Zedge, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words “believes,” “anticipates,” “expects,” “plans,” “intends” and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties that could result in those differences include, but are not limited to, those discussed under Item 1A to Part I “Risk Factors” in this Annual Report. The forward-looking statements are made as of the date of this Annual Report, and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our reports filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our reports on Forms 10-Q and 8-K. The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report. Overview Zedge builds digital marketplaces and friendly competitive games around content that people use to express themselves. Our leading products include Zedge Ringtones and Wallpapers, which we refer to as our “Zedge App,” a freemium digital content marketplace offering mobile phone wallpapers, video wallpapers, ringtones, and notification sounds as well as pAInt, a generative AI wallpaper maker, GuruShots, a skill-based photo challenge game, and Emojipedia, the #1 trusted source for ‘all things emoji’. Our vision is to enable and connect creators who enjoy friendly competitions with a community of prospective consumers in order to drive commerce. 50 We are part of the ‘Creator Economy,’ which is estimated to be worth between $191 billion and $250 billion globally in 2025, with some forecasts placing the global market size as high as $848 billion by 2032 121314 . According to multiple reports, there are now over 207 million active content creators worldwide. 1516 Furthermore, between 45% and 47% of creators identify as working full-time in this space 171819 . Most creators earn modest incomes, and studies suggest that only a small portion, approximately 4%, of creators earn more than $100,000 per year 202122 . We view the Creator Economy as an opportunity for Zedge to expand our business, especially as we execute by connecting our gamers with our marketplace. Our Zedge App (which is named “Zedge Wallpapers” in the App Store) offers a wide array of mobile personalization content including wallpapers, video wallpapers, ringtones, and notification sounds, and is available both in Google Play and the App Store. Over the past two fiscal years, our Zedge App has had between 22.1 million and 28.7 million MAU, ending with 23.3 million MAU as of July 31, 2025. MAU is a KPI for our Zedge app that captures the number of unique users that used our Zedge App during the final 30 days of the relevant period. Our platform allows creators to upload content to our marketplace and avail it to our users either for free or, via ‘Zedge Premium,’ the section of our marketplace where we offer premium content for purchase. In turn, our users utilize the content to personalize their phones and express their individuality. In fiscal 2023, we introduced pAInt, a generative AI wallpaper maker in the Zedge App. A generative AI wallpaper maker is an implementation of artificial intelligence software that can create images from text descriptions. To interface with a generative AI image maker, a user enters a text description of the image they want to create, and the software generates an image based on that description. Today, pAInt is available for text-to-image, image-to-image, and text-to-audio creation. In addition, we upgraded Zedge+, our paid subscription offering by bundling together an ad-free experience with value adds making the offering more compelling. We often refer to our freemium ringtones and wallpapers, our subscription offering, the functionality for creators to market their products and ancillary offerings and features both in our Zedge App and website, as our Zedge Marketplace. The Zedge Marketplace’s monetization stack consists of advertising revenue generated when users view advertisements when using the Zedge App (and the related functionality under the zedge.net website), the in-app sale of Zedge Credits, our virtual currency, that is used to purchase Zedge Premium content, and a paid-subscription offering that provides an ad-free experience to users that purchase a monthly, annual or lifetime subscription. In April 2023, we introduced a subscription tier in the iOS version of the app. As of July 31, 2025, we had approximately 984,000 active subscribers. In fiscal 2025, we began building DataSeeds.AI (“DataSeeds”), a business-to-business marketplace offering access to our rapidly growing catalog of over 30 million high-quality, fully rights-cleared images for AI training, ecommerce, and stock photos. Uniquely positioned to deliver custom content at scale, DataSeeds leverages its global creator network, tens of thousands of photographers from GuruShots and creators from Zedge to fulfill highly specific client briefs across geographies, themes, and use cases. DataSeeds addresses a critical challenge facing foundational models today: the need for edge-case visual content to improve accuracy and performance. Each asset can be enhanced with detailed annotations, segmentation masks, technical metadata, and peer-based quality rankings, ensuring datasets are both robust and production-ready. With scalable infrastructure and fast turnaround times, DataSeeds is a powerful partner for enterprises building the next generation of AI-powered applications. 12 https://www.coherentmarketinsights.com/industry-reports/global-creator-economy-market 13 https://market.us/report/creator-economy-market/ 14 https://inbeat.agency/blog/creator-economy-statistics 15 https://demandsage.com/creator-economy-statistics/ 16 https://www.forbes.com/sites/stevenbertoni/2025/06/16/forbes-top-creators-2025/ 17 https://www.wpbeginner.com/research/creator-economy-statistics-that-will-blow-you-away/ 18 https://nealschaffer.com/creator-economy-statistics/ 19 https://www.spiralytics.com/blog/content-creator-statistics-2025/ 20 https://blog.invitemember.com/how-much-do-content-creators-make/ 21 https://brentonway.com/top-influencer-marketing-statistics/ 22 https://blog.hootsuite.com/instagram-statistics/ 51 In April 2022, we acquired GuruShots Ltd (“GuruShots”), a gamified photography platform that engages a global community of photographers through daily challenges, real-time feedback, and a competitive, interactive experience. GuruShots offers a platform spanning iOS, Android, and the web that provides a fun, educational and structured way for amateur photographers to compete in a wide variety of contests showcasing their photos while gaining recognition with votes, badges, and awards. We estimate that the total addressable market of amateur photographers using their smartphones to take and publicly share artistic photos is 30-40 million people per month and that the market is still in its infancy. Every month, GuruShots stages more than 300 competitions that result in players uploading in excess of 550,000 photographs and casting close to 2.8 billion “perceived votes,” which are calculated by multiplying the number of votes that each player casts by a weighting factor based on various factors related to that user. To improve engagement, GuruShots has adopted a set of retention dynamics focused on individual, team and community dynamics that create a sense of belonging, inspiration, recognition, improvement, and competition. GuruShots utilizes a ‘Free-to-Play’ business model and generates revenue through in-app purchases of virtual currency. Players can use this currency to unlock competitions or gain an edge by purchasing resources