ZEDGE, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

The following information should be read in conjunction with the accompanying
unaudited condensed consolidated financial statements and the associated notes
thereto of this Quarterly Report, and the audited consolidated financial
statements and the notes thereto and our Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in our Annual Report on
Form 10-K for the fiscal year ended July 31, 2022 (the "Form 10-K"), as filed
with the U.S. Securities and Exchange Commission (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 subsidiaries, GuruShots Ltd., Zedge Europe AS and Zedge Lithuania UAB,
collectively.

There are forward-looking statements.

 This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including statements that contain the words
"believes," "anticipates," "expects," "plans," "intends," and similar words and
phrases. These forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from future results.
Factors that may cause such differences include, but are not limited to: (1)
Economic, geopolitical and market conditions can adversely affect our business,
results of operations and financial condition, including our revenue growth and
profitability, which in turn could adversely affect our stock price; (2) Our
ability to successfully make acquisitions and/or successfully integrate
acquisitions that we have made into Zedge without incurring unanticipated costs
or without being subject to other integration issues that may disrupt our
existing operations; (3) Delay or failure to realize 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's response.
For further information regarding risks and uncertainties associated with our
business, please refer to 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 to update the reasons
why actual results could differ from those projected in the forward-looking
statements. Investors should consult all of the information set forth in this
report and the other information set forth from time to time in our reports
filed with the SEC pursuant to the Securities Act of 1933 and the Securities
Exchange Act of 1934, including the Form 10-K.

There aregeo-political and macro economic conditions.

We are subject to risks and uncertainties caused by events with significant
macroeconomic impacts, including but not limited to, Russia's invasion of
Ukraine, rising interest rates, actions taken to counter inflation, reduced
consumer confidence, supply side disruptions, and the COVID-19 pandemic. The
future and full impact that these factors may have on our business, financial
condition, and results of operations is unclear. The risks related to our
business are further described in the section titled "Risk Factors" in Part II,
Item 1A of this Quarterly Report on Form 10-Q and those discussed under Item 1A
to Part I "Risk Factors" in the Form 10-K.

The impact of the invasion of Ukraine by Russia.

We are closely monitoring the current and potential impact on our business, our
people, and our users/customers as Russia's war with Ukraine evolves. We have
taken steps to comply with applicable domestic and international regulatory
restrictions on international trade and financial transactions. Revenues
associated with our users/customers in Russia and Belarus are not material to
our consolidated financial results, and we anticipate that blocking Russian and
Belarus users/customers' access to our mobile app and web platforms will not
have a material impact on our business. Management and our Board of Directors
are monitoring the regional and global ramifications of the continuing events.



Overview

Zedge, Inc. ("Zedge") builds digital marketplaces and friendly competitive games
around content that people use to express themselves. Our leading products
include Zedge Ringtones and Wallpapers, a freemium digital content marketplace
offering mobile phone wallpapers, video wallpapers, ringtones, and notification
sounds which historically was branded as Zedge Premium, and GuruShots, a
skill-based photo challenge game. Our vision is to connect creators who enjoy
friendly competitions with a community of prospective consumers in order to

