Zedge, Inc. Form 10-Q Quarterly Report Filed 2022-06-14

143
Business Address 1178 BROADWAY SUITE 1450, 3RD FLOOR NEW YORK NY 10001 330-577-3424 Mailing Address 1178 BROADWAY SUITE 1450, 3RD FLOOR NEW YORK NY 10001 SECURITIES AND EXCHANGE COMMISSION FORM 10-Q Quarterly report pursuant to sections 13 or 15(d) Filing Date: 2022-06-14 | Period of Report: 2022-04-30 SEC Accession No. 0001213900-22-032808 (HTML Version on secdatabase.com) FILER Zedge, Inc. CIK:1667313| IRS No.: 263199071 | State of Incorp.:DE | Fiscal Year End: 0731 Type: 10-Q | Act: 34 | File No.: 001-37782 | Film No.: 221015058 SIC: 7372 Prepackaged software Copyright © 2022 www.secdatabase.com . All Rights Reserved. Please Consider the Environment Before Printing This Document

Transcript of Zedge, Inc. Form 10-Q Quarterly Report Filed 2022-06-14

Business Address1178 BROADWAYSUITE 1450, 3RD FLOORNEW YORK NY 10001330-577-3424

Mailing Address1178 BROADWAYSUITE 1450, 3RD FLOORNEW YORK NY 10001

SECURITIES AND EXCHANGE COMMISSION

FORM 10-QQuarterly report pursuant to sections 13 or 15(d)

Filing Date: 2022-06-14 | Period of Report: 2022-04-30SEC Accession No. 0001213900-22-032808

(HTML Version on secdatabase.com)

FILERZedge, Inc.CIK:1667313| IRS No.: 263199071 | State of Incorp.:DE | Fiscal Year End: 0731Type: 10-Q | Act: 34 | File No.: 001-37782 | Film No.: 221015058SIC: 7372 Prepackaged software

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UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-37782

ZEDGE, INC.(Exact Name of Registrant as Specified in its Charter)

Delaware 26-3199071(State or other jurisdiction of

incorporation or organization)(I.R.S. Employer

Identification Number)

1178 Broadway, 3rd Floor #1450, New York, NY 10001(Address of principal executive offices) (Zip Code)

(330) 577-3424(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registeredClass B common stock, par value $.01 per share NYSE American

Trading symbol: ZDGE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file suchreports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, everyInteractive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during thepreceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smallerreporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smallerreporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐

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Non-accelerated filer ☐ Smaller reporting company ☒Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition periodfor complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct.): Yes ☐ No ☒

As of June 10, 2022, the registrant had the following shares outstanding:

Class A common stock, $.01 par value: 524,775 shares outstandingClass B common stock, $.01 par value: 14,501,517 shares outstanding

ZEDGE, INC.

TABLE OF CONTENTS

PART I. Financial Information 1

Item 1. Financial Statements (Unaudited) 1

Condensed Consolidated Balance Sheets 1

Condensed Consolidated Statements of Operations and Comprehensive Income 2

Condensed Consolidated Statements of Changes In Stockholders’ Equity 3

Condensed Consolidated Statements of Cash Flows 5

Notes To Condensed Consolidated Financial Statements 6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20

Item 3. Quantitative and Qualitative Disclosures About Market Risks 30

Item 4. Controls and Procedures 30

PART II. OTHER INFORMATION 31

Item 1. Legal Proceedings 31

Item 1A. Risk Factors 31

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 32

Item 3. Defaults Upon Senior Securities 32

Item 4. Mine Safety Disclosures 32

Item 5. Other Information 32

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Item 6. Exhibits 33

SIGNATURES 34

i

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ZEDGE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands, except par value data)

(Unaudited)

April 30, July 31,2022 2021

AssetsCurrent assets:

Cash and cash equivalents $ 17,095 $ 24,908Trade accounts receivable, net of allowance of $0 at April 30, 2022 and July 31, 2021 2,718 2,545Prepaid expenses 298 111Other current assets 211 49

Total current assets 20,322 27,613Property and equipment, net 1,716 1,980Intangible assets, net 21,602 -Goodwill 11,031 2,262Deferred tax assets, net 560 477Other assets 436 5,145

Total assets $ 55,667 $ 37,477Liabilities and stockholders’ equityCurrent liabilities:

Trade accounts payable $ 1,425 $ 585Acquisitions related contingent consideration and deferred payment payable 4,358 -Accrued expenses and other current liabilities 4,422 1,771Deferred revenues 3,724 1,821

Total current liabilities 13,929 4,177Contingent consideration payable 2,508 -Other liabilities 101 145

Total liabilities 16,538 4,322Commitments and contingencies (Note 10)Stockholders’ equity:

Preferred stock, $.01 par value; authorized shares—2,400; no shares issued and outstanding - -Class A common stock, $.01 par value; authorized shares—2,600; 525 shares issued and outstanding

at April 30, 2022 and July 31, 2021 5 5

Class B common stock, $.01 par value; authorized shares—40,000; 14,575 shares issued and 14,502shares outstanding at April 30, 2022, and 13,923 shares issued and 13,865 outstanding at July 31,2021

146 139

Additional paid-in capital 42,955 41,664Accumulated other comprehensive loss (1,272) (997)

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Accumulated deficit (2,371) (7,554)Treasury stock, 74 shares at April 30, 2022 and 58 shares at July 31, 2021, at cost (334) (102)

Total stockholders’ equity 39,129 33,155Total liabilities and stockholders’ equity $ 55,667 $ 37,477

See accompanying notes to unaudited condensed consolidated financial statements.

1

ZEDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME(in thousands, except per share data)

(Unaudited)

Three Months Ended Nine Months EndedApril 30, April 30,

2022 2021 2022 2021Revenues $ 6,230 $ 5,252 $ 19,173 $ 14,328Costs and expenses:

Direct cost of revenues (excluding amortization of capitalizedsoftware and technology development costs which is includedbelow)

401 290 1,053 907

Selling, general and administrative 4,064 2,694 9,902 6,859Depreciation and amortization 423 289 1,181 972

Income from operations 1,342 1,979 7,037 5,590Interest and other income, net 15 9 42 14Net (loss) gain resulting from foreign exchange transactions (125) (12) (220) 21

Income before income taxes 1,232 1,976 6,859 5,625Provision for (benefit from) income taxes 429 (473) 1,676 (147)

Net Income $ 803 $ 2,449 $ 5,183 $ 5,772Other comprehensive (loss) income:

Changes in foreign currency translation adjustment (195) 129 (275) 335Total other comprehensive (loss) income (195) 129 (275) 335Total comprehensive income $ 608 $ 2,578 $ 4,908 $ 6,107Income per share attributable to Zedge, Inc. common stockholders:

Basic $ 0.06 $ 0.18 $ 0.36 $ 0.46Diluted $ 0.05 $ 0.17 $ 0.35 $ 0.43

Weighted-average number of shares used in calculation of income pershare:Basic 14,307 13,676 14,295 12,531Diluted 14,859 14,570 14,974 13,323

See accompanying notes to unaudited condensed consolidated financial statements.

2

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ZEDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(in thousands)(Unaudited)

Class ACommon Stock

Class BCommon Stock

AdditionalPaid-in

AccumulatedOther

ComprehensiveAccumulated Treasury

TotalStockholders’

Shares Amount Shares Amount Capital Loss Deficit Stock EquityBalance – July 31, 2021 525 $ 5 13,923 $ 139 $ 41,664 $ (997) $ (7,554) $ (102) $ 33,155Stock-based compensation - - 12 - 319 - - - 319Purchase of treasury stock - - - - - - - (232) (232)Foreign currency translation

adjustment- - - - - 142 - - 142

Net income - - - - - - 2,055 - 2,055Balance -October 31, 2021 525 $ 5 13,935 $ 139 $ 41,983 $ (855) $ (5,499) $ (334) $ 35,439Exercise of stock options - - 3 - 7 - - - 7Stock-based compensation - - 6 - 446 - - - 446Stock issued for matching

contributions to the 401(k)Plan

- - 5 - 43 - - - 43

Foreign currency translationadjustment

- - - - - (222) - - (222)

Net income - - - - - - 2,325 - 2,325Balance – January 31, 2022 525 $ 5 13,949 $ 139 $ 42,479 $ (1,077) $ (3,174) $ (334) $ 38,038Restricted stock issuance in

connection withGuruShots acquisition

- - 626 7 (7) - - - -

Stock-based compensation - - - - 483 - - - 483Foreign currency translation

adjustment- - - - - (195) - - (195)

Net income - - - - - - 803 - 803Balance – Apr. 30, 2022 525 $ 5 14,575 $ 146 $ 42,955 $ (1,272) $ (2,371) $ (334) $ 39,129

See accompanying notes to unaudited condensed consolidated financial statements.

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ZEDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY(in thousands)(Unaudited)

Class ACommon Stock

Class BCommon Stock

AdditionalPaid-in

AccumulatedOther

ComprehensiveAccumulated Treasury

TotalStockholders’

Shares Amount Shares Amount Capital Loss Deficit Stock EquityBalance – July 31, 2020 525 $ 5 11,788 $ 118 $ 25,725 $ (1,085) $ (15,802) $ (76) $ 8,885Stock-based compensation - - 39 - 237 - - - 237Purchase of treasury stock - - - - - - - (26) (26)

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Foreign currency translationadjustment

- - - - - (159) - - (159)

Net Income - - - - - - 1,045 - 1,045Balance -October 31, 2020 525 $ 5 11,827 $ 118 $ 25,962 $ (1,244) $ (14,757) $ (102) $ 9,982Exercise of stock options - - 312 3 393 - - - 396Stock-based compensation - - 8 - 113 - - - 113Stock issued for matching

contributions to the 401(k)Plan

- - 7 - 39 - - - 39

Proceeds from sales of ClassB Common Stock

- - 762 8 4,777 - - - 4,785

Foreign currency translationadjustment

- - - - - 365 - - 365

Net income - - - - - - 2,278 - 2,278Balance – January 31, 2021 525 $ 5 12,916 $ 129 $ 31,284 $ (879) $ (12,479) $ (102) $ 17,958Exercise of stock options - - 185 2 421 - - - 423Stock-based compensation - - 93 1 98 - - - 99Proceeds from sales of Class

B Common Stock- - 489 5 7,096 - - - 7,101

Foreign currency translationadjustment

- - - - - 129 - - 129

Net income - - - - - - 2,449 - 2,449Balance – Apr. 30, 2021 525 $ 5 13,683 $ 137 $ 38,899 $ (750) $ (10,030) $ (102) $ 28,159

See accompanying notes to unaudited condensed consolidated financial statements.

4

ZEDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(Unaudited)

Nine Months EndedApril 30,

2022 2021

Operating activitiesNet income $ 5,183 $ 5,772Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 1,181 972Stock-based compensation 1,291 488Deferred income taxes (83) (542)

Change in assets and liabilities:Trade accounts receivable 64 (1,336)Prepaid expenses and other current assets (274) 171Other assets 7 75Trade accounts payable and accrued expenses 2,042 1,651Deferred revenue 1,903 486

Net cash provided by operating activities 11,314 7,737Investing activities

Payments for business combination, net of cash acquired (17,422) -

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Payments for asset acquisitions (917) -Capitalized software and technology development costs and purchase of equipment (468) (543)Investment in private company - (50)

Net cash used in investing activities (18,807) (593)Financing activitiesProceeds from sales of Class B common stock - 12,355

Payment of issuance costs - (469)Repayment of insurance premium loan payable - (161)Proceeds from exercise of stock options 7 819Purchase of treasury stock in connection with restricted stock vesting (232) (26)Net cash (used in) provided by financing activities (225) 12,518

Effect of exchange rate changes on cash and cash equivalents (95) 142Net (decrease) increase in cash and cash equivalents (7,813) 19,804Cash and cash equivalents at beginning of period 24,908 5,111Cash and cash equivalents at end of period $ 17,095 $ 24,915

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash payments made for income taxes $ 309 $ 1Cash payments made for interest expenses $ - $ 2

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIESContingent consideration related to business acquisition $ 5,904 $ -Right-of-use assets acquired under operating leases $ 86 $ -Acquisition of Emojipedia through release of escrow funds of $4,776, due to seller of $1,923 and legal

fee of $12 $ 6,711 $ -

Accounts receivable from certain Emojipedia websites collected by Seller $ 45 $ -Note payable issued for insurance premium financing $ - $ 181

See accompanying notes to unaudited condensed consolidated financial statements.

5

ZEDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Unaudited)

Note 1—Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Zedge, Inc. and its subsidiaries, GuruShots Ltd,Zedge Europe AS and Zedge Lithuania UAB (the “Company”), have been prepared in accordance with accounting principles generallyaccepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q andArticle 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for completefinancial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for afair presentation have been included. Operating results for the three and nine months ended April 30, 2022 are not necessarily indicativeof the results that may be expected for the fiscal year ending July 31, 2022 or any other period. The balance sheet at July 31, 2021 hasbeen derived from the Company’s audited financial statements at that date but does not include all of the information and footnotesrequired by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statementsand footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2021, as filed with theU.S. Securities and Exchange Commission (the “SEC”).

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The Company’s fiscal year ends on July 31 of each calendar year. Each reference below to a fiscal year refers to the fiscal yearending in the calendar year indicated (e.g., fiscal 2022 refers to the fiscal year ending July 31, 2022).

Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S. GAAPrequires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, aswell as related disclosure of contingent assets and liabilities. Actual results could differ materially from the Company’s estimates due torisks and uncertainties, including uncertainty in the current economic environment due to various global events. To the extent that thereare material differences between these estimates and actual results, the Company’s financial condition or operating results will beaffected. The Company bases its estimates on past experience and other assumptions that the Company believes are reasonable underthe circumstances, and the Company evaluates these estimates on an ongoing basis.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No.2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (ASU 2019-12), which simplifies the accounting forincome taxes. The Company adopted this new accounting standard on August 1, 2021, and the adoption did not have a material impacton the Company’s unaudited condensed consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326), which requires themeasurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existingincurred loss impairment model with an expected loss model which requires consideration of forward-looking information to calculatecredit loss estimates. These changes will result in an earlier recognition of credit losses. The Company's financial assets held atamortized cost include accounts receivable. The amendments in ASU 2020-05 deferred the effective date for Topic 326 to fiscal yearsbeginning after December 15, 2022. The Company will adopt the new standard effective August 1, 2023 and does not expect theadoption of this guidance to have a material impact on its consolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assets and Contract Liabilities From ContractsWith Customers. ASU 2021-08 requires an acquirer in a business combination to recognize and measure contract assets and contractliabilities from acquired contracts using the revenue recognition guidance in Accounting Standards Codification (“ASC”) Topic 606,Revenue from Contracts with Customers, rather than the prior requirement to record them at fair value. The guidance is effective forfiscal years, and interim periods within those fiscal years, beginning after December 15, 2022. Early adoption is permitted. TheCompany will adopt the new standard effective August 1, 2023 and does not expect the adoption of this guidance to have a materialimpact on its consolidated financial statements.

6

With the exception of the standard discussed above, there have been no other recent accounting pronouncements or changes inaccounting pronouncements during the nine months ended April 30, 2022, as compared to the recent accounting pronouncementsdescribed in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2021, that are of significance or potentialsignificance to the Company.

Significant Accounting Policies

Other than intangible assets described below, there have been no material changes to the Company's significant accountingpolicies from its Annual Report on Form 10-K for the fiscal year ended July 31, 2021.

Business Combinations

The Company accounts for business combination using the acquisition method of accounting. The Company allocates thepurchase price of the acquisition to the tangible and intangible assets acquired and liabilities assumed and contingent considerations

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based on their estimated fair values at the acquisition dates. The excess of the purchase price over those fair values is recorded asgoodwill. During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustmentsto the assets acquired and liabilities assumed with a corresponding offset to goodwill. Upon the conclusion of the measurement periodor final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments arerecorded to the unaudited condensed consolidated statements of operations and comprehensive income. Acquisition-related costs arerecognized separately from the acquisition and are expensed as incurred.

Intangible Assets-Net

Intangible assets (see Note 6) are carried at cost, less accumulated amortization, unless a determination has been made thattheir value has been impaired. Intangible assets are amortized on a straight-line basis over their estimated useful lives of between five tofifteen years. The Company reviews identifiable amortizable intangible assets to be held and used for impairment whenever events orchanges in circumstances indicate that the carrying value of the assets may not be recoverable. Determination of recoverability is basedon the lowest level of identifiable estimated undiscounted cash flows resulting from use of the asset and its eventual disposition.Measurement of any impairment loss is based on the excess of the carrying value of the asset over its fair value. There were noimpairment charges recorded in the nine months ended April 30, 2022 presented in the accompanying unaudited condensed consolidatedfinancial statements.

Related Party Transactions

The Company was formerly a majority-owned subsidiary of IDT Corporation (“IDT”). On June 1, 2016, IDT’s interest in theCompany was spun-off by IDT to IDT’s stockholders and the Company became an independent public-held company. IDT charges theCompany for services it provides, and the Company charges IDT for services it provides, pursuant to a Transition Services Agreement(“TSA”). The Company was charged for legal services by IDT in the amounts of $29,600 and $91,600 respectively, for the three andnine month periods ended April 30, 2022, and $25,900 and $98,400 respectively, for the three and nine month periods ended April 30,2021. The Company charged IDT for consulting services provided to IDT by a Zedge employee in the amounts of $35,100 and$140,000 respectively, for the three and nine month periods ended April 30, 2022, and $33,900 and $119,500, respectively, for the threeand nine month periods ended April 30, 2021. As of April 30, 2022 and July 31, 2021, IDT owed the Company $5,000 and $6,000,respectively.

The Company is party to a consulting agreement with Activist Artist Management, LLC (“Activist”), which assists thecompany in strategic business development. A member of the Company’s Board of Directors owns a significant minority stake inActivist. The Company paid $11,000 and $38,000, respectively, in the three and nine month periods ended April 30, 2022, and $11,000and $38,000, respectively, in the three and nine month periods ended April 30, 2021, to Activist pursuant to the agreement. Under theterms of the agreement, which was amended as of August 1, 2020, the Company pays Activist $3,750 per month, plus possiblecommissions. On June 7, 2022 the Company’s Board approved a $65,000 advisory fee to Activist in connection with the GuruShotsacquisition. In addition, the Board also approved the increase in monthly retainer from $3,750 to $5,000 per month retroactive fromApril 1, 2022, see Note 17 below.

The Company paid $0 and $30,000, respectively, in the three and nine month periods ended April 30, 2022, and $0 in the threeand nine month periods ended April 30, 2021, to Braze Inc. (formerly “Appboy, Inc.”) for use of its customer relationship managementand lifecycle marketing platform. The former Chief Executive Officer and Co-Founder of Braze, Inc. is a member of the Company’sBoard of Directors.

7

Note 2—Revenue

Disaggregation of Revenue

The following table summarizes revenue by type of monetization mechanisms of the Zedge App and other revenues, includingEmojipedia revenues and GuruShots’ revenue from April 13 to April 30, 2022, for the periods presented:

Three Months Ended Nine Months EndedApril 30, April 30,

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2022 2021 2022 2021(in thousands) (in thousands)

Advertising revenue $ 4,526 $ 4,227 $ 14,532 $ 11,612Paid subscription revenue 910 899 2,823 2,358Other revenues 794 126 1,818 358

Total revenues $ 6,230 $ 5,252 $ 19,173 $ 14,328

Revenue from Emojipedia was $232,000 and $823,000 for the three and nine month periods ended April 30, 2022, andpresented in the other revenues line in the table above. Revenue from GuruShots was $294,000 for the three and nine month periodsended April 30, 2022, and presented in the other revenues line in the table above.

Contract Balances

The Company enters into contracts with its customers, which may give rise to contract liabilities (deferred revenue) andcontract assets (unbilled revenue). The payment terms and conditions within the Company’s contracts vary by products or servicespurchased, the substantial all of which are due in less than one year. When the timing of revenue recognition differs from the timing ofpayments made by customers, the Company recognizes only deferred revenue (customer payment is received in advance ofperformance). The Company does not have unbilled revenue (its performance precedes the billing date).

Deferred revenues

On April 1, 2022, the Company received a one-time integration bonus for set up activities of $2 million from AppLovinCorporation for migrating to their mediation platform. This amount is being amortized over an estimated service period of 24 months.

The Company records deferred revenues related to the unsatisfied performance obligations with respect to subscriptionrevenue. As of April 30, 2022, the Company’s deferred revenue balance related to paid subscriptions was approximately $1.5 million,representing approximately 713,000 active subscribers including those under the account hold designation implemented by Google Playon November 1, 2020. Account hold is a subscription state that begins when a user's form of payment fails and the three-day graceperiod has ended without payment resolution. The account hold period lasts for up to 30 days. As of July 31, 2021, the Company’sdeferred revenue balance related to paid subscriptions was approximately $1.6 million, representing approximately 752,000 activesubscribers. The amount of revenue recognized in the nine months ended April 30, 2022 that was included in the deferred balance atJuly 31, 2021 was $1.5 million.

The Company also records deferred revenues when users purchase or earn Zedge Credits. Unused Zedge Credits represent thevalue of the Company’s unsatisfied performance obligation to its users. Revenue is recognized when Zedge App users use ZedgeCredits to acquire Zedge Premium content or upon expiration of the Zedge Credits upon 180 days of account inactivity. As of April 30,2022, and July 31, 2021, the Company’s deferred revenue balance related to Zedge Premium was approximately $281,000 and$218,000, respectively.

Total deferred revenues increased by $1.9 million from $1.8 million at July 31, 2021 to $3.7 million at April 30, 2022,primarily attributed to the integration bonus from AppLovin.

Significant Judgments

The advertising networks and advertising exchanges to which the Company sell its inventory track and report the impressionsand installs to Zedge and Zedge recognizes revenues based on these reports. The networks and exchanges base their payments off ofthose reports and Zedge independently compares the data to each of the client sites to validate the imported data and identify anydifferences. The number of impressions and installs delivered by the advertising networks and advertising exchanges is determined atthe end of each month, which resolves any uncertainty in the transaction price during the reporting period.

8

Practical Expedients

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The Company expenses the fees retained by Google Play related to subscription revenue when incurred as marketing expensebecause the duration of the contracts for which the Company pays commissions are less than one year. These costs are included in theselling, general and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensiveincome.

Note 3—Fair Value Measurements

The following tables present the balance of assets and liabilities measured at fair value on a recurring basis:

Level 1 (1) Level 2 (2) Level 3 (3) Total(in thousands)

April 30, 2022Assets:

Foreign exchange forward contracts $ - $ - $ - $ -

Liabilities:Current portion of contingent consideration payable $ - $ - $ 3,396 $ 3,396Contingent consideration payable $ - $ - $ 2,508 $ 2,508Foreign exchange forward contracts $ - $ 167 $ - $ 167

July 31, 2021Assets:

Foreign exchange forward contracts $ - $ - $ - $ -

Liabilities:Foreign exchange forward contracts $ - $ 54 $ - $ 54

(1) – quoted prices in active markets for identical assets or liabilities(2) – observable inputs other than quoted prices in active markets for identical assets and liabilities(3) – no observable pricing inputs in the market

Fair Value of Other Financial Instruments

The Company’s other financial instruments at April 30, 2022 and July 31, 2021 included trade accounts receivable, tradeaccounts payable, and due to seller of Emojipedia. The carrying amounts of the trade accounts receivable, trade accounts payable, anddue to seller of Emojipedia approximated fair value due to their short-term nature.

Note 4—Derivative Instruments

The primary risk managed by the Company using derivative instruments is foreign exchange risk. Foreign exchange forwardcontracts are entered into as hedges against unfavorable fluctuations in the U.S. Dollar (USD) to Norwegian Kroner (NOK) and USD toEuro (EUR) exchange rates. The Company is party to a Foreign Exchange Agreement with Western Alliance Bank allowing theCompany to enter into foreign exchange contracts under its revolving credit facility with the bank (see Note 11). The Company does notapply hedge accounting to these contracts, and therefore the changes in fair value are recorded in unaudited condensed consolidatedstatements of operations and comprehensive income. By using derivative instruments to mitigate exposures to changes in foreignexchange 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.

