of GuruShots agreed to withdraw and settle claims related to the purchase agreement pursuant to which the Company

purchased the equity of GuruShots, including any dispute about minimum user acquisition spend for GuruShots, any right of the prior owners

to an earnout payment and the Company’s claim for indemnification related to alleged misrepresentations in the agreement.

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 with a grant date fair value of $ 4 million 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.

In fiscal 2024

and 2023, 182,565 shares and 205,618 shares were vested with a fair value of $ 446,000 and $ 397,000 , respectively.

See Note 13, Stock-Based

Compensation , for additional information.

In fiscal 2024 and 2023, we paid $ 1.3 million and $ 1.1 million in cash retention bonuses,

respectively.

The aggregated cash retention bonus payments are expected to be $ 500,000 lower than the initial cash bonus pool due to termination

of employment of eligible employees.

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 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)

Purchase price consideration:

Cash consideration paid at close

Cash contributed to escrow accounts at close

Cash deducted from purchase price and contributed to GuruShots’ working capital

Fair value of contingent consideration to be achieved at year 1

Fair value of contingent consideration to be achieved at year 2

Fair value of total consideration transferred

Total purchase price, net of cash acquired

Fair value allocation of purchase price:

Cash and cash equivalents

Trade accounts receivable

Prepaid expenses

Property and equipment, net

Other assets (including ROU)

Accounts payable and accrued expenses

Operating lease liabilities, current

Operating lease liabilities, noncurrent

Acquired intangible assets

Total purchase price

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.

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)

The Company recorded a measurement period adjustment

of $ 180,000 in the three months period ended July 31, 2022 which reduced the goodwill balance from $ 8.9 million to $ 8.7 million.

wrote off the remaining goodwill balance and recorded a loss on goodwill impairment of $ 8.7 million in the in the third quarter of fiscal

2023 as discussed below in Note 7, Intangible Assets, Net and Goodwill .

Of the 8.7 million of goodwill impairment loss recorded,

$ 2.8 million is deductible for tax purposes.

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) Asset Value Useful Life

Identified intangible assets:

Acquired developed technology

Customer relationships

Trade names $ 3,570 12 years

Acquired developed technology 3,950 5 years

Customer relationships 7,800 10 years

Total identified intangible assets $ 15,320

The Company’s initial fair value estimates related to the various

identified intangible assets were determined under various valuation approaches including the relief-from-royalty method and multi-period

excess earnings.

These valuation methods require management to project revenues, operating expenses, working capital investment, capital

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,

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.

The Company’s initial fair value estimates

related to the various identified intangible assets were determined under various valuation approaches including the relief-from-royalty

method and multi-period excess earnings.

These valuation methods require management to project revenues, operating expenses, working capital

investment, capital 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.

As of January 31, 2024, the Company wrote off

the remaining carrying value of the intangible assets and recorded impairment charge of $ 11.9 million as discussed below in Note 7, Intangible

Assets, Net and Goodwill .

The cash consideration paid included $ 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 made against the escrow account which was released in its entirety on November 15, 2023.

We incurred approximately $ 860,000 in acquisition-related

transaction costs in connection with the GuruShots transaction which were not included as a component of consideration transferred but

were expensed as incurred in fiscal 2022.

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 .

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 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.

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.

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):

Intangible assets are initially recorded at fair

value and stated net of accumulated amortization and impairments.

The Company amortizes its intangible assets that have finite lives using

either the straight-line method, or if reliably determinable, based on the pattern in which the economic benefit of the asset is expected

to be utilized.

Amortization is recorded over the estimated useful lives ranging from 5 to 15 years.

The Company evaluates the recoverability

of its definite lived intangible assets whenever events or changes in circumstances or business conditions indicate that the carrying

value of these assets may not be recoverable based on expectations of future undiscounted cash flows for each asset group.

If the carrying

value of an asset or asset group exceeds its undiscounted cash flows, the Company estimates the fair value of the assets, generally utilizing

a discounted cash flow analysis based on the present value of after-tax cash flows to be generated by the assets using a risk-adjusted

discount rate.