drive commerce. 19 We are part of the 'Creator Economy,' where over 1 billion people create and
share their content across social platforms, mobile, and video games, and
content marketplaces. Within this group of individuals, over 200 million
identify as creators, people who use their influence, skill, and creativity to
amass an audience and monetize it. Furthermore, approximately 12% of full-time
creators earn more than $50,000 per year, and 10% of influencers earn more than
$100,000 per year. We view the Creator Economy as an untapped opportunity for
Zedge to expand its business, especially as we execute by connecting our gamers
with our marketplace. The Zedge Ringtones and Wallpapers app (which is named "Zedge Wallpapers" in the
App Store), which we refer to as our "Zedge App," is a marketplace offering a
wide array of mobile personalization content including wallpapers, video
wallpapers, ringtones, and notification sounds, and is available both in Google
Play and the App Store. As of January 31, 2023, our Zedge App has been installed
nearly 596 million times since inception and, over the past two years, has had
between 31.9 and 36.3 million monthly active users ("MAU"). MAU is a key
performance indicator ("KPI") that captures the number of unique users that used
our Zedge App during the final 30 days of the relevant period. Our platform
allows creators to upload content to our marketplace and avail it to our users
either for free or for a price, via 'Zedge Premium.' In turn, our users utilize
the content to personalize their phones and express their individuality. In fiscal 2022 we introduced several new customer facing product features
including 'NFTs Made Easy' and social and community features, all meant to
improve customer engagement, MAU, and revenue growth over the long term. In
addition, we migrated to a new ad mediation platform - Applovin MAX. Applovin
paid us a one-time $2 million integration bonus and their performance has been
on-par or better than our prior platform. The Zedge App's monetization stack consists of advertising revenue generated
when users view advertisements when using the Zedge App or surfing our website,
the in-app sale of Zedge Credits, our virtual currency, that is used to purchase
Zedge Premium content, and a paid-subscription offering that provides an ad-free
experience to users that purchase a monthly or annual subscription. As of
January 31, 2023, we had approximately 654,000 active paying subscribers.



In late 2021, we introduced NFT functionality to a limited number of Zedge
Premium creators via 'NFTs Made Easy'. Over time we believe this product
enhancement has the potential to drive significant artist growth and revenue
production. 'NFTs Made Easy' is an eco-friendly platform that enables artists
and consumers to sell and purchase NFTs within the Zedge App even though they
may lack deep knowledge and proficiency in the crypto space. All transactions
are made using Zedge Credits.

In April 2022, we acquired GuruShots, a recognized category leader focused on
gamifying the photography vertical. GuruShots offers a platform spanning iOS,
Android, and the web that provides a fun, educational and structured way for
amateur photographers to compete in a wide variety of contests showcasing their
photos while gaining recognition with votes, badges, and awards. We estimate
that the total addressable market of amateur photographers using their
smartphones to take and publicly share artistic photos is 30-40 million people
per month and that the market is still in its infancy. Every month, GuruShots
stages more than 345 competitions that result in players uploading in excess of
1 million photographs and casting close to 4+ billion "perceived votes", which
are calculated by multiplying the number of votes that each player casts by a
weighting factor based on various factors related to that user. To improve
engagement, GuruShots has adopted a set of retention dynamics focused on
individual, team and community dynamics that create a sense of belonging,
inspiration, recognition, improvement, and competition. Today, GuruShots utilizes a 'Free-to-Play' business model that leads to strong
monetization with the purchase of resources that are used to give paying players
an edge while still maintaining a fair and competitive experience for all
participants. Over the past six years, the monthly average paying player spend
has increased in excess of 11.2% annually to more than $50.1 per player.



As we look to the future, we are advancing several initiatives that we expect
will drive user growth, increase engagement, drive in-app purchases, and advance
our in-game economy. Some of these include:



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

Is that correct? It's an economy. Evolving the economy of the game.

There are mechanics and features.

Premium currencies are linked to resources and benefits. We hope that's the case.

In the future, an advertising layer will be introduced.