9

The outstanding contracts at April 30, 2022, were as follows:

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Settlement Date U.S. DollarAmount

NOKAmount

May-22 225,000 1,970,619Jun-22 225,000 1,999,125Jul-22 225,000 1,999,800Aug-22 225,000 2,000,025Sep-22 225,000 2,000,250Oct-22 225,000 2,000,700Nov-22 225,000 2,000,925

Total $ 1,575,000 13,971,444

Settlement Date U.S. DollarAmount

EURAmount

May-22 225,000 188,673Jun-22 225,000 203,381Jul-22 225,000 203,105Aug-22 225,000 202,812Sep-22 225,000 202,484Oct-22 225,000 202,156Nov-22 225,000 201,848

Total $ 1,575,000 1,404,459

The fair value of outstanding derivative instruments recorded in the accompanying unaudited condensed consolidated balancesheets were as follows:

April 30, July 31,Assets and Liabilities Derivatives: Balance Sheet Location 2022 2021Derivatives not designated or not qualifying as

hedging instruments(in thousands)

Foreign exchange forward contracts Accrued expenses and other current liabilities $ 167 $ 54

The effects of derivative instruments on the unaudited condensed consolidated statements of operations and comprehensiveincome were as follows:

Three Months EndedApril 30,

Nine Months EndedApril 30,

Amount of (Loss) Gain Recognized on Derivatives 2022 2021 2022 2021Derivatives not designated or not qualifying

as hedging instrumentsLocation of Gain (Loss)

Recognized on Derivatives(in thousands) (in thousands)

Foreign exchange forward contracts Net (loss) gain resulting fromforeign exchange transactions $ (154) $ 16 (271) $ 67

Note 5—Business Combination and Assets Acquisition

GuruShots Acquisition

On April 12, 2022, the Company consummated the acquisition of 100% of the outstanding equity securities of GuruShots, Ltd.(“GuruShots”), an Israeli company that operates a platform used for its competitive photography game available across iOS, Androidand the web. The acquisition was effected pursuant to a Share Purchase Agreement (the “SPA”) between the Company, GuruShots andthe holders of the GuruShots equity interests. This acquisition was accounted for as a business combination under the acquisitionmethod of accounting and the results of operations of GuruShots have been included in the Company’s results of operations as of theacquisition date.

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The purchase price for the equity securities of GuruShots consists of $18 million in cash paid at closing and contingentpayments (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 toGuruShots achieving certain financial targets set forth in the SPA. The fair value of the earnout amount has been estimated at $5.9million as part of the preliminary purchase price allocation. In connection therewith, the Company has agreed to make certain minimuminvestments in user acquisition for GuruShots in the period covered by the Earnout, subject to GuruShots maintaining agreed uponlevels of Return On Ad Spend (“ROAS”).

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In addition, the Company has committed to a retention pool of $4 million in cash and issued 626,242 shares of the CompanyClass B common stock with a fair value of $4 million or $6.39 per share (based on the volume weighted average closing prices of theClass B common stock on the NYSE American Exchange for the thirty trading days ended April 12, 2022) for GuruShots’ founders andemployees that will be payable or vest, as applicable, over three years from closing based on the beneficiaries thereof remainingemployed by the Company or a subsidiary.

The parties to the SPA have made customary representations, warranties and covenants therein. The assertions embodied inthose representations and warranties were made for purposes of the SPA and are subject to qualifications and limitations agreed by therespective parties in connection with negotiating the terms of the SPA. In addition, certain representations and warranties made as of aspecified date may be subject to a contractual standard of materiality different from what might be viewed as material to stockholders,or may have been used for the purpose of allocating risk between the respective parties rather than establishing matters as facts. For theforegoing reasons, no person should rely on the representations and warranties as statements of factual information at the time they weremade or otherwise.

The cash purchase price and the earnout have been preliminarily allocated to GuruShots’ tangible assets, identifiable intangibleassets, and assumed liabilities based on their estimated fair values. The preliminary fair value estimates of the net assets acquired arebased upon preliminary calculations and valuations, and those estimates and assumptions are subject to change as the Company obtainsadditional information for those estimates during the measurement period (up to one year from the acquisition date). The excess of thetotal consideration over the tangible assets, identifiable intangible assets, and assumed liabilities was recorded as goodwill.

The Company will record measurement period adjustments based on its ongoing valuation and purchase price allocationprocedures. The Company is still finalizing the valuation and purchase price allocation as it relates to the net working capital amount inthe table below.

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

(Dollar Amounts in Thousands)Purchase price consideration:Cash consideration paid at close $ 15,242Cash contributed to escrow accounts at close 2,700Cash deducted from purchase price and contributed to GuruShots' working capital 58Fair value of contingent consideration to be achieved at year 1 3,396Fair value of contingent consideration to be achieved at year 2 2,508Fair value of total consideration transferred 23,904Total purchase price, net of cash acquired $ 23,384

Fair value allocation of purchase price:Cash and cash equivalents $ 520Accounts receivable 282Prepaid and other assets 145Property and equipment, net 17Other assets (including ROU) 151Accounts payable and accrued expenses (1,351)Operating lease liabilities, current (53)

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Operating lease liabilities, noncurrent (34)Acquired intangible assets 15,320Goodwill 8,907Total purchase price $ 23,904

The cash consideration paid includes $2.7 million deposited with the escrow agent for post-closing indemnification claimsmade within 18 months of the acquisition date.

The maximum earnout of $16.8 million will be determined based upon the satisfaction of certain defined operationalmilestones and will be remeasured at fair value at each reporting period through earnings. As the fair value is based on unobservableinputs, the liabilities are included in Level 3 of the fair value measurement hierarchy. The unobservable inputs used in the determinationof the fair value of the earnout which is assumed to be paid in cash include managements assumptions about the likelihood of paymentbased on the satisfaction of certain defined operational milestones and discount rates based on cost of debt.

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The Company issued 626,242 shares of the Company’s Class B common on the closing date to the founders and employees asa retention bonus pool. These shares will vest, in equal tranches, over three years assuming that the recipients remain employed by theCompany or a subsidiary through the vesting dates. The $4 million fair value of these unvested restricted stock is not included aspurchase consideration above, as it has a post-combination service requirement and will be accounted for separately from the businesscombination as stock compensation expense. Additionally, the founders and employees are also entitled to receive $4 million retentioncash bonus over three years.

Identified intangible assets consist of trade names, technology, non-compete agreements, and customer relationships. The fairvalue of intangible assets and the determination of their respective useful lives were made in accordance with ASC 805 and are outlinedin the table below:

(Dollar Amounts in Thousands) Asset Value Useful LifeIdentified intangible assets:Trade names $ 3,570 12 yearsAcquired developed technology 3,950 5 yearsCustomer relationships 7,800 10 yearsTotal identified intangible assets $ 15,320

The Company’s initial fair value estimates related to the various identified intangible assets were determined under variousvaluation approaches including the Relief-from-Royalty Method and Multi-period excess earnings. These valuation methods requiremanagement to project revenues, operating expenses, working capital investment, capital spending and cash flows for the GuruShotsover 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 theseassets is consumed.

The Company recorded the excess of the purchase price over the identified tangible and intangible assets as goodwill. TheCompany believes that the investment value of the future enhancement of the Company’s products and offerings created as a result ofthis acquisition has principally contributed to a purchase price that resulted in the recognition of $8.9 million of goodwill, which isdeductible for tax purposes.

Acquisition-related transaction costs (e.g., legal, due diligence, valuation, and other professional fees) are not included as acomponent of consideration transferred but are required to be expensed as incurred. During the nine months ended April 30, 2022, weincurred and accrued $860,000 of acquisition-related costs, which are included in Selling, General and Administrative expenses on theCompany’s condensed consolidated statement of operations and comprehensive income.

Unaudited Pro Forma Consolidated Financial Information

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The unaudited pro forma financial information for all periods presented below has been calculated after adjusting the results ofZedge and GuruShots to reflect the business combination accounting effects resulting from this acquisition, including acquisition costsand the amortization expense from acquired intangible assets as though the acquisition occurred on August 1, 2020. The historicalconsolidated financial statements have been adjusted in the pro forma combined financial statements to give effect to pro forma eventsthat are directly attributable to the business combination. The pro forma financial information is for informational purposes only and isnot indicative of the results of operations that would have been achieved if the acquisition had taken place on August 1, 2020.

Three Months Ended Nine Months EndedApril 30 (1) April 30 (1)

(‘000) 2021 2022 2021 2022

Revenue $ 7,522 $ 7,625 $ 21,002 $ 24,134

Net income $ 1,625 $ 571 $ 2,240 $ 2,580

1) The fiscal year end of Zedge is July 31 and the fiscal year end of GuruShots is December 31. The pro forma financial informationabove has been prepared utilizing the three and nine months ended April 30th for Zedge and March 31st for GuruShots.

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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 ofGuruShots;

(ii) incremental compensation expense related to the vesting of retention awards to GuruShots employees consisting ofrestricted stock awards and cash payments; and

(iii) the reversal of historical fair value adjustments and interest expense recorded on GuruShots’ convertible notes thatwere settled on the acquisition date.

(iv) Income tax expense (benefit) was adjusted for the impact of the above adjustments for each period.

Transaction costs incurred during the three and nine months ended April 30, 2022 were $0.7 million and $0.9 million,respectively. For pro forma purposes, these expenses were reclassified to the earliest period presented. The unaudited pro formafinancial information is for comparative purposes only and is not necessarily indicative of what the Company’s operating results wouldhave been had the GuruShots Acquisition taken place on August 1, 2020.

GuruShots’ operating results are consolidated with our operating results beginning on April 13, 2022. Therefore, ourconsolidated results of operations for the three and nine months ended April 30, 2022 may not be comparable to the same period in2021. GuruShots’ results of operations included in our consolidated results of operations for the three and nine months ended April 30,2022 include revenues of $0.3 million and a net loss of $0.2 million.

Emojipedia Acquisition

Pursuant to an Asset Purchase Agreement, on August 1, 2021 (“Closing”), the Company consummated the acquisition ofsubstantially all of the assets of Emojipedia Pty Ltd, a proprietary company organized under the laws of Australia. The total purchaseprice of the assets has been determined to be $6.7 million of which $4.8 million was paid on August 2, 2021 and $917,000 was paid onFebruary 1, 2022, with the remaining $962,000 to be paid out on the twelve-month anniversary of the Closing. The final purchase priceof $6.7 million was $194,000 lower than initially estimated.

The assets purchased include emojipeida.org, a set of smaller websites, a bank of emoji related URLs and other assets relatedto the seller’s business, including World Emoji Day, the annual World Emoji Awards, and Emojitracker. The asset purchase does notqualify as a business combination under FASB ASC 805, Business Combinations, and has therefore been accounted for as an assetacquisition. The total purchase price for this acquisition was allocated to intangible assets are amortized on a straight-line basis overtheir estimated useful lives of fifteen years.

The results of operations of the purchased assets are included in the Company’s unaudited condensed consolidated statementsof operations and comprehensive income since the date of the acquisition.

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Note 6—Intangible Assets and Goodwill

The following table presents the detail of intangible assets as of July 31, 2021 and April 30, 2022 (in thousands):

GrossCarrying

Value

AccumulatedAmortization

NetCarrying

Value

Balance at July 31, 2021 $ - $ - $ -Websites and other internet domains acquired 6,711 335 6,376Acquired developed technology 3,950 40 3,910Customer relationships 7,800 39 7,761Trademarks and trade names 3,570 15 3,555

Balance at April 30, 2022 $ 22,031 $ 429 $ 21,602

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Estimated future amortization expense as of April 30, 2022 is as follows (in thousands):

Remainder of fiscal 2022 $ 579Fiscal 2023 2,315Fiscal 2024 2,315Fiscal 2025 2,315Fiscal 2026 2,315Thereafter 11,763Total $ 21,602

Goodwill

Changes in the carrying amount of goodwill in the nine months ended April 30, 2022 are as follows (in thousands):

(in thousands) CarryingAmount

Balance at July 31, 2021 $ 2,262GuruShots acquisition 8,907Foreign currency translation adjustments (138)

Balance at April 30, 2022 $ 11,031

Note 7—Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:

April 30, July 31,2022 2021

(in thousands)Accrued vacation $ 663 $ 424Accrued income taxes payable 1,711 264Accrued payroll taxes 304 291Accrued payroll and bonuses 638 374

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Accrued business combination expenses 340 -Operating lease liability 142 86Derivative liability 167 54Due to artists 327 246Other 130 32Total accrued expenses and other current liabilities $ 4,422 $ 1,771

Note 8—Stock-Based Compensation

On November 10, 2021, the Company’s Board of Directors amended the 2016 Incentive Plan to increase the number of sharesof the Company’s Class B common stock available for the grant of awards thereunder by an additional 325,000 shares to an aggregateof 1,846,000 shares. This amendment was ratified by the Company’s stockholders at the Annual Meeting of Stockholders held onJanuary 12, 2022.

On March 23, 2022, the Company’s Board of Directors amended the 2016 Incentive Plan to increase the number of shares ofthe Company’s Class B common stock available for the grant of awards thereunder by an additional 685,000 shares to an aggregate of2,531,000 shares, including 685,000 shares for the GuruShots retention pool. The Company expects to submit the amendment forratification by the Company’s stockholders at the Annual Meeting of Stockholders to be held in January 2023.

At April 30, 2022, there were 492,000 shares of Class B common stock available for awards under the 2016 Incentive Planbefore accounting for the approximately 204,000 contingently issuable shares related to the deferred stock units (“DSUs”) with bothservice and market conditions.

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In addition to stock options and restricted stock awards, the Company occasionally issues DSU’s. On September 7, 2021, theCompany granted a total of 291,320 DSUs to 64 of its employees and consultants. Each DSU represents the right to receive one share ofthe Company’s Class B common stock.

30% of the DSU’s (or 87,396) have service vesting conditions only, with a vesting schedule of 25% on September 7, 2022,33% on September 7, 2023, and remaining on September 7, 2024. Vesting of the remaining 70% of the DSUs (or 203,924) is subject tocontinued service as well as a market condition. These DSUs will vest if the grantee remains in service to the Company and only if theaggregate market capitalization of the Company’s equity securities has reached or exceeded $451 million for five consecutive tradingdays between the grant date and the vest date. Subject to satisfaction of both of those conditions, these DSU’s with both service andmarket conditions have a vesting schedule of 25% September 7, 2022, up to 58% (the 25% eligible to vest in 2022 and an additional33%) on September 7, 2023, and up to 100% on September 7, 2024. In the event the market capitalization condition has not been metprior to a vesting date, but is met by a subsequent vesting date, all DSUs with a market condition eligible for vesting prior to that dateshall vest. In the event that the market capitalization condition has not been met by September 7, 2024, the DSUs with a marketcondition shall expire.

The Company recognizes stock-based compensation for stock-based awards, including stock options, restricted stock andDSUs based on the estimated fair value of the awards and recognized over the relevant service period. The Company estimates the fairvalue of stock options on the measurement date using the Black-Scholes option valuation model. The Company estimates the fair valueof restricted stock and DSUs with service conditions only using the current market price of the stock. The Company estimates the fairvalue of DSUs with both service and market conditions using the Monte Carlo Simulation valuation model.

The Black-Scholes and Monte Carlo Simulation valuation models incorporate assumptions as to stock price volatility, theexpected life of options or awards, a risk-free interest rate and dividend yield. We recognize stock-based compensation expense relatedto options and restricted stock units on a straight-line basis over the service period of the award, which is generally 4 years for optionsand 3 years for restricted stock units.

In our accompanying unaudited condensed consolidated statements of operations and comprehensive income, the Companyrecognized stock-based compensation for our employees and non-employees as follows:

Three Months Ended Nine Months Ended

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April 30, April 30,2022 2021 2022 2021

(in thousands)Selling, general and administrative $ 483 $ 98 $ 1,291 $ 488

The estimated grant-date fair value of our stock options was calculated using the Black-Scholes option pricing model, based on thefollowing weighted-average assumptions:

Nine months ended April 30, 2022 2021Expected term 6.0 years 6.0 yearsVolatility 92.4% 92.4%Risk free interest rate 1.5% 0.6%Dividends — —Weighted average grant date fair value $ 7.76 $ 3.26

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The following table summarizes stock option activity for the nine months ended April 30, 2022:

Stock OptionsWeighted-

Number of AverageOptions Exercise

(in thousands) PriceOutstanding at July 31, 2021 843 $ 2.72Granted 42 10.29Exercised (4) 1.87Cancelled / forfeited (27) 12.28Outstanding at April 30, 2022 854 $ 2.79Exercisable at April 30, 2022 645 $ 2.09

The following table summarizes restricted stock activity for the nine months ended April 30, 2022:

Number ofShares

WeightedAverage

Grant DateFair Value

Non-vested stock award as of July 31, 2021 127,300 $ 3.27Granted (GuruShots Retention Bonus shares) 626,242 6.39Vested (65,101) 2.80Forfeited - -Non-vested stock award as of April 30, 2022 688,441 $ 6.15

The following table summarizes DSU activity for the nine months ended April 30, 2022:

Number ofShares

WeightedAverage

Grant DateFair Value

Non-vested DSU award as of July 31, 2021 37,500 $ 1.54Granted (1) 291,320 9.60Vested (12,500) 1.54Forfeited (18,720) 7.88

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Non-vested DSU award as of April 30, 2022 297,600 $ 9.03

(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 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 isbeing recognized on a graded vesting method over the vesting period. The DSUs with a service condition only had a grant date fairvalue of $1.3 million. Total grant date fair value for the remaining 30% DSUs without market-based condition was approximately $1.0million. The unrecognized compensation expense is being recognized on a straight-line basis over the vesting period.

As of April 30, 2022, the Company’s unrecognized stock-based compensation expense was $661,000 for unvested stockoptions, $1.9 million for DSUs and $4.1 million for unvested restricted stock including the $4 million portion of retention bonus to bepaid in the Company’s Class B common stock in connection with the GuruShots acquisition.

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Note 9—Earnings Per Share

Basic earnings per share is computed by dividing net income attributable to all classes of common stockholders of theCompany by the weighted average number of shares of all classes of common stock outstanding during the applicable period, and is thesame amount for the Company’s Class A common stock and Class B common stock. Diluted earnings per share is computed in the samemanner as basic earnings per share, except that the number of shares is increased to include restricted stock still subject to risk offorfeiture, issuances to be made on the vesting of unvested DSUs and the exercise of potentially dilutive stock options using the treasurystock method, unless the effect of such increase is anti-dilutive.

The weighted-average number of shares used in the calculation of basic and diluted earnings per share attributable to theCompany’s common stockholders consists of the following:

Three Months Ended Nine Months EndedApril 30, April 30,

2022 2021 2022 2021(in thousands)

Basic weighted-average number of shares 14,307 13,676 14,295 12,531Effect of dilutive securities:

Stock options 505 762 598 715Non-vested restricted Class B common stock 30 98 63 48Deferred stock units 17 34 18 29

Diluted weighted-average number of shares 14,859 14,570 14,974 13,323

The following shares were excluded from the dilutive earnings per share computations because their inclusion would have beenanti-dilutive:

Three Months Ended Nine Months EndedApril 30, April 30,

2022 2021 2022 2021(in thousands) (in thousands)

Stock options 95 24 59 25Non-vested restricted Class B common stock - - - -Deferred stock units 277 - 238 -Shares excluded from the calculation of diluted earnings per share 372 24 297 25

Note 10—Contingencies

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Legal Proceedings

The Company may from time to time be subject to other legal proceedings that arise in the ordinary course of business.Although there can be no assurance in this regard, the Company does not expect any of those legal proceedings to have a materialadverse effect on the Company’s results of operations, cash flows or financial condition.

Note 11—Revolving Credit Facility

As of September 27, 2016, the Company entered into a loan and security agreement with Western Alliance Bank for arevolving credit facility of up to $2.5 million for an initial two-year term which was extended twice for another two-year term expiringSeptember 26, 2022. At the Company’s request in September 2020, advances under this facility have been reduced to the lesser of $2.0million or 80% of the Company’s eligible accounts receivable, subject to certain concentration limits. The revolving credit facility issecured by a lien on substantially all of the Company’s assets. Effective with the September 2020 extension, the outstanding principalamount bears interest per annum at the greater of 3.5% or the prime rate plus 1.25%. Previously the interest rate was capped at 5.0%.Interest is payable monthly and all outstanding principal and any accrued and unpaid interest is due on the maturity date of September26, 2022. The Company is required to pay an annual facility fee of $10,000 to Western Alliance Bank. The Company is also required tocomply with various affirmative and negative covenants and to maintain certain financial ratios during the term of the revolving creditfacility. The covenants include a prohibition on the Company paying any dividend on its capital stock. The Company may terminate thisagreement at any time without penalty or premium provided that it pays down any outstanding principal, accrued interest and bankexpenses. At April 30, 2022 and July 31, 2021, there were no amounts outstanding under the revolving credit facility and the Companywas in compliance with all of the covenants.

As of November 16, 2016, the Company entered into a Foreign Exchange Agreement with Western Alliance Bank to allow theCompany to enter into foreign exchange contracts not to exceed $5.0 million in the aggregate at any point in time under its revolvingcredit facility. This limit was raised to approximately $6.5 million pursuant to the Loan and Security Modification Agreement datedMay 30, 2018. The available borrowing under the revolving credit facility is reduced by an applicable foreign exchange reservepercentage as determined by Western Alliance Bank, in its reasonable discretion from time to time, which was initially set at 10% of thenominal amount of the foreign exchange contracts in effect at the relevant time. In December 2016, the applicable foreign exchangereserve percentage was changed so that the reduction of available borrowing for major currency forward contracts of less than sixmonths tenor is set at 10% of the nominal amount of the foreign exchange contracts, and for contracts over six months tenor, 12.5% ofthe nominal amount of the foreign exchange contracts. At April 30, 2022, there were $3.2 million of outstanding foreign exchangecontracts with the majority being less than six months tenor under the credit facility, which reduced the available borrowing under therevolving credit facility by $326,000.

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Note 12—Business Segment and Geographic Information

The Company provides a content platform, worldwide, centered on self-expression, attracting both creators looking to promotetheir content and consumers who utilize such content to express their identity, feelings, tastes and interests. The Company’s platformenables consumers to personalize their mobile devices with mostly free, high-quality ringtones, wallpapers, home screen app icons,widgets and notification sounds. The Company conducts business as one operating segment.

Net long-lived assets and total assets, other than goodwill, deferred tax assets and investment in private company, held outsideof the United States, which are located primarily in Israel and Norway, were as follows:

UnitedStates Foreign Total

(in thousands)Long-lived assets, net:

April 30, 2022 $ 7,995 $ 15,709 $ 23,704July 31, 2021 $ 1,900 $ 399 $ 2,299

Total assets:

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April 30, 2022 $ 25,960 $ 29,707 $ 55,667July 31, 2021 $ 32,745 $ 4,732 $ 37,477

Note 13— Operating Leases

The Company has operating leases primarily for office space. Operating lease right-of-use assets recorded and included inother assets were $164,000 and $243,000 at April 30, 2022 and July 31, 2021, respectively.

In connection with the GuruShots acquisition, the Company also acquired $86,000 of right-of-use assets related to its officespace in Tel Aviv and assumed $86,000 lease liabilities.

Other than the above, there were no other material changes in the Company's operating and finance leases in the three and ninemonths ended April 30, 2022, as compared to the disclosure in the Company's Annual Report on Form 10-K for the fiscal year endedJuly 31, 2021.

Note 14—Provision for Income Taxes

The Company’s tax provision or benefit from income taxes for interim periods has generally been determined using an estimateof its annual effective tax rate, adjusted for identified discrete items, if any. Under certain circumstances where the Company is unableto make a reliable estimate of the annual effective tax rate, the accounting guidance permits the use of the actual effective tax rate for theyear-to-date period.

The Company expects its overall effective tax rate for the fiscal year ending July 31, 2022 to be approximately 25.7%. Theeffective tax rate differed from the United States federal statutory tax rate of 21% due to certain factors with temporary impact primarilyrelated to equity compensation expenses. During the nine months ended April 30, 2022, the Company accounted for a discrete itemrelated to restricted stock windfall (vesting date fair market value above the grant date fair market value) which resulted in a neteffective tax rate of 24.4%.

As of April 30, 2022, the Company had $560,000 of deferred tax assets for which it has not established a valuation allowance,related to U.S. federal and state taxes and for a certain international subsidiary. The Company completed its reassessment of the abilityto realize these assets and concluded that a valuation allowance was not required.

The Company is subject to taxation in the United States and certain foreign jurisdictions. Earnings from non-U.S. activities aresubject to local country income tax. The material jurisdictions where the Company is subject to potential examination by tax authoritiesinclude the United States, Norway and Lithuania.

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Note 15—Loans Payable

Effective August 1, 2020, the Company obtained a loan of $181,462 to pay for its insurance coverages, repayable in nine equalinstallments of $20,491 starting from September 1, 2020 which represented a 3.89% annual percentage interest rate. This loan wascompletely repaid by April 2021.