and participating in additional gameplay. Over the past eight years, the monthly average paying player spend has increased in excess of 6.2% annually to more than $40.9 per player. In fiscal 2024, we revamped GuruShots’ customer onboarding experience by guiding new players through simplified photo competitions of limited size and duration. The upgrade was designed to enhance the gaming experience for new players by increasing their potential for winning and providing immediate gratification. The new onboarding has shown improvements in engagement, retention, and revenue from new users. In addition, we migrated to a coin-based economy with multiple currencies in order to enable more players to earn and spend their currency on in-game resources. Since the acquisition, GuruShots has faced challenges in growth and profitability, and its revenue has declined. We have cut costs at GuruShots, including as part of the restructuring implemented in January 2025, and have materially scaled back on PUA for the unit. In parallel, we are developing a plan, referred to as GuruShots 2.0, to revamp GuruShots’ offering in order to put it on a growth trajectory and unlock the potential value of this asset. Our strategy focuses on attracting new users and converting them into recurring, paying players. To date, we have introduced a fun and comprehensive onboarding experience to draw new users into the gameplay with ease and migrated to a coin-based in-game economy to enable more opportunities to reward and monetize players Historically, we marketed GuruShots to prospective players primarily via PUA channels including Google, Meta, TikTok and other platforms, utilizing a variety of ad formats, such as static and video ads. As part of the restructuring plan, we have significantly reduced PUA investment to improve ROAS and intend to continue managing PUA spend in this framework performance. In addition to its potential as a standalone game, we believe that the extensive library of photographs generated by GuruShots players through submissions to GuruShots’ competitions represents a valuable dataset for our emerging DataSeeds offering. To date, we have secured rights to license a portion of this library for various applications, including AI training, and we continue to expand the licensable catalog by securing rights to additional photographs. We believe the scale and distinctive characteristics of this dataset position it as a meaningful resource for DataSeeds’ target market. In August 2021, we acquired Emojipedia Pty Ltd (“Emojipedia”), the world’s leading authority dedicated to providing up-to-date and well-researched emoji definitions, information, and news, as well as World Emoji Day and the annual World Emoji Awards. In July 2025, Emojipedia received approximately 48.4 million monthly page views and has approximately 8.9 million monthly active users as of July 31, 2025 of which approximately 46.2% are located in well-developed markets. It is the top resource for all things emoji, offering insights into data and cultural trends. Post its acquisition in August 2021, Emojipedia was immediately accretive to earnings. In the past year, we have made many changes to Emojipedia including an AI-powered emoji sticker generator tool as well as an extensive emoji sticker library. 52 In late September 2025, Google released an update to its Search Engine Results Page (SERP) enabling users to copy emojis directly from search results rather than being directed to third-party sites such as Emojipedia. In addition, AI platforms, including ChatGPT and Claude, now return emoji results in response to user queries. While it is too early to accurately quantify the impact of these changes on Emojipedia’ s monthly active users (MAU), we believe they are likely to result in reduced traffic and adversely affect revenue. In light of these developments, we will evaluate potential mitigation strategies and determine whether such measures warrant investment given the associated costs and expected benefits. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses as well as the disclosure of contingent assets and liabilities. Critical accounting policies are those that require application of management’s most subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. The methods, estimates, interpretations, and judgments we use in applying our most critical accounting policies can have a significant impact on the results that we report in our consolidated financial statements. The SEC considers an entity’s most critical accounting policies to be those policies that are both most important to the portrayal of the entity’s financial condition and results of operations and those that require the entity’s most difficult, subjective, or complex judgments, often as a result of the need to make assumptions and estimates about matters that are inherently uncertain. We believe that the following critical accounting policies reflect the more significant judgments, estimates and assumptions used in the preparation of our consolidated financial statements. ● Revenue Recognition ● Intangible Assets-Net ● Goodwill ● Capitalized software and technology development costs ● Stock-Based Compensation ● Restructuring Charges ● Income Taxes See Note 1, Description of Business and Summary of Significant Accounting Policies, to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for a complete discussion of our significant accounting policies. Revenue Recognition We generate revenue from the following sources: (1) Advertising; (2) Paid Subscription; (3) Other revenues including primarily Zedge Premium (the section of our marketplace where we offer premium content for purchase), and (4) Digital Goods and Services. The substantial majority of our revenue is generated from selling our advertising inventory (“Advertising Revenue”) to advertising networks and advertising exchanges. Our weekly, 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% of the net purchase price, after payment of fees to Google Play or the App Store, when users purchase licensed content using Zedge Credits or unlock licensed content by watching a video or taking a survey on Zedge Premium. Sales and other similar taxes are excluded from revenues. Advertising Revenue : We generate the bulk of our revenue from selling the Zedge Marketplace’s advertising inventory to advertising networks and advertising exchanges. ● Advertising Networks. An advertising network is a third-party relationship where buyers of advertising inventory go to purchase either specific targeted inventory or a large scale of inventory at a set price. Advertising Networks serve as an indirect source of advertising fill to a variety of branded ad campaigns and performance-based ad campaigns. ● Advertising Exchanges. An advertising exchange is similar to an advertising network, except that the exchange typically bids in real-time for advertising inventory. Advertisers may utilize an exchange when looking for scale or specific audiences, and accept that the price will vary based on when and how much volume of inventory they wish to buy. 53 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: Beginning in January 2019 and April 2023, we started offering paid subscription services sold through Google Play and the App Store, respectively. When a customer subscribes, they execute a clickthrough agreement with Zedge outlining the terms and conditions between Zedge and the subscriber. Google Play and the App Store process subscription prepayment on Zedge’s behalf, and retain a fee of up to 30%. Subscriptions are nonrefundable after a period of seven days. Paid subscriptions are automatically renewed at expiration unless cancelled by subscribers. While customers can cancel at any time, they will not receive any refund, and will continue to receive the 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 the 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 lifetime subscriptions deemed to have 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 our users. The content owner sets the price and end users 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 end users can acquire the content by watching a brief video ad. 