zdge-20260430

UNITED STATES

SECURITIES 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, 2026

☐ 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, 3^rd 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 registered
Class 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 the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), 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, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
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 period for 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 Exchange Act.): Yes ☐ No ☒

As of June 10, 2026, the registrant had the following shares outstanding:

Class A common stock, $.01 par value:	524,775 shares
Class B common stock, $.01 par value:	12,543,856 shares (excluding 2,885,871 shares held in treasury)

ZEDGE, INC.

TABLE OF CONTENTS

PART I. Financial Information

Item 1.	Financial Statements (Unaudited)	1

	Condensed Consolidated Balance Sheets	1

	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	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	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risks	33

Item 4.	Controls and Procedures	33

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	34

Item 1A.	Risk Factors	34

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 3.	Defaults Upon Senior Securities	34

Item 4.	Mine Safety Disclosures	34

Item 5.	Other Information	34

Item 6.	Exhibits	35

SIGNATURES		36

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

ZEDGE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except par value data)

	April 30,			July 31,
	2026			2025
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	19,692		$	18,609
Trade accounts receivable		3,908			3,164
Prepaid expenses and other current assets		799			671
Total Current assets		24,399			22,444
Property and equipment, net		1,224			1,290
Intangible assets, net		1,065			4,922
Goodwill		2,138			1,931
Deferred tax assets, net		5,041			4,823
Other assets		437			244
Total assets	$	34,304		$	35,654
Liabilities and stockholders’ equity
Current liabilities:
Trade accounts payable	$	1,258		$	1,471
Accrued expenses and other current liabilities		2,178			2,867
Deferred revenues		4,159			3,425
Total Current liabilities		7,595			7,763
Deferred revenues--non-current		1,998			1,937
Other liabilities		153			53
Total liabilities		9,746			9,753
Commitments and contingencies (Note 9)
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, 2026 and July 31, 2025		5			5
Class B common stock, $.01 par value; authorized shares—40,000; 15,238 shares issued and 12,523 outstanding at April 30, 2026 and 15,073 shares issued and 12,692 shares outstanding at July 31, 2025		152			151
Additional paid-in capital		49,676			49,768
Accumulated other comprehensive loss		(1,057	)		(1,509	)
Accumulated deficit		(16,080	)		(15,505	)
Treasury stock, 2,715 shares at April 30, 2026 and 2,381 shares at July 31, 2025, at cost		(8,138	)		(7,009	)
Total stockholders’ equity		24,558			25,901
Total liabilities and stockholders’ equity	$	34,304		$	35,654

See accompanying notes to unaudited condensed consolidated financial statements.

ZEDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except for per share data)

(Unaudited)

	Three Months Ended						Nine Months Ended
	April 30,						April 30,
	2026			2025			2026			2025
Revenues	$	7,992		$	7,757		$	23,856		$	21,930
Costs and expenses:
Direct cost of revenues (excluding amortization of capitalized software and technology development costs which is included below)		550			452			1,651			1,360
Selling, general and administrative		6,235			6,343			18,848			20,278
Depreciation and amortization		133			225			536			924
Impairment of intangible assets		-			-			3,570			-
Restructuring charges		-			577			-			1,058
Impairment of capitalized software and technology development costs		-			-			145			827
Income (loss) from operations		1,074			160			(894	)		(2,517	)
Interest and other income, net		135			154			403			507
Net loss resulting from foreign exchange transactions		(26	)		(41	)		(211	)		(141	)
Income (loss) before income taxes		1,183			273			(702	)		(2,151	)
Income tax expense (benefit)		257			88			(127	)		(318	)
Net income (loss)	$	926		$	185		$	(575	)	$	(1,833	)
Other comprehensive income:
Changes in foreign currency translation adjustment		117			448			452			287
Total other comprehensive income		117			448			452			287
Total comprehensive income (loss)	$	1,043		$	633		$	(123	)	$	(1,546	)
Income (loss) per share attributable to Zedge, Inc. common stockholders:
Basic	$	0.07		$	0.01		$	(0.04	)	$	(0.13	)
Diluted	$	0.07		$	0.01		$	(0.04	)	$	(0.13	)
Weighted-average number of shares used in calculation of income (loss) per share:
Basic		13,002			13,720			12,992			13,835
Diluted		13,272			13,940			12,992			13,835

See accompanying notes to unaudited condensed consolidated financial statements.

ZEDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

(Unaudited)

	Class A Common Stock				Class B Common Stock				Additional Paid-in			Accumulated Other Comprehensive			Accumulated			Treasury Stock					Total Stockholders’
	Shares		Amount		Shares		Amount		Capital			Loss			Deficit			Shares		Amount			Equity
Balance – July 31, 2025		525	$	5		15,073	$	151	$	49,768		$	(1,509	)	$	(15,505	)		2,381	$	(7,009	)	$	25,901
Stock-based compensation		-		-		30		-		104			-			-			-		-			104
Purchase of treasury stock		-		-		-		-		-			-			-			243		(789	)		(789	)
Cash dividends paid		-		-		-		-		(208	)		-			-			-		-			(208	)
Foreign currency translation adjustment		-		-		-		-		-			99			-			-		-			99
Net income		-		-		-		-		-			-			788			-		-			788
Balance – October 31, 2025		525	$	5		15,103	$	151	$	49,664		$	(1,410	)	$	(14,717	)		2,624	$	(7,798	)	$	25,895
Exercise of stock options		-		-		23		-		45			-			-			-		-			45
Stock-based compensation		-		-		63		1		274			-			-			-		-			275
Purchase of treasury stock		-		-		-		-		-			-			-			11		(87	)		(87	)
Cash dividends paid		-		-		-		-		(209	)		-			-			-		-			(209	)
Foreign currency translation adjustment		-		-		-		-		-			236			-			-		-			236
Net loss		-		-		-		-		-			-			(2,289	)		-		-			(2,289	)
Balance – January 31, 2026		525	$	5		15,189	$	152	$	49,774		$	(1,174	)	$	(17,006	)		2,635	$	(7,885	)	$	23,866
Exercise of stock options		-		-		49		-		84			-			-			-		-			84
Stock-based compensation		-		-		-		-		78			-			-			-		-			78
Purchase of treasury stock		-		-		-		-		-			-			-			80		(253	)		(253	)
Cash dividends paid		-		-		-		-		(260	)		-			-			-		-			(260	)
Foreign currency translation adjustment		-		-		-		-		-			117			-			-		-			117
Net income		-		-		-		-		-			-			926			-		-			926
Balance – April 30, 2026		525	$	5		15,238	$	152	$	49,676		$	(1,057	)	$	(16,080	)		2,715	$	(8,138	)	$	24,558

	Class A Common Stock				Class B Common Stock				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Treasury Stock					Total Stockholders’
	Shares		Amount		Shares		Amount		Capital		Loss			Deficit			Shares		Amount			Equity
Balance – July 31, 2024		525	$	5		14,866	$	149	$	48,263	$	(1,832	)	$	(13,113	)		1,051	$	(2,576	)	$	30,896
Stock-based compensation		-		-		30		-		379		-			-			-		-			379
Purchase of treasury stock		-		-		-		-		-		-			-			226		(804	)		(804	)
Foreign currency translation adjustment		-		-		-		-		-		(29	)		-			-		-			(29	)
Net loss		-		-		-		-		-		-			(339	)		-		-			(339	)
Balance – October 31, 2024		525	$	5		14,896	$	149	$	48,642	$	(1,861	)	$	(13,452	)		1,277	$	(3,380	)	$	30,103
Stock-based compensation		-		-		73		1		602		-			-			-		-			603
Purchase of treasury stock		-		-		-		-		-		-			-			245		(690	)		(690	)
Foreign currency translation adjustment		-		-		-		-		-		(132	)		-			-		-			(132	)
Net loss		-		-		-		-		-		-			(1,679	)		-		-			(1,679	)
Balance – January 31, 2025		525	$	5		14,969	$	150	$	49,244	$	(1,993	)	$	(15,131	)		1,522	$	(4,070	)	$	28,205
Stock-based compensation		-		-		-		-		326		-			-			-		-			326
Purchase of treasury stock		-		-		-		-		-		-			-			219		(536	)		(536	)
Foreign currency translation adjustment		-		-		-		-		-		448			-			-		-			448
Net income		-		-		-		-		-		-			185			-		-			185
Balance – April 30, 2025		525	$	5		14,969	$	150	$	49,570	$	(1,545	)	$	(14,946	)		1,741	$	(4,606	)	$	28,628

See accompanying notes to unaudited condensed consolidated financial statements.