To estimate the fair value of the assets, the Company uses market participant assumptions pursuant to ASC 820, Fair

Value Measurements.

During the second quarter of fiscal 2024, in connection

with its company-wide strategic planning process as well as evaluating the current operating performance of its GuruShots reporting unit,

including product enhancement and marketing, the Company reassessed its short-term and long-term commercial plans for this business.

Company made certain operational and strategic decisions to invest in, and increase its focus on, the long-term success of this business,

which resulted in the Company significantly reducing its forecasted revenues and operating results.

As a result, the Company identified indicators

of impairment and performed an undiscounted cash flow analysis pursuant to ASC 360, Property, Plant, and Equipment - Overall , to

determine if the cash flows expected to be generated by the GuruShots business over the estimated remaining useful life of its primary

assets were sufficient to recover the carrying value of the asset group.

Based on this analysis, the undiscounted cash flows were not

sufficient to recover the carrying value of the long-lived assets.

As a result, the Company was required to perform Step 3 of the impairment

test and determine the fair value of the asset group.

To estimate the fair value of the asset group, the Company utilized the income approach,

which is based on a discounted cash flow (DCF) analysis and calculates the fair value by estimating the after-tax cash flows attributable

to the asset group and then discounting the after-tax cash flows to present value using a risk-adjusted discount rate.

Assumptions used

in the DCF require significant judgment, including judgment about appropriate discount rates, growth rates, and the amount and timing

of expected future cash flows.

The forecasted cash flows were based on the Company’s most recent strategic plan and for periods

beyond the strategic plan, the Company’s estimates were based on assumed growth rates expected as of the measurement date.

believes its assumptions were consistent with the plans and estimates that a market participant would use to manage the business.

discount rate used was intended to reflect the risks inherent in future cash flow projections and was based on an estimate of the weighted

average cost of capital (WACC) of market participants relative to the asset group.

The Company used a discount rate of 30.5 %.

this analysis, the fair value of the GuruShots asset group was below its carrying value.

The Company determined that the fair value of

this asset group was approximately zero and the carrying value of the long-lived assets was fully impaired.

To record the adjustment of the carrying value

of the asset group to fair value, the Company recorded an impairment charge of $ 11.9 million during the second quarter of fiscal 2024.

The impairment charge was allocated to the long-lived assets on a pro-rata basis as follows:

$ 2.5 million to acquired developed technology,

$ 6.4 million to customer relationships, and $ 3.0 million to trade names.

The Company believes its assumptions used to determine the fair

value of the asset group were reasonable.

The following table presents the detail of intangible

assets, net as of July 31, 2024 and 2023 (in thousands):

July 31, 2024

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Accumulated Amortization

Allocation of Impairment Loss

Net Carrying Value

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(in thousands):

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.

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

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 analysis.

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:

The Company performs its annual goodwill impairment

tests on the first day of its fiscal 4 th quarter in accordance with ASC 350-20 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, 2022 to July 31, 2024:

(in thousands)

1 unchanged sentence

Balance as of July 31, 2022

Goodwill acquired during the period

Measurement period adjustment

Goodwill impairment charge

Impact of currency translation

Balance as of July 31, 2023

Goodwill impairment charge

Impact of currency translation

Balance as of July 31, 2024

The total accumulated impairment loss of the Company’s goodwill

as of July 31, 2023 was $ 8.7 million.

The total accumulated impairment loss of the Company’s

goodwill as of July 31, 2024 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)

Note 8—Accrued Expenses and Other Current

Accrued expenses and other current liabilities

consist of the following:

Accrued payroll and bonuses

24 unchanged sentences

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.

In connection with the acquisition of GuruShots, the Company (i) committed

to a retention pool of $ 4 million in cash (in addition to the $ 4 million portion of the retention pool to be paid in the Company’s

Class B common stock discussed in Note 13-Stock-Based Compensation) to be paid to the founders and employees of GuruShots payable over

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

and (ii) agreed to

invest a minimum in user acquisition in the first 24 months following the closing subject to the acquired users generating minimum ROAS

thresholds and payment of an earnout if certain growth targets were met.