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, Google Play or the 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 App Store fee (“Royalty Payment”) and we receive the remaining 30%, which is recognized as revenue. Digital Goods and Services : GuruShots generates the substantial majority of its revenues from the sale of virtual tokens that players can redeem for in-game goods and services (e.g., power-ups, entry fees, or resource bundles). GuruShots distributes its game to users through mobile platforms such as Apple’s App Store and Google Play, as well as via the internet. Through these platforms, users can download the free-to-play game and can purchase virtual goods which are redeemed in the game to enhance their game-playing experience. Players can pay for their virtual item purchases through various widely accepted payment methods offered in the game. Payments from players for virtual goods are required at the time of purchase, are non-cancellable and relate to non-cancellable contracts that specify GuruShots’ obligations and cannot be redeemed for cash nor exchanged for anything other than virtual goods within the GuruShots’ game. The purchase price is a fixed amount which reflects the consideration that GuruShots expects to be entitled to receive in exchange for use of virtual goods by its customers. The platform providers collect proceeds from the game players and remit the proceeds to GuruShots after deducting their respective platform fees. Sales and other taxes collected from customers on behalf of governmental authorities are accounted for on a net basis and are not included in revenues or operating expenses. GuruShots’ performance obligation is to display the virtual goods in game play based upon the nature of the virtual item. 54 GuruShots categorizes its virtual goods as consumable. GuruShots’ game sells only consumable virtual goods. Consumable virtual goods represent items that can be consumed by a specific player action and do not provide the player any continuing benefit following consumption. GuruShots has determined - through a review of game play behavior - that players generally do not purchase additional virtual goods until their existing virtual goods balances have been substantially consumed. This review includes an analysis of game players’ historical play behavior, purchase behavior, and the amounts of virtual goods outstanding. Revenue is recognized once the virtual goods are sold. GuruShots monitors its analysis of customer play behavior on a quarterly basis. As discussed above, GuruShots concluded that revenue related to the promise of enhancing users’ gaming experience through in-game resource purchases should be recognized ratably over the period of benefit period (i.e., the period over which the enhanced gaming experience is provided). However, for practical reasons, GuruShots does not defer the portion of revenue attributable to future uses of resources as of any given balance sheet date. This is due to the duration of the enhanced gaming experience that is provided being, in substantially all of the cases, and applying the portfolio approach (as GuruShots reasonably expects that the effects on the financial statements of applying Accounting Standards Codification (“ASC”) 606 guidance to the portfolio would not differ materially from applying ASC 606 guidance to the individual contracts), a very short time frame ranging from a few hours to less than two weeks. Therefore, the result of recognizing the related revenues at the point in time which user first consumes the respective resource would yield a result that is not substantially different then ratable recognition over the period of benefit. Accordingly, revenue is recognized once the virtual goods are sold. Gross Versus Net Revenue Recognition We report revenue on a gross or net basis based on management’s assessment of whether we act as a principal or agent in the transaction. To the extent we act as the principal, revenue is reported on a gross basis. To the extent we act as the agent, revenue is reported on a net basis. The determination of whether we act as a principal or an agent in a transaction is based on an evaluation of whether we control the good or service prior to transfer to the customer. We generally report our advertising revenue net of amounts due to agencies and brokers because we are not the primary obligor in the relevant arrangements, we do not finalize the pricing, and we do not establish or maintain a direct relationship with the advertiser. GuruShots is primarily responsible for providing the virtual goods, has control over the content and functionality of games and has the discretion to establish the virtual goods’ prices. Therefore, GuruShots is the principal and, accordingly revenues are recorded on a gross basis. Payment processing fees paid to platform providers are recorded within selling, general and administrative expenses. We report subscription revenue gross of the fee retained by Google Play and the App Store, as the subscriber is our customer in the contract and we control the service prior to the transfer to the subscriber. With respect to Zedge Premium, Zedge, as provider of the platform, is effectively operating as a broker or intermediary connecting online content providers with the end user. While we use gross revenue (net of the 30% fee retained by Google Play or the App Store when a user purchases Zedge Credits) as a performance metric, we record revenue on a net basis from Zedge Premium which consists of a 30% platform fee, in-app purchases profit and breakage. Content providers are paid their portion of revenue which is a 70% share of the gross revenue calculated. Intangible Assets-Net We test the recoverability of our intangible assets with finite useful lives whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. We test for recoverability based on the projected undiscounted cash flows to be derived from such asset. If the projected undiscounted future cash flows are less than the carrying value of the asset, we will record an impairment loss, if any, based on the difference between the estimated fair value and the carrying value of the asset. We generally measure fair value by considering sale prices for similar assets or by discounting estimated future cash flows from such asset using an appropriate discount rate. Cash flow projections and fair value estimates require significant estimates and assumptions by management. Should the estimates and assumptions prove to be incorrect, we may be required to record impairments in future periods and such impairments could be material. 