ZEDGE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	Nine Months Ended
	April 30,
	2026			2025

Operating activities
Net loss	$	(575	)	$	(1,833	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation		43			48
Amortization of intangible assets		286			335
Amortization of capitalized software and technology development costs		207			541
Stock-based compensation		457			1,308
Impairment charge of capitalized software and technology development costs		145			827
Impairment charge of intangible assets		3,570			-
Deferred income taxes		(218	)		(184	)
Change in assets and liabilities:
Trade accounts receivable		(744	)		87
Prepaid expenses and other current assets		(128	)		(353	)
Other assets		(42	)		(54	)
Trade accounts payable and accrued expenses		(892	)		229
Deferred revenues		795			1,797
Net cash provided by operating activities		2,904			2,748
Investing activities
Capitalized software and technology development costs		(278	)		(329	)
Purchase of property and equipment		(26	)		(49	)
Net cash used in investing activities		(304	)		(378	)
Financing activities
Purchase of treasury stock in connection with share buyback program and stock awards vesting		(1,129	)		(2,030	)
Payment of cash dividends		(677	)		-
Proceeds from exercise of stock options		129			-
Net cash used in financing activities		(1,677	)		(2,030	)
Effect of exchange rate changes on cash and cash equivalents		160			95
Net increase in cash and cash equivalents		1,083			435
Cash and cash equivalents at beginning of period		18,609			19,998
Cash and cash equivalents at end of period	$	19,692		$	20,433

Supplemental cash flow information:
Cash paid for income taxes	$	176		$	194

Non-cash operating and financing activities:
ROU assets obtained in exchange for lease liabilities	$	286		$	111

See accompanying notes to unaudited condensed consolidated financial statements.

ZEDGE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

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

Description of Business

Zedge builds and operates creator communities that collectively serve 20 million monthly active users across its platforms. Zedge Marketplace, our flagship platform, is a leading marketplace for mobile personalization content that powers a vibrant creator ecosystem including a full generative AI creation suite. DataSeeds.AI is our B2B business, delivering managed, multimodal datasets that are ethically sourced, rights-cleared, built to spec and delivered at scale to frontier AI developers. The content foundation for DataSeeds.AI is supplied by Zedge’s proprietary creator communities, including Zedge Marketplace contributors and photo competition community GuruShots, which is supplemented by crowdsourced content. We also offer GuruShots, the world’s most popular photo competition game, where photographers of all skill levels compete, vote, and improve through gamified photo challenges. Our portfolio also includes Emojipedia, the number one trusted reference for emojis. Our vision is to enable creators and foster community while driving commerce across our ecosystem. Except where the context clearly indicates otherwise, the terms “Company,” “Zedge,” “we,” “us,” or “our” refer to Zedge, Inc. and its consolidated subsidiaries.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Zedge, Inc. and its subsidiaries: GuruShots Ltd. (“GuruShots”); Zedge Europe AS; and Zedge Lithuania UAB (the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended April 30, 2026 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2026 or any other period. The balance sheet at July 31, 2025 has been derived from the Company’s audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2025 (the “2025 Form 10-K”), 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 below to a fiscal year refers to the fiscal year ending in the calendar year indicated (e.g., fiscal 2025 refers to the fiscal year ended July 31, 2025).

Significant Accounting Policies and Estimates

There have been no material changes to the Company’s significant accounting policies and critical accounting estimates described in the 2025 Form 10-K.

Use of Estimates

The preparation of our unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as related disclosure of contingent assets and liabilities. Actual results could differ materially from our estimates due to risks and uncertainties, including uncertainty in the economic environment due to various global events. To the extent that there are material differences between these estimates and actual results, our financial condition or operating results will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”), ASU 2024-03 will require public entities to disaggregate, within the notes to the financial statements, certain expenses presented on the face of the financial statements to enhance transparency and help investors better understand an entity’s performance. The amendment will specifically require that an entity disclose the amounts related to purchases of inventory, employee compensation, depreciation and intangible asset amortization. Entities will also be required to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, disclose the total amount of selling expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses. This ASU is effective for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company will not be required to adopt ASU 2024-03 until August 1, 2027. The Company is currently evaluating the impact of the adoption of ASU 2024-03 on the Company’s financial statement disclosures.