In the first quarter of fiscal 2024, the Company and the prior owners

of GuruShots agreed to withdraw and settle claims related to the purchase agreement pursuant to which the Company purchased the equity

of GuruShots, including any dispute about minimum user acquisition spend for GuruShots, any right of the prior owners to an earnout payment

and the Company’s claim for indemnification related to alleged misrepresentations in the agreement.

Legal Proceedings

5 unchanged sentences

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.

office space located in Trondheim, Norway and 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 $ 214,000 and $ 360,000 at July 31, 2024 and 2023, 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

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Operating leases:

Other current liabilities

Accrued expenses and other current liabilities

Other liabilities

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The following table includes the components of

our occupancy costs in our consolidated statements of (loss) income and comprehensive (loss) income:

our occupancy costs in our consolidated statements of operations and comprehensive loss:

Years ended July 31,

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Operating lease cost (1)

Short-term lease cost

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.

(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

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Weighted average remaining lease term:

Operating leases

Operating leases 2.55 years 3.23 years

Weighted average discount rate:

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Note 12—Income Taxes

The components of (loss) income before income taxes are as follows:

The components of (loss) income before income

taxes are as follows (in thousands):

Fiscal year ended July 31,

(in thousands)

(Loss) income before income taxes

Provision for (benefit from) income taxes consisted of the following:

Loss before income taxes

Benefit from (provision for) income taxes consisted

of the following (in thousands):

Fiscal year ended July 31,

(in thousands)

Total current expense

Total deferred expense

(Benefit from) provision for income taxes

Benefit from income taxes

The differences between income taxes expected

federal statutory income tax rate and income taxes reported were as follows:

federal statutory income tax rate and income taxes reported were as follows (in thousands):

Fiscal year ended July 31,

(in thousands)

U.S federal income tax at statutory rate

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Stock-based compensation

(Benefit from) provision for income taxes

The Company is subject to taxation in the United States and certain

foreign jurisdictions.

Benefit from 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 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

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Significant components of the Company’s

deferred tax assets and deferred tax liabilities are as follows:

(in thousands)

deferred tax assets and deferred tax liabilities are as follows (in thousands):

Deferred tax assets:

Depreciation and amortization

Net operating loss carryforwards (Foreign)

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Stock-based compensation

Depreciation and amortization

Net deferred tax assets

Less valuation allowance

Total deferred tax assets

Less valuation allowance

Net deferred tax assets

At July 31, 2024 and 2023, the Company had available

state NOL carryforwards from domestic operations of approximately $ 0.1 million and $ 0.9 million, respectively, to offset future taxable

state net operating loss (“NOL”) carryforwards from domestic operations of approximately $ 0 and $ 741,000 , respectively,

to offset future taxable income.

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.

At July 31, 2024 and 2023, 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

(in thousands):

Fiscal year ended July 31,

(in thousand)

Balance at beginning of year

Additions related to stock-based compensation

Balance at end of year

Reserves deducted from deferred income taxes, net:

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of this reporting date.

In the fiscal years ended July 31, 2023 and 2022, the Company recorded no interest and penalties on income taxes.

In the fiscal years ended July 31, 2024 and 2023, the Company recorded $ 4,500 in interest and penalties on income

At July 31, 2024 and 2023, 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.

The Company currently remains subject to examinations

federal, state, and foreign tax returns generally for fiscal years 2019 through 2023.

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 convention.

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.

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.

At July 31, 2024, there were 346,000 shares of

Class B common stock available for awards under the 2016 Incentive Plan before accounting for the remaining 170,000 contingently issuable

shares related to the DSUs with both service and market conditions discussed below.

Stock-based compensation

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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

models incorporate assumptions as to stock price volatility, the expected term 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.

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 2024 and fiscal 2023, the Company recognized

stock-based compensation for its employees and non-employees as follows:

Fiscal Year Ended

(in thousands)

stock-based compensation for its employees and non-employees as follows (in thousands):

Fiscal Year Ended July 31,

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.