 20 We market GuruShots to prospective players, primarily via paid user acquisition
channels, and utilize a host of creative formats including static and video ads
in order to promote the game. Our marketing team invests material resources in
analyzing all attributes of a campaign ranging from the creative assets, offer
acquisition channel, and platform (i.e., iOS, Android, and web), just to name a
few, with the goal of determining whether a specific campaign is likely to yield
a profitable customer. When we unearth a successful combination of these
variables we scale up until we experience diminishing returns. Ultimately, we
believe that the efforts we are making to advance the product coupled with the
investment in user acquisition can significantly increase GuruShots' player
base. Beyond our commitment to growing both the Zedge App and GuruShots on a
standalone basis, we believe that there are many potential synergies that we can
capitalize on that exist between the two businesses. Specifically, we plan to
enable the ability for GuruShots players to become Zedge Premium artists and
sell their photos to our audience of 30+ million MAU as standard digital images
or NFTs. In addition, we look to benefit from the experience that the GuruShots
team possesses and test gamifying the Zedge App. We believe that successful
gamification can contribute to increasing engagement, retention, and lifetime
value, all critical KPIs for our business. Longer term, we believe that there
are complementary content verticals that lend themselves to gamification. In August 2021, we acquired the assets of Emojipedia Pty Ltd ("Emojipedia"),
including Emojipedia.org the world's leading authority dedicated to providing
up-to-date and well-researched emoji definitions, information, and news as well
as World Emoji Day and the annual World Emoji Awards, and Emojitracker, which
provides real time visualization of all emoji symbols used on Twitter. In
January 2023, Emojipedia receives approximately 44.9 million monthly page views
and has approximately 10.4 million monthly active users as of January 31, 2023
of which approximately 52% 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 the Unicode Consortium, the standards body responsible for
approving new emojis, Emojipedia works alongside major emoji creators including
Apple, Google, Facebook, and Twitter.



We believe that Emojipedia provides growth potential to the Zedge App, and it
was immediately accretive to earnings. In the past year, we have made many
changes to Emojipedia including migrating to a new ad mediation platform,
redesigning the Emojipedia website, and introducing localized versions of
Emojipedia in eighteen different languages aside from English. We will continue
to enhance this offering and are exploring new features including a native
mobile offering as well as additional monetization opportunities.



Critical Accounting Policies

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

of
Operations in the Form 10-K.

The accounting standards have not yet been adopted.

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

                                       21

There are key performance indicators.

Zedge App-MAU and ARPMAU



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 that we define as the number of unique users that used our Zedge App
during the previous 30-day period, which is important to understanding the 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 measuring the general health of our
business, gauging both present and potential users/customers' experience,
assessing the efficacy of product improvements and marketing campaigns and
overall user engagement.



ARPMAU is defined as (i) the total revenue derived from Zedge App in a monthly
period, divided by (ii) MAU in that same period. ARPMAU for a particular time
period longer than one month is the average ARPMAU for each month during that
period. ARPMAU is valuable because it provides insight into how well we monetize
our users and, changes and trends in ARPMAU are indications of how effective our
monetization investments are.

MAU decreased 11.3% in Q2 of fiscal 2023 when compared to the same period a year
ago. Over the past several years, we have experienced a continuing shift in our
regional customer make-up with MAU in emerging markets representing an
increasing portion of our user base. As of January 31, 2023, users in emerging
markets represented 77% of our MAU, the same percentage from a year ago. This
shift impacts our business because emerging markets do not monetize as well as
well-developed markets due to lower effective cost per thousand ad impressions
("eCPM") and lower monthly and annual subscription sales in these regions
coupled with lower priced subscriptions SKUs. ARPMAU for the three months ended
January 31, 2023 declined 13.0% when compared to the same period a year ago. The following tables present the MAU - Zedge App and ARPMAU - Zedge App for the
three months ended January 31, 2023 as compared to the same period a year ago:



                                                            Three Months Ended
                                                               January 31,
(in millions, except ARPMAU - Zedge App)                    2023          2022         % Change
MAU- Zedge App                                                 32.2          36.3          -11.3 %
Developed Markets MAU - Zedge App                               7.4           8.5          -12.9 %
Emerging Markets MAU - Zedge App                               24.8          27.8          -10.8 %
Emerging Markets MAU - Zedge App/Total MAU - Zedge App           77 %      

 77 % 0.6 % ARPMAU - Zedge App $ 0.0523 $ 0.0601          -13.0 %

The following charts present the MAU - Zedge App and ARPMAU - Zedge App for the consecutive eight quarters ended January 31, 2023:

The image was removed.