Note 16—Sales of Class B Common Stock

The Company filed with the SEC a Registration Statement on Form S-3 (the “Form S-3”) on November 30, 2020 whichbecame effective on December 4, 2020 to facilitate capital raising. The Registration Statement registered the issuance and sale by theCompany of Class B common stock or related securities for gross proceeds to the Company of up to $20 million. On November 30,2020, the Company engaged National Securities Corp. and H.C. Wainwright & Co, LLC (the “Sales Agents”) to act as the Company’sexclusive co-Sales Agents in connection with the Company’s “at-the-market” offering of shares of the Company’s Class B commonstock up to $5 million. The Company filed a Prospectus Supplement (supplementing the Prospectus included in the Form S-3) onDecember 9, 2020 and contemporaneously entered into an At The Market Offering Agreement with the Sales Agents (the “ATM SalesAgreement”), pursuant to which the Company sold 761,906 shares at an average price of $6.5625 per share for total proceeds of $5

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million as of January 28, 2021. In connection with this offering, the Company incurred a total issuance cost of $215,000. The Companyintends to use the net proceeds from this offering for working capital and other general corporate purposes.

On March 16, 2021, the Company filed a prospectus supplement with the SEC which contemplated the sale, for a grossaggregate sale price of up to $10,000,000, of shares of the Company’s Class B common stock, from time to time in “at the marketofferings” pursuant to an At Market Issuance Sales Agreement with National Securities Corporation and Maxim Group LLC (the “NewSales Agents”), dated as of March 16, 2021 (the “New ATM Sales Agreement”), pursuant to which we sold 663,686 shares at anaverage price of $15.0674 per share for total proceeds of $10 million. In connection with this offering, we incurred a total issuance costof $350,000. We intend to use the net proceeds from this offering for working capital and other general corporate purposes.

Note 17—Subsequent Events

On June 7, 2022, the Company’s Board approved a $65,000 advisory fee to Activist in connection with the GuruShots acquisition.In addition, the Board also approved the increase in monthly retainer from $3,750 to $5,000 per month retroactive from April 1, 2022,

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the accompanying unaudited condensed consolidated financialstatements and the associated notes thereto of this Quarterly Report, and the audited consolidated financial statements and the notesthereto and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our AnnualReport on Form 10-K for the fiscal year ended July 31, 2021 (the “Form 10-K”), as filed with the U.S. Securities and ExchangeCommission (the “SEC”).

As used below, unless the context otherwise requires, the terms “the Company,” “Zedge,” “we,” “us,” and “our” refer to Zedge,Inc., a Delaware corporation and its subsidiary Zedge Europe AS, collectively.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the SecuritiesAct 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 anduncertainties that could cause actual results to differ materially from future results. Factors that may cause such differences include, butare not limited to: (1) Economic, geopolitical and market conditions can adversely affect our business, results of operations andfinancial condition, including our revenue growth and profitability, which in turn could adversely affect our stock price; (2) Our abilityto successfully make acquisitions and/or successfully integrate acquisitions that we have made in to Zedge without incurringunanticipated costs or without being subject to other integration issues that may disrupt our existing operations; (3) Delay or failure torealize the expected synergies and benefits of the GuruShots acquisition; (4) The impact of the Covid-19 pandemic on our employees,customers, partners, and the global financial markets; and (5) Russia's recent invasion of Ukraine, and the international community'sresponse. For further information regarding risks and uncertainties associated with our business, please refer to Part II, Item 1A (RiskFactors) in this Quarterly Report on Form 10-Q, those discussed under Item 1A to Part I “Risk Factors” in the Form 10-K. The forward-looking statements are made as of the date of this report and we assume no obligation to update the forward-looking statements, or toupdate the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all ofthe information set forth in this report and the other information set forth from time to time in our reports filed with the SEC pursuant tothe Securities Act of 1933 and the Securities Exchange Act of 1934, including the Form 10-K.

Impact of COVID-19

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic, which continues to impactthe U.S. and the world. We are unable to accurately predict the full impact that COVID-19 will have due to numerous uncertainties,including the duration of the outbreak, actions that may be taken by governmental authorities, the impact to the business of ourcustomers and partners, the risk of additional, and currently-unknown COVID-19 variations necessitating further measures to mitigate

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risk and seek to protect employee and vendor health and safety. We will continue to evaluate the scope and extent of the impact to ourbusiness, consolidated results of operations, and financial condition.

Impact of Russia's recent invasion of Ukraine

In February of 2022, the Russian Federation invaded Ukraine. As a result, many governments and businesses imposed tradeand economic sanctions on the Russian Federation and Belarus. Zedge has a small user base in Russia and Belarus; however, it also hasa development center in Vilnius, Lithuania, which is approximately 40 kilometers from the Belarussian border. In the event that theconflict spills over into other countries, Zedge may need to relocate personnel potentially resulting in a slowdown in work productgenerated by those personnel. At present, the Company is working on contingency planning to be in a position to minimize any potentialinterruptions. GuruShots has several contractors originally based in Ukraine who were inaccessible for a period of time. Most of themare now back at work and some of them have relocated to neighboring countries. As a result, there has been minimal disruption in thedevelopment work performed for GuruShots. We disabled both the Zedge app and GuruShots in Russia and Belarus resulting in a loss ofthat customer base and associated revenue. Finally, at the outset of the war, we changed the color of the Zedge App's icon to the colorsof the Ukrainian flag as a demonstration of our solidarity with Ukraine. This change triggered a spate of users, primarily located incountries that have close ties to the Russian Federation, to either uninstall the Zedge App and/or reduce our star ranking across thevarious storefronts. We also updated the collateral materials in these storefronts to the color of the Ukrainian flag resulting in a declinein new installs from these same countries.

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Overview

Zedge builds marketplaces and games around digital content that people use to express themselves. Our portfolio consists ofseveral leading digital consumer brands that, as April 30, 2022, served 41 million monthly active users across the globe. Our portfolioconsists of Zedge Ringtones and Wallpapers (“Zedge App”), as of August 1, 2021, Emojipedia and, as of April 12, 2022, GuruShots.

We operate a state-of-the-art digital publishing platform that powers the Zedge App, which is available in the Google Play storeand App Store, and offers an easy, entertaining and immersive way for end-users to engage with our rich and diverse catalogue ofwallpapers, video wallpapers, ringtones, notification sounds on Android and wallpapers, video wallpapers, ringtones and custom iconpacks on iOS. We secure our content from amateur and professional artists, and also from emerging and major brands. Artists have theability to easily launch a virtual storefront in our Zedge App where they can market and sell their content to our user base. In August of2021, we acquired Emojipedia, the leading source of all things emoji and, on April 12, 2022, we acquired GuruShots, an Israelicompany that operates a platform used for its competitive photography game available across iOS, Android and the web.

Our Zedge App has been installed approximately 556 million times, and at April 30, 2022, served approximately 32 millionmonthly active users, or MAU. MAU is a key performance indicator that captures the number of unique users that used our Zedge Appduring the final 30 days of the relevant period. Our Zedge App has consistently ranked as one of the most popular free apps in theGoogle Play store in the United States. Historically, we have not made a material investment in paid user acquisition for our Zedge App;however, we have started investing more in this area.

Our Zedge App’s success stems from its ability to meet consumer demand for a rich and diverse catalogue of both long-tail andpopular content in a fun, intuitive and user-friendly fashion that aligns with their interest in expressing their essence in a bespokemanner, to offer reliable search and discovery capabilities and to make relevant content recommendations to our users. To this end, weinvest heavily in both product design and development and the underlying technology required to satisfy both our Zedge App’s users’and content contributors’ expectations. Our Zedge App contains both user-generated and licensed, third-party content to achieve thesegoals.

In March 2018, we launched Zedge Premium, a marketplace within our Zedge App where professional creators and brandsmarket, distribute and sell their digital content to our consumers. At launch, Zedge Premium was a “walled garden” – a separate sectionof the app which users needed to proactively choose to enter. In November 2020 , we embedded Zedge Premium content throughout theapp making it far more prominent. We also introduced a new content type on iOS: custom icon packs. Over time, we expect that ZedgePremium will contribute to a virtuous cycle whereby it drives new consumers into our Zedge App resulting in more artist payouts,which in turn makes the platform more attractive for artists and brands looking to expand their reach and increase their income. InDecember of 2021 we introduced ‘NFTs Made Easy’ to select Zedge Premium artists interested in selling single edition, tokenized,

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video wallpapers. Our all-in-one platform allows creators to self-publish, mint and sell their NFTs simply by selecting the NFT optionwithin our self-publishing platform and without the need for them to be cryptocurrency experts or technology wizards. ‘NFTs MadeEasy’ is currency agnostic and allows consumers to purchase NFTs with Zedge tokens acquired via in-app purchases, eliminating theneed to set up a crypto wallet to buy cryptocurrencies. Over time we expect to expand the offering with features including features likenumbered editions, drop dates and new content types.

In January 2019, we started offering freemium Zedge App Android users the ability to convert into paying subscribers for,amongst other things, the ability to remove unsolicited advertisements from our Zedge App. During the first 12 months after acustomer’s sign up for the subscription-based product, Google retains up to 30% as a fee, which decreases to 15% from month 13 andbeyond. As of April 30, 2022, we had approximately 713,000 active subscribers, 90% of which had subscribed on an annual basis. Sinceinception in January 2019, subscriptions have generated approximately $9.4 million in gross revenue.

In December 2019, we completed the beta launch of ‘Shortz’ our new entertainment app offering serialized, short-form fictionrendered in a text-message format and more recently as audio productions available across both Android and iOS, and focusing on usersin the United States, the United Kingdom and Canada and it is now available globally. Based on the limited success of Shortz with ouruser base, we have decided to deprioritize its development and focus our resources on other opportunities.

During the quarters ended April 30, 2022 and 2021, we generated approximately 77% and 81%, respectively, of our revenuesfrom selling our Zedge App’s advertising inventory primarily to advertising networks and advertising exchanges. Advertising networksand advertising exchanges are third-party technology platforms that facilitate the buying and selling of media advertising inventory frommultiple ad networks. The price of advertising inventory is fixed on an advertising network whereas the price for inventory isdetermined through real-time bidding on an advertising exchange. Advertisers are attracted to our Zedge App because of its sizable userbase.

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In our Zedge Premium marketplace, the content owner sets the price and the user can purchase the content by paying for it withZedge Credits, our closed virtual currency. A user can earn Zedge Credits when taking specific actions such as watching a rewardedvideo or taking a survey. Alternatively, users can buy Zedge Credits via an in-app purchase. If a user purchases Zedge Credits, GooglePlay or App Store keeps up to 30% of the purchase price with the remainder being paid to us. When a user purchases Zedge Premiumcontent, the artist or brand receives 70% of the actual value of the Zedge Credits used to buy the content item as a royalty and we retainthe remaining 30% as our fee, which we recognize as revenue. As Zedge Premium matures and expands, we expect to also diversify ourrevenue source mix.

Over the past several years, our Zedge App has experienced a continuing decline in its MAU in well-developed markets withgrowth of MAU in emerging markets, so that users in emerging markets represent an increasing portion of our user base. In addition, therate of user growth in emerging markets slowed in the first half of fiscal 2022 compared to prior periods. As of April 30, 2022, users inemerging markets represented 77% of the MAU for our Zedge App compared to 73% a year prior. This shift has negatively impactedrevenue because advertising rates in emerging markets are materially lower than in well-developed markets. In the third quarter of fiscal2022, users in well-developed economies and emerging markets declined by 15.6% and 3.9% respectively when compared to the sameperiod in fiscal 2021. As of April 30, 2022, approximately 41% of our Zedge App’s user base was located in North America (21%) andEurope (including Eastern Europe, 20%), compared with 42% (North America, 20% and Europe 22%) as of July 31, 2021. Theremaining 59% of the user base was primarily located in emerging markets with 27% located in India.

MAU growth is tightly coupled with new user growth. Historically, our relatively high ranking in the Google Play store hasbeen one of the primary drivers for securing new users. Although still an important factor, we now also dedicate resources to growthinitiatives, both organic and paid. We have started increasing paid user acquisition spend while monitoring results to ensure that theinvestment is yielding a positive return on investment. With time, we believe that we can change our growth dynamic in well-developedmarkets and return to more robust growth in all markets. Aside from targeted growth initiatives, we need to continually improve thecore user experience, test different mechanisms and content verticals that may spur growth and capitalize on the role that ZedgePremium artists can have on driving new users into the Zedge platform.

Business Combination and Asset Acquisition

Emojipedia

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On August 1, 2021, we acquired Emojipedia, the world’s leading authority dedicated to providing up to date and well-researched emoji definitions, information, and news as well as World Emoji Day and the annual World Emoji Awards, and Emojitracker,which provides real time visualization of all emoji symbols used on Twitter. In January 2022 Emojipedia receives approximately 45million monthly page views and has approximately 8.6 million monthly active users of which approximately 50% are located in well-developed markets. It is the top resource for all things emoji, offering insights into data and cultural trends. As a voting member of theUnicode Consortium, the standards body responsible for approving new emojis, Emojipedia works alongside major emoji creatorsincluding Apple, Google, Facebook and Twitter.

GuruShots

On April 12, 2022, we completed the acquisition of GuruShots (“GS”). GS, founded in 2014, is an Israeli company and theleader in the photo gaming space. It provides a fun, educational, and structured way for amateur photographers -- anyone with a cellphone -- to compete and showcase their photos, gain recognition and progress via votes, badges, and awards. GS, via its LiveOps team,posts daily competitive challenges that are voted on by the platform's Gurus and the wider community. The platform releasesapproximately 10 challenges daily and users upload more than1 million high-quality photos monthly. Challenges can amass more than20,000 submissions within 36 hours of being posted.

GS has developed a sophisticated gamification platform that is being used to power its photo game GS business is based on aFree-to-Play model that leads to strong monetization with the purchase of resources that are used to give competitors a competitive edgewhile still maintaining a fair and competitive experience for all participants. Furthermore, it has a built-in social layer with featuresincluding leaderboards, chat, and team leagues.

Its uniqueness is tied to several key elements including:

● Retention Dynamics – focused on individual, team, and community dynamics that create a sense of belonging, inspiration,recognition, improvement, and competition.

●Crowd Based Voting System – allows users to vote in favor or other player’s photos in order to secure a higher ranking.Users can earn greater voting power, or “perceived votes,” by engaging in gameplay. On a monthly basis, this yields morethan 4.5 billion perceived votes, a strong indication of user-engagement.

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● Real-Time Image Ranking – a competitive dynamic that acts as a catalyst for users to reach top ranks. To date, GS hasmore than 130 million ranked images. By definition these are high-quality images, otherwise, they would not be ranked.

● Gamification Dynamics – these include challenges, points, levels, achievements, and game loops.

GS’s Business Model

GS generates revenue by selling game resources via in-app and online purchases. Some of these resources include increasing aphotograph’s exposure, access to locked game content, exchanging an image in the competition with a different image, and skippingvoting sessions.

GS’s User Growth and Acquisition

GS’ user acquisition and growth strategy is currently focused on paid user acquisition channels including Google, Facebook,and Instagram. GS is in the early stages of testing additional user acquisition platforms. Prior to the acquisition by Zedge, GSoutsourced paid user acquisition to a 3rd party marketing agency. In the coming months, we expect to migrate many of the marketingresponsibilities in-house which we believe will yield improved ROAS and ROI. In addition, we plan on investing in organic user growthinitiatives including user referral programs, search engine optimization, app store optimization, etc. which are standard growth driversfor gaming apps. Finally, we expect to cross market to existing Zedge users.

GS’s Product Roadmap

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In 2021, GS focused on improving retention with game loops focused on improving challenges and achievements. In addition,it rolled out “Leagues,” which enables team-play, and which is scaling well. GS is increasingly focusing on improving the on boardingprocess in order to draw more users into the competitions, introducing a set of self-learning modules that can assist users in becomingbetter photographers. Gamifying learning is an area that can make a material difference in engagement and monetization.

GS’s Technology

GS’ cloud-based platform uses machine learning ranking technology to ensure fair exposure of all photos submitted tocompetitions. It also employs image classification technology to suggest which competitions a photo should enter. It has a strongmoderation tool that actively detects content for policy violations. In addition, the platform is self-governing with regards to flagginginappropriate and copyrighted content, as many users are quick to flag this due to the competition context. Over time the plan is tomigrate GS technology to the same cloud platform that Zedge currently uses with the expectation that this will yield cost savings andsimplify operations.

Critical Accounting Policies

Our unaudited condensed consolidated financial statements and accompanying notes are prepared in accordance withaccounting principles generally accepted in the United States of America, or U.S. GAAP. Our significant accounting policies aredescribed in Note 1 to the consolidated financial statements included in the Form 10-K. The preparation of financial statements requiresmanagement to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well asthe disclosure of contingent assets and liabilities. Critical accounting policies are those that require application of management’s mostsubjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Ourcritical accounting policies include those related to capitalized software and technology development costs, revenue recognition,business combinations and valuing contingent considerations, recognition and impairment of intangible assets and goodwill.Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under thecircumstances. Actual results may differ from these estimates under different assumptions or conditions. For additional discussion ofour critical accounting policies, see our Management’s Discussion and Analysis of Financial Condition and Results of Operations in theForm 10-K.

Recently Issued Accounting Standards Not Yet Adopted

Please refer to Note 1 to the unaudited condensed consolidated financial statements included in Item 1 to Part I of thisQuarterly Report on Form 10-Q.

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Key Performance Indicators

The presentation of our results of operations includes disclosure of two key performance indicators - Monthly Active Users(MAU) and Average Revenue Per Monthly Active User (ARPMAU) from our Zedge App. MAU is a key performance indicator thatcaptures the number of unique users that used our Zedge App during the previous 30-day period, which is important to understandingthe size of the user base for our Zedge App which is a main driver of our revenue. Changes and trends in MAU are useful for measuringthe general health of our business, gauging both present and potential customers' experience, assessing the efficacy of productimprovements and marketing campaigns and overall user engagement. ARPMAU is valuable because it provides insight into how wellwe monetize our users and, changes and trends in ARPMAU are indications of how effective our monetization investments are.

MAU decreased 7.0% in the third quarter of fiscal 2022 when compared to the same period a year ago and increased 11.6% ona sequential basis. Over the past several years, we have experienced a continuing shift in our regional customer make-up with MAU inemerging markets representing an increasing portion of our user base. As of April 30, 2022, users in emerging markets represented 77%of our MAU compared to 73% a year prior. This shift impacts our business because emerging markets do not monetize as well as well-developed markets due to lower eCPMs and lower monthly and annual subscription sales in these regions coupled with lower pricedsubscriptions SKUs. However, ARPMAU for the three months ended April 30, 2022 was up approximately 7.8% when compared to thesame period a year ago, pointing to progress we have made in extracting more revenue from our users, particularly from paidsubscriptions sales and improvement in ad optimization. ARPMAU declined 13.0% on a sequential basis due to seasonality.

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We believe that much of the decline was caused by one-off events and estimate that a third or more of the MAU decline isattributable to a combination of uninstalls driven by our need to push a forced upgrade of the Zedge App in order to migrate toAppLovin’s Max ad mediation platform combined with losses attributable to our decision to change the color of the Zedge App's icon tothe colors of the Ukrainian flag as a demonstration of our solidarity with Ukraine. This change triggered a spate of users, primarilylocated in countries that have close ties to the Russian Federation, to either uninstall the Zedge App and/or reduce our star rankingacross the various storefronts. We also updated the collateral materials in these storefronts to the color of the Ukrainian flag resulting ina decline in new installs from these same countries. In addition, we disabled both the Zedge App and GuruShots in Russia and Belarusresulting in a loss of that customer base. Furthermore, we are accustomed to experiencing MAU declines resulting from seasonality inthe business in Q3, which follows the end-of-year holiday season. Thus, we believe much of the decline was caused by [one-off events.Nonetheless, we have implemented a variety of product changes to reverse the trend, including changing our app icon and storebranding in India, increasing the frequency and regularity of push notification campaigns as well as app icon changes, and continuingour rollout of social and community features.

Three Months EndedApril 30,

(in millions, except ARPMAU - Zedge App) 2022 2021 % ChangeMAU- Zedge App 32.1 34.5 -7.0%Developed Markets MAU - Zedge App 7.5 8.9 -15.7%Emerging Markets MAU - Zedge App 24.6 25.6 -3.9%Emerging Markets MAU - Zedge App/Total MAU - Zedge App 77% 73% 5.0%

ARPMAU - Zedge App $ 0.0523 $ 0.0485 7.8%

Three MonthsEnded

April 30,

Three MonthsEnded

January 31,(in millions, except ARPMAU) 2022 2022 % ChangeMAU- Zedge App 32.1 36.3 -11.6%Developed Markets MAU - Zedge App 7.5 8.5 -11.8%Emerging Markets MAU - Zedge App 24.6 27.8 -11.5%Emerging Markets MAU - Zedge App/Total MAU - Zedge App 77% 77% 0.1%

ARPMAU - Zedge App $ 0.0523 $ 0.0601 -13.0%

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The following charts present the MAU – Zedge App and ARPMAU – Zedge App for the consecutive eight quarters endedApril 30, 2022:

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* Please note the MAU-Zedge App graph above excludes MAU for both Emojipedia and GuruShots

Results of Operations

Three and Nine months ended April 30, 2022 Compared to Three and Nine months ended April 30, 2021

Three Months EndedApril 30, Change Nine Months Ended

April 30, Change

2022 2021 $ % 2022 2021 $ %(in thousands) (in thousands)

Revenues $ 6,230 $ 5,252 $ 978 18.6% $ 19,173 $ 14,328 $ 4,845 33.8%Direct cost of revenues 401 290 111 38.3% 1,053 907 146 16.1%Selling, general and administrative 4,064 2,694 1,370 50.9% 9,902 6,859 3,043 44.4%Depreciation and amortization 423 289 134 46.4% 1,181 972 209 21.5%Income from operations 1,342 1,979 (637) -32.2% 7,037 5,590 1,447 25.9%Interest and other income, net 15 9 6 66.7% 42 14 28 200.0%Net (loss) gain resulting from foreign

exchange transactions (125) (12) (113) 941.7% (220) 21 (241) nm

Provision for (benefit from) incometaxes 429 (473) 902 nm 1,676 (147) 1,823 nm

Net Income $ 803 $ 2,449 $ (1,646) -67.2% $ 5,183 $ 5,772 $ (589) -10.2%

nm—not measurable

Revenues

The following table sets forth the composition of our revenues for the three and nine months ended April 30, 2022 and 2021:

Three Months Ended Nine Months EndedApril 30, April 30, % Changes

2022 2021 2022 2021 Three Months Nine Months(in thousands) (in thousands)

Advertising revenue $ 4,526 $ 4,227 $ 14,532 $ 11,612 7% 25%Paid subscription revenue 910 899 2,823 2,358 1% 20%Other revenues 794 126 1,818 358 530% 408%

Total revenues $ 6,230 $ 5,252 $ 19,173 $ 14,328 19% 34%

Advertising revenue. Advertising revenue increased 7% and 25% in the three and nine months ended April 30, 2022,respectively, compared to the three and nine months ended April 30, 2021, primarily due to improvement in our ad optimizations andhigher advertising rates.

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Paid subscription revenue. We rolled out a subscription-based product on Android in January 2019, whereby users of ourZedge app could pay a monthly or annual fee to remove unsolicited ads when using our Zedge app. We employ a regional pricingstrategy in order to improve conversions. The U.S. constitutes our largest subscriber base and we generally charge $0.99 per month and$4.99 per year. Pricing in other markets is based on local conditions. We generated $931,000 and $2,747,000 in gross prepaidsubscription in the three and nine months ended April 30, 2022, respectively, compared to $990,000 and $2,806,000 in the three andnine months ended April 30, 2021. The 6% decline in gross prepaid subscription sale for the three months ended April 30, 2022 whencompared to the same period a year ago was primarily due to approximately 3% decline in new installs in well-development markets inthe corresponding periods and a decrease in renewal rate. As of April 30, 2022, the first year renewal rate was 44% and second yearrenewal rate was 53%. We expect that from time to time the prices of our subscription in each country/region may change and we maytest other plan and price variations.