As of July 31, 2024, the Company’s unrecognized

stock-based compensation expense was $ 185,000 for unvested stock options, $ 48,000 for unvested DSUs and $ 1.1 million for unvested restricted

stock including $ 769,000 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 2024 and fiscal 2023, restricted stock

and DSUs awards with respect to 246,000 shares and 267,000 shares vested.

In connection with this vesting, the Company purchased 6,328

shares and 6,310 shares respectively of Class B Stock from certain employees for $ 13,000 and $ 17,000 respectively, to satisfy tax withholding

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

In the fiscal years ended July 31, 2024 and 2023

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.

there was no 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

a 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 period.

In fiscal years 2024 and 2023, 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.

Committee approved grants of options to purchase 18,000 and 58,000 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 2024 and 2023 were $ 32,000 and $ 104,000 respectively based on the estimated fair value of the

options on the grant dates.

In fiscal 2024, the Company received proceeds

of $ 2,975 from the exercise of stock options for which the Company issued 2,500 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

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

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

of 5,200 shares and 57,000 shares in fiscal 2024 and fiscal 2023 respectively primarily due to employee resignations.

Repricing of Outstanding and Unexercised Options

On October 20, 2022, the Board unanimously approved

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Fiscal year ended July 31, 2024 2023

Expected term

Expected term 6.0 years 6.0 years

Volatility 87.7 % 90.0 %

Risk free interest rate 4.1 % 3.9 %

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1, 2016 and options granted under the 2016 Incentive Plan adopted on June 2, 2016:

Stock Options

Weighted- Average

Number of Options (in thousands)

Exercise Price

Intrinsic Value

(in thousands)

Stock Options Weighted-Average Aggregte

Number of Options Weighted-Average Remaining Contractual Intrinsic Value

(in thousands) Exercise Price Term (in years) (in thousands)

Outstanding at July 31, 2022 857 $ 2.76 5.88 $ 763

Granted 58 2.35

Exercised ( 2 ) 1.19

Cancelled / forfeited ( 57 ) 7.83

Outstanding at July 31, 2023 856 $ 1.79 4.98 $ 346

Granted 18 2.45

Exercised ( 2 ) 1.19

Cancelled / forfeited ( 5 ) 1.96

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At July 31, 2024, there was approximately $ 185,000

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 1.9 years.

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.

Restricted Stock

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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.

2024 and 2023, the Company has amortized $ 1.2 million and $ 1.3 million in stock-based compensation expenses related to these shares.

fiscal 2024, 6,262 shares were forfeited due to resignations.

In fiscal 2023, 51,143 shares were forfeited due to resignations.

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cost related to these non-vested restricted shares, which is expected to be recognized over a weighted-average period of 1.6 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.

In fiscal 2024 and fiscal 2023, 213,000 and 237,000 ,

previously restricted shares vested, respectively.

There were no shares repurchased in connection with tax withholdings related to these

vesting events.

The following represents restricted shares activity

for the fiscal years ended July 31, 2024 and 2023:

Number of Shares

Weighted Average Grant Date Fair Value

Non-vested stock award as of July 31, 2022

Granted (GuruShots Retention Bonus shares)

Non-vested stock award as of July 31, 2023

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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

30% of the DSU’s (or 87,396) had service

vesting conditions only, with a vesting schedule of 25% on September 7, 2022, 33% on September 7, 2023, and the 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.

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has not been met by September 7, 2024, the DSUs with a market condition shall expire.

See Note 18, Subsequent Events .

In fiscal 2024, the Company purchased 6,328 shares

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obligations in connection with the vesting of DSUs.

The following represents restricted shares activity for the fiscal

years ended July 31, 2023 and 2022:

The following represents DSU activity for the fiscal years ended July

31, 2024 and 2023:

Number of Shares

Weighted Average Grant Date Fair Value

Non-vested DSU award as of July 31, 2022

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Non-vested DSU award as of July 31, 2024

(1) Includes 203,924 DSUs (or 70 % of total awards) of which vesting

are subject to both service and market condition.

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.

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 period.

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.

At July 31, 2023, there were 202,038 non-vested

DSUs and the unrecognized compensation expense related to unvested DSUs was an aggregate of $ 48,000 which is expected to be recognized

over a weighted-average period of 1.1 years.

over a weighted-average period of 0.3 year.