 22 GuruShots-MAPs and ARPMAP Monthly Active Payers ("MAPs").We define a MAP as a unique active user on the
GuruShots or GuruShots.com in a month that completed at least one in-app
purchase ("IAP") during that time period. MAPs for a time period longer than one
month are the average MAPs for each month during that period. We estimate the
number of MAPs by aggregating certain data from third-party attribution
platforms. Average Revenue Per Monthly Active Payer ("ARPMAP").We define ARPMAP as (i) the
total revenue from IAPs derived from GuruShots and GuruShots.com in a monthly
period, divided by (ii) MAPs in that same period. ARPMAP for a particular time
period longer than one month is the average ARPMAP for each month during that
period. ARPMAP shows how efficiently we are monetizing each MAP. The following table shows our MAP and ARPMAP for the three months ended January
31, 2023 and 2022. Please note that we acquired GuruShots on April 12, 2022, as
such, information for the three months ended January 31, 2022 is presented below
as pro forma and is only used for comparative purpose.



                                                         Three Months Ended January 31,
                                                          2023                    2022            % Change

Monthly Active Payers                                          7,943                   9,333          -14.9 %
Average Revenue per Monthly Active Payer             $          52.4       

 $          61.8          -15.2 %

The following charts present the MAP and ARPMAP - GuruShots for the consecutive eight quarters ended January 31, 2023:

The image was removed.

Our KPIs are not based on any standardized industry methodology and are not
necessarily calculated in the same manner that other companies or third parties
may use to calculate these or similarly titled measures. The numbers that we use
to calculate MAP and ARPMAP are derived from data that we generate internally.
While these numbers are based on what we believe to be reasonable judgments and
estimates for the applicable period of measurement, there are inherent
challenges in measuring usage and engagement. We regularly review and may adjust
our processes for calculating our internal metrics to improve their accuracy. 23 Results of Operations Three and six months ended January 31, 2023 Compared to Three and six months
ended January 31, 2022 Three Months Ended Six Months Ended January 31, Change January 31, Change 2023 2022 % 2023 2022 % (in thousands) (in thousands)
Revenues $ 6,983 $ 6,915 1.0 % $ 13,883 $ 12,943 7.3 %
Direct cost of
revenues 632 342 84.8 % 1,264 652 93.9 %
Selling, general and
administrative 5,871 3,106 89.0 % 11,697 5,838 100.4 %
Depreciation and
amortization 815 360 126.4 % 1,608 758 112.1 %
Change in fair value
of contingent
consideration (1,793 ) - nm (1,943 ) - nm
Income from
operations 1,458 3,107 -53.1 % 1,257 5,695 -77.9 %
Interest and other
income, net 77 14 450.0 % 112 27 314.8 %
Net gain (loss)
resulting from
foreign exchange
transactions 160 (85 ) nm 84 (95 ) nm
Provision for income
taxes 89 711 -87.5 % 16 1,247 -98.7 %
Net income $ 1,606 $ 2,325 -30.9 % $ 1,437 $ 4,380         -67.2 %




nm-not meaningful



Revenues

The following table sets forth the composition of our revenues for the three and six months ended January 31, 2023 and 2022:

 Three Months Ended Six Months Ended January 31, January 31, 2023 2022 % Changes 2023 2022 % Changes
Zedge App (in thousands) (in thousands)
Advertising revenue $ 4,630 $ 5,718 -19 % $ 9,120 $ 10,598 -14 %
Paid subscription revenue 875 953 -8 % 1,766 1,913 -8 %
Other revenues 230 244 -6 % 420 432 -3 %
Total Zedge App revenue 5,735 6,915 -17 % 11,306 12,943 -13 %
GuruShots
Digital goods and services 1,248 - nm 2,577 - nm
Total revenue $ 6,983 $ 6,915 1 % $ 13,883 $ 12,943               7 %