The following table summarizes subscription revenue for the three and nine months ended April 30, 2022 and 2021:

Three Months Ended Nine Months EndedApril 30, April 30,

2022 2021 % Change 2022 2021 % Change(in thousands, except revenue per subscriber and

percentages)Revenues $ 910 $ 899 1% $ 2,823 $ 2,358 $ 20%Active subscriptions net additions -49 42 nm -39 249 nmActive subscriptions at end of period 713 753 -5% 713 753 -5%Average active subscriptions 718 734 -2% 747 652 15%Average monthly revenue per active

subscription $ 0.42 $ 0.41 2% $ 0.42 $ 0.40 $ 5%

Gaming revenue. GuruShots sells game resources via in-app and online purchases. Some of these virtual items includeincreasing a photograph’s exposure, exchanging an image in the competition with a different image, and skipping voting sessions.GuruShots recognizes revenue at the time of purchase because the overwhelming majority of users only purchase game resources whenthey need them to progress in the game. GuruShots generated $294,000 between April 13, 2022 to April 30, 2022 which is included inOther Revenues.

Zedge Premium. Gross transaction value (the total sales volume transacting through the platform), or “GTV,” increased 63%and 75% in the three and nine months ended April 30, 2022, respectively, compared to the three and nine months ended April 30, 2021.Net revenue increased 47% and 74% in the three and nine months ended April 30, 2022, respectively, compared to the three and ninemonths ended April 30, 2021.The gross and net revenue growth in Zedge Premium can be attributed to the investment we made in ournew content management system as well as the landing page redesign.

The following table summarizes Zedge Premium gross and net revenue for the three and nine months ended April 30, 2022 and2021:

Three Months Ended Nine Months EndedApril 30, April 30, % Changes

2022 2021 2022 2021 Three Months Nine Months(in thousands) (in thousands)

Zedge Premium-gross revenue(“GTV”) $ 410 $ 252 $ 1,173 $ 671 63% 75%

Zedge Premium-net revenue $ 182 $ 124 $ 610 $ 351 47% 74%

Revenue from Zedge Premium, web-based advertising revenues from Emojipedia and other related sites, as well as revenuesgenerated by Shortz, are reported under Other Revenues, and those offerings constitute potential growth drivers in the quarters to come.

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Integration bonus. On April 1, 2022, we received a one-time integration bonus of $2 million from AppLovin Corporation formigrating to their mediation platform. This amount is being amortized over an initial estimated service period of 24 months which isalso included in Other Revenues.

Direct cost of revenues. Direct cost of revenues consists primarily of content hosting and content delivery costs.

Three Months EndedApril 30,

Nine Months EndedApril 30,

(in thousands) 2022 2021 % Change 2022 2021 % ChangeDirect cost of revenues $ 401 $ 290 38.3% $ 1,053 $ 907 16.1%As a percentage of revenues 6.4% 5.5% 5.5% 6.3%

Direct cost of revenues increased 38.3% and 16.1% in the three and nine months ended April 30, 2022, respectively, comparedto three and nine months ended April 30, 2021. The increase in the direct cost of revenues can be attributed to utilizing a new dataanalytics tool provided by Google’s Cloud Computing Services and the inclusion of GuruShots’ infrastructure costs.

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As a percentage of revenue, direct cost of revenues in three and nine months ended April 30, 2022 were 6.4% and 5.5%,respectively, compared to 5.5% and 6.3%, in the three and nine months ended April 30, 2021, primarily due to significant higherrevenue in the nine-month periods and the fixed nature of many of our direct cost of revenues.

Selling, general and administrative expense. Selling, general and administrative expense (“SG&A”) consists mainly ofGuruShots’ operating expenses, payroll, benefits, recruiting fees, facilities, marketing, consulting, professional fees, software licensing(“SaaS”), M&A related expenses and public company related expenses.

Three Months EndedApril 30,

Nine Months EndedApril 30,

(in thousands) 2022 2021 % Change 2022 2021 % ChangeSelling, general and administrative $ 4,064 $ 2,694 50.9% $ 9,902 $ 6,859 44.4%As a percentage of revenues 65.2% 51.3% 51.6% 47.9%

SG&A expense increased 50.9% and 44.4% in the three and nine months ended April 30, 2022, respectively, compared to thethree and nine months ended April 30, 2021. This increase was primarily attributable to transaction costs of $860,000 related to theGuruShots acquisition, higher compensation costs resulting from additional headcount, higher stock-based compensation as discussedbelow, higher professional fees and offset by reductions in discretionary expenses.

As a percentage of revenue, SG&A expense in the three and nine months ended April 30, 2022 were 65.2% and 51.6%,respectively, compared to 51.3% and 47.9%, in the three and nine months ended April 30, 2021. Excluding costs related to theGuruShots acquisition SG&A expense as a percentage of revenue in the three and nine months ended April 30, 2021 would have been53.3% and 47.2%.

Our headcount (including 30 added through the GS acquisition) totaled 93 as of April 30, 2022 compared to 52 as of April 30,2021 with the majority of our employees currently based in Lithuania.

SG&A expense also included stock-based compensation expense including equity grants to employees and consultants, as wellas stock issuances to pay for board compensations and 401(k) matching contributions. Certain stock options, deferred stock unit andrestricted stock grants are more fully described in Note 8 to the unaudited condensed consolidated financial statements included inItem 1 to Part I of this Quarterly Report on Form 10-Q.

Depreciation and amortization. Depreciation and amortization consist mainly of amortization of intangible assets andcapitalized software and technology development costs of our internal developers on various projects that we invested in specific to thevarious platforms on which we operate our service.

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Three Months EndedApril 30,

Nine Months EndedApril 30,

(in thousands) 2022 2021 % Change 2022 2021 % ChangeDepreciation and amortization $ 423 $ 289 46.4% $ 1,181 $ 972 21.5%As a percentage of revenues 6.8% 5.5% 6.2% 6.8%

Depreciation and amortization expenses increased approximately 46.4% and 21.5% in the three and nine months ended April30, 2022, compared to three and nine months ended April 30, 2021. This increase was primarily attributable to the amortization ofintangible assets related to the acquisition of GuruShots and Emojipedia.

Interest and other income, net. Interest and other income, net in the three and nine months ended April 30, 2022 increased$6,000 and $28,000 respectively when compared to the same periods in fiscal 2021 due to higher cash balance resulting from cash flowsprovided by operating activities and financing activities in fiscal 2021.

Three Months EndedApril 30,

Nine Months EndedApril 30,

(in thousands) 2022 2021 % Change 2022 2021 % ChangeInterest and other income, net $ 15 $ 9 66.7% $ 42 $ 14 200.0%As a percentage of revenues 0.2% 0.2% 0.2% 0.1%

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Net (loss) gain resulting from foreign exchange transactions. Net loss resulting from foreign exchange transactions iscomprised of gains and losses generated from movements in NOK and EUR relative to the U.S. Dollar, including gains or losses fromour hedging activities.

Three Months EndedApril 30,

Nine Months EndedApril 30,

(in thousands) 2022 2021 % Change 2022 2021 % ChangeNet (loss) gain resulting from foreign

exchange transactions $ (125) $ (12) nm $ (220) $ 21 nm

As a percentage of revenues -2.0% -0.2% -1.1% 0.1%

In the three and nine months ended April 30, 2021, we realized losses of $154,000 and $271,000, respectively, from NOK andEUR hedging activities, compared to gains of $16,000 and $67,000, respectively in the three and nine months ended April 30, 2021 dueto the strengthening of the US dollars in current periods, as more fully described in Note 4 to the unaudited condensed consolidatedfinancial statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.

Provision for income taxes. The tax expense consists of federal and state taxes based on taxable income and allocated networth and certain income taxes payable in foreign jurisdictions where our subsidiaries reside.

Three Months EndedApril 30,

Nine Months EndedApril 30,

(in thousands) 2022 2021 % Change 2022 2021 % ChangeProvision for (benefit from) income

taxes $ 429 $ (473) nm $ 1,676 $ (147) nm

As a percentage of revenues 6.9% -9.0% 8.7% -1.0%

Our tax provision or benefit for income taxes for interim periods has generally been determined using an estimate of its annualeffective tax rate, adjusted for discrete items, if any. Under certain circumstances where we are unable to make a reliable estimate of theannual effective tax rate, the accounting guidance permits the use of the actual effective tax rate for the year-to-date period.

We expect our overall effective tax rate for fiscal year ending July 31, 2022 to be approximately 25.7 %. The effective tax ratediffered from the United States federal statutory tax rate of 21% due to certain factors with temporary impact primarily related to the

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equity compensation expenses. During the nine months ended April 30, 2022, we accounted for a discrete item related to restricted stockwindfall (vesting date fair market value above the grant date fair market value) which resulted in a net effective tax rate of 24.4%.

As of April 30, 2022, we had $560,000 of deferred tax assets for which it has not established a valuation allowance, related tothe U.S. federal states and certain international subsidiary. The Company completed its reassessment of the ability to realize these assetsand concluded that a valuation allowance was not required.

We are subject to taxation in the United States and certain foreign jurisdictions. Earnings from non-U.S. activities are subject tolocal country income tax. The material jurisdictions where we are subject to potential examination by tax authorities include the UnitedStates, Norway and Lithuania.

Liquidity and Capital Resources

General

At April 30, 2022, we had cash and cash equivalents of $17.1 million and working capital (current assets less current liabilities)of $6.4 million, compared to $24.9 million and $23.4 million, respectively, at July 31, 2021. We expect that our cash and cashequivalents on hand and our cash flow from operations will be sufficient to meet our anticipated cash requirements for the twelve-monthperiod ending June 14, 2023. During fiscal 2021, we raised an aggregate of $15 million through sales of equity in At the Marketofferings. We also maintain a revolving line of credit of up to $2.0 million and a foreign exchange contract facility of up to $6.5 millionwith Western Alliance Bank, as discussed below in Financing Activities.

The following tables present selected financial information for the nine months ended April 30, 2022 and 2021:

Nine Months EndedApril 30,

(in thousands) 2022 2021 $ ChangesCash flows provided by (used in):

Operating activities $ 11,314 $ 7,737 $ 3,577Investing activities (18,807) (593) (18,214)Financing activities (225) 12,518 (12,743)Effect of exchange rate changes on cash and cash equivalents (95) 142 (237)(Decrease) increase in cash and cash equivalents $ (7,813) $ 19,804 $ (27,617)

28

Operating Activities

Our cash flow from operations varies significantly from quarter to quarter and from year to year, depending on our operatingresults and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable. Cashprovided by operating activities increased $3.6 million in the nine months ended April 30, 2022 to $11.3 million from $7.7 million inthe nine months ended April 30, 2021, primarily attributable to the higher revenues generated from our service offerings, principallyadvertising, paid subscription revenues and a $2 million integration bonus received from AppLovin.

Investing Activities

On April 12, 2022, we acquired 100% of the outstanding equity securities of GuruShots. The purchase price consists of $18million in cash paid at closing and contingent payments (the “Earnout”) of up to a maximum of $16.8 million, payable either in cash orClass B common stock of the Company or a combination thereof (in the Company’s discretion) payable over two years from closingsubject to GS achieving certain financial targets set forth in the SPA. In connection therewith, we agreed to make certain minimuminvestments in user acquisition for GS in the period covered by the Earnout, subject to GS maintaining agreed upon levels of return onad spend (ROAS). In addition, we committed to a retention pool of $4 million in cash and issued 626,242 shares of the Company ClassB common stock with a fair value of $4 million or $6.39 per share for GuruShots’ founders and other employees that will be payable orvest, as applicable, over three years from closing based on the beneficiaries thereof remaining employed by the Company or asubsidiary.

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On August 1, 2021, we acquired substantially all of the assets of Emojipedia Pty Ltd, a proprietary company organized underthe laws of Australia. The final purchase price of the assets has been determined to be $6.7 million of which $4.8 million was paid onAugust 2, 2021 with the remaining $1.9 million to be paid out on the six-month and twelve-month anniversary of the Closing. We paidapproximately half of the $1.9 million on February 1, 2022. That $4.8 million was funded into an escrow account on July 30, 2021 andclassified as other assets on our balance sheet as of July 31, 2021.

Business combination and assets acquisition are more fully described in Note 5 to the unaudited condensed consolidatedfinancial statements the included in Item 1 to Part I of this Quarterly Report on Form 10-Q.

Cash used in investing activities in nine months ended April 30, 2022 and 2021 also consisted of capitalized software andtechnology development costs related to various projects that we invested in specific to the various platforms on which we operate ourservice.

Financing Activities

Between December 14, 2020 and January 26, 2021, we sold an aggregate of 761,906 shares of our Class B common stock at anaverage price of $6.5625 per share for total gross proceeds of $5 million in a registered “At the Market” offering through NationalSecurities Corp. and H.C. Wainwright & Co, LLC as sales agents. In connection with this offering, total issuance costs were $215,000.We are using the net proceeds from this offering for general corporate purposes including organic and other growth initiatives.

In August 2020, we obtained a loan of $181,000 to finance about 82% of our directors’ and officers’ liability and cyber liabilityinsurance policies, at an annual percentage interest rate of 3.89% to be repaid over nine equal monthly installments of $20,490 startingfrom September 1, 2020. We repaid approximately $100,000 in principal in the nine months ended April 30, 2021.

In the nine months ended April 30, 2022 and 2021, we issued 3,666 shares and 497,252 shares respectively of Class B commonstock and received $7,000 and $819,000 respectively, in connection with options exercised during the period.

In the nine months ended April 30, 2022 and 2021, we purchased 16,115 shares and 17,630 shares, respectively, of Class Bcommon stock from employees for $232,000 and $26,000 respectively, to satisfy tax withholding obligations in connection with thevesting of restricted stock and DSUs.

We maintain a credit facility of up to $2.0 million provided by Western Alliance Bank which is more fully described in Note 11to the to the unaudited condensed consolidated financial statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.

We do not anticipate paying dividends on our common stock until we achieve sustainable profitability and retain certainminimum cash reserves. The payment of dividends in any specific period will be at the sole discretion of our Board of Directors.

29

Changes in Trade Accounts Receivable

Gross trade accounts receivable increased $0.2 million to $2.7 million at April 30, 2022 from $2.5 million at July 31, 2021,primarily due to the inclusion of GS’ accounts receivable.

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 revenuefrom mobile advertising, as we aggressively manage our collections and perform due diligence on our customers. In addition, themajority of our revenue is derived from large, credit-worthy customers, e.g. MoPub (owned by Twitter until it was sold to AppLovin onJanuary 3, 2022), Google, Facebook and AppLovin, and we terminate our services with smaller customers immediately upon balancesbecoming past due. Since these smaller customers rely on us to derive their own revenue, they generally pay their outstanding balanceson a timely basis.

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In the nine months ended April 30, 2022, three customers represented 29%, 19% and 13% of our revenue. In the nine monthsended April 30, 2021, three customers represented 31%, 22% and 12% of our revenue. At April 30, 2022, two customers represented40% and 19% of our accounts receivable balance, and at July 31, 2021, two customers represented 37% and 28% of our accountsreceivable balance. All of these significant customers were advertising exchanges operated by leading companies, and the receivablesrepresent many smaller amounts due from their advertisers.

Contractual Obligations and Other Commercial Commitments

Smaller reporting companies are not required to provide the information required by this item.

Off-Balance Sheet Arrangements

At April 30, 2022, we did not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that arereasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures orcapital resources.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

Smaller reporting companies are not required to provide the information required by this item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluatedthe effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Actof 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our ChiefExecutive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of April 30,2022.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reportingduring the quarter ended April 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal controlover financial reporting.

30

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Legal proceedings in which we are involved are more fully described in Note 10 to the unaudited condensed consolidatedfinancial statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

Other than the risk factors described below, there are no other material changes from the risk factors previously disclosed inItem 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended July 31, 2021.

We may not be successful in acquiring a sufficient number of users that convert into paying players that generate profits forGuruShots

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We invest in paid user acquisition and in other marketing activities in order to secure new users and we dedicate resources toconvert free users into paying users as well as to prompt existing paying users to increase their spend with us. If our user acquisition andmonetization strategies do not yield the desired results we may fail to attract, retain or monetize users and experience a decrease inspending levels which would result in lower revenues and could have a material adverse effect on our business and financial results.

We may not be successful converting free users into paying players to generate profits for GuruShots

Revenues of free-to-play games typically rely on a small percentage of players who convert into paying users by purchasinggame resources that yield additional advantages and features. The vast majority of users play for free or only occasionally spend moneyon the game. Accordingly, only a small percentage of users who play GuruShots’ games in any period are paying users. In addition,even among the paying users, a small portion of those users generate a large percentage of GuruShots’ revenues. Because of this, it isimperative for us to retain the small percentage of paying users and to maintain or increase their spending. Over the past six years,GuruShots has successfully increased the compounded annual growth rate of monthly spending per paying player by around 18%. Therecan be no assurance that we will be able to continue to retain paying users or that paying users will maintain or increase their spending.We may experience a net decline in paying players resulting in a decrease in revenue resulting in a materially adverse outcome for ourbusiness and financial results.

We may not manage our game economy properly and as a result, disincentivize players from purchasing game resources

GuruShots is available to players for free, and GuruShots generates nearly all of its revenues from the sale of game resourcesthat users can purchase to secure additional advantages and features that can be utilized to increase the visibility of their photos in acompetition. The perceived value of these resources can be impacted by how much we charge for them, how much we discount them,and what resources can be earned by taking specific actions during gameplay. If we fail to manage our economy well we risk confusingor upsetting paying players to the point that they reduce their purchases which could negatively hurt the business.

In addition, there are players that share strategies about how to win the competitions across various social media platformswhich could reduce the paying player spend or provide advantages to players negating the need for them to purchase in-game resources.

We may not accurately track key performance indicators needed to run our business profitably accurately

We track certain key performance indicators, including the number of active and paying players using both internal and third-party tracking tools. Our analytical tools have certain limitations, and our ability to access and monitor this data may change, whichwould adversely impact our ability to track these KPIs. If the internal or external tools we use to track data contain bugs we may makepoor decisions based on flawed and inaccurate data which hurt our reputation and financial position.

Zedge may experience a material downturn in its business making it impossible to meet the user acquisition spend obligations thatwe have made to GuruShots

In connection with the purchase of GuruShots, we made commitments on user acquisition spend at GuruShots. In the event thatthere is a material economic setback or another catastrophic event that negatively impacts advertising spend we may be unable to meetour user acquisition obligations to GuruShots which would expose us to liability to the prior owners of GuruShots.

31

Zedge may be unable to successfully integrate GuruShots into Zedge

Zedge and GuruShots will need to integrate their operations which will require coordination between management, marketing,technology, product development, and operations. Zedge may not execute the integration successfully resulting in higher costs, productdelays, employee resignations, and overall underperformance.

The GuruShots acquisition may fail to yield growth opportunities and achieve beneficial synergies

Zedge acquired GuruShots with the expectation that the transaction will yield growth on a standalone basis as well as strategicsynergies on a combined basis. Our success in realizing these growth opportunities and strategic synergies, and their associated timing

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depends, amongst other things, on the successful integration of the respective businesses. Even if we are successful with the integration,there is no guarantee that the strategic synergies that we envisioned will bear fruit.

We may cause additional dilution to investors

In the event that GuruShots meets or exceeds the target thresholds associated with the earnout Zedge may need to issue stock tomake the earnout payments resulting in additional dilution to you.

Russia's recent invasion of Ukraine, and the international community's response, have created substantial political and economicdisruption, uncertainty, and risk.

In February 2022, Russia's military action in Ukraine resulted in wide-ranging sanctions and international protests, creatingsignificant political and economic uncertainty at a global level. These and related actions, responses, and consequences may contributeto world-wide economic downturns. We have no way to predict the progress or outcome of the situation, as the conflict and governmentreactions are rapidly developing and beyond our control. Prolonged unrest, military activities, or broad-based sanctions could have amaterial adverse effect on our operations and business outlook.

We track certain key performance indicators with internal and third-party tools and do not independently verify all of these metrics.Certain of these indicators may have challenges in being tracked accurately which could negatively impact our business.

We track certain key performance indicators, including the number of active and paying players using a both internal and third-party tracking tools. Our analytical tools have certain limitations, including those from third-party providers, and our ability to accessand monitor this data may change adversely impacting our ability to track these KPIs. If the internal or external tools we use to trackdata contain bugs we may make poor decisions based on flawed and inaccurate data which hurt our reputation and financial position.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

32

Item 6. Exhibits

ExhibitNumber Description

31.1* Certification of Chief Executive Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.

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31.2* Certification of Chief Financial Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.

32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.

32.2* Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.

101.INS* Inline XBRL Instance Document

101.SCH* Inline XBRL Taxonomy Extension Schema Document

101.CAL* Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB* Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE* Inline XBRL Taxonomy Extension Presentation Linkbase Document

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

* Filed or furnished herewith.

33

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed onits behalf by the undersigned thereunto duly authorized.

ZEDGE, INC.

June 14, 2022 By: /s/ JONATHAN REICHJonathan Reich

Chief Executive Officer

June 14, 2022 By: /s/ YI TSAIYi Tsai

Chief Financial Officer

34

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Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, JONATHAN REICH, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Zedge, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed underour supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is madeknown to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting.

Date: June 14, 2022

/s/ JONATHAN REICHJonathan Reich

Chief Executive Officer

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Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Yi Tsai, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Zedge, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed underour supervision, to ensure that material information relating to the registrant, including its consolidated subsidiary, is madeknown to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting.

Date: June 14, 2022

/s/ YI TSAIYi Tsai

Chief Financial Officer

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Exhibit 32.1

Certification Pursuant to18 U.S.C. Section 1350

(as Adopted Pursuant to Section 906 ofthe Sarbanes-Oxley Act Of 2002)

In connection with the Quarterly Report of Zedge, Inc. (the “Company”) on Form 10-Q for the quarter ended April 30, 2022 asfiled with the Securities and Exchange Commission (the “Report”), I, JONATHAN REICH, Chief Executive Officer of the Company,certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company.

Date: June 14, 2022

/s/ JONATHAN REICHJonathan Reich

Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwiseadopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, hasbeen provided to Zedge, Inc. and will be retained by Zedge, Inc. and furnished to the Securities and Exchange Commission or its staffupon request.

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Exhibit 32.2

Certification Pursuant to18 U.S.C. Section 1350

(as Adopted Pursuant to Section 906 ofthe Sarbanes-Oxley Act Of 2002)

In connection with the Quarterly Report of Zedge, Inc. (the “Company”) on Form 10-Q for the quarter ended April 30, 2022 asfiled with the Securities and Exchange Commission (the “Report”), I, Yi Tsai, Chief Financial Officer of the Company, certify, pursuantto 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company.

Date: June 14, 2022

/s/ YI TSAIYi Tsai

Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwiseadopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, hasbeen provided to Zedge, Inc. and will be retained by Zedge, Inc. and furnished to the Securities and Exchange Commission or its staffupon request.