55 Intangible assets are carried at cost, less accumulated amortization, unless a determination has been made that their value has been impaired. Intangible assets are amortized on a straight-line basis over their estimated useful lives of between five to fifteen years. We review identifiable amortizable intangible assets to be held and used for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is based on the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the carrying value of the asset over its fair value. We recorded $11.9 million impairment charges in Q2 of our fiscal year ended July 31, 2024. Goodwill Goodwill represents the excess of purchase price and related costs over the fair value of assets acquired and liabilities assumed of the business acquired. Under ASC 350, Intangibles-Goodwill and Other , goodwill is not amortized, but instead is tested for impairment annually, or if certain circumstances indicate a possible impairment may exist. We test goodwill for impairment on the first day of the fourth fiscal quarter or upon the occurrence of events or changes in circumstances that indicate that the asset might be impaired. Goodwill is assigned to our reporting units, which are our operating segments, or components of an operating segment, that constitute a business for which discrete financial information is available, and for which segment management regularly reviews the operating results. During the annual impairment review process we have the option to first perform a qualitative assessment (commonly referred to as “step zero”) over relative events and circumstances to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value or to perform a quantitative assessment (“step one”) where we estimate the fair value of each reporting unit using primarily a market capitalization approach. We would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized would not exceed the total amount of goodwill allocated to that reporting unit. Additionally, we consider income tax effects from any tax-deductible goodwill on the carrying amount of its reporting unit when measuring the goodwill impairment loss, if applicable. Capitalized software and technology development costs Capitalized Software and Technology Development Costs-Internal-Use Software Software and technology development activities generally fall into three stages: 1 Planning Stage activities include developing a project or business plan that outlines the goals for the content distribution platform or new product or service; determining the functionality; identifying hardware and software applications that will achieve functionality, security, and traffic flows; and selecting the internal resources that will be assigned to the project as well as the external vendors where applicable. 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; and 3 Post-Implementation/Operating Stage activities address training, administration, maintenance, and all other activities to operate an existing content distribution platform or new product or service. During the Planning Stage, we charge all costs to expense as incurred. During the Application and Infrastructure Development Stage, we begin to capitalize costs when the project has been properly authorized and we determine that completion is probable. If a project is subsequently cancelled prior to placement in service, costs that have been capitalized to date will be reviewed for potential impairment. Capitalization ceases no later than the point at which a computer software project is substantially complete and ready for its intended use. Amortization, which is generally over three years, begins for each project when the code is ready for use, whether or not it is actually placed in service at that time (an exception being if the project’s functionality completely depends on the completion of another project, in which case, amortization begins when that other project is ready for use). 56 During the Post-Implementation/Operating Stage, we expense training costs and maintenance costs as incurred. However, upgrades and enhancements, defined as modifications to existing internal-use software that result in additional functionality (modifications to enable the software to perform tasks that it was previously incapable of performing, normally requiring new software specifications and perhaps a change to all or part of the existing software specifications) are treated as though they were new projects, and are assessed utilizing the same stages and criteria on a project-by-project basis. As such, internal costs incurred for upgrades and enhancements are expensed or capitalized based on the requirements noted above, while costs incurred for maintenance are expensed as incurred. These projects are tracked individually, such that the beginning and ending of the capitalization can be appropriately established, as well as the amounts capitalized therein. Amortization of these costs is included in depreciation and amortization in the consolidated statements of operations and comprehensive loss. Capitalized Software and Technology Development Costs-Software to Be Sold, Leased, or Marketed 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. We evaluate these long-lived assets for impairment whenever circumstances arise that indicate the carrying amount of an asset may not be recoverable. The Company’s strategic reassessment of GuruShots’ operations in connection with the restructuring initiative resulted in a $0.8 million impairment of capitalized software and technology development costs which is recorded in the Company’s consolidated statements of operations and comprehensive loss for the fiscal year ended July 31, 2025. 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 operations and comprehensive loss. Restructuring Charges The restructuring charges incurred by the Company in fiscal 2025 consist primarily of cash expenditures for compensation and severance payments, employee benefits, payroll taxes and related facilities restructuring costs associated with the Company’s workforce reduction announced (and substantially implemented) in the second quarter of fiscal 2025. Employee termination benefits are recognized as a liability at estimated fair value, at the time of communication to employees, unless future service is required, in which case the costs are recognized ratably over the future service period. Ongoing termination benefits are recognized as a liability at estimated fair value when the amount of such benefits is probable and reasonably estimable. Charges related to facilities restructuring actions are comprised of costs related to early termination of the lease agreement and impairment of the right-of-use asset in connection with the abandonment of the property. 57 Income Taxes 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 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. 