Note 14—Related Party Transactions

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owed IDT $ 2,000 and $ 8,000 respectively.

The activities between the Company and IDT were as follows (in thousands):

The activities between the Company and IDT were

as follows (in thousands):

Fiscal years ended July 31,

(in thousands)

Balance at beginning of year

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Cash payments made to IDT

* Due to IDT is included in accrued expenses and other current

* Due to IDT is included in accrued expenses and other current liabilities

On June 19, 2024, the Company signed a revenue sharing agreement with

National Retail Services, Inc.

(“NRS”), a wholly owned subsidiaries of IDT, whereby the Zedge group of companies (Zedge, Emojipedia

and GuruShots) will provide a selection of their digital content for display on NRS’s screens and share in the revenue generated

from the resulting advertisements.

In fiscal 2024 the Company’s revenue generated in accordance to the NRS revenue sharing agreement was $ 28,000 .

As of July 31, 2024, the

Company was owed $ 19,000 from NRS which is included in prepaid expenses and other receivables.

The Company is party to a consulting agreement

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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 $ 60,000 respectively, to Activist in the fiscal years ended July 31, 2024 and 2023, respectively.

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maker is its Chief Executive Officer as of July 31, 2024.

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

Effective Q1 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)

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 (in thousands):

Fiscal Year Ended July 31,

Zedge Marketplace

Total Revenues

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.

Total loss from operations

The CODM does not evaluate operating segments

using asset information and, accordingly, the Company does not report asset information by segment.

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:

of the United States, which are located primarily in Israel and Norway, were as follows (in thousands):

United States

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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.

At October 27, 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

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Once repaid, a Term Advance may not be reborrowed.

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

On November 15, 2023, the Company elected to prepay

the entire principal amount of $ 2 million.

The Amended Loan Agreement may also require early

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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.

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”.

This covenant shall be tested quarterly as of the end of each fiscal quarter.

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

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To be agreed upon

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.

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

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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.

Plan, effective August 1, 2016, available to all employees based in the United States meeting certain eligibility criteria.

Plan permits participants to elect pre-tax or after-tax salary deferrals that will be contributed to the 401(k) Plan, not to exceed the

limits established by the Internal Revenue Code.

The 401(k) Plan provides for enhanced safe harbor employer matching contributions.

contributions made by participants and safe harbor matching contributions by the Company will be fully vested.

The Company’s Class

B common stock is not an investment option for elective deferrals by the 401(k) Plan’s participants.

However, matching contributions

may be made in shares of Class B common stock 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.

to the 401(k) Plan were $ 49,000 and $ 45,000 for the fiscal years ended July 31, 2024 and 2023, 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

the Company opted to contribute 21,629 shares and 18,278 shares of the Company’s Class B common stock to the 401(k) Plan for fiscal

2024 and fiscal 2023, 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.

Term Loan and Revolving Credit Facility

with Western Alliance Bank

On October 28, 2024, the Company entered into

an Amended and Restated Loan and Security Agreement Modification Agreement (“Amended Loan Agreement”) with WAB.

which, WAB agreed to renew the $ 4,000,000 revolving credit facility for another four-year term through October 28, 2028 and remove certain

provisions, including financial covenants, in respect of the $ 2,000,000 Term Loan which was repaid in full in November 2023.

Foreign Exchange Forward Contracts

On August 1, 2024 the Company entered into the following FX forward

contracts with WAB, which reduced the available borrowing under the revolving credit facility by $ 300,000 .

Dollar Amount

Operating Lease

On August 7, 2024, the Company renewed its lease for the office space

in Tel Avis for a two-year term.

Future minimum lease payments related to this

lease renewal are as follows (in thousands):

Years ending July 31,

Operating Leases

Total future minimum lease payments

Less imputed interest

DSUs with both service and market condition

On September 7, 2024, 169,820 DSUs with both service

and market condition expired because the market capitalization condition has not been met.

Share Buyback Program

On September 9, 2024, our Board approved a new

$ 5 million share buyback program after the completion of our prior $ 3 million share buyback program on August 28, 2024.

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