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9 Months EndedDocument And EntityInformation - shares Apr. 30, 2022 Jun. 10, 2022

Document Information Line ItemsEntity Registrant Name ZEDGE, INC.Trading Symbol ZDGEDocument Type 10-QCurrent Fiscal Year End Date --07-31Amendment Flag falseEntity Central Index Key 0001667313Entity Current Reporting Status YesEntity Filer Category Non-accelerated FilerDocument Period End Date Apr. 30, 2022Document Fiscal Year Focus 2022Document Fiscal Period Focus Q3Entity Small Business trueEntity Emerging Growth Company falseEntity Shell Company falseDocument Quarterly Report trueDocument Transition Report falseEntity File Number 1-37782Entity Incorporation, State or Country Code DEEntity Tax Identification Number 26-3199071Entity Address, Address Line One 1178 BroadwayEntity Address, Address Line Two 3rd Floor #1450Entity Address, City or Town New YorkEntity Address, State or Province NYEntity Address, Postal Zip Code 10001City Area Code (330)Local Phone Number 577-3424Title of 12(b) Security Class B common stock, par value $.01 per shareSecurity Exchange Name NYSEEntity Interactive Data Current YesClass A Common StockDocument Information Line ItemsEntity Common Stock, Shares Outstanding 524,775Class B Common StockDocument Information Line ItemsEntity Common Stock, Shares Outstanding 14,501,517

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Condensed ConsolidatedBalance Sheets (Unaudited) -

USD ($)$ in Thousands

Apr.30,

2022

Jul.31,

2021

Current assets:Cash and cash equivalents $

17,095$24,908

Trade accounts receivable, net of allowance of $0 at April 30, 2022 and July 31, 2021 2,718 2,545Prepaid expenses 298 111Other current assets 211 49Total current assets 20,322 27,613Property and equipment, net 1,716 1,980Intangible assets, net 21,602Goodwill 11,031 2,262Deferred tax assets, net 560 477Other assets 436 5,145Total assets 55,667 37,477Current liabilities:Trade accounts payable 1,425 585Acquisitions related contingent consideration and deferred payment payable 4,358Accrued expenses and other current liabilities 4,422 1,771Deferred revenues 3,724 1,821Total current liabilities 13,929 4,177Contingent consideration payable 2,508Other liabilities 101 145Total liabilities 16,538 4,322Commitments and contingencies (Note 10)Stockholders’ equity:Preferred stock, $.01 par value; authorized shares—2,400; no shares issued and outstandingClass A common stock, $.01 par value; authorized shares—2,600; 525 shares issued andoutstanding at April 30, 2022 and July 31, 2021 5 5

Class B common stock, $.01 par value; authorized shares—40,000; 14,575 shares issued and14,502 shares outstanding at April 30, 2022, and 13,923 shares issued and 13,865 outstanding atJuly 31, 2021

146 139

Additional paid-in capital 42,955 41,664Accumulated other comprehensive loss (1,272) (997)Accumulated deficit (2,371) (7,554)Treasury stock, 74 shares at April 30, 2022 and 58 shares at July 31, 2021, at cost (334) (102)Total stockholders’ equity 39,129 33,155Total liabilities and stockholders’ equity $

55,667$37,477

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Condensed ConsolidatedBalance Sheets (Unaudited)(Parentheticals) - USD ($)shares in Thousands, $ in

Thousands

Apr. 30, 2022Jul. 31, 2021

Net of allowance (in Dollars) $ 0 $ 0Preferred stock par value (in Dollars per share) $ 0.01 $ 0.01Preferred stock, shares authorized 2,400 2,400Preferred stock, shares issuedTreasury stock, shares 74 58Class A Common StockCommon stock, par value (in Dollars per share) $ 0.01 $ 0.01Common stock, shares authorized 2,600 2,600Common stock, shares issued 525 525Common stock, shares outstanding 525 525Class B Common StockCommon stock, par value (in Dollars per share) $ 0.01 $ 0.01Common stock, shares authorized 40,000 40,000Common stock, shares issued 14,575 14,502Common stock, shares outstanding 13,923 13,865

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3 MonthsEnded

9 MonthsEnded

Condensed ConsolidatedStatements of Operations

and Comprehensive Income(Unaudited) - USD ($)

shares in Thousands, $ inThousands

Apr.30,

2022

Apr.30,

2021

Apr.30,

2022

Apr.30,

2021

Income Statement [Abstract]Revenues $ 6,230 $ 5,252 $

19,173$14,328

Costs and expenses:Direct cost of revenues (excluding amortization of capitalized software andtechnology development costs which is included below) 401 290 1,053 907

Selling, general and administrative 4,064 2,694 9,902 6,859Depreciation and amortization 423 289 1,181 972Income from operations 1,342 1,979 7,037 5,590Interest and other income, net 15 9 42 14Net (loss) gain resulting from foreign exchange transactions (125) (12) (220) 21Income before income taxes 1,232 1,976 6,859 5,625Provision for (benefit from) income taxes 429 (473) 1,676 (147)Net Income 803 2,449 5,183 5,772Other comprehensive (loss) income:Changes in foreign currency translation adjustment (195) 129 (275) 335Total other comprehensive (loss) income (195) 129 (275) 335Total comprehensive income $ 608 $ 2,578 $ 4,908 $ 6,107Income per share attributable to Zedge, Inc. common stockholders:Basic (in Dollars per share) $ 0.06 $ 0.18 $ 0.36 $ 0.46Diluted (in Dollars per share) $ 0.05 $ 0.17 $ 0.35 $ 0.43Weighted-average number of shares used in calculation of income pershare:Basic (in Shares) 14,307 13,676 14,295 12,531Diluted (in Shares) 14,859 14,570 14,974 13,323

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Condensed ConsolidatedStatements of Changes in

Stockholders’ Equity(Unaudited) - USD ($)

shares in Thousands, $ inThousands

Class ACommon

Stock

Class BCommon

Stock

AdditionalPaid-inCapital

AccumulatedOther

ComprehensiveLoss

AccumulatedDeficit

TreasuryStock Total

Balance at Jul. 31, 2020 $ 5 $ 118 $ 25,725 $ (1,085) $ (15,802) $ (76) $8,885

Balance (in Shares) at Jul. 31,2020 525 11,788

Stock-based compensation 237 237Stock-based compensation (inShares) 39

Purchase of treasury stock (26) (26)Foreign currency translationadjustment (159) (159)

Net income 1,045 1,045Balance at Oct. 31, 2020 $ 5 $ 118 25,962 (1,244) (14,757) (102) 9,982Balance (in Shares) at Oct. 31,2020 525 11,827

Exercise of stock options $ 3 393 396Exercise of stock options (inShares) 312

Stock issued for matchingcontributions to the 401(k)Plan

39 39

Stock issued for matchingcontributions to the 401(k)Plan (in Shares)

7

Proceeds from sales of Class BCommon Stock $ 8 4,777 4,785

Proceeds from sales of Class BCommon Stock (in Shares) 762

Stock-based compensation 113 113Stock-based compensation (inShares) 8

Foreign currency translationadjustment 365 365

Net income 2,278 2,278Balance at Jan. 31, 2021 $ 5 $ 129 31,284 (879) (12,479) (102) 17,958Balance (in Shares) at Jan. 31,2021 525 12,916

Exercise of stock options $ 2 421 423Exercise of stock options (inShares) 185

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Proceeds from sales of Class BCommon Stock $ 5 7,096 7,101

Proceeds from sales of Class BCommon Stock (in Shares) 489

Stock-based compensation $ 1 98 99Stock-based compensation (inShares) 93

Foreign currency translationadjustment 129 129

Net income 2,449 2,449Balance at Apr. 30, 2021 $ 5 $ 137 38,899 (750) (10,030) (102) 28,159Balance (in Shares) at Apr. 30,2021 525 13,683

Balance at Jul. 31, 2021 $ 5 $ 139 41,664 (997) (7,554) (102) 33,155Balance (in Shares) at Jul. 31,2021 525 13,923

Stock-based compensation 319 319Stock-based compensation (inShares) 12

Purchase of treasury stock (232) (232)Foreign currency translationadjustment 142 142

Net income 2,055 2,055Balance at Oct. 31, 2021 $ 5 $ 139 41,983 (855) (5,499) (334) 35,439Balance (in Shares) at Oct. 31,2021 525 13,935

Exercise of stock options 7 7Exercise of stock options (inShares) 3

Stock issued for matchingcontributions to the 401(k)Plan

43 43

Stock issued for matchingcontributions to the 401(k)Plan (in Shares)

5

Stock-based compensation 446 446Stock-based compensation (inShares) 6

Foreign currency translationadjustment (222) (222)

Net income 2,325 2,325Balance at Jan. 31, 2022 $ 5 $ 139 42,479 (1,077) (3,174) (334) 38,038Balance (in Shares) at Jan. 31,2022 525 13,949

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Restricted stock issuance inconnection with GuruShotsacquisition

$ 7 (7)

Restricted stock issuance inconnection with GuruShotsacquisition (in Shares)

626

Stock-based compensation 483 483Foreign currency translationadjustment (195) (195)

Net income 803 803Balance at Apr. 30, 2022 $ 5 $ 146 $ 42,955 $ (1,272) $ (2,371) $ (334) $

39,129Balance (in Shares) at Apr. 30,2022 525 14,575

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9 Months EndedCondensed ConsolidatedStatements of Cash Flows

(Unaudited) - USD ($)$ in Thousands

Apr. 30,2022

Apr. 30,2021

Operating activitiesNet income $ 5,183 $ 5,772Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization 1,181 972Stock-based compensation 1,291 488Deferred income taxes (83) (542)Change in assets and liabilities:Trade accounts receivable 64 (1,336)Prepaid expenses and other current assets (274) 171Other assets 7 75Trade accounts payable and accrued expenses 2,042 1,651Deferred revenue 1,903 486Net cash provided by operating activities 11,314 7,737Investing activitiesPayments for business combination, net of cash acquired (17,422)Payments for asset acquisitions (917)Capitalized software and technology development costs and purchase of equipment (468) (543)Investment in private company (50)Net cash used in investing activities (18,807) (593)Financing activitiesProceeds from sales of Class B common stock 12,355Payment of issuance costs (469)Repayment of insurance premium loan payable (161)Proceeds from exercise of stock options 7 819Purchase of treasury stock in connection with restricted stock vesting (232) (26)Net cash (used in) provided by financing activities (225) 12,518Effect of exchange rate changes on cash and cash equivalents (95) 142Net (decrease) increase in cash and cash equivalents (7,813) 19,804Cash and cash equivalents at beginning of period 24,908 5,111Cash and cash equivalents at end of period 17,095 24,915SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash payments made for income taxes 309 1Cash payments made for interest expenses 2SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCINGACTIVITIESContingent consideration related to business acquisition 5,904Right-of-use assets acquired under operating leases 86Acquisition of Emojipedia through release of escrow funds of $4,776, due to seller of$1,923 and legal fee of $12 6,711

Accounts receivable from certain Emojipedia websites collected by Seller 45

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Note payable issued for insurance premium financing $ 181

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9 Months EndedCondensed ConsolidatedStatements of Cash Flows

(Unaudited) (Parentheticals)$ in Thousands

Apr. 30, 2022USD ($)

Statement of Cash Flows [Abstract]Escrow fund $ 4,776Due to seller 1,923Legal fee $ 12

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9 Months EndedBasis of Presentation andSummary of Significant

Accounting Policies Apr. 30, 2022

Accounting Policies[Abstract]Basis of Presentation andSummary of SignificantAccounting Policies

Note 1—Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Zedge,Inc. and its subsidiaries, GuruShots Ltd, Zedge Europe AS and Zedge Lithuania UAB (the“Company”), have been prepared in accordance with accounting principles generally accepted inthe United States of America (“U.S. GAAP”) for interim financial information and with theinstructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include allof the information and footnotes required by U.S. GAAP for complete financial statements. In theopinion of management, all adjustments (consisting of normal recurring accruals) considerednecessary for a fair presentation have been included. Operating results for the three and ninemonths ended April 30, 2022 are not necessarily indicative of the results that may be expected forthe fiscal year ending July 31, 2022 or any other period. The balance sheet at July 31, 2021 hasbeen derived from the Company’s audited financial statements at that date but does not include allof the information and footnotes required by U.S. GAAP for complete financial statements. Forfurther information, please refer to the consolidated financial statements and footnotes theretoincluded in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2021,as filed with the U.S. Securities and Exchange Commission (the “SEC”).

The Company’s fiscal year ends on July 31 of each calendar year. Each reference belowto a fiscal year refers to the fiscal year ending in the calendar year indicated (e.g., fiscal 2022refers to the fiscal year ending July 31, 2022).

Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financialstatements in conformity with U.S. GAAP requires management to make estimates andassumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as wellas related disclosure of contingent assets and liabilities. Actual results could differ materiallyfrom the Company’s estimates due to risks and uncertainties, including uncertainty in the currenteconomic environment due to various global events. To the extent that there are materialdifferences between these estimates and actual results, the Company’s financial condition oroperating results will be affected. The Company bases its estimates on past experience and otherassumptions that the Company believes are reasonable under the circumstances, and theCompany evaluates these estimates on an ongoing basis.

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issuedAccounting Standard Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying theAccounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes.The Company adopted this new accounting standard on August 1, 2021, and the adoption did nothave a material impact on the Company’s unaudited condensed consolidated financial statementsand related disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses(Topic 326), which requires the measurement and recognition of expected credit losses forfinancial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss

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impairment model with an expected loss model which requires consideration of forward-lookinginformation to calculate credit loss estimates. These changes will result in an earlier recognitionof credit losses. The Company's financial assets held at amortized cost include accountsreceivable. The amendments in ASU 2020-05 deferred the effective date for Topic 326 to fiscalyears beginning after December 15, 2022. The Company will adopt the new standard effectiveAugust 1, 2023 and does not expect the adoption of this guidance to have a material impact on itsconsolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assetsand Contract Liabilities From Contracts With Customers. ASU 2021-08 requires an acquirer in abusiness combination to recognize and measure contract assets and contract liabilities fromacquired contracts using the revenue recognition guidance in Accounting Standards Codification(“ASC”) Topic 606, Revenue from Contracts with Customers, rather than the prior requirement torecord them at fair value. The guidance is effective for fiscal years, and interim periods withinthose fiscal years, beginning after December 15, 2022. Early adoption is permitted. The Companywill adopt the new standard effective August 1, 2023 and does not expect the adoption of thisguidance to have a material impact on its consolidated financial statements.

With the exception of the standard discussed above, there have been no other recentaccounting pronouncements or changes in accounting pronouncements during the nine monthsended April 30, 2022, as compared to the recent accounting pronouncements described in theCompany’s Annual Report on Form 10-K for the fiscal year ended July 31, 2021, that are ofsignificance or potential significance to the Company.

Significant Accounting Policies

Other than intangible assets described below, there have been no material changes to theCompany's significant accounting policies from its Annual Report on Form 10-K for the fiscalyear ended July 31, 2021.

Business Combinations

The Company accounts for business combination using the acquisition method ofaccounting. The Company allocates the purchase price of the acquisition to the tangible andintangible assets acquired and liabilities assumed and contingent considerations based on theirestimated fair values at the acquisition dates. The excess of the purchase price over those fairvalues is recorded as goodwill. During the measurement period, which may be up to one yearfrom the acquisition date, the Company may record adjustments to the assets acquired andliabilities assumed with a corresponding offset to goodwill. Upon the conclusion of themeasurement period or final determination of the values of assets acquired or liabilities assumed,whichever comes first, any subsequent adjustments are recorded to the unaudited condensedconsolidated statements of operations and comprehensive income. Acquisition-related costs arerecognized separately from the acquisition and are expensed as incurred.

Intangible Assets-Net

Intangible assets (see Note 6) are carried at cost, less accumulated amortization, unless adetermination has been made that their value has been impaired. Intangible assets are amortizedon a straight-line basis over their estimated useful lives of between five to fifteen years. TheCompany reviews identifiable amortizable intangible assets to be held and used for impairmentwhenever events or changes in circumstances indicate that the carrying value of the assets maynot be recoverable. Determination of recoverability is based on the lowest level of identifiableestimated 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 overits fair value. There were no impairment charges recorded in the nine months ended April 30,2022 presented in the accompanying unaudited condensed consolidated financial statements.

Related Party Transactions

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The Company was formerly a majority-owned subsidiary of IDT Corporation (“IDT”).On June 1, 2016, IDT’s interest in the Company was spun-off by IDT to IDT’s stockholders andthe Company became an independent public-held company. IDT charges the Company forservices it provides, and the Company charges IDT for services it provides, pursuant to aTransition Services Agreement (“TSA”). The Company was charged for legal services by IDT inthe amounts of $29,600 and $91,600 respectively, for the three and nine month periods endedApril 30, 2022, and $25,900 and $98,400 respectively, for the three and nine month periods endedApril 30, 2021. The Company charged IDT for consulting services provided to IDT by a Zedgeemployee in the amounts of $35,100 and $140,000 respectively, for the three and nine monthperiods ended April 30, 2022, and $33,900 and $119,500, respectively, for the three and ninemonth periods ended April 30, 2021. As of April 30, 2022 and July 31, 2021, IDT owed theCompany $5,000 and $6,000, respectively.

The Company is party to a consulting agreement with Activist Artist Management, LLC(“Activist”), which assists the company in strategic business development. A member of theCompany’s Board of Directors owns a significant minority stake in Activist. The Company paid$11,000 and $38,000, respectively, in the three and nine month periods ended April 30, 2022, and$11,000 and $38,000, respectively, in the three and nine month periods ended April 30, 2021, toActivist pursuant to the agreement. Under the terms of the agreement, which was amended as ofAugust 1, 2020, the Company pays Activist $3,750 per month, plus possible commissions. OnJune 7, 2022 the Company’s Board approved a $65,000 advisory fee to Activist in connectionwith the GuruShots acquisition. In addition, the Board also approved the increase in monthlyretainer from $3,750 to $5,000 per month retroactive from April 1, 2022, see Note 17 below.

The Company paid $0 and $30,000, respectively, in the three and nine month periodsended April 30, 2022, and $0 in the three and nine month periods ended April 30, 2021, to BrazeInc. (formerly “Appboy, Inc.”) for use of its customer relationship management and lifecyclemarketing platform. The former Chief Executive Officer and Co-Founder of Braze, Inc. is amember of the Company’s Board of Directors.

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9 Months EndedRevenue Apr. 30, 2022Revenue from Contract withCustomer [Abstract]Revenue Note 2—Revenue

Disaggregation of Revenue

The following table summarizes revenue by type of monetization mechanisms of theZedge App and other revenues, including Emojipedia revenues and GuruShots’ revenue fromApril 13 to April 30, 2022, for the periods presented:

Three MonthsEnded Nine Months Ended

April 30, April 30,2022 2021 2022 2021(in thousands) (in thousands)

Advertising revenue $ 4,526 $ 4,227 $ 14,532 $ 11,612Paid subscription revenue 910 899 2,823 2,358Other revenues 794 126 1,818 358

Total revenues $ 6,230 $ 5,252 $ 19,173 $ 14,328

Revenue from Emojipedia was $232,000 and $823,000 for the three and nine monthperiods ended April 30, 2022, and presented in the other revenues line in the table above.Revenue from GuruShots was $294,000 for the three and nine month periods ended April 30,2022, and presented in the other revenues line in the table above.

Contract Balances

The Company enters into contracts with its customers, which may give rise to contractliabilities (deferred revenue) and contract assets (unbilled revenue). The payment terms andconditions within the Company’s contracts vary by products or services purchased, the substantialall of which are due in less than one year. When the timing of revenue recognition differs fromthe timing of payments made by customers, the Company recognizes only deferred revenue(customer payment is received in advance of performance). The Company does not have unbilledrevenue (its performance precedes the billing date).

Deferred revenues

On April 1, 2022, the Company received a one-time integration bonus for set upactivities of $2 million from AppLovin Corporation for migrating to their mediation platform.This amount is being amortized over an estimated service period of 24 months.

The Company records deferred revenues related to the unsatisfied performanceobligations with respect to subscription revenue. As of April 30, 2022, the Company’s deferredrevenue balance related to paid subscriptions was approximately $1.5 million, representingapproximately 713,000 active subscribers including those under the account hold designationimplemented by Google Play on November 1, 2020. Account hold is a subscription state thatbegins when a user's form of payment fails and the three-day grace period has ended withoutpayment resolution. The account hold period lasts for up to 30 days. As of July 31, 2021, theCompany’s deferred revenue balance related to paid subscriptions was approximately $1.6million, representing approximately 752,000 active subscribers. The amount of revenuerecognized in the nine months ended April 30, 2022 that was included in the deferred balance atJuly 31, 2021 was $1.5 million.

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The Company also records deferred revenues when users purchase or earn ZedgeCredits. Unused Zedge Credits represent the value of the Company’s unsatisfied performanceobligation to its users. Revenue is recognized when Zedge App users use Zedge Credits toacquire Zedge Premium content or upon expiration of the Zedge Credits upon 180 days ofaccount inactivity. As of April 30, 2022, and July 31, 2021, the Company’s deferred revenuebalance related to Zedge Premium was approximately $281,000 and $218,000, respectively.

Total deferred revenues increased by $1.9 million from $1.8 million at July 31, 2021 to$3.7 million at April 30, 2022, primarily attributed to the integration bonus from AppLovin.

Significant Judgments

The advertising networks and advertising exchanges to which the Company sell itsinventory track and report the impressions and installs to Zedge and Zedge recognizes revenuesbased on these reports. The networks and exchanges base their payments off of those reports andZedge independently compares the data to each of the client sites to validate the imported dataand identify any differences. The number of impressions and installs delivered by the advertisingnetworks and advertising exchanges is determined at the end of each month, which resolves anyuncertainty in the transaction price during the reporting period.

Practical Expedients

The Company expenses the fees retained by Google Play related to subscription revenuewhen incurred as marketing expense because the duration of the contracts for which the Companypays commissions are less than one year. These costs are included in the selling, general andadministrative expenses in the unaudited condensed consolidated statements of operations andcomprehensive income.

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9 Months EndedFair Value Measurements Apr. 30, 2022Fair Value Disclosures[Abstract]Fair Value Measurements Note 3—Fair Value Measurements

The following tables present the balance of assets and liabilities measured at fair valueon a recurring basis:

Level 1 (1) Level 2 (2) Level 3 (3) Total(in thousands)

April 30, 2022Assets:

Foreign exchange forward contracts $ - $ - $ - $ -

Liabilities:Current portion of contingent

consideration payable $ - $ - $ 3,396 $ 3,396

Contingent consideration payable $ - $ - $ 2,508 $ 2,508Foreign exchange forward contracts $ - $ 167 $ - $ 167

July 31, 2021Assets:

Foreign exchange forward contracts $ - $ - $ - $ -

Liabilities:Foreign exchange forward contracts $ - $ 54 $ - $ 54

(1) – quoted prices in active markets for identical assets or liabilities(2) – observable inputs other than quoted prices in active markets for identical assets andliabilities(3) – no observable pricing inputs in the market

Fair Value of Other Financial Instruments

The Company’s other financial instruments at April 30, 2022 and July 31, 2021 includedtrade accounts receivable, trade accounts payable, and due to seller of Emojipedia. The carryingamounts of the trade accounts receivable, trade accounts payable, and due to seller of Emojipediaapproximated fair value due to their short-term nature.

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9 Months EndedDerivative Instruments Apr. 30, 2022Derivative Instruments andHedging ActivitiesDisclosure [Abstract]Derivative Instruments Note 4—Derivative Instruments

The primary risk managed by the Company using derivative instruments is foreignexchange risk. Foreign exchange forward contracts are entered into as hedges against unfavorablefluctuations in the U.S. Dollar (USD) to Norwegian Kroner (NOK) and USD to Euro (EUR)exchange rates. The Company is party to a Foreign Exchange Agreement with Western AllianceBank allowing the Company to enter into foreign exchange contracts under its revolving creditfacility with the bank (see Note 11). The Company does not apply hedge accounting to thesecontracts, and therefore the changes in fair value are recorded in unaudited condensedconsolidated statements of operations and comprehensive income. By using derivativeinstruments to mitigate exposures to changes in foreign exchange rates, the Company is exposedto credit risk from the failure of the counterparty to perform under the terms of the contract. Thecredit or repayment risk is minimized by entering into transactions with high-qualitycounterparties.

The outstanding contracts at April 30, 2022, were as follows:

Settlement DateU.S.

DollarAmount

NOKAmount

May-22 225,000 1,970,619Jun-22 225,000 1,999,125Jul-22 225,000 1,999,800Aug-22 225,000 2,000,025Sep-22 225,000 2,000,250Oct-22 225,000 2,000,700Nov-22 225,000 2,000,925

Total $1,575,000 13,971,444

Settlement DateU.S.

DollarAmount

EURAmount

May-22 225,000 188,673Jun-22 225,000 203,381Jul-22 225,000 203,105Aug-22 225,000 202,812Sep-22 225,000 202,484Oct-22 225,000 202,156Nov-22 225,000 201,848

Total $1,575,000 1,404,459

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

April30,

July31,

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Assets and LiabilitiesDerivatives: Balance Sheet Location 2022 2021

Derivatives not designated or notqualifying as hedginginstruments

(inthousands)

Foreign exchange forward contracts Accrued expenses and other current liabilities $ 167 $ 54

The effects of derivative instruments on the unaudited condensed consolidatedstatements of operations and comprehensive income were as follows:

Three Months EndedApril 30,

Nine Months EndedApril 30,

Amount of (Loss) Gain Recognized onDerivatives 2022 2021 2022 2021

Derivatives not designatedor not qualifying ashedging instruments

Location of Gain(Loss)Recognized onDerivatives

(in thousands) (in thousands)

Foreign exchange forwardcontracts

Net (loss) gainresulting fromforeign exchangetransactions

$ (154) $ 16 (271) $ 67

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9 Months EndedBusiness Combination andAssets Acquisition Apr. 30, 2022

Business Combinations[Abstract]Business Combination andAssets Acquisition

Note 5—Business Combination and Assets Acquisition

GuruShots Acquisition

On April 12, 2022, the Company consummated the acquisition of 100% of theoutstanding equity securities of GuruShots, Ltd. (“GuruShots”), an Israeli company that operatesa 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 theCompany, GuruShots and the holders of the GuruShots equity interests. This acquisition wasaccounted for as a business combination under the acquisition method of accounting and theresults of operations of GuruShots have been included in the Company’s results of operations asof the acquisition date.