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 our consolidated statements of operations and comprehensive loss. Trends and Uncertainties Current Economic Conditions The majority of our users and employees are located outside of the United States exposing us to a range of economic factors and regulations including foreign exchange fluctuations. There is uncertainty surrounding macroeconomic factors in the U.S. and globally. We believe these macroeconomic conditions coupled with the global political climate and unrest, including the ongoing wars between Ukraine and Russia and Israel and Hamas, may negatively impact our performance. The Israel-Hamas and Israel-Hezbollah Conflicts Given our operations in Israel, the impact of economic, political, geopolitical, and military conditions in the region directly affects us, including conflicts involving missile strikes, infiltrations, and terrorism. Notably, on October 7, 2023, Hamas, a designated terrorist organization, launched a savage terror attack in Israel, along with launching thousands of rockets into Israeli sovereign territory. The State of Israel declared war against Hamas resulting in the mobilization of more than 300,000 army reserve. In addition, Hezbollah, another designated terrorist organization, based in Lebanon, has been indiscriminately shelling Israeli territory. Since October 8, 2023, the Houthi rebels based in Yemen have also launched ballistic missiles and kamikaze drones at Israel, and the Islamic Republic of Iran has on two occasions attacked Israel with a barrage of ballistic missiles. In June of 2025 Israel and Iran entered into the ’12-Day War’ during which our office and schools were closed and there were shelter in place orders that were issued. The constant barrage of ballistic missiles launched from Iran and Yemen interrupted our operations. Although a temporary ceasefire is in place, it is unclear if it is sustainable. The extent and duration of this conflict remain uncertain. Israel’s response to Hamas’ unprecedented attack led to the mobilization of IDF reservists, affecting our workforce. Prior to this, changes in Israel’s judicial system had already raised concerns about the business environment, compounded by recent events, potentially impacting foreign investment, currency fluctuations, credit ratings, interest rates, and security markets. Furthermore, regional political unrest and threats from extremist groups, notably Iran, pose additional risks. Management and our Board of Directors are closely monitoring the situation in Israel to address potential business disruptions and implications. 58 AI Technology Trends A key component of our growth strategy involves the adoption and utilization of AI, which introduces certain risks that may materially and adversely affect our business, financial condition, results of operations, and reputation. We incorporate AI into products such as pAInt and rely on AI for content moderation, personalization, and user engagement, but market demand for AI-driven offerings remains uncertain and may be outpaced by competitors. Compliance with evolving AI laws, such as the EU AI Act, may impose significant operational costs. Additionally, in late September 2025, Google released an update to its Search Engine Results Page (SERP) enabling users to copy emojis directly from search results rather than being directed to third-party sites such as Emojipedia, and AI platforms, including ChatGPT and Claude, now return emoji results in response to user queries. While it is too early to accurately quantify the impact of these changes on Emojipedia’s MAU, we believe they are likely to result in reduced traffic and adversely affect revenue. These uncertainties could significantly diminish the value of our services and materially and adversely affect our revenue, profitability, and prospects. Key Performance Indicators Our results of operations discussion includes disclosure of four key performance indicators - Monthly Active Users (MAU) and Average Revenue Per Monthly Active User (ARPMAU) for our Zedge App and Monthly Active Payers (MAP) and Average Revenue Per Monthly Active Payer (ARPMAP) for GuruShots. Zedge App’s MAU and ARPMAU MAU is a key performance indicator that captures the number of unique users that used our Zedge App in the last thirty days of the relevant period, which is important to understanding the size of the user base for our Zedge App which is a significant driver of revenue. Changes and trends in MAU are useful for measuring the general health of our business, gauging both present and potential customers’ experience, assessing the efficacy of product improvements and marketing campaigns and overall user engagement. ARPMAU is valuable because it provides insight into how well we monetize our users and the changes and trends in ARPMAU are indications of how effective our monetization investments are. As of July 31, 2025 MAU declined 11.1% year over year primarily due to attrition in emerging markets, particular in Latin America and South Asia. As a result, users in emerging markets represented 76.7% of our MAU as of July 31, 2025 compared to 78.9% a year prior. ARPMAU increased 16.9% for the three months ended July 31, 2025 when compared to the same period a year ago, primarily due to higher advertising rate and higher subscription revenue. The following tables present the MAU – Zedge App and ARPMAU – Zedge App for the three months ended July 31, 2025 as compared to the same period a year ago: Three Months Ended July 31, (in millions, except ARPMAU - Zedge App) 2025 2024 % Change MAU - Zedge App 23.3 26.1 -11.1 % Developed Markets MAU - Zedge App 5.4 5.5 -1.8 % Emerging Markets MAU - Zedge App 17.8 20.6 -13.6 % Emerging Markets MAU - Zedge App/Total MAU - Zedge App 76.7 % 78.9 % -2.8 % ARPMAU - Zedge App $ 0.0925 $ 0.0791 16.9 % 59 The following charts present the MAU – Zedge App and ARPMAU – Zedge App for the consecutive eight fiscal quarters ended July 31, 2025: GuruShots-MAPs and ARPMAP Monthly Active Payers (“MAPs”). We define a MAP as a unique active user on the GuruShots app or GuruShots.com in a month that completed at least one in-app purchase (“IAP”) during that time period. MAPs for a time period longer than one month are the average MAPs for each month during that period. We estimate the number of MAPs by aggregating certain data from third-party attribution platforms. Average Revenue Per Monthly Active Payer (“ARPMAP”). We define ARPMAP as (i) the total revenue from IAPs derived from GuruShots and GuruShots.com in a monthly period, divided by (ii) MAPs in that same period. ARPMAP for a particular time period longer than one month is the average ARPMAP for each month during that period. ARPMAP shows how efficiently we are monetizing each MAP. The following table shows our MAP and ARPMAP for the three months ended July 31, 2025 as compared to the same period a year ago: Three Months Ended July 31, 2025 2024 % Change Monthly Active Payers 3,326 4,521 -26.4 % Average Revenue per Monthly Active Payer $ 43.5 $ 52.5 -17.1 % The following charts present the MAP and ARPMAP – GuruShots for the consecutive eight quarters ended July 31, 2025: Our KPIs related to GuruShots are not based on any standardized industry methodology and are not necessarily calculated in the same manner that other companies or third parties may use to calculate these or similarly titled measures. The numbers that we use to calculate MAP and ARPMAP are derived from data that we generate internally. While these numbers are based on what we believe to be reasonable judgments and estimates for the applicable period of measurement, there are inherent challenges in measuring usage and engagement. We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy. 60 Results of Operations The following table sets forth certain of our consolidated results of operations data for the fiscal year ended July 31, 2025 compared to the fiscal year ended July 31, 2024: Fiscal Year Ended July 31, 2025 2024 $ Change % Change (in thousands, except percentages) Revenues $ 29,398 $ 30,091 $ (693 ) -2.3 % Direct cost of revenues 1,841 1,859 (18 ) -1.0 % Selling, general and administrative 27,187 25,625 1,562 6.1 % Depreciation and amortization 1,149 2,454 (1,305 ) -53.2 % Impairment of intangible assets - 11,958 (11,958 ) -100.0 % Restructuring charges 1,605 - 1,605 nm Loss on