In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025-05”). ASU 2025-05 provides a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Accounting Standards Codification 606, Revenue from Contracts with Customers. The provisions of ASU 2025-05 are effective for fiscal years beginning after December 15, 2025 and interim periods within those fiscal years, with early adoption permitted, and are to be applied prospectively. We do not expect the adoption of ASU 2025-05 to have a material impact on our consolidated financial statements and accompanying Notes.

In September 2025, the FASB issued ASU No. 2025-06, Intangibles-Goodwill and Other-Internal-Use-Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). ASU 2025-06 removes the prescriptive software development “project stages” and requires capitalization of software costs once (1) management authorizes and commits funding and (2) completion and use are probable. Entities must evaluate significant development uncertainty related to technological innovations or performance requirements. The amendments also require Subtopic 360-10 disclosures for all capitalized internal-use software costs and clarify that intangible asset disclosures under Subtopic 350-30 are not required. The standard is effective for annual periods beginning after December 15, 2027, and interim periods within those annual reporting periods, with early adoption permitted. The Company will not be required to adopt ASU 2025-06 until August 1, 2028. The Company is currently evaluating the impact of the adoption of ASU 2025-06 on the Company’s consolidated financial statements.

In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements (“ASU 2025-11”). ASU 2025-11 clarifies the applicability of interim reporting guidance, provides a comprehensive list of required interim disclosures, and establishes a disclosure principle that requires disclosure of material events that occurred after the end of the last annual reporting period. The standard is effective for annual periods beginning after December 15, 2027, and interim periods within those annual reporting periods, with early adoption permitted. The Company will not be required to adopt ASU 2025-11 until August 1, 2028. The Company is currently evaluating the impact of the adoption of ASU 2025-11 on the Company’s financial statement disclosures.

In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements (“ASU 2025-12”). The amendments in ASU 2025-12 represent changes to certain FASB Accounting Standards Codification topics that clarify, correct errors, or make minor improvements. The standard is effective for annual periods beginning after December 15, 2026, and interim periods within those annual reporting periods, with early adoption permitted, and may be applied prospectively or retrospectively. Early adoption and transition method may be elected on an issue-by-issue basis. We do not expect the adoption of ASU 2025-12 to have a material impact on our consolidated financial statements and accompanying Notes.

All other new accounting pronouncements that have been issued but not yet effective are currently being evaluated and at this time are not expected to have a material impact on our financial position or results of operations.

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 the Company became an independent publicly held company. IDT charges the Company for services it provides to the Company, and the Company charges IDT for services it provides to IDT, pursuant to Services Agreements between the companies.

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 the Company’s Board of Directors owns a significant minority stake in Activist.

The Company is party to a revenue sharing agreement with National Retail Services, Inc. (“NRS”), a subsidiary of IDT, under which Zedge and certain of its subsidiaries provide a selection of their digital content for display on NRS screens and share in the revenue generated from the resulting advertisements.

Transactions with these related parties did not have a material impact on the consolidated balance sheets as of April 30, 2026 or July 31, 2025, or the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended April 30, 2026 or 2025.

Note 2—Revenue

Disaggregation of Revenue

The following table presents revenue disaggregated by segment and type (in thousands):

	Three Months Ended April 30,				Nine Months Ended April 30,
	2026		2025		2026		2025
Zedge Marketplace
Advertising revenue	$	5,355	$	5,579	$	16,079	$	15,151
Paid subscription revenue		1,678		1,272		4,832		3,687
Other revenues		451		431		1,425		1,357
Total Zedge Marketplace revenue		7,484		7,282		22,336		20,195
GuruShots
Digital goods and services		508		475		1,520		1,735
Total revenue	$	7,992	$	7,757	$	23,856	$	21,930

Contract Balances

Contract liabilities consist of deferred revenue, which are recorded for payments received in advance of the satisfaction of performance obligations.

The Company records deferred revenues related to the unsatisfied performance obligations with respect to subscription revenue. The Company’s deferred revenue balance for paid subscriptions was approximately $5.8 million, related to approximately 1.3 million active subscribers, and approximately $5.1 million, related to approximately 1.0 million active subscribers, as of April 30, 2026 and July 31, 2025, respectively

The Company also records deferred revenues when users purchase or earn Zedge Credits. Unused Zedge Credits represent the value of the Company’s unsatisfied performance obligation to its users. Revenue is recognized when Zedge App users use Zedge Credits to acquire Zedge Premium content or upon expiration of the Zedge Credits which occurs following180 days of account inactivity (“Breakage”). As of April 30, 2026, and July 31, 2025, the Company’s deferred revenue balance related to Zedge Premium was approximately $322,000 and $248,000, respectively.