The purchase price for the equity securities of GuruShots consists of $18 million in cashpaid at closing and contingent payments (the “Earnout”) of up to a maximum of $8.4 million dueon each of the first and second anniversaries from the closing, payable either in cash or Class Bcommon stock of the Company or a combination thereof, at the Company’s discretion, andsubject to GuruShots achieving certain financial targets set forth in the SPA. The fair value of theearnout amount has been estimated at $5.9 million as part of the preliminary purchase priceallocation. In connection therewith, the Company has agreed to make certain minimuminvestments in user acquisition for GuruShots in the period covered by the Earnout, subject toGuruShots maintaining agreed upon levels of Return On Ad Spend (“ROAS”).

In addition, the Company has committed to a retention pool of $4 million in cash andissued 626,242 shares of the Company Class B common stock with a fair value of $4 million or$6.39 per share (based on the volume weighted average closing prices of the Class B commonstock on the NYSE American Exchange for the thirty trading days ended April 12, 2022) forGuruShots’ founders and employees that will be payable or vest, as applicable, over three yearsfrom closing based on the beneficiaries thereof remaining employed by the Company or asubsidiary.

The parties to the SPA have made customary representations, warranties and covenantstherein. The assertions embodied in those representations and warranties were made for purposesof the SPA and are subject to qualifications and limitations agreed by the respective parties inconnection with negotiating the terms of the SPA. In addition, certain representations andwarranties made as of a specified date may be subject to a contractual standard of materialitydifferent from what might be viewed as material to stockholders, or may have been used for thepurpose of allocating risk between the respective parties rather than establishing matters as facts.For the foregoing reasons, no person should rely on the representations and warranties asstatements of factual information at the time they were made or otherwise.

The cash purchase price and the earnout have been preliminarily allocated to GuruShots’tangible assets, identifiable intangible assets, and assumed liabilities based on their estimated fairvalues. The preliminary fair value estimates of the net assets acquired are based upon preliminarycalculations and valuations, and those estimates and assumptions are subject to change as theCompany obtains additional information for those estimates during the measurement period (upto one year from the acquisition date). The excess of the total consideration over the tangibleassets, identifiable intangible assets, and assumed liabilities was recorded as goodwill.

The Company will record measurement period adjustments based on its ongoingvaluation and purchase price allocation procedures. The Company is still finalizing the valuationand purchase price allocation as it relates to the net working capital amount in the table below.

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

(Dollar Amounts in Thousands)Purchase price consideration:Cash consideration paid at close $ 15,242Cash contributed to escrow accounts at close 2,700Cash deducted from purchase price and contributed to GuruShots' working capital 58Fair value of contingent consideration to be achieved at year 1 3,396Fair value of contingent consideration to be achieved at year 2 2,508Fair value of total consideration transferred 23,904Total purchase price, net of cash acquired $ 23,384

Fair value allocation of purchase price:Cash and cash equivalents $ 520Accounts receivable 282Prepaid and other assets 145Property and equipment, net 17Other assets (including ROU) 151Accounts payable and accrued expenses (1,351)Operating lease liabilities, current (53)Operating lease liabilities, noncurrent (34)Acquired intangible assets 15,320Goodwill 8,907Total purchase price $ 23,904

The cash consideration paid includes $2.7 million deposited with the escrow agent forpost-closing indemnification claims made within 18 months of the acquisition date.

The maximum earnout of $16.8 million will be determined based upon the satisfactionof certain defined operational milestones and will be remeasured at fair value at each reportingperiod through earnings. As the fair value is based on unobservable inputs, the liabilities areincluded in Level 3 of the fair value measurement hierarchy. The unobservable inputs used in thedetermination of the fair value of the earnout which is assumed to be paid in cash includemanagements assumptions about the likelihood of payment based on the satisfaction of certaindefined operational milestones and discount rates based on cost of debt.

The Company issued 626,242 shares of the Company’s Class B common on the closingdate to the founders and employees as a retention bonus pool. These shares will vest, in equaltranches, over three years assuming that the recipients remain employed by the Company or asubsidiary through the vesting dates. The $4 million fair value of these unvested restricted stockis not included as purchase consideration above, as it has a post-combination service requirementand will be accounted for separately from the business combination as stock compensationexpense. Additionally, the founders and employees are also entitled to receive $4 millionretention cash bonus over three years.

Identified intangible assets consist of trade names, technology, non-compete agreements,and customer relationships. The fair value of intangible assets and the determination of theirrespective useful lives were made in accordance with ASC 805 and are outlined in the tablebelow:

(Dollar Amounts in Thousands) AssetValue

UsefulLife

Identified intangible assets:Trade names $ 3,570 12 yearsAcquired developed technology 3,950 5 yearsCustomer relationships 7,800 10 years

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Total identified intangible assets $ 15,320

The Company’s initial fair value estimates related to the various identified intangibleassets were determined under various valuation approaches including the Relief-from-RoyaltyMethod and Multi-period excess earnings. These valuation methods require management toproject revenues, operating expenses, working capital investment, capital spending and cashflows for the GuruShots over a multiyear period, as well as determine the weighted average costof capital to be used as a discount rate.

The Company amortizes its intangible assets assuming no residual value over periods inwhich the economic benefit of these assets is consumed.

The Company recorded the excess of the purchase price over the identified tangible andintangible assets as goodwill. The Company believes that the investment value of the futureenhancement of the Company’s products and offerings created as a result of this acquisition hasprincipally contributed to a purchase price that resulted in the recognition of $8.9 million ofgoodwill, which is deductible for tax purposes.

Acquisition-related transaction costs (e.g., legal, due diligence, valuation, and otherprofessional fees) are not included as a component of consideration transferred but are required tobe expensed as incurred. During the nine months ended April 30, 2022, we incurred and accrued$860,000 of acquisition-related costs, which are included in Selling, General and Administrativeexpenses on the Company’s condensed consolidated statement of operations and comprehensiveincome.

Unaudited Pro Forma Consolidated Financial Information

The unaudited pro forma financial information for all periods presented below has beencalculated after adjusting the results of Zedge and GuruShots to reflect the business combinationaccounting effects resulting from this acquisition, including acquisition costs and the amortizationexpense from acquired intangible assets as though the acquisition occurred on August 1, 2020.The historical consolidated financial statements have been adjusted in the pro forma combinedfinancial statements to give effect to pro forma events that are directly attributable to the businesscombination. The pro forma financial information is for informational purposes only and is notindicative of the results of operations that would have been achieved if the acquisition had takenplace on August 1, 2020.

Three MonthsEnded Nine Months Ended

April 30 (1) April 30 (1)

(‘000) 2021 2022 2021 2022

Revenue $ 7,522 $ 7,625 $ 21,002 $ 24,134

Net income $ 1,625 $ 571 $ 2,240 $ 2,580

1)The fiscal year end of Zedge is July 31 and the fiscal year end of GuruShots is December 31.The pro forma financial information above has been prepared utilizing the three and ninemonths ended April 30th for Zedge and March 31st for GuruShots.

The unaudited pro forma financial information includes the following adjustments, netof any tax impacts:

(i) incremental amortization expense recognized based on fair value of intangibleassets recorded upon acquisition of GuruShots;

(ii)incremental compensation expense related to the vesting of retention awards toGuruShots employees consisting of restricted stock awards and cash payments;and

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(iii) the reversal of historical fair value adjustments and interest expense recordedon GuruShots’ convertible notes that were settled on the acquisition date.

(iv) Income tax expense (benefit) was adjusted for the impact of the aboveadjustments for each period.

Transaction costs incurred during the three and nine months ended April 30, 2022 were$0.7 million and $0.9 million, respectively. For pro forma purposes, these expenses werereclassified to the earliest period presented. The unaudited pro forma financial information is forcomparative purposes only and is not necessarily indicative of what the Company’s operatingresults would have been had the GuruShots Acquisition taken place on August 1, 2020.

GuruShots’ operating results are consolidated with our operating results beginning onApril 13, 2022. Therefore, our consolidated results of operations for the three and nine monthsended April 30, 2022 may not be comparable to the same period in 2021. GuruShots’ results ofoperations included in our consolidated results of operations for the three and nine monthsended April 30, 2022 include revenues of $0.3 million and a net loss of $0.2 million.

Emojipedia Acquisition

Pursuant to an Asset Purchase Agreement, on August 1, 2021 (“Closing”), the Companyconsummated the acquisition of substantially all of the assets of Emojipedia Pty Ltd, a proprietarycompany organized under the laws of Australia. The total purchase price of the assets has beendetermined to be $6.7 million of which $4.8 million was paid on August 2, 2021 and $917,000was paid on February 1, 2022, with the remaining $962,000 to be paid out on the twelve-monthanniversary of the Closing. The final purchase price of $6.7 million was $194,000 lower thaninitially estimated.

The assets purchased include emojipeida.org, a set of smaller websites, a bank of emojirelated URLs and other assets related to the seller’s business, including World Emoji Day, theannual World Emoji Awards, and Emojitracker. The asset purchase does not qualify as a businesscombination under FASB ASC 805, Business Combinations, and has therefore been accountedfor as an asset acquisition. The total purchase price for this acquisition was allocated to intangibleassets are amortized on a straight-line basis over their estimated useful lives of fifteen years.

The results of operations of the purchased assets are included in the Company’sunaudited condensed consolidated statements of operations and comprehensive income since thedate of the acquisition.

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9 Months EndedIntangible Assets andGoodwill Apr. 30, 2022

Goodwill and Intangible AssetsDisclosure [Abstract]Intangible Assets and Goodwill Note 6—Intangible Assets and Goodwill

The following table presents the detail of intangible assets as of July 31, 2021and April 30, 2022 (in thousands):

GrossCarrying

Value

AccumulatedAmortization

NetCarrying

Value

Balance at July 31, 2021 $ - $ - $ -Websites and other internet domains acquired 6,711 335 6,376Acquired developed technology 3,950 40 3,910Customer relationships 7,800 39 7,761Trademarks and trade names 3,570 15 3,555

Balance at April 30, 2022 $ 22,031 $ 429 $ 21,602

Estimated future amortization expense as of April 30, 2022 is as follows (inthousands):

Remainder of fiscal 2022 $ 579Fiscal 2023 2,315Fiscal 2024 2,315Fiscal 2025 2,315Fiscal 2026 2,315Thereafter 11,763Total $ 21,602Goodwill

Changes in the carrying amount of goodwill in the nine months ended April30, 2022 are as follows (in thousands):

(in thousands) CarryingAmount

Balance at July 31, 2021 $ 2,262GuruShots acquisition 8,907Foreign currency translation adjustments (138)

Balance at April 30, 2022 $ 11,031

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9 Months EndedAccrued Expenses and OtherCurrent Liabilities Apr. 30, 2022

Accrued Expenses and Other Current Liabilities[Abstract]Accrued Expenses and Other Current Liabilities Note 7—Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of thefollowing:

April30,

July31,

2022 2021(in thousands)

Accrued vacation $ 663 $ 424Accrued income taxes payable 1,711 264Accrued payroll taxes 304 291Accrued payroll and bonuses 638 374Accrued business combination expenses 340 -Operating lease liability 142 86Derivative liability 167 54Due to artists 327 246Other 130 32Total accrued expenses and other currentliabilities $ 4,422 $ 1,771

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9 Months EndedStock-Based Compensation Apr. 30, 2022Share-Based PaymentArrangement [Abstract]Stock-Based Compensation Note 8—Stock-Based Compensation

On November 10, 2021, the Company’s Board of Directors amended the 2016 IncentivePlan to increase the number of shares of the Company’s Class B common stock available for thegrant 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 ofStockholders held on January 12, 2022.

On March 23, 2022, the Company’s Board of Directors amended the 2016 IncentivePlan to increase the number of shares of the Company’s Class B common stock available for thegrant of awards thereunder by an additional 685,000 shares to an aggregate of 2,531,000 shares,including 685,000 shares for the GuruShots retention pool. The Company expects to submit theamendment for ratification by the Company’s stockholders at the Annual Meeting ofStockholders to be held in January 2023.

At April 30, 2022, there were 492,000 shares of Class B common stock available forawards under the 2016 Incentive Plan before accounting for the approximately 204,000contingently issuable shares related to the deferred stock units (“DSUs”) with both service andmarket conditions.

In addition to stock options and restricted stock awards, the Company occasionallyissues DSU’s. On September 7, 2021, the Company granted a total of 291,320 DSUs to 64 of itsemployees and consultants. Each DSU represents the right to receive one share of the Company’sClass B common stock.

30% of the DSU’s (or 87,396) have service vesting conditions only, with a vestingschedule of 25% on September 7, 2022, 33% on September 7, 2023, and remaining on September7, 2024. Vesting of the remaining 70% of the DSUs (or 203,924) is subject to continued serviceas well as a market condition. These DSUs will vest if the grantee remains in service to theCompany and only if the aggregate market capitalization of the Company’s equity securities hasreached or exceeded $451 million for five consecutive trading days between the grant date andthe vest date. Subject to satisfaction of both of those conditions, these DSU’s with both serviceand market conditions have a vesting schedule of 25% September 7, 2022, up to 58% (the 25%eligible to vest in 2022 and an additional 33%) on September 7, 2023, and up to 100% onSeptember 7, 2024. In the event the market capitalization condition has not been met prior to avesting date, but is met by a subsequent vesting date, all DSUs with a market condition eligiblefor vesting prior to that date shall vest. In the event that the market capitalization condition hasnot been met by September 7, 2024, the DSUs with a market condition shall expire.

The Company recognizes stock-based compensation for stock-based awards, includingstock options, restricted stock and DSUs based on the estimated fair value of the awards andrecognized over the relevant service period. The Company estimates the fair value of stockoptions on the measurement date using the Black-Scholes option valuation model. The Companyestimates the fair value of restricted stock and DSUs with service conditions only using thecurrent market price of the stock. The Company estimates the fair value of DSUs with bothservice and market conditions using the Monte Carlo Simulation valuation model.

The Black-Scholes and Monte Carlo Simulation valuation models incorporateassumptions as to stock price volatility, the expected life of options or awards, a risk-free interestrate and dividend yield. We recognize stock-based compensation expense related to options andrestricted stock units on a straight-line basis over the service period of the award, which isgenerally 4 years for options and 3 years for restricted stock units.

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In our accompanying unaudited condensed consolidated statements of operations andcomprehensive income, the Company recognized stock-based compensation for our employeesand non-employees as follows:

Three MonthsEnded Nine Months Ended

April 30, April 30,2022 2021 2022 2021

(in thousands)Selling, general and administrative $ 483 $ 98 $ 1,291 $ 488

The estimated grant-date fair value of our stock options was calculated using the Black-Scholesoption pricing model, based on the following weighted-average assumptions:

Nine months ended April 30, 2022 2021

Expected term 6.0years

6.0years

Volatility 92.4% 92.4%Risk free interest rate 1.5% 0.6%Dividends — —Weighted average grant date fair value $ 7.76 $ 3.26

The following table summarizes stock option activity for the nine months ended April30, 2022:

Stock OptionsWeighted-

Number of AverageOptions Exercise

(in thousands) PriceOutstanding at July 31, 2021 843 $ 2.72Granted 42 10.29Exercised (4) 1.87Cancelled / forfeited (27) 12.28Outstanding at April 30, 2022 854 $ 2.79Exercisable at April 30, 2022 645 $ 2.09

The following table summarizes restricted stock activity for the nine months ended April30, 2022:

Number ofShares

WeightedAverage

Grant DateFair Value

Non-vested stock award as of July 31, 2021 127,300 $ 3.27Granted (GuruShots Retention Bonus shares) 626,242 6.39Vested (65,101) 2.80Forfeited - -Non-vested stock award as of April 30, 2022 688,441 $ 6.15

The following table summarizes DSU activity for the nine months ended April 30, 2022:

Number ofShares

WeightedAverage

Grant DateFair Value

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Non-vested DSU award as of July 31, 2021 37,500 $ 1.54Granted (1) 291,320 9.60Vested (12,500) 1.54Forfeited (18,720) 7.88Non-vested DSU award as of April 30, 2022 297,600 $ 9.03

(1) Includes 203,924 DSUs (or 70% of total awards) of which vesting are subject to bothservice and market condition.

The DSUs with both service and market conditions were valued using a Monte Carlosimulation model, with a valuation of $7.19 per DSU. Total grant date fair value for these DSUswas approximately $1.5 million. The unrecognized compensation expense is being recognized ona graded vesting method over the vesting period. The DSUs with a service condition only had agrant date fair value of $1.3 million. Total grant date fair value for the remaining 30% DSUswithout market-based condition was approximately $1.0 million. The unrecognized compensationexpense is being recognized on a straight-line basis over the vesting period.

As of April 30, 2022, the Company’s unrecognized stock-based compensation expensewas $661,000 for unvested stock options, $1.9 million for DSUs and $4.1 million for unvestedrestricted stock including the $4 million portion of retention bonus to be paid in the Company’sClass B common stock in connection with the GuruShots acquisition.

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9 Months EndedEarnings Per Share Apr. 30, 2022Earnings Per Share[Abstract]Earnings Per Share Note 9—Earnings Per Share

Basic earnings per share is computed by dividing net income attributable to all classes ofcommon stockholders of the Company by the weighted average number of shares of all classes ofcommon stock outstanding during the applicable period, and is the same amount for theCompany’s Class A common stock and Class B common stock. Diluted earnings per share iscomputed in the same manner as basic earnings per share, except that the number of shares isincreased to include restricted stock still subject to risk of forfeiture, issuances to be made on thevesting of unvested DSUs and the exercise of potentially dilutive stock options using the treasurystock method, unless the effect of such increase is anti-dilutive.

The weighted-average number of shares used in the calculation of basic and dilutedearnings per share attributable to the Company’s common stockholders consists of the following:

Three MonthsEnded Nine Months Ended

April 30, April 30,2022 2021 2022 2021

(in thousands)Basic weighted-average number of shares 14,307 13,676 14,295 12,531Effect of dilutive securities:

Stock options 505 762 598 715Non-vested restricted Class B common stock 30 98 63 48Deferred stock units 17 34 18 29

Diluted weighted-average number of shares 14,859 14,570 14,974 13,323

The following shares were excluded from the dilutive earnings per share computationsbecause their inclusion would have been anti-dilutive:

Three MonthsEnded Nine Months Ended

April 30, April 30,2022 2021 2022 2021(in thousands) (in thousands)

Stock options 95 24 59 25Non-vested restricted Class B common stock - - - -Deferred stock units 277 - 238 -Shares excluded from the calculation of diluted

earnings per share 372 24 297 25

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9 Months EndedContingencies Apr. 30, 2022Loss Contingency [Abstract]Contingencies Note 10—Contingencies

Legal Proceedings

The Company may from time to time be subject to other legal proceedings that arise inthe ordinary course of business. Although there can be no assurance in this regard, the Companydoes not expect any of those legal proceedings to have a material adverse effect on theCompany’s results of operations, cash flows or financial condition.

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9 Months EndedRevolving Credit Facility Apr. 30, 2022Revolving Credit Facility[Abstract]Revolving Credit Facility Note 11—Revolving Credit Facility

As of September 27, 2016, the Company entered into a loan and security agreement withWestern Alliance Bank for a revolving credit facility of up to $2.5 million for an initial two-yearterm which was extended twice for another two-year term expiring September 26, 2022. At theCompany’s request in September 2020, advances under this facility have been reduced to thelesser of $2.0 million or 80% of the Company’s eligible accounts receivable, subject to certainconcentration limits. The revolving credit facility is secured by a lien on substantially all of theCompany’s assets. Effective with the September 2020 extension, the outstanding principalamount bears interest per annum at the greater of 3.5% or the prime rate plus 1.25%. Previouslythe interest rate was capped at 5.0%. Interest is payable monthly and all outstanding principal andany accrued and unpaid interest is due on the maturity date of September 26, 2022. The Companyis required to pay an annual facility fee of $10,000 to Western Alliance Bank. The Company isalso required to comply with various affirmative and negative covenants and to maintain certainfinancial ratios during the term of the revolving credit facility. The covenants include aprohibition on the Company paying any dividend on its capital stock. The Company mayterminate this agreement at any time without penalty or premium provided that it pays down anyoutstanding principal, accrued interest and bank expenses. At April 30, 2022 and July 31, 2021,there were no amounts outstanding under the revolving credit facility and the Company was incompliance with all of the covenants.

As of November 16, 2016, the Company entered into a Foreign Exchange Agreementwith Western Alliance Bank to allow the Company to enter into foreign exchange contracts not toexceed $5.0 million in the aggregate at any point in time under its revolving credit facility. Thislimit was raised to approximately $6.5 million pursuant to the Loan and Security ModificationAgreement dated May 30, 2018. The available borrowing under the revolving credit facility isreduced by an applicable foreign exchange reserve percentage as determined by Western AllianceBank, in its reasonable discretion from time to time, which was initially set at 10% of the nominalamount of the foreign exchange contracts in effect at the relevant time. In December 2016, theapplicable foreign exchange reserve percentage was changed so that the reduction of availableborrowing for major currency forward contracts of less than six months tenor is set at 10% of thenominal amount of the foreign exchange contracts, and for contracts over six months tenor,12.5% of the nominal amount of the foreign exchange contracts. At April 30, 2022, there were$3.2 million of outstanding foreign exchange contracts with the majority being less than sixmonths tenor under the credit facility, which reduced the available borrowing under the revolvingcredit facility by $326,000.

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9 Months EndedBusiness Segment andGeographic Information Apr. 30, 2022

Business Segment AndGeographic Information[Abstract]Business Segment andGeographic Information

Note 12—Business Segment and Geographic Information

The Company provides a content platform, worldwide, centered on self-expression,attracting both creators looking to promote their content and consumers who utilize such contentto express their identity, feelings, tastes and interests. The Company’s platform enablesconsumers to personalize their mobile devices with mostly free, high-quality ringtones,wallpapers, home screen app icons, widgets and notification sounds. The Company conductsbusiness as one operating segment.

Net long-lived assets and total assets, other than goodwill, deferred tax assets andinvestment in private company, held outside of the United States, which are located primarily inIsrael and Norway, were as follows:

UnitedStates Foreign Total

(in thousands)Long-lived assets, net:

April 30, 2022 $ 7,995 $ 15,709 $ 23,704July 31, 2021 $ 1,900 $ 399 $ 2,299

Total assets:April 30, 2022 $ 25,960 $ 29,707 $ 55,667July 31, 2021 $ 32,745 $ 4,732 $ 37,477

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9 Months EndedOperating Leases Apr. 30, 2022Leases [Abstract]Operating Leases Note 13— Operating Leases

The Company has operating leases primarily for office space. Operating lease right-of-use assets recorded and included in other assets were $164,000 and $243,000 at April 30, 2022and July 31, 2021, respectively.

In connection with the GuruShots acquisition, the Company also acquired $86,000 ofright-of-use assets related to its office space in Tel Aviv and assumed $86,000 lease liabilities.

Other than the above, there were no other material changes in the Company's operatingand finance leases in the three and nine months ended April 30, 2022, as compared to thedisclosure in the Company's Annual Report on Form 10-K for the fiscal year ended July 31, 2021.

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9 Months EndedProvision for Income Taxes Apr. 30, 2022Income Tax Disclosure[Abstract]Provision for Income taxes Note 14—Provision for Income Taxes

The Company’s tax provision or benefit from income taxes for interim periods hasgenerally been determined using an estimate of its annual effective tax rate, adjusted foridentified discrete items, if any. Under certain circumstances where the Company is unable tomake a reliable estimate of the annual effective tax rate, the accounting guidance permits the useof the actual effective tax rate for the year-to-date period.

The Company expects its overall effective tax rate for the fiscal year ending July 31,2022 to be approximately 25.7%. The effective tax rate differed from the United States federalstatutory tax rate of 21% due to certain factors with temporary impact primarily related to equitycompensation expenses. During the nine months ended April 30, 2022, the Company accountedfor a discrete item related to restricted stock windfall (vesting date fair market value above thegrant date fair market value) which resulted in a net effective tax rate of 24.4%.

As of April 30, 2022, the Company had $560,000 of deferred tax assets for which it hasnot established a valuation allowance, related to U.S. federal and state taxes and for a certaininternational subsidiary. The Company completed its reassessment of the ability to realize theseassets and concluded that a valuation allowance was not required.

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 materialjurisdictions where the Company is subject to potential examination by tax authorities include theUnited States, Norway and Lithuania.