nm-not meaningful

Advertising revenue. Advertising revenue decreased 19% and 14% in the three and
six months ended January 31, 2023, respectively, compared to the three and six
months ended January 31, 2022, primarily due to the decline in MAU in
well-developed markets and lower effective advertising rates which have suffered
due to the downturn in the economy. 24 Paid subscription revenue. We offer users of our Zedge app a subscription option
where they can pay a monthly or annual fee to remove unsolicited ads when using
our Zedge app. We employ a regional pricing strategy in order to improve
conversions. The United States 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 $0.8 million and $1.7 million in gross
prepaid subscription revenue in the three and six months ended January 31, 2023
compared to $0.9 million and $1.8 million in the three and six months ended
January 31, 2022. The 8% and 7% decline in gross prepaid subscription sales for
the three and six months ended January 31, 2023 when compared to the same
periods a year ago was primarily attributable to the decline in MAU in
well-developed markets between the comparative periods. We expect that from time
to time the prices of our subscription in each country/region may change and we
may test other plan and price variations.

The following table summarizes subscription revenue for the three and six months ended January 31, 2023 and 2022:

 Three Months Ended Six Months Ended January 31, January 31, 2023 2022 % Change 2023 2022 % Change (in thousands, except revenue per subscriber and percentages)
Revenues $ 875 $ 953 -8 % $ 1,766 $ 1,913 $ -8 %
Active subscriptions
net (decrease)
increase (20 ) (1 ) nm (38 ) 10 nm
Active subscriptions
at end of period 654 762 -14 % 654 762 -14 %
Average active
subscriptions during
the period 665 765 -13 % 674 762 -12 %
Average monthly
revenue per active
subscription $ 0.44 $ 0.42 5 % $ 0.44 $ 0.42     $         5 %

Zedge Premium. Gross transaction value (the total sales volume transacting
through the platform), or "GTV," increased 0.9% and decreased 1.7% in the three
and six months ended January 31, 2023 compared to the same periods a year ago.
Net revenue decreased 5.0% and 2.8% respectively in the three and six months
ended January 31, 2023 compared to the same periods a year ago. The decline in
GTV and net revenue can be attributed to the decline in MAU in well-developed
markets.

The following table summarizes Zedge Premium gross and net revenue for the three and six months ended January 31, 2023 and 2022:

 Three Months Ended Six Months Ended January 31, January 31, 2023 2022 % Changes 2023 2022 % Changes (in thousands) (in thousands)
Zedge Premium-gross
revenue ("GTV") $ 438 $ 434 0.9 % $ 750 $ 763 -1.7 %
Zedge Premium-net
revenue $ 229 $ 241 -5.0 % $ 416 $ 428 -2.8 %
Gross margin 52 % 56 % 55 % 56 % Digital goods and services. GuruShots recognizes revenue at the time of purchase
because the overwhelming majority of users purchase game resources when they use
them at a rate that exceeds the rate in which they earn them for free through
participation. Game resources revenue were $1.3 million and $2.6 million for the
three and six months ended January 31, 2023, respectively.

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

 Three Months Ended Six Months Ended January 31, January 31,
(in thousands) 2023 2022 % Change 2023 2022 % Change
Direct cost of
revenues $ 632 $ 342 84.8 % $ 1,264 $ 652 93.9 %
As a percentage of
revenues 9.1 % 4.9 % 9.1 % 5.0 % 25 Direct cost of revenues increased 85% and 94% in the three and six months ended
January 31, 2023, respectively, compared to three and six months ended January
31, 2022. The increase in the direct cost of revenues is a result of GuruShots'
infrastructure costs and the addition of analytical tools. As a percentage of revenue, direct cost of revenues in the three and six months
ended January 31, 2023 was 9.1%, compared to 4.9% and 5.0% in the three and six
months ended January 31, 2022. The higher percentages in the current year
periods were primarily due to higher infrastructure costs related to the
GuruShots. Selling, general and administrative expense. Selling, general and administrative
expense ("SG&A") consists mainly of payroll and benefits, stock-based
compensation expense (as discussed below), paid user acquisition expenses,
third-party payment processing fee relate to in-app purchases, marketing,
consulting, professional fees, software licensing ("SaaS"), recruiting fees,
facilities and public company related expenses. Three Months Ended Six Months Ended January 31, January 31,
(in thousands) 2023 2022 % Change 2023 2022 % Change
Selling, general and
administrative $ 5,871 $ 3,106 89.0 % $ 11,697 $ 5,838 100.4 %
As a percentage of
revenues 84.1 % 44.9 % 84.3 % 45.1 % SG&A expense increased 89.0% and 100.4% in the three and six months ended
January 31, 2023, respectively, compared to the three and six months ended
January 31, 2022. GuruShots accounted for the majority of the increase. The
remaining increase can be attributed to higher compensation costs resulting from
additional headcount, higher stock-based compensation as discussed below, and
higher professional fees, partially offset by reductions in certain
discretionary expenses. As a percentage of revenue, SG&A expense in the three and six months ended
January 31, 2023 were 84.1% and 84.3% respectively, compared to 44.9% and 45.1%
in the three and six months ended January 31, 2022, primarily due to the
addition of GuruShots which has higher SG&A expenses relative to its revenue
base.