disposal of property and equipment 21 - 21 nm Impairment of capitalized software and technology development costs 827 - 827 nm Loss from operations (3,232 ) (11,805 ) 8,573 72.6 % Interest and other income, net 666 626 40 6.4 % Net loss resulting from foreign exchange transactions (151 ) (190 ) 39 20.5 % Income taxes benefit (325 ) (2,198 ) 1,873 85.2 % Net loss $ (2,392 ) $ (9,171 ) $ 6,779 73.9 % nm-not meaningful Comparison of Our Results of Operations for the fiscal years ended July 31, 2025 and 2024 Revenues The following table sets forth the composition of our revenues for the periods indicated: Fiscal Year Ended July 31, 2025 2024 $ Changes % Changes (in thousands, except percentage) Zedge Marketplace Advertising revenue $ 20,338 $ 21,042 $ (704 ) -3.3 % Paid subscription revenue 5,093 4,349 744 17.1 % Other revenues 1,782 1,225 557 45.5 % Total Zedge Marketplace revenue 27,213 26,616 597 2.2 % GuruShots Digital goods and services 2,185 3,475 (1,290 ) -37.1 % Total revenue $ 29,398 $ 30,091 $ (693 ) -2.3 % 61 The following table summarizes our subscription revenue for the periods indicated: Fiscal Year Ended July 31, 2025 2024 % Changes (in thousands, except revenue per subscriber and percentages) Subscription Revenue $ 5,093 $ 4,349 17.1 % Active subscriptions net increase 315 22 1331.8 % Active subscriptions at end of period 984 669 47.1 % Average active subscriptions during the period 789 654 20.6 % Average monthly revenue per active subscription $ 0.54 $ 0.55 -1.8 % The following table presents a reconciliation of subscription billings to the most directly comparable GAAP financial measures for the fiscal years ended July 31, 2025 and 2024. We calculate subscription billings by adding the change in subscription deferred revenue between the start and end of the period to subscription revenue recognized in the same period. Subscription billings is a performance measure that we believe provides useful information to our management and investors as it allows us to better track the growth of the subscription-based portion of our business, which is a critical part of our business plan. The $2.3 million and $1.4 million increase in deferred revenue for the fiscal years ended July 31, 2025 and 2024, respectively, were primarily attributable to the life-time subscription offering we introduced in fiscal 2024. Fiscal Year Ended July 31, 2025 2024 $ Change % Changes (in thousands, except percentages) Subscription Revenue $ 5,093 $ 4,349 $ 744 17.1 % Changes in subscription deferred revenue 2,267 1,356 911 67.2 % Subscription Billings (Non-GAAP) $ 7,360 $ 5,705 $ 1,655 29.0 % The following table summarizes Zedge Premium gross and net revenue for the fiscal years ended July 31, 2025 and 2024. Fiscal Year Ended July 31, 2025 2024 $ Changes % Changes (in thousands, except percentages) Zedge Premium-gross revenue (“GTV”) $ 2,617 $ 2,148 $ 469 21.8 % Zedge Premium-net revenue $ 1,778 $ 1,196 $ 582 48.7 % Gross margin 68 % 56 % For the fiscal year ended July 31, 2025, our advertising revenue decreased by $0.7 million, or 3.3%, from the prior year period primarily due to the decrease in our ad inventory. This decrease was partially offset by an increase in price per advertising impression paid by the advertisers on our platform. For the fiscal year ended July 31, 2025, our subscription revenue increased by $0.7 million, or 17.1%, from the prior year period primarily due to the growth in lifetime subscriptions. Subscription billings increased by $1.7 million, or 29.0%, to $7.4 million in fiscal 2025 from $5.7 million in fiscal 2024. For the fiscal year ended July 31, 2025, our other revenue increased by $0.6 million, or 45.5%, from the prior year period. The increase in fiscal 2025 was primarily due to Zedge Premium net revenue growth which increased $0.6 million, or 48.7%, compared to fiscal 2024. Zedge Premium gross margin was 68% in fiscal 2025 compared to 56% in fiscal 2024. We introduced certain generative AI features in our Zedge App in fiscal 2024 which contributed in part to the higher gross margin in fiscal 2025 as we keep 100% of the associated revenue, i.e. no royalty payment owed to the content creators. 62 For the fiscal year ended July 31, 2025, digital goods and services revenue decreased by $1.3 million, or 37.1%, from the prior year period primarily due to the 27.0% decrease in GuruShots’ MAP year over year. Direct cost of revenues . Direct cost of revenues consists primarily of content hosting, content serving and filtering, and data analytic tools, excluding amortization of capitalized software and technology development costs for both internal used software and software to be sold, leased, or marketed. Fiscal Year Ended July 31, 2025 2024 $ Changes % Changes (in thousands, except percentages) Direct cost of revenues $ 1,841 $ 1,859 $ (18 ) -1.0 % As a percentage of revenues 6.3 % 6.2 % Direct cost of revenues in fiscal 2025 decreased by $18,000, or 1.0%, compared to fiscal 2024 primarily due to the savings from continuing optimizing of our backend infrastructure. Direct cost of revenues as percentage of revenue remained relatively flat year over year at about 6.2% Selling, general and administrative expense . Selling, general and administrative expense (“SG&A”) consists mainly of personnel related expenses, user acquisition costs, stock-based compensation expense (as discussed below), third-party payment processing fees related to in-app purchases (“platform fees”), marketing, consulting, professional fees, software licensing fees, recruiting fees, facilities and public company related expenses. Fiscal Year Ended July 31, 2025 2024 $ Changes % Changes (in thousands, except percentages) Selling, general and administrative $ 27,187 $ 25,625 $ 1,562 6.1 % As a percentage of revenues 92.5 % 85.2 % SG&A expense in fiscal 2025 increased by $1.6 million, or 6.1%, compared to fiscal 2024. The increase was primarily due to the increase in user acquisition costs, platform fee, consulting, professional fees, software licensing fees offset by the decrease in personnel related expenses primarily from the corporate restructuring implemented in January 2025. We ramped up paid user acquisition for our Zedge App significantly but scaled back paid user acquisition for GuruShots in fiscal 2025 when compared to fiscal 2024. As a percentage of revenue, SG&A expense was 92.5% in fiscal 2025 compared to 85.2% in fiscal 2024. Our headcount was 82 and 99 as of July 31, 2025 and 2024, respectively. The reduction in our headcount can be attributed to the corporate restructuring implemented in January 2025. The majority of our employees are based in Lithuania and Israel. SG&A expense also includes stock-based compensation expense including equity grants to employees and consultants, as well as stock issuances to pay for board compensations and 401(k) matching contributions. Certain stock options, deferred stock unit and restricted stock grants are more fully described in Note 13, Stock-Based Compensation , to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. The following table summarizes stock-based compensation expense for the fiscal year ended July 31, 2025 and 2024. Fiscal Year Ended July 31, 2025 2024 $ Changes % Changes (in thousands, except percentages) Stock-based compensation expense $ 1,445 $ 2,141 $ (696 ) -32.5 % Stock-based compensation expense in fiscal 2025 decreased by $0.7 million, or 32.5%, compared to fiscal 2024. The decrease was primarily attributable to lower aggregate fair value related to the deferred stock units (“DSUs”) granted in November 2024 compared to that of the DSUs granted in September 2021 which were being recognized on a graded vesting basis over the requisite service periods. Additionally, our stock-based compensation expense related to the retention bonuses in connection with the GuruShots acquisition were fully recognized as of April 1, 2025, which contributed in part to the year over year decrease. 