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9 Months EndedLoans Payable Apr. 30, 2022Loans Payable [Abstract]Loans Payable Note 15—Loans Payable

Effective August 1, 2020, the Company obtained a loan of $181,462 to pay for itsinsurance coverages, repayable in nine equal installments of $20,491 starting from September 1,2020 which represented a 3.89% annual percentage interest rate. This loan was completely repaidby April 2021.

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9 Months EndedSales of Class B CommonStock Apr. 30, 2022

Sale of Common Stock[Abstract]Sales of Class B CommonStock

Note 16—Sales of Class B Common Stock

The Company filed with the SEC a Registration Statement on Form S-3 (the “FormS-3”) on November 30, 2020 which became effective on December 4, 2020 to facilitate capitalraising. The Registration Statement registered the issuance and sale by the Company of Class Bcommon stock or related securities for gross proceeds to the Company of up to $20 million. OnNovember 30, 2020, the Company engaged National Securities Corp. and H.C. Wainwright &Co, LLC (the “Sales Agents”) to act as the Company’s exclusive co-Sales Agents in connectionwith the Company’s “at-the-market” offering of shares of the Company’s Class B common stockup to $5 million. The Company filed a Prospectus Supplement (supplementing the Prospectusincluded in the Form S-3) on December 9, 2020 and contemporaneously entered into an At TheMarket Offering Agreement with the Sales Agents (the “ATM Sales Agreement”), pursuant towhich the Company sold 761,906 shares at an average price of $6.5625 per share for totalproceeds of $5 million as of January 28, 2021. In connection with this offering, the Companyincurred a total issuance cost of $215,000. The Company intends to use the net proceeds from thisoffering for working capital and other general corporate purposes.

On March 16, 2021, the Company filed a prospectus supplement with the SEC whichcontemplated the sale, for a gross aggregate sale price of up to $10,000,000, of shares of theCompany’s Class B common stock, from time to time in “at the market offerings” pursuant to anAt Market Issuance Sales Agreement with National Securities Corporation and Maxim GroupLLC (the “New Sales Agents”), dated as of March 16, 2021 (the “New ATM Sales Agreement”),pursuant to which we sold 663,686 shares at an average price of $15.0674 per share for totalproceeds of $10 million. In connection with this offering, we incurred a total issuance cost of$350,000. We intend to use the net proceeds from this offering for working capital and othergeneral corporate purposes.

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9 Months EndedSubsequent Event Apr. 30, 2022Subsequent Events[Abstract]Subsequent Event Note 17—Subsequent Events

On June 7, 2022, the Company’s Board approved a $65,000 advisory fee to Activist inconnection with the GuruShots acquisition. In addition, the Board also approved the increase inmonthly retainer from $3,750 to $5,000 per month retroactive from April 1, 2022,

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9 Months EndedAccounting Policies, byPolicy (Policies) Apr. 30, 2022

Accounting Policies[Abstract]Basis of Presentation Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Zedge,Inc. and its subsidiaries, GuruShots Ltd, Zedge Europe AS and Zedge Lithuania UAB (the“Company”), have been prepared in accordance with accounting principles generally accepted inthe United States of America (“U.S. GAAP”) for interim financial information and with theinstructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include allof the information and footnotes required by U.S. GAAP for complete financial statements. In theopinion of management, all adjustments (consisting of normal recurring accruals) considerednecessary for a fair presentation have been included. Operating results for the three and ninemonths ended April 30, 2022 are not necessarily indicative of the results that may be expected forthe fiscal year ending July 31, 2022 or any other period. The balance sheet at July 31, 2021 hasbeen derived from the Company’s audited financial statements at that date but does not include allof the information and footnotes required by U.S. GAAP for complete financial statements. Forfurther information, please refer to the consolidated financial statements and footnotes theretoincluded in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2021,as filed with the U.S. Securities and Exchange Commission (the “SEC”).

The Company’s fiscal year ends on July 31 of each calendar year. Each reference belowto a fiscal year refers to the fiscal year ending in the calendar year indicated (e.g., fiscal 2022refers to the fiscal year ending July 31, 2022).

Use of Estimates Use of Estimates

The preparation of the Company’s unaudited condensed consolidated financialstatements in conformity with U.S. GAAP requires management to make estimates andassumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as wellas related disclosure of contingent assets and liabilities. Actual results could differ materiallyfrom the Company’s estimates due to risks and uncertainties, including uncertainty in the currenteconomic environment due to various global events. To the extent that there are materialdifferences between these estimates and actual results, the Company’s financial condition oroperating results will be affected. The Company bases its estimates on past experience and otherassumptions that the Company believes are reasonable under the circumstances, and theCompany evaluates these estimates on an ongoing basis.

Recently Adopted AccountingPronouncements

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issuedAccounting Standard Update (“ASU”) No. 2019-12, Income Taxes (Topic 740): Simplifying theAccounting for Income Taxes (ASU 2019-12), which simplifies the accounting for income taxes.The Company adopted this new accounting standard on August 1, 2021, and the adoption did nothave a material impact on the Company’s unaudited condensed consolidated financial statementsand related disclosures.

Recently Issued AccountingPronouncements Not YetAdopted

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses(Topic 326), which requires the measurement and recognition of expected credit losses forfinancial assets held at amortized cost. ASU 2016-13 replaces the existing incurred lossimpairment model with an expected loss model which requires consideration of forward-lookinginformation to calculate credit loss estimates. These changes will result in an earlier recognitionof credit losses. The Company's financial assets held at amortized cost include accounts

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receivable. The amendments in ASU 2020-05 deferred the effective date for Topic 326 to fiscalyears beginning after December 15, 2022. The Company will adopt the new standard effectiveAugust 1, 2023 and does not expect the adoption of this guidance to have a material impact on itsconsolidated financial statements.

In October 2021, the FASB issued ASU No. 2021-08, Accounting for Contract Assetsand Contract Liabilities From Contracts With Customers. ASU 2021-08 requires an acquirer in abusiness combination to recognize and measure contract assets and contract liabilities fromacquired contracts using the revenue recognition guidance in Accounting Standards Codification(“ASC”) Topic 606, Revenue from Contracts with Customers, rather than the prior requirement torecord them at fair value. The guidance is effective for fiscal years, and interim periods withinthose fiscal years, beginning after December 15, 2022. Early adoption is permitted. The Companywill adopt the new standard effective August 1, 2023 and does not expect the adoption of thisguidance to have a material impact on its consolidated financial statements.

With the exception of the standard discussed above, there have been no other recentaccounting pronouncements or changes in accounting pronouncements during the nine monthsended April 30, 2022, as compared to the recent accounting pronouncements described in theCompany’s Annual Report on Form 10-K for the fiscal year ended July 31, 2021, that are ofsignificance or potential significance to the Company.

Significant AccountingPolicies

Significant Accounting Policies

Other than intangible assets described below, there have been no material changes to theCompany's significant accounting policies from its Annual Report on Form 10-K for the fiscalyear ended July 31, 2021.

Business Combinations Business Combinations

The Company accounts for business combination using the acquisition method ofaccounting. The Company allocates the purchase price of the acquisition to the tangible andintangible assets acquired and liabilities assumed and contingent considerations based on theirestimated fair values at the acquisition dates. The excess of the purchase price over those fairvalues is recorded as goodwill. During the measurement period, which may be up to one yearfrom the acquisition date, the Company may record adjustments to the assets acquired andliabilities assumed with a corresponding offset to goodwill. Upon the conclusion of themeasurement period or final determination of the values of assets acquired or liabilities assumed,whichever comes first, any subsequent adjustments are recorded to the unaudited condensedconsolidated statements of operations and comprehensive income. Acquisition-related costs arerecognized separately from the acquisition and are expensed as incurred.

Intangible Assets-Net Intangible Assets-Net

Intangible assets (see Note 6) are carried at cost, less accumulated amortization, unless adetermination has been made that their value has been impaired. Intangible assets are amortizedon a straight-line basis over their estimated useful lives of between five to fifteen years. TheCompany reviews identifiable amortizable intangible assets to be held and used for impairmentwhenever events or changes in circumstances indicate that the carrying value of the assets maynot be recoverable. Determination of recoverability is based on the lowest level of identifiableestimated 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 overits fair value. There were no impairment charges recorded in the nine months ended April 30,2022 presented in the accompanying unaudited condensed consolidated financial statements.

Related Party Transactions Related Party Transactions

The Company was formerly a majority-owned subsidiary of IDT Corporation (“IDT”).On June 1, 2016, IDT’s interest in the Company was spun-off by IDT to IDT’s stockholders and

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the Company became an independent public-held company. IDT charges the Company forservices it provides, and the Company charges IDT for services it provides, pursuant to aTransition Services Agreement (“TSA”). The Company was charged for legal services by IDT inthe amounts of $29,600 and $91,600 respectively, for the three and nine month periods endedApril 30, 2022, and $25,900 and $98,400 respectively, for the three and nine month periods endedApril 30, 2021. The Company charged IDT for consulting services provided to IDT by a Zedgeemployee in the amounts of $35,100 and $140,000 respectively, for the three and nine monthperiods ended April 30, 2022, and $33,900 and $119,500, respectively, for the three and ninemonth periods ended April 30, 2021. As of April 30, 2022 and July 31, 2021, IDT owed theCompany $5,000 and $6,000, respectively.

The Company is party to a consulting agreement with Activist Artist Management, LLC(“Activist”), which assists the company in strategic business development. A member of theCompany’s Board of Directors owns a significant minority stake in Activist. The Company paid$11,000 and $38,000, respectively, in the three and nine month periods ended April 30, 2022, and$11,000 and $38,000, respectively, in the three and nine month periods ended April 30, 2021, toActivist pursuant to the agreement. Under the terms of the agreement, which was amended as ofAugust 1, 2020, the Company pays Activist $3,750 per month, plus possible commissions. OnJune 7, 2022 the Company’s Board approved a $65,000 advisory fee to Activist in connectionwith the GuruShots acquisition. In addition, the Board also approved the increase in monthlyretainer from $3,750 to $5,000 per month retroactive from April 1, 2022, see Note 17 below.

The Company paid $0 and $30,000, respectively, in the three and nine month periodsended April 30, 2022, and $0 in the three and nine month periods ended April 30, 2021, to BrazeInc. (formerly “Appboy, Inc.”) for use of its customer relationship management and lifecyclemarketing platform. The former Chief Executive Officer and Co-Founder of Braze, Inc. is amember of the Company’s Board of Directors.

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9 Months EndedRevenue (Tables) Apr. 30, 2022Revenue [Abstract]Schedule of revenue by type of monetizationmechanisms

Three MonthsEnded

Nine MonthsEnded

April 30, April 30,2022 2021 2022 2021

(in thousands) (in thousands)Advertising revenue $4,526 $4,227 $14,532 $11,612Paid subscription revenue 910 899 2,823 2,358Other revenues 794 126 1,818 358

Total revenues $6,230 $5,252 $19,173 $14,328

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9 Months EndedFair Value Measurements(Tables) Apr. 30, 2022

Fair Value Disclosures [Abstract]Schedule of balance of assets and liabilities measured atfair value on a recurring basis

Level 1 (1) Level 2 (2) Level 3 (3) Total(in thousands)

April 30, 2022Assets:

Foreignexchangeforwardcontracts

$ - $ - $ - $ -

Liabilities:Current portion

of contingentconsiderationpayable

$ - $ - $ 3,396 $3,396

Contingentconsiderationpayable

$ - $ - $ 2,508 $2,508

Foreignexchangeforwardcontracts

$ - $ 167 $ - $ 167

July 31, 2021Assets:

Foreignexchangeforwardcontracts

$ - $ - $ - $ -

Liabilities:Foreign

exchangeforwardcontracts

$ - $ 54 $ - $ 54

(1) – quoted prices in active markets for identical assets orliabilities(2) – observable inputs other than quoted prices in active marketsfor identical assets and liabilities(3) – no observable pricing inputs in the market

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9 Months EndedDerivative Instruments(Tables) Apr. 30, 2022

Derivative Instruments andHedging Activities Disclosure[Abstract]Schedule of outstandingcontracts Settlement Date

U.S.Dollar

Amount

NOKAmount

May-22 225,000 1,970,619Jun-22 225,000 1,999,125Jul-22 225,000 1,999,800Aug-22 225,000 2,000,025Sep-22 225,000 2,000,250Oct-22 225,000 2,000,700Nov-22 225,000 2,000,925

Total $1,575,000 13,971,444

Settlement DateU.S.

DollarAmount

EURAmount

May-22 225,000 188,673Jun-22 225,000 203,381Jul-22 225,000 203,105Aug-22 225,000 202,812Sep-22 225,000 202,484Oct-22 225,000 202,156Nov-22 225,000 201,848

Total $1,575,000 1,404,459

Schedule of fair value ofoutstanding derivativeinstruments

April30,

July31,

Assets and LiabilitiesDerivatives: Balance Sheet Location 2022 2021

Derivatives not designated or notqualifying as hedginginstruments

(inthousands)

Foreign exchange forward contracts Accrued expenses and other current liabilities $ 167 $ 54

Schedule of derivativeinstruments on consolidatedstatements of comprehensiveincome

Three Months EndedApril 30,

Nine Months EndedApril 30,

Amount of (Loss) Gain Recognized onDerivatives 2022 2021 2022 2021

Derivatives not designatedor not qualifying ashedging instruments

Location of Gain(Loss)Recognized onDerivatives

(in thousands) (in thousands)

Foreign exchange forwardcontracts

Net (loss) gainresulting fromforeign exchangetransactions

$ (154) $ 16 (271) $ 67

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9 Months EndedBusiness Combination andAssets Acquisition (Tables) Apr. 30, 2022

Business Combinations [Abstract]Schedule of allocation of the purchase price (Dollar Amounts in Thousands)

Purchase price consideration:Cash consideration paid at close $15,242Cash contributed to escrow accounts at close 2,700Cash deducted from purchase price and contributed to GuruShots'working capital 58

Fair value of contingent consideration to be achieved at year 1 3,396Fair value of contingent consideration to be achieved at year 2 2,508Fair value of total consideration transferred 23,904Total purchase price, net of cash acquired $23,384

Fair value allocation of purchase price:Cash and cash equivalents $ 520Accounts receivable 282Prepaid and other assets 145Property and equipment, net 17Other assets (including ROU) 151Accounts payable and accrued expenses (1,351)Operating lease liabilities, current (53)Operating lease liabilities, noncurrent (34)Acquired intangible assets 15,320Goodwill 8,907Total purchase price $23,904

Schedule of intangible assets (Dollar Amounts in Thousands) AssetValue

UsefulLife

Identified intangible assets:Trade names $ 3,570 12 yearsAcquired developed technology 3,950 5 yearsCustomer relationships 7,800 10 yearsTotal identified intangible assets $15,320

Schedule of pro forma consolidated financialinformation

Three MonthsEnded

Nine MonthsEnded

April 30 (1) April 30 (1)

(‘000) 2021 2022 2021 2022

Revenue $ 7,522 $ 7,625 $21,002 $24,134

Net income $ 1,625 $ 571 $ 2,240 $ 2,580

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9 Months EndedIntangible Assets andGoodwill (Tables) Apr. 30, 2022

Goodwill and Intangible AssetsDisclosure [Abstract]Schedule of intangible assets Gross

CarryingValue

AccumulatedAmortization

NetCarrying

Value

Balance at July 31, 2021 $ - $ - $ -Websites and other internet domains acquired 6,711 335 6,376Acquired developed technology 3,950 40 3,910Customer relationships 7,800 39 7,761Trademarks and trade names 3,570 15 3,555

Balance at April 30, 2022 $ 22,031 $ 429 $ 21,602

Schedule of intangible assets Remainder of fiscal 2022 $ 579Fiscal 2023 2,315Fiscal 2024 2,315Fiscal 2025 2,315Fiscal 2026 2,315Thereafter 11,763Total $ 21,602

Schedule of carrying amount ofgoodwill

(in thousands) CarryingAmount

Balance at July 31, 2021 $ 2,262GuruShots acquisition 8,907Foreign currency translation adjustments (138)

Balance at April 30, 2022 $ 11,031

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9 Months EndedAccrued Expenses and OtherCurrent Liabilities (Tables) Apr. 30, 2022

Accrued Expenses and Other Current Liabilities[Abstract]Schedule of accrued expenses and other currentliabilities

April30,

July31,

2022 2021(in thousands)

Accrued vacation $ 663 $ 424Accrued income taxes payable 1,711 264Accrued payroll taxes 304 291Accrued payroll and bonuses 638 374Accrued business combination expenses 340 -Operating lease liability 142 86Derivative liability 167 54Due to artists 327 246Other 130 32Total accrued expenses and other currentliabilities $ 4,422 $ 1,771

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9 Months EndedStock-Based Compensation(Tables) Apr. 30, 2022

Share-Based Payment Arrangement [Abstract]Schedule of operations and comprehensive income Three

MonthsEnded

Nine MonthsEnded

April 30, April 30,2022 2021 2022 2021

(in thousands)Selling, general andadministrative $ 483 $ 98 $1,291 $ 488

Schedule of Black-Scholes option pricing model based onweighted-average assumptions

Nine months ended April 30, 2022 2021

Expected term 6.0years

6.0years

Volatility 92.4% 92.4%Risk free interest rate 1.5% 0.6%Dividends — —Weighted average grant date fair value $ 7.76 $ 3.26

Schedule of stock option Stock OptionsWeighted-

Number of AverageOptions Exercise

(in thousands) PriceOutstanding at July 31, 2021 843 $ 2.72Granted 42 10.29Exercised (4) 1.87Cancelled / forfeited (27) 12.28Outstanding at April 30,2022 854 $ 2.79

Exercisable at April 30, 2022 645 $ 2.09

Schedule of restricted shares non-vested deferred stock unitsNumber of

Shares

WeightedAverage

Grant DateFair Value

Non-vested stock award as ofJuly 31, 2021 127,300 $ 3.27

Granted (GuruShots RetentionBonus shares) 626,242 6.39

Vested (65,101) 2.80Forfeited - -Non-vested stock award as ofApril 30, 2022 688,441 $ 6.15

Schedule of restricted shares non-vested deferred stock unitsNumber of

Shares

WeightedAverage

Grant DateFair Value

Non-vested DSU award as ofJuly 31, 2021 37,500 $ 1.54

Granted (1) 291,320 9.60Vested (12,500) 1.54

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Forfeited (18,720) 7.88Non-vested DSU award as ofApril 30, 2022 297,600 $ 9.03

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9 Months EndedEarnings Per Share (Tables) Apr. 30, 2022Earnings Per Share [Abstract]Schedule of weighted-average number of shares used in thecalculation of basic and diluted earnings per share

Three MonthsEnded

Nine MonthsEnded

April 30, April 30,2022 2021 2022 2021

(in thousands)Basic weighted-average

number of shares 14,307 13,676 14,295 12,531

Effect of dilutivesecurities:Stock options 505 762 598 715Non-vested restricted

Class B common stock 30 98 63 48

Deferred stock units 17 34 18 29Diluted weighted-average

number of shares 14,859 14,570 14,974 13,323

Schedule of dilutive earnings per share computations ThreeMonthsEnded

NineMonthsEnded

April 30, April 30,2022 2021 2022 2021

(inthousands)

(inthousands)

Stock options 95 24 59 25Non-vested restricted Class B

common stock - - - -

Deferred stock units 277 - 238 -Shares excluded from the

calculation of diluted earningsper share

372 24 297 25

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9 Months EndedBusiness Segment andGeographic Information

(Tables) Apr. 30, 2022

Business Segment And Geographic Information [Abstract]Schedule of net long lived assets and total assets United

States Foreign Total

(in thousands)Long-lived assets, net:

April 30, 2022 $ 7,995 $ 15,709 $23,704July 31, 2021 $ 1,900 $ 399 $ 2,299

Total assets:April 30, 2022 $25,960 $ 29,707 $55,667July 31, 2021 $32,745 $ 4,732 $37,477

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3 MonthsEnded

9 MonthsEndedBasis of Presentation and

Summary of SignificantAccounting Policies (Details)

- USD ($)

Jun.07,

2022

Apr.01,

2022

Apr.30,

2022

Apr.30,

2021

Apr.30,

2022

Apr.30,

2021

Jul.31,

2021

Aug.01,

2020Basis of Presentation and Summary ofSignificant Accounting Policies (Details) [LineItems]Legal services $

12,000Minimum [Member]Basis of Presentation and Summary ofSignificant Accounting Policies (Details) [LineItems]Increase decrease in retainer amount $

3,750Maximum [Member]Basis of Presentation and Summary ofSignificant Accounting Policies (Details) [LineItems]Increase decrease in retainer amount $

5,000Subsequent Event [Member]Basis of Presentation and Summary ofSignificant Accounting Policies (Details) [LineItems]Advisory fee $

65,000IDT [Member]Basis of Presentation and Summary ofSignificant Accounting Policies (Details) [LineItems]Legal services $

29,600$25,900 91,600 $

98,400Consulting services 35,100 33,900 140,000119,500Owed amount 5,000 5,000 $

6,000Activist Artists Management, LLC [Member]Basis of Presentation and Summary ofSignificant Accounting Policies (Details) [LineItems]Company for management 11,000 11,000 38,000 $

38,000Commissions $ 3,750Braze Inc. [Member]

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Basis of Presentation and Summary ofSignificant Accounting Policies (Details) [LineItems]Company for management $ 0 $ 0 $

30,000

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1MonthsEnded

3MonthsEnded

9 Months Ended12

MonthsEndedRevenue (Details) - USD ($)

Apr. 01,2022

Jul. 31,2021

Apr.30,

2022Apr. 30, 2022 Jul. 31,

2021

Revenue (Details) [LineItems]Revenue from emojipedia $

232,000 $ 823,000

Revenue from gurushots $294,000 $ 294,000

Integration bonus $2,000,000

Unsatisfied performanceobligations, description

The Company records deferred revenuesrelated to the unsatisfied performanceobligations with respect to subscriptionrevenue. As of April 30, 2022, theCompany’s deferred revenue balancerelated to paid subscriptions wasapproximately $1.5 million, representingapproximately 713,000 active subscribersincluding those under the account holddesignation implemented by Google Playon November 1, 2020. Account hold is asubscription state that begins when auser's form of payment fails and the three-day grace period has ended withoutpayment resolution. The account holdperiod lasts for up to 30 days. As of July31, 2021, the Company’s deferredrevenue balance related to paidsubscriptions was approximately $1.6million, representing approximately752,000 active subscribers.

Deferred revenue recognized $1,500,000

Credits, description The Company also records deferredrevenues when users purchase or earnZedge Credits. Unused Zedge Creditsrepresent the value of the Company’sunsatisfied performance obligation to itsusers. Revenue is recognized when ZedgeApp users use Zedge Credits to acquireZedge Premium content or uponexpiration of the Zedge Credits upon 180days of account inactivity.