Global headcount as of January 31, 2023 totaled 102 (including 37 from GuruShots) compared to 64 as of January 31, 2022 with the majority of our employees currently based in Lithuania and Israel.

SG&A expense also included stock-based compensation expense including equity
grants to employees and consultants, as well as stock issuances to pay for board
compensations and 401(k) matching contributions. The following table summarizes
stock-based compensation expense for the three and six months ended January

31,
2023 and 2022: Three Months Ended Six Months Ended January 31, January 31, 2023 2022 % Change 2023 2022 % Change (in thousands)
Stock-based
compensation expense $ 788 $ 489 61.1 % $ 1,378 $ 808 70.5 % Stock-based compensation expenses increased 61.1% and 70.5% in the three and six
months ended January 31, 2023, respectively, compared to the three and six
months ended January 31, 2022. The increase was primarily attributable to the
amortization of the restricted stock (with a grant date fair value of $4
million) issued in connection with the GuruShots acquisition. Certain stock
options, deferred stock unit and restricted stock grants are more fully
described in Note 8 to the unaudited condensed consolidated financial statements
included in Item 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 in connection with business combination and
asset acquisition as more fully described in Note 5 to the unaudited condensed
consolidated financial statements included in Item 1 to Part I of this Quarterly
Report on Form 10-Q, and capitalized software and technology development costs
of our internal developers on various projects that we invested in specific to
the various platforms on which we operate our service. Three Months Ended Six Months Ended January 31, January 31,
(in thousands) 2023 2022 % Change 2023 2022 % Change
Depreciation and
amortization $ 815 $ 360 126.4 % $ 1,608 $ 758          112.1 %
As a percentage of
revenues                      11.7 %            5.2 %                        11.6 %          5.9 %




                                       26

Depreciation and amortization expenses increased 126% and 112% in the three and
six months ended January 31, 2023, respectively, compared to the three and six
months ended January 31, 2022. This increase was primarily attributable to the
amortization of intangible assets related to the acquisition of GuruShots which
were $467,000 and $934,000 for the three and six months ended January 31, 2023,
respectively.

Interest and other income, net.Interest and other income, net in the three and
six months ended January 31, 2023 increased significantly when compared to the
prior periods due to higher interest rates earned on our cash balances.



                            Three Months Ended                              Six Months Ended
                                January 31,                                    January 31,
(in thousands)             2023             2022         % Change        