63 Depreciation and amortization . Depreciation and amortization expense consists mainly of amortization of intangible assets related to the GuruShots (prior to the full impairment charge of $11.9 million recorded in Q2 of our fiscal 2024) and Emojipedia acquisitions, capitalized software and technology development costs of our internal developers on various projects that we invested in specific to the various platforms on which we operate our service. Fiscal Year Ended July 31, 2025 2024 $ Changes % Changes (in thousands, except percentages) Depreciation and amortization $ 1,149 $ 2,454 $ (1,305 ) -53.2 % As a percentage of revenues 3.9 % 8.2 % Depreciation and amortization expense in fiscal 2025 decreased by $1.3 million, or 53.2%, compared to fiscal 2024, primarily due to the $11.9 million impairment charge of intangible assets recorded in Q2 of fiscal 2024 discussed below. Impairment of intangible assets . We performed an impairment assessment of intangible assets of our GuruShots reporting segment in Q2 of fiscal 2024 and determined that its fair value was approximately $0 and recorded a full impairment charge of $11.9 million, as more fully described in Note 7, Intangible Assets, Net and Goodwill , to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K for additional information. Restructuring charges . In fiscal 2025, we recorded approximately $1.6 million in restructuring charges primarily consisting of severance and employee benefits in connection with the global restructuring implemented in January 2025, as more fully described in Note 18 Restructuring and Other Related Charges to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Loss on disposal of property and equipment . In fiscal 2025, we incurred a $21,000 loss on disposal of property and equipment from the closing of our office in Norway in connection with the restructuring implemented in January 2025, as more fully described in Note 18 Restructuring and Other Related Charges to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K Impairment of capitalized software and technology development costs . In fiscal 2025, we wrote off approximately $0.8 million of GuruShots’ capitalized software and technology development costs in connection with the global restructuring implemented in January 2025, as more fully described in Note 18 Restructuring and Other Related Charges to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Interest and other income, net. Fiscal Year Ended July 31, 2025 2024 $ Changes % Changes (in thousands, except percentages) Interest and other income, net $ 666 $ 626 $ 40 6.4 % As a percentage of revenues 2.3 % 2.1 % The increase in interest and other income, net in fiscal 2025 when compared to fiscal 2024 was primarily due to lower interest yield we received on our cash in fiscal 2025, which was partially offset by $65,000 in interest expense related to the $2 million term loan which was repaid in November 2023 and the $50,000 impairment charge related to our investment in a privately held company of which the carrying value was reduced to $0 as of October 30, 2023. 64 Net loss resulting from foreign exchange transactions . Net loss resulting from foreign exchange transactions is comprised of gains and losses generated from movements in Norwegian Krone (“NOK”) and Euros (“EUR”) relative to the U.S. Dollar, including gains or losses from our currency hedging activities. Fiscal Year Ended July 31, 2025 2024 $ Changes % Changes (in thousands, except percentages) Net loss resulting from foreign exchange transactions $ (151 ) $ (190 ) $ 39 20.5 % As a percentage of revenues -0.5 % -0.6 % nm-not meaningful In fiscal 2025 and 2024, net loss resulting from foreign exchange transactions decreased by $39,000 to $151,000 in fiscal 2025 from $190,000 in fiscal 2024 primarily due to unfavorable FX movement related to our NOK and EUR hedging activities in both periods. We recognized a mark-to-market gain of $18,000 and a mark-to-market loss of $51,000 from NOK and EUR hedging activities, respectively, as of July 31, 2025 and July 31, 2024, as more fully described in Note 4, Derivative Instruments, to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. Following closure of our Norwegian office, we do not anticipate further USD to NOK hedging activities. Income taxes benefit. During fiscal 2025, we had a pretax loss of $2.7 million in respect of which we accrued $0.3 million in income tax benefit, an effective tax rate of 11.9% which is lower than the statutory rate primarily due to adjustments related to certain stock-based compensation and the inclusion for U.S. tax purposes, of foreign earnings partially offset by state taxes and foreign tax differential. During fiscal 2024 we had a pretax loss of about $11.4 million in respect of which we accrued $2.2 million in income tax benefit, an effective tax rate of 19.3% which is lower than the statutory rate primarily due to the addition of $185,000 in valuation allowances related to certain stock-based compensation and the inclusion for U.S. tax purposes, of foreign earnings partially offset by state taxes and foreign tax differential. See Note 12, Income Taxes , to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K, for information regarding income taxes. Fiscal Year Ended July 31, 2025 2024 $ Changes % Changes (in thousands, except percentages) Income taxes benefit $ (325 ) $ (2,198 ) $ 1,873 85.2 % As a percentage of revenues -1.1 % -7.3 % Comparison of our Segment Results of Operations The following table presents the results for our Zedge Marketplace and GuruShots segment income (loss) from operations for the period indicated: Fiscal Year Ended July 31, 2025 2024 $ Changes % Changes (in thousands, except percentages) Segment income (loss) from operations: Zedge Marketplace: $ 2,338 $ 5,667 $ (3,329 ) -58.7 % GuruShots: (5,570 ) (17,472 ) 11,902 68.1 % Total $ (3,232 ) $ (11,805 ) $ 8,573 72.6 % 65 In fiscal 2025, our income from operations related to the Zedge Marketplace decreased 58.7% to $2.3 million from $5.7 million in fiscal 2024, primarily due to higher users acquisition costs and higher other expenses incurred in the current period. Additionally, we recorded $1.2 million restructuring charges in fiscal 2025 which contributed in part to the decrease in the segment income from operation related to the Zedge Marketplace. In fiscal 2025, our loss from operations related to GuruShots decreased 68.1% to $5.6 million from $17.5 million in fiscal 2024, primarily due to the $11.9 million impairment charge of intangible assets recorded in the prior period. LIQUIDITY AND CAPITAL RESOURCES General At July 31, 2025, we had cash and cash equivalents of $18.6 million and working capital (current assets less current liabilities) of $14.7 million, compared to $20.0 million and $17.7 million, respectively, at July 31, 2024. We expect that our cash and cash equivalents on hand and our cash flow from operations will be sufficient to meet our anticipated cash requirements for the twelve-month period ending October 28, 2026, including payment of our recently announced quarterly dividend. We