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Deferred revenue balance $ 218,000 $ 281,000Zedge Premium [Member]Revenue (Details) [LineItems]Deferred revenues decreased $ 3,700,000Zedge Premium [Member] |Minimum [Member]Revenue (Details) [LineItems]Deferred revenues decreased 1,900,000Zedge Premium [Member] |Maximum [Member]Revenue (Details) [LineItems]Deferred revenues decreased $

1,800,000

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3 Months Ended 9 Months EndedRevenue (Details) - Scheduleof revenue by type of

monetization mechanisms -Disaggregation of Revenue

[Member] - USD ($)$ in Thousands

Apr. 30,2022

Apr. 30,2021

Apr. 30,2022

Apr. 30,2021

Revenue (Details) - Schedule of revenue by type of monetizationmechanisms [Line Items]Total Revenues $ 6,230 $ 5,252 $ 19,173 $ 14,328Advertising revenue [Member]Revenue (Details) - Schedule of revenue by type of monetizationmechanisms [Line Items]Total Revenues 4,526 4,227 14,532 11,612Paid subscription revenue [Member]Revenue (Details) - Schedule of revenue by type of monetizationmechanisms [Line Items]Total Revenues 910 899 2,823 2,358Other revenues [Member]Revenue (Details) - Schedule of revenue by type of monetizationmechanisms [Line Items]Total Revenues $ 794 $ 126 $ 1,818 $ 358

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Fair Value Measurements(Details) - Schedule ofbalance of assets and

liabilities measured at fairvalue on a recurring basis -

USD ($)$ in Thousands

Apr. 30, 2022 Jul. 31, 2021

Assets:Foreign exchange forward contractsCurrent portion of contingent consideration payable 3,396Contingent consideration payable 2,508Foreign exchange forward contracts 167 54Fair Value, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]Assets:Foreign exchange forward contracts [1]

Foreign exchange forward contracts [1]

Fair Value, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]Assets:Foreign exchange forward contracts [2]

Foreign exchange forward contracts [2] 167 54Fair Value, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]Assets:Foreign exchange forward contracts [3]

Current portion of contingent consideration payable 3,396Contingent consideration payable 2,508Foreign exchange forward contracts [3]

[1] quoted prices in active markets for identical assets or liabilities[2] observable inputs other than quoted prices in active markets for identical assets and liabilities[3] no observable pricing inputs in the market

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Derivative Instruments(Details) - Schedule of

outstanding contracts - 9months ended Apr. 30, 2022

€ in Thousands, kr inThousands, $ in Thousands

USD ($) NOK (kr) EUR (€)

Derivative Instruments (Details) - Schedule of outstanding contracts[Line Items]Amount $

1,575,000kr13,971,444

€1,404,459

Jun-22 [Member]Derivative Instruments (Details) - Schedule of outstanding contracts[Line Items]Amount 225,000 203,381Jul-22 [Member]Derivative Instruments (Details) - Schedule of outstanding contracts[Line Items]Amount 225,000 203,105Aug-22 [Member]Derivative Instruments (Details) - Schedule of outstanding contracts[Line Items]Amount 225,000 202,812Sep-22 [Member]Derivative Instruments (Details) - Schedule of outstanding contracts[Line Items]Amount 225,000 202,484Oct-22 [Member]Derivative Instruments (Details) - Schedule of outstanding contracts[Line Items]Amount 225,000 202,156Nov-22 [Member]Derivative Instruments (Details) - Schedule of outstanding contracts[Line Items]Amount 225,000 201,848May-22 [Member]Derivative Instruments (Details) - Schedule of outstanding contracts[Line Items]Amount 225,000 € 188,673Western Alliance Bank [Member] | May-22 [Member]Derivative Instruments (Details) - Schedule of outstanding contracts[Line Items]Amount 225,000 1,970,619Western Alliance Bank [Member] | Jun-22 [Member]Derivative Instruments (Details) - Schedule of outstanding contracts[Line Items]

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Amount 225,000 1,999,125Western Alliance Bank [Member] | Jul-22 [Member]Derivative Instruments (Details) - Schedule of outstanding contracts[Line Items]Amount 225,000 1,999,800Western Alliance Bank [Member] | Aug-22 [Member]Derivative Instruments (Details) - Schedule of outstanding contracts[Line Items]Amount 225,000 2,000,025Western Alliance Bank [Member] | Sep-22 [Member]Derivative Instruments (Details) - Schedule of outstanding contracts[Line Items]Amount 225,000 2,000,250Western Alliance Bank [Member] | Oct-22 [Member]Derivative Instruments (Details) - Schedule of outstanding contracts[Line Items]Amount 225,000 2,000,700Western Alliance Bank [Member] | Nov-22 [Member]Derivative Instruments (Details) - Schedule of outstanding contracts[Line Items]Amount $ 225,000 kr

2,000,925

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9 Months EndedDerivative Instruments(Details) - Schedule of fair

value of outstandingderivative instruments - USD

($)$ in Thousands

Apr. 30, 2022 Jul. 31,2021

Schedule of fair value of outstanding derivativeinstruments [Abstract]Balance Sheet Location Accrued expenses and other current

liabilitiesForeign exchange forward contracts $ 167 $ 54

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3 MonthsEnded 9 Months EndedDerivative Instruments

(Details) - Schedule ofderivative instruments onconsolidated statements ofcomprehensive income -

USD ($)$ in Thousands

Apr.30,

2022

Apr.30,

2021Apr. 30, 2022

Apr.30,

2021

Schedule of derivative instruments on consolidatedstatements of comprehensive income [Abstract]Location of Gain (Loss) Recognized on Derivatives Net (loss) gain resulting from

foreign exchange transactionsForeign exchange forward contracts $ (154) $ 16 $ (271) $ 67

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3 MonthsEnded 9 Months EndedBusiness Combination and

Assets Acquisition (Details) -USD ($) Apr. 30,

2022 Apr. 30, 2022 Apr. 12,2022

Business Combination andAssets Acquisition (Details)[Line Items]Preliminary purchase price $

5,900,000 $ 5,900,000

GuruShots Acquisition[Member]Business Combination andAssets Acquisition (Details)[Line Items]Outstanding equity securitiespercentage 100.00%

Purchase price for the equitysecurities 18,000,000$ 18,000,000

Business combination andassets acquisition description

In addition, the Company has committed to a retention poolof $4 million in cash and issued 626,242 shares of theCompany Class B common stock with a fair value of $4million or $6.39 per share (based on the volume weightedaverage closing prices of the Class B common stock on theNYSE American Exchange for the thirty trading days endedApril 12, 2022) for GuruShots’ founders and employees thatwill be payable or vest, as applicable, over three years fromclosing based on the beneficiaries thereof remainingemployed by the Company or a subsidiary.

Cash consideration paidincludes deposited $ 2,700,000

Maximum earnout amount $ 16,800,000Compensation expensesdescription

The Company issued 626,242 shares of the Company’sClass B common on the closing date to the founders andemployees as a retention bonus pool. These shares will vest,in equal tranches, over three years assuming that therecipients remain employed by the Company or a subsidiarythrough the vesting dates. The $4 million fair value of theseunvested restricted stock is not included as purchaseconsideration above, as it has a post-combination servicerequirement and will be accounted for separately from thebusiness combination as stock compensation expense.Additionally, the founders and employees are also entitled toreceive $4 million retention cash bonus over three years.

Recognition of goodwill $ 8,900,000Transaction costs 700,000 $ 900,000

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Operating results description GuruShots’ operating results are consolidated with ouroperating results beginning on April 13, 2022. Therefore,our consolidated results of operations for the three and ninemonths ended April 30, 2022 may not be comparable to thesame period in 2021. GuruShots’ results of operationsincluded in our consolidated results of operations for thethree and nine months ended April 30, 2022 includerevenues of $0.3 million and a net loss of $0.2 million.

GuruShots Acquisition[Member] | Maximum[Member]Business Combination andAssets Acquisition (Details)[Line Items]Purchase price for the equitysecurities

$8,400,000 $ 8,400,000

GuruShots Acquisition[Member] | BusinessCombination [Member]Business Combination andAssets Acquisition (Details)[Line Items]Acquisition-related costs $ 860,000Emojipedia Acquisition[Member]Business Combination andAssets Acquisition (Details)[Line Items]Purchase agreementdescription

Pursuant to an Asset Purchase Agreement, on August 1,2021 (“Closing”), the Company consummated theacquisition of substantially all of the assets of EmojipediaPty Ltd, a proprietary company organized under the laws ofAustralia. The total purchase price of the assets has beendetermined to be $6.7 million of which $4.8 million waspaid on August 2, 2021 and $917,000 was paid on February1, 2022, with the remaining $962,000 to be paid out on thetwelve-month anniversary of the Closing. The final purchaseprice of $6.7 million was $194,000 lower than initiallyestimated.

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9 Months EndedBusiness Combination andAssets Acquisition (Details) -Schedule of allocation of the

purchase price$ in Thousands

Apr. 30, 2022USD ($)

Purchase price consideration:Cash consideration paid at close $ 15,242Cash contributed to escrow accounts at close 2,700Cash deducted from purchase price and contributed to GuruShots' working capital 58Fair value of contingent consideration to be achieved at year 1 3,396Fair value of contingent consideration to be achieved at year 2 2,508Fair value of total consideration transferred 23,904Total purchase price, net of cash acquired 23,384Fair value allocation of purchase price:Cash and cash equivalents 520Accounts receivable 282Prepaid and other assets 145Property and equipment, net 17Other assets (including ROU) 151Accounts payable and accrued expenses (1,351)Operating lease liabilities, current (53)Operating lease liabilities, noncurrent (34)Acquired intangible assets 15,320Goodwill 8,907Total purchase price $ 23,904

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9 Months EndedBusiness Combination andAssets Acquisition (Details) -Schedule of intangible assets

$ in Thousands

Apr. 30, 2022USD ($)

Identified intangible assets:Asset Value $ 15,320Trade names [Member]Identified intangible assets:Asset Value $ 3,570Useful Life 12 yearsAcquired developed technology [Member]Identified intangible assets:Asset Value $ 3,950Useful Life 5 yearsCustomer relationships [Member]Identified intangible assets:Asset Value $ 7,800Useful Life 10 years

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3 Months Ended 9 Months EndedBusiness Combination andAssets Acquisition (Details) -

Schedule of pro formaconsolidated financialinformation - USD ($)

$ in Thousands

Apr. 30,2022

Apr. 30,2021

Apr. 30,2022

Apr.30,

2021

Schedule of pro forma consolidated financial information[Abstract]Revenue [1] $ 7,625 $ 7,522 $ 24,134 $

21,002Net income [1] $ 571 $ 1,625 $ 2,580 $

2,240[1] The fiscal year end of Zedge is July 31 and the fiscal year end of GuruShots is December 31. The pro

forma financial information above has been prepared utilizing the three and nine months ended April30th for Zedge and March 31st for GuruShots.

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9 Months EndedIntangible Assets andGoodwill (Details) - Schedule

of intangible assets$ in Thousands

Apr. 30, 2022USD ($)

Gross Carrying Value [Member]Finite-Lived Intangible Assets [Line Items]BalanceWebsites and other internet domains acquired 6,711Acquired developed technology 3,950Customer relationships 7,800Trademarks and trade names 3,570Balance 22,031Accumulated Amortization [Member]Finite-Lived Intangible Assets [Line Items]BalanceWebsites and other internet domains acquired 335Acquired developed technology 40Customer relationships 39Trademarks and trade names 15Balance 429Net Carrying Value [Member]Finite-Lived Intangible Assets [Line Items]BalanceWebsites and other internet domains acquired 6,376Acquired developed technology 3,910Customer relationships 7,761Trademarks and trade names 3,555Balance $ 21,602

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Intangible Assets andGoodwill (Details) - Schedule

of estimated futureamortization expense

$ in Thousands

Apr. 30, 2022USD ($)

Schedule of estimated future amortization expense [Abstract]Remainder of fiscal 2022 $ 579Fiscal 2023 2,315Fiscal 2024 2,315Fiscal 2025 2,315Fiscal 2026 2,315Thereafter 11,763Total $ 21,602

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9 Months EndedIntangible Assets andGoodwill (Details) - Schedule

of carrying amount ofgoodwill

$ in Thousands

Apr. 30, 2022USD ($)

Schedule of carrying amount of goodwill [Abstract]Balance $ 2,262GuruShots acquisition 8,907Foreign currency translation adjustments (138)Balance $ 11,031

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9 Months Ended 12 Months EndedAccrued Expenses and OtherCurrent Liabilities (Details) -

Schedule of accruedexpenses and other current

liabilities - USD ($)$ in Thousands

Apr. 30, 2022 Jul. 31, 2021

Schedule of accrued expenses and other current liabilities [Abstract]Accrued vacation $ 663 $ 424Accrued income taxes payable 1,711 264Accrued payroll taxes 304 291Accrued payroll and bonuses 638 374Accrued business combination expenses 340Operating lease liability 142 86Derivative liability 167 54Due to artists 327 246Other 130 32Total accrued expenses and other current liabilities $ 4,422 $ 1,771

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1MonthsEnded

9 Months EndedStock-Based Compensation

(Details) - USD ($) Nov. 10,2021

Sep.07,

2021

Mar. 23,2022 Apr. 30, 2022

Stock-Based Compensation(Details) [Line Items]Employees and consultantsshare 291,320

Generally options years 4 yearsService and market conditionsper shares (in Dollars pershare)

$ 7.19

Total grant date fair value (inDollars) $ 1,500,000

Service condition grant datefair value (in Dollars) $ 1.3

Grant date fair valuepercentage 30.00%

Market-based conditionamount (in Dollars) $ 1

unrecognized stock-basedcompensation expense (inDollars)

661,000

Unvested stock options (inDollars) 1,900,000

Unvested restricted stock (inDollars) 4,100,000

Portion of retention bonusamount (in Dollars) $ 4,000,000

Class B Common Stock[Member]Stock-Based Compensation(Details) [Line Items]Shares available for grant 685,000 492,000Aggregate shares 2,531,000204,000Including shares 685,000Restricted stock units years 3 years2016 Incentive Plan [Member]| Class B Common Stock[Member]Stock-Based Compensation(Details) [Line Items]Shares available for grant 325,000

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2016 Incentive Plan [Member]| Class B Common Stock[Member]Stock-Based Compensation(Details) [Line Items]Aggregate of shares 1,846,000Deferred Stock Units[Member]Stock-Based Compensation(Details) [Line Items]Vesting percentage,description

Each DSU represents the right to receive one shareof the Company’s Class B common stock.30% ofthe DSU’s (or 87,396) have service vestingconditions only, with a vesting schedule of 25% onSeptember 7, 2022, 33% on September 7, 2023, andremaining on September 7, 2024. Vesting of theremaining 70% of the DSUs (or 203,924) is subjectto continued service as well as a market condition.These DSUs will vest if the grantee remains inservice to the Company and only if the aggregatemarket capitalization of the Company’s equitysecurities has reached or exceeded $451 million forfive consecutive trading days between the grant dateand the vest date. Subject to satisfaction of both ofthose conditions, these DSU’s with both service andmarket conditions have a vesting schedule of 25%September 7, 2022, up to 58% (the 25% eligible tovest in 2022 and an additional 33%) on September7, 2023, and up to 100% on September 7, 2024. Inthe event the market capitalization condition has notbeen met prior to a vesting date, but is met by asubsequent vesting date, all DSUs with a marketcondition eligible for vesting prior to that date shallvest. In the event that the market capitalizationcondition has not been met by September 7, 2024,the DSUs with a market condition shall expire.

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3 Months Ended 9 Months EndedStock-Based Compensation(Details) - Schedule of

operations andcomprehensive income -

USD ($)$ in Thousands

Apr. 30,2022

Apr. 30,2021

Apr. 30,2022

Apr. 30,2021

Schedule of operations and comprehensive income[Abstract]Selling, general and administrative $ 483 $ 98 $ 1,291 $ 488

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9 Months EndedStock-Based Compensation(Details) - Schedule of Black-Scholes option pricing modelbased on weighted-average

assumptions - $ / shares

Apr. 30,2022

Apr. 30,2021

Schedule of Black-Scholes option pricing model based on weighted-averageassumptions [Abstract]Expected term 6 years 6 yearsVolatility 92.40% 92.40%Risk free interest rate 1.50% 0.60%DividendsWeighted average grant date fair value (in Dollars per share) $ 7.76 $ 3.26

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9 Months EndedStock-Based Compensation(Details) - Schedule of stock

option

Apr. 30, 2022$ / shares

sharesSchedule of stock option [Abstract]Number of options, Beginning balance | shares 843,000Weighted- Average Exercise Price , Beginning balance | $ / shares $ 2.72Number of Options , Granted | shares 42,000Weighted- Average Exercise Price , Granted | $ / shares $ 10.29Number of Options , Exercised | shares (4,000)Weighted- Average Exercise Price , Exercised | $ / shares $ 1.87Number of Options , Cancelled / forfeited | shares (27,000)Weighted- Average Exercise Price , Cancelled / forfeited | $ / shares $ 12.28Number of Options , Ending balance | shares 854,000Weighted- Average Exercise Price , Ending balance | $ / shares $ 2.79Number of Options , Exercisable | shares 645,000Weighted- Average Exercise Price , Exercisable | $ / shares $ 2.09

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9 Months EndedStock-Based Compensation(Details) - Schedule of

restricted shares non-vesteddeferred stock units

Apr. 30, 2022$ / shares

sharesSchedule of restricted shares non-vested deferred stock units [Abstract]Number of Shares , Non-vested stock award Beginning | shares 127,300Weighted Average Grant Date Fair Value , Non-vested stock award Beginning | $ / shares $ 3.27Number of Shares , Granted | shares 626,242Weighted Average Grant Date Fair Value , Granted | $ / shares $ 6.39Number of Shares , Vested | shares (65,101)Weighted Average Grant Date Fair Value , Vested | $ / shares $ 2.8Number of Shares , Forfeited | sharesWeighted Average Grant Date Fair Value , Forfeited | $ / sharesNumber of Shares , Non-vested stock award Ending | shares 688,441Weighted Average Grant Date Fair Value , Non-vested stock award Ending | $ / shares $ 6.15

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9 MonthsEnded

Stock-Based Compensation(Details) - Schedule of

restricted shares non-vesteddeferred stock units -

Restricted Stock [Member]

Apr. 30, 2022$ / shares

sharesStock-Based Compensation (Details) - Schedule of restricted shares non-vested deferredstock units [Line Items]Number of Shares, Non-vested beginning balance | shares 37,500Weighted Average Grant Date Fair Value, Non-vested beginning balance | $ / shares $ 1.54Number of Shares, Granted | shares 291,320 [1]

Weighted Average Grant Date Fair Value, Granted | $ / shares $ 9.6 [1]

Number of Shares, Vested | shares (12,500)Weighted Average Grant Date Fair Value, Vested | $ / shares $ 1.54Number of Shares, Forfeited | shares (18,720)Weighted Average Grant Date Fair Value, Forfeited | $ / shares $ 7.88Number of Shares, Non-vested ending balance | shares 297,600Weighted Average Grant Date Fair Value, Non-vested ending balance | $ / shares $ 9.03[1] Includes 203,924 DSUs (or 70% of total awards) of which vesting are subject to both service and market

condition.

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3 MonthsEnded

9 MonthsEnded

Earnings Per Share (Details)- Schedule of weighted-

average number of sharesused in the calculation of

basic and diluted earningsper share - shares

shares in Thousands

Apr.30,

2022

Apr.30,

2021

Apr.30,

2022

Apr.30,

2021

Earnings Per Share (Details) - Schedule of weighted-average number ofshares used in the calculation of basic and diluted earnings per share [LineItems]Basic weighted-average number of shares 14,307 13,676 14,295 12,531Effect of dilutive securities:Diluted weighted-average number of shares 14,859 14,570 14,974 13,323Stock options [Member]Effect of dilutive securities:Diluted weighted-average number of shares 505 762 598 715Non-vested restricted Class B common stock [Member]Effect of dilutive securities:Diluted weighted-average number of shares 30 98 63 48Deferred stock units [Member]Effect of dilutive securities:Diluted weighted-average number of shares 17 34 18 29

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3 Months Ended 9 Months EndedEarnings Per Share (Details)- Schedule of dilutive

earnings per sharecomputations - shares

Apr. 30,2022

Apr. 30,2021

Apr. 30,2022

Apr. 30,2021

Earnings Per Share, Diluted, by Common Class, Including TwoClass Method [Line Items]Shares excluded from the calculation of diluted earnings per share 372,000 24,000 297,000 25,000Stock options [Member]Earnings Per Share, Diluted, by Common Class, Including TwoClass Method [Line Items]Shares excluded from the calculation of diluted earnings per share 95,000 24,000 59,000 25,000Non-vested restricted Class B common stock [Member]Earnings Per Share, Diluted, by Common Class, Including TwoClass Method [Line Items]Shares excluded from the calculation of diluted earnings per shareDeferred stock units [Member]Earnings Per Share, Diluted, by Common Class, Including TwoClass Method [Line Items]Shares excluded from the calculation of diluted earnings per share 277,000 238,000

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1 Months Ended 9 Months EndedRevolving Credit Facility(Details) - USD ($) Nov. 16, 2016 Sep. 27,

2016 Apr. 30, 2022

Revolving Credit Facility(Details) [Line Items]Loan and security agreementwith Western Alliance Bankfor revolving credit facility

$2,500,000

Line of credit facility annualfee $ 10,000

Foreign exchange, description In December 2016, theapplicable foreign exchangereserve percentage was changedso that the reduction of availableborrowing for major currencyforward contracts of less than sixmonths tenor is set at 10% of thenominal amount of the foreignexchange contracts, and forcontracts over six months tenor,12.5% of the nominal amount ofthe foreign exchange contracts.At April 30, 2022, there were$3.2 million of outstandingforeign exchange contracts withthe majority being less than sixmonths tenor under the creditfacility, which reduced theavailable borrowing under therevolving credit facility by$326,000.

Revolving Credit Facility[Member]Revolving Credit Facility(Details) [Line Items]Line of credit facility,borrowing capacity,description

At the Company’s request inSeptember 2020, advances underthis facility have been reduced tothe lesser of $2.0 million or 80%of the Company’s eligibleaccounts receivable, subject tocertain concentration limits.

Interest rate, description the outstanding principal amountbears interest per annum at thegreater of 3.5% or the prime rateplus 1.25%. Previously theinterest rate was capped at 5.0%.

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Interest is payable monthly andall outstanding principal and anyaccrued and unpaid interest isdue on the maturity date ofSeptember 26, 2022.

Foreign Exchange Contract[Member]Revolving Credit Facility(Details) [Line Items]Line of credit facility,borrowing capacity,description

the Company entered into a ForeignExchange Agreement with WesternAlliance Bank to allow the Companyto enter into foreign exchangecontracts not to exceed $5.0 millionin the aggregate at any point in timeunder its revolving credit facility.This limit was raised toapproximately $6.5 million pursuantto the Loan and SecurityModification Agreement dated May30, 2018. The available borrowingunder the revolving credit facility isreduced by an applicable foreignexchange reserve percentage asdetermined by Western AllianceBank, in its reasonable discretionfrom time to time, which was initiallyset at 10% of the nominal amount ofthe foreign exchange contracts ineffect at the relevant time.

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9 Months Ended 12 Months EndedBusiness Segment andGeographic Information(Details) - Schedule of netlong lived assets and total

assets - USD ($)$ in Thousands

Apr. 30, 2022 Jul. 31, 2021

Long-lived assets, net:United States $ 7,995 $ 1,900Foreign 15,709 399Total 23,704 2,299Total assets:United States 25,960 32,745Foreign 29,707 4,732Total $ 55,667 $ 37,477

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Operating Leases (Details) -USD ($) Apr. 30, 2022Jul. 31, 2021

Leases [Abstract]Other assets $ 164,000 $ 243,000Right-of-use assets 86,000Lease liabilities $ 86,000

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9 Months Ended 12 Months EndedProvision for Income Taxes(Details) - USD ($) Apr. 30, 2022 Jul. 31, 2022

Provision for Income Taxes (Details) [Line Items]Effective tax rate 24.40%Deferred tax assets (in Dollars) $ 560,000Forecast [Member]Provision for Income Taxes (Details) [Line Items]Effective tax rate 25.70%Federal statutory tax rate 21.00%

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Loans Payable (Details) Aug. 01, 2020USD ($)

Loans Payable [Abstract]Insurance coverage $ 181,462Installment fee $ 20,491Annual percentage interest rate 3.89%

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1 MonthsEnded 9 Months EndedSales of Class B Common

Stock (Details) - USD ($) Mar. 16,2021 Apr. 30, 2022

Sales Agent [Member]Sales of Class B CommonStock (Details) [Line Items]Sale of stock, description On November 30, 2020, the Company engaged National Securities

Corp. and H.C. Wainwright & Co, LLC (the “Sales Agents”) to act asthe Company’s exclusive co-Sales Agents in connection with theCompany’s “at-the-market” offering of shares of the Company’sClass B common stock up to $5 million. The Company filed aProspectus Supplement (supplementing the Prospectus included in theForm S-3) on December 9, 2020 and contemporaneously entered intoan At The Market Offering Agreement with the Sales Agents (the“ATM Sales Agreement”), pursuant to which the Company sold761,906 shares at an average price of $6.5625 per share for totalproceeds of $5 million as of January 28, 2021. In connection with thisoffering, the Company incurred a total issuance cost of $215,000. TheCompany intends to use the net proceeds from this offering forworking capital and other general corporate purposes.

Class B Common Stock[Member]Sales of Class B CommonStock (Details) [Line Items]Gross proceeds $ 20,000,000Gross aggregate sale price $

10,000,000Issuance costs 350,000ATM Sales Agreement[Member] | Class B CommonStock [Member]Sales of Class B CommonStock (Details) [Line Items]Gross proceeds $

10,000,000Shares issued (in Shares) 663,686Average price per share (inDollars per share) $ 15.0674

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Subsequent Event (Details) -USD ($) Jun. 07, 2022 Apr. 01, 2022

Subsequent Event [Member]Subsequent Event (Details) [Line Items]Advisory fee $ 65,000Minimum [Member]Subsequent Event (Details) [Line Items]Increase decrease in retainer amount $ 3,750Maximum [Member]Subsequent Event (Details) [Line Items]Increase decrease in retainer amount $ 5,000

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