The amount of deferred revenue recognized in the nine months ended April 30, 2026 that was included in the deferred revenue balance at July 31, 2025 was $2.5 million.

Unsatisfied Performance Obligations

Substantially all of the Company’s unsatisfied performance obligations relate to contracts with an original expected length of 30 months or less.

Significant Judgments

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

For lifetime subscriptions, revenue is recognized over the estimated retention period during which the customer is expected to benefit from use of the Zedge app, which management has determined to be 30 months based on historical usage and retention patterns information available to us to date. This estimate represents a significant judgement and is reviewed periodically for changes in customer behavior or other relevant factors.

Note 3—Fair Value Measurements

The fair value measurement of cash equivalents invested in money market funds is based on quoted market prices in active markets (Level 1). The fair value measurement of foreign exchange forward contracts is based on observable market-based inputs principally derived from or corroborated by observable market data (Level 2).

The following table presents the balance of assets and liabilities measured at fair value on a recurring basis (in thousands):

	April 30, 2026
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	12,219	$	12,219	$	-	$	-
Foreign exchange forward contracts		18		-		18		-
Total	$	12,237	$	12,219	$	18	$	-

	July 31, 2025
	Total		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	13,907	$	13,907	$	-	$	-
Foreign exchange forward contracts		18		-		18		-
Total	$	13,925	$	13,907	$	18	$	-

Fair Value of Other Financial Instruments

The Company’s other financial instruments at April 30, 2026 and July 31, 2025 included trade accounts receivable, prepaid expenses and other current assets, trade accounts payable and accrued expenses and other liabilities are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date.

Note 4—Derivative Instruments

The primary risk managed by the Company using derivative instruments is foreign exchange risk. Foreign exchange forward contracts are entered into as hedges against unfavorable fluctuations in the USD to NOK and USD to EUR exchange rates. The Company is party to a Foreign Exchange Agreement with Western Alliance Bank allowing the Company to enter into foreign exchange contracts under its revolving credit facility with the bank (see Note 10 Revolving Credit Facility). The Company does not apply hedge accounting to these contracts because these are not qualified as hedging accounting pursuant to ASC 815; therefore the changes in fair value are recorded in the condensed consolidated statements of operations and comprehensive income (loss). By using derivative instruments to mitigate exposures to changes in foreign exchange rates, the Company is exposed to credit risk from the failure of the counterparty to perform under the terms of the contract. The credit or repayment risk is minimized by entering into transactions with high-quality counterparties.

As a result of the global restructuring initiated in January 2025, which included the closure of the Company’s Norway operations, the Company no longer has exposure to USD/NOK foreign exchange risk. Accordingly, there were no outstanding NOK forward contracts as of July 31, 2025 or April 30, 2026.

The outstanding EUR forward contracts at April 30, 2026 were as follows:

Settlement Date	U.S. Dollar Amount		EUR Amount
May-26		523,868		450,000
Jun-26		524,543		450,000
Jul-26		525,195		450,000
Aug-26		525,848		450,000
Total		2,099,453		1,800,000

The fair value of outstanding derivative instruments recorded in the accompanying unaudited condensed consolidated balance sheets were as follows (in thousands):

Assets and Liabilities Derivatives:		April 30, 2026		July 31, 2025
Derivatives not designated or not qualifying as hedging instruments	Balance Sheet Location
Foreign exchange forward contracts	Prepaid expenses and other current assets	$	18	$	18

The effects of derivative instruments on the condensed consolidated statements of operations and comprehensive income (loss) were as follows (in thousands):

Amount of Income Recognized		Three Months Ended April 30,				Nine Months Ended April 30,
on Derivatives		2026		2025		2026		2025
Derivatives not designated or not qualifying as hedging instruments	Location of income recognized on derivatives
Foreign exchange forward contracts	Net income resulting from foreign exchange transactions	$	23	$	164		30	$	15

Note 5—Intangible Assets and Goodwill

Intangible assets are initially recorded at fair value and are stated net of accumulated amortization and impairment losses. The Company amortizes intangible assets with finite useful lives using either the straight-line method or, when reliably determinable, based on the pattern in which the economic benefits of the assets are expected to be consumed. Amortization is recorded over estimated useful lives ranging from five to fifteen years.