2023 2022 % Change
Interest and other
income, net $ 77 $ 14 450.0 % $ 112 $ 27 314.8 %
As a percentage of
revenues 1.1 % 0.2 % 0.8 % 0.2 % Net gain (loss) resulting from foreign exchange transactions. Net gain (loss)
resulting from foreign exchange transactions is comprised of gains and losses
generated from movements in NOK and EUR relative to the U.S. Dollar, including
gains or losses from our hedging activities. Three Months Ended Six Months Ended January 31, January 31,
(in thousands) 2023 2022 % Change 2023 2022 % Change
Net gain (loss)
resulting from foreign
exchange transactions $ 160 $ (85 ) nm $ 84 $ (95 ) nm
As a percentage of
revenues 2.3 % -1.2 % 0.6 % -0.7 % In the three and six months ended January 31, 2023, we realized gains of
$185,000 and $64,000, respectively from NOK and EUR hedging activities, compared
to loss of $127,000 and $117,000 in the three and six months ended January 31,
2022 due to the strengthening of the US dollar in current periods, as more fully
described in Note 4 to the unaudited condensed consolidated financial 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 net worth and certain income taxes payable
in foreign jurisdictions where our subsidiaries reside. Three Months Ended Six Months Ended January 31, January 31,
(in thousands) 2023 2022 % Change 2023 2,022 % Change
Provision for income taxes $ 89 $ 711 -87.5 % $ 16 $ 1,247           nm
As a percentage of revenues          1.3 %           10.3 %                

        0.1 %           9.6 %




The Company's tax provision or benefit from income taxes for interim periods has
generally been determined using an estimate of its annual effective tax rate
applied to year-to-date income and records the discrete tax items in the period
to which they relate. In each quarter, the Company updates the estimated annual
effective tax rate and makes a year-to-date adjustment to the tax provision

as
necessary.

The Company's annual effective tax rate for the fiscal year ending July 31, 2023
differs from the United States federal statutory tax rate due to certain factors
with temporary differences primarily related to equity compensation expenses. As of January 31, 2023, the Company had $3.5 million of deferred tax assets for
which it has established a valuation allowance of $1.9 million, related to U.S.
federal and state taxes and for a certain international subsidiary. The Company is subject to taxation in the United States and certain foreign
jurisdictions. Earnings from non-U.S. activities are subject to local country
income tax. The material jurisdictions where the Company is subject to potential
examination by tax authorities include the United States, Norway, Lithuania

and
Israel.



                                       27

The results of our operations are compared.

 The following table presents the results for our Zedge App and GuruShots segment
income (loss) from operations for the three and six months ended January 31,
2023 and 2022: Three Months Ended Six Months Ended January 31, Change January 31, Change 2023 2022 % 2023 2022 %
Segment income (loss)
from operations:
Zedge App $ 1,563 $ 3,107 -49.7 % $ 2,935 $ 5,695 -48.5 %
GuruShots (105 ) - nm (1,678 ) - nm
Total $ 1,458 $ 3,107 -53.1 % $ 1,257 $ 5,695 -77.9 % For the three and six months ended January 31, 2023, our income from operations
related to the Zedge App decreased 50% and 49%, compared to the three and six
months ended January 31, 2022 primarily due to lower revenue coupled with higher
operating expenses. The decline in revenue was largely due to the decrease in
MAU, particularly in well-developed markets. Higher operating expenses can be
attributed to additional headcounts as well as our investment in the paid user
acquisition in Zedge App. For the three and six months ended January 31, 2023, our loss from operations
related to the GuruShots was $1.9 million and $3.5 million, respectively,
primarily due to lower revenue coupled with higher operating expenses. Lower
revenue can be attributed to current macroeconomic condition which resulted in
lower MAP and ARPMAP when compared to prior periods.

Capital resources and liquid assets.

General

At January 31, 2023, we had cash and cash equivalents of $17.5 million and
working capital (current assets less current liabilities) of $14.2 million,
compared to $17.1 million and $11.2 million, respectively, at July 31, 2022. We
expect that our cash and cash equivalents on hand and our cash flow from
operations will be sufficient to meet our anticipated cash requirements for the
twelve-month period ending March 17, 2024. We also maintain a term loan and a
revolving credit facility of up to $11 million in aggregate, including a foreign
exchange contract facility of up to $6.5 million with Western Alliance Bank, as
discussed below in Financing Activities and in Note 11 to the unaudited
condensed consolidated financial statements included in Item 1 to Part I of this
Quarterly Report on Form 10-Q.

The following tables present selected financial information for the six months ended January 31, 2023 and 2022:

The source of the Glimpses is edgar online.