maintain a revolving credit facility of $4 million, including a foreign exchange contract facility of up to $7.5 million with WAB, as discussed below under Financing Activities and in Note 16, Revolving Credit Facility , to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. The following table presents selected cash flow information for the periods indicated: Fiscal Year Ended July 31, (in thousands) 2025 2024 $ Changes Cash flows provided by (used in): Operating activities $ 3,422 $ 5,850 $ (2,428 ) Investing activities (549 ) (1,194 ) 645 Financing activities (4,371 ) (2,643 ) (1,728 ) Effect of exchange rate changes on cash and cash equivalents 109 (140 ) 249 (Decrease) increase in cash and cash equivalents $ (1,389 ) $ 1,873 $ (3,262 ) Operating Activities Our cash flow from operations varies significantly from quarter to quarter and from year to year, depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable. Net cash provided by operating activities was $3.4 million for the fiscal year ended July 31, 2025, primarily consisting of a $2.4 million net loss, adjusted for certain non-cash items, which included a $0.5 million impairment charge (net of tax effect) of capitalized software and technology development costs, $1.1 million of amortization, depreciation, impairment of ROU assets and loss on disposal of property and equipment, $1.5 million of stock-based compensation expense, and a net increase in operating assets and liabilities of $2.7 million, primarily from the deferred revenue associated with the lifetime subscriptions sold in fiscal 2025. Net cash provided by operating activities was $5.8 million for the fiscal year ended July 31, 2024, primarily consisting of $9.2 million of net loss, adjusted for certain non-cash items, which included a $9.5 million impairment charge (net of tax effect) of intangible assets, $2.5 million of amortization, depreciation, and write-offs, $2.1 million of stock-based compensation expense, and a net increase in operating assets and liabilities of $0.9 million. 66 Changes in Trade Accounts Receivable Gross trade accounts receivables were $3.2 million and $3.4 million at July 31, 2025 and 2024, respectively. Our cash collections in fiscal 2025 and fiscal 2024 were $30.0 million and $29.2 million, respectively. Investing Activities Cash used in investing activities in the fiscal years ended July 31, 2025 and 2024 consisted of capitalized software and technology development costs related to various projects that we invested in specific to the various platforms on which we operate our service. Financing Activities On October 28, 2022, we entered into an Amended Loan Agreement with Western Alliance Bank. Pursuant to the Amended Loan Agreement, Western Alliance Bank agreed to provide the Company with a new term loan facility in the maximum principal amount of $7 million for a four-year term and a $4 million revolving credit facility for a two-year term. Pursuant to the Amended Loan Agreement, $2 million was advanced in a single-cash advance on the closing date on October 28, 2022. At our request, the maximum principal amount of the term loan was reduced from $7 million to $2 million as of May 11, 2023. On November 15, 2023, the Company voluntarily prepaid the entire principal amount of $2 million in accordance with the terms of the Amended Loan Agreement without incurring any prepayment penalty. On October 28, 2024, the revolving credit facility was renewed for another four years term, please see Note 16, Revolving Credit Facility , to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report on Form 10-K. During fiscal 2025 we repurchased (a) 219,573 shares of our Class B Common Stock outstanding for approximately $0.8 million pursuant to the 2021 Share Repurchase Plan and (b) 1,104,142 shares of our Class B Common Stock outstanding for approximately $3.6 million pursuant to the 2024 Share Repurchase Plan. As of July 31, 2025, the Company had remaining authorization of approximately $1.4 million for future share repurchases under the 2024 Repurchase Plan. During fiscal 2024, we repurchased 211,495 shares of our Class B Common Stock outstanding for approximately $0.6 million pursuant to the 2021 Share Repurchase Plan. On September 9, 2024, our Board approved the $5 million 2024 Share Repurchase Plan. In fiscal 2025, we received proceeds of $62,126 from the exercise of stock options in respect of which we issued 105,144 shares of Class B common stock. In fiscal 2024, we received proceeds of $2,975 from the exercise of stock options in respect of which we issued 2,500 shares of Class B common stock. 67 In fiscal 2025 and fiscal 2024, we purchased 6,903 shares and 6,328 shares respectively of Class B Stock from certain employees for $22,000 and $13,000 respectively, to satisfy tax withholding obligations in connection with the vesting of restricted stock and DSUs. In light of operational improvements, including consistent positive cash flow from operations and cost cutting, as well as the currently anticipated cash needs, on October 12, 2025 our Board of Directors declared a dividend of $0.01615 per share to be paid on shares of our Class A common stock and Class B common stock held of record on October 24, 2025, to be paid on or around November 7, 2025, as well as the intent to pay a regular quarterly dividend so long as the conditions that allow for it continue. Concentration of Credit Risk and Significant Customers Historically, we have had very little or no bad debt, which is common with other platforms of our size that derive their revenue from digital advertising, as we aggressively manage our collections and perform due diligence on our customers. In addition, the majority of our revenue is derived from large, credit-worthy customers, e.g. Google and Meta, and we terminate our services with smaller customers immediately upon balances becoming past due. Since these smaller customers rely on us to derive their own revenue, they generally pay their outstanding balances on a timely basis. We routinely assess the financial strength of our customers. As a result, we believe that our accounts receivable credit risk exposure is limited and have not experienced significant write-downs in our accounts receivable balances. In the fiscal year ended July 31, 2025, two largest customers represented 37% and 6% of our revenue. In the fiscal year ended July 31, 2024, two largest customers represented 31% and 9% of our revenue. At July 31, 2025, two largest customers represented 48% and 13% of our accounts receivable balance and at July 31, 2024, three largest customers represented 37%, 15% and 10% 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. Reportable Segments Our business consists of two reportable segments: Zedge Marketplace and GuruShots, as further discussed in Note 15, Segment and Geographic Information . Recent Accounting Pronouncements See Note 1, Description of Business and Summary of Significant Accounting Policies, to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, for discussion of new accounting pronouncements. 68 Item 7A. Quantitative and Qualitative Disclosures about Market Risks. Smaller reporting companies are not required to provide the information required by this item. Item 8. Financial Statements and Supplementary Data. The Consolidated Financial Statements of the Company and the report of the independent registered public accounting firm thereon starting on page F-1 are included herein. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.