The Company evaluates the recoverability of its finite-lived intangible assets whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. In accordance with ASC 360, Property, Plant, and Equipment, recoverability is assessed by comparing the carrying amount of the asset group to the sum of the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset group. If the carrying amount exceeds the undiscounted cash flows, the Company estimates the fair value of the asset group. Fair value is generally determined using an income approach, which includes a discounted cash flow analysis based on the present value of projected after-tax cash flows using a risk-adjusted discount rate. The Company’s fair value estimates incorporate market participant assumptions in accordance with ASC 820, Fair Value Measurement.

The following table presents the detail of intangible assets, net as of April 30, 2026 and July 31, 2025 (in thousands):

	April 30, 2026								July 31, 2025
	Gross Carrying Value		Accumulated Amortization		Allocation of Impairment Loss		Net Carrying Value		Gross Carrying Value		Accumulated Amortization		Net Carrying Value

Emojipedia.org and other internet domains acquired	$	6,711	$	2,076	$	3,570	$	1,065	$	6,711	$	1,789	$	4,922
Total intangible assets	$	6,711	$	2,076	$	3,570	$	1,065	$	6,711	$	1,789	$	4,922

Impairment of Emojipedia Intangible Assets

In September 2025, Google implemented changes to its Search Engine Results Page (“SERP”) that allow users to copy emojis directly from the search engine results page, reducing referrals to third-party websites such as Emojipedia. In addition, artificial intelligence platforms, including Gemini, ChatGPT, Claude and others, now provide emoji results directly in response to user queries. These developments have adversely affected traffic and monetization for Emojipedia in the second quarter of fiscal 2026 and are expected to reduce future cash flows. As a result, management has determined that future investment in feature development and growth initiatives for Emojipedia will be limited, and the business will be operated primarily to maintain existing functionality. Accordingly, these factors represent a triggering event under ASC 360.

As a result, the Company performed a recoverability test in accordance with ASC 360 to determine whether the carrying amount of the Emojipedia asset group was recoverable based on estimated undiscounted future cash flows over the remaining useful life of the primary asset. Based on this analysis, the sum of the estimated undiscounted future cash flows was not sufficient to recover the carrying amount of the Emojipedia asset group including intangible asset and capitalized software and technology development costs.

Accordingly, the Company measured the impairment loss by estimating the fair value of the asset group. The Company utilized an income approach based on a discounted cash flow (“DCF”) analysis, which estimates the fair value by projecting after-tax cash flows attributable to the asset group and discounting those cash flows to present value using a risk-adjusted discount rate. The DCF analysis requires significant judgment, including assumptions related to revenue projections, growth rates, terminal values, and the timing and amount of expected future cash flows.

The forecasted cash flows were based on the Company’s most recent strategic plan, and for periods beyond the strategic plan, the Company applied revenue assumptions including a continued decline in revenue considered reasonable as of the measurement date and consistent with market participant expectations. The discount rate was based on an estimate of the weighted average cost of capital (“WACC”) of market participants and was intended to reflect the risks inherent in the projected cash flows. The Company applied a discount rate of 30.0%.

Based on the DCF analysis, the estimated fair value of the Emojipedia asset group was determined to be $1.2 million and below its carrying amount of $4.9 million. The remaining useful life of the Emojipedia internet domain was estimated to be 4.5 years reduced from 10.5 years as originally estimated.

As a result, the Company recorded a non-cash impairment charge of approximately $3.7 million to reduce the carrying amount of the Emojipedia asset group to its estimated fair value. In accordance with ASC 360-10-35-28, the impairment charge was allocated to the long-lived assets within the asset group on a pro rata basis based on their relative carrying amounts. The impairment charge recorded in the second quarter of fiscal 2026 was allocated as follows:

	1/31/26
	Net Carrying Amount		Pro rata allocation factor			Impairment loss		Adjusted Net Carrying Amount
Long-lived assets
Capitalized software and technology development costs	$	191		4	%		145		46
Emojipedia.org and other internet domains acquired

SEC Form 10-Q filed by Zedge Inc.